CitiMortgage, Inc v. Parille

2016 IL App (2d) 150286
No. 2-15-0286
Opinion filed January 22, 2016
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
CITIMORTGAGE, INC., Assignee of ) Appeal from the Circuit Court
Mortgage Electronic Registration Systems, ) of Du Page County.
Inc., as Nominee for Lehman Brothers Bank, )
FSB, )
)
Plaintiff-Appellant and Cross-Appellee, )
)
v. ) No. 10-CH-4540
)
KARYN PARILLE and ANTHONY )
PARILLE, )
)
Defendants-Appellees and Cross- )
Appellants )
)
(MB Financial Bank, N.A.; Centrust Bank, )
N.A.; Sargon Shiba; David Hansel and )
Victoria Hansel; Joseph Puthenpurakal; )
Richard Bernardini; Robert Gresko/Rush )
Enterprises; The State of Illinois; Jana Bode; )
Robert Gresko and Myra Ann Gresko; )
Downers Grove National Bank; Capital )
Development Fund, L.L.C.; Nonrecord ) Honorable
Claimants; Unknown Tenants; and Unknown ) Bonnie M. Wheaton,
Owners, Defendants). ) Judge, Presiding.
______________________________________________________________________________
PRESIDING JUSTICE SCHOSTOK delivered the judgment of the court, with opinion.
Justices Jorgensen and Spence concurred in the judgment and opinion.
OPINION
¶1 This appeal involves the attempt of the plaintiff, CitiMortgage, Inc., to foreclose upon the
home of the defendants, Karyn and Anthony Parille, on the basis of a mortgage that turned out to
be ineffective as a matter of law. After the Parilles raised this defense, CitiMortgage asserted
2016 IL App (2d) 150286
other claims against the Parilles, including equitable lien, unjust enrichment, and fraud. The
circuit court of Du Page County dismissed the third amended complaint with prejudice and
denied leave to file a fourth amended complaint. CitiMortgage appeals. The circuit court also
denied the Parilles’ motions to order the release of the mortgage from their title and for attorney
fees; the Parilles have filed a cross-appeal from that denial. We affirm in part and reverse in
part, and remand.
¶2 BACKGROUND
¶3 In December 2000, the Parilles, who are married to each other, bought a home at 214
Forrest Trail in Oak Brook. The Parilles took title as tenants by the entirety. To buy the home,
they took out a loan of $240,000, which was secured by a mortgage on the property. Both Karyn
and Anthony were identified as borrowers in the note, and both signed the mortgage.
¶4 In March 2001, the Parilles refinanced their home loan. They borrowed $243,000 from
Bank One, again secured by a mortgage. Both of the Parilles signed the note and the mortgage.
The following year, the Parilles took out a home equity loan in the amount of $165,000 from
Bank One.
¶5 In May 2003, the Parilles again refinanced, this time with Lehman Brothers Bank
(Lehman). Both of the Parilles signed the note, which memorialized a loan of $475,000 (First
Lehman Note). The note was secured by a mortgage (First Lehman Mortgage). Although Karyn
was identified in the mortgage as the only “borrower,” both she and Anthony initialed every page
of the mortgage, and they both signed the mortgage without qualification. The proceeds of the
loan went primarily to pay off the Bank One mortgage and the home equity loan.
¶6 Only three months later, on August 20, 2003, Lehman entered into a new loan with
Karyn. The loan was for $481,200, and the proceeds were used to pay off the First Lehman
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Note. The note for the new loan (Second Lehman Note) identified Karyn as the only borrower,
and only Karyn signed and initialed the Second Lehman Note.
¶7 The mortgage securing that loan (Second Lehman Mortgage), like the First Lehman
Mortgage, was prepared by Aurora Loan Services, Inc., at the direction of Lehman. It listed
Karyn as the only “borrower” and stated that “Borrower is the mortgagor under this Security
Instrument.” Karyn initialed every page of the Second Lehman Mortgage. Anthony’s initials do
not appear on any of the pages. One of the provisions in the Second Lehman Mortgage stated, in
printed text, as follows: “any Borrower who co-signs this Security Instrument but does not
execute the note[] is co-signing this Security Instrument only to mortgage, grant and convey the
co-signer’s interest in the Property under the terms of this Security Instrument.” On the last page
of the Second Lehman Mortgage, printed text read: “BY SIGNING BELOW, Borrower accepts
and agrees to the terms and covenants contained in this Security Instrument ***.” Karyn signed
on the line below this statement. On the line below that, Anthony signed his name. Typewritten
text directly below Anthony’s signature read: “Anthony Parille is signing this document for the
sole purpose of waving [sic] homestead rights.” It is undisputed that the Parilles did not insert
(or cause to be inserted) the typewritten text below Anthony’s signature; rather, it appears that
this language was inserted by Aurora Loan Services.
¶8 The HUD-1 Settlement Statement given to the Parilles on August 20, 2003, listed Karyn
as the sole borrower and was signed solely by Karyn. On September 12, 2003, as a result of the
refinancing, the First Lehman Mortgage was released.
¶9 In November 2008, the Parilles stopped paying the Second Lehman Mortgage. Lehman
assigned the Second Lehman Note and the Second Lehman Mortgage to CitiMortgage on July
16, 2010.
