Havana Nat. Bank v. Wiemer

• Court: Appellate Court of Illinois
• Writing for the Court: STENGEL; STOUDER, P.J., and BARRY
• Citation: Havana Nat. Bank v. Wiemer, 335 N.E.2d 506, 32 Ill.App.3d 578 (Ill. App. 1975)
• Decision Date: 30 September 1975
• Docket Number: No. 74--171,74--171
• Parties: The HAVANA NATIONAL BANK, Trustee under Trust Number 143, Plaintiff, v. Amelia E. WIEMER and Lavern C. Wiemer, Defendants. Amelia E. WIEMER and Lavern C. Wiemer, Counterplaintiffs, v. The HAVANA NATIONAL BANK, Trustee under Trust Number 143, Counterdefendants.

Page 506

335 N.E.2d 506

32 Ill.App.3d 578

The HAVANA NATIONAL BANK, Trustee under Trust Number 143, Plaintiff, v. Amelia E. WIEMER and Lavern C. Wiemer, Defendants.

Amelia E. WIEMER and Lavern C. Wiemer, Counterplaintiffs, v. The HAVANA NATIONAL BANK, Trustee under Trust Number 143,

Counterdefendants.

No. 74--171.

Appellate Court of Illinois, Third District.

Sept. 30, 1975.

Rehearing Denied Oct. 23, 1975.

Jay H. Janssen, Peoria, of counsel, for defendants.

David R. Radley, Peoria, for plaintiff.

STENGEL, Justice:

Defendant Amelia Wiemer appeals from a decree of the Circuit Court of Marshall County which ordered her to quitclaim her 310 acre farm to plaintiff, Havana National Bank as trustee, under the terms of a trust agreement executed by defendant and her husband, since deceased. The question presented by this appeal is whether the trust deed and agreement are to be treated as a mortgage.

The basic facts surrounding the transaction between plaintiff and defendant are not disputed. In 1966 the Wiemers contracted to purchase a 310 acre farm in Marshall County for $120,000.00. Mr. Wiemer subsequently was disabled by a heart attack and was thereafter unable to engage actively in farming. In March of 1967 the Wiemers borrowed $25,000.00 from the Herget National Bank of Pekin, Illinois, assigning their interest in the purchase contract as security, and in June of 1967 they assigned their interest in the same contract to plaintiff as security for outstanding loans totaling more than $38,000.00. A $5,000.00 installment on the purchase contract was due on March 1, 1968, and remained unpaid at the time the Wiemers signed the trust deed and agreement in question. Earlier in 1968 the Wiemers had contracted to sell two acres of the farm for $10,000.00 and also had applied for a first mortgage loan from an insurance company.

On March 28, 1968, Wilbur Meadows, assistant to the president of plaintiff bank, came to Wiemers' home and secured their signatures on a trust deed and agreement. Mrs. Wiemer's testimony contradicts that of Meadows' concerning conversations and representations made that morning. Both agreed that Meadows proposed that the bank as trustee, take over the management of the farm, that the Wiemers' debts be consolidated, and that, after one year, the bank would attempt to sell the farm, or at least a part that was suitable for subdivision. The same day, after the deed and agreement were signed, Meadows paid the remaining $95,000.00 purchase price to the sellers of the farm and recorded a warranty deed from the sellers to the Wiemers, and also recorded the trust deed.

Also on the same day plaintiff entered into a 'Supplemental Agreement' with Herget National Bank which established the priority of plaintiff's lien for $38,666.70 over Herget Bank's lien for $25,000.00 and which authorized additional loans under the trust arrangement. Meadows testified that Herget Bank loaned $60,000.00 of the money paid to the sellers, and the plaintiff bank advanced $35,000.00, in order to secure title in the Wiemers' name.

The following day the Wiemers signed a note to plaintiff for $40,000.00 (their prior debt plus interest). In June, 1968, plaintiff and Wiemers jointly executed a first mortgage on 240 acres as security for a loan of $70,000.00 from the insurance company previously contacted by the Wiemers. The proceeds of that loan were paid into the trust account, and used to repay the $60,000.00 loan from Herget Bank and part of the $35,000.00 loan from plaintiff. The Wiemers paid into the trust account the $10,000.00 proceeds from the previous sale of two acres, and also paid in various other sums from farm operations. When the $40,000.00 note to plaintiff became due, the Wiemers twice signed six month extension agreements, both of which stated that the note would be paid from the sale of subdivision property.

Beginning in 1969, plaintiff as trustee advertised the farm for sale, and, in December, 1972, and January, 1973, contracted to sell the farm in two parcels for a total of $154,090.00. When the Wiemers learned of plaintiff's attempts to sell the farm, they recorded their affidavit notifying prospective purchasers that any sale by plaintiffs would be in violation of the Illinois Mortgages Act (Ill.Rev.Stat. ch. 95, § 23 et seq.). In order to remove the cloud on title, plaintiff instituted this suit to compel defendant to execute a quitclaim deed to plaintiff.

