Chicago Title Insurance Company v. Bass

Illinois Official Reports
Appellate Court
Chicago Title Insurance Co. v. Bass, 2015 IL App (1st) 140948
Appellate Court CHICAGO TITLE INSURANCE COMPANY, Individually and as
Caption Subrogee for William Baczek, Jan W. Baczek, and Andrea M. Baczek,
Plaintiff-Appellant, v. BENJAMIN J. BASS, Individually and d/b/a
Property Group, Defendant-Appellee.
District & No. First District, First Division
Docket No. 1-14-0948
Filed April 27, 2015
Decision Under Appeal from the Circuit Court of Cook County, No. 2012-L-004198;
Review the Hon. Sanjay Tailor, Judge, presiding.
Judgment Affirmed.
Counsel on Kindwald Law Offices, P.C., of Chicago (Donald J. Kindwald, of
Appeal counsel), for appellant.
Reiter Law Offices, Ltd., of Chicago (Gregory M. Reiter and Lynnette
E. Lockwitz, of counsel), for appellee.
Panel JUSTICE HARRIS delivered the judgment of the court, with opinion.
Justices Cunningham and Connors concurred in the judgment and
opinion.
OPINION
¶1 Plaintiff, Chicago Title Insurance Company (Chicago Title), appeals the order of the
circuit court granting defendant Benjamin Bass’s motion for summary judgment on plaintiff’s
complaint for breach of contract and unjust enrichment. On appeal, Chicago Title contends the
trial court erred in granting summary judgment in favor of Bass where it paid out proceeds in
accordance with its title insurance policy issued to the Baczeks and thus became an assignee
and subrogee for the Baczeks’ claim against Bass for breach of warranty. Alternatively,
Chicago Title argues that Bass was unjustly enriched when the Baczeks gave him $65,000 and
in return they received a worthless warranty deed. For the following reasons, we affirm.
¶2 JURISDICTION
¶3 The trial court granted Bass’s motion for summary judgment on March 18, 2014. Chicago
Title filed its notice of appeal on March 26, 2014. Accordingly, this court has jurisdiction
pursuant to Illinois Supreme Court Rules 301 and 303 governing appeals from final judgments
entered below. Ill. S. Ct. R. 301 (eff. Feb. 1, 1994); R. 303 (eff. May 30, 2008).
¶4 BACKGROUND
¶5 This appeal stems from tax proceedings conducted on property located at 522 E.
Washington Street in Round Lake Park, Illinois. The property includes a commercial building.
On July 6, 1984, Patricia and Richard Kelver owned the subject property as joint tenants. On
November 20, 2003, the Kelvers allegedly signed an agreement to sell the Washington Street
property to William and Jan Baczek for $140,000. A dispute over the sale subsequently arose
and the Kelvers failed to close on the contract. Meanwhile, the Baczeks continued to claim an
interest in the property. In August 2004, they recorded a “Memorandum of Sale” with Lake
County. By recording this interest in the property, the Baczeks effectively created a cloud on
its title. On February 25, 2005, the Baczeks filed suit against the Kelvers for specific
performance of the sales contract. On April 22, 2005, the Baczeks recorded a lis pendens
notice on the property. Richard passed away on March 30, 2005, and thereafter Patricia
became sole owner of the property.
¶6 Prior to this dispute, the property was delinquent in paying real estate taxes in 2002. On
December 1, 2003, the Lake County treasurer conducted a tax sale for the 2002 real estate
taxes. Property Group, owned by Benjamin J. Bass, purchased the property’s 2002 taxes. In
May 2006, Property Group filed a petition for issuance of a tax deed related to the delinquent
2002 taxes it purchased. Pursuant to the litigation, the property owner and interested parties
had until September 28, 2006, to redeem Property Group’s tax lien and to avoid having a tax
deed issued to Bass. Both Patricia and the Baczeks received timely notice of the tax deed
litigation. On August 28, 2006, the Baczeks redeemed the 2002 taxes. The Baczeks’ attorney
informed Patricia’s attorney of the redemption, and in reliance on the action, Patricia refrained
from redeeming the taxes herself. Following the redemption, Property Group filed a motion to
dismiss its tax deed petition, which the trial court granted on September 21, 2006.
