Deutsche Bank National Trust Co. v. Payton
2017 IL App (1st) 160305
| Ill. App. Ct. | 2017Background
- Carla and Marvin Watkins held two mortgages (≈ $371,833.90) on 6437 N. Kimball. They fell behind in 2005.
- FundingForeclosures.com arranged transactions purportedly transferring title; a warranty deed (Nov. 11, 2005) conveyed the property to Gary and Tammy Payton.
- The Paytons obtained a $450,000 mortgage from Long Beach; Long Beach used loan proceeds to pay off the Watkinses’ Citimortgage and Countrywide mortgages and paid the Watkinses $119,583.92; releases from the prior lenders appear in the record.
- Long Beach assigned the Paytons’ mortgage to Deutsche Bank (trustee). Deutsche Bank later sued to foreclose when the Paytons defaulted and added the Watkinses as defendants.
- Deutsche Bank moved for summary judgment based on equitable subrogation; the trial court granted partial summary judgment subordinating the Watkinses’ interest to Long Beach/Deutsche Bank and later granted full summary judgment; the Watkinses appealed, arguing forgery of the deed and lack of standing.
Issues
| Issue | Plaintiff's Argument (Deutsche Bank) | Defendant's Argument (Watkinses) | Held |
|---|---|---|---|
| Whether pay-off of Watkinses’ prior mortgages subrogated Long Beach to prior lenders’ lien priority | Long Beach paid off Citimortgage and Countrywide; by operation of law it was subrogated to their lien priority | No substantive dispute on payoff; Watkinses challenged later standing but not subrogation | Court: Payoff created equitable subrogation; Long Beach/Deutsche Bank acquired priority over Watkinses’ interest |
| Whether Deutsche Bank had standing to foreclose if the deed to the Paytons was forged or there was no written mortgage with Watkinses | Even if deed was forged or no direct written mortgage with Watkinses, Long Beach’s extinguishment of prior indebtedness gave it (and assignee Deutsche Bank) standing as legal holder and by subrogation; preventing unjust enrichment supports foreclosure | Watkinses: deed was forged and thus Paytons/assignee acquired no interest; without written mortgage between Watkinses and Long Beach/Deutsche Bank, bank lacks standing to foreclose on Watkinses | Court: Watkinses failed to produce admissible evidence of forgery; equitable subrogation and the pay-off gave Deutsche Bank standing despite asserted forgery or lack of direct contract |
| Whether allowing the Watkinses’ standing/forgery defense would result in unjust enrichment | Deutsche Bank: permitting the defense would let Watkinses keep $119,583.92 and have mortgages paid off while avoiding subordination — inequitable | Watkinses: defense bars foreclosure if deed/mortgage chain is invalid | Court: Avoiding unjust enrichment favors equitable subrogation; summary judgment appropriate to prevent inequity |
Key Cases Cited
- Dix Mutual Insurance Co. v. LaFramboise, 149 Ill.2d 314 (discussion of equitable subrogation principles)
- Thompson v. Gordon, 241 Ill.2d 428 (summary judgment standard; de novo review)
- Glisson v. City of Marion, 188 Ill.2d 211 (standing doctrine; who may sue)
- Interstate Bank of Oak Forest v. Ames Capital Corp., 315 Ill. App.3d 700 (application of subrogation to lien priority)
- Lebron v. Gottlieb Memorial Hospital, 237 Ill.2d 217 (affirmative defenses and burden to plead lack of standing)
- Carruthers v. B.C. Christopher & Co., 57 Ill.2d 376 (need evidentiary support to create material factual issues for summary judgment)