Agribank, FCB v. Rodel Farms, Inc.

Page 1016

623 N.E.2d 1016

251 Ill.App.3d 1050, 191 Ill.Dec. 426

AGRIBANK, FCB, a Federally Chartered Corporation, Successor by Merger to Farm Credit Bank of St. Louis Successor by Merger to the Federal Land Bank of St. Louis, Plaintiff-Appellee, v. RODEL FARMS, INC., Defendant-Appellant and Delbert Snyder, Deanna Snyder, Robert Snyder, Construction Equipment Credit Union, f/k/a Mid-Central Credit Union United States of America, acting through the Farmers Home Administration, United States Department of Agriculture Unknown Owners and Nonrecord Claimants, Defendants.

No. 3-93-0352.

Appellate Court of Illinois, Third District.

Nov. 19, 1993.

James G. Baber (argued), Stansell, Whitman & Baber, Monmouth, for Rodel Farms, Inc.

Robert Lindstrom, Mustain & Lindstrom, Galesburg, for Agribank, FCB, Farm Credit Bank of St. Louis, Federal Land Bank of St. Louis.

Justice BRESLIN delivered the opinion of the court:

The defendant, Rodel Farms, Inc., appeals from an order in a foreclosure action granting post-judgment possession of certain farm real estate to the plaintiff, Agribank, FCB. We affirm, finding that Rodel had constructive notice of the foreclosure proceeding and that the issues raised by Rodel on appeal are now moot.

In 1981, Agribank made a loan to defendants, Delbert Snyder, Deanna Snyder, and Robert Snyder (Snyders). The loan was secured by a mortgage on certain real estate in Fulton and Peoria counties. The Snyders defaulted on the loan, and in April 1988, Agribank filed a foreclosure complaint against the Snyders in the circuit court of Fulton County. At that same time, Agribank recorded a notice of foreclosure pursuant to section 15-1503 of the Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15-1503 (West 1992)). The complaint for foreclosure did not name Rodel as a party, even though Rodel had an interest in the property under a January 1988 lease with the Snyders. Rodel, however, did not record this lease.

In May 1988, the Snyders filed bankruptcy under chapter 11 of the United States Bankruptcy Code and were placed as debtors in possession of the property. In January 1989, the Snyders and Rodel entered into another lease which provided that Rodel would pay increased rent and that the lease was automatically renewable from year to year, but could be terminated by either party upon six months notice. In October 1989, the bankruptcy court dismissed the bankruptcy cases. Upon the dismissal of those cases, the circuit court of Fulton County entered a foreclosure judgment on January 9, 1990. This judgment was subsequently stayed by the bankruptcy court pending appeal of the bankruptcy cases. On February 10, 1993, the bankruptcy court granted Agribank's motion for relief from the stay, thereby allowing Agribank to proceed with the enforcement of the previously entered judgment of foreclosure.

On February 26, 1993, Rodel recorded the January 1989 lease agreement it had with the Snyders. In April 1993, Agribank filed a motion for post-judgment possession of the real estate under section 15-1701 of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1701 (West 1992)). Because Rodel had recorded its lease, Agribank gave Rodel notice of the hearing on the motion for post-judgment possession. Rodel filed a special and limited appearance and contested jurisdiction since it was not named as a party in the foreclosure action. The court found that it had jurisdiction over Rodel, and Rodel then argued the merits of Agribank's motion. After hearing arguments, the trial court granted Agribank's motion finding that Rodel's tenancy interest derived from the 1989 lease, and thus, Rodel's tenancy rights were subject to the trial court's rulings after the notice of foreclosure was filed in April 1988. Rodel appealed from that decision, but it did not seek a stay of the post-judgment possession order in the trial court or in this court. Further, Rodel did not seek a stay of the foreclosure sale scheduled for April 21, 1993. Thereafter, a foreclosure sale was held as scheduled and a report of sale was filed in the foreclosure action. Agribank filed a motion to confirm the sale and gave notice of the hearing on the motion to Rodel. Rodel did not appear at the hearing and the trial court entered an order confirming the sale. Rodel did not appeal from that order or request that it be stayed pending its appeal of the court's post-judgment possession order.

On appeal, Rodel first contends that it had a valid tenancy interest pursuant to the 1988 lease entered into with the Snyders prior to the foreclosure proceeding. Rodel argues that in order to bind it to the rights adjudicated in the foreclosure proceeding, the Bank had to make Rodel a party to the proceeding and that the lis pendens notice provision of section 2-1901 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1901 (West 1992)) was not effective to give Rodel constructive notice in this case because Rodel did not fall within the terms of that provision since it was in possession of the property at the time Agribank filed the foreclosure proceeding. Section 2-1901 of the Code provides in relevant part that a lis pendens notice filed in the county recorder's office is:

"constructive notice to every person subsequently acquiring an interest in or a lien on the property affected thereby, and every person acquiring an interest or lien as above stated, not in possession of the property and whose interest or lien is not shown of record at the time of filing such notice shall, for the purposes of this Section, be deemed a subsequent purchaser and shall be bound by the proceedings to the same extent and in the same manner as if he or she were a party thereto." (Emphasis added.) 735 ILCS 5/2-1901 (West 1992).

In its reliance on section 2-1901, Rodel ignores the fact that that section is not the only Illinois statutory lis pendens provision. Section 15-1503 of the Illinois Mortgage Foreclosure Law is another lis pendens provision and specifically applies to foreclosure proceedings and by its own terms takes precedence over a section 2-1901 notice. (See 735 ILCS 5/15-1503 (West 1992).) Section 15-1503 of the Foreclosure Law specifically provides that:

"a notice of foreclosure * * * made in accordance with this section and recorded in the county in which the mortgaged real estate is located shall be constructive notice of the pendency of the foreclosure to every person claiming an interest in or lien on the mortgaged real estate, whose interest or lien has not been recorded prior to the recording of such notice of foreclosure." (Emphasis added.) 735 ILCS 5/15-1503 (West 1992).

Furthermore, that section provides that:

"A notice which complies with this Section shall be deemed to comply with Section 2-1901 of the Code of Civil Procedure and shall have the same effect as a notice filed pursuant to that Section; however, a notice which complies with Section 2-1901 shall not be constructive notice unless it also complies with the requirements of this Section." 735 ILCS 5/15-1503 (West 1992).

Here, Rodel did not record its lease interest until 1993, which was five years after the lis pendens notice filed by the Bank. Rodel's recording of the lease was also after a judgment of foreclosure was entered in the case. Unlike section 2-1901 of the Code, section 15-1503 of the Foreclosure Law provides that the constructive notice is effective regardless of possession if the party claiming an interest fails to record that interest before the foreclosing party files its lis pendens notice. Thus, we find it immaterial whether Rodel relies on the 1988 lease or the 1989 lease, or both, since it did not record any lease interest until after the lis pendens notice, and thus, Rodel was deemed to have constructive notice of the foreclosure action and the circuit court could adjudicate rights affecting Rodel.

Rodel cites Mid-Town Petroleum, Inc. v. Dine (1983), 114 Ill.App.3d 112, 69 Ill.Dec. 878, 448 N.E.2d 596, and Niles Construction Co. v. LaSalle National Bank (1969), 119 Ill.App.2d 1, 254 N.E.2d 535, for the proposition that the lis pendens doctrine applies only to those acquiring an interest subsequent to the notice being filed. We find, however, that Rodel's reliance on those cases is misplaced. They do not involve foreclosure proceedings or notices pursuant to section 15-1503 of the Foreclosure Law.

Next, Rodel argues that Agribank waived any right to...