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Land Trust Cannot Rescind Under TILA

Real Estate Roundup

Sharp  Thinking

No. 124    Perspectives on Developments in the Law from Sharp-Hundley, P.C.      December 2014

Land Trust Cannot Rescind Under TILA

            A land trust which is not an obligor on a loan but which gave a mortgage to secure the loan cannot seek rescission under the Truth In Lending Act, 15 U.S.C. § 1601 et seq. (TILA), a panel in the Appellate Court’s First District has held.

            Ruling in Financial Freedom Acquisition, LLC v. Standard B.&T. Co., 2014 IL App (1st) 120982, the court noted that the land trust was not an “obligor” on the loan under Black’s Law Dictionary’s definition of “obligor”.  Noting the standard exculpatory clause under which the land trustee disclaims personal liability, the court said the land trustee could not rescind the transaction because TILA’s rescission rights are limited to obligors.

-John Hundley, Jhundley@lotsharp.com, 618-242-0200

“Complete Defense” Rule Inapplicable To Title Insurance   

            Title insurance providers are not bound by the “complete defense” rule, the U.S. Court of Appeals for the Seventh Circuit has held.

            Ruling in Philadelphia Indemnity Ins. Co. v. Chicago Title Ins. Co., 771 F.3d 391 (7th Cir. 2014), the court acknowledged that under Illinois law, if a general liability insurer has a duty to defend as to at least one count of the lawsuit, it has a duty to defend in all counts of that lawsuit under the complete defense rule.  It further explained that “[a] promise to defend a ‘suit’ is construed as a promise to defend the entire suit even if only one or some of the claims are covered by the policy” (court’s emphasis).

            Here, the court was asked to apply the complete defense rule to an insurer who provided title insurance.  The court declined to do so recognizing that there were “no Illinois cases applying the complete-defense rule outside the context of general liability insurance.” 

            The court explained that “[t]itle insurance is different” than general liability insurance in that it “only indemnifies against losses incurred by reason of defects in title and specifically limits the insurer’s duty to defend to claims that are within the policy’s coverages,” while general liability insurers contractually provide “broad indemnity and defense duties.”

            As such, the court held that the contractual limits on the insurer’s duty to defend were enforceable.

“Relocation Assistance” Seller Provision Doesn’t Thwart Liability

            The existence of a “relocation assistance” owner who takes title to a home and attempts to sell it under § 15(7) of the Residential Real Property Disclosure Act (765 ILCS 77) does not thwart liability of the previous owner for misrepresentation on the required disclosure form, a panel in the Appellate Court’s Third District has held.

Hundley Acquires Sharp Law Firm

       Mt. Vernon attorney John T. Hundley this month completed his acquisition of The Sharp Law Firm, P.C.

Hundley

       Hundley, a partner in the firm since 2005, said the firm now will be known as Sharp-Hundley, P.C., and will continue to offer services in creditors’ rights, litigation, business transactions, probate, real estate and family law.

       Firm founder Terry Sharp will remain as a consultant to the firm.  Others continuing to assist in providing the firm’s services will include attorneys Rebecca Reinhardt and Darren Taylor. 

       Hundley brings to the leadership of the firm 35 years of experience in civil litigation and business law matters.  A former partner with the international law firm now known as Mayer Brown, Hundley holds the highest possible rankings for both legal ability and ethical conduct from the nation’s leading lawyer-rating organization. 

       Hundley also is a member of the Leading Lawyers of Illinois and of the Super Lawyers of Illinois.  His articles on legal topics are widely cited by courts and commentators across the country, and have been published in the American Law Reports, the DePaul Business Law Journal, the Southern Illinois University Law Journal, the Chicago Bar Association Record, and the Illinois Bar Journal.      

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            In Bouton v. Bailie, 2014 IL App (3d) 130406, the former homeowners argued that § 15(7) and the lack of privity between them and the eventual purchaser meant that they could not be held liable for alleged misstatements in the disclosure form they signed.  Noting that § 15(7) requires, in the case of a relocation-assistance middleman, that the previous owner execute a disclosure form and that the middleman make it available to all prospective buyers, the panel rejected those arguments and held that § 15(7) immunized only the middleman, not the previous owner.

-John Hundley, Jhundley@lotsharp.com, 618-242-0200

Mechanic’s Lien Act Requires Strict Compliance

       The failure of a mechanic’s lien contractor to have provided a sworn contractor’s statement properly results in summary judgment for the defendant, a panel in the Appellate Court’s First District held recently.

       The court said that “regardless of equitable considerations, the rights created under the [Mechanic’s Lien] Act are in derogation of the common law and therefore the procedural and technical requirements of section 5 of the Act [770 ILCS 60/5] must be strictly complied with in order for a mechanic’s lien to be valid.”  Cityline Constr. Fire & Water Restoration, Inc. v. Roberts, 2014 IL App (1st) 130730.  

SHARP-HUNDLEY, P.C.
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