In Will County, Illinois, the SouthtownStar
- State officials have told the niece of a 100-year-old Monee woman known as "Aunt Aggie" to stop trying to sell the woman's 70-acre farm. A cease and desist order was issued against Bridget Gruzdis and her firm, Phoenix Horizon LLC, to immediately stop marketing and attempting to sell the home of Agnes Albinger.
- For the past few months, the SouthtownStar has chronicled Aunt Aggie's struggle to stay on her farm. Aunt Aggie's niece formed Phoenix Horizon and engaged in a series of transactions with her aunt that resulted in the farm being subdivided and annexed to the village for commercial development in 2003. The state, after learning of transactions between Aunt Aggie and her niece through news reports, launched an investigation into why the farm was at risk for foreclosure.
- Phoenix Horizon annexed the land to the village of Monee in 2003 with hopes of developing hotels and shopping centers. Gruzdis borrowed $700,000 against the property but paid back only $49 before the bank filed for foreclosure in 2006.(1)
- The Monee police launched an investigation into whether Aunt Aggie knew what she was doing when she was signing transactions with Phoenix over the past decade. They turned over their findings to the Will County state's attorney's office. The state's attorney's financial crimes prosecutor is still investigating, Will County state's attorney's office spokesman Chuck Pelkie said Thursday.
- Aunt Aggie, who turns 101 in August, has farmed the Monee property since 1949. Her husband died in 1956, and Aunt Aggie is well known in her community for raising as many as 40 foster children over the course of nearly five decades. On May 3, Gruzdis sent Aunt Aggie an eviction notice giving her 30 days to vacate the farm - a threat that was never carried out. Jim Armstrong is a longtime friend of Aunt Aggie's who acted as a whistleblower by alerting the media to Aggie's predicament.
For the story, see State to Aunt Aggie's niece: Stop right there (Woman blocked from trying to sell centenarian's property).
In a follow-up story, see In summer heat, Aunt Aggie finds strength.
For another story on an Illinois property owner falling victim in a real estate equity ripoff, see Blind Victim Of Sale Leaseback, Equity Stripping Scam Peddled As A Refinance Now Faces The Boot, Despite "Successful" Civil Prosecution By Illinois AG.
(1) With some exceptions, under Illinois law, a lender looking to take real estate as collateral for a loan generally has a duty to inquire into the rights and equities of anyone in open possession of the premises who is not the owner of record. Failure to do so could leave the lender's security interest subordinate to any legal rights and equities the party in possession who is not the owner of record can establish.
See Ambrosius v. Katz, 2 Ill. 2d 173; 117 N.E.2d 69; 1954 Ill. LEXIS 321 (Ill. 1954) (bold text is my emphasis, not in the original text):
- A purchaser is bound to inquire of the person in possession by what tenure he holds and what interest he claims in the premises. It is well settled that whatever is sufficient to put a party on inquiry is notice of all facts which pursuit of such inquiry would disclose, and without such inquiry no one can claim to be an innocent purchaser as against him whose possession raises the inquiry. (Bryant v. Lakeside Galleries, Inc. 402 Ill. 466; Miller v. Bullington, 381 Ill. 238.)
- This rule protects a grantor whose grant was induced by fraud, but who, remaining in possession, can show such possession as notice of his equity against a subsequent grantee. (White v. White, 89 Ill. 460; Ronan v. Bluhm, 173 Ill. 277.) The purchaser cannot excuse himself by merely obtaining information as to how possession was obtained or inquiring of the grantor or of other persons as to the rights of the person in possession, but he is bound to inquire of the person in possession by what tenure he holds and what interest he claims. Open possession is sufficient to charge such purchaser with notice of all legal and equitable claims of the occupant. German-American Nat. Bank v. Martin, 277 Ill. 629.
See also, Bullard v. Turner, 357 Ill. 279, 192 N.E. 223 (Ill. 1934) (bold text is my emphasis, not in the original text):
- Under the system of recording the evidences of title to real estate in force in this State, the actual occupancy of land is equivalent to the record of the instrument under which the occupant claims so far as notice to subsequent purchasers and incumbrancers is concerned. McDonnell v. Holden, 352 Ill. 362; Garlick v. Imgruet, 340 id. 136; Moore v. Machinery Sales Co. 297 id. 564; Merchants and Farmers State Bank v. Dawdy, 230 id. 199; Coari v. Olsen, 91 id. 273.
- A purchaser or incumbrancer is bound to inquire of a person in possession of real estate by what right he holds possession and what interest he claims; and in case the purchaser or incumbrancer fails to make such inquiry, the law charges him with constructive notice of all those facts which he would have ascertained respecting the claim or title of the person in possession had inquiry been made of him. (Nelson v. Joshel, 305 Ill. 420; Williams v. Brown, 14 id. 200; White v. White, 89 id. 460; Coari v. Olsen, 91 id. 273; Ford v. Marcall, 107 id. 136; Tillotson v. Mitchell, 111 id. 518; Rock Island and Peoria Railway Co. v. Dimick, 144 id. 628; German-American Nat. Bank v. Martin, 277 id. 629; Moore v. Machinery Sales Co. 297 id. 564).
The foregoing principles were applied by a Federal court in Chicago last year in Davis v. Elite Mortg. Servs., 592 F. Supp. 2d 1052 (USDC D. Ill., East. Div. 2009), in the context of a foreclosure rescue scam. The Court found that the mortgage lender that unwittingly financed the scam was not entitled to the protection accorded to a bona fide purchaser, saying that, despite the lack of evidence that the lender had any actual knowledge of the scam, it had constructive notice of any claim the screwed-over homeowner can establish in the property by reason of his open, exclusive possession thereof.
For more on the duty to inquire of persons in possession in real estate transactions in Illinois, see Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry (Illinois Supreme Court cases), and Illinois Bona Fide Purchaser, Possession, Duty Of Inquiry - State Appellate Cases, Federal Cases.
For more on this duty to inquire in other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.