delivered the opinion of the court:
The issue in this case is the quality of notice required to be given to a tenant in possession by a mortgagee in a consent mortgage foreclosure proceeding.
On or about June 16, 1986, a mortgage was executed by Chicago Title & Trust Company, as trustee under a land trust, and Home Savings, as lender, for the property consisting of 192 apartments, commonly known as Applegate Apartments, located at 60 East Beech Drive, Schaumburg, Illinois. (It is now known as Beech Pointe Apartments.) The amount of the mortgage was $5.7 million. An assignment of rents was also entered into between the mortgagor, as assignor, and the mortgagee, as assignee. The mortgagee recorded its mortgage and assignment of rents with the Cook County registrar of titles on or about July 8, 1986.
On or about June 7, 1988, a laundry room lease was executed by the defendant, as lessee, and Investors Realty Services, Inc., the mortgagor’s authorized agent, as lessor. The laundry rooms and facilities were leased to the defendant for a period of five years. Pursuant to the lease, the defendant installed laundry equipment on the premises on October 1, 1988, and has operated that equipment since that time. The defendant did not record its lease with the registrar of titles. The mortgagee did not consent to the execution of the lease; the mortgage did not require the mortgagee’s consent.
Under the terms of a rider to the lease, the 5-year lease would be expanded to an additional 10 years, unless the lessee gave notice 60 days before the expiration of the 5-year term of its intention not to extend the lease. Both the lessee and lessor could terminate the lease after the extended term began subject to certain time limitations. The rider provided that the lessor would pay rent in the sum of 55% of the receipts from the lessees’ coin-operated equipment. The rider was to terminate "upon change of ownership or change of management or change of management company or sale of property or transfer or assignment of this lease.” If the rider was terminated, the rent would revert to the terms of the lease itself, which provided for rent in the sum of 15% of the coin receipts.
The defendant installed laundry equipment which was identified as the defendant’s property through attached labels. The labels also provided the defendant’s telephone number. Identical information was displayed on several signs in the laundry facility; the signs measured 141/2 inches by 103/4 inches and were posted shortly after the commencement of the lease.
On March 6, 1992, the mortgagee filed a complaint for foreclosure in the circuit court of Cook County alleging an indebtedness of almost $6.2 million, including an unpaid principal balance of almost $5.6 million. On March 10, the mortgagee recorded its lis pendens notice with the registrar of titles. On April 29, 1992, a judgment of consent foreclosure was entered which vested absolute title to the property in the mortgagee. The judgment also provided that the mortgagor would not be liable for any deficiency judgment.
The defendant was not named in the complaint and did not appear in the foreclosure action. The complaint and the judgment of foreclosure did not identify the defendant’s leasehold interest as one to be terminated in the foreclosure proceedings. The mortgagee filed its affidavit for service by publication as to all nonrecord claimants and unknown owners who were served by publication. The affidavit, which was on a circuit court of Cook County form, was signed by the attorney for the mortgagee and alleged "on information and belief [the nonrecord claimants and unknown owners] cannot be found so that process cannot be served upon defendant [sic].” The words "on due inquiry” were crossed out and the words "upon information
On May 20, 1992, 20 days after the entry of the judgment of consent foreclosure, the mortgagee’s agent, Draper & Kramer, Inc., sent a letter of introduction to the defendant which made no mention of the foreclosure action, but it informed the defendant that Draper and Kramer was the new management company for the property. After being notified of the change in management, the defendant reduced its rental payments from 55% to 15% of the gross coin receipts generated by the laundry operation, pursuant to the terms of the rider to the lease.
In December 1992, the mortgagee, Home Savings, sold its interest in the property to a land trust of which the plaintiff is the beneficiary. The mortgagee sent the defendant a letter dated December 18, 1992, stating:
"Since the time that Home Savings of America entered upon and took exclusive possession of the Property pursuant to its Mortgage, Home Savings of America has neither accepted any rent payment from Commercial [the defendant] nor recognized Commercial as a tenant under the existing lease.
Therefore, the lease and your rights to possession are deemed void and terminated. We further demand that you immediately vacate possession of the premises occupied by you at the above-referenced Property.”
The defendant responded by letter dated January 5, 1993, refusing to relinquish possession and asserting the continuing validity and enforceability of the lease. On January 11, the plaintiff filed its complaint for possession under the Forcible Entry and Detainer Act. 735 ILCS 5/9 — 101 et seq. (West 1992).
