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Apex Mortgage Corp. v. Great Northern Insurance Co.

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

July 9, 2019



          Virginia M. Kendall United States District Judge

         In December 2010, two firefighters tragically died on duty when the roof of a rundown laundromat collapsed on them. The next year, representatives of their families sued the owners of the property and the lender that had a mortgage on it. The lender, Apex Mortgage Corporation (“Apex”), settled that lawsuit for $15 million in 2017. Apex asked its insurer, Federal Insurance Company (“Federal”), to pay for this settlement because the governing policy covers third-party liability claims for bodily injury or death arising out of an accident on property within Apex's care, custody, or control. Federal disclaimed coverage because its insurance policy excludes any property Apex acquired as “mortgagee in possession.”

         Apex sued Federal in district court for breach of contract (among other things) based on Federal's refusal to compensate Apex for the settlement. Apex stipulated to the dismissal of all the claims it alleged against Federal's co-defendant, Great Northern Insurance Company, in 2018. (Dkt. 131.) Apex and Federal then cross-moved for summary judgment arguing over whether Apex acquired the old laundromat as a mortgagee in possession. (Dkt. 121, 132.) Because the undisputed facts establish that Apex was a mortgagee who obtained possession of the property from the owners with their consent in the mortgage agreement, the Court grants Federal's motion (Dkt. 121), denies Apex's cross-motion (Dkt. 132), and accordingly enters summary judgment for Federal.


         Brothers Chuck and Richard Dai purchased property located at 1738-1744 E. 75th Street, Chicago, IL in 1986. (Dkt. 135 ¶ 15.) For some time, the Dais operated a commercial laundromat at this location known as “Singway Laundry.” Id. On February 28, 2000, Chuck Dai (Dai) obtained a $60, 000 commercial loan from Apex, secured by a mortgage on the property recorded on March 2, 2000. (Dkt. 135 ¶ 15; Dkt. 137 ¶ 6.) The Dais closed their business in 2007 and it later fell into disrepair. Id. ¶ 17. In October 2008, Dai defaulted on his loan for a second time. Id. ¶ 18.

         The mortgage agreement states that, upon default, Apex may “enter and take possession of the Property and manage and operate the Property, as Mortgagee in possession . . . regardless of whether foreclosure proceedings have been instituted or not.” (Dkt. 122-2 § 23.4.) The agreement continues in the next section: “Upon the occurrence of any Event of Default, Mortgagee . . . may . . . do any acts required of Mortgagor hereunder in such manner and to such extent as either may deem necessary to protect the security hereof . . . [and] enter upon the Property for such purposes . . .” Id. § 24.

         To remedy his default, Dai offered to tender ownership of the property to Apex by deed in lieu of foreclosure in December 2008. (Dkt. 135 ¶ 18; Dkt. 137 ¶ 8.) Apex conditionally agreed, and the Dais signed a deed and contract. (Dkt. 135 ¶ 18.) Upon receipt of those documents, Apex hired a local realtor to clean out and inspect the property. Id. ¶ 19. The inspection confirmed the City of Chicago's previous finding that the roof was collapsing. (Dkt. 135 ¶ 20; Dkt. 137 ¶ 10.) The Realtor therefore arranged to place a tarp over the roof, board up the windows, and change the locks on the doors. Id. ¶ 21. Apex never sought an order under the Illinois Mortgage Foreclosure Law (IMFL) placing it in possession of the property. Id. ¶ 22.

         Although it admits it changed the locks, Apex claims that it “never prevented Dai from accessing the Property.” Id. ¶ 25. This is of course a material fact, but Apex does not genuinely dispute it. Apex cites to one question and answer in Richard Dai's deposition to support its contention. (Dkt. 133-23, Apex Ex. 22, R. Dai Dep. at 119:12- 15 (“Q: Did APEX Mortgage every prevent you or tell you you could not access the property? . . . A: No.”).) Installing new locks and not providing the Dais with the keys effectively prevented the Dais from entering the property; Apex did not need to hire bouncers to stand in front of the doors to keep visitors out.

         The Dais' deposition testimony is full of facts establishing that Apex never gave the Dais the keys and the Dais were consequently unable to access the property. (Dkt. 122-25, Federal Ex. 24, R. Dai Dep. at 23:11-13, 34:7-13, 71:13-72:9, 100:15-101:5, 106:14-107:9; Dkt. 122-26, Federal Ex. 25, C. Dai Dep. at 69:2-72:7, 86:16-88:7, 109:10-17, 158:15-159:12).) What is more, Apex's own counsel in the underlying case, Steven Pearson, represented that “[t]here is . . . no dispute that the Dais were not provided with keys to the new locks which were placed on the building at Apex's direction.” Dkt. 122-38 at 3; see Dkt. 133-42 at 4-6. That led the state court to deny Apex's motion to dismiss in part because “Apex chang[ed] the locks on the premises to exclude others, including the owners . . .” (Dkt. 122-30 at 5.)

         On December 22, 2010, the building caught fire. (Dkt. 135 ¶ 28; Dkt. 137 ¶ 12.) In their efforts to extinguish it, firefighters Corey Ankum and Edward Stringer died when the roof collapsed on them. (Dkt. 135 ¶ 28; Dkt. 137 ¶ 12.) In 2011 and 2012, the representatives of their families sued the Dais and Apex in state court to recover damages for the tragic deaths of Ankum and Stringer. (Dkt. 135 ¶ 31; Dkt. 137 ¶ 13.) The principal issue in that case was “‘whether Apex actually exercised dominion and control over the property so as to render it a possessor of the land for liability purposes.'” (Dkt. 135 ¶ 47 (citing Ex. 55, Mem. Op. at 5); Dkt. 137 ¶ 18 (citing Ex. 55, [ECF 133-56], July 18, 2016 Mem. Op. at 5).)

         Shortly before trial, Apex settled the families' claims for $15 million. (Dkt. 135 ¶ 57; Dkt. 137 ¶ 27.) Federal then disclaimed coverage for the settlement because Apex “acquired the property as a mortgagee in possession.” (Dkt. 135 ¶ 58; Dkt. 137 ¶ 28.) In March 2017, Apex sued Federal in district court to recover the money it believes Federal insured it for. (Dkt. 135 ¶¶ 68, 70; Dkt. 137 ¶ 29.)


         Summary judgment is proper when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see, e.g., Reed v. Columbia St. Mary's Hosp., 915 F.3d 473, 485 (7th Cir. 2019). The parties genuinely dispute a material fact when “‘the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'” Daugherty v. Page, 906 F.3d 606, 609-10 (7th Cir. 2018) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). “Rule 56 ‘mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential ...

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