No. 2-- 06--0713 Fil ed: 6-29-07

______________________________________________________________________________ IN THE APP ELL ATE C OURT

OF IL LINO IS SECOND DI STRICT

______________________________________________________________________________ UNI ONB ANK, ) Ap peal f rom th e Ci rcui t Court ) o f D e K alb Co un t y. Plai ntif f-A ppelle e, ) ) v. ) No. 04-- CH--48 ) T RAC Y T HR ALL , a/ k/ a T r ac y N. T hr all; ) JAMI E T HRALL , LAKE HOL ID AY ) MA RINA, INC., W

ILL IAM LOK EY, ) JONELL LOK EY, DONA

LD K AUS, ) CEARISE BENES, JAMES ROONEY, ) EU RE KA SAVI NGS BANK, UNKN OWN ) OWNERS, and NON-RE CORD ) CLA IMANTS, ) ) De f en da n ts ) Ho no r ab le ) Kur t P. Klein, (Eureka Sav i ngs Ban k, Def endan t-App el l an t). ) Judge, Presi din

g.

______________________________________________________________________________ JU STI CEGI LL

ER A N JOH NS ON de l i v ered th e op i n i on of th e c our t: T his mortgag e foreclosure case gave rise t o a dispu t e bet wee n t wo banks , p laintiff UnionBa nk (U nion) and d efenda nt Eureka S av ing s B an k ( E ur ek a) , r eg ar di ng wh ich ba nk 's lo an s h ad pr io r it y. The trial court hel d that Union h

ad priori ty, and Eureka appeal

s. We reverse and rem

and. The facts are l

argely undi sputed. The mortgagor, Tracy Th rall, owned sev e ral

pa rce l s of resi dentia l re al est at e including o ne in Sandwi ch , I llino is, an d o ne in S o mo na uk , I llino is. T hr all borrowed money fro m bot h Eu re ka a nd Un i on at v ari ous ti mes an d s ecur ed th es e l oan s wi th se pa ra te mortgag es on the pro pert ies, as f ollows:No. 2-- 06--0713

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• On De ce mbe r29 , 19 95 , T hr all t oo k o ut a mor t gag e wit h Eu re ka o n t he S an dw ich pr o pe r t y, in the am ount o f $100,800. Eureka recorded this m ort gage on Janua

ry 23, 1996. On

May 31, 1996, T hr allto ok out a m

ort gage wi

th Eureka on the Somonauk proper ty i n the am ount o f $112,800. Eurekarecorded t hi s m

ort gage on June 4, 1996. (These two mortgages are referred t o he re in as t he 1996 m ortgages .)

• On Au gu st 31 , 19 99 , T hr alltoo k out mortgages on both the Sandwi ch an d Somonauk propert ie s wit h Union, which r eco rd ed t hese mor t gag es o n Sep t ember 8 , 1 999 (t he 1999 m ortgages ).

• On Novem

ber 13, 2001, Thrall e

xecuted new prom

is sory n ot es and m

ort gages on the two propert ie s with Eureka, i

n the am ount o f $98,250 on the San dwic h property and $108,00 0 on t he Somonau k property

(the 2 001 m

ortgages ).

• On Novem

ber 26, 2001, Eu re ka r eco rd ed t he 200 1 mo rt gag es o n t he t wo pr op er t ies and released the 1996 mort gages. On Ma y 6, 20 04 , Un io n file d a n a men de d c o mpla in t fo r fo re clos ur e o n t he Sa ndwich a nd Somonauk

pr op er t ies, a lleging

that its i nterests in

the propert ie s had pri

ority over those of Eureka. Eu re ka filed a c ou nt er claim all eging t hat Union's inter est s we re subo rd inate t o it s o wn. Un i on concedes that when

it recorde d the 1999 mortgages, it vi ewed those mortgages as j un i orto the 1996

mortgages

he l d by Eureka
. Ind eed , t he 19 99 U nion lo an do cument s re cite t hat t he loan wa s s ecure d by

