Flora Bank & Trust v. Czyzewski

• Decision Date: 26 December 1991
• Docket Number: No. 5-90-0763,5-90-0763
• Citation: 164 Ill.Dec. 804,583 N.E.2d 720,222 Ill.App.3d 382
• Parties: , 164 Ill.Dec. 804 FLORA BANK & TRUST, a banking corporation, Plaintiff-Appellant, v. Michael L. CZYZEWSKI, et al., Defendants-Appellees (Unknown Owners et al., Defendants).
• Court: United States Appellate Court of Illinois

Page 720

583 N.E.2d 720

222 Ill.App.3d 382, 164 Ill.Dec. 804

FLORA BANK & TRUST, a banking corporation, Plaintiff-Appellant, v. Michael L. CZYZEWSKI, et al., Defendants-Appellees (Unknown Owners et al., Defendants).

No. 5-90-0763.

Appellate Court of Illinois Fifth District.

Dec. 26, 1991.

John R. Meyer, Meyer & Meyer, Flora, for plaintiff-appellant.

Mark Tungate, Flora, for Angela K. Czyzewski Wooley.

Eric L. Terlizzi, Pfaff, Garner & Terlizzi, Salem, no brief filed, for Michael Czyzewski.

Justice WELCH delivered the opinion of the court:

Flora Bank & Trust appeals from a judgment of the circuit court of Fayette County, entered October 30, 1990, which barred deficiency judgments against Michael L. Czyzewski and Angela K. Czyzewski Wooley (appellees) in the bank's mortgage foreclosure action against them. The pertinent facts are as follows.

On March 21, 1990, Flora Bank & Trust (hereinafter "Bank") filed a complaint for foreclosure against appellees, seeking to foreclose its mortgage lien on a residence owned by appellees. The complaint alleges that the amount of the original indebtedness was $18,000, that appellees were in default under the terms of the mortgage, and that the total amount due was $17,012.55, plus interest and costs. The complaint further alleges that both appellees are personally liable for any deficiency. The complaint prays for a judgment of foreclosure and a personal judgment for any deficiency, as well as authorization for a judicial sale of the property.

On May 11, 1990, a judgment was entered by the circuit court of Fayette County pursuant to a stipulation entered into between Bank and each appellee. The stipulation provides that appellees admit all of the allegations of the complaint for foreclosure, that appellees have agreed to execute and deliver to Bank deeds conveying their respective interests in the property to Bank and that said deeds shall be made subject to the terms and provisions of the stipulation and judgment to be entered, and that appellees waive all rights of homestead and rights of redemption. Finally, the stipulation provides that the judgment is approved by the appellees and that appellees consent to entry of said judgment. The stipulation is dated May 3, 1990, and is signed by appellee Wooley and her attorney, Mark Tungate, and by appellee Czyzewski, as well as by the attorney for Bank. Appellee Czyzewski was not represented by counsel at the time he executed the stipulation.

The judgment entered upon the stipulation finds that the stipulation was entered into freely and voluntarily and is not unconscionable. The judgment further finds that the stipulation should be approved and that a judgment and order should be entered in accordance with said stipulation and that the court should retain jurisdiction of the cause for the purpose of enforcing all the terms of the judgment. The judgment finds that there was due to Bank from the appellees the sum of $18,861.92. The judgment ordered that appellees be barred from the right of redemption, that the mortgaged real estate be sold by Bank at public auction, and that said sale shall be to satisfy the amount due the Bank as set forth in the judgment. The terms of the sale were set forth. The manner of the disposition of the proceeds of the sale was set forth and included the provision that any surplus would be remitted to the appellees. Finally, the judgment provides that if the money arising from the sale is insufficient to pay the amount due Bank, the person conducting the sale shall specify the amount of the deficiency in the report of sale and a judgment shall be entered therefor.

On June 13, 1990, a report of sale was filed by the Bank's attorney indicating that the property had sold at auction for the sum of $4,600. The report indicated that, in the opinion of Bank, the property was worth substantially more than this amount and that the sale should be disapproved and the property be resold with a fixed minimum price. Appellee Wooley also filed an objection to the sale for the reason that the property was worth substantially more than $4,600.

