Illini Federal Sav. and Loan Ass'n v. Doering

• Decision Date: 06 November 1987
• Docket Number: No. 5-86-0712,5-86-0712
• Citation: 516 N.E.2d 609,162 Ill.App.3d 768
• Parties: , 114 Ill.Dec. 454 ILLINI FEDERAL SAVINGS AND LOAN ASSOCIATION, a corporation, Plaintiff-Appellant, v. Thomas E. DOERING, Darlene M. Doering, d/b/a Ban Dor Investments, a partnership; Thomas E. Doering and Darlene M. Doering, individually; Wallace A. Brezik; Gisela Brezik; First Consolidated Exchange Corporation, a California Corporation; Jerry J. Lanting; Cornelia Lanting; the United States of America; Exclusive Services, a California Corporation; Elmer Baccus, d/b/a Baccus Roofing and Siding; Ren-Le, Inc.; Lowe's of Illinois, Inc., d/b/a Lowe's of Marion; Richard Pachulski, Trustee of the Estate of Exclusive Services, Debtor; Neon Sign Company of Herrin, Inc.; and Unknown Owners, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 609

516 N.E.2d 609

162 Ill.App.3d 768, 114 Ill.Dec. 454

ILLINI FEDERAL SAVINGS AND LOAN ASSOCIATION, a corporation Plaintiff-Appellant, v. Thomas E. DOERING, Darlene M. Doering, d/b/a Ban Dor Investments, a partnership; Thomas E. Doering and Darlene M. Doering, individually; Wallace A. Brezik; Gisela Brezik; First Consolidated Exchange Corporation, a California Corporation; Jerry J. Lanting; Cornelia Lanting; the United States of America; Exclusive Services a California Corporation; Elmer Baccus, d/b/a Baccus Roofing and Siding; Ren-Le, Inc.; Lowe's of Illinois Inc., d/b/a Lowe's of Marion; Richard Pachulski, Trustee of the Estate of Exclusive Services, Debtor; Neon Sign Company of Herrin, Inc.; and Unknown Owners, Defendants-Appellees.

No. 5-86-0712.

Appellate Court of Illinois Fifth District.

Nov. 6, 1987.

R.W. McGovern, R.W. McGovern, Ltd., James H. Bandy, James H. Bandy, Ltd., Belleville, for plaintiff-appellant.

P. Michael Kimmel, Gilbert, Kimmel, Huffman & Prosser, Ltd., Carbondale, for Jerry J. Lanting and Cornelia Lanting.

Justice LEWIS delivered the opinion of the court:

The instant appeal arises out of a mortgage foreclosure proceeding in which the trial court, after entering an order "approving deficiency and sheriff's report of sale and distribution" of the mortgaged property, granted the motion of certain of the defendants-mortgagors to set aside the order approving deficiency. The trial court set an evidentiary hearing to determine the value of the property, and the plaintiff-mortgagee filed this interlocutory appeal pursuant to Supreme Court Rule 308 (107 Ill.2d R. 308). The issue on appeal, as certified by the trial court, is "whether[,] in a foreclosure proceeding[,] the trial court can set aside a personal deficiency judgment against one or more defendants and order an evidentiary hearing, the purpose of which [is] to determine the actual valuation of the foreclosed real estate." We reverse.

On August 13, 1985, the plaintiff, Illini Federal Savings & Loan Association, filed a complaint of foreclosure against the several defendants, who had various interests in the mortgaged property. On May 12, 1986, the court entered a stipulated order wherein the parties agreed that the plaintiff was owed the amount of $755,197.73 on its promissory note, which was secured by the mortgage being foreclosed. In its judgment of foreclosure and sale entered on May 20, 1986, the trial court found the total amount due, including costs and attorney fees, to be $776,538.78.

On July 15, 1986, the foreclosed premises were sold at a sheriff's sale, at which the plaintiff was the only bidder. The plaintiff's bid of $500,000 was accepted by the sheriff. On that same day the sheriff submitted his report of sale and distribution, which showed a deficiency in the amount of $276,538.78. The report further stated that, upon approval by the court, the property would be sold to the plaintiff and a certificate of sale would be issued and recorded. The trial court entered an order approving the deficiency and the report of sale on July 15, 1986.

