Wednesday, August 7, 2013

FYI: Ill App Ct Confirms Records of Prior Servicer Not Inadmissible Hearsay

The Illinois Appellate Court for the Fifth District recently upheld a trial court's grant of summary judgment in favor of the mortgagee in a mortgage foreclosure action, ruling that the mortgagee's affidavit testimony was admissible, despite the fact that it contained assertions concerning the records of prior servicers.



A borrower filed an answer with affirmative defenses and counterclaims to a bank's residential foreclosure complaint.  The mortgagee moved to strike the affirmative defenses and counterclaims, which the court granted.  The mortgagee then moved for summary judgment. 


On the day of the hearing, the borrower filed a response to the mortgagee's motion for summary judgment and a motion for leave to amend his answer.  The court struck the borrower's response to the mortgagee's motion, denied the motion for leave to amend the answer, granted the mortgagee's motion for summary judgment, and awarded the bank attorney fees and costs.  The borrower appealed. 


On appeal, the borrower advanced three arguments: (1) that the lower court erred in granting the mortgagee's motion for summary judgment, due to alleged problems with the mortgagee's affidavit;  (2) that the lower court erred in striking the borrower's response and denying the borrower's motion for leave to file an amended answer; and  (3) that the lower court erred in awarding the bank attorney's fees and costs. 


The Appellate Court first considered the borrower's arguments concerning the mortgagee's motion for summary judgment affidavit.  The borrower alleged that the affidavit included with the mortgagee's motion - which included claims regarding records kept by entities other than the mortgagee, namely the prior servicers of the mortgage loan - would be inadmissible as hearsay if offered at trial, and therefore was not sufficient to demonstrate that the mortgagee was entitled to summary judgment. 


The Court began by analyzing Illinois Supreme Court Rule 236 (regarding business records), noting that it provided in pertinent part that a showing that an affiant lacks personal knowledge as to business records "may be shown to affect [the writing or record's] weight, but shall not affect its admissibility." 


The Court then noted that the mortgagee's affiant attested that she was personally familiar with the procedures for creating and maintaining its records; that the relevant records were made at or near the time of the occurrence of the matters set forth therein; and that it was the mortgagee's regular practice to keep such records. 


Accordingly, the Court held that the affidavit testimony was admissible pursuant to Illinois Supreme Court Rule 236, and further held that the affidavit provided a "sufficient basis upon which to conclude that [the mortgagee] was entitled to summary judgment."


The borrower also raised allegations as to whether the mortgagee properly calculated the balance of his loan, and filed an affidavit with the lower court alleging that he made payments pursuant to a loan modification agreement that were not timely applied. 


However, the Appellate Court noted that these payments appeared to have been applied to his loan per the terms of the loan modification agreement.  In addition, the Court noted that under Illinois law, the facts asserted by the mortgagee's affiant were to be deemed admitted, unless contradicted by counter-affidavit. 


As the borrower failed to submit any counter-affidavit, as required, the Court rejected the borrower's claims. 


Next, the Court considered the lower court's decision to strike the borrower's response and deny him leave to file an amended answer, again finding in favor of the mortgagee. 


In so ruling, the Appellate Court placed emphasis on the fact that a circuit court has "discretion to manage its docket to ensure that there is no undue delay."  The Court further emphasized that the contentions contained within the borrower's stricken pleadings appeared to have been previously considered and rejected by the lower court.  The Court also observed that the borrower did not attach a proposed amended answer to his related motion, noting that the same is a "primary factor" for a lower court to consider in determining whether to allow a motion to amend. 


Finally, the Court considered whether the lower court properly awarded attorney's fees and costs to the bank.  It answered in the affirmative, emphasizing the fact that the borrower failed to contest the bank's assertion that it was entitled to attorney's fees in accordance with the terms of the related mortgage, nor did they claim that the fees were unreasonable.  Further, the Court noted that the borrower failed to raise the issue in the lower court, and failed to object to the lower court's award.  Accordingly, the Court determined that the borrower waived his right to challenge the award. 


Accordingly, the Appellate Court affirmed the judgment of the lower court.    






Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874


Admitted to practice law in Illinois


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