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¶ 10 On August 12, 2010, CitiMortgage filed a one-count foreclosure action against the
Parilles and various other parties with possible interests in the property (none of whom are
before us in this appeal). The action was based upon the Second Lehman Note and Mortgage,
and both of these (along with the assignment to CitiMortgage) were attached to the complaint.
Although the Parilles first appeared pro se, they later obtained the services of several lawyers. In
March 2013, an agreed judgment of foreclosure was entered. In August 2013, shortly before the
scheduled date of the judicial sale, the Parilles obtained a new lawyer. They then filed a motion
to vacate the judgment of foreclosure on the basis that the Second Lehman Mortgage was not a
valid encumbrance on the property, because the property was held by both of the Parilles as
tenants by the entirety, but only Karyn had signed the mortgage—Anthony’s signature was only
for the purpose of waiving his homestead rights. The trial court granted the motion and vacated
the judgment of foreclosure.
¶ 11 Thereafter, CitiMortgage filed an amended complaint, followed closely by a second
amended complaint that corrected typographical errors in the amended complaint. The second
amended complaint asserted six claims: foreclosure of the Second Lehman Mortgage (count I);
reformation of the mortgage to nullify the typewritten language below Anthony’s signature
(count II); equitable lien (count III); unjust enrichment, against Anthony only (count IV); fraud,
against Karyn (count V); and fraud, against Anthony (count VI).
¶ 12 The Parilles filed a combined motion to dismiss pursuant to section 2-619.1 of the Code
of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2012)). The Parilles argued that counts I,
IV, V, and VI should be dismissed under section 2-619 of the Code (735 ILCS 5/2-619 (West
2102)), based upon affirmative matters. As to count I, the affirmative matter was their
ownership of the property as tenants by the entirety, and the existence of various statutes bearing
on the effectiveness of the Second Lehman Mortgage. They noted that, under section 1c of the
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Joint Tenancy Act (765 ILCS 1005/1c (West 2012)), “[n]o deed, contract for deed, mortgage, or
lease of homestead property held in tenancy by the entirety shall be effective unless signed by
both tenants.” They also called attention to section 3-114 of the Uniform Commercial Code (810
ILCS 5/3-114 (West 2012)), which codifies the “typewriter rule,” providing among other things
that, “[i]f an instrument contains contradictory terms, typewritten terms prevail over printed
terms.” They argued that the Second Lehman Mortgage was ineffective because it was not
signed by both of the Parilles: by the express terms of the typewritten portion of the mortgage,
Anthony’s signature was only for the purpose of waiving his homestead rights and did not
operate to encumber his undivided interest in the property. Thus, they argued, CitiMortgage
could not foreclose upon the property and count I should be dismissed.
¶ 13 Further, they argued that count IV was barred by the applicable statute of limitations,
which was five years for unjust enrichment claims. 735 ILCS 5/13-205 (West 2012). Because
the alleged enrichment to Anthony occurred in 2003 (when the proceeds of the Second Lehman
Note were used to pay off the First Lehman Note and cause the release of the First Lehman
Mortgage that encumbered his interest in the property), CitiMortgage was required to raise its
claim of unjust enrichment no later than 2008. However, CitiMortgage did not file suit until
2010. As count IV was untimely, it should be dismissed. The statute of limitations for fraud was
also five years (id.), and thus, they argued, counts V and VI should also be dismissed.
¶ 14 As to the remaining counts, the Parilles sought dismissal pursuant to section 2-615 of the
Code (735 ILCS 5/2-615 (West 2012)). The Parilles argued that CitiMortgage’s allegations were
insufficient as a matter of law because they were contradicted by the plain language of the
Second Lehman Mortgage (attached and thus incorporated into the complaint), which showed
that Anthony’s interest in the property had not been encumbered. The Parilles argued that,
because the best indication of the intent of the parties to a contract was the language of that
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2016 IL App (2d) 150286
contract, CitiMortgage could not assert, in its count II claim for reformation of the contract, that
the parties intended for the Parilles to encumber their entire interest in the property but made a
mutual mistake of fact. As to count III, asserting an equitable lien upon the property,
CitiMortgage had alleged that, because the proceeds of the Second Lehman Note were used to
satisfy a debt and release a lien upon which Anthony was liable (the First Lehman Note and
Mortgage), the Second Lehman Mortgage should be held to encumber both Karyn’s and
Anthony’s interests in the property. The Parilles argued that there was no equitable basis for
relieving CitiMortgage of the consequences of Lehman’s actions when Lehman knew that the
property was held by both of the Parilles as tenants by the entirety and Lehman’s agent drafted
the Second Lehman Note and Mortgage, including the typewritten portion. Finally, as to the
fraud claims (counts V and VI), CitiMortgage had not identified any misrepresentation allegedly
made by either of the Parilles and could not show that either of them acted with the intent to
defraud Lehman or its successor.
¶ 15 After briefing and oral argument, the trial court ruled. It dismissed counts I and IV with
prejudice on the grounds that the Second Lehman Mortgage was not effective to encumber the
property and that any unjust enrichment claim was untimely. It dismissed the remaining counts
without prejudice, permitting CitiMortgage to replead them if it wished. Following an
unsuccessful motion to reconsider, CitiMortgage did so.
