2019 IL App (5th) 180332
Ill. App. Ct.2019Background
- Property had been held in an Illinois land trust since 1996; Phillip Alward was the sole surviving beneficiary.
- On March 5, 2012, Alward (believing he owned title) executed and the Alwards recorded a quitclaim deed transferring the property to Grant and Carrie Alward; the deed did not mention the land trust or identify Alward as beneficiary.
- The Alwards later (Sept. 2015) obtained a mortgage from Jacob Holding, which recorded its mortgage; Jacob Holding did not have notice of a defect other than public-record information.
- In May–June 2016 Alward directed the trustee to reconvey title to him and then filed a quiet title action asserting the 2012 deed and the 2015 mortgage were clouds on title.
- The circuit court denied Alward’s SJ motion and granted Jacob Holding’s cross-motion; Alward appealed.
- The appellate court reversed: it held the 2012 quitclaim deed was ineffective to convey legal title or, alternatively, Alward’s beneficial interest, and remanded with directions to grant Alward summary judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a land-trust beneficiary can convey legal title by executing a quitclaim deed | Alward: No — beneficiary lacks legal title; only trustee can convey | Jacob Holding: The deed conveyed the beneficiary’s directing power/interest; courts allow beneficiaries to effect transfers in some circumstances | Court: No — beneficiary cannot convey legal title by quitclaim; trustee alone holds legal title |
| Whether the 2012 quitclaim deed operated as an assignment of Alward’s beneficial interest in the trust | Alward: Deed made in individual capacity, omitted trust language, so no assignment | Jacob Holding: Deed effectively transferred beneficiary rights to the Alwards | Court: Deed did not assign beneficiary interest — Alward acted individually and forgot the trust; deed lacked trust reference |
| Whether Jacob Holding is protected as a bona fide purchaser/mortgagee for value without notice | Alward: Constructive notice of the land trust existed in public record; Jacob Holding could have required a trustee’s deed | Jacob Holding: It relied on recorded quitclaim deed and had no actual notice of defect; should be protected | Court: Rejected Jacob Holding’s entitlement to keep mortgage; public-record notice and failure to obtain trustee’s deed defeat protection under these facts |
| Whether summary judgment in favor of Jacob Holding was proper | Alward: No genuine issue — deed ineffective; SJ for plaintiff should be granted | Jacob Holding: Facts and precedent justify affirming SJ for defendant | Court: Reversed — no genuine issue that deed was ineffective; grant Alward SJ and remove cloud on title |
Key Cases Cited
- In re Estate of Crooks, 266 Ill. App. 3d 715 (Ill. App.) (beneficiary cannot convey legal title by quitclaim; must observe trust form)
- Madigan v. Buehr, 125 Ill. App. 2d 8 (Ill. App.) (beneficiary may contract to direct trustee to convey where trust vests such power)
- Rizakos v. Kekos, 56 Ill. App. 3d 404 (Ill. App.) (specific performance against beneficiaries who concealed trust status where agreement contemplated trustee’s deed)
- Paine/Wetzel Associates, Inc. v. Gitles, 174 Ill. App. 3d 389 (Ill. App.) (beneficiary may enter enforceable contract affecting title if trust vests sole direction power)
- People v. Chicago Title & Trust Co., 75 Ill. 2d 479 (Ill.) (Illinois land trusts generally leave management/control with beneficiary but legal title remains with trustee)
- Seaberg v. American Nat’l Bank & Trust Co. of Chicago, 35 Ill. App. 3d 1065 (Ill. App.) (discussing limits on beneficiary’s power to convey without trustee action)
- Kortenhof v. Messick, 18 Ill. App. 3d 1 (Ill. App.) (persons dealing with trust property must strictly observe trust features)
- Gambino v. Boulevard Mortgage Corp., 398 Ill. App. 3d 21 (Ill. App.) (quiet title principles and requirement that plaintiff must have title)