Nos. 2--95--1366, 2--95--1391 cons.
_________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
_________________________________________________________________
FIRST AMERICAN TITLE INSURANCE ) Appeal from the Circuit Court
COMPANY and WINNEBAGO COUNTY ) of Winnebago County.
TITLE COMPANY, )
)
Plaintiffs-Appellees, ) No. 93--MR--225
)
v. )
)
TCF BANK, F.A., f/k/a TCF )
Savings Bank, F.S.B., ) Honorable
) Gerald F. Grubb,
Defendant-Appellant. ) Judge, Presiding.
_________________________________________________________________
FIRST AMERICAN TITLE INSURANCE ) Appeal from the Circuit Court
COMPANY and WINNEBAGO COUNTY ) of Winnebago County.
TITLE COMPANY, )
)
Plaintiffs-Appellants, ) No. 93--MR--225
)
v. )
)
TCF BANK, F.A., f/k/a TCF )
Savings Bank, F.S.B., ) Honorable
) Gerald F. Grubb,
Defendant-Appellee. ) Judge, Presiding.
_________________________________________________________________
JUSTICE McLAREN delivered the opinion of the court:
The defendant, TCF Bank, appeals the trial court's order of
April 27, 1995, denying the defendant's motion for summary
judgment and granting partial summary judgment in favor of the
plaintiffs, First American Title Insurance Company (First
American) and Winnebago County Title Company (Winnebago). The
plaintiffs appealed the court's denial of part of their summary
judgment motion, and the defendant appealed the court's partial
granting of the plaintiffs' summary judgment motion. In
addition, the Illinois Land Title Association (Association) filed
an amicus curiae brief. We affirm in part, reverse in part, and
remand for further proceedings.
The following facts are taken from the pleadings and
supporting documents and affidavits. On May 3, 1989, the
defendant granted Patricia Bartholomew a 10-year, $40,000
revolving line of credit secured by a mortgage on Bartholomew's
home located at 820 South 19th Street, Rockford, Illinois. A
revolving line of credit is an arrangement between a lender and a
debtor in which the lender may from time to time make loans or
advances to the debtor. Ill. Rev. Stat. 1989, ch. 17, par. 6405.
Further, "[a]ny mortgage *** given to secure a revolving credit
loan may *** secure not only the existing indebtedness, but also
such future advances *** made within [the next] twenty years."
Ill. Rev. Stat. 1989, ch. 17, par. 312.3. On May 5, 1989, the
defendant recorded the mortgage document with the Winnebago
County recorder of deeds. The document states in part: "This
mortgage secures a revolving line of credit under which advances,
payments and readvances may be made from time to time."
On May 18, 1990, TCF Mortgage Corporation (TCF Mortgage)
granted Bartholomew a traditional loan secured by Bartholomew's
home; the same property used to secure the defendant's loan.
This subsequent mortgage was recorded on May 23, 1990. Plaintiff
Winnebago acted as closing agent and title insurer for this
second loan for plaintiff First American. Plaintiff Winnebago
guaranteed that TCF Mortgage was not subject to any "covenants,
conditions or restriction" under which TCF Mortgage's lien would
be subordinated. On May 18, 1990, the defendant sent plaintiff
Winnebago a "payoff" letter stating the amount to be paid in full
to satisfy the defendant's loan. The letter indicated the payoff
amount was $35,785.78. The letter also stated: "[t]his is a
credit line; checks may be outstanding. Please call *** for an
updated payoff figure before closing." On May 18, 1990,
plaintiff Winnebago sent a check to the defendant for the sum
requested in the payoff letter. On the face of the check
appeared the words "For Mortgage Payoff." The defendant cashed
the check on May 23, 1990. At that time, Bartholomew's credit-
line mortgage balance was reduced to zero. However, the
defendant did not release its lien on Bartholomew's home.
Subsequently, Bartholomew borrowed almost $40,000 on the
defendant's line of credit. When Bartholomew defaulted, the
defendant foreclosed its mortgage on her home. The plaintiffs
brought this suit seeking release of the defendant's lien,
damages, and the placement of TCF Mortgage's lien in first lien
position. The plaintiffs filed a motion for partial summary
judgment, and the defendant filed a motion for summary judgment.
