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Deutsche Bank National Trust Co. v. Hart

Court of Appeals of Illinois, Third District

September 22, 2016

DEUTSCHE BANK NATIONAL TRUST COMPANY, as Trustee for Long Beach Mortgage Loan Trust 2005-WL1, Plaintiff-Appellee,
DANIEL J. HART, ELLEN C. HART, and FIRST UNITED BANK, as Trustee Under the Provisions of a Trust Dated March 16, 1994, and Known as Trust No. 1671, and JVS FINANCIAL SERVICES, INC., Defendants Daniel J. Hart and Ellen C. Hart, Defendants-Appellants.

         Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois, Circuit No. 07-CH-4201 Honorable Daniel Rippy, Judge, Presiding.

          JUSTICE McDADE delivered the judgment of the court, with opinion. Justice Schmidt concurred in the judgment and opinion. Justice Carter specially concurred, with opinion.


          McDADE, JUSTICE.

         ¶ 1 Defendants appeal from the trial court's order confirming the sale of foreclosed property. Defendants argue that the agreed order of foreclosure has no legal effect because the mortgage itself was void. We reject defendants' argument on a number of grounds and initiate sanctions proceedings against defendants and their counsel.

         ¶ 2 FACTS

         ¶ 3 On December 21, 2007, plaintiff, Deutsche Bank National Trust Company, filed a complaint for foreclosure against defendants, Daniel and Ellen Hart. The foreclosure was sought upon a mortgage signed by defendants on April 1, 2005, securing a loan of $716, 000. Paragraph I of the complaint contained the legal description of the mortgaged real estate as well as the common address of 26828 S. Will Center Road, Monee, Illinois. The complaint alleged that defendants failed to pay the monthly installment due on August 1, 2007, and all payments thereafter, resulting in a total amount owed of $734, 758.11.

         ¶ 4 Plaintiff attached a copy of the mortgage in question as an exhibit to the complaint. On the first page of the mortgage, "1 of 16" has been handwritten at the bottom of the page. Typewritten on the bottom of each subsequent page is the page number, as well as the number of pages-for example, the bottom of the second pages reads "Page 2 of 15." On each page, however, the typewritten pagination has been crossed out, with a number handwritten underneath. The presumable cause of this repagination is the third page of the attached mortgage, which contains the legal description of the property. The legal description is the same as that provided in the complaint. This page, unlike the others, does not bear defendants' initials. In turn, the next page has a typewritten "Page 3 of 15" crossed out, with the numeral 4 written underneath. This fourth page also contains a large blank space, above which it reads "Legal Description Attached Hereto and Made a Part Hereof." Beneath the blank space appears the property address: 26828 S. Will Center Road, Monee, Illinois.

         ¶ 5 Defendants were served with a summons on December 28, 2007. On February 4, 2008, Gary Davidson filed an appearance on behalf of defendants. On March 24, 2008, the trial court entered a default judgment for foreclosure and sale, as defendants had yet to file an answer to the complaint. Davidson subsequently filed a motion to vacate the default judgment, which the trial court granted. Attorney Brett Geiger-of the same firm as Davidson-filed an answer on behalf of defendants soon thereafter. In their answer, defendants admitted to, inter alia, paragraph I of the complaint, which contained the legal description.

         ¶ 6 Plaintiff moved for summary judgment on July 30, 2008, noting that defendants had not denied any of the relevant allegations made in the complaint. On October 3, 2008, defendants moved to amend their answer. In that motion, defendants claimed for the first time that the legal description contained in the complaint "was not the property Plaintiff or Defendant intended to secure with the loan."

         ¶ 7 As an exhibit to their motion for leave to amend the answer, defendants attached a copy of the mortgage that had not been repaginated. See supra ¶ 4. They also attached a copy of a quitclaim deed from November 2004. The quitclaim deed evidenced that defendants had conveyed to themselves as tenants in the entirety a tract of less than five acres. In the motion, defendants argued that it was only that smaller tract of land that they had intended to mortgage.

         ¶ 8 The trial court granted defendants' motion for leave to amend their answer. The amended answer, filed on October 8, 2008, denied the allegations in paragraph I of the complaint. Plaintiff subsequently withdrew its motion for summary judgment.

         ¶ 9 The parties spent most of the next three years engaging in discovery. At a court appearance on May 2, 2011, both parties indicated that they had "entered into substantive discussions intended to settle the outstanding issues between the parties." The trial was set for October 3, 2011.

         ¶ 10 On September 27, 2011, plaintiff filed a motion to bar the defense of mistake. In support, plaintiff argued that mistake is an affirmative defense and that an affirmative defense not pled is waived. On the day of trial, before the trial court could rule upon plaintiff's motion, the parties met in the chambers of trial judge Barbara N. Petrungaro to discuss settlement terms. Negotiations continued that afternoon outside of chambers. The parties eventually agreed on terms, and an agreed judgment of foreclosure and sale was filed by the trial court on October 3, 2011.

         ¶ 11 The agreed judgment declared defendants to owe $988, 585.60 on the note and mortgage and provided a four-month redemption period, expiring on February 3, 2012. The agreed judgment contained the full legal description as provided in the original complaint. The agreed judgment also provided that defendants would maintain possession of the property for 60 days after the date of any future order confirming sale. The agreed judgment was signed by both defendants, as well as their attorney, David Smith, of the same firm as Davidson and Geiger. A separate agreed order filed the same day declared that plaintiff would pay a sum of $10, 000 to defendants.

