Matter of Chapman, Bankruptcy No. 90 B 14910.
| Decision Date | 10 September 1991 |
| Docket Number | Bankruptcy No. 90 B 14910. |
| Citation | 132 BR 132 |
| Parties | In the Matter of Lamar CHAPMAN III and Vanessa M. Chapman, Debtors. |
| Court | U.S. Bankruptcy Court — Northern District of Illinois |
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Richard J. Lipschultz, Chicago, Ill., for debtors.
Steven R. Rappin, Hauselman & Rappin, Ltd., Chicago, Ill., for Citicorp Mortg., Inc.
The debtor-defendants Lamar and Vanessa M. Chapman ("Debtors") filed their pending proceeding under Chapter 13 of the Bankruptcy Code, Title 11 U.S.C. Prior to that filing, they had mortgaged their home to Citicorp Savings of Illinois ("Citicorp") to secure a loan. Citicorp filed a foreclosure action in state court and obtained judgment. The bankruptcy filing followed.
Citicorp filed a secured claim herein in the amount of $112,744.77 based upon its state court judgment.
Debtors object to that claim by pleading an affirmative defense and a counterclaim. Debtors claim they are entitled to reinstate their mortgage and receive damages due to Citicorp's assertedly improper conduct, and contend that Citicorp is not entitled to any claim against them. Citicorp has moved for summary judgment on Debtors' objections based upon principles of res judicata and the record of state court proceedings. For reasons set forth herein, the motion is granted in part and denied in part.
Apart from moving papers and briefs, the parties filed exhibits accompanied by affidavits. From those papers the following undisputed facts appear.1
Debtors executed a mortgage and $50,700.00 promissory note (collectively referred to as "Mortgage") with First Federal Savings and Loan Association of Chicago on August 15, 1978. First Federal eventually merged into and was succeeded by Citicorp Savings of Illinois. The promissory note provided for interest at the rate of 7.90% per annum on the principal balance, payable in monthly installments of $372.00, commencing on October 1, 1978. The Mortgage was properly recorded on August 25, 1978.
Debtors fell behind in their Mortgage payments. On October 29, 1985, Citicorp commenced a foreclosure action against Debtors in the Circuit Court of Cook County, Illinois ("First Foreclosure Complaint"). The Honorable George A. Higgins presided. On February 6, 1986, Citicorp provided Debtors a statement of the amount necessary to reinstate or bring current the delinquent Mortgage. It required Debtors to pay $6,517.71 by cashier's check on or before February 28, 1986, and if paid, Citicorp agreed to dismiss the case. Debtors failed to comply. The State Court entered a Judgment of Foreclosure and Sale on behalf of Citicorp on March 20, 1986 ("First Foreclosure Order").
("April 1986 Order").
Debtors again fell behind in their mortgage payments. Citicorp filed a new Complaint for Foreclosure of Mortgage on November 6, 1986 in the Circuit Court of Cook County, Illinois ("Second Foreclosure Complaint"). In their Answer to that Complaint, Debtors admitted all allegations, except paragraph P, wherein a receiver was requested. Also, no denial was made of paragraph Q which alleged Debtors had reinstated a previous default pursuant to Illinois Revised Statutes 1985, Chapter 95, § 57 ("Mortgage Act").
Debtors asked Citicorp to provide a statement of all amounts due for the purpose of paying them and reinstating the Mortgage. On February 26, 1986, Citicorp responded that Debtors had no right to reinstatement under the Mortgage Act more than once in a span of five years. Accordingly, Citicorp refused to provide Debtors the requested figures. The letter stated in pertinent part:
Please be advised that Citicorp Savings of Illinois will not provide you with reinstatement figures in connection with the pending mortgage foreclosure action, since you previously have reinstated your delinquent mortgage. Under Illinois Revised Statutes 1985, Chapter 95, Section 57, a Mortgagor only has one right to reinstate within a five year period, and your right has now been utilized and is not again available to you.