"j un i ormor t gag e[ s]" on t he San dw i ch an d Som ona uk prope rti es . Si m i l ar U ni on loan documen ts from wh

at appear to be additi onal

loan s to T hral

l i n 2000 also recite thatth e s ecuri ty for the loans in

cluded "second mortgage[ s]" on t he two p rop erties.No. 2-- 06--0713

-3-

Wh erethe part ies di

ff er is on the eff

ect o f Eureka's actions in 2001. Union contends t ha t when Eu re ka r elease d it s 19 96 mo rt gag es, Union's loans beca me the senio r mo rt gag es o n t he pro pert ies. Eureka contends that its 2001 m ort gages were m

erely replac e m en

ts o f th e 1996 mortgag es and thus were entitled to retain the priority of the 1996 mort gages. Eurekafi le d a m oti on f or sum mar y j udgm en t i n wh i ch i t con ten de d th at i ts li ens were en

titled to pri ori ty un der th e doctri

ne of "c on v en ti on al su b rog ati on ." In su pp ort, i t atta ch ed an af f i da vi t f rom Ch r is Ho lde nr id, wh o av er r ed t ha t he wa s " a d uly elect ed a nd

active off ic er" of Eureka, that he had "personal kn o wle dg e o f all t he fac t s he r ein after se t forth ," an d tha t the 200 1 m

ortgages "were in tended by Tra cy Thr all and

Eu re ka S avings B ank" as r eplac ement s for t he 1996 mortgages. Eureka also ci ted Kan kak ee Federal

Saving s & Lo an Ass'n v. Arno ve , 3 18 I ll. App. 261 (1 943 ), for t he pr op os itio n: "[ I]t i s th e s ettl ed l aw of th i s S tate tha t when a re f un di ng m ortga gei s m ade, th e l i en of t he ol d mortgage continues

in effect wit hou t inter ru pt ion and t he ne w mo rt ga ge do es no t be co me subo rd inate t o a n inter vening lien or inter est at t aching bet wee n t he t ime of t he r eco rd ingof t he ol d mo rt gag e and t he effect ive dat e o f the new o ne, even t hou gh t he o ld mor t gag e be released. T his i s b ec au se

of the do ctrine of conventional subrogat ion." Arno ve , 318 Ill . App. at 268. Eurekaal so asserted that Union' s rec ord i ng of i ts i ntere sts f ail ed to com

pl y wi th al l statutory requiremen

ts. In res pon se , Un i on f i l ed a m oti on to strikethe H old

en ri d af f i dav i t as v i ola tin g Supre me Court Ru le 191 (210 Ill . 2d R. 191) because i t was conclus ory and i

nsuf fi ci ently detail ed. Uni on al so fi le dNo. 2-- 06--0713

-4-

a re spo nse br ief, ar guing t hat t he do ct rine of conventional subrogat ion was i

nappli cable to this case because it has been

defi ned by Ill in ois court s as i

nvolvi ng three parties : the debtor, an origin al credi tor-li enor, and a n

ew c r edi to r who pays

the debt to t he origi

nal creditor pursuant to an agree ment with the d ebtor that he wil l ass um e l i en ri ghts equa l to that of the origi

na l credi tor, including priority over in

tervening l

ien ors. See Western Un

ited Dai ry Co. v. Conti

nen tal Mortgage Co. , 28 Ill . App. 2d 132, 135 (1 960 ). Union a rg ued t hat t he do ct rine of con ve nti ona l su br oga ti on co uld not apply

her e, wh ere Eureka re

pl ac ed i ts ow n d ebt. Un i on a l so p oi nte d out th

at n one of Eu re ka's 200 1 do cument s indicat e anywhe re t hat t he 2001 m ortgages were i n ten de d a s rep l ac em

en ts f orthe 1 996 m

ortgages . Union as se

rte d th at, i n ste ad , the doctr

i n e of "f i rs t i n ti me, f i rs t i n ri gh t" sho uld b e a

pp l i ed , a n d th at Eureka' s 2001 m

ort gages m

ust be subordi

nated to Union' s 1999
m ortgages be caus e the

Uni on m ortgages were recorde d earl

i er. Un i on also ci ted Uni on Plan ters Bank, N.A. v. FT Mor tgage Co s. , 341 Ill . App. 3d 921, 925- 26 (2003), as holdi

ng that a p ar ty seeki ng to apply

conven tional subrogation m

ust show that it is f

ree f rom gross n egl i gen ce. Un i onar gu ed t ha t E ur ek a c o uld no t sho w t his, as t he r ele as e d ee ds it executed in 2001 unam

bi guously released al l of i ts right s and inter est s in the ear lier mor t gag es, and Eurekadi d n ot co n tact Un i on to obt ain a su bor dinat ion ag re ement . U nion su bmitt ed t he af f i da vi t of Ken n eth Jon es , one of i ts o f f i cers , s tati n g th at a l th oug h Eur eka h ad re qu ested

th at U n i on su b ordi n ate it s 19 99 m

ortg ag e on

an oth er property also o wn ed b y Th ral l to a 2001 Eureka mortgage on that pr o pe rt y, Eureka never m ade a si mi la r request regarding the Sandwich and Somonauk pro pert ies. Fin ally, Un

