Attorneys' Title Guar. Fund, Inc. v. Barlow
| Decision Date | 04 November 2013 |
| Docket Number | No. 1-12-2473,No. 1-12-2653,1-12-2473,1-12-2653 |
| Parties | ATTORNEYS' TITLE GUARANTY FUND, INC., Plaintiff-Appellee, v. DANIEL BARLOW, Defendant-Appellant (The City of Chicago and The Chicago Transit Authority, Defendants). ATTORNEYS' TITLE GUARANTY FUND, INC., Plaintiff-Appellant, v. THE CITY OF CHICAGO and THE CHICAGO TRANSIT AUTHORITY, Defendants-Appellees (Daniel Barlow, Defendant). |
| Court | United States Appellate Court of Illinois |
ORDER
¶1 Held: The circuit court erred in granting summary judgment for the plaintiff and dismissing two defendants because questions of material fact existed as to whether the defendant was a bona fide purchaser of a piece of property.
¶ 2 Defendant appeals from the circuit court's determination that he breached a real estate contract and statutory warranty deed provisions when he conveyed a parcel of property that he did not own to plaintiff's insured. He also disputes the amount of damages awarded to plaintiff. On appeal, he contends that the circuit court erred in interpreting the statutes governing real estate registration. Additionally, he contends that the damages award was against the manifest weight of the evidence. For the following reasons, we affirm in part and reverse in part and remand for further proceedings.
¶ 4 In 2004, defendant Daniel Barlow and Christopher Cotey entered into a real estate contract whereby Barlow purportedly conveyed three parcels of real estate to Cotey: a condominium unit, a deeded parking space, and a vacant 360-square foot parcel running along the back of the lot. At issue in this case is whether Barlow had title to the parcel at the back of the lot at the time he conveyed it to Cotey. The property, known as Parcel 3, is legally described as "the east 15 feet of the west 65 feet of Lot 18." The transaction closed on July 30, 2004, and a warranty deed was recorded in Cook County on August 31, 2004.
¶ 5 Plaintiff Attorneys' Title Guarantee Fund (ATG) issued a title insurance policy to Coteyin the course of this real estate transaction. Some time after closing, Cotey learned that Barlow may not have owned Parcel 3 at the time he conveyed it. Cotey filed a title insurance claim with ATG, which conducted its own investigation into ownership of Parcel 3 and determined that Barlow did not have title when he conveyed it to Cotey. ATG hired an appraiser to value the property and settled Cotey's claim for $162,600. Cotey then assigned his rights to ATG to seek recovery from Barlow.
¶ 6 ATG filed suit against Barlow asserting claims for a breach of the real estate contract and a breach of the statutory warranties that apply to the warranty deed. Paragraph 4 of the contract stated that Barlow "shall execute and deliver to [Cotey] *** a recordable Warranty Deed with release of homestead rights [for each of the three parcels] *** subject only to the following, if any: covenants, conditions, and restrictions of record ***." ATG alleged that the Warranty Deed that was executed by Barlow and delivered to Cotey did not convey "all right, title, and interest" in Parcel 3.
¶ 7 Rather, ATG alleged, Parcel 3 was owned by the City of Chicago (City) pursuant to a judgment order dated April 1, 1942, entered in an eminent domain lawsuit filed in Cook County. The City then enacted an ordinance on April 30, 1945, in which it granted to the Chicago Transit Authority (CTA) the right to "acquire, construct, reconstruct, maintain and operate facilities for local transportation" on Parcel 3. Accordingly, ATG sought to recover from Barlow the $162,600 it paid to Cotey, plus $1,806.25 it paid in appraisal fees.
¶ 8 ATG also filed alternative claims for trespass against the City and CTA. It alleged that the although the City obtained a judgment order to condemn Parcel 3 in 1941, it never perfectedits ownership interest by recording the judgment order with the Office of the Registrar as required by sections 49 and 85 of the Registered Titles (Torrens) Act (765 ILCS 35/49, 85) (West 1990)), a recording statute that was in effect at the time. The City was not listed on the title as it existed in the Torrens registration system.
¶ 9 Consequently, ATG alleged that when Barlow acquired Parcel 3 in 2002, he did so as a bona fide purchaser with no actual or constructive notice of the City's claim to the property. Similarly, ATG alleged that when Cotey acquired the property from Barlow, he was also a bona fide purchaser.