On July 26, 1986, defendants Jerry and Cornelia Lanting filed a motion to set aside the order approving deficiency. In their motion, the Lantings objected to the amount of the deficiency, alleging that, during the foreclosure action, the plaintiff had procured an appraisal of the mortgaged premises valuing the property at $700,000. The Lantings maintained that, by reason of this appraisal, the

"deficiency should have been established in the amount of the actual value of the property, being $700,000, less the amount owed, establishing a deficiency in the amount of $76,538.78."

The Lantings requested that the order approving deficiency be vacated, that the court hold an evidentiary hearing to establish the actual value of the premises, and that

"the deficiency be established as the difference between the actual value of the premises and the amount owed, and in an amount not to exceed $76,538.78."

A hearing was held on the Lantings' motion, after which the court vacated the deficiency judgment and set the cause for an evidentiary hearing to determine the value of the premises. The plaintiff subsequently filed an appeal from that order pursuant to Rule 308.

In arguing that the trial court's order vacating the deficiency judgment was proper, the Lantings assert that the trial court had the authority, under its equitable powers in supervising mortgage foreclosure sales, to set aside the deficiency and "establish it at an amount to be determined by the value of the property." They assert, therefore, that the trial court, upon their allegation of inadequate sale price, properly ordered an evidentiary hearing to determine the value of the property so as to set the deficiency based upon the court's determination of value. The Lantings contend that the court's action was necessary to prevent a double recovery by the plaintiff-mortgagee, which would result if the plaintiff were allowed to bid less than the value of the property and then collect the remaining deficiency from the defendants-mortgagors.

Under the statute relating to mortgage foreclosure actions (Ill.Rev.Stat.1985, ch. 110, par. 15-101 et seq.), a deficiency judgment may be obtained against persons liable on the mortgage

"if the sale of the mortgaged premises fails to produce a sufficient amount to pay the amount found due in the judgment [of foreclosure], together with interest thereon and all costs of the action and expenses of sale * * *." (Ill.Rev.Stat.1985, ch. 110, par. 15-112.)

Thus, the statute provides for a deficiency judgment in an amount equal to the difference between the sale price and the debt sued upon. (See Bank of Benton v. Cogdill (1983), 118 Ill.App.3d 280, 73 Ill.Dec. 871, 454 N.E.2d 1120; Emerson v. La Salle National Bank (1976), 40 Ill.App.3d 794, 352 N.E.2d 45.) There is no requirement that the sale price be equal to the value of the property, and there is no provision for determining the value of the property in setting the amount of the deficiency. Rather, absent any fraud or irregularity in the foreclosure proceeding, the price at which the property is sold is deemed to be the conclusive measure of its value for purposes of setting a deficiency judgment. See First Granite City National Bank v. Champion (1971), 130 Ill.App.2d 970, 268 N.E.2d 35.

Notwithstanding the lack of statutory authority for setting a deficiency judgment independent of the sale price of the property, the defendants maintain that the trial court could, in the exercise of its equity powers, vacate the deficiency judgment based on the sale price of the property and set a new deficiency amount based on a judicial determination of the property's value. The defendants concede that no Illinois case can be found in which the court specifically set or modified a deficiency judgment in this way. They argue, however, that this would be analogous to a court setting aside a foreclosure sale upon equitable grounds and ordering a new sale with a minimum "upset" price determined in advance. See Levy v. Broadway-Carmen Building Corp. (1937), 366 Ill. 279, 8 N.E.2d 671.

It is settled that a court of equity has wide discretion in supervising judicial sales to insure that such sales are conducted according to law and free from fraud which could deprive the equity owner of valuable rights. (Levy v. Broadway-Carmen Building Corp.; Moeller v. Miller (1925), 315 Ill. 454, 146 N.E. 449.) This discretion is not unlimited, however, and it is a firmly established rule that unless there is evidence of mistake, fraud, or...