i on con ten de d th at i ts rec ordi n g of th e 1 99 9 m

ortg ages adeq uatel y met al l statutory requiremen

ts.No. 2-- 06--0713

-5-

In its r eply to Union's ar gument s, E ur eka admit t ed t hat per haps "co nvent ional su bro gat ion"
was not t he b est lab el

for the l egal

prin ci ple it was es pousin g, but argued that t hi s prin ci ple had b een recognized

by Ill in ois court s as far back as Sh av er v. Williams , 87 Ill . 469 (187 7), and had b een referred t o as "c o nve nt io na l su br o ga t io n" in modern cases i

ncl udin g Arno ve . Eur eka also responded t o Un io n's ar gu men t r eg ar di ng gr o ss ne gl ig en ce , ar gu ing t ha t it di d n o t ap pl y. Th e tri al cou rt de ni ed the moti on to s tri ke th e H olden

rid a f f i da v i t, find ing t ha t t he affid av it
me t th e req ui re men ts of R ule 191 (210 Il

l . 2d R. 1 91). Th e tri

al cou rt al so den i ed Eureka' s m

oti on f orsum ma ry j udgme nt, fi ndi ng that the 200 1 doc um en ts' si l en ceon th e iss ue of th e p ar ti es ' i n ten t to replac e the

ea rl i er m ortga ge s stood in c o nt r as t t o t he Ho lde nr id aff ida vi t's asserti on that t he parties did agree to thi s, an

d theref ore there was a f

actual question preventi

ng sum ma ry j udgme nt. In ruli ng, t he trial court suggested that additi onal evi dence f rom the parties to the 2001 mortgages wo uld like ly be n ecessary to resolve the case. Neit her par t y pro duc ed a ny addit ional evide nce o n t he issue of E ur eka 's inte nt in execu t ing t he 200 1 mo rt gag es a nd

l oan doc um en ts. In ste ad , U

n i on f i l ed a m oti on to ad j udi ca te priority of l

iens, in wh i ch i t aske d th e tr i al cou rt to re so lvethe le gal

is sue of wh

ic h ba nk's li ens h ad priori ty as a m atter of l aw, con tend i ng th at there were no disputed

questions of

f act. In t heir br iefs on t his mot ion, t he partiesrai sed

ess en tia l l y the s am e argu men ts that h ad b een rai sed i n the proce edi

ngs on su m mary j udgm en t. Eureka once agai

n sub mi tt ed t he Ho lde nr id a ffida vit in su pp o rt o f it s p o sit io n. Un io n d id not renew i ts chal le nge to the aff

ida vi t, but argued t hat even

if the aff ida vi t were accepted as true, t he do ct rine o f co nve nt io na l su br o ga t io n d id n o t ap ply a nd Un io n sh o uld win under the rule of fi rst in t ime, first in right . T he o nly new arg ument was t he claim by Union that E ureka was "g ui l ty ofNo. 2-- 06--0713

-6-

l ach es," for t he sa me rea so ns t hat Union p re viou sly claim ed t hat Eureka wa s g

ros sl y n eg l i gen t. Eureka resp onde d tha

t Uni on coul d not sh ow the e l em

en ts ne ces sary

f or la ches
. The tria l court he l d a h

eari ng on the moti on to a

dj udi ca te p riori ty of l i ens, a t the cl ose of whi ch it too k the ma

tt er under advi

sem ent. On Jul

y 21, 2005, i

t issued a le tt er r ulin g in wh ich it fou nd that: (1) Union's 1999 mort gages pro vided suff ici ent not ice to meet stat uto ry requirem ents; (2) the doct rin

e of conve

ntional subrogation di

d not apply

in this case; and (3) the princi

ple of f irst in t ime, firs t in

right go ver ned t he ca se . T he t r ial c o ur t st at ed t ha t t o ap ply a ny o t he rleg al p r inc iple
wo uld "defeat the purp ose o f recording m ort gage instrumen

ts. " Th e tri al

court concl

uded that t her efo re Uni

on's 1999 l

ie ns h ad priori ty over Eureka's 2001 l

ie ns. On A ugust 17, 2005, t he t r ia l
co ur t en t er ed an o r de rt o t his e ffec t . E ur ek a file d a t imely no t ice o f ap pe al. The part ies raise the same argumen ts on appeal

as wererai se d i

n th e m oti on to ad j udi ca te pri ori ty of l ie ns, wi th mi nor vari ations. Eureka has aband one d it s claim tha t Union's rec orda ti on of t he 19 99 mortg ag es

wa s def i ci en t. Union has renewed its att ack on t he Holdenrid aff idav it. We fi rst consider the trial court 's deci

sions regardin

g the le gal is sues appl

ic abl e to t he case , which we rev ie w de novo . Il

l i n oi s H ea l th Ma i n ten an ce Orga n iza ti on Guaran ty Ass'n v. Dep ar t ment of Insuran ce , 372 Ill . Ap p. 3d 24 , 31 (20 07). We co nc lud e t ha t t he t r ial c o ur t er r ed in ho ldin g t ha t "fir st in t ime, firs t in r igh t " is t he o nly le gal prin ci ple properly applic abl e to t hi s case. In Aam

es Capi tal Corp. v. Interstat e Bank of Oak Forest , 315 Ill . App. 3d 700 (2000), t hi s court not ed:

"The do ct r ine o f fir st in t ime, firs t in r igh t is not alway s as cl ear and obv

iousas i t may
seem . For ins

tance, a separate body of

la w governs l

ie n pr io r it y in

cases i nvol vi ng renewalNo. 2-- 06--0713

-7-

notes and m

ort gages. A ren

ewal note an d m ortga gedo n ot or dinar ily

op er at e as payment and in dis charge of a

n origi nal note for purposes of determi ni ng whet he r the ren

ew al n ote
ma in taine d priority position." Aam

es , 315 Ill . App. 3d at 704, citin g Stat e Bank of

Lake Zur ich v. Winnet ka B ank , 245 Il l . Ap p. 3d 98 4, 991 ( 1993)
. Indeed, t he leg al d o ct r ine E ur ek a in vo ke d h as ex ist ed in I llino is ca se l aw f orover 100 years, and it i s n ot lim ited t o t he t hird- par t y situa t ion d esc ribed by Union. In Shave r , t he su pr eme co ur t he ld t hat a lende r's r efinancing of a debt se cu red by a m ortga ge , cou pled wi th a si m ul tan eou s rel ea se of t he origi nal mortgage hel

d b y th e l ender, did not disturb the previ ous priority

of l ie ns on the l

and, wherean i

nterveni ng l ie nor to ok his

li en wi th knowle dge of the origi nal mortgage. Shave

r , 87 I ll. at 471. T hi s was so because the in terveni ng l ie nor, that is, the party who recei ved a second m ort gage on t he pr o pe rt y, wa s n

ot pre j udi ce d by the f i rs t l i en or' s retenti

on of l i en pri ori ty : the i nte rv en i ng l i en or knew that his li en was junior in pri

ority at the tim

e h e fi rst issued t he de bt in exchang e fo r t he
mo rtgage, and t he pr ior ity o f his li en wa s neit her bet t er ed no r w or sene d by t he o riginal lienor 's is suance of

a new m ort gage i n pl ace of the old mortgage. As the suprem e court st ated: "[N]o good r eason can

be sh ownwh y appe l l an t [the i nterv en i ng l i enor] sh o ul d h av e p r io r it y. Wh en he made t he loa n and accepted a mortgage, the record disclosed the fact that appell

ee [t he o r igin al lie no r ] ha d a pr io rlien. T his r ec o r d w as co nst ruc t ive no t ice t o him and al l others of app ellee's r ight s, a nd

wh at ev er int er es t he ac qu ire d in the premi ses was s ubordin ate to that he ld b y appe l l ee . A

pp el l an t has i n no manner bee

n m is le d or deceived, and unde r such ci rcumstances t o g ive him prior ity o f li en, fro m the fact al

one that appell

ee can cel ed of record
one mortgage *** and at

the sam e tim e accepted another mortgage, deriv in g no substantialNo. 2-- 06--0713

-8-

advan tage whi ch h e di d not previousl

y h ave, would b e nei

ther just nor equitable." Shave r , 87 Ill . at 472. The sup re me co ur t re iter at ed t his principle a few year s lat er in Campbe l lv. Tro tt er , 100 Ill . 281 (1881 ). In Ca mpb ell , t he o r igin al mo rt ga ge e r efin an ce d t he init ial lo an an d t o o k a ne w mo rt ga ge in order t o g ivet he bor ro wer mor e t ime on t he loa n, bu t ano t her lender t oo k a mo rt gag e o n t he property sho rt ly be fo r e t he ne w mo rt ga ge wa s r ec o r de d. T he su pr eme court hel d that t he origi

nal
m ortgagee wasen titl ed to ass ert the pri ority

of the f i rst m ortgage. Ca mpb ell , 100 Ill . at 285. T his do ct rine is no t re ally an e xce pt io n t o t he r ule o f firs t in t ime, fi r st in r igh t . I nst ea d it simp ly holds that, under certain ci

