                                     2017 IL App (1st) 160305
                                          No. 1-16-0305
                                          April 11, 2017
                                                                            SECOND DIVISION



                                              IN THE


                                APPELLATE COURT OF ILLINOIS


                                         FIRST DISTRICT



     DEUTSCHE BANK NATIONAL TRUST                 )       Appeal from the Circuit Court
     COMPANY,                                     )       of Cook County.
                                                  )
          Plaintiff-Appellee,                     )
                                                  )       No. 07 CH 05861
          v.                                      )
                                                  )       The Honorable
     GARY LEIGH PAYTON, CARLA                     )       Robert E. Senechalle,
     WATKINS and MARVIN WATKINS,                  )       Judge Presiding.
                                                  )
          Defendants-Appellants.                  )


                  JUSTICE NEVILLE delivered the judgment of the court, with opinion.
                  Presiding Justice Hyman and Justice Pierce concurred in the judgment and
       opinion.


                                           OPINION


¶1        When Carla and Marvin Watkins, the defendants, did not pay their mortgages, they

       became concerned that Citimortgage, Inc. (Citimortgage), and Countrywide Home Loans

       (Countrywide) would commence foreclosure proceedings against them. On November 11,

       2005, a warranty deed containing the Watkinses’ signatures conveyed the subject property to
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        Gary Leigh Payton and Tammy Marie Payton. 1 The Paytons obtained a mortgage from Long

        Beach Mortgage Company (Long Beach) in the amount of $450,000, and some of the loan

        proceeds were used to extinguish the Watkinses’ mortgages on the subject property with

        Citimortgage and Countrywide. On February 28, 2007, Long Beach assigned and transferred

        its interest in the Paytons’ mortgage to the plaintiff, Deutsche Bank National Trust Company

        (Deutsche Bank), as trustee for Long Beach. On March 2, 2007, Deutsche Bank initiated

        foreclosure proceedings against the Paytons when they failed to make their mortgage

        payments, and later named the Watkinses. On July 13, 2010, Deutsche Bank filed a motion

        for summary judgment against the Watkinses and the Paytons, predicated on the doctrine of

        equitable subrogation. The motion was granted.

¶2         We find that once Long Beach, Deutsche Bank’s assignor, paid off the Watkinses’

        mortgages with Citimortgage and Countrywide, Long Beach was subrogated, by operation of

        law, and Long Beach stepped into the shoes of Citimortgage and Countrywide. Therefore,

        Long Beach acquired Citimortgage's and Countrywide’s priority interest in the subject

        property. We also find that the circuit court correctly granted Deutsche Bank’s motion for

        summary judgment, predicated on the doctrine of equitable subrogation, in order to avoid an

        unjust result and to prevent the Watkinses from being unjustly enriched when they invoked

        their forged deed defense. Therefore, we hold that the circuit court did not err when it granted

        Deutsche Bank’s motion for summary judgment predicated on the doctrine of equitable

        subrogation.

           1
            The Paytons are not parties to this appeal.


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¶3                                            BACKGROUND

¶4          On November 18, 1996, a quitclaim deed conveyed the subject property located at 6437

        North Kimball, Lincolnwood, Illinois, to Carla Watkins. She later married Marvin Watkins.

        On April 29, 2003, the Watkinses obtained a mortgage from Magnus Financial Corporation

        for $321,000. On May 17, 2004, they obtained a second mortgage from Greenlight Financial

        Services for $45,000. Magnus Financial Corporation later assigned its interest in the

        Watkinses’ mortgage to Citimortgage, and Greenlight Financial Services assigned its interest

        in the Watkinses’ second mortgage to Countrywide.

¶5          The Watkinses stopped making payments on their mortgages in 2005. Agents from an

        entity known as FundingForeclosures.com contacted the Watkinses and promised to save

        their home from foreclosure by providing financial assistance. Fundingforeclosures.com had

        the Watkinses (i) execute an Equity Purchase Agreement on July 14, 2005, in which the

        Watkinses sold the subject property to Fundingforeclosures.com; (ii) re-purchase the

        property at a set price pursuant to Addendum A attached to the Agreement; (iii) execute a

        Residential Lease After Sale Agreement on July 17, 2005, which allowed the Watkinses to

        continue to occupy the subject property but obligated them to pay $1,600 each month in rent;

        and (iv) execute a grant deed 2 on July 17, 2005, transferring title to the subject property from

        the Watkinses to Fundingforeclosures.com.



