Illinois App. Court Holds Reverse Mortgage Borrower Had Mortgageable Interest Following Intestate Death of His Spouse

The Appellate Court of Illinois, First District, recently ruled that the mortgagee of a reverse mortgage loan held an interest in the secured property to the extent that the borrower inherited an interest in the property following the non-borrower’s spouse’s intestate death.

Accordingly, the Court reversed the trial court’s dismissal of the reverse mortgagee’s foreclosure complaint and remanded the matter for further determination of the borrower’s inherited interest in the subject property.

A copy of the opinion in Reverse Mortgage Solutions, Inc. v. Rahman is available at:  Link to Opinion.

The borrower and his spouse purchased the subject property as joint tenants.  Some years later, the borrower quit claimed his interest to his spouse, but the couple continued to reside together at the subject property until the spouse’s death.  As noted by the Court on appeal, the trial court record appears to indicate that the spouse died intestate leaving the borrower and a daughter – the defendant heir in the foreclosure action – as the only heirs.

The quit claim deed from the borrower to the wife did not provide the complete legal description for the subject property, but did identify the property by the common address.

Subsequent to the death of the wife, the borrower entered into a reverse mortgage, which was eventually assigned to the plaintiff mortgagee in the foreclosure action.

Following the borrower’s death, the mortgagee initiated its foreclosure action.  The defendant heir to the borrower and spouse moved to dismiss the foreclosure complaint arguing that at the time the reverse mortgage was executed the borrower had no interest in the subject property to convey due to the quit claim deed, and therefore, the reverse mortgage was void and the foreclosure complaint should be dismissed.

In response, the mortgagee argued that the quit claim deed failed for lack of a sufficient description of the property being conveyed, and alternatively, that even if the quit claim deed were valid, the borrower still had a mortgageable interest in the subject property due to the intestate death of his wife.  In support of its position that the quit claim deed was insufficient, the mortgagee submitted an affidavit from an attorney with the title company who opined that the description in the quit claim deed was ambiguous on its face.

The trial court rejected the mortgagee’s arguments – specifically determining that the quit claim deed was valid, and that the mortgagee’s affidavit was “self-serving” – and granted the heir’s motion to dismiss the foreclosure action with prejudice as to the mortgagee’s claims for foreclosure, quit title, reformation and declaratory judgment.

The trial court also denied a request for sanctions filed by the heir pursuant to Illinois Supreme Court Rule 137 in which she argued that the foreclosure complaint was not well-grounded in fact or law.

The mortgagee appealed the dismissal and the heir appealed the denial of sanctions.

On appeal, the Appellate Court agreed with the lower court’s determination that the quit claim deed sufficiently identified the subject property to validly convey the borrower’s interest to the spouse.  In doing so, the Court noted that Illinois courts presume that the grantor of a quit claim deed intends to convey the property he or she owns, but if the land cannot be located from the description in the deed, the deed is void for uncertainty.

However, the Court also noted that the “description is sufficient if it allows a competent surveyor to identify it with reasonable certainty.”  And, the deed will not be declared void for uncertainty “if it is possible, by any reasonable rules of construction, to ascertain from the description, aided by extrinsic evidence, what property it is intended to convey.” Brunotte v. DeWitt, 360 Ill. 518, 528 (1935).

Here, the Appellate Court determined that although the legal description in the quitclaim deed was “truncated, it is not inaccurate.”  Despite omitting several lines of the correct legal description, the Court found that the record indicated that it was undisputed that the subject property existed at the time the quitclaim deed was executed and that the borrower owned it at that time.

Relying upon the presumption that the borrower intended to convey the property he owned at that time, and extrinsic evidence that provided the full legal description for the subject property, the Court concluded that the quitclaim deed contained a sufficient legal description and was not void for uncertainty.

As an aside, the Appellate Court explained that the fact that the borrower continued to reside at the subject property with his spouse following the conveyance by quitclaim deed was not probative of his intent.  Further, the Court noted, the fact that the borrower represented in his application for the reverse mortgage that he owned the subject property in fee simple was also not indicative of whether or not he intended to convey the subject property by quitclaim deed because it was plausible that the borrower – a layman – assumed he had inherited the property outright after his wife’s death.  The Court also found that the affidavit of the title attorney submitted by the mortgagee in support of its argument that the quitclaim deed was ambiguous added no substance to the analysis because the affiant had no personal knowledge of the making of either the quitclaim deed or reverse mortgage.

The Appellate Court did, however, agree with the mortgagee’s alternative argument that the spouse died intestate, leaving the borrower with a mortgageable interest in the subject property at the time the reverse mortgage was executed.

As you may recall, under the intestacy laws of Illinois, the spouse’s real and personal estate would be divided equally between the borrower and the heir, after payment of all just claims against the spouse’s estate.  Further, in Illinois “a cotenant can mortgage his or her interest in a jointly held property.”  Cadle Co. II v. Stauffenberg, 221 Ill. App. 3d 267, 269 (1991).  If the cotenant attempts to mortgage more than his share, the mortgage “stays in force for the actual interest of the mortgagor.” Thus, the Court held, the borrower owned a half-interest in the subject property, which he had a right to mortgage to the extent of his interest.

The Court criticized the heir’s prevarication on the issue of whether or not the spouse died with or without a will.  As noted by the Court, that the heir’s mere speculation that the spouse may have had a will at the time of her death is not well-taken considering that the heir “is in a good position to know whether her mother had a will, and certainly has an interest to know.”  The heir’s failure to introduce any evidence to the contrary allowed the mortgagee to argue on information and belief that the spouse died intestate –  it need not do anything further to prove a negative (the non-existence of a will).  The Court also noted that the fact that the spouse’s estate had never been fully sorted out was not the fault or in the control of the mortgagee.

Ultimately, the Court determined that factual issues existed as to whether the spouse died with or without a will, and as a consequence the interests in the subject property inherited by the borrower, which warranted further discovery.  Accordingly, the Court held that the trial court’s granting of the motion to dismiss was in error and remanded the case for further proceedings on the mortgagee’s claims.

As to the trial court’s denial of sanctions requested by the heir, the First District upheld the trial court’s ruling that sanctions were not appropriate.

Illinois Supreme Court Rule 137 provides that an attorney’s signature on a pleading indicates that to the best of the attorney’s knowledge “after reasonable inquiry” the pleading is “well grounded in fact and is warranted by existing law.”  If a trial court finds that a violation of this rule occurred, the court may impose sanctions on the offending party including attorney’s fees.

Initially, the Appellate Court rejected the heir’s argument that the trial court erred in not requiring the mortgagee to provide a written response to her petition for sanctions and for failing to provide a written explanation for its denial.  In doing so, the Court noted that there are no such requirements provided for under Rule 137, and that the Court will not read these requirements into the rule.

Further, the Court rebuffed the heir’s arguments that the case was an “open-and-shut case” either factually or legally, and that the multiple amended pleadings submitted by the mortgagee were not an abuse of the judicial process or vexatious and harassing.

Accordingly, the Appellate Court reversed the trial court’s dismissal of the foreclosure complaint, upheld its denial of a sanctions award, and remanded the matter for further proceedings consistent with its opinion.

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Cole Braun is based in Maurice Wutscher's Chicago office, where he practices in the firm's Commercial Litigation, Consumer Litigation, and Insurance Recovery and Advisory groups. He has significant litigation experience in a number of state and federal jurisdictions in a variety of different types of litigation. Cole graduated magna cum laude from Florida State University College of Law, and earned the distinction to be elected to the Order of the Coif. He was awarded his Bachelor of the Arts degree from the University of Tennessee.