rcumstances, equi

ty requi res that a subsequen

t lienor be consi

dered t he sam e as if h e were the origi

nal li enor. "The [origi

nal ] mortgage, despite bei

ng released, i s deem

ed to have contin

ued uni nterrupted *** and t hu s p r ec ed ed [ t he int er ve ning lieno r 's] pu r po rt ed lien in t ime. Theref

ore it is the

[origi nal ] mortgage t ha t wa s 'f

irs t in tim e' an d [the party who ref

in anced that mortgage] *** that is 'fi

rst in righ t. ' " La Sal

le Bank, N. I. v. Fir st American B ank , 316 Ill . App. 3d 515, 523 (2000), citin

g Arno ve , 318 Ill . App. at 268. Nei ther Shave

rnor Ca mpb ellref

ersto thi s doctri

ne as " conv en tion al sub rogati on." Tha

t term
was fi rst use d in Home Sav

in gs Bank v . Bierstadt , 168 Ill . 618, 624 (1897), where the court defi ned
conven tional su br oga ti on as "a n equ itable r ight spr inging fro m an expr ess a gr eement wit h t he debtor, by wh i ch one ad va nc esmone

y to pa y a c l ai m f orth e s ecuri

ty of whi ch there ex

is ts a li en, by whi ch agr eement he is t o ha ve an e qua l li en t o t hat paid o ff." T his definitio n of t he t er m, in which a thi rd pa rty pays off the origi nal deb t an d a ss ume s t he pla ce o f t he o r igin al lie no r , ha s be en fair ly wid elyNo. 2-- 06--0713

-9-

applie d, in cases ra nging fr o m Kam in skas v. Ce pa us kis , 36 9 Il

l . 56 6 (1 938 ), to Uni on Pl an ters , 341 Ill . App. 3d at 925, which was deci ded within

the last fi ve y ears. So me Ill in ois courts, however, have suggested that the phrase "conv entiona l s ubroga ti on "
encom passes both (1) the Shave

rsi tuation in whi ch the origi

nal li enor refi nan ces the i ni tial loan and takes a n ew mortg ag e i

n re tur n , but does

so i n ten di n g to maint ain his priori

ty, and (2) the Bi erstadt si tua ti on in whi ch a thi rd party pays off

an i ndebtedness i

n exchan ge f ora new mor t gag e t hat re t ains t he pr ior ity o f the or iginal indebt edne ss. In Arno ve , 318 Ill . App. at 268, the court ap pli ed the term to the fi rst of these si

tuations. There, in

1926 the ban

k'spre decessor loan

ed the Arnove s $2,000, whi ch was se cu r ed by a mortgage. Li en s we re su bs eque ntl y place d aga

i nst the prope

rty to se cure i ntr a-f am i l y debts con ne cte d w i th th e di stri bu ti on of t he es t at e o f Mrs. Arno ve. In 1 937 , t he bank is sued a n ew l oan i n th e a moun t of $2 ,50 0, w

h i ch prov i de d f

un dsto pay the bal ance on the origi

nal mortgage, delinque nt taxes and assessm ents, a m echan ic 's l ie n, and m is cella neous i nsuran ce an d t it le fees. The initial mort gag e wa s re leased at t he clos ing o n t he new loan. The re was evidenc e t hat t he family lienholder s we re awa re of bo t h t he o riginal mor t gag e and the refi nan ci ng an d agreed t hat t he ba nkwo uld r et ain f

i rst pri ority
. The co ur t held t hat t he bank 's new mor t gag e had pr ior ity o ver t he family's liens , an d in t he pa ss ag e w e q uo t ed ea r lier , it descri bed the l egal prin ci ple bei ng appl ie d as conven tional sub rogati on. Arno ve , 318 Il

l . Ap p. at 268
. Altho ugh Arno ve i nv ol ve d the s am

e l i en or refi nan ci ng an earli er loan a nd m ort gage, i t ci ted (am ong othe r cas es) Kam

in skas , in wh

ich it was a thi rd pa rt y who had pa id o ff

the origi nal mor t gag e and was see king t o a sser t t he sa me pr ior ity as t he origi nal m ortgagee . Arno ve , 318 Il l . Ap p. at 268 -69. The

court appe ared to reg ard both o f these situ at ions a s falling within t he ambit o f co nvent ional su bro gat ion.No. 2-- 06--0713

