due-on-sale clause in Illinois

1984The court first noted that under Baker v. Loves Park Savings & Loan Association (1975), 61 Ill. 2d 119 , 333 N.E.2d 1 , a mortgagee may enforce a due-on-sale clause upon the outright sale of the mortgaged properties.

1984The court first noted that under Baker v. Loves Park Savings & Loan Association (1975), 61 Ill. 2d 119 , 333 N.E.2d 1 , a mortgagee may enforce a due-on-sale clause upon the outright sale of the mortgaged properties.

1987The pledge of real estate to secure that promise is a different and distinct agreement, which ordinarily does not affect the promise to pay, and the holder of the note may discard the mortgage entirely and sue on the note. ( 358 Ill. 302, 306 , 193 N.E. 123 .) In 1984 the Illinois Supreme Court in Abdul-Karim v. First Federal Savings & Loan Association (1984), 101 Ill. 2d 400 , 462 N.E.2d 488 , relying on Oswianza, held that a due-on-sale clause in the mortgage was enforceable even though the note secured by the mortgage did not contain such a clause. ( 101 Ill. 2d 400, 403-11 , 462 N.E .2d 48

1987The pledge of real estate to secure that promise is a different and distinct agreement, which ordinarily does not affect the promise to pay, and the holder of the note may discard the mortgage entirely and sue on the note. ( 358 Ill. 302, 306 , 193 N.E. 123 .) In 1984 the Illinois Supreme Court in Abdul-Karim v. First Federal Savings & Loan Association (1984), 101 Ill. 2d 400 , 462 N.E.2d 488 , relying on Oswianza, held that a due-on-sale clause in the mortgage was enforceable even though the note secured by the mortgage did not contain such a clause. ( 101 Ill. 2d 400, 403-11 , 462 N.E .2d 48

1987The pledge of real estate to secure that promise is a different and distinct agreement, which ordinarily does not affect the promise to pay, and the holder of the note may discard the mortgage entirely and sue on the note. ( 358 Ill. 302, 306 , 193 N.E. 123 .) In 1984 the Illinois Supreme Court in Abdul-Karim v. First Federal Savings & Loan Association (1984), 101 Ill. 2d 400 , 462 N.E.2d 488 , relying on Oswianza, held that a due-on-sale clause in the mortgage was enforceable even though the note secured by the mortgage did not contain such a clause. ( 101 Ill. 2d 400, 403-11 , 462 N.E .2d 48

1987The pledge of real estate to secure that promise is a different and distinct agreement, which ordinarily does not affect the promise to pay, and the holder of the note may discard the mortgage entirely and sue on the note. ( 358 Ill. 302, 306 , 193 N.E. 123 .) In 1984 the Illinois Supreme Court in Abdul-Karim v. First Federal Savings & Loan Association (1984), 101 Ill. 2d 400 , 462 N.E.2d 488 , relying on Oswianza, held that a due-on-sale clause in the mortgage was enforceable even though the note secured by the mortgage did not contain such a clause. ( 101 Ill. 2d 400, 403-11 , 462 N.E .2d 48

1981App.3d 646 , 424 N.E.2d 939 , the validity of the due-on-sale clause was conceded by the parties and was not an issue on appeal.

1981App. 3d 646 , 424 N.E.2d 939 , the validity of the due-on-sale clause was conceded by the parties and was not an issue on appeal.

1984App. 3d 660, 664 , 410 N.E.2d 990, 993 .) Subsequently, however, in Abdul-Karim v. First Federal Savings & Loan Association (1984), 101 Ill. 2d 400 , 462 N.E.2d 488 , wherein plaintiff sought a declaratory judgment that the due-on-sale clause which appeared in the mortgage but was neither incorporated nor specifically referred to in the note precluded the lender from foreclosing the mortgage, the court in Abdul-Karim stated that “to the extent it [2140 Lincoln Park West] held that the mortgage provision provided a covenant without a remedy [citation], the holding was in error,” but it agreed t

1984App. 3d 660, 664 , 410 N.E.2d 990, 993 .) Subsequently, however, in Abdul-Karim v. First Federal Savings & Loan Association (1984), 101 Ill. 2d 400 , 462 N.E.2d 488 , wherein plaintiff sought a declaratory judgment that the due-on-sale clause which appeared in the mortgage but was neither incorporated nor specifically referred to in the note precluded the lender from foreclosing the mortgage, the court in Abdul-Karim stated that “to the extent it [2140 Lincoln Park West] held that the mortgage provision provided a covenant without a remedy [citation], the holding was in error,” but it agreed t