            2
             A grant deed has some but not all of the usual covenants of title. The grantor warrants that he or
        she (i) has not previously conveyed the estate being granted, (ii) has not encumbered the property
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¶6          On November 11, 2005, a warranty deed 3 containing the Watkinses’ signatures

        transferred title to the subject property to Gary Leigh Payton and Tammy Marie Payton. The

        Paytons obtained a mortgage from Long Beach in the amount of $450,000. The settlement

        statement for this transaction indicates (i) that Long Beach paid off the Watkinses’ mortgages

        with Citimortgage and Countrywide and (ii) that the Watkinses received a payout of

        $119,583.92. The record also includes releases from Citimortgage and Countrywide.

¶7          On February 28, 2007, Long Beach assigned the Paytons’ mortgage to Deutsche Bank.

        When the Paytons did not make payments on their loan, Deutsche Bank filed a “Complaint to

        Foreclose Mortgage” on March 2, 2007, against the Paytons, two subordinate lenders,

        unknown owners, and non-record claimants. On June 13, 2007, James Smith filed an

        appearance on behalf of Carla Watkins as an unknown owner and non-record claimant. On

        July 18, 2007, Carla Watkins filed an answer and affirmative defenses, asserting that she and

        her husband were victims of a “foreclosure rescue fraud,” and she maintained that the

        Watkinses had never met the Paytons, that the Watkinses did not sell the Paytons any

        property, and that FundingForeclosures.com forged their signatures on the deed transferring

        title of the subject property to the Paytons.

¶8          On September 28, 2007, Deutsche Bank filed an “Amended Complaint to Foreclose

        Mortgage,” named Carla and Marvin Watkins as additional defendants, and claimed that any



        except as noted in the deed, and (iii) will convey to the grantee any title to the property acquired after
        the date of the deed. Black’s Law Dictionary 424 (7th ed. 1999).
            3
              A warranty deed is a stipulation by the grantor in which he guarantees to the grantee that title to
        the property at issue will be good and that the grantor’s possession will be undisturbed. Midfirst Bank
        v. Abney, 365 Ill. App. 3d 636, 644 (2006).

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          interest the Watkinses had in the subject property was inferior to that of the bank’s. On June

          9, 2009, James Smith filed an appearance on behalf of Marvin Watkins in the instant lawsuit.

¶9           On July 13, 2010, Deutsche Bank filed “Plaintiff’s Amendment to Complaint to

          Foreclose Mortgage,” added count II, named the Watkinses and the Paytons as defendants,

          and prayed, pursuant to the doctrine of equitable subrogation, for a judgment of foreclosure.

          Specifically, count II sought foreclosure on Deutsche Bank’s assignor’s liens that were

          equitably subrogated to the liens of the Watkinses’ prior mortgagees, Citimortgage and

          Countrywide.

¶ 10         On October 7, 2010, the Watkinses filed an answer and affirmative defenses to

          “Plaintiff’s Amendment to Complaint to Foreclose Mortgage,” and admitted that Long Beach

          made a loan to the Paytons that paid off the Watkinses’ prior mortgages with Citimortgage

          and Countrywide in full.

¶ 11         On March 22, 2011, Deutsche Bank filed a motion for partial summary judgment,

          requesting the entry of a judgment on count II, its equitable subrogation claim, and prayed

          only for a partial judgment that the Watkinses’ interest in the subject property would be

          subordinated to Long Beach’s interest to the extent of $371,833.90. On May 24, 2011, the

          circuit court found (i) that the Watkinses admitted that their delinquent mortgages to

          Citimortgage and Countrywide in the amount of $371,833.90 were paid off, (ii) that proceeds

          from the Paytons’ mortgage that was being foreclosed on by Long Beach were used to pay

          off the Watkinses’ mortgage, and (iii) that Long Beach intended for its mortgage to be a first

          lien on the property. The circuit court granted Deutsche Bank’s motion for partial summary


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       No. 1-16-0305


          judgment on count II of their complaint and held that the Watkinses’ interests were

          subordinate to the interest of Long Beach mortgage to the extent of $371,833.90.

