Rhone v. First Am. Title Ins. Co.

Decision Date17 May 2010
Docket NumberNo. 1-09-1216.,1-09-1216.
Citation340 Ill.Dec. 588,928 N.E.2d 1185,401 Ill.App.3d 802
PartiesRay H. RHONE and Denise Rhone, Plaintiffs-Appellants,v.FIRST AMERICAN TITLE INSURANCE COMPANY, a California Corporation, Defendant-Appellee.
CourtUnited States Appellate Court of Illinois

Michael J. Sreenan, Chicago, IL, for Plaintiffs-Appellants.

Jeffrey D. Corso, Cooney & Corso, LLC, Lisle, IL, for Defendant-Appellee.

Justice GARCIA delivered the opinion of the court.

The plaintiffs, Ray and Denise Rhone (the Rhones), filed a two-count complaint against defendant First American Title Insurance Company (First American), the issuer of a title insurance policy on the townhome they purchased in 2006. Count I sought a declaration that the policy covered unassessed property taxes for the years 2004 and 2005; count II sought special damages because First American's denial of the Rhones' claim for reimbursement of those taxes was “vexatious and unreasonable.” The parties filed cross-motions for summary judgment. First American contended the policy did not cover the taxes because they were levied after the date the policy was issued and, in any event, the policy specifically exempted such taxes. Judge Daniel A. Riley granted First American's motion and denied the Rhones'.

We hold that the unassessed taxes did not constitute liens or encumbrances until the bills for the unassessed property taxes were issued in 2008, well after the effective date of the title insurance policy of August 31, 2006. Consequently, we affirm.


On August 31, 2006, the Rhones closed on their $800,000 purchase from the original owners of a three-year-old townhome at 1417 South Campus Parkway in Chicago. At the closing, First American issued an owner's title insurance policy. The policy insured the Rhones against losses caused by [a]ny defect in or lien or encumbrance on the title” as of August 31, 2006, subject to several specified exceptions and exclusions. Although the policy listed several “standard exceptions” to coverage, including “Taxes, or special assessments which are not shown as existing liens by the public records,” First American waived those exceptions through an endorsement.

In her deposition, Denise Rhone testified that at closing she and her husband were aware that Cook County had assessed the townhome as “vacant land” from 2004 through 2006, the years the sellers lived in the home. Based on the improper assessment, the Rhones were well aware that the property taxes “were going to increase.” However, Denise Rhone testified that she “didn't know anything about omitted taxes.”

Concerned with the potential property tax increase because the townhome was not assessed as improved property at the time of their purchase contract, the Rhones had their attorney contact Kent Novit, the sellers' attorney and “issuing agent” on the Rhones' title commitment policy. In their letter to Novit, dated August 14, 2006, 17 days before closing, the Rhones pointed out that a neighboring “comparable property” was assessed for nearly $9,000 more in property taxes for the tax year 2005 than the townhome to be purchased. To assuage the Rhones' concerns, at closing the parties signed a “tax reproration agreement,” which required the sellers to place $10,000 in escrow to cover the sellers' share of any additional taxes due for 2006. Under the agreement, a tax reproration between the parties would occur if the townhome were reassessed as improved property before March 31, 2008. However, the agreement did not address any additional real estate taxes that might arise from reassessment for 2004 and 2005, when the property was also taxed as vacant land. In other words, the agreement did not apportion any additional property tax liability should the property be reassessed as improved land for the years prior to 2006 (the unassessed taxes).

In February 2008, the Rhones received two tax bills from the Cook County assessor titled 2007 Omitted Assessment Property Tax Bill.” The bills indicated that the townhome was not assessed as improved land in 2004 and 2005 and sought, from D. Rhone or Current Owner,” additional unassessed taxes for the two years. The tax bill for 2004 sought $2,763.58; the tax bill for 2005 sought $6,600.09. Each bill indicated the amount due was “entered as a warrant [in the County Collector's warrant book] in Tax Year 2007 [payable in 2008].”

On February 12, 2008, the Rhones' attorney filed a claim with First American under the title insurance policy seeking indemnification for the unassessed taxes. First American denied the claim, explaining in a letter dated April 4, 2008, that the unassessed taxes “are not due and payable until 2008 and are therefore, not a matter covered by the title policy.”

On June 10, 2008, the Rhones filed a two-count complaint against First American, seeking a declaration that the title insurance policy covered the unassessed taxes and special damages under section 155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2008)). The parties filed cross-motions for summary judgment. Judge Riley granted summary judgment in favor of First American; the Rhones timely appeal.


