Wagemann Oil Co. v. Marathon Oil Co.

• Decision Date: 30 June 1999
• Docket Number: No. 1-98-0553.,1-98-0553.
• Citation: 239 Ill.Dec. 549,714 N.E.2d 107,306 Ill. App.3d 562
• Parties: WAGEMANN OIL COMPANY, Plaintiff-Appellant, v. MARATHON OIL COMPANY, Defendant-Appellee (William J. Lussow, Jane E. Lussow, United States of America, First Arlington National Bank, State of Illinois, Palatine Express Car Wash, Inc., Deer Lake Homeowners Association, Unknown Owners and Nonrecord Claimants, Defendants).
• Court: United States Appellate Court of Illinois

714 N.E.2d 107

306 Ill. App.3d 562

239 Ill.Dec. 549

WAGEMANN OIL COMPANY, Plaintiff-Appellant, v. MARATHON OIL COMPANY, Defendant-Appellee (William J. Lussow, Jane E. Lussow, United States of America, First Arlington National Bank, State of Illinois, Palatine Express Car Wash, Inc., Deer Lake Homeowners Association, Unknown Owners and Nonrecord Claimants, Defendants).

No. 1-98-0553.

Appellate Court of Illinois, First District, Fifth Division.

June 30, 1999.

Gerald C. Risner, Park Ridge, and Robert G. Epsteen, Chicago, for Appellant.

John H. Kallman, Chicago, for Appellee.

Justice GREIMAN delivered the opinion of the court:

Plaintiff Wagemann Oil Company (Wagemann) appeals from an order denying its motion for summary judgment and granting summary judgment to defendant Marathon Oil Company (Marathon). Wagemann contends that the circuit court erred in determining that Marathon's judgment lien upon the real estate which was the res of an Illinois land trust was superior to Wagemann's security interest in the beneficial interest of that trust. We affirm.

This case involves the priority of the parties' rights to the proceeds from the sale of certain real property commonly known as 124 South Ela Road in Barrington, Illinois. Upon filing cross-motions for summary judgment, the parties agreed there were no material issues of fact. The relevant facts are as follows.

On June 1, 1973, an Illinois land trust, trust A-349, was established, vesting title to the real estate with First Arlington National Bank (First Arlington) as the trustee. The trust agreement provided that William J. Lussow and Jane E. Lussow owned the beneficial interest of trust A-349 and held the power of direction.

On October 18, 1973, the Lussows obtained a $60,000 loan from Central Federal Savings & Loan Association (Central Federal). The Lussows executed a note, and First Arlington, as trustee, executed the note and a mortgage encumbering the property.

In June 1977, William Lussow obtained a loan from First Arlington in the amount of $420,000 and executed a promissory note on June 3, 1977, for the amount of the loan made payable to First Arlington. The loan was secured by William Lussow's assignment of the beneficial interest in trust A-349 as well as other assets.

On June 23, 1977, the Lussows executed a junior assignment of their beneficial interest in trust A-349, including the power of direction, to Wagemann and a collateral pledge to Wagemann and others as security for debts due and to be due. Wagemann asserts this assignment was given in consideration for the agreement by Wagemann's owner, Peter Spina, to co-sign the note given to First Arlington for the $420,000 loan. Both documents stated that the assignment was junior to the assignment made on June 3, 1977, to First Arlington.

On June 23, 1977, William Lussow and Wagemann's attorney provided Robert Mills, the president of First Arlington, with the junior assignment and collateral pledge. Wagemann contends it lodged the document with the trustee by tendering it to Mills. The assignment was not signed or acknowledged by the trustee.

On July 18, 1978, First Arlington as trustee of trust A-349 conveyed the real estate to a nominee at the direction of the Lussows, who immediately conveyed the real estate to First Arlington as trustee under a new trust agreement, trust A-843.

In 1979, William Lussow filed suit against Spina in the circuit court, seeking a determination of the status of accounts between them.

On March 21, 1980, First Arlington released its security interest in the beneficial interest, which partly secured the loan for $420,000.

In 1981, the suit filed by William Lussow against Spina was transferred to the United States Bankruptcy Court. On February 18, 1992, the bankruptcy court required William Lussow to account to Spina for damages arising out of their business relationship.

On September 11, 1992, the Lussows directed First Arlington as trustee of trust A-843 to convey the property by quitclaim deed to themselves as tenants by the entirety.

On November 4, 1993, Wagemann attached a legal description of the property to the junior collateral assignment which had been given in 1977 with reference to the original land trust. This instrument was recorded with the county recorder.

On December 14, 1993, Wagemann filed suit against the Lussows in the circuit court seeking to set aside the September 11, 1992, transfer of the property to the Lussows as tenants by the entirety and to impose a constructive trust upon the property in its favor.