         ¶ 12 The February 3, 2012, deadline passed without defendants making a redemption. On March 14, 2012, Daniel Hart filed a pro se motion "to cease and desist any further action [and] pending sheriff's sale of property." The motion also sought to strike the agreed judgment of October 3, 2011, "re-open [the] case, " and proceed to trial. Daniel also requested the trial court "to release plaintiffs from mortgage and note and return property as free and clear." In support of the motion, Daniel wrote as follows:

"Former defendants *** Daniel and Ellen Hart were blatantly and willfully lied to by opposing counsel-were coerced into signing all rights to property and to agree to the contents of former plaintiff's decrees as true and correct by telling Daniel and Ellen Hart that if we didn't sign off that they would take procession [sic] of our property and throw us out the following day-October 4th, 2011."

         Daniel further contended that plaintiff had "inserted fictitious paperwork, " in reference to the legal description, and that defendants would not have signed such a mortgage. David Smith subsequently sought and was granted leave to withdraw as attorney for defendants.

         ¶ 13 Plaintiff filed a motion to strike defendants' motion. On June 12, 2012, Thomas Burdelik filed an appearance on behalf of defendants, as well as a motion to vacate agreed orders. In that motion, Burdelik expounded upon defendants' claims that plaintiff's counsel, Craig Cronquist, had threatened that defendants could be removed from their home within 48 hours if plaintiff prevailed at trial. The motion also alleged that defendants' previous counsel (Smith) did not have sufficient experience in mortgage litigation and that his recommendation that they settle on the day of trial was "a complete about face" from his prior confidence in the case. The motion concluded: "Upon later reflection [defendants] recognized that their interests had not been well represented, which lead [sic] to the present motion." The motion to vacate agreed orders also elaborated on defendants' claim that they had not intended to mortgage the entirety of their property.

         ¶ 14 In a response filed on July 2, 2012, plaintiff argued that the parties were bound by the settlement agreement and that the settlement was neither grossly unfair nor unconscionable. Further, plaintiff reasserted that defendants were barred by waiver from raising error as an affirmative defense. Plaintiff attached as an exhibit to its response a copy of a check for $10, 000 dated October 20, 2011, and made payable to defendants and their attorneys. In an affidavit also attached to plaintiff's response, Cronquist denied having made any threats to defendants.

         ¶ 15 The matter proceeded to an evidentiary hearing held on August 15, 2012. Though the record on appeal does not include a report of proceedings for this hearing, the trial court's subsequent order-dated September 24, 2012-provides a detailed summary of the testimony presented.[1] It is from this summary that we detail the evidence presented.

         ¶ 16 Daniel testified that the property at 26828 S. Will Center Road encompasses 40.3 acres of land. He and Ellen contacted mortgage broker Joanne Rogers with the intent of mortgaging 40 acres of their land. Rogers told them that 40 acres would be a nonconforming loan, and that they would have to decrease the acreage. At Rogers' behest, defendants asked attorney Raymond Feeley to prepare a quitclaim deed. Daniel believed that the quitclaim deed was for seven acres. He felt that the legal description in the quitclaim deed was the legal description that should have been later attached to the mortgage.

         ¶ 17 Defendants were represented by Smith as they engaged in settlement discussions on October 3, 2011. Defendants rejected all settlement offers before breaking for lunch. After lunch, Smith talked with Cronquist in the hall. Daniel Hart (one of the defendants) testified that when defendants joined the attorneys in the hall, Cronquist conceded that defendants might win on the mortgage issue. However, Cronquist assured defendants that plaintiff would still be able to collect on the note, and that defendants could be evicted from their home the next day. Daniel testified that Smith agreed with Cronquist's statements. As part of the settlement, plaintiff agreed to pay $10, 000 and to give defendants extra time on the property. On the way home from the courthouse on October 3, 2011, Daniel learned from multiple sources that Cronquist's threat was false, that defendants could not be evicted in such a short time frame. Daniel later received and cashed the check. At that time, defendants owed Smith's law firm over $9, 000.

         ¶ 18 The testimony of Ellen Hart was substantially similar to that of her husband. She agreed that they did not intend to mortgage the entire 40 acres and described the legal description in the quitclaim deed as encompassing 15 acres. Ellen testified that Smith had expressed confidence in their case but his demeanor changed on the day of trial. When Cronquist told defendants they could be removed from their property within 24 hours, Smith told them the statement was correct. Ellen testified that if she had known the statement to be false, she would not have agreed to settle.

         ¶ 19 Cronquist testified that on October 3, 2011, the trial court met with the attorneys in chambers in an effort to settle the case. Thereafter, Cronquist met with Smith to discuss settlement parameters. It became apparent that the settlement would involve payment to defendants to ease the costs associated with moving, as well as providing them additional time to move out. Cronquist testified that he never predicted plaintiff would lose on the mortgage issue but win on the note. He did not make any sort of predictions regarding cases to the opposition. Additionally, his motion in limine regarding the defense of mistake was still pending at that time. Cronquist denied making any sort of threats regarding eviction to Smith or to defendants. He knew that eviction in such a short time frame would be an impossibility.

         ¶ 20 Cronquist testified that the settlement had three main parts. First, plaintiff would pay defendants a sum of $10, 000. Second, the redemption period, which is normally three months, would be extended to four months. Third, defendants would be given 60 days in possession ...

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