2017 IL App (1st) 160305
No. 1-16-0305
April 11, 2017
SECOND DIVISION
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
DEUTSCHE BANK NATIONAL TRUST ) Appeal from the Circuit Court
COMPANY, ) of Cook County.
)
Plaintiff-Appellee, )
) No. 07 CH 05861
v. )
) The Honorable
GARY LEIGH PAYTON, CARLA ) Robert E. Senechalle,
WATKINS and MARVIN WATKINS, ) Judge Presiding.
)
Defendants-Appellants. )
JUSTICE NEVILLE delivered the judgment of the court, with opinion.
Presiding Justice Hyman and Justice Pierce concurred in the judgment and
opinion.
OPINION
¶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
No. 1-16-0305
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.
1
The Paytons are not parties to this appeal.
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¶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.
2
A grant deed has some but not all of the usual covenants of title. The grantor warrants that he or
she (i) has not previously conveyed the estate being granted, (ii) has not encumbered the property
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¶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
except as noted in the deed, and (iii) will convey to the grantee any title to the property acquired after
the date of the deed. Black’s Law Dictionary 424 (7th ed. 1999).
3
A warranty deed is a stipulation by the grantor in which he guarantees to the grantee that title to
the property at issue will be good and that the grantor’s possession will be undisturbed. Midfirst Bank
v. Abney, 365 Ill. App. 3d 636, 644 (2006).
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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 Deutsche Bank’s motion for partial summary
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judgment on count II of their complaint and held that the Watkinses’ interests were
subordinate to the interest of Long Beach mortgage to the extent of $371,833.90.
¶ 12 On September 28, 2012, Deutsche Bank filed a motion for entry of a default judgment
against the Paytons and a motion requesting the entry of a judgment of foreclosure and sale
against all defendants who had not answered or appeared.
¶ 13 On April 1, 2013, Deutsche Bank filed a second motion for summary judgment on count
II of the complaint and requested the relief it had not previously obtained: “summary
judgment pursuant to 735 ILCS 5/2-1005, or, in alternative, for judgment of foreclosure
pursuant to 735 ILCS 5/15-1506.” In response, the Watkinses did not challenge the circuit
court’s previous order granting partial summary judgment based on Deutsche Bank’s
superior interest in the property. Instead, the Watkinses challenged the bank’s standing to
foreclose on the Paytons’ mortgage (i) because FundingForeclosures.com’s agents forged the
Watkinses’ signatures on the deed that conveyed the property to the Paytons and (ii) because
Deutsche Bank and its assignor did not have a written mortgage on the Watkinses’ property.
¶ 14 On May 28, 2013, Deutsche Bank filed a reply in support of its motion for summary
judgment on count II of the complaint and attached pages from Carla Watkins’s deposition in
which she testified that she recognized her signature on the warranty deed transferring title of
the subject property from the Watkinses to the Paytons, but she also testified that she did not
sign the deed. Deutsche Bank also attached pages from Marvin Watkins’s deposition, in
which he testified that he signed the warranty deed transferring title to the subject property
from the Watkinses to the Paytons.
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¶ 15 On June 11, 2013, the circuit court found that the Watkinses failed to file evidentiary
materials that created material issues of fact and granted the bank’s motion for summary
judgment pursuant to section 2-1005 of the Code of Civil Procedure (Code). 735 ILCS 5/2
1005 (West 2012). On July 12, 2013, the court entered a judgment of foreclosure and sale
pursuant to section 15-1506 of the Illinois Mortgage Foreclosure Law (Foreclosure Law).
735 ILCS 5/15-1506 (West 2012). On October 15, 2013, the property was sold by judicial
sale, and the bank was the successful bidder. The court confirmed the sale on November 7,
2013, without written objection. On December 22, 2015, the court granted Deutsche Bank’s
motion to voluntarily dismiss count I. Finally, the appellate court granted the Watkinses’
leave to file a late notice of appeal on February 10, 2016.
¶ 16 ANALYSIS
¶ 17 The Watkinses seek review of the circuit court’s June 11, 2013, order, which granted
Deutsche Bank’s motion for summary judgment on count II of Deutsche Bank’s complaint.
A circuit court may grant a motion for summary judgment only if the pleadings, depositions,
and admissions on file, together with any affidavits, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of law.
Thompson v. Gordon, 241 Ill. 2d 428, 438 (2011). We review a circuit court’s order that
grants a motion for summary judgment de novo. Thompson, 241 Ill. 2d at 438.
