Page 35 - John Hundley 2014

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.
- Darren Taylor, Dtaylor@lotsharp.com, 618-242-0200
“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.

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
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