¶ 12         On September 28, 2012, Deutsche Bank filed a motion for entry of a default judgment

          against the Paytons and a motion requesting the entry of a judgment of foreclosure and sale

          against all defendants who had not answered or appeared.

¶ 13         On April 1, 2013, Deutsche Bank filed a second motion for summary judgment on count

          II of the complaint and requested the relief it had not previously obtained: “summary

          judgment pursuant to 735 ILCS 5/2-1005, or, in alternative, for judgment of foreclosure

          pursuant to 735 ILCS 5/15-1506.” In response, the Watkinses did not challenge the circuit

          court’s previous order granting partial summary judgment based on Deutsche Bank’s

          superior interest in the property. Instead, the Watkinses challenged the bank’s standing to

          foreclose on the Paytons’ mortgage (i) because FundingForeclosures.com’s agents forged the

          Watkinses’ signatures on the deed that conveyed the property to the Paytons and (ii) because

          Deutsche Bank and its assignor did not have a written mortgage on the Watkinses’ property.

¶ 14         On May 28, 2013, Deutsche Bank filed a reply in support of its motion for summary

          judgment on count II of the complaint and attached pages from Carla Watkins’s deposition in

          which she testified that she recognized her signature on the warranty deed transferring title of

          the subject property from the Watkinses to the Paytons, but she also testified that she did not

          sign the deed. Deutsche Bank also attached pages from Marvin Watkins’s deposition, in

          which he testified that he signed the warranty deed transferring title to the subject property

          from the Watkinses to the Paytons.


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       No. 1-16-0305


¶ 15         On June 11, 2013, the circuit court found that the Watkinses failed to file evidentiary

          materials that created material issues of fact and granted the bank’s motion for summary

          judgment pursuant to section 2-1005 of the Code of Civil Procedure (Code). 735 ILCS 5/2­

          1005 (West 2012). On July 12, 2013, the court entered a judgment of foreclosure and sale

          pursuant to section 15-1506 of the Illinois Mortgage Foreclosure Law (Foreclosure Law).

          735 ILCS 5/15-1506 (West 2012). On October 15, 2013, the property was sold by judicial

          sale, and the bank was the successful bidder. The court confirmed the sale on November 7,

          2013, without written objection. On December 22, 2015, the court granted Deutsche Bank’s

          motion to voluntarily dismiss count I. Finally, the appellate court granted the Watkinses’

          leave to file a late notice of appeal on February 10, 2016.

¶ 16                                             ANALYSIS

¶ 17         The Watkinses seek review of the circuit court’s June 11, 2013, order, which granted

          Deutsche Bank’s motion for summary judgment on count II of Deutsche Bank’s complaint.

          A circuit court may grant a motion for summary judgment only if the pleadings, depositions,

          and admissions on file, together with any affidavits, show that there is no genuine issue as to

          any material fact and that the moving party is entitled to a judgment as a matter of law.

          Thompson v. Gordon, 241 Ill. 2d 428, 438 (2011). We review a circuit court’s order that

          grants a motion for summary judgment de novo. Thompson, 241 Ill. 2d at 438.

¶ 18         The Watkinses do not challenge the circuit court’s order, granting Deutsche Bank’s

          motion for partial summary judgment on its equitable subrogation claim, but argue, instead,

          that the circuit court erred when it granted Deutsche Bank’s motion for summary judgment


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       No. 1-16-0305


          because there was a genuine issue of material fact as to whether Deutsche Bank had standing

          to   foreclose   on   the   subject   property.   Specifically,   the   Watkinses   argue     that

          FundingForeclosures.com’s agents forged the deed transferring title to the subject property

          from the Watkinses to the Paytons and that Deutsche Bank and its assignor did not have a

          written mortgage with the Watkinses. Therefore, according to the Watkinses, Deutsche

          Bank’s assignor acquired no interest in the subject property from the Paytons’ mortgage,

          Deutsche Bank and its assignor did not have a written mortgage with the Watkinses, and

          Deutsche bank had no standing to foreclose on the subject property. We disagree.