The defendant and the plaintiffs both appeal. The cases have
been consolidated.
The trial court granted partial summary judgment in the
plaintiffs' favor ruling that (1) as a matter of law, the
defendant was not required to release the lien; and (2) as a
matter of equity, the defendant must either release the lien or
return the funds forwarded by plaintiff Winnebago to pay off the
mortgage. The trial court ordered the defendant either to pay
back the payoff money or to release its lien. The parties and
the Association essentially raise two issue on appeal: (1)
whether the defendant was legally obligated to release its lien;
and (2) whether the defendant was obligated, under principles of
equity, either to release the lien or to return the payoff funds
to plaintiff Winnebago.
Summary judgment is proper when the pleadings, depositions,
and affidavits demonstrate that no genuine issue of material fact
exists and that the moving party is entitled to judgment as a
matter of law. 735 ILCS 5/2--1005(c) (West 1994). In
adjudicating a summary judgment motion, a court must construe the
evidence strictly against the movant and liberally in favor of
the nonmoving party. Espinoza v. Elgin, Joliet & Eastern Ry.
Co., 165 Ill. 2d 107, 113 (1995); Guerino v. Depot Place
Partnership, 273 Ill. App. 3d 27, 30 (1995). "[S]ummary judgment
is encouraged to aid the expeditious disposition of a lawsuit."
Espinoza, 165 Ill. 2d at 113. However, it is a drastic means of
resolving litigation and should be allowed only when the moving
party's right to judgment is clear and free from doubt. Guerino,
273 Ill. App. 3d at 30. "Therefore, where reasonable persons
could draw divergent inferences from the undisputed material
facts or where there is a dispute as to a material fact, summary
judgment should be denied and the issue decided by the trier of
fact." Espinoza, 165 Ill. 2d at 114. We conduct a de novo
review of an order granting or denying summary judgment.
Espinoza, 165 Ill. 2d at 113.
After reviewing the applicable statutes, the pleadings,
along with the supporting documents and affidavits, we determine
that the defendant was not legally obligated to release its lien
on Bartholomew's home. Contrary to the opinion of the special
concurrence, we do not determine that Winnebago was prevented
"from requesting a release of the Bartholomew lien." Slip op. at
12. The mortgage instrument provides in part:
"Termination of this Mortgage. If borrower pay [sic]
to Lender all of the amounts owed to Lender under this
Mortgage and under the agreement, and keeps all promises
made in this Mortgage and in the Agreement, then Lender's
rights in the Property will end. Lender will send Borrower
a document stating this and Borrower can file it with the
County in which the Property is located."
Further, the agreement between Bartholomew and the defendant
provides in part that the defendant "will not release the lien
until [Bartholomew has] paid [the defendant] everything [she]
owe[s] [the defendant] under this agreement and [has] cancelled
this agreement." Thus, under the clear and unambiguous language
of the mortgage and agreement, the defendant had no obligation to
release its lien on Bartholomew's property until or unless
Bartholomew cancelled the agreement.
Further, the applicable statute clearly indicates that the
defendant was not obligated to release the lien without a request
from Bartholomew. It is well established that in interpreting a
statute we must give the language used by the legislature its
plain and ordinary meaning. Boaden v. Department of Law
Enforcement, 171 Ill. 2d 230, 237 (1996). Section 4.1 of the
Interest Act mandates that the request for a release must come
directly from the borrower. Ill. Rev. Stat. 1989, ch. 17, par.
6405. The Interest Act permits a lender to take an interest in
real property to secure a revolving credit agreement "in excess
of $5,000." Ill. Rev. Stat. 1989, ch. 17, par. 6405. The
Interest Act also provides that "[a]ny request by a borrower to
release a security interest under a revolving credit arrangement
shall be granted by the lender provided the borrower renders
payment of the total outstanding balance as required by this
Section before the security interest of record may be released."
Ill. Rev. Stat. 1989, ch. 17, par. 6405. We determine that the
clear and unambiguous language of the statute explicitly limits
who may make a proper request for a release of a lien to the
borrower alone. Neither party has alleged that Bartholomew
requested a release from the defendant. Thus, we determine that
the trial court correctly ruled that, as a matter of law, the
defendant was not obligated to release Bartholomew's lien after
cashing plaintiff Winnebago's payoff check.
