St. Paul Federal Sav. & Loan Ass'n of Chicago v. Avant

• Decision Date: 29 July 1985
• Docket Number: No. 84-0941,84-0941
• Citation: 135 Ill.App.3d 568,481 N.E.2d 1050,90 Ill.Dec. 250
• Parties: , 90 Ill.Dec. 250 ST. PAUL FEDERAL SAVINGS & LOAN ASSOCIATION OF CHICAGO, Plaintiff-Appellee, v. Marie E. AVANT, et al., Defendants, and Tollway Arlington National Bank, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 1050

481 N.E.2d 1050

135 Ill.App.3d 568, 90 Ill.Dec. 250

ST. PAUL FEDERAL SAVINGS & LOAN ASSOCIATION OF CHICAGO Plaintiff-Appellee, v. Marie E. AVANT, et al., Defendants and Tollway Arlington National Bank, Defendant-Appellant.

No. 84-0941.

Appellate Court of Illinois First District, First Division.

July 29, 1985.

Berger, Newmark & Fenchel P.C., Chicago, for defendant-appellant; Harry D. Lavery, George A. Zelcs, Chicago, of counsel.

Rudnick & Wolfe, Chicago, for plaintiff-appellee; Don E. Glickman, Steven S. Levenson, Chicago, of counsel.

O'CONNOR, Justice:

This appeal involves an action by plaintiff, St. Paul Federal Savings and Loan Association of Chicago, based upon theories of unjust enrichment and constructive trust for the recovery of funds paid to defendant, Tollway Arlington National Bank (Tollway), in return for Tollway's release of a purported mortgage on certain residential real estate. After Tollway had accepted payment from plaintiff it was discovered that the mortgage released was of no value, as it had been based upon a forgery perpetrated by one of Tollway's commercial customers. The trial court granted plaintiff's motion for summary judgment for the return of the funds paid to Tollway, and Tollway appeals. In addition, Tollway appeals the trial court's denial of its claim for reasonable expenses and attorney fees pursuant to section 2-611 of the Code of Civil Procedure. We affirm.

The lengthy record in this case reveals an elaborate real estate fraud scheme in which both plaintiff and defendant were apparently victimized. The basic facts can best be drawn from a review of the pleadings themselves.

St. Paul instituted the original action in September 1981, to foreclose a mortgage on certain real estate located in Glenview, Illinois ("subject property") made by Marie E. Avant and secured by Avant's promissory note to plaintiff in the amount of $62,300. Also listed as defendants were a "Mr. and Mrs. Kolock" (sic) and "unknown owners." An answer was subsequently filed by Luana and Richard Koloch, stating that Avant at no time had any legal or equitable interest in the subject property, that they were the sole legal and equitable owners thereof and that they had not conveyed, or authorized anyone else to convey, any interest in the subject premises. The Kolochs also filed a counterclaim to quiet title, naming Robert Anderson, Robert Thomas & Associates, Inc., First Arlington National Bank as trustee under trust No. A1291, Tollway Arlington National Bank, Avant and St. Paul as counter-defendants. In its answer, St. Paul again averred its interest in the subject property as set forth in its complaint.

The record shows that Luana Koloch was deposed in July of 1982, and additional counsel appeared for St. Paul in September 1982. St. Paul then amended its complaint adding counts II and III against Robert Anderson and Walter Chiczewski, Robert Thomas & Associates and Suburban Realty and Investments, Thomas Schwendau, the former husband of Marie Avant d/b/a T & J Management, Avant and Tollway. Counts II and III charged these defendants with conspiring to defraud St. Paul of $62,300 through various acts including: Anderson forging the Kolochs' names to an October 3, 1982 deed in trust which conveyed the subject property to trust A1291 and designating himself as beneficiary of said trust; Chiczewski notarizing the forged signatures of the Kolochs on the deed in trust; Anderson obtaining a $50,000 loan on or about December 4, 1980 from Tollway secured by a mortgage on the subject property with Tollway's actual or constructive knowledge that Anderson lacked authority to direct the execution of such a mortgage; Anderson then forging the Kolochs' names to a real estate contract prepared by Chiczewski and purporting to sell the subject property to Avant, Anderson and Chiczewski, then mailing to St. Paul a mortgage application signed by Avant to finance the purchase of the subject property, which application contained false information intended to deceive St. Paul; Schwendau falsely verifying Avant's employment and yearly salary with T & J Management to St. Paul; Avant's executing a mortgage on the subject property to secure her indebtedness to St. Paul. It was also alleged that Avant had never intended to purchase the subject property, or paid any earnest money to Suburban Realty and Investment as indicated in the real estate contract. On the basis of the false information and documents submitted to it, St. Paul loaned Avant $62,300 to purchase the subject property from trust A1291, disbursing $51,350.66 of the net proceeds of the mortgage loan to Tollway to pay off Anderson's purported mortgage, and the balance to Anderson. St. Paul also alleged that the foregoing sums were wrongfully obtained by Anderson and Tollway in that they knew or should have known that Tollway did not have a valid mortgage on the subject premises.