The defendant filed its appearance and later filed a motion for summary judgment asserting that, because the mortgagee failed to make the defendant a party to the foreclosure, the defendant had no actual notice of the proceedings, and therefore the proceedings did not become binding upon the defendant even though the lease was subordinate to the mortgage. The plaintiff then filed its cross-motion for summary judgment with supporting affidavits, stating that in the absence of any agreement between either the defendant and the plaintiff or the mortgagee, the defendant’s junior lease was unenforceable against the mortgagee and, therefore, against the plaintiff.
The judge subsequently entered an order granting summary judgment to the defendant. The plaintiff then filed a motion to reconsider and raised, for the first time, the issue of the lis pendens notice recorded by the mortgagee. The judge denied the plaintiff’s motion to reconsider and allowed the parties to file briefs on the question of the amount of rent due under the lease. The judge subsequently entered an order fixing the rent due at 55% of gross revenues and rejected the defendant’s argument that the rent should have been restricted to 15% of gross revenues.
The parties have exhaustively briefed and argued this case both in the trial court and in this court and have cited many cases. Although we appreciate the industry and scholarship of the attorneys, we deem some of the arguments irrelevant. One example is the argument over whether, under present Illinois law, a mortgagee’s interest is an interest in title or a lien interest. (Compare Kelley/ Lehr & Associates, Inc. v. O’Brien (1990),
At this point we turn to the plaintiff’s argument that under the Act a tenant in
We have two observations to make initially. The first is that section 15 — 1501 is included in that part of the statute dealing with "judicial foreclosure procedure.” This complaint was brought under section 15 — 1402 of the Act (735 ILCS 5/15 — 1402 (West 1992)), which deals with consent foreclosures and which is silent as to who are necessary parties.
The second observation is that before the adoption of the Act in 1987, a tenant in possession was held in some cases to be a necessary party. (See J. Gearen, J. Vranicar & E. Becker, Into Harms’ Way: Now That Harms v. Sprague Has Established the Lien Theory of Mortgages in Illinois, Does Foreclosure Cut Off Junior Lease or Can a Mortgagee Elect to Preserve Them% 34 DePaul L. Rev. 449, 463-70 (1985).) The question arises: Did the legislature intend by the adoption of the Act that a tenant in possession be not considered a necessary party in a consent foreclosure proceeding? Although the answer is not clear because of the separation in the Act between consent foreclosures and judicial foreclosures, we will assume that a tenant in possession is not a necessary party in a consent foreclosure proceeding. That being so, another question arises: If tenants in possession are not necessary parties but do have a possessory interest, how are they to be notified of the consent foreclosure proceedings?
Section 15 — 1402(a), which as noted is the section under which the foreclosure action was filed, provides that in a consent foreclosure judgment the mortgagee shall obtain title free and clear of all claims (except liens of the United States) including "nonrecord claimants given notice in accordance with” the provisions of section 15— 1502(c)(2). (735 ILCS 5/15 — 1402(a) (West 1992).) Both parties agree that the defendant is not a nonrecord claimant, which is defined in section 15 — 1210. (735 ILCS 5/15 — 1210 (West 1992).) There is nothing in section 15 — 1402(a) about the rights of unknown owners or notice to unknown owners. As noted, there is reference to unknown owners in section 15 — 1501(c), which deals with judicial foreclosures. Section 15 — 1402(b) also provides that any party with an interest in the property may object to the consent foreclosure. (735 ILCS 5/15— 1402(b) (West 1992).) Tenants in possession are obviously parties with an interest in the property. Therefore, if tenants in possession are not necessary parties and they are not nonrecord claimants, we agree with the plaintiff that they must perforce be considered unknown owners. Section 15 — 1501(c) provides that any unknown owner may be made a party in accordance with section 2 — 413 of the Code of Civil Procedure (the Code) (735 ILCS 5/2 — 413 (West 1992)). Section 15 — 1221 of the Act provides that "unknown owner” means the same as "unknown owner” as used in section 2 — 413 of the Code. 735 ILCS 5/15 — 1221 (West 1992).
