Lasalle Bank v. Ferone

• Decision Date: 07 July 2008
• Docket Number: No. 2-07-0031.,2-07-0031.
• Citation: 892 N.E.2d 585
• Parties: LaSALLE BANK, Plaintiff-Appellee, v. Catherine FERONE, Defendant-Appellant (Marc J. Biagini, Individually and as Trustee of the 6604 Langley Court Trust dated 5-6-2002, Unknown Owners, and Nonrecord Claimants, Defendants).
• Court: United States Appellate Court of Illinois

892 N.E.2d 585

LaSALLE BANK, Plaintiff-Appellee, v. Catherine FERONE, Defendant-Appellant (Marc J. Biagini, Individually and as Trustee of the 6604 Langley Court Trust dated 5-6-2002, Unknown Owners, and Nonrecord Claimants, Defendants).

No. 2-07-0031.

Appellate Court of Illinois, Second District.

July 7, 2008.

Laura Myers, Eliot Abarbanel, Prairie State Legal Services, Inc., Carol Stream, for Marc J. Biagini and Catherine Ferone.

Scott M. Annes, Law Offices of Scott M. Annes, Ltd., Park Ridge, for LaSalle Bank.

Justice O'MALLEY delivered the opinion of the court:

In this mortgage foreclosure action, defendant, Catherine Ferone, appeals the judgment of the circuit court of Du Page County, granting summary judgment in favor of plaintiff, LaSalle Bank, as to her affirmative defense. On appeal, defendant contends that the trial court erred in finding that (1) plaintiff was a bona fide mortgagee for value because plaintiff did not have actual or constructive notice of defendant's interest in the subject property or of the fraud that defendant Marc J. Biagini perpetrated on defendant; and (2) Biagini's fraud was fraud in the inducement rather than fraud in the execution. We reverse and remand.

The following summary of facts is drawn from the record on appeal, consisting of the various pleadings, depositions, and the like submitted by the parties. The genesis of this case is in the friendship between defendant and Biagini's girlfriend, then wife, Denise. Biagini, in turn, became defendant's friend, and defendant retained Biagini to represent her at the closing for the subject property, as well as to draft her will and her aunt's will.

Before the spring of 2002, defendant was the trustee of the Catherine L. Ferone Revocable Family Trust, which held the title to the subject property. In the spring of 2002, when defendant's business began to fail, she turned to Biagini for help in obtaining a line of credit using her house, the subject property, as collateral. Biagini agreed to assist defendant.

According to defendant, on May 6, 2002, Biagini asked defendant to sign a power of attorney, effective for only 24 hours. Biagini represented to defendant that this would help him to arrange for an appraisal of the property. Instead of a power of attorney, Biagini presented defendant with a deed in trust. When defendant signed the deed in trust, she did not understand that the effect of the document was to quitclaim her interest in the subject property. Rather, defendant trusted Biagini because he was her lawyer and her friend, and she believed Biagini's representation that she was signing a power of attorney that would be valid only for 24 hours. Defendant thereafter did not receive a copy of the deed in trust. The effect of the deed in trust was to convey the subject property into a new trust, the "6604 Langley Court Trust." Biagini was the beneficiary of the 6604 Langley Court Trust. Defendant did not know either of the existence or of the terms of the 6604 Langley Court Trust when she signed the deed in trust that Biagini proffered.

Defendant conceded, however, that she had previously used power of attorney forms that Biagini had prepared to assist defendant in administering the estates of her aunt and her father. Additionally, the deed in trust was clearly, if not altogether conspicuously, labeled as a "deed in trust."

In August 2002, the subject property was appraised by Flavin Appraisals. Defendant testified that she believed the appraisal was in connection with the line of credit she was pursuing and for which she had signed the document she believed to be a 24-hour power of attorney. As it turned out, Flavin Appraisals was appraising the subject property for the mortgage that Biagini was taking out on it without defendant's knowledge or permission. Defendant told the appraiser that she was the owner of the subject property, and she informed the appraiser of the improvements that she had made as its owner. Plaintiff conceded that, in August 2002, before the mortgage on the subject property was executed by Biagini, defendant informed the appraiser that she was the owner of the subject property.