On June 29, 1990, appellee Czyzewski filed a motion to bar entry of deficiency judgment. The motion alleges that appellee had executed and delivered to Bank a deed in lieu of foreclosure, that section 15-1401 of the Illinois Mortgage Foreclosure Law (Ill.Rev.Stat.1989, ch. 110, par. 15-1401) provides that Bank's acceptance of a deed in lieu of foreclosure relieves all persons from personal liability on the debt except to the extent a person agrees not to be so relieved in an instrument executed contemporaneously, and that appellee did not contemporaneously execute any such instrument. On July 31, 1990, appellee Wooley filed a similar motion to bar entry of deficiency judgment. On August 2, 1990, appellee Wooley filed an amendment to her motion to bar entry of deficiency judgment, alleging that appellee Wooley did, in fact, execute an instrument contemporaneously with her execution of the deed in lieu of foreclosure but that that instrument is vague and ambiguous as to whether appellee could be held liable for a deficiency. Because the instrument was drafted by Bank, any ambiguity should be construed against Bank and in favor of appellee. Therefore, appellee argued, she was not liable for a deficiency.

On August 6, 1990, the court entered an order disapproving the sale and ordering that the property be resold. The court refused to set a minimum price.

On September 26, 1990, a second report of sale was filed by Bank's attorney indicating that the property had sold at auction for the sum of $7,600 and that a deficiency of $12,469.41 existed. The report prayed that the sale be approved and that a deficiency judgment be entered.

On October 2, 1990, appellee Czyzewski filed a motion to bar entry of deficiency judgment similar to the motion he had previously filed. On October 4, 1990, appellee Wooley also filed a motion to bar entry of deficiency judgment similar to her amended motion previously filed.

Hearing was held on these motions on October 4, 1990. Appellee Czyzewski's attorney pointed out three paragraphs of the stipulated judgment which bear on the point at issue.

Paragraph 3 of that judgment provides as follows:

"(3) The mortgaged real estate shall be sold by Plaintiff. That Plaintiff may either employ an auctioneer or use either an officer of the bank or the bank's attorney to conduct the sale. That the sale of said premises shall be for cash with twenty percent of the sale price to be paid on the date of the public sale and the balance of the purchase price to be paid upon delivery of the deed by Plaintiff to purchaser within ten days of the date of the sale. That the abstracts of title covering said premises owned by Michael L. Czyzewski and Angela K. Czyzewski Wooley which are now in the possession of the Plaintiff and the supplemental abstract obtained by Plaintiff in connection with the preparation of the Complaint in this case shall be delivered to the purchaser at said sale. That said sale shall be to satisfy the amount due the Plaintiff as set forth in this judgment together with interest thereon at the statutory judgment rate from the date of this judgment." (Emphasis added.)

Paragraph 17 provides as follows:

"(17) The proceeds resulting from the sale ordered herein shall be applied in the following order:

(a) The reasonable expenses of sale, including but not limited to abstract costs, any necessary title insurance costs, publication of notices and advertising costs, auctioneer's costs, insurance on the premises, both prior to and after the filing of the Complaint to the time of the delivery of the deed to the purchaser, and the fees of Plaintiff's attorney in connection with such sale;

(b) The reasonable expenses of holding, maintaining and preparing the real estate for sale, including premiums on hazard and liability insurance;

(c) Satisfaction of the mortgage indebtedness of Plaintiff, including its costs in this proceeding ; and

(d) Remittance of any surplus to the mortgagors." (Emphasis added.)

Appellee Czyzewski's counsel argued that the underlined language clearly indicates that the sale of the property is to satisfy in full the amount due from appellee to Bank.

Paragraph 21 provides:

"(21) If the money arising from said sale shall be insufficient to pay the amounts due to Plaintiff with interest and the costs and expenses of sale, the person conducting the sale shall specify the amount of such deficiency in the report of sale and a judgment shall be entered therefore."

Appellee's counsel argued that, because his client was unrepresented by counsel at the time he entered into the stipulation, he could not have understood the import of the language of paragraph 21. He argued that the purpose of the new Illinois Mortgage Foreclosure Law was to protect the consumer and that if one who gives a deed in lieu of foreclosure is to also be held personally liable, it should be crystal clear from the instrument executed. The language of paragraph 21 is not crystal clear to a lay person. Finally, Czyzewski's attorney argued that, if Czyzewski remains personally liable for a deficiency, he received no consideration for execution of the deed in lieu of foreclosure.

Counsel for appellee Wooley argued that the judgment entered on the stipulation is ambiguous in that paragraph 3 provides that the sale of the property shall satisfy the indebtedness while paragraph 21 provides for a deficiency judgment in the event the sale proceeds are insufficient to satisfy the debt.

Attorney for the Bank argued that the deeds executed by appellees were not deeds in lieu of foreclosure. Instead, he argued, the stipulations were entered into in settlement of the foreclosure action and that by signing the stipulations appellees admitted all the allegations of the foreclosure complaint, including that they were liable for any deficiency. Attorney for Bank...