Friday, January 13, 2012

FYI: Ill App Ct Allows For Deficiency Judgments Even When Borrower Only Served Through Co-Resident

The Illinois Appellate Court for the First District recently held that(1) actions for mortgage foreclosure and deficiency judgments may occur in the same proceeding; and (2) "personal service" for purposes of obtaining a deficiency judgment against a defendant includes service by leaving a copy with a co-resident of the borrower
A copy of the opinion is available at:
After defendant-appellee mortgage borrower ("Borrower") failed to make payments on a mortgage loan on a multi-unit  property in Chicago, appellant mortgage lender ("Bank") brought an action to foreclose the mortgage and obtain a deficiency judgment against the Borrower.  The mortgage specifically provided for the mortgagee's right to obtain a judgment for any deficiency still owed after a foreclosure sale of the property. 
The Cook County sheriff served the foreclosure notice by abode service -- that is, by leaving the summons and complaint at the Borrower's home with an adult member of the Borrower's family and mailing copies of the documents to the Borrower at the same address.  The Borrower never answered the complaint or appeared in the foreclosure case.   The trial court entered a default judgment against the Borrower along with an order for the sale of the property.  The order provided that the Bank was entitled to a deficiency judgment against the Borrower for any amount still owing on the mortgage loan after the sale of the property. 
Following the foreclosure sale, which brought in less than the amount owed on the loan, the Bank filed motions to confirm the sale and for a deficiency judgment against the Borrower.  The trial court later confirmed the sale, but denied the Bank's motion for a personal deficiency judgment, reasoning that, because the Borrower had been notified of the foreclosure by abode service, the Borrower had not been personally served as required by the Illinois Mortgage Foreclosure Law.  The Bank appealed.  The Appellate Court reversed, agreeing with the Bank that abode service constitutes "personal service" in foreclosure actions. 
As you may recall, the Illinois Mortgage Foreclosure Law ("Foreclosure Law") provides in part that an order confirming a foreclosure sale may include a personal deficiency judgment against the defendant, provided the defendant has been personally served or has made an appearance in the foreclosure case.  See 735 ILCS 5/15-1508(b), 15-1508(e).  The Foreclosure Law also provides that Article II of the Illinois Code of Civil Procedure governs service of process in foreclosure actions. 735 ILCS 5/15-1107(a).    Article II of the Illinois Code of Civil Procedure, in turn, provides that service of process of the summons and foreclosure complaint on an individual may be accomplished either by abode service, as was done in this case, or by serving the defendant personally.  735 ILCS 5/2-203(a) ("Section 2-203"). 
After providing an overview of the evolution of Illinois foreclosure and deficiency law, the Court noted among other things that current foreclosure statutes specifically allow a foreclosure complaint to include a request for a personal deficiency judgment and that, where the defendant is personally liable for the deficiency and has been personally served in a manner provided for under Section 2-203, a court "shall" enter a deficiency judgment.  See 735 ILCS 5/15-1508(e). 
As the Borrower had failed to appear in the case, the appellate court focused on the meaning of "personal service" under the Foreclosure Law.  The Court observed that, although the Foreclosure Law does not define the term "personal service," Section 2-203 specifically permits abode service as a means of obtaining personal jurisdiction over a defendant.  The Court explained, "where there is abode service as set forth in section 2-203, a court hearing a foreclosure action or any other action at law or equity would have personal jurisdiction over a defendant residing [in Illinois]."  Accordingly, the Court determined that the Foreclosure Law allows foreclosure and deficiency actions to proceed together in one proceeding.
In addition, noting that the defendant had been properly served in accordance with Section 2-203, and that the lower court therefore had personal jurisdiction over the defendant in the foreclosure action, the court ruled that "abode service satisfies the service requirements of section 15-1508."
Thus, the appellate court concluded that abode service is personal in nature for purposes of the Foreclosure Law, and that allowing actions for a deficiency and foreclosure to proceed together in a single proceeding is consistent with the purpose of the Foreclosure Law.  A different result, the court held, would be absurd and result in a mortgage lender having to go through the inconvenience of filing a separate deficiency suit in which abode service alone would provide the court with personal jurisdiction over the defendant. 


Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
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