Plaintiff asserts that defendant contradicts herself by maintaining that she did not realize the appraiser was conducting an appraisal to support a mortgage when she admits that she was seeking a line of credit collateralized by the subject property. Plaintiff notes that defendant testified that she was present when the appraisal was conducted, along with her roommate, Christine Peters. Plaintiff further notes that defendant told the appraiser that she was hoping to get the money soon in order to do more projects on the subject property and that she never told the appraiser that she was not going to go ahead with the transaction.

We here digress to a small extent. In its statement of facts, plaintiff's characterization of defendant's "contradiction" borders closely upon argument (if it does not cross into it), which is prohibited by the supreme court rules. See 210 Ill.2d R. 341(h)(6). We do not necessarily perceive defendant to have contradicted herself — the lack of knowledge and permission to which she refers concerns Biagini's procurement of a mortgage in his name with the proceeds to be disbursed to him, not a transaction resulting in the subject property collateralizing a loan from which she would receive the proceeds. We caution plaintiff to follow the supreme court rules and to provide argument not in its statement of facts but only in the "argument" section of its brief. To the extent that plaintiff is providing argument in its statement of facts, we will disregard it and will consider only that portion of the statement of facts that complies with Rule 341(h)(6).

Plaintiff further notes that defendant denies that she granted permission for a mortgage to be placed on the subject property, but that she also states that she solicited Biagini's assistance to procure some sort of loan using the subject property as collateral. Plaintiff points out that defendant conceded that she was aware that she would not have been able to acquire a mortgage on her own, as a result of her poor credit history. Plaintiff further notes that defendant acknowledged that she needed a loan as a result of her financial hardship and her failing business venture. Plaintiff also points out that defendant agreed to allow Biagini to use his own information (plaintiff equates this to Biagini's credit history) to help her secure some sort of loan.

The record demonstrates that Biagini's application for the mortgage on the subject property included representations that Biagini had owned the subject property since 2000 or 2001. Defendant notes that, actually, she had owned the property since that time. Biagini also represented that he owned a property in Downers Grove. In fact, Biagini did not own and never had owned the Downers Grove property. Biagini also claimed that he received a monthly salary of $26,500; he did not.

Plaintiff eventually closed on the loan and issued the mortgage, paying the proceeds to Biagini. Some of the proceeds were used to pay off debts on several of Biagini's personal credit cards. Biagini later defaulted on the loan.

On February 20, 2004, plaintiff filed an action to foreclose the subject property. In May 2004 (and, plaintiff notes, at no time before then) defendant filed a police report alleging that she had been defrauded by Biagini. In November 2004, defendant filed her affirmative defense to the foreclosure action, alleging that she had an interest in the subject property in spite of executing the deed in trust. Defendant further asserted that she executed the deed in trust as a result of the fraud perpetrated by Biagini.

Plaintiff filed a motion for summary judgment as to defendant's affirmative defenses. On January 24, 2006, the matter came before the trial court for hearing. The trial court ruled orally as follows:

"I don't believe that there is any genuine issue of material fact as to the fraud that was perpetrated here, but I believe that that does constitute fraud in the inducement and not fraud in the execution.

The operative document, I believe, is the deed in trust and that clearly states that it is a deed in trust and any reasonable person reading it would know that title was being transferred to Mr. Biagini, not personally, but as trustee. And that document was recorded on May 10th of 2002.

If there is, indeed, a duty of the mortgage lender to inquire as to the status of any tenant on the property, [defendant's] residence at [the] property is certainly not inconsistent with her status as the [grantor] of the deed in trust. Indeed, I think it would be very unusual to find the trustee of a deed in trust actually living in the property.

Certainly, she, herself, had a duty to advise the lender or the appraiser, as the lender's designee, of what her status of the property was.

Given all of the facts and circumstances in this case and the fact that she was actively seeking to have a mortgage provided to Mr. Biagini or to her through Mr. Biagini, I don't think that there is any question but that [plaintiff] is a bona fide mortgage lender for value.

As such, I think there are no genuine issues of material fact, and summary judgment in favor of [plaintiff] as to the affirmative defense is proper."

The trial court entered judgment in favor of plaintiff and against defendant on defendant's affirmative defense.

Defendant filed a motion to reconsider. On May 6, 2006, the trial court heard and denied the motion. The trial court ruled:

"In taking all of [defendant's] deposition testimony in the light most favorable to her, I think that it clearly establishes that she signed a document that she did not read. Even if she truly in her heart believed that she was filing — signing a 24-hour power of attorney, by all of the relevant case law, she's charged with the obligation to read it and to know the...