¶ 18 The Watkinses do not challenge the circuit court’s order, granting Deutsche Bank’s
motion for partial summary judgment on its equitable subrogation claim, but argue, instead,
that the circuit court erred when it granted Deutsche Bank’s motion for summary judgment
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because there was a genuine issue of material fact as to whether Deutsche Bank had standing
to foreclose on the subject property. Specifically, the Watkinses argue that
FundingForeclosures.com’s agents forged the deed transferring title to the subject property
from the Watkinses to the Paytons and that Deutsche Bank and its assignor did not have a
written mortgage with the Watkinses. Therefore, according to the Watkinses, Deutsche
Bank’s assignor acquired no interest in the subject property from the Paytons’ mortgage,
Deutsche Bank and its assignor did not have a written mortgage with the Watkinses, and
Deutsche bank had no standing to foreclose on the subject property. We disagree.
¶ 19 Equitable Subrogation
¶ 20 We note that the circuit court granted Deutsche Bank’s motion for partial summary
judgment based on the doctrine of equitable subrogation. The supreme court examined the
doctrine of subrogation and explained it as follows:
“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
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subrogation exists since this right depends upon the equities of each particular
case. [Citation.]
One who asserts a right of subrogation must step into the shoes of, or be
substituted for, the one whose claim or debt he has paid and can only enforce
those rights which the latter could enforce. [Citation.]” Dix Mutual Insurance
Co. v. LaFramboise, 149 Ill. 2d 314, 319 (1992).
¶ 21 We find that the Watkinses had mortgages on the subject property from Citimortgage and
Countrywide of approximately $371,833.90. Long Beach, Deutsche Bank’s assignor, loaned
the Paytons $450,000, and the Paytons executed a note and gave Long Beach a mortgage on
the subject property they acquired from the Watkinses. Deutsche Bank’s assignor used some
of the Paytons’ loan proceeds to extinguish the Watkinses’ prior mortgages on the subject
property with Citimortgage and Countrywide. By paying off the Watkinses’ two mortgages,
Deutsche Bank’s assignor (i) was subrogated by operation of law and stepped into the shoes
of the Watkins’ mortgagees, Citimortgage and Countrywide (LaFramboise, 149 Ill. 2d at
319), and (ii) acquired Citimortgage's and Countrywide’s priority interest in the subject
property. Ames Capital Corp. v. Interstate Bank of Oak Forest, 315 Ill. App. 3d 700, 705
(2000) (subrogation has been applied to subrogate one party to the lien priority of another).
¶ 22 We find that the circuit court properly found that Deutsche Bank’s assignor, after paying
off the Watkinses’ mortgages to Citimortgage and Countrywide, was subrogated to
Citimortgage's and Countrywide’s interest in the subject property. Therefore, the circuit court
correctly found that the Watkinses’ interest in the subject property was subordinate to
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Deutsche Bank or its assignor’s interest in the property (Interstate Bank, 315 Ill. App. 3d at
705) and correctly granted the bank’s motion for partial summary judgment.
¶ 23 Forged Deed
¶ 24 Next, we must determine if the circuit court erred when it granted Deutsche Bank’s
motion for summary judgment based on the doctrine of equitable subrogation when the
Watkinses claimed that the Paytons’ deed was forged, the bank’s assignor had no written
mortgage with the Watkinses, and Deutsche Bank lacked standing because its assignor had
no interest in the subject property. The doctrine of standing is designed to preclude persons
who have no interest in a controversy from bringing suit and assures that issues are raised
only by those parties that have a real interest in the controversy. Glisson v. City of Marion,
188 Ill. 2d 211, 221 (1999).
¶ 25 Under Illinois law, a lack of standing is an affirmative defense, which is the defendant’s
burden to plead and prove. Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252
(2010)). The burden was on the Watkinses to prove (i) that the Paytons had a forged deed and
that the bank and its assignor did not have a written mortgage and (ii) that because of the
forged deed and lack of a written mortgage, Deutsche Bank and its assignor lacked standing
to file a foreclosure complaint against the Paytons. Lebron, 237 Ill. 2d at 252; U.S. Bank
National Ass’n v. Sauer, 392 Ill. App. 3d 942, 946 (2009).