¶ 16 CitiMortgage’s third amended complaint alleged the same six claims raised in its prior
complaint. As to counts I and IV, the third amended complaint stated that they were realleged
solely to preserve them for appeal. The third amended complaint contained the following
changes from the previous complaint. As to count I, all of the previous complaints had stated, in
the “form” portion of the foreclosure claim required by section 15-1504 of the Illinois Mortgage
Foreclosure Law (735 ILCS 5/15-1504 (West 2010)), that the sole “mortgagor” was Karyn, but
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in the third amended complaint, the “mortgagor” was identified as Karyn and Anthony.
(However, the amended and second amended complaints had also contained general allegations
that both Karyn and Anthony agreed to grant a mortgage on the property and that both Karyn and
Anthony signed the mortgage, so the change to count I’s form portion merely conformed that
allegation with the general allegations.) As to count II, CitiMortgage added allegations that both
Lehman and Anthony intended for Anthony to encumber his interest in the property by signing
the Second Lehman Mortgage and requested that the Second Lehman Mortgage be reformed to
include an acknowledgment of that intent. In count III, CitiMortgage alleged that Anthony owed
it a duty (because its predecessor Lehman paid off the First Lehman Mortgage, which had
encumbered his interest in the property), and that this duty should give rise to an equitable lien.
In the fraud counts, CitiMortgage alleged that Karyn “knowingly signed” the Second Lehman
Mortgage without intending to encumber the property, and that she “made the false statement”
with the intention that Lehman rely on it; it alleged further that Anthony signed the Second
Lehman Mortgage “as a co-signor and co-mortgagor” but did not intend to convey his interest in
the property.
¶ 17 The Parilles filed a combined motion to dismiss the third amended complaint pursuant to
section 2-619.1, raising many of the same arguments as in their previous motion. They argued
that the allegations of count II were still refuted by the express language of the mortgage. As to
count III, they argued that CitiMortgage had not identified any legally cognizable source of the
alleged duty owed by Anthony: CitiMortgage could not claim that Anthony caused the allegedly
inequitable situation, given the fact that Lehman knew how the property was held and yet its
agent drafted a note and mortgage identifying Karyn as the sole borrower and mortgagor. As to
the fraud counts, CitiMortgage still had not identified any false statement made by either of the
Parilles and those counts were still barred by the statute of limitations.
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2016 IL App (2d) 150286
¶ 18 After briefing and a hearing, the trial court again dismissed the complaint, this time with
prejudice. As to count I, it reasoned that, by the express terms of the Second Lehman Mortgage,
Anthony was not a mortgagor and thus the mortgage was ineffective, and it found that none of
the remaining counts (counts II, III, IV, V, and VI) stated a cognizable claim. In closing, the trial
court commented that it did not believe that CitiMortgage was completely out of luck, as it might
have a cause of action at law against Karyn on the Second Lehman Note, but any such claim
could not be heard in the current case, which had been brought in chancery.
¶ 19 Over the following few weeks, the Parilles filed two motions: a motion seeking attorney
fees pursuant to section 15-1510(a) of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-
1510(a) (West 2012)) and a motion to clarify or amend the judgment to require CitiMortgage to
release the lien imposed by the ineffective Second Lehman Mortgage. CitiMortgage also filed
two motions: a motion to reconsider and a motion for leave to file a fourth amended complaint
that would add two more claims against the Parilles, for equitable subrogation and conventional
subrogation. On February 25, 2015, the trial court denied all of the motions. CitiMortgage filed
an appeal from the trial court’s order dismissing the third amended complaint and its order
denying reconsideration and leave to file a fourth amended complaint. The Parilles filed a cross-
appeal from the denial of their motions for attorney fees and to clarify or amend the judgment.
¶ 20 ANALYSIS
¶ 21 Appeal
¶ 22 We begin by considering CitiMortgage’s appeal from the dismissal of its third amended
complaint and the denial of leave to file a fourth amended complaint.
¶ 23 A motion to dismiss brought under section 2-615 of the Code attacks the sufficiency of
the complaint, on the basis that, even assuming the allegations of the complaint to be true, the
complaint does not state a cause of action that would entitle the plaintiff to relief. 735 ILCS 5/2-
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615 (West 2012); Vitro v. Mihelcic, 209 Ill. 2d 76, 81 (2004). A section 2-619 motion to dismiss
likewise assumes the allegations of the complaint to be true, but it asserts an affirmative defense
or other matter that would defeat the plaintiff’s claim. 735 ILCS 5/2-619 (West 2012); Nielsen-
Massey Vanillas, Inc. v. City of Waukegan, 276 Ill. App. 3d 146, 151 (1995). Pursuant to section
2-619.1 of the Code, a party may file a combined motion attacking various counts of a complaint
under both sections 2-615 and 2-619. 735 ILCS 5/2-619.1 (West 2012). Under either section, a
claim should not be dismissed on the pleadings “unless it is clearly apparent that no set of facts
can be proved which will entitle [the] plaintiff to recover.” Nielsen-Massey Vanillas, 276 Ill.
App. 3d at 151. We review the dismissal of a complaint pursuant to either section de novo.
Wallace v. Smyth, 203 Ill. 2d 441, 447 (2002). In its appeal, CitiMortgage addresses the viability
of each count in numerical order, and we will do the same.