¶7 With their specific performance litigation against Patricia still pending, the Baczeks
contacted Bass and expressed a desire to purchase the property through the dismissed tax deed
litigation. In his affidavit, Bass stated that the parties entered into an oral contract in which the
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Baczeks agreed to purchase the property for $65,000. On October 20, 2006, pursuant to the
agreement, Property Group filed its motion to expunge the redemption and to vacate the order
dismissing the petition. The attorney for the Baczeks then filed his appearance on their behalf
in the reinstated tax deed litigation. Neither Patricia nor her attorney received notice of
Property Group’s motion. On December 7, 2006, the trial court entered an “agreed order”
expunging the August 28, 2006, redemption of the taxes on the property and issued a tax deed
for the property to Bass. Bass then transferred the property to the Baczeks via warranty deed on
February 13, 2007, for $65,000. On April 20, 2007, the Baczeks voluntarily nonsuited their
specific performance action against the Kelvers.
¶8 As part of their purchase of the property, the Baczeks obtained a title insurance policy from
Chicago Title for $140,000. The policy protected against loss or damage due to (1) title “being
vested other than as stated” in the policy; (2) “any defect in or lien or encumbrance on the
title”; (3) “unmarketability of the title”; and (4) lack of access to and from the land. However,
the policy excluded from coverage “loss or damage, costs, attorneys’ fees or expenses which
arise by reason of *** [d]efects, liens, encumbrances, adverse claims or other matters ***
created, suffered, assumed or agreed to by the insured claimant.”
¶9 Patricia subsequently discovered that the Baczeks acquired the property through the tax
deed litigation. Patricia filed a petition pursuant to section 2-1401 of the Code of Civil
Procedure (735 ILCS 5/2-1401 (West 2006)). In the petition, Patricia alleged that Bass
procured the property by fraud or deception. She stated that at the time of her petition, the
Baczeks had listed the property for sale for $335,000. She also argued that the Baczeks’
payment of the 2002 taxes was to her benefit and, furthermore, if she had been notified of the
motion to expunge the redemption, she would have redeemed the taxes herself. Patricia
requested that the trial court vacate the agreed order expunging the redemption and the order
issuing the tax deed and declare as void the tax deed issued to Property Group.
¶ 10 Since the Baczeks were respondents in Patricia’s section 2-1401 petition, they filed a title
policy claim with Chicago Title, which accepted their claim. On November 16, 2010, after
extensive litigation, Patricia prevailed on her section 2-1401 petition. As a result, the trial court
entered an order vacating the issuance of the tax deed to Bass and revesting the property to
Patricia, and also ordered Patricia to reimburse Bass and the Baczeks for real estate taxes paid
on the property. Patricia subsequently filed another claim against Bass, the Baczeks, and the
Baczeks’ attorney, alleging fraud, intentional interference, conspiracy, waste, and unjust
enrichment. This suit remains pending.
¶ 11 Chicago Title did not appeal the decision, but instead made a loss payment under its policy
to the Baczeks for $115,000. Chicago Title also incurred $67,379.66 in attorney fees defending
the Baczeks in the action. In return for the payment, the Baczeks executed a settlement, release
and assignment of rights with Chicago Title. The agreement provided that Chicago Title “shall
be subrogated to the Insureds for any claims against the Insureds’ seller or any other potentially
liable party with respect” to the matter. It also provided that the “Insureds agree to assign their
rights and claims against the Sellers or any other potentially liable parties to [Chicago Title]
with respect to the subject matter of this claim.” Based on this agreement, Chicago Title
demanded payment and reimbursement from Bass for breach of warranty and quiet enjoyment.
Bass refused, and Chicago Title filed a two-count complaint against him alleging breach of
warranty deed and unjust enrichment. The parties filed cross-motions for summary judgment,
which were fully briefed and argued before the trial court. In defense of his motion for
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summary judgment, Bass argued that Chicago Title had no contractual right to subrogation
where it was a voluntary payor and that Chicago Title sought damages it was not entitled to
pursue. On March 18, 2014, the trial court granted Bass’s motion and denied Chicago Title’s
motion for summary judgment. Chicago Title filed this timely appeal.
¶ 12 ANALYSIS
¶ 13 Chicago Title contends that the trial court erred in denying its motion for summary
judgment and granting Bass’s motion for summary judgment. Summary judgment is proper
when the pleadings, depositions, admissions and affidavits, viewed in the light most favorable
to the nonmoving party, show that no genuine issue of material fact exists and the moving
party is entitled to judgment as a matter of law. Progressive Universal Insurance Co. of Illinois
v. Liberty Mutual Fire Insurance Co., 215 Ill. 2d 121, 127-28 (2005). Although an order
denying a motion for summary judgment is not final and appealable, an exception exists if the
parties filed opposing motions and the trial court grants one motion but denies the other.
