Marquette Bank v. Heartland Bank & Trust Co. (IL)

Summary: Tenancy by the entirety ownership of the beneficial interest in a land trust only precludes the sale of joint owners' interest to satisfy a money judgment against one of the owners.

Marquette Bank v. Heartland Bank & Trust Co., 2015 IL App (1st) 142627.

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Facts:  Defendant, Lawrence Gesiakowski, took out a business loan with Marquette Bank. As security for the loan, Lawrence encumbered both his business property and personal residence, which was in a land trust. Lawrence and his wife, Gail, owned the beneficial interest in the land trust as tenants by the entirety.

The business loan was evidenced by a promissory note signed only by Lawrence, and secured by two mortgages: one for the commercial property and one for the Gesiakowskis' home. The land trustee, at the express written direction (letter of direction) of the sole beneficiaries of the land trust (both Gesiakowskis), granted the mortgage to Marquette Bank.

When the loan matured, Lawrence defaulted. Marquette Bank filed two separate mortgage foreclosure actions: one for the commercial property and one for the Gesiakowskis' home.

The Gesiakowskis' objected to the foreclosure and sale of their home in an affirmative defense. They argued that Marquette Bank could not sell their home to satisfy debt held solely by Lawrence because they owned their beneficial interest in the land trust as tenants by the entirety, as allowed by the Joint Tenancy Act (Act) (765 ILCS 1005/1c (West 2012)), and, therefore, section 12–112 of the Illinois Code of Civil Procedure (Code) ( 735 ILCS 5/12–112 (West 2012)), precluded judicial foreclosure and the sale of their home. The trial court disagreed and entered summary judgment in Marquette Bank's favor.

In denying the Gesiakowskis' affirmative defense, the trial court relied on land trust case law bifurcating beneficial interest and the res of the land trust. The trial court held that the Gesiakowskis owned their beneficial interest in the land trust as personal property, not real estate, as tenants by the entirety. The Gesiakowskis expressly directed the trustee to execute the mortgage, thereby estopping them from asserting their defense. The trial court also cited Gail's knowledge of the mortgage. The Geisakowskis appealed.

 

Holding: Affirmed.  On appeal, the Gesiakowskis argued that the Joint Tenancy Act and section 12–112 of the Code barred foreclosure of a mortgage because their home was in an Illinois land trust and, as beneficiaries, they owned the beneficial personal property interest as tenants by entirety. They claimed that their ownership of beneficial interest in the land trust as tenants by entirety should be treated as the legal equivalent of owning the real property held in the land trust as tenants by entirety. The court held to the contrary.

In affirming the trial court’s judgment, the appellate court stated that the Joint Tenancy Act and section 12–112 of the Code did not apply. Marquette Bank was granted the mortgage at the direction of both of the Gesiakowskis and held the mortgage directly on the property. Tenancy by the entirety ownership of the beneficial interest in the land trust, as discussed in section 12–112 of the Code, only precluded the sale of the joint owners' personal property interest to satisfy a money judgment against one of the owners. The protection afforded by tenancy by the entirety ownership depended on whether the debt was individual or joint. Property held as tenants by the entirety may be sold the same as if title was held in joint tenancy to enforce a joint debt.

The letter of direction specifically authorized and directed the land trustee to execute and deliver the mortgage on the Gesiakowskis' home as security for the business loan. Under the trust agreement, the land trustee could not act without the direction of both of the Gesiakowskis. It stood as an uncontested fact that both Gail and Lawrence directed the land trustee. Therefore, Marquette Bank established a prima facie case for foreclosure and the Gesiakowskis failed to meet their burden to prove payment under the terms of the mortgage or establish a valid defense.

Opinion Year: 
2015
Jurisdiction: 
Illinois
By: ATG Underwriting Department | Posted on: Tue, 11/15/2016 - 3:17pm