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S imila r ly, in t he r ec ent ca se o f Aam es , th e c ourt' s des cri

pti on of conven

tional subrogation at
one poi n t ap pe ar s to appl

y to a th i rd pa rty who replace s the

origi na l l i enor ( Aam

es , 315 Ill . App. 3d at 709, citi

ng Bi erstadt , 168 Ill . at 624), ye t t he court also quotes with approval Arno ve , whi ch h olds that conven

tional subrogation n

eed no t inv o lve a t hir d p ar t y ( Aam es , 3 15 I ll. App. 3d a t 709 , c iting Arno ve , 31 8 I ll. Ap

p. at 264 ). Aam

es itse lf i nvolved a t hird p ar t y'srefi nanci ng of two ot her banks' earli er mor t gag es. Neve rt heless, when t he co ur t an no un ce d it s ho ldin g it did so in lan gu ag e e qu ally ap plic ab le t o eit he rt ype o f sit ua t io n: "a r efin an cin g mor t ga ge e t ha t r ec o r ds it s mo rt ga ge lien is entitled to be subrogated t o t he o riginal lien, and it s co rr esp ond ing pr ior ity po sitio n, e st ablished by t he or iginal mort gag ee, unde r t he doct rine of conv entional subrogat ion." Aam

es , 315 Ill . App. 3d at 710 . T his langua ge indica t es t hat t he do ct rine o f co nvent ional su bro gat ion ap plies eq ually to t he
re place ment of the fi

rst mor t gag e by the origi

na l m ortga ge e a nd by a n ew l en der. Se e al so Fi

rstm ark Stand ard Li fe Insurance Co. v. Superi or Bank F SB , 27 1 I l l . A

pp . 3d 43 5, 440(1 99 5) (c i

ti n g b oth third-party l

ie nor cases an

d Arno ve i

n de scri bi ng th e sc ope of

conv en tion al sub rogati on). I n exam in in g this confus ion i

n the case

la w over the proper scope o f conv entiona l subr og at ion, we

n ote that ou r su pr eme co ur t has a pplied t hat t er m only to a t hird p ar t y's refinancing of an origi nal mortgage. See Bi erstadt , 16 8 Ill. at 624 ; Kam in skas , 36 9 I ll. at 569 -7 0. Altho ugh t he
su pr eme co ur t als o cle ar ly r ec o gn ize s t he r igh t o f t he o r igin al mo rt ga ge e t o r et ain i ts i n i ti al pri ori ty
over in terveni ng l ie nors when

is sui ng a n ew m ort gage i n pl ace of the f

irst m ort gage, it has

not used t he phrase "c onven

tional subrogation" i

n i ts cases recogni

zi ng thi s righ

t. See Shave

r , 87 Ill . at 472; Ca mpb ell , 100 Ill . at 282-83. The authors of the Re sta temen t (Thi rd) of Property pref er the term "repl ac ement o f s eni

or mortgages" rather t han "conven tional subrogation" to describ e this la tt erNo. 2-- 06--0713

-11-

situ at ion. Re sta

tem en t (Th i rd) of Pro perty §7 .6, Com

men t e (1997) . Re gardles s of t he lab el, however, it is clea r t hat t he do ct rine remai ns v alid un der Ill in ois l aw and that Eureka properly rais ed i t bef ore the trial

court . Union's argum

ent that conventi onal

subrogation m

ust in volv e a th i rd pa rty thus is mi splaced, and the trial

court erred in

fi ndi ng that the doctr in

e i nvoke d by

Eu rek a di d n ot appl y h ere. We now t ur n t o t he ap plicat ion o f tha t do ct rine t o t his case . E xamina ti on of the co urt s' holdi ngsin Shave

rand Arno ve en

ab l es usto disc er

n th e e l em en ts t ha t mus t ex ist in o r de rt o ap ply t he doctr ine recogni ze d in those cases , in

whi ch the origi

nal li enor who refi

nan ces the m ort gage re t ains thepriority

of hi s lie n over that of an i

nterveni ng l ie nor despi te the release of

the origi nal mortgage. The r efin an cin g lie no rmus t ha ve int en de d t o r et ain the priori ty of h is origi nal mortgage; t he new m ort gage musthave been

used t o p ay off t he first mor t gag e; t he inte rve ning lienor must have be en on noticeof t he o riginal mor t gag e's p rio rit y at t he t ime he issued t he indebt edne ss se cur ed by his lien; and t he first mor t gag e must not have be en r elease d pr ior t o t he inte rve ning lien. See Shave r , 87 I ll . at 471 -72 ; Arno ve , 318 Ill . App. at 268. Union h as not rai se d a n y argu men t wi th re sp ect to t he las t t hr ee o f t he se ele men t s. T hu s, t he o nly r ema ining iss ue is w he t he rE ur ek a in t en de d t o r et ain its priority i

n 2001 when i

t refinan ced and released the 1996 mort gages. Af ter it de nie d E ur ek a' s mo t io n fo rsu mmar y jud gme nt , t he t r ial c o ur t ind ica t ed t ha t it antic ipa ted re ceiving f