¶ 26 The Watkinses invoked section 2-619(a)(2) of the Code and asserted a legal defense: (i)
that Deutsche Bank lacked standing or the legal capacity to file a foreclosure action against
them because the Paytons obtained their mortgage with a forged deed or (ii) that Deutsche
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Bank’s assignor did not have a written mortgage with the Watkinses and therefore, without a
contractual nexus, the bank and its assignor had no standing to sue the Watkinses. See 735
ILCS 5/2-619(a)(2) (West 2012) (the plaintiff does not have legal capacity to sue or the
defendant does not have legal capacity to be sued).
¶ 27 We note, however, that the whole system of equity jurisprudence proceeds upon the
ground that a party having a legal right shall not be permitted to avail himself of it for the
purpose of injustice or fraud. Weaver v. Poyer, 79 Ill. 417, 421 (1875). We must determine
whether the circuit court properly restrained the Watkinses from invoking their standing
defense because it would be inequitable to assert the legal defense once Deutsche Bank’s
assignor extinguished the Watkinses’ indebtedness. Poyer, 79 Ill. at 421.
¶ 28 The Foreclosure Law defines a mortgagee as the holder of an indebtedness and any
person claiming through a mortgagee as successor (735 ILCS 5/15-1208 (West 2006)) and
includes the mortgagee’s assignee. Klehm v. Grecian Chalet, Ltd., 164 Ill. App. 3d 610, 617
(1987). By extinguishing the Watkinses’ mortgages with Citimortgage and Countrywide,
Long Beach acquired a legally cognizable interest in the subject property that gave its
successor, Deutsche Bank, the trustee and the legal holder of the Watkinses’ indebtedness,
standing to commence a foreclosure action against the Watkinses. Glisson, 188 Ill. 2d at 221;
735 ILCS 5/15-1504(a)(3)(N) (West 2006) (the Foreclosure Law indicates that the legal
holder of the indebtedness—a pledgee, an agent, a trustee under a trust deed, or otherwise—
may file the case).
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¶ 29 While a complaint, answer, and responsive pleadings may purport to raise issues of
material fact, if such issues are not further supported by evidentiary facts in affidavits,
admissions, or depositions, summary judgment is inappropriate. Carruthers v. B.C.
Christopher & Co., 57 Ill. 2d 376, 380 (1974). We find, after reviewing the record, that the
Watkinses failed to present evidentiary materials—admissions, affidavits or depositions—
that created a material issue of fact and established that the Paytons’ deed was forged.
¶ 30 We also find that the Watkinses would be unjustly enriched if Deutsche Bank’s
assignor’s paid off the Watkinses’ two mortgages and paid the Watkinses $119,583.92, but
the Watkinses were permitted to invoke a legal defense that divested the bank of its interest
in the property. The doctrine of equitable subrogation is the remedial device designed to
prevent an unjust enrichment. State Farm Mutual Insurance Co. v. Du Page County, 2011 IL
App (2d) 100580, ¶ 32. Therefore, even if the Paytons acquired the subject property through
a forged deed and even if the bank and its assignor had no written mortgage with the
Watkinses, Deutsche Bank’s assignor acquired standing when it paid off the Watkinses’
mortgages and its successor, Deutsche Bank, as trustee, had a right to predicate its
foreclosure action against the Watkinses on the fact that it was the legal holder of the
Watkinses’ indebtedness. Glisson, 188 Ill. 2d at 221; 735 ILCS 5/15-1504(a)(3)(N) (West
2006). Accordingly, we find that the circuit court properly granted Deutsche Bank’s motion
for summary judgment because even if the Paytons’ deed was forged and there was no
written mortgage, the doctrine of equitable subrogation prevented the circuit court from
permitting the Watkinses’ to be unjustly enriched.
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¶ 31 Illinois case law notes that the right to equitable subrogation depends upon the equities of
each case. Interstate Bank of Oak Forest, 315 Ill. App. 3d at 706. Here, given Deutsche
Bank’s assignor’s payoff of the Watkinses’ two mortgages and payout of $119,583.92 to the
Watkinses, and given our need to avoid an unjust result, we find the equities are with
Deutsche Bank. Accordingly, we hold that the circuit court did not err when it granted
Deutsche Bank’s motion for summary judgment based on the doctrine of equitable
subrogation.
¶ 32 CONCLUSION
¶ 33 The circuit court correctly applied the doctrine of equitable subrogation, given the
equities in this case. Accordingly, we affirm the circuit court’s order that granted Deutsche
Bank’s motion for summary judgment.
¶ 34 Affirmed.
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