Illinois State Chamber of Commerce v. Filan, 216 Ill. 2d 653, 677 (2005). Furthermore, where
the parties file cross-motions for summary judgment, they agree that no genuine issues of
material fact exist and that the dispute involves only questions of law. Steadfast Insurance Co.
v. Caremark Rx, Inc., 359 Ill. App. 3d 749, 755 (2005). We review the trial court’s
determination on motions for summary judgment de novo. Outboard Marine Corp. v. Liberty
Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992). In our review, we may affirm on any basis
supported in the record regardless of whether the trial court relied on that basis or whether its
reasoning was correct. Illinois State Bar Ass’n Mutual Insurance Co. v. Coregis Insurance Co.,
355 Ill. App. 3d 156, 163 (2004).
¶ 14 Chicago Title argues that the trial court erred in denying its motion for summary judgment
on their complaint against Bass because the Baczeks properly assigned their rights to Chicago
Title, and Bass breached the warranty of title he gave the Baczeks when he conveyed the
property to them. The agreement executed between Chicago Title and the Baczeks provided
that Chicago Title “shall be subrogated to the Insureds” for claims against Bass, and that the
Baczeks “agree to assign their rights and claims against [Bass]” to Chicago Title. Whether
Chicago Title claims a right of subrogation, or a right pursuant to an assignment, it must stand
in the shoes of the Baczeks and can only enforce those rights they could enforce. Dix Mutual
Insurance Co. v. LaFramboise, 149 Ill. 2d 314, 319 (1992); YPI 180 N. LaSalle Owner, LLC v.
180 N. LaSalle II, LLC, 403 Ill. App. 3d 1, 5 (2010). Therefore, Chicago Title can assert its
rights against Bass only if the Baczeks could maintain a cause of action against Bass regarding
the transfer of the property to them via the warranty deed. See Dix, 149 Ill. 2d at 319.
¶ 15 In the underlying proceedings, Patricia challenged the Baczeks’ title to the property
through a section 2-1401 petition. Section 22-45 of the Property Tax Code (35 ILCS 200/1-1 et
seq. (West 2006)) (Tax Code) provides that once the trial court issues a tax deed pursuant to the
Tax Code, a party cannot contest the order except by direct appeal or by a section 2-1401
petition. 35 ILCS 200/22-45 (West 2006). The Tax Code provides for four grounds upon
which relief may be granted through a section 2-1401 petition: (1) the taxes were paid prior to
the sale; (2) the property was exempt from taxation; (3) the tax deed had been procured by
fraud or deception; and (4) a party holding a recorded interest in the property was not given
proper notice of the tax deed litigation. 35 ILCS 200/22-45 (West 2006).
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¶ 16 However, the trial court is without authority to vacate the tax deed order through a section
2-1401 petition if there exists a bona fide purchaser for value of the property. In re Application
of the Cook County Collector for Judgment & Sale Against Lands & Lots Returned Delinquent
for Nonpayment of General Taxes for the Year 1985 & Petition for Tax Deed of Barnard, 228
Ill. App. 3d 719, 734 (1991) (hereinafter Elsie Bee); 735 ILCS 5/2-1401(e) (West 2006). “A
purchaser is not a bona fide purchaser if he had constructive notice of an outstanding title or
right in another person.” Elsie Bee, 228 Ill. App. 3d at 734. Furthermore, “[i]f tax deed grantees
had notice of the owners’ claim to the property, then they stand in no better position than the
tax purchaser and are subject to relief against them.” Id. at 735.
¶ 17 The trial court below granted Patricia’s petition, vacating the issuance of the tax deed to
Bass and revesting the property to Patricia. It clearly determined that the Baczeks were not
bona fide purchasers of the property. The record on appeal, however, does not contain the
pleadings in the underlying proceedings, other than Patricia’s section 2-1401 petition to
vacate, or the transcripts. Without this material, we cannot know the arguments presented at
the proceedings or the trial court’s reasoning when it made its determination. In this
circumstance, we must presume that the trial court acted in conformity with the law and had a
sufficient factual basis for its determination. Foutch v. O’Bryant, 99 Ill. 2d 389, 391-92 (1984).
