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Paliatka v. Bush

Court of Appeals of Illinois, First District, Third Division

July 18, 2018

EDWARD F. PALIATKA, Plaintiff-Appellant,
JOHN BUSH, JOANNA BUSH, and CREDIT UNION I, Defendants-Appellees.

          Appeal from the Circuit Court of Cook County. No. 16 CH 8105 Honorable William B. Sullivan, Judge, presiding.

          PRESIDING JUSTICE COBBS delivered the judgment of the court, with opinion. Justices Howse and Lavin concurred with the judgment and opinion.



         ¶ 1 Plaintiff, Edward F. Paliatka, appeals from the order dismissing his first amended complaint with prejudice pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 2016)). The trial court found that dismissal with prejudice was warranted because Paliatka was unable to state a cause of action for an equitable mortgage. This finding was based on Paliatka's representation that there was no written agreement subrogating him to the original mortgage on the property at issue. Paliatka contends that the trial court misapplied the law regarding the elements of an equitable mortgage and an equitable subrogation. We affirm.

         ¶ 2 I. BACKGROUND

         ¶ 3 The following facts are obtained from the pleadings in the record. The property at issue is located at 4021 West 99th Street in Oak Lawn, Illinois (the property), and is currently owned by John and Joanna Bush. The Bushes entered into a real estate contract to purchase the property from Miarstar Properties, LLC (Miarstar), in April 2016, with a closing date of June 9, 2016. They funded the purchase using a Credit Union I loan with the property pledged as security. The Credit Union I mortgage agreement and the warranty deed granted by Miarstar were both executed on June 9, 2016, and recorded in Cook County on July 20, 2016.

         ¶ 4 Paliatka first filed a complaint against Miarstar; Skyline 1, Inc.; S12, LLC; and any unknown owners and nonrecord claimants on June 16, 2016, asserting a lien against the property and seeking foreclosure. Skyline 1, Inc., and S12, LLC, are companies solely owned and operated by Paliatka's grandson, Lyle Anastos. Anastos did not file an appearance in the proceedings below. At the time Paliatka filed his complaint, Miarstar was the recorded owner of the property. Paliatka also filed a lis pendens against the property in conjunction with his complaint. Paliatka was later granted leave of the court to add John Bush, Joanna Bush, and Credit Union I as defendants. On April 20, 2017, Paliatka voluntarily dismissed Miarstar as a defendant, with prejudice. The trial court dismissed the complaint against the Bushes and Credit Union I under section 2-615.

¶ 5 With leave of the trial court, Paliatka filed an amended complaint on May 18, 2017. The amended complaint named Skyline 1, Inc.; S12, LLC; the Bushes; and Credit Union I as defendants and sought a judgment declaring the existence of Paliatka's "equitable lien and mortgage" on the property and to initiate foreclosure proceedings. According to Paliatka's amended complaint, Anastos owned the property, operating under the business S12, LLC, until he sold it on July 1, 2014. Prior to the sale of the property, Anastos executed a mortgage, security agreement, and financing statement for $290, 000[1] in favor of Renovo Financial Loan Fund, LLC (Renovo), pledging the property and a second property as security for the loan. This mortgage was recorded in Cook County on August 24, 2013.[2] The following year, Renovo assigned its interest in both properties to RFLF 2, LLC. This assignment was recorded on March 31, 2014. On July 1, 2014 a quitclaim deed conveying the property to Miarstar was recorded in Cook County. The deed stated that Miarstar paid Anastos's company $75, 000 for the property.

         ¶ 6 The amended complaint further alleged that Paliatka paid $342, 354.67 to RFLF 2, LLC, on October 29, 2015, to satisfy the outstanding balance on the mortgage loan. Paliatka claimed that through this payment he acquired all the rights, liens, and interest of RFLF 2, LLC, and Renovo in relation to the property and mortgage agreement. Paliatka alleged that S12, LLC, defaulted on the mortgage because it had missed more than eight months of payments and it violated the terms of the mortgage by conveying the property to Miarstar. Thus, Paliatka brought this suit to foreclose on the property and satisfy the defaulted mortgage.

         ¶ 7 On September 11, 2017, the trial court granted the Bushes and Credit Union I's jointly filed motion to dismiss under section 2-615, with prejudice. The trial court's order explicitly stated it found Paliatka could not state a cause of action for an equitable mortgage based on the representation by his counsel, in open court, that no written agreement existed showing that Paliatka was subrogated to Renovo's or RFLF 2, LLC's mortgage interest.

         ¶ 8 Although not attached to the amended complaint, Paliatka entered an additional exhibit during the proceedings showing that Renovo executed a release deed referencing the mortgaged property and the assignment to RFLF 2, LLC. The release deed was dated November 10, 2015, and recorded in Cook County on December 18, 2015.

         ¶ 9 II. ANALYSIS

         ¶ 10 Paliatka assigns error to the trial court's dismissal of his first amended complaint for failure to state a cause of action. Paliatka contends that he sufficiently pleaded a claim for an equitable mortgage because he pleaded facts showing an equitable subrogation. Further, even if he had failed to plead sufficient facts, Paliatka argues that dismissal with prejudice was erroneous because he could cure the deficient complaint with further amendments.

         ¶ 11 The question on appeal is whether Paliatka pleaded sufficient facts to state a claim upon which relief can be granted. A motion to dismiss pursuant to section 2-615 challenges the legal sufficiency of a complaint. Wilson v. County of Cook, 2012 IL 112026, ¶ 14. Illinois is a fact-pleading jurisdiction and plaintiffs are required to allege "a legally recognized cause of action and *** must plead facts which bring the particular case within that cause of action." (Internal quotation marks omitted.) Chandler v. Illinois Central R.R. Co., 207 Ill.2d 331, 348 (2003). When reviewing a section 2-615 motion, a court must determine "whether the allegations in the complaint, considered in a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief can be granted." Sheffler v. Commonwealth Edison Co., 2011 IL 110166, ΒΆ 61. A court should only dismiss a ...

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