¶ 19                                        Equitable Subrogation

¶ 20           We note that the circuit court granted Deutsche Bank’s motion for partial summary

          judgment based on the doctrine of equitable subrogation. The supreme court examined the

          doctrine of subrogation and explained it as follows:

                       “The doctrine of subrogation is a creature of chancery. It is a method

                   whereby one who has involuntarily paid a debt or claim of another succeeds to

                   the rights of the other with respect to the claim or debt so paid. [Citation.] The

                   right of subrogation is an equitable right and remedy which rests on the principle

                   that substantial justice should be attained by placing ultimate responsibility for

                   the loss upon the one against whom in good conscience it ought to fall.

                   [Citation.] Subrogation is allowed to prevent injustice and unjust enrichment but

                   will not be allowed where it would be inequitable to do so. [Citation.] There is

                   no general rule which can be laid down to determine whether a right of


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                  subrogation exists since this right depends upon the equities of each particular

                  case. [Citation.]

                       One who asserts a right of subrogation must step into the shoes of, or be

                  substituted for, the one whose claim or debt he has paid and can only enforce

                  those rights which the latter could enforce. [Citation.]” Dix Mutual Insurance

                  Co. v. LaFramboise, 149 Ill. 2d 314, 319 (1992).

¶ 21         We find that the Watkinses had mortgages on the subject property from Citimortgage and

          Countrywide of approximately $371,833.90. Long Beach, Deutsche Bank’s assignor, loaned

          the Paytons $450,000, and the Paytons executed a note and gave Long Beach a mortgage on

          the subject property they acquired from the Watkinses. Deutsche Bank’s assignor used some

          of the Paytons’ loan proceeds to extinguish the Watkinses’ prior mortgages on the subject

          property with Citimortgage and Countrywide. By paying off the Watkinses’ two mortgages,

          Deutsche Bank’s assignor (i) was subrogated by operation of law and stepped into the shoes

          of the Watkins’ mortgagees, Citimortgage and Countrywide (LaFramboise, 149 Ill. 2d at

          319), and (ii) acquired Citimortgage's and Countrywide’s priority interest in the subject

          property. Ames Capital Corp. v. Interstate Bank of Oak Forest, 315 Ill. App. 3d 700, 705

          (2000) (subrogation has been applied to subrogate one party to the lien priority of another).

¶ 22         We find that the circuit court properly found that Deutsche Bank’s assignor, after paying

          off the Watkinses’ mortgages to Citimortgage and Countrywide, was subrogated to

          Citimortgage's and Countrywide’s interest in the subject property. Therefore, the circuit court

          correctly found that the Watkinses’ interest in the subject property was subordinate to


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       No. 1-16-0305


          Deutsche Bank or its assignor’s interest in the property (Interstate Bank, 315 Ill. App. 3d at

          705) and correctly granted the bank’s motion for partial summary judgment.

¶ 23                                           Forged Deed

¶ 24         Next, we must determine if the circuit court erred when it granted Deutsche Bank’s

          motion for summary judgment based on the doctrine of equitable subrogation when the

          Watkinses claimed that the Paytons’ deed was forged, the bank’s assignor had no written

          mortgage with the Watkinses, and Deutsche Bank lacked standing because its assignor had

          no interest in the subject property. The doctrine of standing is designed to preclude persons

          who have no interest in a controversy from bringing suit and assures that issues are raised

          only by those parties that have a real interest in the controversy. Glisson v. City of Marion,

          188 Ill. 2d 211, 221 (1999).

¶ 25         Under Illinois law, a lack of standing is an affirmative defense, which is the defendant’s

          burden to plead and prove. Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252

          (2010)). The burden was on the Watkinses to prove (i) that the Paytons had a forged deed and

          that the bank and its assignor did not have a written mortgage and (ii) that because of the

          forged deed and lack of a written mortgage, Deutsche Bank and its assignor lacked standing

          to file a foreclosure complaint against the Paytons. Lebron, 237 Ill. 2d at 252; U.S. Bank

          National Ass’n v. Sauer, 392 Ill. App. 3d 942, 946 (2009).

¶ 26         The Watkinses invoked section 2-619(a)(2) of the Code and asserted a legal defense: (i)

          that Deutsche Bank lacked standing or the legal capacity to file a foreclosure action against

          them because the Paytons obtained their mortgage with a forged deed or (ii) that Deutsche


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       No. 1-16-0305


          Bank’s assignor did not have a written mortgage with the Watkinses and therefore, without a

          contractual nexus, the bank and its assignor had no standing to sue the Watkinses. See 735

          ILCS 5/2-619(a)(2) (West 2012) (the plaintiff does not have legal capacity to sue or the

          defendant does not have legal capacity to be sued).

