Saturday, September 21, 2013

FYI: Ill App Ct Confirms "Technical" Defect Not Resulting in Prejudice Insufficient to Undo Foreclosure

The Illinois Appellate Court, Third District, recently rejected a borrower's allegations of a defective grace period notice in connection with a foreclosure action, holding that because the borrower failed to allege any prejudice resulting from the alleged defect, any alleged defect would be "technical" only, and therefore without merit.



A bank ("bank") filed a foreclosure action against two defendants (the "borrowers").  The lower court granted foreclosure, approved the foreclosure sale, and entered an order of possession for the bank, but granted the borrowers 60 days' possession of the subject property.  In so doing, the lower court allegedly instructed the borrowers that "maybe you can get a lawyer who will file the appropriate motions and see if we can give you any kind of assistance on this." 


The borrowers then filed a petition to vacate the foreclosure orders, arguing that the Illinois grace-period notice provided by the bank was ineffective because it was addressed only to one of the two borrowers.  Accordingly, the borrowers claimed that the foreclosure action was void, and could not lawfully commence until both borrowers received the appropriate notice. 


The borrowers also argued that the due diligence requirement imposed under Illinois law for petitions to vacate was inapplicable, because the court had given them 60 days to "come back to Court with any issues they are able to find."  The lower court disagreed, and denied the borrowers' petition and a subsequent motion to reconsider. The borrowers appealed.


As you may recall, Illinois law requires that a grace-period notice be mailed to the mortgagor at the common address of the subject property prior to filing a foreclosure complaint.  735 ILCS 5/15-1502.5(c).  However, a technical defect in the grace period notice does not warrant the dismissal of a foreclosure action, where the mortgagor does not allege any resulting prejudice.  Aurora Loan Services, LLC v. Pajor, 2012 IL App (2d) 110899, Par. 27.


On appeal, the Court began by determining the appropriate standard by which to evaluate the borrowers' petition, noting that "despite the fact that the [borrowers] styled their motion as a section 2-1401 petition, it was actually a motion brought pursuant to section 2-1203 of the code (735 ILCS 5/2-1203 (West 2012))." 


The Court based its conclusion on its determination that the lower court extended the period during which a postjudgment motion might be filed to 60 days.  Because Sec. 2-1401 applies only to motions brought after the period for postjudgment motions has expired, the Court held that section 2-1401 was inapplicable.


Accordingly, the Court evaluated the borrowers' motion based on section 2-1203, which required the Court to determine "not merely whether the [lower] court's order... represented an abuse of discretion but, rather...whether substantial justice is being done between the parties."  In re Marriage of Sutherland, 251 Ill. App. 3d 411, 414 (1993).


With that standard in place, the Court had little difficulty in rejecting the borrowers' contentions, noting that the borrowers' sole contention was that the grace-period notice was defective because it was sent to only one of the two borrowers.  However, the Court noted that the borrowers failed to allege any prejudice in connection with the alleged defect, as required. 


In addition, the Court indicated that the borrowers' petition to vacate suggested that "both [borrowers] had received the grace-period notice, and even indicates that there had been some dialogue between [the parties] concerning a loan modification." 


Accordingly, the Court determined that the borrowers' arguments were "meritless," and affirmed the ruling 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


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