The Illinois Appellate Court, Second District, recently reversed the dismissal of a post-judgment foreclosure challenge where the mortgagee’s process server was not licensed under the Illinois Private Detective Act, as required.
The Appellate Court held that because the process server’s license had expired it was not eligible for appointment as a process server, and therefore the service of process on the borrower was invalid. As a result, the Appellate Court ruled that the default judgment of foreclosure was void ab initio.
A copy of this opinion is available at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2014/2ndDistrict/2131146.pdf.
As you may recall, in Illinois, “[p]rocess shall be served by a sheriff” or, in counties with populations of less than 2 million, “process may be served, without special appointment, by a person who is licensed or registered as a private detective under the Private Detective, Private Alarm, Private Security, Fingerprint Vendor, and Locksmith Act of 2004 [(Illinois Private Detective Act) (225 ILCS 447/5-5 et seq.)] or by a registered employee of a private detective agency certified under that Act as provided in Section (a-5).” 735 ILCS 5/2-202(a).
Subsection (a-5) provides: “Upon motion and in its discretion, the court may appoint as a special process server a private detective agency certified under the Private Detective *** Act ***.” Id.
In 2005, the lender extended a $10 million revolving-credit loan to the borrower, secured by multiple mortgages on properties owned by the borrower in several counties. The borrower defaulted on the loan in 2008.
Beginning in December 2008, the lender filed 23 foreclosure actions against the borrower on the properties that secured the promissory note. In all but one of these cases, the lender sought and obtained orders appointing the detective agency as special process server. The detective agency’s employees served process upon the borrower in those cases.
The lender subsequently obtained default judgments of foreclosure in all of the cases. In 2009, the properties were sold to the lender at sheriff’s sales and the sales were confirmed by the court. The lender later sold the properties to third parties.
Four years later, in April 2013, the borrower filed petitions for relief from judgment in all 23 cases. The borrower argued that service was defective because the detective agency was not certified to act as a special process server at the time its employees served the summonses in the cases. In fact, on August 31, 2008, the detective agency’s license expired, and had never been renewed.
The borrower therefore argued that the trial courts had never acquired personal jurisdiction over the borrower, and the orders subsequently entered in the cases were void.
The trial court granted the lender’s motion to dismiss the borrower’s petitions, reasoning that, even though the detective agency itself was not licensed at the time of service, its employees who served the summonses were licensed and thus there was no defect in service. It also stated that allowing the petitions to vacate judgments to proceed more than five years after the properties were sold would be “inequitable.”
The Appellate Court reversed the trial court’s ruling
The Appellate Court found that Section 2-202’s language is clear: a court may appoint, as a special process server, only a private detective agency that is “certified” under the Illinois Private Detective Act (225 ILCS 447/5-5 et seq.). The Appellate Court noted that the Illinois Private Detective Act was enacted to protect the public. It reasoned that as the detective agency’s license had expired before the lender moved to appoint it as special process server, its certificate was invalid. Therefore, the Court held, the detective agency was not eligible for appointment under Section 2-202(a-5).
The Appellate Court then proceeded to reject a series of arguments presented by the lender.
First, the lender argued that the detective agency’s lack of certification should not invalidate the service, because its owner had a detective license that remained in good standing and the employees who served the summonses were “registered employees” under Section 2-202(a-5)(1) with valid permanent employee registration cards. See 735 ILCS 5/2-202(a-5)(1).
The Appellate Court rejected the lender’s argument because it ignored the fact that the entity appointed as the special process server was the detective agency, not its owner. The Appellate Court determined that a special process server may not “delegate” the service of process to one who was not named in the appointment, citing ITT Thorp Corp. v. Hitesman, 115 Ill. App. 3d 202, 206 (1983).
The lender next argued that the detective agency’s expired certification is a technical defect that should not result in a lack of personal jurisdiction.
The Appellate Court again rejected the lender’s argument and recognized binding Illinois Supreme Court precedent requiring that strict compliance with the statutes governing the service of process is required before a court will acquire personal jurisdiction over the person served, citing Sarkissian v. Chicago Board of Education, 201 Ill. 2d 95, 109 (2002); C.T.A.S.S. & U. Federal Credit Union v. Johnson, 383 Ill. App. 3d 909, 912 (2008).
The Appellate Court also recognized prior Illinois decisions holding that, where a private detective was not authorized to serve process because he was not appointed as required by section 2-202 of the Code, the court lacked personal jurisdiction over the defendant and the default judgment obtained by the plaintiff was void. Citing Schorsch v. Fireside Chrysler-Plymouth, Mazda, Inc., 172 Ill. App. 3d 993, 998 (1988).
The lender then argued that the borrower had notice of the lawsuits even if it was not properly served, thus fulfilling the purpose behind the service of process.
Again, the Appellate Court once again rejected the lender’s argument and noted that the Illinois Supreme Court had previously determined that “[a] judgment rendered without service of process, *** where there has been neither a waiver of process nor a general appearance by the defendant, is void regardless of whether the defendant had actual knowledge of the proceedings.” State Bank of Lake Zurich v. Thill, 113 Ill. 2d 294, 308 (1986).
The lender also contended that the borrower could not use the petitions to vacate judgment to assert a lack of personal jurisdiction once the sales of the properties had been confirmed, because, after that point, a foreclosure judgment may be attacked only through a motion pursuant to section 15-1508(b) of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1508(b)). In support of its argument, the Lender cited Wells Fargo Bank, N.A. v. McCluskey, 2013 IL 115469, ¶ 27, in which the Illinois Supreme Court held that a mortgagor could challenge a judgment of foreclosure by filing a motion under section 2-1301(e) of the Code (735 ILCS 5/2-1301(e)) only until the mortgagee moved to confirm the sale; after that point, the movant must proceed under section 15-1508(b) (735 ILCS 5/15-1508(b)).
The Appellate Court disagreed and distinguished McCluskey and other cases cited by the lender because they did not involve default judgments that were void for lack of personal jurisdiction.
Finally, the lender argued that the borrower’s jurisdictional challenge was barred by the doctrine of laches.
As you may recall, in order “to assert the defense of laches, a party must show both that there was unreasonable delay in bringing the action and that the delay materially prejudiced him.” Eckberg v Benso, 182 Ill. App. 3d 126, 132 (1989).
The Appellate Court declined to resolve whether laches could bar a jurisdictional challenge to a void judgment. Instead, it rejected the lender’s argument because the lender failed to make a showing that it was prejudiced by the borrower’s delay.
The Appellate Court noted that Section 2-1401(e) of the Code provides that where the underlying judgment is void, but the lack of jurisdiction did not affirmatively appear in the record when judgment was entered, the subsequent vacating of the judgment does not affect any “right, title or interest” in any real property acquired by third parties. 735 ILCS 5/2-1401(e). The Appellate Court also noted that the borrower did not seek return of the properties.
Ralph T. Wutscher
McGinnis Wutscher LLP
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Chicago, Illinois 60602
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