¶ 24 The trial court dismissed count I, the foreclosure claim, pursuant to section 2-619 of the
Code. The trial court correctly observed that, in assessing the validity of a claim, the exhibits
attached to a complaint must be considered as part of that complaint. Burton v. Airborne
Express, Inc., 367 Ill. App. 3d 1026, 1034 (2006). Further, if the allegations in a pleading
conflict with the facts disclosed in an exhibit, the exhibit controls. Id. Where an attachment is a
contract or other instrument, the proper construction of that contract is a matter of law.
Gallagher v. Lenart, 226 Ill. 2d 208, 219 (2007). “The primary objective in construing a
contract is to give effect to the intent of the parties.” Id. at 232. The language of a contract,
given its plain and ordinary meaning, is the best indication of the parties’ intent. Id. at 233.
“Moreover, because words derive their meaning from the context in which they are used, a
contract must be construed as a whole, viewing each part in light of the others.” Id. We review
the trial court’s interpretation of a contract de novo. Id. at 219.
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¶ 25 Here, the Second Lehman Mortgage was attached to the complaint as the instrument
giving rise to the foreclosure claim. The trial court correctly construed the Second Lehman
Mortgage as having been made solely by Karyn: the first page identified Karyn as the only
“Borrower” and further stated that “Borrower is the mortgagor under this Security Instrument”;
only Karyn initialed every page; and on the last page, only Karyn signed without qualification.
Although Anthony also signed the last page, his signature was qualified by the typewritten text
stating that he was signing solely for the purpose of waiving his homestead rights. There is no
reason not to give effect to the typewritten qualification: it merely reinforces the other
expressions of intent that Karyn was to be the sole mortgagor. Anthony did not sign the
mortgage as a mortgagor.
¶ 26 Thus, although CitiMortgage alleged that Anthony intended to, and did, sign the Second
Lehman Mortgage as a mortgagor, this allegation is contradicted by the plain language of the
instrument itself. CitiMortgage urges that its allegations must, at this stage, be taken as true, but
it ignores the law that an instrument attached to a complaint must be considered part of the
complaint and, if the allegations of the complaint conflict with the facts disclosed in that
instrument, the instrument controls. Burton, 367 Ill. App. 3d at 1034. CitiMortgage also argues
that intent is a question of fact, but the issue of the parties’ intent when signing a contract is to be
determined solely from the language of that contract, unless the contract is ambiguous.
Gallagher, 226 Ill. 2d at 233.
¶ 27 CitiMortgage argues that the instrument is ambiguous, because the intent that Anthony
convey his interest in the property is inferable from the provision stating that “any Borrower who
co-signs this Security Instrument but does not execute the note[] is co-signing this Security
Instrument *** to mortgage, grant and convey the co-signer’s interest in the Property.”
However, this provision is not applicable to Anthony because, by the express terms of the
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instrument, he is not a “Borrower.” This conclusion is supported by two facts: Anthony is not
identified as a borrower in the Second Lehman Mortgage, and, as a factual matter, he is not a
borrower under the Second Lehman Note, which was incontestably executed only by Karyn.
CitiMortgage argues that the parties’ intent to encumber “the entire property” is shown by the
fact that the address and legal description stated in the Second Lehman Mortgage are for the
entire property. (It also argues that the amount of the mortgage reflects the value of the entire
property at the time of the refinancing, but CitiMortgage has not included in the complaint or its
exhibits any allegation or facts regarding the 2008 value of the property.) However, as Karyn
has an undivided interest in “the entire property,” not merely one half of it, these facts are not
inconsistent with an interpretation of the Second Lehman Mortgage as having been executed by
Karyn alone as the sole mortgagor. Accordingly, none of these provisions demonstrate any
ambiguity in the Second Lehman Mortgage, and the construction of that instrument is an issue of
law, not one of fact.
¶ 28 CitiMortgage’s final argument regarding count I is that the Parilles did not raise any
“affirmative matter” that would defeat their complaint, as required by section 2-619(a)(9) of the
Code. 735 ILCS 5/2-619(a)(9) (West 2012). This argument misunderstands the nature of
“affirmative matter,” which need not be in the form of evidence such as an affidavit but may be a
legal matter that operates to defeat the claim. See Barber-Colman Co. v. A&K Midwest
Insulation Co., 236 Ill. App. 3d 1065, 1072 (1992) (section 2-619 motion need not be
accompanied by supporting material if the affirmative matter appears on the face of the
complaint or can be determined as a matter of law). Here, the “affirmative matter” was the fact
that the title to the property was held by both Anthony and Karyn by the entirety (shown by the
deed attached as an exhibit to the complaint); the fact that only Karyn had signed the Second
Lehman Mortgage as a mortgagor (shown by the face of that instrument, which was also attached
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to the complaint); and section 1c of the Joint Tenancy Act, which provides that “[n]o deed,
contract for deed, mortgage, or lease of homestead property held in tenancy by the entirety shall
be effective unless signed by both tenants.” 765 ILCS 1005/1c (West 2012). Under these
circumstances, no affidavit was necessary. The trial court did not err in dismissing count I of the
complaint.