On March 10, 1994, Marathon obtained a judgment in the circuit court for $200,000 against the Lussows and recorded that judgment with the county recorder the same day.

On September 13, 1995, the federal government filed two tax liens against the Lussows with the county recorder.

On December 20, 1996, the United States Bankruptcy Court entered judgment for Spina against William Lussow for $741,451.99. The order stated that the damages were secured by the assignment of the beneficial interest in trust A-349 at First Arlington dated June 23, 1977.

On January 15, 1997, the circuit court entered an agreed order resolving Wagemann's lawsuit against the Lussows. The order stated in relevant part:

"2. On June 23, 1977, [the Lussows] assigned their beneficial interest in the land trust to Wagemann * * *.

3. As a result of [the Lussows'] assignment, Wagemann held a valid, subsisting and continuous security interest in the beneficial interest in the property from June 23, 1977, until the present.

4. Without the consent or knowledge of Wagemann, the Lussows caused the property to be transferred to themselves as `Tenants by the Entirety' by means of a Quitclaim Deed dated September 11, 1992 * * *."

The order further directed:

"1. The property located at 124 South Ela Road, Barrington, Illinois has been subject to a valid, subsisting and continuous security interest in favor of Wagemann * * * since June 23, 1977.

2. A constructive trust is imposed in favor of Wagemann * * * and against the property in the form of a lien securing a debt in the amount of $741,561.99 as of June 23, 1977.

3. The Quitclaim Deed dated September 11, 1992, and recorded * * *, deeding the property to William and Jane Lussow as `Tenants by the Entirety' is declared void and of no effect."

Marathon was not a party to that lawsuit and the record contains no lis pendens notice to evidence the existence of the pending action.

On May 17, 1996, Central Federal filed this lawsuit to foreclose the original mortgage. Central Federal thereafter assigned the mortgage and note to Wagemann and Wagemann was substituted as the plaintiff and filed the appropriate amended complaint seeking foreclosure.

Both Wagemann and Marathon moved for summary judgment as to the priority of the various interests of the parties. The parties agreed that the original mortgage for $60,000 held priority upon foreclosure among all of the other interests. Wagemann and Marathon agreed that the federal government's interest was inferior to their claims. An order of default was entered against the other defendants.

On October 28, 1997, the circuit court entered partial summary judgment in favor of Marathon and against Wagemann as to the priority of interests. The court determined that the Central Federal mortgage now owned by Wagemann held first priority, Marathon's judgment lien held second priority, Wagemann's junior assignment of beneficial interest in trust A-349 held third priority, and the federal government's tax lien held fourth priority. The circuit court thereafter entered a decree and an amended decree of foreclosure and sale. Wagemann appealed.

Summary judgment is appropriate where the pleadings, depositions, and admissions, together with any affidavits, demonstrate that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law. 735 ILCS 5/2-1005 (West 1996). The standard of review is de novo. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill.2d 90, 102, 180 Ill.Dec. 691, 607 N.E.2d 1204 (1992)

.

Wagemann argues that the circuit court erred in determining Marathon's judgment lien superior to Wagemann's junior assignment of the beneficial interest in trust A-349 because Wagemann's interest was perfected and filed before Marathon filed its interest with the county recorder. Marathon recognizes the general rule that a lien that is first in time has priority and is entitled to prior satisfaction out of the property it binds. First State Bank v. De Kalb Bank, 175 Ill. App.3d 812, 817, 125 Ill.Dec. 386, 530 N.E.2d 544 (1988). Marathon contends, however, that by reason of the law pertaining to Illinois land trusts, Wagemann's interest, if valid, would only be an interest in personalty and does not bind the real estate itself. Thus, Marathon asserts that its interest is superior to Wagemann's interest.

An Illinois land trust is an arrangement under which legal and equitable title to real property is held by the trustee and the interest of the beneficiary is personal property. Espevik v. Kaye, 277 Ill.App.3d 689, 694, 214 Ill.Dec. 360, 660 N.E.2d 1309 (1996); Klein v. La Salle National Bank, 155 Ill.2d 201, 207, 184 Ill.Dec. 420, 613 N.E.2d 737 (1993). A land trust beneficiary has the exclusive right to direct the trustee in dealing with the title and the owner of the beneficial interest is empowered to transfer his or her beneficial interest through an assignment. Espevik, 277 Ill.App.3d at 694, 214 Ill.Dec. 360, 660 N.E.2d 1309. An assignee of a beneficial interest in a land trust acquires only an interest in personal property; the transaction does not give the assignee a direct interest in the realty which is the res of the trust. Melrose Park National Bank v. Melrose Park National Bank, 123 Ill.App.3d 282, 285, 78 Ill.Dec. 622, 462 N.E.2d 741 (1984). Based on these general principles, Marathon argues that its judgment lien,...