Chicago Title v. Watkin

BACKGROUND

In 2011, Plaintiff, Chicago Title Land Trust Company, as trustee to a land trust, executed a mortgage in favor of Defendant Sara Watkin. She was trustee of a revocable trust. The mortgage served as security for a one-year line of credit to the beneficial owners of the land trust.

In 2022, the Defendant filed a foreclosure action against Plaintiff, which was dismissed without prejudice. The dismissal of that case was never appealed. That complaint was never amended or refiled. In 2023, Plaintiff filed a complaint to quiet title, arguing that the mortgage lien was extinguished by operation of law, after the expiration of the limitations period for both the debt and the mortgage. Therefore, the mortgage constituted a cloud on title which should be removed. The parties filed cross-motions for summary judgment.

On May 30, 2024, the circuit court granted Defendant’s motion for summary judgment, “subject to the furnishing of the proper identification of the Plaintiff and proof of its current ownership of the subject property, which will be done via a Third Amended Complaint, to be filed on or before May 31, 2024,” and further denied Plaintiff’s cross-motion for summary judgment.

On May 31, 2024, Plaintiff filed a third amended complaint, as directed by the circuit court. Plaintiff also filed a motion for clarification, requesting that the circuit court enter a final and appealable order pursuant to its grant of summary judgment; and that it clarify that its order was over Plaintiff’s objections. On June 25, 2024, the circuit court denied Plaintiff’s motion for clarification but indicated that “[t]his order is final and appealable as of the date of its entry.”

ANALYSIS

On appeal, Plaintiff asserts that the circuit court erred in granting summary judgment in favor of Defendant, because the note and mortgage were unenforceable due to the expiration of the statute of limitations. The Defendant’s motion for summary judgment was based exclusively on her contention that she had a valid lien on Plaintiff’s property, even though the statute of limitations barred her from enforcing the terms of the note or mortgage.

The appellate court characterized the issue on appeal as to determine the effect of the statute of limitations on the validity of a mortgage lien. The appellate court stated that they recently considered this precise issue in the context of a case that bears remarkable similarity to the case before us. That case is Sims v. Deutsche Bank National Trust Co., 2025 IL App (1st) 241112-U, for those readers who desire to be more steeped in this issue.

The court then crystalized the issue as follows:
“The question in this case, however, is not whether an action on the mortgage is procedurally barred—there is no dispute that it is—but instead whether the inability to enforce the mortgage lien operates to extinguish the lien. We agree with the circuit court that it does not and that the mortgage lien in this case remained a valid encumbrance on title such that the circuit court properly granted Defendant summary judgment with respect to Plaintiff’s quiet title action.”

They went on to state:
“It is well settled that the expiration of a statute of limitations operates to bar the availability of a remedy but does not affect the substantive right at issue—while it bars the right to sue for recovery, it does not extinguish the underlying obligation.” … “Indeed, our supreme court has indicated that a debt continues to constitute “‘an unquestioned moral obligation’” even after the expiration of the statute of limitations, despite the fact that there is no longer any remedy for enforcement of the obligation. … For this reason, a promise to pay a time-barred debt may revive the initial obligation, removing the statutory bar to enforcement.”

Further the appellate court noted that:
“We also observe that the expiration of a statute of limitations does not automatically terminate a potential cause of action upon the passage of a certain period of time. Instead, the statute of limitations is an affirmative defense, which must be raised in response to an allegedly time-barred claim.”

According to the appellate court, the characteristics of a statute of limitations highlight that it is “intended to be a procedural bar, not a substantive discharge of an underlying property interest.” And they note “we cannot find that the expiration of the statute of limitations with respect to an action on a mortgage automatically results in the extinguishment of the underlying mortgage lien.”

Finally, the appellate court discussed a case that neither party relied on in their arguments, to wit: Livingston v. Meyers, 6 Ill. 2d 325 (1955). In Livingston, the plaintiff seller and defendant buyer entered into a contract for the sale of two parcels of real property in 1954. Upon receiving the abstract of title, the buyer discovered that there were two trust deeds encumbering the title to the property and refused to complete the sale. The trust deeds at issue had been executed and recorded in 1930 and were given as security for a three-year note. The question the Supreme Court was asked to consider was whether section 11b, now section 13-116 of the Code of Civil Procedure (735 ILCS 5/13-116), rendered the trust deeds “void and no longer liens upon the premises.”

In Livingston, id. the supreme court found that “[t]he clearly expressed intent of the legislature in adopting section 11b was to remedy the condition of the law as it existed with reference to mortgage and trust deed liens and to bar the enforcement of such liens except as they were preserved of record as therein required, without regard to the continued existence of the secured debt.”

CONCLUSION

Based on the foregoing, the appellate court agreed with the circuit court’s grant of summary judgment and affirmed summary judgment in favor of defendant, opining that the lapsing of the statute of limitations for enforcement of the note and mortgage did not extinguish the lien on plaintiff’s property.