Monday, August 4, 2014

FYI: Ill App Ct Holds Non-Titled Spouse in Possession Has No Homestead Right

The Illinois Appellate Court, Second District, recently held that a non-titled spouse who maintains his/her primary residence at the property could not claim a homestead exemption under Illinois law.


A copy of the opinion is available at:


As you may recall, Section 12-901 states:


“Every individual is entitled to an estate of homestead to the extent in value of $15,000 of his or her interest in a farm or lot of land and buildings thereon, a condominium, or personal property, owned or rightly possessed by lease or otherwise and occupied by him or her as a residence, or in a cooperative that owns property that the individual uses as a residence.  That homestead and all right in and title to that homestead is exempt from attachment, judgment, levy, or judgment sale for the payment of his or her debts or other purposes and from the laws of conveyance, descent, and legacy, except as provided in this Code or in Section 20-6 of the Probate Act of 1975 . . . If 2 or more individuals own property that is exempt as a homestead, the value of the exemption of each individual may not exceed his or her proportionate share of $30,000 based upon percentage of ownership.”



In 2003, the husband borrower (“Titleholder Spouse”) purchased the Subject Property with a $244,900 purchase-money mortgage.  The Titleholder Spouse’s wife (“Non-Titleholder Spouse”) (collectively the “Spouses”) never had a formalized interest in the Subject Property.  The Titleholder Spouse refinanced twice and the note was subsequently sold to another entity (“Foreclosure Plaintiff”).


On November 2, 2011, the Foreclosure Plaintiff filed a complaint seeking a judgment of foreclosure against the Titleholder Spouse.  The Foreclosure Plaintiff joined the Non-Titleholder Spouse as a defendant due to the possibility that she may claim an interest in the Subject Property. 


The Spouses filed an answer to the foreclosure complaint and alleged three affirmative defenses, including unclean hands.  Specifically, the Non-Titleholder Spouse claimed her signature on a waiver of homestead rights was forged, and that she was not present at the time of closing. 


On November 6, 2012, both spouses filed a counterclaim for partition raising the same allegations contained in their unclean hands affirmative defense.  They further claimed that at the time the Title Holder Spouse refinanced, the Subject Property was the Non-Titleholder Spouse’s primary residence, that she had homestead rights, and thus was entitled to a $15,000.00 estate of homestead.


The Foreclosure Plaintiff filed a combined motion to strike and motion to dismiss the Spouses’ affirmative defenses and counterclaim.  The trial court granted the Foreclosure Plaintiff’s motion without prejudice.


The Non-Titleholder Spouse subsequently filed an amended complaint alleging she was entitled to her own homestead exemption because the Subject Property had been her primary residence since the time of the Title-Holder Spouse refinanced.  She again claimed she did not sign the waiver of homestead rights and was not present at closing. 


The Foreclosure Plaintiff moved to dismiss the amended complaint arguing that the Non-Titleholder Spouse cannot claim a statutory homestead exemption because she does not have any formalized interest or formalized possession of the home.  The Foreclosure Plaintiff further argued that because the Non-Titleholder Spouse had no formalized interest in the Subject Property, it was irrelevant whether or not she expressly waived her homestead rights. 


The trial court denied the Foreclosure Plaintiff’s motion to dismiss by relying on Brod v. Brod, 390 Ill. 312 (1945) (“Brod”).  Specifically, the trial court determined that Brod held that a spouse’s interest in property need not be formalized for the purposes of homestead rights.  However, the trial court acknowledged that more recent federal authority supported the Foreclosure Plaintiff’s position.


The trial court certified the following question for appeal:


“Whether a spouse may claim her homestead exemption when that spouse is not on title to the property but is the spouse of the title holder and maintains the property as her primary place of residence under 735 ILCS 5/12-901.”


On appeal, the Foreclosure Plaintiff first argued that the plain language of Section 12-901 only allowed a party with a formalized interest in property to claim a homestead exemption.  In support of its interpretation of Section 12-901, the Foreclosure Plaintiff cited bankruptcy case In re Belcher, 551 F.3d 688 (7th Cir. 2008) (“Belcher”) applying Illinois law. 


In Belcher, a husband and wife filed for chapter 7 bankruptcy protection and, after the trustee sold their home to satisfy their debts, both claimed they were entitled to homestead exemptions.  The trustee objected to the husband’s claim, arguing he was ineligible because his name was not on the title to the home. 


The Belcher court agreed with the trustee and held that the husband could not claim a homestead exemption from the home’s sale proceeds because he was not on the title and he did not have any other formalized interest in the property.  Id. at 689.


The Foreclosure Plaintiff next argued that the trial court erred in relying on Brod because it is factually distinguishable and addresses a pre-1982-amendment version of Section 12-901.


The Appellate Court agreed with the Foreclosure Plaintiff, ruling that Brod was distinguishable from the instant matter because “the couple in that case owned the property as joint tenants, the case involved a dispute between a husband and a wife and not a couple against a creditor, and, perhaps most significantly, the case did not center on Section 12-901 of the Code, which is the homestead exemption statute at issue here.”


The Appellate Court next rejected the Spouses’ argument that Section 12-901 and its companion statutes demonstrated the legislature’s intent to create a homestead estate in all marital property.  In support of this argument, the Spouses cited: (1) section 16 of the Rights of Married Persons Act which requires one spouse to provide a homestead for the other spouse before removing that spouse from the homestead without his or her consent; and  (2) section 27 of the Conveyances Act which requires that a spouse’s release or waiver of homestead rights be express.


However, the Appellate Court held that neither statute touches upon the exemptions discussed under Section 12-901, and thus have no application here.


Lastly, the Spouses argued that Belcher is factually distinguishable because it involved a bankruptcy and that the “application of the homestead exemption to a debtor’s bankruptcy estate differs greatly from a refinancing lender’s ability to enforce a mortgage conveyed to it by a married person without the written release of his or her spouse.”  The Court disagreed stating the distinction “does not warrant a different result.”


Thus, the Appellate Court held that a “spouse who is not on title to property, but is the spouse of the titleholder and maintains the property as her primary place of residence, cannot claim the homestead exemption under Section 12-901 of the Code.”






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



          McGinnis Wutscher Beiramee LLP





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