¶ 29 We next turn to count II, the claim for reformation, the sufficiency of which was
challenged by the Parilles under section 2-615 of the Code. A court may reform a contract when
the written agreement does not reflect the parties’ intent. Such a claim rests on the theory that
the parties reached an agreement but then erred somehow (by mutual mistake of fact, or by
mistake on one side and fraud on the other) in reducing that agreement to writing, with the result
that the writing fails to reflect the parties’ agreement. United City of Yorkville v. Village of
Sugar Grove, 376 Ill. App. 3d 9, 25 (2007). To plead a claim for reformation, a plaintiff must
allege: “(1) the existence and substance of an agreement between the parties and the identity of
the parties to the agreement; (2) that the parties agreed to reduce their agreement to writing; (3)
the substance of the written agreement; (4) that a variance exists between the parties’ original
agreement and the writing; and (5) the basis for reformation (e.g., mutual mistake).” Briarcliffe
Lakeside Townhouse Owners Ass’n v. City of Wheaton, 170 Ill. App. 3d 244, 252 (1988). For
the purposes of reformation of a written instrument, a mutual mistake exists “when the contract
has been written in terms which violate the understanding of both parties.” In re Marriage of
Johnson, 237 Ill. App. 3d 381, 394 (1992). “A mutual mistake is one that is common to the
parties such that each labors under the same misconception. In such a case, the parties are in
actual agreement, but the instrument to be reformed, in its present form, does not express the
parties’ real intent.” Wheeler-Dealer, Ltd. v. Christ, 379 Ill. App. 3d 864, 869 (2008).
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¶ 30 The Parilles argue that CitiMortgage failed to allege any facts showing a prior agreement
between themselves and Lehman that was not reflected in the Second Lehman Mortgage.
However, we must read the allegations of the complaint in the light most favorable to the
plaintiff. Bryson v. News America Publications, Inc., 174 Ill. 2d 77, 86 (1996). Count II alleges
that, because the Second Lehman Mortgage resulted in the release of the First Lehman Mortgage,
Lehman “would not have agreed to” enter into the Second Lehman Note unless the Second
Lehman Mortgage also encumbered the interests of both of the Parilles. This is, in essence, an
allegation that Lehman intended the Second Lehman Mortgage to encumber the interests of both
Parilles in the property. (Although this type of allegation might be unusual, the Parilles have not
cited any case law showing that CitiMortgage cannot allege the intent of someone other than
itself in this way.) Further, CitiMortgage alleged that the Parilles intended that both Karyn’s and
Anthony’s interests in the property would be encumbered by the Second Lehman Mortgage. The
fact that, as discussed above, this allegation is contradicted by the express language of the
instrument itself is not fatal to a claim for reformation. Because the thrust of such a claim is that
the instrument’s language does not accurately reflect the parties’ agreement, parol evidence may
be introduced on the issue of the parties’ intent, “even when the instrument to be reformed is
clear and unambiguous on its face.” Beynon Building Corp. v. National Guardian Life Insurance
Co., 118 Ill. App. 3d 754, 760 (1983). Construing count II liberally, we find that it adequately
alleges that the Parilles and Lehman agreed that Lehman would loan the Parilles $481,200 that
would be used to pay off the First Lehman Mortgage, in return for a mortgage secured by both of
the Parilles’ interests in the property.
¶ 31 The Parilles argue that the allegations are insufficient in another way, however, because
they show that Lehman and/or CitiMortgage was mistaken about the effect of the Second
Lehman Mortgage, which is a mistake of law, not a mistake of fact. They contend that
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reformation is available only for mutual mistakes of fact, not law. However, the distinction
between mistakes of fact and mistakes of law has been eroded in recent years, an erosion
reflected both in Illinois case law and various treatises on contract law. See, e.g., Harbaugh v.
Hausman, 210 Ill. App. 3d 715, 721-22 (1991) (tracing the development of the law in this area
and citing Illinois Supreme Court cases as well as treatises on contract law); see also In re Estate
of Hurst, 329 Ill. App. 3d 326, 336 (2002) (reformation was appropriate remedy on facts of case
even where mistake was one of law). These authorities hold that, in appropriate circumstances,
equity may allow the reformation of a contract even when the mistake is one of law. As such
circumstances require the presentation of proof, the dismissal of CitiMortgage’s reformation
claim at the pleading stage was not warranted. Accordingly, the trial court erred in dismissing
count II with prejudice pursuant to section 2-615 of the Code.
¶ 32 We pause to note that our reversal of the dismissal of count II should not be taken to
suggest that CitiMortgage will be able to prove its claim for reformation. “There is a
presumption that a written instrument conforms to the intention of the parties thereto ***.”
Klemp v. Hergott Group, Inc., 267 Ill. App. 3d 574, 584 (1994). Thus, “[t]o succeed in an action
for contract reformation, a party must show [the elements of the claim] by strong, clear, and
convincing evidence.” Alliance Syndicate, Inc. v. Parsec, Inc., 318 Ill. App. 3d 590, 603 (2000).
Further, given that the defect in the Second Lehman Mortgage appears on the face of the
recorded documents (that mortgage and the warranty deed to the property), arguments may be
raised about CitiMortgage’s diligence in deciding to accept the assignment from Lehman that
could affect CitiMortgage’s ability to assert this claim. As no such arguments are presently
before us, however, we express no opinion on the ultimate merits of the claim. We therefore turn
our attention to count III.
