In re Estate of LaPlume (IL)

Summary: Probate courts have discretion to order the sale of real property free and clear of all liens, under 755 ILCS 5/20-6(b), if such a sale is necessary for the proper administration of the decedent's estate.


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In re Estate of LaPlume, 2014 IL App (2d) 130945.


Facts: On March 26, 2012, Erika LaPlume passed away and was survived only by her daughter, the executor. The decedent's residence was the only asset of the estate, which was encumbered by liens and mortgages totaling more than $207,000. Of this amount, Bank of America (BoA) had a lien totaling approximately $165,000. On June 25, 2012, the executor was formally appointed by the probate court.

On December 18, 2012, BoA separately filed a complaint for foreclosure against the property. On March 12, 2013, the executor filed her first petition for approval to sell the subject property for $200,000, representing that she had found a buyer for the property. In the petition, which named all known lienholders, the executor argued that section 20–6(b) of the Probate Act (755 ILCS 5/20–6(b)) permitted the probate court, at its discretion, to order the short sale of the subject property and prorate the various encumbrances so that the property would be sold free and clear of all mortgages, liens, and encumbrances.

While the parties were briefing the matter, the executor filed a second petition for approval to sell the property. The bank did not respond to the petition. In camera discussions were held and the probate court concluded that a conflict of law existed between section 20-6(b) and the Foreclosure Law. The court's order stated that it could not interpret the provisions of section 20-6(b) with any certainty and would not utilize its alleged discretion under the statute. Therefore, the probate court held that the executor’s petitions and counterclaim were dismissed, and stayed BoA's foreclosure action pending further order. The executor appealed.

Holding: Reversed and Remanded. First, the appellate court held that the word "may" confers discretion on the probate court to apply section 20-6(b). When the representative of the decedent's estate invokes section 20-6(b) seeking permission from the court to sell the property, the probate court must consider whether "such a sale is necessary for the proper administration of the decedent's estate." The appellate court noted that section 20-6(b) does not automatically apply when the decedent's property is underwater. Moreover, there are three components to section 20-6(b) and all three must be performed together: (1) the court has the power to direct the sale of real estate free and clear of any existing encumbrances, (2) the existing encumbrances will be satisfied from the proceeds of the sale of the property, and (3) the court will determine and adjust the priorities of the claimants to the encumbrances.

Next, the appellate court considered which party, the lender or executor, was the first to seek relief. The appellate court stated that the trigger was when the executor filed the petition under section 20-6(b). Here, the executor opened the probate estate before the lender filed for foreclosure, but filed the petition after the lender's foreclosure action. However, this does not end the inquiry. Whether and what kind of action is filed first should be one of the factors the probate court considers.

Regarding conflicts between the Probate Act and Foreclosure Law, BoA first attempted to claim that section 20–6(b) was largely irrelevant because the mortgagee choses whether to allow a sale under the Probate Act or the Foreclosure Law. The court summarily dismissed this argument because the case was about the probate court's discretion, not the bank's discretion.

BoA next argued that the Foreclosure Law and section 20–6 of the Probate Act were roughly equivalent, with the Foreclosure Law being somewhat more detailed and specific, and therefore Foreclosure Law should have applied exclusively. The court held that the two laws did not cover the same subject matter, even though they adopted similar procedures to protect the rights of lienholders. The court stated that a foreclosure action focuses on maximizing the mortgagee's recovery; in a probate action, the focus is on maximizing and properly administering the decedent-mortgagor's estate. Accordingly, the court stated that the specific-versus-general canon of construction did not apply under the circumstances of the case as the probate action and the foreclosure action did not involve the same parties or the same action.


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By: ATG Underwriting Department | Posted on: Wed, 06/24/2015 - 12:30pm