Chicago Title Insurance Co. v. Aurora Loan Services, LLC
2013 IL App (1st) 123510
Ill. App. Ct.2013Background
- This is a Chicago Title Insurance Company subrogation suit against Aurora Loan Services for breach of a special warranty deed.
- Aurora conveyed 201 N. Westshore Dr., Unit 2603 to Waterside by special warranty deed on Feb. 23, 2010; deed recorded March 11, 2010.
- Chicago Title issued an owner's title insurance policy on March 11, 2010.
- Delinquent special assessment taxes were previously sold at a 2007 tax sale to Salta Group, creating a lis pendens against the property.
- Aurora did not redeem the 2007 tax sale and did not notify Waterside of a petition for a tax deed; Salta obtained a tax deed and Waterside was divested of its interest in 2010; Chicago Title paid Waterside $290,000 under the policy.
- The circuit court dismissed Waterside’s claim with prejudice under section 2-619, holding the encumbrance was pre-Aurora and not caused by its conduct.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Aurora breached the special warranty by encumbrances pre-dating its title | Waterside: encumbrances preexisted but Aurora failed to redeem/advise; breached by not removing encumbrances. | Aurora: preexisting encumbrances are not covered by the special warranty; liability limited to encumbrances caused by Aurora. | No breach; encumbrance predated Aurora and was not caused by its conduct. |
| Whether failure to redeem after notice of a tax deed petition constitutes breach | Waterside contends failure to redeem or notify constitutes breach of covenant. | No post-conveyance duty to redeem or notify; warranty limited to actions by grantor. | Abandoned as a matter of law; post-conveyance conduct not within the warranty. |
| Whether lis pendens or tax deed proceedings create encumbrances under the special warranty | Lis pendens or tax sale encumbrances should be covered by warranty. | Lis pendens is not an encumbrance; tax sale encumbrance existed before grantor; not covered. | Lis pendens not an encumbrance; tax sale encumbrance preexisted and was not caused by Aurora. |
| Whether the exception for taxes not yet due and payable applies to 2007 tax sale taxes | Taxes not yet due and payable exception covers unpaid taxes causing the tax sale. | Taxes sold in 2007 were preconveyance and not within the exception; lien shifted to tax purchaser. | Not within exception; 2007 taxes were prior liens; not covered by warranty. |
Key Cases Cited
- Inland Real Estate Corp. v. Oak Park Trust & Savings Bank, 127 Ill. App. 3d 535 (Ill. App. 1983) (encumbrances include liens and rights diminishing value; covenant breach at delivery)
- Firebaugh v. Wittenberg, 309 Ill. 536 (1903) (covenant against encumbrances breached at the moment of delivery; covenant does not run with land)
- Knodle v. Jeffrey, 189 Ill. App. 3d 877 (1989) (recorded lis pendens provides notice to future purchasers about potential title defects)
- In re Estate of Schlenker, 209 Ill. 2d 456 (2004) (affirms standards for evaluating affirmative defenses in pleadings)