Friday, February 22, 2013

FYI: Ill App Ct Rejects Borrower's Attempt to Undo Foreclosure Based on Alleged Payments Made After Judgment Entered

The Illinois Appellate Court, First District, recently upheld the denial of a borrower's petition to vacate a final order in a foreclosure, where the borrower argued that the final order was allegedly void because the loan owner accepted additional payments from borrower after the foreclosure judgment was entered. 


A copy of the opinion is available at:


Defendant borrower ("Borrower") defaulted on her home mortgage loan.  Plaintiff loan owner ("Loan Owner") then filed a foreclosure complaint against her pursuant to the Illinois Mortgage Foreclosure Law ("IMFL").  In her answer, Borrower asserted that she did not default on the loan until Loan Owner refused to accept her mortgage payments.  Loan Owner moved for summary judgment, supporting its motion with an affidavit of judgment detailing Borrower's loan default.    


The lower court ultimately granted Loan Owner's summary judgment motion and entered a judgment of foreclosure the same day.  Borrower did not appeal the court's findings.


Over a year later, Borrower's property was sold at a judicial foreclosure sale, with Loan Owner being the successful bidder.  The lower court confirmed the sale shortly thereafter, also entering an in rem deficiency judgment of over $100,000.   Again, Borrower did not appeal. 


Several months following the confirmation of sale, Borrower filed a motion to stay possession of the property, making various assertions including that she had not been given notice of the foreclosure proceedings.   In response, Loan Owner provided the court with various items, including proof of service of process, appearance of Borrower's defense counsel, and numerous notices to defense counsel and defense counsel's response thereto.      


About five months after the confirmation of sale and entry of judgment, Borrower, represented by new counsel, filed a petition to vacate the final order in the foreclosure.  Borrower claimed among other things that the order for summary judgment was invalid and void, because Loan Owner allegedly continued to accept payments from Borrower after the judgment was entered.  She also claimed to have a meritorious defense to Loan Owner's foreclosure action, and that she was diligent in presenting her petition to the court. 


Loan Owner argued that Borrower's challenge to the foreclosure judgment was barred under Section 15-1509 of the IMFL, and that the procedural rule allowing petitions to vacate final orders did not apply because the IMFL was the exclusive procedure for foreclosure in Illinois and thus trumped the Code of Civil Procedure.


The lower court denied Borrower's petition.  Borrower appealed.  The Appellate Court affirmed.


As you may recall, Section 15-1509(a) of the IMFL provides:  "[a]fter (i) confirmation of the sale, and (ii) payment of the purchase price . . . of the sale, the court (or . . .the person who conducted the sale . . . ), shall upon the request of the holder of the certificate of sale. . . promptly execute a deed to the holder or purchaser sufficient to convey title. . . .  If the deed issues to a grantee prior to the expiration of the period for appealing the confirmation of sale, and the grantee conveys title to another party within that period, that other party will not be deemed a bond fide purchaser unless and until such period expires without an appeal having been filed or, an appeal having been filed, such appeal is denied or withdraw."  735 ILCS 5/15-1509(a).


In addition, Section 15-1509 of the IMFL further provides, "(b) [d]elivery of the deed executed on the sale of the real estate, even if the purchaser or holder of the certificate of sale is a party to the foreclosure, shall be sufficient to pass the title thereto" and "(c) [a]ny vesting of title by . . . deed pursuant to subsection (b) of Section 15-1509, unless otherwise specified in the judgment of foreclosure, shall be an entire bar of (i) all claims of parties to the foreclosure. . . ."   735 ILCS 5/15-1509(b), (c).


Moreover, Illinois Supreme Court Rule 303(a)(1) provides that a notice of appeal must be filed within 30 days after the entry of a final judgment.  Ill. Sup. Ct. R. 303(a)(1).


Finally, Section 2-1401 of the Illinois Code of Civil Procedure specifies that a petitioner is entitled to relief from a judgment if he sets forth each of the following elements:  (1) the existence of a meritorious defense or claim; (2) due diligence in presenting the defense or claim to the circuit court in the original action; and (3) due diligence if filing the petition.  


Noting, first, that because the order confirming the sale of the property in this case rendered the foreclosure judgment final and appealable, and that Borrower had forfeited her argument as to the propriety of summary judgment in favor of Loan Owner, the Appellate Court pointed out that Borrower filed her Section 2-1401 petition more than 30 days after the entry of final judgment as required by Illinois Supreme Court Rule 303(a)(1).  See In re Marriage of Verdung, 126 Ill. 2d 542, 555-56 (1989); Fiala v. Schulenberg, 256 Ill. App. 922, 929 (1993). 


Rejecting Borrower's argument that her Section 2-1401 petition was not barred by IMFL Section 15-1509, the Appellate Court reasoned that Borrower misinterpreted Section 15-1509(a) by failing to take into account that this provision applies only to situations in which the grantee under the foreclosure, here, Loan Owner, attempts to convey title to another party before expiration of the period for appealing the confirmation of sale, which did not occur here. 


Thus, agreeing with Loan Owner that applying Section 2-1401 petitions to the appeal provision in Section 15-1509(a) would nullify Section 15-1509(c)'s bar on claims, the Appellate Court pointed out that not only did Borrower not appeal the confirmation of sale within the 30-day period required by the Illinois Supreme Court rules, but that a Section 2-1401 petition is not a timely appeal, but rather a completely new action.  See Ill. Sup. Ct. R. 303(a)(1); Sarkissian v. Chicago Board of Education, 201 Ill. 2d 95, 102 (2002)(filing a section 2-1401 petition is a new proceeding, not a continuation of the old one).


Relying on a case involving a petition to vacate after a default foreclosure judgment and confirmation of sale, the Appellate Court noted that using the Illinois Code of Civil procedure to circumvent the IMFL would eviscerate the IMFL provisions governing finality of sale.  See  Mortgage Electronic Registration Systems, Inc. v. Barnes, 406 Ill. App. 3d 1 (2010)(recognizing that IMFL Section 15-1508(b)'s provision governing confirmation of sale was more restrictive, inconsistent with, and thus trumped, Section 2-1301(e) of the Illinois Code of Civil Procedure's provision regarding vacatur of judgments).  Again noting that Borrower failed to challenge the confirmation of sale within the 30-day appeal period, the Appellate Court further reasoned that there was no authority to support her contention that she could circumvent IMFL Section 15-1509(a) or (c) after confirmation of sale by using a Section 2-1401 petition to vacate. 


Finding Section 15-1509(c)'s language dispositive, the Appellate Court concluded that Borrower's claim in her Section 2-1401 petition was barred once the circuit court confirmed the sale of the property.  As the court explained, "[i]f there is no relief available to the defendant under section 2-1301(e) [in Barnes], it follows logically that there can be no relief under section 2-1401."  


Accordingly, the Appellate Court affirmed the lower court's denial of Borrower's Section 2-1401 petition to vacate.




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