¶ 10 Therefore, ATG alleged, the City did not have title to the property and it lacked the authority to grant the CTA the right to use the property for transportation purposes. As a result, the CTA's use of Parcel 3 was a "continuous and unlawful entry" that "constitutes an actual interference with Cotey's right to exclusive possession of Parcel 3" and the City and the CTA are liable for trespass. ATG sought $164,406.25 in damages, representing the amount of the claim paid to Cotey plus appraisal expenses.
¶ 11 Finally, ATG asserted another alternative claim for a declaration of ownership of Parcel 3. It asserted that Cotey, Barlow, the City, and the CTA all claimed an ownership interest in the property at some point and their interests should be determined as a matter of law.
¶ 12 Barlow then filed a motion for summary judgment.1 He argued that he was a bona fidepurchaser of Parcel 3 and that the City has no claim to the property. He argued that because the City never recorded the judgment order for condemnation of Parcel 3 in the Torrens system, it did not appear as the title owner in the Torrens system. He argued that as a result, the City's purported interest in the property also was not recorded under a new system of title registration that was implemented in 1997.
¶ 13 Barlow explained that in 1997, the Torrens Act was repealed by the Torrens Repeal Law. 765 ILCS 40/1 et seq. (West 1997). The Torrens Repeal Law (Repeal Law) required that a Certificate of Title from the Torrens office must be filed with the Cook County Recorder of Deeds (Recorder) to register property under the new recording system and would reflect the title owner as it was listed in the Torrens system. 765 ILCS 40/7 (West 1997). Additionally, he asserted that section 7 of the Repeal Law stated that the newly-filed Certificate of Title "constituted a new chain of record title in the registered owner of any estate or interest as shown on the Certificate [of Title]."
¶ 14 Barlow argued that the Certificate of Title that issued to the Recorder in 1998 reflected that the title owner of Parcel 3 was George Sweet and contained no reference to the City's judgment order. Thus, he argued that whatever interest the City may have had in 1942 was extinguished in 1998 when the Certificate of Title was filed with the Recorder. He argued that he purchased Parcel 3 from Sweet in 2002 as a bona fide purchaser, as the chain of title did not reflect any ownership interest in the City or the CTA. Accordingly, as the bona fide purchaser,he owned Parcel 3 and transferred it to Cotey in 2004. Therefore, he did not breach the real estate contract or the warranty deed.
¶ 15 While Barlow's motion was pending, the City and the CTA filed motions to dismiss ATG's complaint pursuant to section 2-619 of the Code of Civil Procedure (735 ILCS 5/2-619 (West 2010)) (Code). It asserted that ATG's claim was barred by the statute of limitations under sections 13-109 and 13-118 of the Code. Specifically, it argued that under section 13-109, "the City and CTA exclusively possessed [Parcel 3] for at least seven consecutive years" and that having obtained tax-exempt status on the property, the City "paid all taxes legally assessed" on the property. Therefore, the City should be considered the legal owner of the property and not subject to this lawsuit. It also argued that under section 13-118, the 1942 judgment order cannot be challenged because "the Torrens Certificates obviously could not be trusted, [meaning] that [ATG], Barlow, and Cotey must be aware of the possibility that the 1942 Order had in fact been registered, but never memorialized."
¶ 16 The City explained that it filed a lis pendens against Parcel 3 in 1941, which was registered on the title certificate in the Torrens system. Some time thereafter, the title certificate was separated into two certificates, one of which reflected the lis pendens and one that did not. However, it is undisputed that the 1942 judgment order was never registered in the Torrens system. The City explained that the chain of title relied on by Barlow and Cotey and ATG (the George Sweet certificate) originates from the certificate that did not list the lis pendens. The other chain of title shows that title was transferred to Louise, Geraldine, and Brenda Fields and only reflected the lis pendens until 1962. According to the City, there was "no indication" as towhy the title certificate for Parcel 3 was treated this way. Nevertheless, the City further contended that it obtained tax exempt status for Parcel 3 "for at least the nine-year period from 1997 through 2006."
¶ 17 The City argued that regardless of whether the actual judgment order for condemnation was registered in the Torrens system, it obtained equitable title to Parcel 3 when it paid the condemnation judgment in 1942. The City further argued that because it held equitable title since 1942, it could only be divested of title if there was a conveyance to a bona fide purchaser. However, it argued, neither Barlow nor Cotey were bona fide purchasers because they had notice of the City's ownership of...
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