1984Acknowledging that in Baker v. Loves Park Savings & Loan Association (1975), 61 Ill. 2d 119 , 333 N.E.2d 1 , our supreme court held that due-on-sale clauses are valid, the Becovics nevertheless argue that the trend in cases decided since Baker is to examine the reasonableness of each due-on-sale clause on a case-by-case basis and to deny enforcement thereof absent a demonstration that it is necessary to protect against impairment of the security or risk of default, citing as an example the California supreme court opinion in Wellenkamp v. Bank of America (1978), 21 Cal. 3d 943 , 582 P.2d 970 ,

1984Acknowledging that in Baker v. Loves Park Savings & Loan Association (1975), 61 Ill. 2d 119 , 333 N.E.2d 1 , our supreme court held that due-on-sale clauses are valid, the Becovics nevertheless argue that the trend in cases decided since Baker is to examine the reasonableness of each due-on-sale clause on a case-by-case basis and to deny enforcement thereof absent a demonstration that it is necessary to protect against impairment of the security or risk of default, citing as an example the California supreme court opinion in Wellenkamp v. Bank of America (1978), 21 Cal. 3d 943 , 582 P.2d 970 ,

1984On January 13, 1983, plaintiff filed a motion to vacate the judgment order on the ground that the trial court was prohibited from interfering with its enforcement of the due-on-sale clause by reason of the presumption doctrine as enunciated in Fidelity Federal Savings & Loan Association v. de la Cuesta (1982), 458 U.S. 141 , 73 L.

1984On January 13, 1983, plaintiff filed a motion to vacate the judgment order on the ground that the trial court was prohibited from interfering with its enforcement of the due-on-sale clause by reason of the presumption doctrine as enunciated in Fidelity Federal Savings & Loan Association v. de la Cuesta (1982), 458 U.S. 141 , 73 L.

1984App. 3d 660, 664 , 410 N.E.2d 990, 993 .) Subsequently, however, in Abdul-Karim v. First Federal Savings & Loan Association (1984), 101 Ill. 2d 400 , 462 N.E.2d 488 , wherein plaintiff sought a declaratory judgment that the due-on-sale clause which appeared in the mortgage but was neither incorporated nor specifically referred to in the note precluded the lender from foreclosing the mortgage, the court in Abdul-Karim stated that “to the extent it [2140 Lincoln Park West] held that the mortgage provision provided a covenant without a remedy [citation], the holding was in error,” but it agreed t

1983App. 3d 660 , 410 N.E.2d 990 , argue that the absence of a due-on-sale clause in the note renders the due-on-sale clause in the mortgage instrument unenforceable.

1990(See Wachta, 103 Ill.

1990App. 3d 808 , 462 N.E.2d 6 , a mortgagee brought a foreclosure action alleging that the beneficial owner of a land trust had violated a due-on-sale clause in her mortgage.

1990App. 3d at 809-10 , 462 N.E.2d at 7 .) The fourth district held that the due-on-sale clause in the mortgage was not triggered by this arrangement because the deed was not executed by the bank, but was merely held in escrow.

1987(Casey v. Business Men’s Assurance Co. of America (5th Cir. 1983), 706 F.2d 559 .) A mortgagee is not entitled to a prepayment penalty in addition to full payment of the indebtedness where it exercises its contractual right under the due-on-sale clause.

1987Tan v. California Federal Savings & Loan Association (1983), 140 Cal. App. 3d 800 , 189 Cal. Rptr. 775 .

1987Tan v. California Federal Savings & Loan Association (1983), 140 Cal. App. 3d 800 , 189 Cal. Rptr. 775 .

1986Co. (1952), 411 Ill. 378, 390 , 104 N.E.2d 240, 246 .) In Home Savings & Loan Association v. Schneider (1985), 108 Ill. 2d 277 , 483 N.E.2d 1225 , for example, vendors committed fraud in stating that the property would be paid for in 30 years and by failing to disclose a due-on-sale clause in a mortgage agreement that plaintiffs-purchasers had assumed.

