The Illinois Appellate Court, First District, recently affirmed a lower court's decision to deny a borrower's motion to vacate a default judgment in a mortgage foreclosure action, ruling that:
(1) the borrower's contention that the plaintiff lacked standing was not relevant to whether the lower court had subject matter jurisdiction over the action;
(2) the borrower's contention - raised after the foreclosure sale - that the bank failed to provide her with a grace period notice was untimely; and
(3) that lack of standing is an affirmative defense that must be raised in an answer or responsive pleading.
A copy of the opinion is available at http://www.state.il.us/court/Opinions/AppellateCourt/2015/1stDistrict/1133898.pdf.
A borrower defaulted on her home loan, and the bank foreclosed. The borrower appeared in the action and was given time to file an appearance and answer or otherwise plead to the bank's complaint. The borrower failed to do either.
The bank then filed a motion for judgment of foreclosure and sale, which the lower court granted. The property was sold at judicial sale, and the bank purchased the property and filed a motion to confirm the sale.
Shortly before the hearing on that motion, an attorney appeared for the first time on behalf of the borrower, and filed a combined motion to vacate default and judgment and response to the motion to confirm. Therein, the borrower argued that the bank failed to send her the required grace period notice, and that it lacked standing to foreclose.
The lower court denied the borrower's motion, and granted the bank's motion to confirm the same. The borrower appealed, repeating her earlier arguments and also claiming that the lower court lacked subject matter jurisdiction over the matter.
The Appellate Court rejected the borrower's arguments. It began with her subject matter jurisdiction argument - which as the Court noted was premised on the theory that because the foreclosing party allegedly had no interest in the loan, the lower court lacked jurisdiction and its orders were "void for lack of justiciability."
The Appellate Court had little difficulty in disposing of this argument, noting that "legal deficiencies in an action, alone, are not enough to divest a court of subject matter jurisdiction." Rather, the "only consideration [as to whether a matter is justiciable] is whether the alleged claim falls within the general class of cases that the court has the inherent power to hear and determine." In re Luis R., 239 Ill. 2d 299, 301 (2010).
Thus, because "there can be no dispute that the [lower] court had the power to hear and enter dispositions on the foreclosure complaint" brought by the bank, the Court determined that the borrower's claim was without merit.
Next, the Appellate Court turned to the borrower's contention that the lower court erred in denying her motion to vacate the judgment of foreclosure and sale, explaining that because the borrower filed her motion to vacate after the sale, she would have to establish among other things that justice was not done in connection with the foreclosure sale. 735 ILCS 5/15-1508(b).
The borrower argued that "justice was not done" within the meaning of 735 ILCS 5/15-1508(b), in that the bank failed to provide a grace period notice required by Illinois statute. However, the Court noted she did not raise her argument until after the sale had occurred, nor did she raise any allegations of fraud or misrepresentation that might have prevented her from raising her defenses earlier.
The Appellate Court observed that Illinois case law provides that, following a sale, it is not enough to raise a meritorious defense; rather, the borrower must argue fraud, misrepresentation or another equitable matter that prevented her from raising her defenses earlier. See Wells Fargo Bank v. McCluskey, 2013 IL 115469, para. 26.
Accordingly, the Appellate Court determined that the borrower's grace period notice allegation did not satisfy the grounds of section 15-1508(b).
Finally, the Appellate Court rejected the borrower's standing arguments, noting that "lack of standing is an affirmative defense that must be pleaded in the answer or responsive pleading." Because the borrower did not do so, the Court determined that her standing argument was untimely and thus waived.
Accordingly, the Appellate Court affirmed the judgment of the lower court.
Ralph T. Wutscher
McGinnis Wutscher LLP
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Chicago, Illinois 60602
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