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U.S. Bank National Association v. Jkm Mundelein LLC

United States District Court, N.D. Illinois, Eastern Division

May 12, 2015

U.S. BANK, NATIONAL ASSOCIATION, et al., Plaintiff,
v.
JKM MUNDELEIN LLC, et al., Defendants. CHICAGO TITLE INSURANCE CO., Counter-Plaintiff,
v.
U.S. BANK, NATIONAL ASSOCIATION, et al., Counter-Defendant. CHICAGO TITLE INSURANCE CO., Cross-Plaintiff,
v.
JKM MUNDELEIN LLC, et al., Cross-Defendants.

MEMORANDUM OPINION AND ORDER

JOHN ROBERT BLAKEY, District Judge.

Before the Court are the motion to dismiss filed by plaintiff and counterclaim defendant U.S. Bank, National Association [29] and the motion for judgment on the pleadings filed by cross-claim defendants Joel K. Mann, JKM Mundelein LLC ("JKM") and WBK Financial Limited Partnership ("WBK"), collectively, the "JKM Entities." [44]. Both motions concern Chicago Title's responsive pleading, a combined counterclaim and cross-claim [19]. Both motions are granted.

Background & Procedural History

At the center of the controversy is a piece of real property located in Mundelein, Illinois that operated as a Walgreen's drugstore. The litigation involves the various mortgages and encumbrances that were placed on the property by Mann, JKM and WBK and the conflicting assertions of rights of the various purported mortgage holders.

In 1999, Mann agreed to purchase the property; the deal closed on February 23, 2000. At closing, title to the property was deeded to American National Bank and Trust Company as Trustee of Trust No. 12561106 (the "Land Trust").[1] That same day, the Trustee executed and delivered to Bank of America ("BofA") a mortgage encumbering the property; the mortgage was recorded on February 23, 2000. The debt secured by the BofA mortgage was refinanced in 2001 with a loan from Wells Fargo, which was intended to be fully secured with a first priority mortgage lien but was not (for reasons that are complicated but presently not relevant).

Mann formed JKM in December 2006. In January 2007, he caused the Land Trustee to transfer title to the property to JKM. He did so purportedly as the sole partner of WBK and the sole beneficiary of the Land Trust. Also in January 2007, JKM borrowed $2.15 million from BofA; as security for the loan, JKM executed and delivered a second mortgage to Mortgage Electronic Registration Systems, Inc. ("MERS"), as nominee for BofA. Also in January 2007, Mann allowed the Wells Fargo loan to go into default. After the default, the holder of the mortgage made a claim on a policy of title insurance issued by Chicago Title and, ultimately, Chicago Title purchased all of the holder's rights in the Wells Fargo loan.

Before this lawsuit was filed, Chicago Title filed an action in Lake County Circuit Court seeking a judgment of foreclosure based upon the Wells Fargo mortgage (the rights to which Chicago Title acquired when it bought out Wells Fargo's claims under the title insurance policy, after Mann threatened to pursue a claim that the Wells Fargo mortgage was invalid).

In the Lake County Circuit Court action, Chicago Title Insurance Co. v. Joel K. Mann, et al., Case No. 07 CH 1715, Chicago Title sued the JKM Entities, along with Bond Drug Company of Illinois and MERS. The parties reached a settlement and executed a written settlement agreement. Thereafter, and consistent with the terms of the settlement agreement, on February 4, 2013, the Lake County Circuit Court entered an agreed judgment order against the JKM Entities in the amount of $2.5 million. Also consistent with the settlement agreement, Chicago Title proceeded on a path toward trial with respect to its claims against MERS. MERS filed a motion seeking full summary judgment and, in the alternative, partial summary judgment. On September 3, 2014, the court granted the latter, finding that "the MERS mortgage security interest has priority to any Chicago Title liens." See September 3, 2014 Order, Exhibit C to U.S. Bank's brief in support of its motion to dismiss [30]. In December 2014, Chicago Title moved to voluntarily dismiss the remainder of the case, and the case was dismissed without prejudice on December 12, 2014. See Cross-defendants' Rule 12(c) motion for judgment on the pleadings [44-1], Exhibits E, F, pp. 51-52, 54. U.S. Bank filed its complaint in this action three days later, on December 15, 2014 [1].

Several of the pleadings from the Lake County Circuit Court action, captioned Chicago Title Insurance Co. v. Joel K. Mann, et al., Case No. 07 CH 1715, are before the Court, filed in connection with the pending motions. The Court has before it Chicago Title's Third Amended Complaint, several motions and orders, including the order entered on MERS' motion for summary judgment and the ultimate dismissal order; the Court also has the Rule 2.04 Statement MERS filed in that action, which attaches as an exhibit the parties' settlement agreement. The order relating to MERS' priority, entered September 3, 2014, is a state court order handwritten by counsel; it provides, in its entirety:

This case coming on [MERS'] motion 1) for full summary judgment and 2) partial summary judgment with the court considering the pleadings, briefs and arguments and being fully advised in the premises
IT IS ORDERED
1) the motion for full summary judgment is DENIED
2) the motion for partial summary judgment is granted and the MERS mortgage security interest has priority to any Chicago Title liens.

Chicago Title v. Mann, et al., No. 07 CH 1715 (Lake County Circuit Court, Sept. 3, 2014)(attached as Exhibit C to U.S. Bank's motion to dismiss [30-3]). The February 4, 2013 agreed judgment order, entered as a result of the settlement reached by Chicago Title and the defendants in that suit, awarded $2.5 million to Chicago Title from the JKM Entities. Chicago Title sought and obtained a Rule 304(a) finding on the agreed judgment order (indicating that the order was final and appealable), but did not seek an appeal. The remainder of the case was scheduled to proceed to trial, but Chicago Title moved to voluntarily dismiss the remainder of the action just a few days before trial. The ...


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