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PNC Bank, National Association v. Pattermann

Court of Appeals of Illinois, Third District

September 23, 2016

PNC BANK, NATIONAL ASSOCIATION, Plaintiff-Appellee,
v.
STEVEN M. PATTERMANN, STEVEN M. PATTERMANN, as Trustee of the Steven M. Pattermann Revocable Trust Instrument dated April 3, 2002 for benefit of Steven M. Pattermann, HARRIS NATIONAL ASSOCIATION, successor by merger to Harris Bank Naperville, RIVER RUN HOMEOWNERS ASSOCIATION, THE LAW OFFICE OF EDWARD R. JACQUAYS, PANOS & ASSOCIATES, LLC and PNC BANK, NATIONAL ASSOCIATION, Defendants. (Gina Pattermann, Intervenor-Appellant).

         Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois. Circuit No. 10-CH-4508 Honorable Daniel Rippy, Judge, Presiding.

          PRESIDING JUSTICE O'BRIEN delivered the judgment of the court, with opinion. Justices Holdridge and Wright concurred in the judgment and opinion.

          OPINION

          O'BRIEN PRESIDING JUSTICE

         ¶ 1 Intervenor, Gina Pattermann, filed an interlocutory appeal from a grant of partial summary judgment disposing of her homestead interest in mortgaged property in a foreclosure action brought by PNC Bank against several defendants, including Gina's ex-husband, defendant Steven Pattermann.

         ¶ 2 FACTS

         ¶ 3 Steven and Gina Pattermann were married on August 14, 1998. Prior to the marriage, Steven held title to the property that is the subject of these proceedings, which was a vacant lot at that time. On or about February 2, 2001, Steven and Gina agreed to take out a mortgage from HSBC Mortgage Corporation to finance the building of the marital residence on the property. The property remained titled in Steven's name alone, and Steven executed a mortgage and a promissory note to finance the construction. At that time, Gina executed a waiver of her homestead interest.

         ¶ 4 On April 3, 2002, Steven created the "Steven M. Pattermann Revocable Trust" (the Trust), and transferred title to the subject property to the Trust. The quitclaim deed expressly stated that Steven was married to Gina and provided: "Per the Attached [ ] hereby releasing and waiving all rights under and by virtue of the Homestead Exemption Laws of the State of Illinois." It was only signed by Steven and contained only a notarization of Steven's signature.

         ¶ 5 On September 2, 2003, Steven, as trustee of the Trust, signed a new mortgage and note for the subject property with the lender MidAmerica Bank, FSB, the predecessor in interest of the plaintiff, PNC Bank. The proceeds from this note paid off the original loan from HSBC Mortgage Corporation. Gina was not a party to the MidAmerica Bank transaction, and she did not reexecute a waiver of homestead. Thereafter, on June 24, 2005, Steven, as trustee of the Trust, borrowed additional monies from MidAmerica Bank, signing another promissory note and a junior mortgage.

         ¶ 6 On August 24, 2005, Steven filed for divorce from Gina. In the divorce proceedings, the circuit court entered a judgment for dissolution of marriage that disposed of the marital assets of Steven and Gina. With respect to the subject property, the marital residence, the circuit court found that the vacant lot had been Steven's nonmarital property but that it was transmuted to marital property because the home was built with nonmarital and marital funds and maintained by marital funds. The circuit court found that the fair market value of the marital residence was $900, 000 and the equity in the residence was to be determined by subtracting the first mortgage from that amount. The circuit court further ruled that the junior mortgage, a home equity loan, was the sole responsibility of Steven. Upon refinancing of the mortgage and payment by Gina to Steven of sums due pursuant to the division of marital assets, Steven was ordered to deliver to Gina a quitclaim deed, conveying the property to Gina. The circuit court order stated that if Gina was unable to refinance with six months of the judgment, then the marital residence should be sold and the net proceeds divided in accordance with the judgment. Commencing on July 1, 2008, Gina was to be responsible for the payment of the mortgage, real estate taxes, and expenses of the marital residence. The circuit court did not address Gina's homestead interest. Gina appealed the dissolution judgment but did not raise any issue with respect to the marital residence other than to challenge its value as a marital asset when it was encumbered by the first mortgage. See In re Marriage of Pattermann, No. 3-09-0472 (2011) (unpublished order under Supreme Court Rule 23).

         ¶ 7 During the pendency of the dissolution appeal, on July 28, 2010, PNC Bank filed the current foreclosure action. PNC Bank alleged that the first mortgage was in default and that the balance due at that time was $506, 587.20. On July 10, 2014, PNC Bank filed a motion for partial summary judgment, seeking an order that Gina did not possess a homestead right in the subject property following the dissolution of marriage. The circuit court granted the motion, finding that Gina no longer possessed a homestead interest pursuant to GMAC Mortgage, LLC v. Arrigo, 2014 IL App (2d) 130938. Gina's motion for reconsideration was denied. However, the circuit court certified the issue to the appellate court and entered an appropriate Illinois Supreme Court Rule 308(a) (eff. Feb. 26, 2010) order. Gina filed an application for leave to appeal pursuant to Rule 308(b), which was allowed.

         ¶ 8 ANALYSIS

         ¶ 9 Gina argues that the circuit court erred in holding that her homestead interest was extinguished by the divorce judgment. The question certified for review is whether a former spouse loses her homestead exemption in property arising pursuant to section 12-901 of the Code of Civil Procedure (the Code) (735 ILCS 5/12-901 (West 2012)) by virtue of divorce where the divorce decree grants the former spouse specific formal rights in the property, effects a self-executing present conveyance of those rights, and does not otherwise address or dispose of the former spouse's homestead interest in the property. PNC Bank argues that the certified question is purely hypothetical in this case but, in any event, Gina's homestead rights terminated upon her divorce. Our review of this issue is de novo. In re M.M.D., 213 Ill.2d 105, 113 (2004).

         ¶ 10 The estate of homestead is one of statutory creation. GMAC Mortgage, LLC v. Arrigo, 2014 IL App (2d) 130938, ¶ 15. Section 12-901 of the Code is the homestead exemption statute and provides:

"Every individual is entitled to an estate of homestead to the extent in value of $15, 000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence, or in a cooperative that owns property ...

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