Section 2 — 413 provides that persons interested "whose names are unknown” may be made parties to an action "by the name and description of unknown owners ***; but an affidavit shall be filed by the party desiring to make those persons parties stating that their names are unknown.” (735 ILCS 5/2 — 413 (West 1992).) It has been repeatedly held that persons seeking a judgment against unknown owners must make an honest attempt to see that interested parties have notice of proceedings involving their property rights. (See Mulvey v. Gibbons (1877),
At this point we refer to the assertions made by the plaintiff throughout its briefs that "at no time prior to or during the Foreclosure was the Mortgagee either advised of or did it consent to the Lease” (emphasis added) and that the mortgagee did not join the defendant in the foreclosure action because "it was unaware of Defendant’s unrecorded interest in the Property.” In support of its claim that it was never "advised of’ or was "unaware of’ the lease, the plaintiff refers to a letter sent by the mortgagee to the defendant on December 18, 1992, and affidavits filed by the plaintiff both in support of its motion for summary judgment and in response to the defendant’s motion for summary judgment. Those exhibits established that the mortgagee never acknowledged or consented to the lease, but they certainly do not establish that the mortgagee was unaware of the lease. To illustrate, the defendant submitted the affidavit of one of its partners in which he recited the following:
"On numerous occasions between April 29, 1992, and December 18, 1992, various management agents for Applegate Apartments, and an agent for Commercial [the defendant], conducted joint field audits of the laundry revenues at the Leased Premises. At each of approximately sixty (60) such field audits, the management agents and commercial agents filled out and jointly executed a Courtesy Service Acknowledgment and Receipt form.”
In response to that affidavit the plaintiff filed affidavits of three employees of Draper & Kramer, who stated that at the request of the defendant, they participated in coin counts and signed a "Courtesy Service Acknowledgement and Receipt” solely to verify and acknowledge that the count was conducted and that the amounts recorded were consistent with the coin count. Those counts took place between April 29, 1992, and December 18, 1992, at the Applegate Apartments. All three swore that they were never authorized or qualified to certify or affirm whether Commercial Coin had a lawful lease. The plaintiff also submitted the affidavit of a vice-president of Draper & Kramer, in which he swore that at no time since taking possession of the property on April 30, 1992, did Draper & Kramer acknowledge "the existence of a landlord/tenant relationship” between the mortgagee and the defendant. The vice-president was the same person who sent the letter on May 20, 1992, to the defendant "re: Applegate Apartments” informing the defendant that Draper & Kramer had assumed the management of Applegate Apartments. In his affidavit, that vice-president never explained what prompted him to send the letter to the defendant on May 20, 1992, 20 days after the foreclosure.
Similarly, in the letter of December 18, 1992, from the mortgagee to the defendant, the mortgagee’s vice-president said that subsequent to the recordation of the mortgage the defendant "purportedly” entered into a lease of the laundry room beginning on October 1, 1988, for a term of 10 years. The plaintiff never explained when the mortgagee became aware of the lease. In fact, in our judgment, the question of when the mortgagee was finally "advised” of the lease was artfully avoided in the plaintiff’s affidavits.
This property, which was worth several million dollars, is rental property containing 192 apartments. The mortgage was secured by an assignment of rents. Common sense dictates the conclusion that, when the mortgagor defaulted, the parties negotiated before
At this point, we refer to the affidavit of the attorney for the mortgagee swearing that "on information and belief” he was unaware of the names and addresses of any nonrecord claimants and unknown owners. From this we must conclude that the attorney for the mortgagee never asked for the identities of the lessees or, if he asked, he was told by the mortgagor that there were none and he accepted that statement without any further inquiry. We express no judgment as to the credibility of the affidavit, but we will observe that the affidavit clearly shows an absence of due diligence.
The plaintiff relies on section 15 — 1502(c) of the Act, which provides that the existence, names or present or last known places of residence of certain persons are unknown may be made upon information and belief. That section also provides that the affidavit need not state that inquiry has been made to ascertain the names or present or last known places of residence. But that section applies only to notice to nonrecord claimants. It does not apply to unknown owners. In short, the affidavit of the attorney of the mortgagee was insufficient to establish notice to the unknown owners, including the defendant. See Hartung v. Hartung (1881),
The plaintiff also relies on Agribank, FCB v. Rodel Farms, Inc. (1993),
The lessee relied on section 2 — 1901 of the Code, which provides that a lis pendens notice in the county recorder’s office shall be:
"constructive notice to every person subsequently acquiring an interest in or a lien on the property affected thereby, and *** every person acquiring an interest or lien as above stated, not in possession of the property and whose interest or lien is not shown of record at the time of filing such notice, shall, for the purposes of this Section, be deemed a subsequent purchaser and shall be bound by the proceedings to the same extent and in the same manner as if he or she were a party thereto.” (Emphasis added.) (735 ILCS 5/2 — 1901 (West 1992).)