1986Co. (1952), 411 Ill. 378, 390 , 104 N.E.2d 240, 246 .) In Home Savings & Loan Association v. Schneider (1985), 108 Ill. 2d 277 , 483 N.E.2d 1225 , for example, vendors committed fraud in stating that the property would be paid for in 30 years and by failing to disclose a due-on-sale clause in a mortgage agreement that plaintiffs-purchasers had assumed.

1986Co. (1952), 411 Ill. 378, 390 , 104 N.E.2d 240, 246 .) In Home Savings & Loan Association v. Schneider (1985), 108 Ill. 2d 277 , 483 N.E.2d 1225 , for example, vendors committed fraud in stating that the property would be paid for in 30 years and by failing to disclose a due-on-sale clause in a mortgage agreement that plaintiffs-purchasers had assumed.

1986Co. (1952), 411 Ill. 378, 390 , 104 N.E.2d 240, 246 .) In Home Savings & Loan Association v. Schneider (1985), 108 Ill. 2d 277 , 483 N.E.2d 1225 , for example, vendors committed fraud in stating that the property would be paid for in 30 years and by failing to disclose a due-on-sale clause in a mortgage agreement that plaintiffs-purchasers had assumed.

1981Although not involving a due-on-sale provision Kalpatrick v. Germania Life Insurance Co. (1905), 186 N. Y. 163 , 75 N.E. 1124 , holds that where acceleration of an obligation is the result of nonpayment by the obligor the election to so accelerate is binding and may not be revoked in order to charge and collect a prepayment penalty.

1981The due-on-sale clause appearing in this mortgage may not be used as an instrument to require an increase in interest rate nor for collecting a penalty in order to prevent acceleration and foreclosure." 345 So.2d 300, 303-04 .

1981The due-on-sale clause appearing in this mortgage may not be used as an instrument to require an increase in interest rate nor for collecting a penalty in order to prevent acceleration and foreclosure.” 345 So. 2d 300, 303-04 .

1981(E.g., Tucker v. Lassen Savings & Loan Association (1974), 12 Cal. 3d 629 , 526 P.2d 1160 , 116 Cal. Rptr. 633 ; Patton v. First Federal Savings & Loan Association (1978), 118 Ariz. 473 , 578 P.2d 152 ; Nichols v. Ann Arbor Federal Savings & Loan Association (1977), 73 Mich. App. 163 , 250 N.W.2d 804 .) Furthermore, the Supreme Court of California has held that the burden is upon the lender in each case to demonstrate that enforcement of the due-on-sale clause is reasonably necessary to protect against impairment of security.

1981(E.g., Tucker v. Lassen Savings & Loan Association (1974), 12 Cal. 3d 629 , 526 P.2d 1160 , 116 Cal. Rptr. 633 ; Patton v. First Federal Savings & Loan Association (1978), 118 Ariz. 473 , 578 P.2d 152 ; Nichols v. Ann Arbor Federal Savings & Loan Association (1977), 73 Mich. App. 163 , 250 N.W.2d 804 .) Furthermore, the Supreme Court of California has held that the burden is upon the lender in each case to demonstrate that enforcement of the due-on-sale clause is reasonably necessary to protect against impairment of security.

1981In Baker v. Loves Park Savings & Loan Association (1975), 61 Ill. 2d 119 , 333 N.E.2d 1 , the supreme court reiterated its earlier rule that restraints on alienation are void unless reasonably designed to attain or encourage accepted social or economic ends (Gale v. York Center Community Cooperative, Inc. (1960), 21 Ill. 2d 86 , 171 N.E.2d 30 ), and then held a due-on-sale clause to be a reasonable restraint, “one for which sound and convincing reason exists.” ( 61 Ill. 2d 119, 125 , 333 N.E.2d 1,4 .) The court in Baker discussed in considerable detail the lender’s need to protect its security

1981In Baker v. Loves Park Savings & Loan Association (1975), 61 Ill. 2d 119 , 333 N.E.2d 1 , the supreme court reiterated its earlier rule that restraints on alienation are void unless reasonably designed to attain or encourage accepted social or economic ends (Gale v. York Center Community Cooperative, Inc. (1960), 21 Ill. 2d 86 , 171 N.E.2d 30 ), and then held a due-on-sale clause to be a reasonable restraint, “one for which sound and convincing reason exists.” ( 61 Ill. 2d 119, 125 , 333 N.E.2d 1,4 .) The court in Baker discussed in considerable detail the lender’s need to protect its security

1981In other jurisdictions, some courts have concluded that enforcement of a due-on-sale clause is a reasonable restraint on alienation where the purpose is to obtain an increased rate of interest ( e.g., Century Federal Savings & Loan Association v. Van Glahn (1976), 144 N.J.