The plaintiffs argue that the last sentence of section 4.1
mandates a lender to release a mortgage lien upon "[a]ny request"
and full payment of the account. However, when the phrase "[a]ny
request" is read in context, it is clear that it refers to how
the request may be made, not who may make it. The entire phrase
reads "[a]ny request by a borrower." Thus, the plaintiffs'
argument fails.
The plaintiffs also cite section 2 of the Mortgage Act (Ill.
Rev. Stat. 1989, ch. 95, par. 52) to support their argument.
Section 2 provides in part:
"Every mortgagee of real property *** having received
full satisfaction and payment of all such sum or sums of
money as are really due to him from the mortgagor ***
[shall] make, execute and deliver to the mortgagor *** an
instrument in writing *** releasing such mortgage *** or
shall deliver that release to the recorder or registrar for
recording or registering." Ill. Rev. Stat. 1989, ch. 95,
par. 52.
However, the plaintiffs fail to recognize that the legislature
provided different requirements for traditional mortgages and
revolving credit loans. Section 2 of the Mortgage Act (Ill. Rev.
Stat. 1989, ch. 95, par. 52) applies to "mortgages," while the
section 4.1 of the Interest Act (Ill. Rev. Stat. 1989, ch. 17,
par. 6405) and section 5d of the Illinois Banking Act (Ill. Rev.
Stat. 1989, ch. 17, par. 312.3), apply to "revolving credit
loans." Because the case at bar involves a revolving credit
loan, and not a traditional mortgage, the plaintiffs' argument
fails.
Next, the plaintiffs and the Association argue that the
plaintiffs acted as an agent for Bartholomew, and, thus,
Bartholomew requested a release through the plaintiffs. It is
well established that an agent's authority may be either actual
or apparent. See FDL Foods, Inc. v. Kokesch Trucking, Inc., 233
Ill. App. 3d 245, 256 (1992). Actual authority may be granted
either expressly or impliedly. FDL Foods, Inc., 233 Ill. App. 3d
at 256. Further, "[a]n 'apparent agent' is a person who, whether
authorized or not, reasonably appears to third persons, because
of acts of another, to be authorized to act as agent for such
other person." FDL Foods, Inc., 233 Ill. App. 3d at 256, citing
Mitchell Buick & Oldsmobile Sales, Inc. v. National Dealer
Services, Inc., 138 Ill. App. 3d 574, 582 (1985). However, it is
well established that the authority of an agent, whether actual
or apparent, can only be established upon the words and conduct
of the alleged principal, not the alleged agent. Tierney v.
Community Memorial General Hospital, 268 Ill. App. 3d 1050, 1062
(1994); Wadden v. Village of Woodridge, 193 Ill. App. 3d 231, 239
(1990). In this case, there is nothing in the record to indicate
that the defendant should have reasonably believed that the
plaintiffs possessed the actual or apparent authority to request
a release on Bartholomew's behalf. Thus, the plaintiffs'
argument fails.
We now address whether the trial court correctly ruled that
the defendant was obligated, under principles of equity, either
to release its lien or to return the payoff funds to the
plaintiffs. Although the trial court ruled that principles of
equity apply to this case and ordered the defendant either to
release its lien or to pay back the payoff money, the trial court
did not articulate which equitable theory it applied.
The plaintiffs claim that equitable subrogation applies to
this case. Our supreme court explained the doctrine in the
following manner:
"The doctrine of subrogation is a creature of chancery.
It is a method whereby one who has involuntarily paid a debt
or claim of another succeeds to the rights of the other with
respect to the claim or debt so paid. [Citation.] The
right of subrogation is an equitable right and remedy which
rests on the principle that substantial justice should be
attained by placing ultimate responsibility for the loss
upon the one against whom in good conscience it ought to
fall. [Citation.] Subrogation is allowed to prevent
injustice and unjust enrichment but will not be allowed
where it would be inequitable to do so. [Citation.] There
is no general rule which can be laid down to determine
whether a right of subrogation exists since this right
depends upon the equities of each particular case." Dix
Mutual Insurance Co. v. LaFramboise, 149 Ill. 2d 314, 319
(1992).