Tollway's answer admitted the mortgage loan to Anderson and its receipt of $51,350.66 from St. Paul in the name of Anderson to pay off said loan. It denied knowledge of any wrongdoing on the part of Anderson and the other co-defendants, and denied knowledge of or participation in any wrongful conduct or conspiracy.

Extensive discovery ensued and subsequently, on September 9, 1983, St. Paul was given leave of court to withdraw its charges made in counts II and III against the various defendants and to file its counts IV and V in unjust enrichment and for constructive trust against Tollway alone. At the same time, Tollway's motion for attorney fees and expenses incurred as a result of the withdrawn allegations was denied "without factual hearing."

In counts IV and V, St. Paul again alleged Tollway's December 1980 loan to Anderson which was secured by a mortgage on the subject property and other property, as well as a series of loans by Tollway to Anderson between July 1979 and July 1981, representing a continual course of business with Anderson during that time. St. Paul further alleged that on January 30, 1981, it paid Tollway $51,350.66 to release its mortgage on the subject property under the mistaken belief that Tollway's mortgage was valid, that Tollway was in a better position than St. Paul to discover the invalidity of its mortgage because of its continuing course of business with Anderson, and that Tollway in fact released nothing of value, thereby becoming unjustly enriched at St. Paul's expense.

In its answer to counts IV and V, Tollway denied knowledge of the forgeries by Anderson, and denied that it was in a better position than St. Paul to discover the invalidity of its mortgage. Tollway also stated that the only security other than the mortgage on the subject property and the assignment of the beneficial interest in trust A1291 for the $50,000 loan to Anderson was collateral which had been previously pledged to secure an earlier loan by Tollway to Anderson and which subsequently had to be liquidated to reduce Anderson's indebtedness arising out of that loan. Tollway admitted that it had made six loans and various renewals to Anderson between July 1979 and February 1981, and that an Anderson entity maintained a checking account at Tollway during that time, however it denied a "continual course of business" with Anderson.

By way of affirmative defense, Tollway stated that St. Paul had failed to exercise ordinary care in verifying the false statements made by Avant in her loan application before disbursing its loan proceeds and that St. Paul's failure to inquire into the Koloch's possession of the subject premises or to verify any impending sale with those persons then in possession was the direct and proximate cause of the loss sustained by St. Paul. Tollway also alleged that Luana Koloch had notified St. Paul shortly after the Avant loan closing that Avant did not reside at the subject property, but despite these communications, St. Paul made no claim on Tollway for the $51,350.66, continuing to request Tollway's release of the beneficial interest in trust A1291. Tollway contended that St. Paul's acceptance of the releases with knowledge of the aforesaid facts constituted a waiver by St. Paul and estopped plaintiff from making any claims against Tollway for monies disbursed on the Avant loan. In addition, it alleged that by abandoning its efforts to collect from those defendants previously named in counts II and III, St. Paul had waived and was estopped from any recovery against Tollway. It further alleged that, pursuant to the trustee's direction that the sale proceeds be paid to Anderson, the $51,350.66 paid to Tollway was received by Tollway for the benefit of Anderson. Finally, Tollway denied that it was unjustly enriched at the expense of St. Paul, stating that it gave good and valuable consideration to Anderson when it loaned that amount to him and that it applied the $51,350.66 it received for, and on behalf of, Anderson in payment and satisfaction of Anderson's indebtedness.

St. Paul subsequently filed its motion for summary judgment on counts IV and V of its complaint along with extensive exhibits. In it, St. Paul alleged Anderson's forgery on the deed in trust to First Arlington National Bank by which he designated himself beneficiary, and Tollway's loan of $50,000 to Anderson secured by a mortgage and by Anderson's purported beneficial interest. St. Paul further alleged that Avant applied to it for a loan in the amount of $62,300 purportedly to finance her purchase of the subject property, and that as security for its loan, St. Paul attempted to obtain a first lien on the property. In this process, St. Paul received a pay-off letter signed by Robert Lawler, Tollway's then president. The letter, which is attached to plaintiff's motion as exhibit A, stated that on January 30, 1981, Tollway would accept a pay-off amount of $51,350.66 in the name of Robert Anderson, in exchange for which it would release its mortgage on the subject...