urthe r e vidence on t his issue o f intent . T he t rial co ur t did no t re ceive a ny ad di ti onal evi dence an d thus nev

er made a fi ndi ng of f act on this issue. Al

though the trial

cour t ult imat ely fo un d in fav

or o f Un ion, i t did so on the basi

s of a purel

y l egal determi nation, that

i s, i ts mi staken bel ie f that the l eg al doc tri ne arg ue d by Eureka di d n

ot appl y . Now t hat we a re re ver singNo. 2-- 06--0713

-12-

t his legal de t er minatio n, w e r emandso tha t the tri al cou rt m ay com pletei ts f ac tual de term i na ti on on t he qu es t io n o f E ur ek a' s int en t in t aking t he 20 01 mo rt gag es a nd r eleasing the 1 996 m ortgages . In doi n g s o, w e prov

i de th e f oll owi n g addi ti on al gui da n ce to th e tr i al cou rt. Un i on ar gue d t hat t he une quivo cal nat ur e o f a re lease d emons t ra t es t hat Eu re ka d id no t intend to pr es er ve it s priori

ty when i t rel ea se d i ts 1 996 m ortga ge s. I n s upp ort of thi s c onte nti on, Un i on ci ted West Suburb an Ban

k v. Attorneys'

Titl e Insuran

ce Fun d, Inc. , 326 Il

l . Ap p. 3d 50 2, 509 (2001) , in wh i ch we h el d th at a cred i tor' s rel ea se of i ts mortgage extin

guis hed an y lien it ha d o n t he pr o pe r t y, and ot her cases

in whi ch we stated general

ly that t he rel

ease of a m

ort ga ge extingu ishes t he lien. No ne of t hese cas es, how ever , invo lved t he r efinancing o f t he mo rt ga ge and t he is su anc e o f a new mortgage in

tended t o t ake the place of the old mortgag e that is bei ng released. Moreo ver, the case la wdis cu ss ed ab o ve mak es it cl ea r that the re l ea se

of a p riormortgage doe s n

ot ex ti n gui sh pri ori ty
r igh t s w he n t he r ele as e is part of a ref in anci ng of the m

ort gage. See Shave

r , 87 Ill. at 472 (r elease of old m ort gage did not show in

tent t o reli

nqui sh pri ority of refi nan ced mort gage ); Arno ve , 31 8 I ll. App. at 268 (s am

e). Thu s, t he r elease of t he 1996 mortgages by itsel f does n ot in dic ate that E ureka int en de d t o ab an do n it s p r ev io us pr io r it y. In den y i ng Eu reka' s m otion f or sum mary judgm ent, the trial

co ur t fou nd significant Eu re ka's 2001 mortgage and rel

ease docum

ents, whi ch do not ex

pli ci tly state tha t the 200 1 m

ortgages were in tended as replacem

ents f or t he 1996 m

ort gages. Uni

on argue d th at this

sile nce i n the 2001 docum en ts means that t he Shave

r/Arno ve do ct rine d oe s no t app ly. Union no t ed t hat in Shave r , t he
ne w mo rt ga ge sp ec ifica lly stated that i

t was m ade " to secure

the ide ntica l i ndebtedness" m

entione d in the fi rst mortgage. Shave

r , 87 Il l . at 470. But altho ugh t he pr ese nce o f explicit lang uag e in theNo. 2-- 06--0713

-13-

new mo rt ga ge may be us efu l in det er mini ng t hat t he new mor t gag e wa s inte nded t o r eplac e t he fi rst
m ortga ge , th e a bs en ceof such l anguage h

as no legal

signifi cance. The new mo rt gag e in Ca mpb ell had n o su ch l an gu ag e, but th

e s up re me c our

t h ad n o di f f i cul ty in d et er minin g that it was a
re place ment mortgage, wh ere i t me t the other cri

teri a outli ne d ab ove. Ca mpb ell , 100 Ill . at 284-85. S imila r ly, t he new mor t gag es in Bi erstadt , Arno ve , a nd Aam es wer e silent on t he is sue of wh ether they were intended as replacem ent mort gages, yet t he court s i nthese cases

found that they

were. Bi erstadt , 168 Ill . at 625 ; Arno ve , 318 Ill. App. at 268 ; Aam es , 315 Ill . App. 3d at 708-09. Indeed, in Aam es werej ected