Summary judgment is warranted when “the pleadings, depositions, and admissions on file, together with any affidavits, when viewed in the light most favorable to the nonmovant, reveal there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law.” Midwest Trust Services, Inc. v. Catholic Health Partners Services, 392 Ill.App.3d 204, 209, 331 Ill.Dec. 229, 910 N.E.2d 638 (2009), citing 735 ILCS 5/2-1005(c) (West 2000). Our review of a grant of summary judgment is de novo. DeSaga v. West Bend Mutual Insurance Co., 391 Ill.App.3d 1062, 1066, 331 Ill.Dec. 86, 910 N.E.2d 159 (2009).

Because the facts are not in dispute, this case presents only a question of law as to which party is entitled to summary judgment. See Liberty Mutual Fire Insurance Co. v. St. Paul Fire & Marine Insurance Co., 363 Ill.App.3d 335, 339, 299 Ill.Dec. 431, 842 N.E.2d 170 (2005) (“where the parties file cross-motions for summary judgment, they invite the court to decide the issues presented as a matter of law”). In their declaratory judgment count, the Rhones contend that Judge Riley should have granted their motion because the unassessed taxes constitute a defect, lien, or encumbrance under the Rhones' title insurance policy. First American responds that under the Property Tax Code (the Tax Code) (35 ILCS 200/1-1 et seq. (West 2008)), the unassessed taxes reflected in the two tax bills become liens against the property only as of the year the taxes are levied. In other words, the unassessed taxes for 2004 and 2005 become liens only “in Tax Year 2008,” as First American asserts; it is illogical to treat the unassessed taxes as levied in 2004 and 2005, when actual taxes were levied, albeit as vacant land, and fully paid in those years. According to First American, because the unassessed taxes did not achieve lien status until 2008, the unassessed taxes do not fall within the ambit of the policy, which insured only against “any defect in or lien or encumbrance on the title” as of the date the policy was issued, August 31, 2006. First American adds, even if the unassessed taxes constituted a defect, lien, or encumbrance before the policy was issued, the policy specifically excluded such taxes from coverage.

“Real estate taxes can only be levied, assessed and collected in the manner expressly required by statute.” In re County Collector of Will County for Judgment for Taxes for the Year 1988, 229 Ill.App.3d 641, 643, 171 Ill.Dec. 314, 593 N.E.2d 1134 (1992), citing People ex rel. Pickerill v. New York Central R.R. Co., 391 Ill. 377, 63 N.E.2d 405 (1945). In Illinois, the Tax Code controls “the basis upon which real property is valued for purposes of collecting property tax revenue.” Walsh v. Property Tax Appeal Board, 181 Ill.2d 228, 230, 229 Ill.Dec. 487, 692 N.E.2d 260 (1998). The Tax Code provides that “the taxes upon property * * * shall be a prior and first lien on the property * * * from and including the first day of January in the year in which the taxes are levied.” 35 ILCS 200/21-75 (West 2008). Thus, property owners are issued a tax bill at the beginning of each year for taxes owed for the preceding year; pursuant to the Tax Code, the tax bill is a lien as of January 1 of the year in which it is issued.

Pursuant to statute, the Cook County assessor has the authority, as a county with a population of 3 million or more, to “assess properties which may have been omitted from assessments for the current year or during any year or years for which the property was liable to be taxed, and for which the tax has not been paid.” 35 ILCS 200/9-260(a) (West 2008). Such an “omitted assessment tax bill is not due until the date on which the second installment property tax bill for the preceding year becomes due.” 35 ILCS 200/9-260(b) (West 2008). Thus, for years when taxes have been paid, the property may nonetheless be subject to additional taxes if no taxes were assessed on land improvements. People ex rel. McDonough v. Birtman Electric Co., 359 Ill. 143, 145, 194 N.E. 282 (1934) (“if no assessment was made [,] * * * an assessment of the omitted property [may be made] in a subsequent year”). As a safeguard against unforeseen additional taxes, ‘the legislature has provided that no charge for tax for previous years shall be made against any property prior to the date of ownership of the person owning such property at the time the liability for such omitted tax was ascertained.’ Inland Real Estate Corp. v. Oak Park Trust & Savings Bank, 127 Ill.App.3d 535, 545, 82 Ill.Dec. 670, 469 N.E.2d 204 (1983), quoting McDonough, 359 Ill. at 148, 194 N.E. 282. The section insulating a new owner from unassessed taxes prior to ownership requires ownership be of “bona fide legal and equitable titles or interests acquired for...

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