Because the determinative question before us is construction of the trust agreement and deed, we must set out the relevant provisions of both.

After reciting Wiemers' overdue debt to plaintiff and Herget Bank and 'the desire of the parties to arrange satisfaction of said indebtedness in lieu of foreclosure of the liens' of the previously assigned real estate purchase contract, the agreement provided for the Wiemers to execute a deed in trust to plaintiff as trustee, and, if requested by the trustee after payment of the purchase contract debt, to execute another deed conveying the premises to the trustee to perfect title in the trustee. Other provisions may be summarized as follows:

1. To pay off the purchase contract the trustee shall borrow at least $60,000.00 from Herget National Bank, secured by a first mortgage on the 240 acres used for grain farming, with the trustee entitled to refinance the loan from any other source. Additional money needed shall be borrowed from plaintiff bank, secured by a second mortgage with the same right to refinance.

2. When directed by plaintiff and Herget Bank, the trustee shall sell all or part of the farm, except that no part of the grain farming portion shall be sold to anyone other than the Wiemers for one year.

3. The net proceeds of sale of the grain farming portion shall first be applied to the first mortgage debt (Herget) and next to the second mortgage debt (plaintiff). The proceeds from the other part of the farm shall be paid first to plaintiff to discharge present and future debts, and second to Herget Bank. Any excess after payment of the debts to the banks shall be paid to the Wiemers.

4. After all debts to the banks are paid in full, the trustee shall convey any unsold property to the Wiemers.

5. Plaintiff shall have control of the management, renting and possession of the property, and shall apply net income in the same order as proceeds of sale. (Note: In fact, defendant continued to reside on the farm until the circuit court order was entered, and the trustee leased the farm to Wiemers' former tenant on a crop-share basis.)

The trust deed conveyed the farm to plaintiff as trustee, and granted the trustee full authority to manage, improve, protect, subdivide, sell, convey, donate, mortgage, lease, dedicate or partition the premises, and to deal with the property in all other ways lawfully available to any owner. The deed also provided that the beneficiaries shall have an interest only in the earnings or proceeds from sale, and 'such interest is hereby declared to be personal property, and no beneficiary hereunder shall have any title or interest, legal or equitable, in or to said real estate as such, but only an interest in the earnings, avails and proceeds . . ..'

When defendant refused to give plaintiff a quitclaim deed to perfect title for sale of the farm, plaintiff brought this action to enforce the trust agreement. Plaintiff's position is that the Wiemers voluntarily and knowingly conveyed fee simple title to plaintiff as a means of settling their debts, and that an absolute power of sale was vested in the trustee; therefore, plaintiff is entitled to a decree of specific performance.

Defendant contends that the intent and purpose of the transaction was for the trust deed to be security for the bank loans, so that the deed was in the nature of a mortgage, and, under the Illinois Mortgages Act, the trustee cannot sell defendant's property except by foreclosure proceedings. Ill.Rev.Stat. ch. 95, § 23 provides:

'No real estate within this state, shall be sold by virtue of any power of sale, contained in any mortgage, trust deed or other conveyance in the nature of a mortgage . . . but all such mortgages, trust deeds or other conveyances in the nature of a mortgage, shall only be foreclosed, in the manner provided for foreclosing mortgages . . ..'

The trial court, in a written opinion, concluded that the only evidence supporting defendant's contention was the defendant's own testimony that Meadows, at the time of signing, said that the instrument was a mortgage. Meadows denied making such an assertion, and the court held that the parties intended the trust agreement and deed to be carried out according to the express terms of the instruments, including the trustee's power to sell. The trial court also found that all the documentary evidence supported its interpretation. Plaintiff was granted a decree of specific performance.

In DeVoigne v. Chicago Title & Tr. Co., 304 Ill. 177, 136 N.E. 498 (1922), a trust deed agreement contained provisions similar to those before us. The trustee was given full power to sell the property, and the beneficiaries' interest was declared to be personal property. The trust agreement also provided for reconveyance if the beneficiaries paid certain obligations within 60 days. After noting that Section 23 of the Mortgages Act was passed in 1879 to prevent sales of the equity of redemption, the court stated: '(N)o scheme or device to evade the statute or circumvent it by providing for a sale depriving the debtor of his equity of redemption will be upheld.' 304 Ill. at 183, 136 N.E. at 501. The court observed that a mortgage need not contain a promise to pay a debt, but, since by definition a mortgage is security for a debt, there must be an existing debt or obligation to be enforced. The supreme court then ruled that the provisions of the deed and trust agreement giving the trustee power to sell were void. See Quinn v. Pullman Tr. & S. Bk., 98...