McIntyre v. Bank of Am., N.A. (In re Estate of LaPlume), 2–13–0945.

24 N.E.3d 792

In re ESTATE OF Erika Anna LaPLUME, Deceased (Andrea McIntyre, as Independent Executor of the Estate of Erika Anna LaPlume, Petitioner and Defendant and Counterplaintiff–Appellant,

v. Bank of America, N.A., Respondent and Plaintiff and Counterdefendant–Appellee (Diamond Quest Realty, Inc., Respondent; Citibank (South Dakota) N.A., Capital One Bank (USA) N.A., and Citibank N.A., s/b/m to Citibank (South Dakota) N.A., Respondents and Defendants; Unknown Heirs and Legatees of Erika A. LaPlume, Unknown Owners and Nonrecord Claimants, and Julie Fox, as Special Representative of the Estate of Erika A. LaPlume, Deceased, Defendants)).

No. 2–13–0945.

Appellate Court of Illinois, Second District.

Dec. 4, 2014.

Fredric B. Lesser and Jeffrey P. O'Kelley, both of Lesser, Lutrey & McGlynn, LLP, of Lake Forest, for appellant.

Alan S. Kaufman and Keith Levy, both of Manley Deas Kochalski LLC, of Chicago, for appellee.

OPINION

Justice BIRKETT delivered the judgment of the court, with opinion.

¶ 1 Andrea McIntyre, the executor of the estate of decedent, Erika Anna LaPlume, challenges the judgment of the circuit court of Lake County dismissing her first and second petitions for approval to sell the subject property and granting Bank of America's motion to dismiss her counterclaim to the bank's complaint to foreclose the mortgage on the subject property. The executor contends that section 20–6 of the Illinois Probate Act of 1975 (Probate Act) (755 ILCS 5/20–6 (West 2012) ) trumps the Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15–1401.1(b), (c), 15–1107 (West 2012)) so that the probate court should have allowed the executor's counterclaim and approved the sale of the subject property free and clear of any remaining liens and mortgages. Because we determine that the probate court did not exercise its discretion under section 20–6 of the Probate Act, we reverse and remand.

¶ 2 I. BACKGROUND

¶ 3 The pertinent facts of record reveal that, on March 26, 2012, the decedent passed away, survived only by her daughter, the executor. The executor is also the “sole surviving heir and legatee” under the decedent's will. On June 25, 2012, the executor was formally appointed by the probate court to serve as executor of the decedent's estate. The subject property, the decedent's residence on Pheasant Ridge Drive in Lake Zurich, was the only asset of the estate. The subject property was encumbered by liens and mortgages totaling more than $207,000. Of this amount, the bank's lien totaled about $165,000.

¶ 4 On December 18, 2012, the bank filed a complaint for foreclosure against the subject property. The foreclosure action was filed separately from the probate of the decedent's estate.

¶ 5 On March 12, 2013, the executor filed her first petition for approval to sell the subject property. The executor represented that she had found a buyer for the subject property and that the sale price for that transaction was $200,000. In the petition, the executor named the bank along with all other known lienholders. The executor argued that section 20–6(b) of the Probate Act (755 ILCS 5/20–6(b) (West 2012)) permitted the probate court to order the short sale of the subject property and prorate the various encumbrances so that the property would be sold free and clear of all mortgages, liens, and encumbrances. The bank filed no response to the petition.

¶ 6 On April 17, 2013, the matter was consolidated in the probate court. In consolidating the actions, the probate court agreed with the executor that a judgment in the foreclosure proceeding could potentially conflict with the relief she was seeking in her petition for approval of the sale of the subject property. About two weeks later, the bank filed several motions, including a motion for an order of default in the now-consolidated foreclosure proceeding, a motion for the entry of a judgment of foreclosure and sale, and a motion to appoint an officer to conduct the sale. On May 28, 2013, the executor filed an answer to the bank's amended foreclosure complaint and a counterclaim. In the counterclaim, the executor restated her position that section 20–6(b) allowed the probate court to order a short sale, and she repeated the allegations of the petition for approval.

¶ 7 The bank did not file an answer to the counterclaim. Instead, on June 13, 2013, the bank filed a motion to dismiss the executor's counterclaim, pursuant to section 2–615 of the Code of Civil Procedure (Code) (735 ILCS 5/2–615 (West 2012) ). The parties proceeded to brief the matter, setting an August 29, 2013, hearing date for the motion and the petition for approval.