1981In other jurisdictions, some courts have concluded that enforcement of a due-on-sale clause is a reasonable restraint on alienation where the purpose is to obtain an increased rate of interest (e.g., Century Federal Savings & Loan Association v. Van Glahn (1976), 144 N.J.

1981(E.g., Tucker v. Lassen Savings & Loan Association (1974), 12 Cal. 3d 629 , 526 P.2d 1160 , 116 Cal. Rptr. 633 ; Patton v. First Federal Savings & Loan Association (1978), 118 Ariz. 473 , 578 P.2d 152 ; Nichols v. Ann Arbor Federal Savings & Loan Association (1977), 73 Mich. App. 163 , 250 N.W.2d 804 .) Furthermore, the Supreme Court of California has held that the burden is upon the lender in each case to demonstrate that enforcement of the due-on-sale clause is reasonably necessary to protect against impairment of security.

1981(E.g., Tucker v. Lassen Savings & Loan Association (1974), 12 Cal. 3d 629 , 526 P.2d 1160 , 116 Cal. Rptr. 633 ; Patton v. First Federal Savings & Loan Association (1978), 118 Ariz. 473 , 578 P.2d 152 ; Nichols v. Ann Arbor Federal Savings & Loan Association (1977), 73 Mich. App. 163 , 250 N.W.2d 804 .) Furthermore, the Supreme Court of California has held that the burden is upon the lender in each case to demonstrate that enforcement of the due-on-sale clause is reasonably necessary to protect against impairment of security.

1981The mortgage stated, inter alia, that it was given "to secure performance of the other agreements in said note, which are hereby incorporated herein and made a part hereof * * *." (Emphasis added.) • 2 In the case involving a bond secured by a trust deed, the test was said to be whether the language in one instrument was such as to bring its terms clearly within the provisions of the other instrument. ( Oswianza v. Wengler & Mandell, Inc. (1934), 358 Ill. 302 , 193 N.E. 123 .) The courts of this State have long recognized that "[w]hen a note and the mortgage given to secure it mutually refer t

1981(E.g., Tucker v. Lassen Savings & Loan Association (1974), 12 Cal. 3d 629 , 526 P.2d 1160 , 116 Cal. Rptr. 633 ; Patton v. First Federal Savings & Loan Association (1978), 118 Ariz. 473 , 578 P.2d 152 ; Nichols v. Ann Arbor Federal Savings & Loan Association (1977), 73 Mich. App. 163 , 250 N.W.2d 804 .) Furthermore, the Supreme Court of California has held that the burden is upon the lender in each case to demonstrate that enforcement of the due-on-sale clause is reasonably necessary to protect against impairment of security.

1981(E.g., Tucker v. Lassen Savings & Loan Association (1974), 12 Cal. 3d 629 , 526 P.2d 1160 , 116 Cal. Rptr. 633 ; Patton v. First Federal Savings & Loan Association (1978), 118 Ariz. 473 , 578 P.2d 152 ; Nichols v. Ann Arbor Federal Savings & Loan Association (1977), 73 Mich. App. 163 , 250 N.W.2d 804 .) Furthermore, the Supreme Court of California has held that the burden is upon the lender in each case to demonstrate that enforcement of the due-on-sale clause is reasonably necessary to protect against impairment of security.

1981Contra, Tierce v. APS Co. (Ala. 1979), 382 So.2d 485 .

1981Contra, Tierce v. APS Co. (Ala. 1979), 382 So. 2d 485 .

1981App. 1977), 553 S.W.2d 660 , a case involving acceleration resulting from an election made on the application of a due-on-sale clause, the court concluded the obligee was not entitled to a prepayment penalty since once the maturity date of the obligation was accelerated by the obligee payment thereafter could not constitute prepayment of the obligation.