Court Opinion

ID: 9540230
Source: CourtListenerOpinion
Date Created: 2023-08-07 16:13:54.080373+00
Date Added: 2024-06-11T14:59:44.740755
License: Public Domain

Mr. JUSTICE SEIDENFELD, specially concurring: I concur with the holding expressed in the majority opinion. The manifest weight of the evidence compels the conclusion that defendants accepted the extension note and authorized its execution on their behalf by the trustee, De Kalb Bank. It then follows they may not take advantage of the defense that a guarantor is discharged from his obligation by a material alteration of the principal debt. I am disturbed, however, with the dicta which questions whether defendants were “mere guarantors” as opposed to “principal debtors.” The majority’s reasoning is apparently based upon the fact that defendants’ joint venture, Riverside Trails, received the credit extended by the Bank of Commerce pursuant to the mortgage. The dicta suggests that when a beneficiary of a land trust guarantees a mortgage obligation of the land trust and also receives the credit which accrues from the mortgage, the beneficiary as a matter of law assumes the status of a “principal debtor.” I must disagree because whether a beneficiary has assumed a mortgage obligation of the land trust is strictly a factual matter based upon evidence that the beneficiary did, in fact, agree to be bound as a principal. The majority’s dicta is similar to the argument raised before the Illinois Supreme Court in Barkhausen v. Continental Illinois National Bank & Trust Co., 3 Ill. 2d 254, 263-64 (1954). The defendant bank in that case made “* * ” the argument that because Bohrer and Barkhausen, as beneficiaries of a conventional Illinois land trust, had authority to direct their trustee in the administration of the trust property, he was their agent, and his assumption of the mortgage debt solely as such trustee was an assumption of that debt by the beneficiaries as principals.” The Supreme Court rejected the argument and observed, “The assumption of the mortgage by Brash, as trustee, rather than by the plaintiffs, was to insulate them from liability. The record clearly indicates that the authority of Brash, if he be regarded as agent, did not extend to, and was known not to extend to, the incurring of personal liability for his principal. The use of a nominee is uniformly recognized as an approved practice in limiting the liability of principals in real-estate transactions. (Naas v. Peters, 388 Ill. 505; In re Childs Co. 163 Fed. 2d 379, 2nd Cir. 1947.)” (3 Ill. 2d 254, 264-65.) Thus, land trusts are a valid technique for limiting the liability of its beneficiaries by the creation of a “strawman,” the trustee. According to Barkhausen whether a beneficiary has specifically undertaken the obligation of the land trust mortgage is a factual matter to be established by the evidence. The Supreme Court stated in reference to In re Childs Co., 163 F.2d 379 (2d Cir. 1947), ° 0 the court pointed out that, in a ‘strawman’ case, the party seeking to go beyond the ‘strawman’ had the burden of showing, if they could, the existence of an agreement changing the ‘strawman’ practice and imposing personal liability upon the real parties in interest.” 3 Ill. 2d 254, 266. Moreover, the dicta is completely unnecessary in view of the fact that the mortgagee, Bank of Commerce, has met its evidentiary obligations relating to the beneficiaries’ obligations as guarantors. The record manifestly demonstrates that defendants both executed the guarantee obligation and later authorized an extension under modified terms. For these reasons I concur only in the narrow holding of the majority opinion.