Northridge Bank v. Lakeshore Commercial Finance Corp.

365 N.E.2d 382 (1977)

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Northridge Bank v. Lakeshore Commercial Finance Corp.

Illinois Appellate Court
365 N.E.2d 382 (1977)

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  • Written by Rich Walter, JD

Facts

On September 16, 1974, Howard Bloom mortgaged property to Lakeshore Commercial Finance Corporation (Lakeshore) (defendant). This mortgage stated that it secured Lakeshore’s $30,000 loan to Bloom. However, the mortgage went on to state that it also secured any future amounts Bloom might borrow from Lakeshore. Lakeshore did not immediately record the mortgage. On October 4, 1974, Bloom mortgaged the same property to Northridge Bank (Northridge) (plaintiff). Northridge later claimed to have had neither actual nor constructive notice of Lakeshore’s mortgage. Northridge’s mortgage provided no information as to what debt it secured. Northridge recorded its mortgage on the morning of October 25, 1974. That afternoon, Lakeshore finally recorded its own mortgage. When it became clear that the value of Bloom’s property was insufficient to satisfy both encumbrances, Lakeshore and Northridge forced a foreclosure sale. Northridge sued for a declaratory judgment prioritizing Northridge’s claim to the sale proceeds. The trial court entered judgment for Northridge. Lakeshore appealed to the Illinois Appellate Court.

Rule of Law

Issue

Holding and Reasoning (Downing, J.)

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Casebooks

Real Estate Transactions

Key Terms

  • EncumbranceA claim on real property by someone other than the owner; a lien or mortgage.
  • Constructive NoticeNotice that is presumed by law to have been received on account of existing facts and circumstances, in contrast to actual notice.
  • Equity1. Fairness; justice. 2. The value of a property minus any mortgages or liens on it. 3. A branch of jurisprudence that arose in England as an alternative to the harsh common law, in which courts tried to determine what would be fair in a given situation instead of strictly applying law and precedent. Today in the U.S., courts of law and equity have merged for the most part, but equity still applies in situations where appropriate relief would be an injunction or specific performance instead of monetary damages or there is otherwise no remedy available at law.
  • MortgageA lien against property that is given as security for a debt or other obligation and that is removed when the debt or obligation is satisfied.
  • Actual NoticeA party's direct knowledge of an existing fact or future occurrence.
  • Foreclosure SaleA sale of property in which a person’s right of ownership in the property is extinguished, with the resulting proceeds applied to satisfy a debt held by such person.
  • RecordingIn the case of a property interest, presenting a deed or other property interest to a government official for the purpose of creating an official record of the property interest.
  • PriorityThe order in which competing claimants may satisfy their claims against the same collateral. Subject to some exceptions and qualifications, the general rule of priority is that the first claimant in time is first in line to satisfy a claim.

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