¶ 27         We note, however, that the whole system of equity jurisprudence proceeds upon the

          ground that a party having a legal right shall not be permitted to avail himself of it for the

          purpose of injustice or fraud. Weaver v. Poyer, 79 Ill. 417, 421 (1875). We must determine

          whether the circuit court properly restrained the Watkinses from invoking their standing

          defense because it would be inequitable to assert the legal defense once Deutsche Bank’s

          assignor extinguished the Watkinses’ indebtedness. Poyer, 79 Ill. at 421.

¶ 28         The Foreclosure Law defines a mortgagee as the holder of an indebtedness and any

          person claiming through a mortgagee as successor (735 ILCS 5/15-1208 (West 2006)) and

          includes the mortgagee’s assignee. Klehm v. Grecian Chalet, Ltd., 164 Ill. App. 3d 610, 617

          (1987). By extinguishing the Watkinses’ mortgages with Citimortgage and Countrywide,

          Long Beach acquired a legally cognizable interest in the subject property that gave its

          successor, Deutsche Bank, the trustee and the legal holder of the Watkinses’ indebtedness,

          standing to commence a foreclosure action against the Watkinses. Glisson, 188 Ill. 2d at 221;

          735 ILCS 5/15-1504(a)(3)(N) (West 2006) (the Foreclosure Law indicates that the legal

          holder of the indebtedness—a pledgee, an agent, a trustee under a trust deed, or otherwise—

          may file the case).




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¶ 29         While a complaint, answer, and responsive pleadings may purport to raise issues of

          material fact, if such issues are not further supported by evidentiary facts in affidavits,

          admissions, or depositions, summary judgment is inappropriate. Carruthers v. B.C.

          Christopher & Co., 57 Ill. 2d 376, 380 (1974). We find, after reviewing the record, that the

          Watkinses failed to present evidentiary materials—admissions, affidavits or depositions—

          that created a material issue of fact and established that the Paytons’ deed was forged.

¶ 30         We also find that the Watkinses would be unjustly enriched if Deutsche Bank’s

          assignor’s paid off the Watkinses’ two mortgages and paid the Watkinses $119,583.92, but

          the Watkinses were permitted to invoke a legal defense that divested the bank of its interest

          in the property. The doctrine of equitable subrogation is the remedial device designed to

          prevent an unjust enrichment. State Farm Mutual Insurance Co. v. Du Page County, 2011 IL

          App (2d) 100580, ¶ 32. Therefore, even if the Paytons acquired the subject property through

          a forged deed and even if the bank and its assignor had no written mortgage with the

          Watkinses, Deutsche Bank’s assignor acquired standing when it paid off the Watkinses’

          mortgages and its successor, Deutsche Bank, as trustee, had a right to predicate its

          foreclosure action against the Watkinses on the fact that it was the legal holder of the

          Watkinses’ indebtedness. Glisson, 188 Ill. 2d at 221; 735 ILCS 5/15-1504(a)(3)(N) (West

          2006). Accordingly, we find that the circuit court properly granted Deutsche Bank’s motion

          for summary judgment because even if the Paytons’ deed was forged and there was no

          written mortgage, the doctrine of equitable subrogation prevented the circuit court from

          permitting the Watkinses’ to be unjustly enriched.


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       No. 1-16-0305


¶ 31         Illinois case law notes that the right to equitable subrogation depends upon the equities of

          each case. Interstate Bank of Oak Forest, 315 Ill. App. 3d at 706. Here, given Deutsche

          Bank’s assignor’s payoff of the Watkinses’ two mortgages and payout of $119,583.92 to the

          Watkinses, and given our need to avoid an unjust result, we find the equities are with

          Deutsche Bank. Accordingly, we hold that the circuit court did not err when it granted

          Deutsche Bank’s motion for summary judgment based on the doctrine of equitable

          subrogation.

¶ 32                                          CONCLUSION

¶ 33         The circuit court correctly applied the doctrine of equitable subrogation, given the

          equities in this case. Accordingly, we affirm the circuit court’s order that granted Deutsche

          Bank’s motion for summary judgment.

¶ 34         Affirmed.




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