Thus, if this theory applies to this case, the subrogee
(plaintiffs) would stand in the place of the debtor
(Bartholomew). Dix Mutual Insurance Co. 149 Ill. 2d at 319.
Accordingly, the defendant in this case would be obligated to
release its lien.
The plaintiffs also argue that principles of equitable
estoppel should apply to this case. "Generally, the doctrine of
equitable estoppel may be invoked when a party reasonably and
detrimentally relies on the words or conduct of another."
Brown's Furniture, Inc. v. Wagner, 171 Ill. 2d 410, 431 (1996).
Equitable estoppel is based on the principle that one may not act
in a certain manner and then take an inconsistent position which
prejudices another who acted in reliance of the act. Empire Fire
& Marine Insurance Co. v. Faith Truck Lines, 178 Ill. App. 3d
356, 359 (1988). Thus, if this theory applies, the defendant
would be estopped from asserting its priority lien status. See
Empire Fire, 178 Ill. App. 3d at 359.
We note, in passing, that the equitable principle of unjust
enrichment may also apply to this case. Unjust enrichment
applies where: (1) a party performs a service which benefits
another party; "(2) the benefitting party accepts the benefit;
and (3) the circumstances indicate that the service was not
intended to be gratuitous." Village of Clarendon Hills v.
Mulder, 278 Ill. App. 3d 727, 735 (1996). Thus, under this
theory, the defendant would be required either to release its
lien or to return the benefit it received from the plaintiffs;
i.e., the money given to pay off Bartholomew's debt. See HPI
Health Care Services, Inc. v. Mt. Vernon Hospital, Inc., 131 Ill.
2d 145, 160 (1989) ("unjust enrichment underlies a number of
legal and equitable actions and remedies, including *** the legal
actions of assumpsit and restitution or quasi-contract").
After reviewing the record, we determine that summary
judgment is precluded because a genuine issue of material fact
exists. 735 ILCS 5/2--1005(c) (West 1994). The plaintiffs
alleged that Winnebago requested a release from the defendant at
the same time it sent the payoff check. The defendant denies
this allegation. However, neither party has conclusively
supported its allegation regarding this issue. Further, neither
party provides any information regarding whether, under the
circumstances, the defendant knew or should have known that
plaintiff Winnebago expected a release in exchange for the payoff
check. Moreover, neither party provides any information
regarding whether plaintiff Winnebago reasonably relied on the
defendant's act of cashing the payoff check as an indication that
the defendant intended to release its lien. Therefore, there is
a material issue of fact as to whether the plaintiffs are
entitled to equitable relief and the nature and extent thereof.
Accordingly, we reverse that portion of the trial court's
judgment granting partial summary judgment in the plaintiffs'
favor and remand for further proceedings.
Finally, the defendant argues that a judgment ordering
release or payback of the money would be contrary to section 4.1
of the Interest Act (Ill. Rev. Stat. 1989, ch. 17, par. 6405).
We disagree. We acknowledge that equity must follow the law and
that the legislature may limit the equitable power of the courts.
In re Liquidation of Security Casualty Co., 127 Ill. 2d 434, 447
(1989). However, nothing in the Interest Act expressly precludes
equitable remedies. Further, the Interest Act does not address
the issue of returning the funds from a payoff check when equity
so demands. Thus, this argument fails.
Finally, unlike the opinion of the special concurrence, we
do not wish to speculate as to what evidence may or may not be
sufficient to sustain the relief the trial court may ultimately
grant or deny, nor do we deem it necessary to opine as to how the
trial court should view the evidence presented upon a hearing on
the merits.
That part of the judgment of the circuit court of Winnebago
County denying relief as a remedy at law is affirmed. That part
of the judgment granting relief in equity is reversed and the
cause is remanded for further proceedings in accordance with this
opinion.
Affirmed in part and reversed in part; cause remanded.
RATHJE, J., concurs.