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¶ 33 Count III asserts a claim for an equitable lien. The imposition of an equitable lien is a
remedy for a debt that cannot be legally enforced, but which ought in right and fairness to be
recognized. Hargrove v. Gerill Corp., 124 Ill. App. 3d 924, 930-31 (1984). An equitable lien
can arise despite the absence of an express agreement by the defendant to be liable for the debt.
Id. at 931. For example, an equitable lien has been imposed upon land when a tenant has made
improvements on that land. Id. In order to assert an equitable lien, a plaintiff must allege (1) “a
debt, duty or obligation” owed to it by the defendant, and (2) the existence of a res—an asset that
in some way is particularly related to the debt or obligation. Id.
¶ 34 Here, CitiMortgage seeks the imposition of an equitable lien on the property. The
Parilles sought dismissal of this claim under section 2-615 of the Code on the basis that
CitiMortgage has not alleged any facts that would give rise to a debt, duty, or obligation by
Anthony toward CitiMortgage.
¶ 35 Count III alleges that Anthony received a benefit from Lehman—Lehman paid off the
First Lehman Mortgage. (For the purposes of our analysis here, we assume without deciding that
the First Lehman Mortgage was a legally valid mortgage that encumbered both Anthony’s and
Karyn’s interests in the property). CitiMortgage also alleged that Lehman would not have done
this unless it was to receive a similar mortgage in return. It argues that these allegations are
enough to give rise to a duty by Anthony toward CitiMortgage.
¶ 36 Illinois case law does not directly answer the question whether these allegations
sufficiently plead the existence of a duty or obligation by Anthony toward Lehman and
CitiMortgage as its successor. As noted above, the typical example of a circumstance giving rise
to such a duty is where one party has improved land belonging to another. Id. That situation is
not present here. The facts in W.E. Erickson Construction, Inc. v. Congress-Kenilworth Corp.,
132 Ill. App. 3d 260 (1985), are somewhat similar to those in the case before us, although it is
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not on all fours. There, a property owner and a builder entered into a contract to construct a
water slide on the property. In return for building the water slide, the owner agreed to deed the
property to the builder; when the slide was built and the owner had paid the builder the agreed
price, the builder was to transfer the property back to the owner. Id. at 270. The use of the
property as security failed when it was learned that the putative owner did not, in fact, own the
property prior to deeding it to the builder. The court held that, in these circumstances, the
builder was entitled to an equitable lien on the property in the amount of the value of the
improvements to the property. Id. Although the fact of an unexpectedly invalid security interest
is similar in both W.E. Erickson and this case, W.E. Erickson is distinguishable in that there the
plaintiff had made improvements to the subject property, making that case more like the
commonly cited scenario in which an equitable lien is granted. See id. (stating that an equitable
lien was properly imposed because, “when the security failed, [the builder] in effect was
expending its own money for the improvement of [the] property”). We are reluctant to rely on
W.E. Erickson as supporting the existence of a duty or obligation in the circumstances present
here, where no improvement to the property has been made.
¶ 37 Of the three cases cited by CitiMortgage in its arguments regarding equitable lien, one is
an unreported Illinois case (and thus we ignore CitiMortgage’s citation of it), and another
involves very different facts and an equitable lien asserted to have arisen out of a contract, a
different creature than the extra-contractual equitable lien sought here. See Deutsche Bank
National Trust Co. v. Dolci, 2012 IL App (2d) 111275-U; La Salle National Trust, N.A. v.
Village of Westmont, 264 Ill. App. 3d 43 (1994). The remaining case, Shchekina v. Washington
Mutual Bank, No. 08 C 6094, 2012 WL 3245957 (N.D. Ill. Aug. 7, 2012), is an unpublished
federal case. “Unpublished federal decisions are not binding or precedential in Illinois courts.”
King’s Health Spa, Inc. v. Village of Downers Grove, 2014 IL App (2d) 130825, ¶ 63. However,
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“nothing prevents this court from using the same reasoning and logic as that used in an
unpublished federal decision,” should it so choose. Id. Shchekina was a quiet title case in which
the homeowner’s signature appeared to have been forged on the last few mortgages (all of which
were executed for the purposes of refinancing). The trial court held that, through equitable
subrogation, the bank holding the last mortgage could step into the shoes of the bank that held
the most recent authentic mortgage. Shchekina, 2012 WL 3245957, at *6. Once the bank was
equitably subrogated to that mortgage, the plaintiff must be viewed as owing the bank a debt in
the amount of that mortgage. Id. This satisfied the requirement of a debt or duty owed by the
homeowner, and thus the bank could assert an equitable lien on the mortgaged property in the
amount of the authentic mortgage. Id. Otherwise the homeowner would be unjustly enriched by
having that mortgage paid off without the substitution of a new valid mortgage.
¶ 38 We find Shchekina well reasoned and persuasive on the issue of whether the invalidity of
a later mortgage may potentially support a claim for an equitable lien. However, there is an
important distinction between Shchekina and this case: in Shchekina, the bank sought, among
other things, to be equitably subrogated to the most recent valid mortgage as an alternative to
disproving the homeowner’s allegations of forgery. This equitable subrogation claim was the
basis for the court’s finding that the homeowner owed the bank a duty. Moreover, by seeking
equitable subrogation to a prior mortgage, the bank implicitly agreed to accept an equitable lien
in a lesser amount (the amount of the last valid mortgage rather than the higher amount of the
newest mortgage) if the homeowner proved that the later mortgages were forged. Id.