¶ 8 While the parties were briefing the matter, the executor managed to find a buyer who would purchase the subject property for $205,000. The purchase price was still less than the total amount of the encumbrances, so the executor would still be unable to sell the property free and clear unless the probate court employed section 20–6 of the Probate Act. On August 23, 2013, the executor filed a second petition for approval to sell the subject property, based on the August 15, 2013, contract to purchase the property for $205,000. The second petition advanced the same arguments, under section 20–6(b) of the Probate Act, raised in the first petition and the counterclaim. The bank did not file a response to the second petition.

¶ 9 On August 29, 2013, the probate court held a hearing on the executor's first and second petitions for approval and on the bank's motion to dismiss the executor's counterclaim. All interested parties had been given proper notice of the hearing, but only the executor and the bank appeared; another lienholder and the estate's special representative in the foreclosure proceeding (both of whom are not parties to this appeal) did not attend.

¶ 10 The probate court related, on the record, that it and the parties held an in camera discussion during which they expressed and explored their positions, but no verbatim record was maintained of the in camera discussion. The probate court further explained that, during the in camera discussion, it had been able to “pre-try [the] matter and discuss it [with the parties].” The court summarized the in camera discussion for the record, noting that its main inquiry:

“[E]ssentially [was] how does the Court get around the fact that existing statutory law in the [Foreclosure Law] and all the case law that [the probate court had] seen that basically says that the Court cannot invalidate, change, vacate, strike, ignore a mortgage and allow the Estate to sell the [subject property] free and clear of any liens and then basically net out the money in a percentage-base to all the lienholders[?]”

¶ 11 The court inquired about the specifics of the proposed sale of the subject property versus the various encumbrances, and the parties informed the court that the proposed sale price was $205,000, the bank held a mortgage of approximately $165,000, the total amount of the encumbrances was about $207,500, and that total did not include the 2012 and 2013 real estate taxes or interest for any of the judgment liens against the subject property. The probate court observed that the $207,500 figure also did not include any commission, real estate charges, attorney fees, or the like connected to the sale of the subject property and the administration of the estate.

¶ 12 In summarizing the in camera discussion, counsel for the executor stated that he disagreed with the probate court's in camera ruling but understood the court's position, because the executor had been unable to provide the court with any case law to support her position that the court was empowered by section 20–6(b) of the Probate Act to order a short sale extinguishing the encumbrances on the subject property and divide the resulting funds in a pro rata fashion. By contrast, counsel for the bank agreed with the probate court's ruling, asserting that the foreclosure action should be allowed to proceed and that, if it did, all pending matters would be resolved.

¶ 13 The probate court then orally held:

“Today the Court is going to make the following ruling. That the original motion for the sale of the property [ (the first petition for approval) ], the amended motion for the sale of the property with an amended contract offering $205,000 as a purchase price [ (the second petition for approval),] and the [executor's] counterclaim are going to be denied. I'm sorry. The original petition and the amended petition will be denied and dismissed. The counterclaim will be dismissed.

I'm going to make that a final and [appealable] Order. I think it's time we sort out, at least what I find, inconsistency between the [Foreclosure Law] and the cited portion of the [P]robate [A]ct that seems to give me almost unlimited power in this situation when read with the paragraphs preceding it. The foreclosure at this time is being ordered to be held on hold over the objection of the bank. The Court has told the bank that if they want to file a petition to move [the foreclosure proceeding] from my probate court and back into chancery, they can do that. I'm not giving any time limit. They need some time to decide whether or not that would be a proficuous idea. And today I'll need an Order to that effect.

And I'm hoping that we will find out whether or not in a probate situation a judge can strip, change, amend, vacate a foreclosure and let the estate sell the property for whatever it can get and divvy up the proceeds. So[,] thank you, gentlemen, very much. Thank you for your research and I will see—perhaps I'll see Mr. Shaw when he decides to move it into foreclosure, but right now it's on hold.”

¶ 14 After the hearing, the parties submitted a written order conforming to the probate court's oral pronouncement. The order asserted that it was immediately appealable under Illinois Supreme Court Rule 304(b)(1) (eff. Feb. 26, 2010), and, in the alternative, it also included language pursuant...