JUSTICE HUTCHINSON, specially concurring:
I concur in the majority's judgment. I agree a genuine
issue of material fact exists in the form of whether Winnebago
requested a release from defendant. However, because I believe
the majority does not sufficiently delineate what plaintiffs must
prove to be entitled to equitable relief, I write separately to
provide the trial court with guidance upon remand.
Initially, the reasonableness of any reliance or expectation
forming the basis for equitable relief must be determined in
light of section 4.1 of the Interest Act. The majority
determined that section 4.1 clearly and unambiguously prevented
Winnebago from requesting a release of the Bartholomew lien. The
fact that the action out of which arises Winnebago's need to seek
equitable relief is beyond the title company's legal authority
militates strongly against a finding of reasonableness. How may
a party reasonably rely, or reasonably expect something in
return, on the basis of an action the law does not permit the
party to take?
Assuming this hurdle can be cleared, any equitable theory
potentially forming the basis of a ruling in favor of plaintiffs
should not be premised exclusively on evidence that Winnebago
sent defendant what the title company alleges was a "payoff"
check on the revolving credit line. Such evidence does not,
standing alone, establish that (1) Winnebago reasonably expected
a release of defendant's lien; (2) defendant reasonably should
have known Winnebago expected a release; (3) Winnebago's reliance
was reasonable; (4) Winnebago reasonably expected its lien to
take priority over defendant's lien; (5) defendant reasonably
should have known Winnebago expected its lien to take priority
over defendant's lien; and (6) Winnebago paid down the revolving
credit line "involuntarily."
Basing any of the preceding findings exclusively on the
paying down of the Bartholomew revolving credit line would
require defendant to act as Winnebago's attorney--and, failing
this, to be prescient. Defendant should not be required to
divine the reasons for and consequences of actions undertaken by
Winnebago. Sophisticated business entities engaged in arms-
length transactions should not be duty bound to decipher and
discern the motivations for business decisions made by other
sophisticated business entities whose personnel fail to acquaint
themselves with the clear and unambiguous meaning of the law. On
remand, if the trial court discovers only that the parties
exchanged paperwork under the impression that the revolving
credit line was a traditional mortgage--i.e., neither party
understood that a revolving credit line is governed by different
legal principles--I believe that the trial court should find
Winnebago's reliance, its expectation of a release of defendant's
lien, and the expectation of gaining first priority over this
lien unreasonable.
This will be a difficult case on remand. One of these
parties will be burdened with $40,000 of apparently uncollectible
debt. Such an outcome creates a powerful and just incentive for
sophisticated lending institutions and their associated entities
to read and abide by the law. Persons are presumed to know the
law and ignorance of the same is no excuse. See In re Cheronis,
114 Ill. 2d 527, 535 (1986) (stating that attorney's commingling
of client funds is not excused because attorney was unaware such
conduct was prohibited); Pyle v. Ferrell, 12 Ill. 2d 547, 554-55
(1958) (stating that party's failure to take remedial action is
not excused because he did not understand his mineral rights
could be sold to satisfy delinquent taxes without sale of
attendant land); Singh v. Department of Professional Regulation,
252 Ill. App. 3d 859, 868 (1993) (stating that pharmacist's lack
of compliance with controlled substances reporting requirements
not excused because he was unaware of such requirements); In re
Estate of Winters, 239 Ill. App. 3d 730, 736 (1993) (stating that
party is presumed aware of statutory probate claim period),
quoting In re Estate of Malone, 198 Ill. App. 3d 960, 964 (1990)
(same); Kampen v. Department of Transportation, 150 Ill. App. 3d
578, 581 (1986) (stating that party transporting corrosive
liquids is presumed aware of regulations governing this
activity), citing United States v. International Minerals &
Chemical Corp., 402 U.S. 558, 563, 29 L. Ed. 2d 178, 182, 91 S.
Ct. 1697, 1701-02 (1971). This fundamental notion must apply
equally to mammoth corporations as it does to the common man.
Equity is not a palliative for a party's folly, nor does a harsh
result convert the ignorance of one party into an injustice by
another.
I note, in further passing, plaintiffs did not raise the
question of unjust enrichment in their briefs. Therefore, I
believe it is unnecessary to discuss this equitable doctrine.