the ve ry arg um en t raise d by

Un i on here, stating that "we do not bel ie ve that
*** a sp ecific pr ovisio n in the mortgage do cu men t re ga rdi n g th e a ss um pti on of th e f i rs t pri ori ty pos i ti on is req uire d by t he ho lding in Bi erstadt ." Aam es , 315 Ill . App. 3d at 708. Thus, the si le nce of the 2001 documen

ts regarding pri

ority does n

ot provide ev

ide nceon t he issue of E ur eka 's inte nt t o pr es er ve it s p r ev io us pr io r it y. The 20 01 do cu men t s d o pr o vid e e vid en ce o f int en t in a somewh

at di f f eren t respe ct, howe

ver; t he new m

ort gages were r ecorded at t he sa me time as t he r elease of t he o ld mor t gag es. In t he
co nt ext of m

ort gage refi

nan ci ng, cour ts have vie

wed thi s type of

contemporaneous action as demo nst ra t ingthat the

new m ortgages were i nten ded a s rep l acemen

ts f or the old. See, e.g. , Shave r , 87 Ill . at 471 (t he "fac t t hat t he r elease of t he o ld mor t gag e and [t he] fil ing for re co rd of t he ot her [new] one was do ne at t he sa me tim e" i ndi cated th e origi na l mortgagee 's

i nten t to retain his pri ority ); Ca mpb ell , 10 0 I l l . a

t 28 4 ( ori

gi n al m ortg ag ee ' s priori

ty mai nt ain ed wh er e h e r ele as ed t he o ld mortgage of record "[upon] receiv in g the new n

ot es and mor tg age" ); Arno ve , 31 8 I ll. App. at 265, 268 (the old m

ort gage was released at the tim e t he ne w loan

was cl osed; court found origi

nalNo. 2-- 06--0713

-14-

mortgagee i

nten ded to m ai ntai n i ts priority ). In this case, Eureka's recordi

ng of the n

ew m ort gages and i ts re l ea se of the 199 6 m ortga ge s b oth oc cu

rre d on Novem ber 26, 2001. The contemporaneous
na ture of th es e ev en

ts prov i de s s om

e ev i den ce

th at th e l ate r m ortg ag es werei n ten de d a s rep l ac em

en ts for the earlier ones. On ap pea l, Unio n has r enew ed it s at t ack on t he Ho ldenr id affidavit. As we are rem andi ng, however, wel ea

ve al l of the i ss ue s reg ard

i ng the af f i da vi t's ad m i ss i bi l i ty to t he t rial co ur t 's so und discr et ion. Bill Marek 's The Compe titiv e Edge, Inc. v. Mickel son Group, Inc. , 34 6 I ll. App. 3d 996, 1010 (2004)
. Un i on rais es two fi

nal argumen ts on appeal. F irst, Uni on compl ai ns that i t has b een dis advan tagedbecause

the 2001 mortga ges have longer maturity dates than the 1996 mort gages. T his argumen

t is unsupported by Il

li nois la w. Indeed, Uni

on did n ot ci te a ny au t ho r it y fo rt his
ar gu men t , an d t hu s w e n ee d n o t co nsid er it f urthe r. Midfi rst Bank v. A

bne y , 365 Ill . App. 3d 636, 650 (2 00 6) . U nio n als o cha rg es t hat Eu re ka is g uilt y of la ches , but we cannot see t hat Eureka unreasonably

del ay ed i n ass erting i

ts clai m: i t recor ded i

ts new mo rt ga ge s p r o mpt ly

in 2 00 1, an d it fi le d its counterclaim o n t he iss ue o f pr io r it y pr o mpt ly aft er it ha d b ee n se rve d in t his c as e. I t is diffic ult to s ee

wh at e l se Eur eka sh oul d h av e don e to prote ct i

ts i n terests a n d a ss er t i ts cl ai m . Un i on argues t ha t E ur ek a c o uld have ask ed U nion t o s ubo rd inate its 1 999 mor t gag es o n t he Sa ndwich a nd Somonauk

prop erti es , as i t did on a dif ferent prop erty also owned by Thrall a nd m ort gaged to E ureka and Un ion. Eureka's

actions wi

th respect to this

third property are si

mpl y n ot relev ant to t he i ssue of the pri ori ty of the mortga ge s on the Sa ndw i ch and Som onau k properti es, h owever, and the l

awNo. 2-- 06--0713

-15-

weha ve di scus se d here i

n d oesnot require a reques

t for subordin

ation. Nei

ther of th es e a rgum en ts h as meri t. Fo r t he f oregoi ng r eas ons, th e j udgm en t of the ci rcui t court of De Ka

lb County is reversed, and the cause is rem

anded for further pro ceedings. Reversed a

nd rem anded. McL AR EN an d BYR NE, JJ ., conc

ur.