CNB Bank & Trust, N.A. v. Rosentreter
39 N.E.3d 337
Ill. App. Ct.2015Background
- CNB Bank (plaintiff) obtained judgments foreclosing multiple mortgages on nine tracts owned/controlled by members of the Rosentreter family and related entities; counts I–XII sought foreclosure, XIII–XVI sought replevin of grain bins.
- Count IV alleged Frances A. Rosentreter (individually) mortgaged tracts 1–6 (she undisputedly owned 100% of tract 4; ownership of tracts 1,2,3,5,6 was disputed).
- At foreclosure sale, tracts 1 and 7 (which share a grain elevator facility) were offered separately then en masse; separate high bids totaled $9,000,000 ($150,000 for tract 1; $8,850,000 for tract 7), en masse sale bid was $9,100,000.
- Defendants (cotrustees of Gerald E. Rosentreter Trust B) submitted appraisals by accredited rural appraiser Mark Akers valuing tract 1 at $5.6M and tract 7 at $2.875M; plaintiff relied on auction bids to apportion proceeds.
- Trial court confirmed sale and apportioned $151,666.67 to tract 1 (derived from separate-bid proportions) and remainder to tract 7; court also later ruled the grain bins were fixtures to be sold with the land.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Frances A. Rosentreter’s mortgage (Oct. 28, 2010) conveyed 100% fee simple in tracts 1,2,3,5,6 | Admission that interest subject to mortgage was “fee simple” and that mortgaged real estate listed tracts 1–6 establishes Frances owned whole fee simple estate | Paragraph 3(K) of complaint and post-judgment executor’s deed/estate inventory show Gerald’s trust (via cotrustees) owned an undivided 1/2 of those tracts when mortgage was executed, so Frances could only mortgage her undivided 1/2 | Not resolved as matter of law for either side on summary judgment; plaintiff not entitled to judgment that Frances owned 100%, and defendants not entitled to judgment that she owned only 1/2 without proof of ownership at the mortgage date |
| Whether grain bins are personal property (replevin) or fixtures (realty) | Plaintiff sought replevin (possession) as personal property | Defendants argued bins are fixtures and therefore part of real estate (not subject to replevin) | Moot as to replevin counts: trial court later found bins were fixtures and ordered they be sold with the real estate |
| Proper apportionment of $9.1M sale proceeds between tracts 1 and 7 sold en masse | Auction results (separate bids and en masse bid) reflect arm’s-length values; allocation should follow proportion of separate high bids (resulting in ~$151,666.67 to tract 1) | Allocation based on independent appraisals (Akers): tract 1 = $5.6M, tract 7 = $2.875M; reapportion proceeds by appraisal ratios (resulting in $6.006M to tract 1) | Trial court’s apportionment to give only ~$151,666.67 to tract 1 was unconscionably low and against manifest weight; remanded to reapportion $9.1M using Akers’s unrebutted appraisals ($6.006M to tract 1; $3.094M to tract 7) |
| Standard/role of foreclosure sale bids in proving fair market value | Auction (even a foreclosure) is best indicator of fair market value when arm’s-length | Forced-sale dynamics mean foreclosure bids often understate market value; expert appraisal may better reflect FMV for apportionment | Foreclosure bid alone is not conclusive FMV; court abused discretion treating the low separate bid for tract 1 as not grossly inadequate when it was only ~2.7% of appraised FMV (unconscionable) |
Key Cases Cited
- Steel City Bank v. Village of Orland Hills, 224 Ill. App. 3d 412 (1991) (courts avoid issuing advisory opinions on premature issues)
- Deutsche Bank Nat’l Trust Co. v. Burtley, 371 Ill. App. 3d 1 (2006) (foreclosure sale is a forced sale)
- Horney v. Hayes, 11 Ill. 2d 178 (1957) (property generally does not bring full value at forced sales)
- Cadle Co. II v. Stauffenberg, 221 Ill. App. 3d 267 (1991) (cotenant cannot mortgage more than own undivided interest)
- Levy v. Broadway-Carmen Bldg. Corp., 366 Ill. 279 (1937) (court may set aside/decline to confirm sale if price is grossly inadequate)
- JP Morgan Chase Bank v. Fankhauser, 383 Ill. App. 3d 254 (2008) (appellate recognition that ~10% of FMV can be unconscionable in foreclosure sale)
- Household Bank, FSB v. Lewis, 229 Ill. 2d 173 (2008) (standard of review on confirmation of foreclosure sale)