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Deutsche Bank National Trust Co. v. Payton

Court of Appeals of Illinois, First District, Second Division

April 11, 2017

DEUTSCHE BANK NATIONAL TRUST COMPANY, Plaintiff-Appellee,
v.
GARY LEIGH PAYTON, CARLA WATKINS and MARVIN WATKINS, Defendants-Appellants.

         Appeal from the Circuit Court of Cook County. No. 07 CH 05861 The Honorable Robert E. Senechalle, Judge Presiding.

          JUSTICE NEVILLE delivered the judgment of the court, with opinion. Presiding Justice Hyman and Justice Pierce concurred in the judgment and opinion.

          OPINION

          NEVILLE, JUSTICE

         ¶ 1 When Carla and Marvin Watkins, the defendants, did not pay their mortgages, they became concerned that Citimortgage, Inc. (Citimortgage), and Countrywide Home Loans (Countrywide) would commence foreclosure proceedings against them. On November 11, 2005, a warranty deed containing the Watkinses' signatures conveyed the subject property to Gary Leigh Payton and Tammy Marie Payton.[1] The Paytons obtained a mortgage from Long Beach Mortgage Company (Long Beach) in the amount of $450, 000, and some of the loan proceeds were used to extinguish the Watkinses' mortgages on the subject property with Citimortgage and Countrywide. On February 28, 2007, Long Beach assigned and transferred its interest in the Paytons' mortgage to the plaintiff, Deutsche Bank National Trust Company (Deutsche Bank), as trustee for Long Beach. On March 2, 2007, Deutsche Bank initiated foreclosure proceedings against the Paytons when they failed to make their mortgage payments, and later named the Watkinses. On July 13, 2010, Deutsche Bank filed a motion for summary judgment against the Watkinses and the Paytons, predicated on the doctrine of equitable subrogation. The motion was granted.

         ¶ 2 We find that once Long Beach, Deutsche Bank's assignor, paid off the Watkinses' mortgages with Citimortgage and Countrywide, Long Beach was subrogated, by operation of law, and Long Beach stepped into the shoes of Citimortgage and Countrywide. Therefore, Long Beach acquired Citimortgage's and Countrywide's priority interest in the subject property. We also find that the circuit court correctly granted Deutsche Bank's motion for summary judgment, predicated on the doctrine of equitable subrogation, in order to avoid an unjust result and to prevent the Watkinses from being unjustly enriched when they invoked their forged deed defense. Therefore, we hold that the circuit court did not err when it granted Deutsche Bank's motion for summary judgment predicated on the doctrine of equitable subrogation.

         ¶ 3 BACKGROUND

         ¶ 4 On November 18, 1996, a quitclaim deed conveyed the subject property located at 6437 North Kimball, Lincolnwood, Illinois, to Carla Watkins. She later married Marvin Watkins. On April 29, 2003, the Watkinses obtained a mortgage from Magnus Financial Corporation for $321, 000. On May 17, 2004, they obtained a second mortgage from Greenlight Financial Services for $45, 000. Magnus Financial Corporation later assigned its interest in the Watkinses' mortgage to Citimortgage, and Greenlight Financial Services assigned its interest in the Watkinses' second mortgage to Countrywide.

         ¶ 5 The Watkinses stopped making payments on their mortgages in 2005. Agents from an entity known as FundingForeclosures.com contacted the Watkinses and promised to save their home from foreclosure by providing financial assistance. Fundingforeclosures.com had the Watkinses (i) execute an Equity Purchase Agreement on July 14, 2005, in which the Watkinses sold the subject property to Fundingforeclosures.com; (ii) re-purchase the property at a set price pursuant to Addendum A attached to the Agreement; (iii) execute a Residential Lease After Sale Agreement on July 17, 2005, which allowed the Watkinses to continue to occupy the subject property but obligated them to pay $1, 600 each month in rent; and (iv) execute a grant deed[2] on July 17, 2005, transferring title to the subject property from the Watkinses to Fundingforeclosures.com.

         ¶ 6 On November 11, 2005, a warranty deed[3] containing the Watkinses' signatures transferred title to the subject property to Gary Leigh Payton and Tammy Marie Payton. The Paytons obtained a mortgage from Long Beach in the amount of $450, 000. The settlement statement for this transaction indicates (i) that Long Beach paid off the Watkinses' mortgages with Citimortgage and Countrywide and (ii) that the Watkinses received a payout of $119, 583.92. The record also includes releases from Citimortgage and Countrywide.

         ¶ 7 On February 28, 2007, Long Beach assigned the Paytons' mortgage to Deutsche Bank. When the Paytons did not make payments on their loan, Deutsche Bank filed a "Complaint to Foreclose Mortgage" on March 2, 2007, against the Paytons, two subordinate lenders, unknown owners, and non-record claimants. On June 13, 2007, James Smith filed an appearance on behalf of Carla Watkins as an unknown owner and non-record claimant. On July 18, 2007, Carla Watkins filed an answer and affirmative defenses, asserting that she and her husband were victims of a "foreclosure rescue fraud, " and she maintained that the Watkinses had never met the Paytons, that the Watkinses did not sell the Paytons any property, and that FundingForeclosures.com forged their signatures on the deed transferring title of the subject property to the Paytons.

         ¶ 8 On September 28, 2007, Deutsche Bank filed an "Amended Complaint to Foreclose Mortgage, " named Carla and Marvin Watkins as additional defendants, and claimed that any interest the Watkinses had in the subject property was inferior to that of the bank's. On June 9, 2009, James Smith filed an appearance on behalf of Marvin Watkins in the instant lawsuit.

         ¶ 9 On July 13, 2010, Deutsche Bank filed "Plaintiff's Amendment to Complaint to Foreclose Mortgage, " added count II, named the Watkinses and the Paytons as defendants, and prayed, pursuant to the doctrine of equitable subrogation, for a judgment of foreclosure. Specifically, count II sought foreclosure on Deutsche Bank's assignor's liens that were equitably subrogated to the liens of the Watkinses' prior mortgagees, Citimortgage and Countrywide.

         ¶ 10 On October 7, 2010, the Watkinses filed an answer and affirmative defenses to "Plaintiff's Amendment to Complaint to Foreclose Mortgage, " and admitted that Long Beach made a loan to the Paytons that paid off the Watkinses' prior mortgages with Citimortgage and Countrywide in full.

         ¶ 11 On March 22, 2011, Deutsche Bank filed a motion for partial summary judgment, requesting the entry of a judgment on count II, its equitable subrogation claim, and prayed only for a partial judgment that the Watkinses' interest in the subject property would be subordinated to Long Beach's interest to the extent of $371, 833.90. On May 24, 2011, the circuit court found (i) that the Watkinses admitted that their delinquent mortgages to Citimortgage and Countrywide in the amount of $371, 833.90 were paid off, (ii) that proceeds from the Paytons' mortgage that was being foreclosed on by Long Beach were used to pay off the Watkinses' mortgage, and (iii) that Long Beach intended for its mortgage to be a first lien on the property. The circuit court granted ...


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