Deutsche Bank Nat'l Trust Co. v. Payton

2017 IL App (1st) 160305

76 N.E.3d 804

DEUTSCHE BANK NATIONAL TRUST COMPANY, Plaintiff-Appellee,

v.Gary Leigh PAYTON, Carla Watkins and Marvin Watkins, Defendants-Appellants.

No. 1-16-0305

Appellate Court of Illinois, First District, SECOND DIVISION.

April 11, 2017

Voelker Litigation Group, of Chicago (Daniel J. Voelker and Olga S. Dmytriyeva, of counsel), for appellants.

Stahl Cowen Crowley Addis, LLC, of Chicago (Ronald A. Damashek and Jeremy Kreger, of counsel), for appellee.

OPINION

JUSTICE NEVILLE delivered the judgment of the court, with 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 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.

¶ 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 deed² on July 17, 2005, transferring title to the subject property from the Watkinses to Fundingforeclosures.com.

¶ 6 On November 11, 2005, a warranty deed³ 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 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 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.

¶ 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 5/21005 (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 ...