¶ 18 The issue is whether the Baczeks now have a claim against Bass for breach of the warranty
deed where the trial court determined that they were not bona fide purchasers under section
2-1401 and they lost the property Bass conveyed to them. A warranty deed stipulates that the
grantor guarantees good title to the property and that his possession is undisturbed. Midfirst
Bank v. Abney, 365 Ill. App. 3d 636, 644 (2006). In an action for breach of warranty, the
purchaser must prove that the grantor gave the warranty as an inducement to make the
purchase and the purchaser actually relied upon that warranty. Regopoulos v. Waukegan
Partnership, 240 Ill. App. 3d 668, 674 (1992). The purchaser need not show, however, that the
reliance was reasonable. Id.
¶ 19 Given the facts in the record, the Baczeks cannot show that Bass offered the warranty as an
inducement for them to purchase the property or that they relied on the warranty. Bass did not
induce the Baczeks to purchase the property. Instead, it was the Baczeks who approached Bass
about the possibility of obtaining the property through the tax deed litigation. The parties
entered into an oral agreement in which the Baczeks agreed to purchase the property for
$65,000. Pursuant to the agreement, Property Group filed its motion to expunge the property’s
tax redemption and to vacate the order dismissing its petition for a tax deed. The Baczeks and
Bass agreed to this transaction so that the Baczeks could obtain property they had been trying
to obtain since 2004. Since Bass did not use the warranty to induce the Baczeks to purchase the
property, the Baczeks cannot maintain an action against Bass for breach of the warranty.
Therefore, Chicago Title cannot file a claim against Bass because, as subrogee and assignee of
the Baczeks’ rights, it must stand in the shoes of the Baczeks and can only enforce those rights
they could enforce. Dix, 149 Ill. 2d at 319; YPI 180 N. LaSalle Owner, 403 Ill. App. 3d at 5.
¶ 20 Chicago Title argues that the Baczeks should be able to recover against Bass based on the
warranty deed, and it cites Midfirst Bank as support. In Midfirst Bank, the Second District
found that when a purchaser receives a covenant of good title through a warranty deed, “the
law should allow him to enforce its performance and recover damages for its breach”
regardless of the purchaser’s actual knowledge of an encumbrance. Midfirst Bank, 365 Ill.
App. 3d at 644. However, although the purchaser in Midfirst Bank had knowledge of an
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outstanding interest in the property at the time of purchase, he stated that the seller assured him
that the outstanding mortgage would be satisfied and the purchaser relied on that oral
representation. Id. at 643. In other words, the seller used the warranty to induce the purchaser
to buy the property and the purchaser relied on the warranty. Midfirst Bank supports our
determination here.
¶ 21 Alternatively, Chicago Title argues that the Baczeks have a claim against Bass for unjust
enrichment because Bass retained $65,000 in proceeds from the sale although the tax deed was
subsequently declared void. Unjust enrichment is an equitable remedy and does not apply
“[w]here there is a specific contract that governs the relationship of the parties.” Nesby v.
Country Mutual Insurance Co., 346 Ill. App. 3d 564, 567 (2004). Although a party may plead
unjust enrichment in the alternative, it may not include allegations of an express contract in its
counts for unjust enrichment. Guinn v. Hoskins Chevrolet, 361 Ill. App. 3d 575, 604 (2005). A
warranty deed is a contract. Bormann v. Simpson, 45 Ill. App. 3d 176, 179 (1977).
¶ 22 In count I of its first amended complaint, Chicago Title alleges breach of warranty and
states that Bass conveyed the property to the Baczeks via warranty deed in which he warranted
“the quiet and peaceable possession of such premises.” In count II alleging unjust enrichment,
Chicago Title argues that when Bass conveyed the property to the Baczeks, he received
$65,000 as proceeds which he retained even though his tax deed for the property was later
declared void by the trial court. Although Chicago Title does not specifically reference the
warranty deed in its unjust enrichment count, it does incorporate the first 10 paragraphs of
count I, which contain references to the warranty deed. Chicago Title also attached the
warranty deed to the complaint. See Guinn, 361 Ill. App. 3d at 604-05 (dismissal of plaintiff’s
unjust enrichment count proper where it incorporated allegations of a valid agreement into that
count and also attached a copy of the relevant contract to the complaint). The theory of unjust
enrichment is not applicable in this case.
¶ 23 Due to our disposition of this case, we need not address Bass’s arguments that Chicago
Title had no contractual right of subrogation because the Baczeks’ loss was expressly excluded
from coverage by the policy and that the attorneys fees Chicago Title seeks as damages are not
recoverable as a subrogated claim.
¶ 24 For the foregoing reasons, the judgment of the circuit court is affirmed.
¶ 25 Affirmed.
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