The Illinois Appellate Court, First District, recently held that once a motion to confirm a foreclosure sale is filed, a borrower cannot raise any defenses to the underlying foreclosure and can only seek to set aside the sale by raising one or more of the four limited bases provided under 735 ILCS 5/15-1508(b) (“Section 15-1508”).
As you may recall, Section 15-1508(b) states that a court shall confirm the sale unless it finds that: “(1) proper notice was not given; (2) terms of the sale were unconscionable; (3) the sale was conducted fraudulently; or (4) justice was otherwise not done.” 735 ILCS 5/15-1508(b).
A copy of the opinion is available at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2014/1stDistrict/1123176.pdf
In 2006, the mortgagee (“Mortgagee”) filed a complaint to foreclose on property owned by the borrower homeowner (“Borrower”). On May 1, 2006, the trial court entered an order of default against the Borrower. The Borrower proceeded to retain an attorney who filed a motion to vacate the default order, which the trial court granted.
The Mortgagee then moved for summary judgment asserting =, among other things, that it was the current holder and owner of the note and mortgage. The Borrower failed to respond, and thus the trial court granted the motion for summary judgment. The Borrower then filed a petition to vacate the sale. The trial court vacated the order approving the sale.
Five years after all proceedings were terminated, including a related federal court action, the Borrower filed an emergency motion to stay the sale, which the trial court granted. The foreclosure sale occurred thereafter, and the Mortgagee was the successful bidder. The trial court confirmed the sale, and issued an order stating: “all notices required by statute were given; said sale was fairly properly made; the sale proceeded in accordance with the terms of the court’s judgment; and that justice was done.”
The Borrower filed a motion to vacate the trial court’s order confirming the sale, claiming “the sale was unconscionable because she allegedly received word that the sale would not precede on May 10, 2007, so she did not have someone at the sale representing her.” The trial court noted that nothing in the record indicated the sale was being continued. Moreover, the Borrower’s right of redemption had passed. Accordingly, the trial court denied the motion to vacate. The Borrower proceeded to file the instant appeal.
On appeal, the Borrower argued that the Mortgagee lacked standing to bring the foreclosure action in the first place. The Appellate Court noted that the Borrower’s right of redemption had passed and the judicial sale already occurred. As a result, the Court determined that Borrower’s appeal is controlled by the recent Illinois Supreme Court case of Wells Fargo Bank, N.A. v. McCluskey, 2013 IL. 115469 (“McCluskey”).
In McCluskey, the mortgagor filed a motion to vacate the default judgment 10 months after a judgment of foreclosure was entered, and after the judicial sale of the property was conducted. The mortgagor alleged that plaintiff lacked standing to bring the foreclosure suit. The trial court denied the defendant’s motion to vacate. The defendant appealed the denial of the motion to vacate, but not the order confirming the sale.
On appeal, the McCluskey Court held that a borrower could not challenge a default judgment through a motion to vacate after the judicial sale has occurred. Id. ¶ 25. The Illinois Supreme Court explained that once a motion to confirm the sale has been filed, it is no longer sufficient to raise meritorious defenses to the underlying foreclosure complaint because the balance of interests has shifted between the parties. Id. ¶¶ 25 & 26.
Moreover, the Illinois Supreme Court held that after a judicial sale and a motion to confirm the sale have been filed, “a party seeking to set aside the sale at this point is limited to the three specified grounds related to defects in the sale proceedings, or the fourth ground, that ‘justice was not otherwise done.”’ Id. ¶ 18. In order to demonstrate that “justice was not otherwise done,” a borrower must show that the lender, through fraud or misrepresentation, prevented the borrower from raising meritorious defenses to the complaint, or that the borrower was otherwise prevented from protecting his or her property interests. Id. ¶ 25.
The Appellate Court in the case at had applied McCluskey, and held that the Borrower could not challenge the Mortgagee’s standing because the redemption period had passed and the judicial sale had already taken place. Thus, the Borrower could only challenge the judicial sale by alleging one of the specified grounds listed in Section 15-1508.
The Court explained that the trial court had already determined that pursuant to Section 15-1508 “all notices required by statute were given; said sale was fairly properly made; the sale proceeded in accordance with the terms of the court’s judgment; and that justice was done.”
Moreover, the Borrower failed to raise any fraud allegations or challenge the order confirming the sale. Instead, the Borrower raised a meritorious defense to the underlying foreclosure, after a motion to confirm the sale has been filed, which was improper.
Accordingly, the Appellate Court upheld the trial court’s order approving the sale and judgment of foreclosure.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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