Almost one year later (February 6, 1987), Citicorp filed a motion for summary judgment in the foreclosure case. After extensive briefing, the trial court entered an order on April 20, 1987, granting Citicorp's motion and entered judgment of foreclosure and sale ("Second Foreclosure Order"). Thirty days later (May 20, 1987), Debtors moved to vacate the Second Foreclosure Order, and reinstate the Mortgage. Debtors claimed the earlier reinstatement was pursuant to Paragraphs 12 and 19 of the Mortgage and not, as the April 1986 Order shows, the Mortgage Act. Paragraphs 12 and 19 of Mortgage, respectively, provide in pertinent part:
Remedies Cumulative. All remedies provided in this Mortgage are distinct and cumulative to any other right or remedy under this Mortgage or afforded by law or equity, and may be exercised concurrently, independently or successively . . .
("Paragraph 12").
Borrower\'s Right to Reinstate. Notwithstanding Lender\'s acceleration of the sums secured by this Mortgage, Borrower shall have the right to have any proceedings begun by Lender to enforce this Mortgage discontinued at any time prior to entry of a judgment enforcing this Mortgage if: (a) Borrower pays Lender all sums which would be then due under this Mortgage, the Note and Notes Securing Future Advances, if any, had no acceleration occurred; (b) Borrower cures all breaches of any other covenants or agreements of Borrower contained in this Mortgage; (c) Borrower pays all reasonable expenses incurred by Lender in enforcing the covenants and agreements of Borrower contained in this Mortgage and in enforcing Lender\'s remedies as provided in Paragraph 18 hereof, including, but not limited to reasonable attorney\'s fees; and (d) Borrower takes such actions as Lender may reasonably require to assure that the lien of this Mortgage, Lender\'s interest in the Property and Borrower\'s obligation to pay the sums secured by this Mortgage shall continue unimpaired. Upon such payment and cure by Borrower, this Mortgage and the obligation secured hereby shall remain in full force and effect as if no acceleration had occurred. . . .
("Paragraph 19").
Eight days later (May 28, 1987), Debtors filed a pro se petition before Judge Robert L. Sklodowski, the successor judge to Judge Higgins, asking the trial court to amend the prior April 1986 Order entered by Judge Higgins. Judge Sklodowski denied the motion on that date. The written order does not state the reasons for Judge Sklodowski's ruling.
On June 1, 1987, Debtors' motion to vacate the Second Foreclosure Order was continued to June 30, 1987. In the meantime, on June 26, 1987, Debtors filed an emergency petition pursuant to § 2-1401 of the Code of Civil Procedure Illinois Revised Statute Ch. 110, ¶ 2-1401. Debtors again requested the trial court to amend the April 1986 Order, a request which had previously been denied. Debtors reiterated that Paragraph 19 of the Mortgage provided a right to reinstate the Mortgage in addition to the right afforded by the Mortgage Act.
On June 29, 1987, Judge Sklodowski entered an order amending the April 1986 Order nunc pro tunc. The first two paragraphs are essentially unchanged. That Order was revised to read as follows:
IT IS FURTHER ORDERED that this cause be and the same is hereby dismissed, without costs to any party, the Defendants having heretofore reinstated all defaults in the payment of said mortgage pursuant to Paragraph 19 of that certain mortgage agreement dated August 15, 1978 by and between Lamar Chapman, III and Vanessa Chapman, his wife as mortgagor, and First Federal of Chicago n/k/a Citicorp Savings of Illinois as mortgagee.
On July 31, 1987, the state trial court issued a written opinion ("July 1987 Order") granting Debtors' motion to vacate the Second Foreclosure Order. The question considered was whether a prior reinstatement under the Illinois Mortgage Act affects any independent contractual right to reinstate. The trial court noted:
The . . . issue is whether the reinstatement statute Ill.Rev.Stat.1985, ch. 95, para. 57 effects paragraph 19, the reinstatement provision of the Mortgage Agreement. Namely, whether the statutory limitation that the mortgagor may obtain reinstatement only once every five years also applies to the contractual right of reinstatement, the terms of which contain no such limitation.
July 1987 Order at p. 9.
The trial court held that the parties had agreed to reinstatement separate and apart from the statutory right to reinstate. Thus, the trial court concluded that Debtors could reinstate and that Citicorp had improperly denied reinstatement. The court vacated the Second Foreclosure Order and ordered Citicorp to provide Debtors with a letter setting forth the amount due under the Mortgage:
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