The Third District Appellate Court held that section 2 — 1901 did not apply because it was superseded by section 15 — 1503:
"A notice which complies with this Section shall be deemed to comply with Section 2 — 1901 of the Code of Civil Procedure and shall have the same effect as a notice filed pursuant to that Section; however, a notice which complies with Section 2 — 1901 shall not be constructive notice unless it also complies with the requirements of this Section.” 735 ILCS 5/15 — 1503 (West 1992).
We do not read section 15 — 1503 to mean what the Agribank court read it to mean. Section 2 — 1901 of the Code requires that a notice set forth the title of the action, the parties to it, the court where it was brought and a description of the real estate. Section 15 — 1503 provides that the notice of foreclosüre must include the names of plaintiffs and the case number, the court in which the action was brought, the names of title holders of record, a legal description of the real estate sufficient to identify it with reasonable certainty, a common address or description
We must also disagree with the court’s rejection of the lessee’s argument that the lis pendens doctrine applies only to those acquiring an interest subsequent to the notice being filed. The court concluded that the cases cited by the lessee, Mid-Town Petroleum, Inc. v. Dine (1983),
We note that in General Electric Credit Corp. v. American National Bank & Trust Co. (N.D. 111. 1983),
"This language indicates that the statute does not apply to unknown owners and non-record claimants who have an interest in the property as of the date the complaint was filed, but only to those who acquire an interest after the lis pendens notice is filed.” (Emphasis in original.) (General Electric,562 F. Supp. at 461 .)
We recognize that General Electric was decided before the adoption of the Act in 1987; but we refuse to accept the argument that the legislature intended, by the adoption of section 15 — 1503, to extend the binding effect of such a notice filed in a foreclosure action against a tenant in possession.
Cases considering the purpose of lis pendens statutes hold that one of the purposes is to alert persons who have not yet acquired an interest or lien in the property of the existence of pending litigation. (See, e.g., Admiral Builders Corp. v. Robert Hall Village (1981),
We agree with the defendant’s argument that acceptance of the plaintiff’s claim that section 15 — 1503 applies to tenants in possession at the time a lis pendens notice is filed would create serious due process questions. (See Mennonite Board of Missions v. Adams (1983),
For these reasons, we judge that the court entering the consent foreclosure judgment did not have jurisdiction over the defendant and that the plaintiff acquired the property subject to the defendant’s lease. Therefore, the orders of the circuit court granting summary judgment to the defendant and denying summary judgment to the plaintiff are affirmed.
We turn now to the defendant’s cross-appeal. Under the original lease the rent was to be 15% of the coin receipts. The rider to the lease provided that the rent was to be 55% of the coin receipts; but the rider further provided that it would terminate "upon change of ownership or change of management or change of management company or sale of property or transfer or assignment of this lease.” Therefore, it is clear that if the rider was terminated, the original rent of 15% of coin receipts would apply. The plaintiff raises several arguments to support the judge’s holding that the 55% rent as provided in the rider was still applicable:
(1) Section 9 — 215 of the Code (735 ILCS 5/9 — 215 (West 1992)) supports the judge’s ruling;
(2) The trial judge properly "balanced the equities” because the defendant was "claiming inconsistent rights.”
(3) The term of the lease calling for rent of 15% of the coin receipts is unconscionable.
We must reject all of the plaintiff’s arguments:
(1) Section 9 — 215 simply provides that a grantee or assignee of leased lands shall have the same rights against the lessee, including actions for rent, as the grantee or lessor "for the non-performance of any agreement.” There has been no "non-performance” by the defendant.
(2) There has been no balancing of the equities and the defendant has not claimed inconsistent rights. The defendant was entitled to possession under its lease pursuant to a contract. It claims the same right to pay rent pursuant to the same contract.
(3) The plaintiff has failed to establish any unconscionability of the rental terms. The parties have entered into an unambiguous lease, which is governed by the law applicable to all contracts. (Design Studio International, Inc. v. Chicago Title & Trust Co. (1989),
Judgment affirmed in part and reversed in part.
McNAMARA, P.J., and RAKOWSKI, J., concur.