Bank of New York v. Langman (IL)

Summary: Filing of a lis pendens gives constructive notice to every mortgagor acquiring a lien on the land or every person subsequently acquiring an interest in the land, even a bona fide purchaser.


Bank of New York v. Langman, 2013 IL App (2d) 120609.


Facts: This appeal involves an instance in which two separate cases for foreclosure proceeded simultaneously against the same property. In 1999, GN Mortgage Corporation (GN) gave Vincent Langman (Langman) a loan secured by residential property at 2311 Collins Court (the property). In August of 2000, a forged release to GN’s mortgage was recorded, but Langman continued to pay the loan. In December of 2001, Langman obtained a mortgage on the property that favored Matrix Financial Services, Inc. (Matrix). Langman defaulted on the Matrix mortgage and Deutsche Bank (as assignee) commenced foreclosure proceedings, but did not name GN or its assignee, Bank of New York. A judgment of foreclosure was entered against Langman and the property was sold to Abdul Rehman Hamidani and Joyce Hamidani.

Langman continued to pay the debt on the GN loan until he defaulted in February of 2003. In March of 2006, Bank of New York learned of the forged release of GN’s mortgage. In July of 2006, Bank of New York filed a complaint for foreclosure and recorded a notice of foreclosure lis pendens.

In August of 2006, the Hamidanis entered into a mortgage with a revolving line of credit with Washington Mutual Bank (WaMu). The Hamidanis defaulted and WaMu brought a foreclosure action. JP Morgan Chase (Chase) acquired the Hamidani’s mortgage after WaMu was placed in receivership. A trial court entered an order of foreclosure and sale in favor of Chase in June of 2008.

In July of 2008, a trial court granted summary judgment in favor of Bank of New York holding that the release of GN’s mortgage was a forgery and that WaMu was not a necessary party to the foreclosure proceeding because of the recorded notice of foreclosure lis pendens by Bank of New York.

When Chase discovered Bank of New York’s foreclosure action, it filed a petition to intervene in order to get a ruling on whose mortgage had priority. The trial court held that Bank of New York had priority, reasoning that if Chase had performed a reasonable inquiry, they would have found Bank of New York’s adverse interest. Chase appealed.


Holding: Affirmed. The appellate court found that the bona fide purchaser (BFP) doctrine applied to forged releases and the forged release in the present case was not patently invalid. Despite this, Bank of New York’s lien would take priority to any subsequent purchaser with notice or anything to put that purchaser on notice. This is because the Deutsche Bank foreclosure did not completely extinguish the Bank of New York mortgage.

The court rejected the argument that Bank of New York is equitably estopped from asserting its lien interest because it failed to record an affidavit of correction. Illinois has no requirement that a property owner must record such an affidavit. This, taken with the fact that WaMu was on notice of the adverse interest because of the lis pendens, makes equitable estoppel inapplicable. For these reasons the holding of the trial court was affirmed.


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By: ATG Underwriting Department | Posted on: Mon, 10/21/2013 - 11:25am