¶ 39 Here, by contrast, CitiMortgage’s third amended complaint included no request for
equitable subrogation. Further, although CitiMortgage sought leave to file a fourth amended
complaint that included an alternative claim titled “equitable subrogation,” that claim (count VII)
did not sufficiently state a claim for equitable subrogation on the First Lehman Mortgage (the
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most recent presumptively valid mortgage on the property). Rather, count VII of the proposed
fourth amended complaint contained a contradictory and confusing hodgepodge of allegations:
that Anthony obtained a benefit in the amount of $481,200 (the amount of the Second Lehman
Note) because the proceeds of that note were used to pay off the debt secured by the First
Lehman Mortgage (i.e., $475,000); that CitiMortgage was entitled to be equitably subrogated
into the “first lien position enjoyed by Lehman” on the First Lehman Mortgage, with the result
that CitiMortgage’s interest in the property would have priority over any interest held by the
Parilles; and that the Second Lehman Mortgage “represent[ed] a lien” on the property with
priority to the Parilles’ interests. In its prayer for relief, CitiMortgage then asked the court to
find that the Parilles’ interests in the property were “subordinate to the interest held by
CitiMortgage by virtue of the mortgage recorded on September 23, 2003” (i.e., the Second
Lehman Mortgage—which, as we have held, was not a valid instrument). This jumble of
assertions does not make out a claim for equitable subrogation of the type recognized in
Shchekina, as CitiMortgage did not seek permission to step into the shoes of Lehman so that it
could enforce a prior mortgage (the First Lehman Mortgage) against the Parilles. Rather, it
sought to step into Lehman’s shoes but continue to enforce the newest mortgage—relief that is
not available. (Similarly, the relief sought in count III, the equitable lien claim, was the
imposition of a lien in the amount of the indebtedness remaining with respect to the Second
Lehman Mortgage.) Thus, Shchekina is inapposite. As CitiMortgage has not sufficiently pled a
claim for equitable subrogation, it has not established a basis for the imposition of a debt or duty
upon Anthony. Accordingly, its claim for an equitable lien must also fail.
¶ 40 We next consider count IV, the claim of unjust enrichment. This claim was properly
dismissed pursuant to section 2-619 on the basis that it was untimely. The limitations period
applicable to unjust enrichment claims is five years, as set out in section 13-205 of the Code (735
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ILCS 5/13-205 (West 2010)). See Frederickson v. Blumenthal, 271 Ill. App. 3d 738, 742 (1995).
Here, CitiMortgage alleged that Anthony was unjustly enriched when the First Lehman
Mortgage, which encumbered his interest in the property, was released and the new mortgage
substituted for it was invalid. (This claim was pled in the alternative to CitiMortgage’s
contention that the Second Lehman Mortgage was a valid and enforceable instrument.) It is
undisputed that this alleged unjust enrichment occurred no later than September 2003, when the
First Lehman Mortgage was released. However, CitiMortgage did not bring suit until July 2010,
well after the five-year limitations period had expired.
¶ 41 CitiMortgage argues that the discovery rule applied, tolling the commencement of the
limitations period until it knew that the Parilles would assert the invalidity of the Second Lehman
Mortgage. In Illinois, “[t]he discovery rule postpones the start of the limitations period until a
party knows or reasonably should know both that an injury has occurred and that it was
wrongfully caused.” Henderson Square Condominium Ass’n v. LAB Townhomes, LLC, 2015 IL
118139, ¶ 52. There is no tolling merely because a party is not aware of facts making it prudent
for it to act on its legal rights, and CitiMortgage’s argument to the contrary borders on the
frivolous. Indeed, the Illinois Supreme Court rejected an argument similar to CitiMortgage’s
over a century ago, in Ater v. Smith, 245 Ill. 57, 71-72 (1910):
“[I]f the circumstances were such as should have induced inquiry, and the means of
ascertaining the truth were readily available upon such inquiry but the party neglects to
make it, he will be chargeable with laches the same as if he had known the facts. The
rule is the same where ignorance of the facts, or concealment of them by one whose duty
it was to disclose them, is relied on to arrest the running of the Statute of Limitations.”
In Ater, the children of a decedent asserted that they had not realized the invalidity of the deeds
made by their father until after litigation for an accounting had begun, when there was testimony
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that the deeds, although executed, had never been delivered. Id. at 71. The children argued that
the statute of limitations and any laches period should be held not to have commenced until they
had full knowledge of the lack of delivery. The supreme court rejected this argument, noting that
the children had been aware of the making of the deeds at the time they were made and knew
that their father died two days later and that the deeds were not recorded until after he died.
Thus, it held, the children had a duty to inquire into their rights further at that time, and, as they
could easily have discovered the facts upon such inquiry, their claims were barred. Id. at 72.
¶ 42 Here, all of the relevant facts—the Parilles’ ownership of the property by the entirety, and
Karyn’s designation as the sole borrower under the Second Lehman Note and as the sole
mortgagor under the Second Lehman Mortgage—were known (or should reasonably have been
known) in September 2003 when the First Lehman Mortgage was released. Any cause of action
for unjust enrichment was complete at that time, and could have been brought thereafter. The
relevant facts were all of record, and the commencement of the limitations period did not await
CitiMortgage’s realization of the legal effect of those facts, or that the Parilles would stand upon
those facts. See id.; see also Waterman Hall v. Waterman, 220 Ill. 569, 577 (1906) (where one
cotenant purported to convey the entire estate, conveyance was recorded, and grantee thereafter
occupied entire property, facts were sufficient to place other cotenants on inquiry notice despite
their lack of awareness, until shortly before the litigation, that they had an interest in the
property). Accordingly, we reject CitiMortgage’s attempt to invoke the discovery rule to
preserve its claim of unjust enrichment. The trial court properly dismissed count IV as untimely.
¶ 43 The same statute of limitations bars counts V and VI, the fraud claims. Like unjust
enrichment, fraud is subject to a five-year limitations period under section 13-205 of the Code.
Chicago Park District v. Kenroy, Inc., 78 Ill. 2d 555, 560-61 (1980); Rozny v. Marnul, 43 Ill. 2d
54, 69 (1969). CitiMortgage raises the same argument regarding the discovery rule as it did with
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respect to count IV and its argument is equally unavailing here. Although the trial court
dismissed counts V and VI for failure to state claims of fraud (a conclusion with which we would
likely agree, were we to consider that aspect), we may affirm a judgment on any basis appearing
in the record. Ultsch v. Illinois Municipal Retirement Fund, 226 Ill. 2d 169, 192 (2007). Here,
the Parilles sought dismissal of these counts under section 2-619 of the Code as untimely, in
addition to challenging the sufficiency of the pleading under section 2-615. We affirm the
dismissal of these counts on the basis of untimeliness.
¶ 44 The final argument raised by CitiMortgage concerns the trial court’s denial of leave to
file a fourth amended complaint. The right to amend a complaint is not absolute, but is a matter
within the trial court’s discretion. Alpha School Bus Co. v. Wagner, 391 Ill. App. 3d 722, 748
(2009). Accordingly, we will not reverse the trial court’s decision absent an abuse of that
discretion. Id. at 748-49. Generally, a trial court should exercise its discretion liberally in favor
of allowing amendments to pleadings if doing so will further the ends of justice. Id. at 748. In
making its determination, the trial court should consider, among other things, whether the
proposed amendment would cure the defective pleading or state a claim. Id.
¶ 45 In its proposed fourth amended complaint, CitiMortgage attempted to assert two new
claims, for equitable subrogation (count VII) and conventional subrogation (count VIII). As we
have already noted (supra ¶ 39), the proposed count VII contained a jumbled collection of
allegations that did not state a claim for equitable subrogation. The proposed count VIII reveals
the same problems, alleging that CitiMortgage is entitled to be subrogated to Lehman’s priority
with respect to the Second Lehman Mortgage and requesting a declaration that the Parilles’
interests in the property are subordinate “by virtue of” the Second Lehman Mortgage. However,
we have held that that mortgage was ineffective to convey any security interest to Lehman, and
thus subrogation to Lehman’s interest in that mortgage would not provide CitiMortgage with any
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security interest in the property. As the allegations CitiMortgage sought to add in the fourth
amended complaint did not adequately state any cognizable cause of action, the trial court did
not abuse its discretion in denying the motion for leave to file that complaint. Alpha School Bus
Co., 391 Ill. App. 3d at 748-49.
¶ 46 To recap, we affirm the dismissal of all of CitiMortgage’s claims except for its claim for
reformation in count II. We also affirm the trial court’s denial of CitiMortgage’s motion for
leave to file a fourth amended complaint. We now turn to the Parilles’ cross-appeal.
¶ 47 Cross-Appeal
¶ 48 In their cross-appeal, the Parilles raise two arguments: first, that the trial court’s denial
of their motion to clarify or amend the judgment was improper; and second, that the trial court
should have granted them attorney fees pursuant to section 15-1510(a) of the Illinois Mortgage
Foreclosure Law (735 ILCS 5/15-1510(a) (West 2012)). However, both of these remedies may
be sought only once the underlying litigation has been concluded. Here, as the result of our
reversing the dismissal of count II, the case must be remanded for further proceedings on that
claim, and the trial court’s orders regarding these two motions must be vacated. Given this, it
would be premature for us to rule on the arguments raised in the Parilles’ cross-appeal, and we
decline to do so. People v. White, 2011 IL 109689, ¶ 153.
¶ 49 CONCLUSION
¶ 50 For the foregoing reasons, the judgment of the circuit court of Du Page County entered
on November 24, 2014, dismissing the third amended complaint with prejudice, is affirmed as to
counts I, III, IV, V, and VI, but reversed as to count II. We affirm the trial court’s order of
February 25, 2015, insofar as it denied leave to file a fourth amended complaint, but we vacate
the portions of that order relating to the Parilles’ motions to clarify or amend and for attorney
fees. The cause is remanded for further proceedings consistent with this opinion.
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¶ 51 Judgment affirmed in part and reversed in part; order affirmed in part and vacated in part;
cause remanded.
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