The Illinois Appellate Court, First District, recently affirmed a trial court's summary judgment ruling in favor of a mortgagee, holding that the mortgagors did not raise a triable issue of fact regarding the authenticity of a mortgage and promissory note, and rejecting the mortgagors' arguments under the Illinois Mortgage Foreclosure Law that the foreclosure sale price was "unconscionable" and that "justice was not done" with the foreclosure sale.
A copy of the opinion is available at: Link to Opinion
In 2002, the mortgagors obtained an adjustable rate mortgage loan with rate adjustments occurring every six months based on the terms of an adjustable rater rider ("rider"). The lender sold and assigned the mortgage loan to a bank ("mortgagee").
The mortgagors defaulted in 2005, and the mortgagee filed a foreclosure action. The mortgagee attached copies of the mortgage and promissory note to the complaint. The mortgagors denied that the copies of the mortgage and note attached to the complaint were true and correct copies of the originals that they signed, and claimed their signatures were forged on the copies.
The mortgagee moved for summary judgment and submitted an affidavit establishing the mortgagors' default under the loan. The trial court granted summary judgment to the mortgagee and held that the mortgagors' affidavits submitted in opposition to the mortgagee's motion for summary judgment failed to show a genuine issue of a material fact. The trial court subsequently entered a judgment of foreclosure and sale. The mortgagee sold the property for $81,840.00 and moved to confirm the sale and to seek a deficiency judgment. The trial court granted the mortgagee's motion in February of 2022 and the mortgagors timely appealed.
On appeal, the mortgagors raised three issues. First, they argued that the trial court erred in granting summary judgment in the mortgagee's favor because their answer and affidavits supposedly raised a triable issue of fact regarding the authenticity of the mortgage. Second, they argued that the trial court failed to fully consider whether the price for which the mortgagee sold the property was "unconscionable" under the Illinois Mortgage Foreclosure Law. Third, the mortgagors argued that justice was not done by the sale of the property under the Illinois Mortgage Foreclosure Law.
In Illinois, when a mortgagee establishes that it is the holder of a duly executed note and mortgage and that a default occurred, the burden shifts to the defendant to prove any affirmative defense to foreclosure. PNC Bank, National Ass'n v. Zubel, 2014 IL App (1st) 130976, ¶ 18. Here, the mortgagors argued that they "refused" to close on the mortgage and had actually negotiated a 30-year mortgage with a fixed interest rate and executed a fixed rate mortgage and did not sign the adjustable rate mortgage and note that the mortgagee attached to the foreclosure complaint.
However, the mortgagors submitted no evidence to support their claim or forgery. In Illinois, a party seeking to impeach a notarized instrument must present clear and convincing evidence from a disinterested witness. See, e.g., In re Estate of Bontkowski, 337 Ill. App. 3d 72, 76-77 (2003). Here, the mortgagors did not attach the alleged fixed rate mortgage or note, and only offered their own self-serving sworn statements which was not sufficient to raise a genuine issue of material fact regarding the authenticity of the mortgage loan documents included with the foreclosure complaint.
The Illinois Supreme Court previously held that the reason for this strict approach is that, if the "law allow(ed) the unsupported testimony of an interested witness to offset and destroy the deliberate act of certification under oath by one created by law to certify instruments of conveyance, it would shock the moral sense of the community, deny justice, and create chaos in land titles." Koepke v. Schumacher, 406 Ill. 93, 98 (1950).
The mortgagors further argued that their position was supported by a separate and subsequently executed promissory note, an incomplete and unrecorded mortgage, and a handwritten notarized letter expressing their intent to obtain a fixed rate mortgage loan that questioned the validity of mortgage and note included with the foreclosure complaint. The mortgagors' arguments relied upon the case of Krilich v. Millikin Mortgage Co., 196 Ill. App. 3d 554, 557-58, 563 (1990), which held that alterations to the interest rate on a mortgagee's copy of an adjustable rate note raised a genuine issue of triable fact.
The Appellate Court distinguished this case from Krilich, and held that the documents relied upon by the mortgagors did not invite an inference that the mortgagors did not execute the documents attached to mortgagee's complaint because a notarized instrument is valid and not impeachable except in instances of fraud or imposition See Hardisty, 269 Ill. App. 3d at 616-17. As a result, the Court of Appeals held the mortgagors failed to raise a triable issue of fact regarding the authenticity of the promissory note and the enforceability of the mortgage, and affirmed the trial court's decision granting summary judgment in favor of the mortgagee.
Next, the mortgagors argued that the Appellate Court should remand the case for limited discovery and an evidentiary hearing because the trial court failed to fully consider whether the price the mortgagee sold the property was unconscionable. In Illinois, an Appellate Court reviews an order confirming a judicial sale following a foreclosure judgment for an abuse of discretion. CitiMortgage, Inc. v. Bermudez, 2014 IL App (1st) 122824, ¶ 57. During the trial court proceedings, the mortgagors submitted unofficial valuations found on Zillow and Redfin in support of their objections to the sale. The mortgagee offered a broker's price opinion ("BPO") based on an inspection conducted by a licensed appraiser. The mortgagors argued that the sale price was only 40% of the property's estimated value whereas the mortgagee argued the sale price was 62% of the BPO.
Notably, the mortgagors did not argue that mortgagee's actions were somehow deficient in procuring higher bids during the sale process. The Appellate Court disagreed with mortgagors' argument by noting that the mortgagors bear the burden of ensuring the Appellate Court receives a complete record and mortgagors failed to supply a report of proceedings from the confirmation hearing.
Accordingly, the Appellate Court held that absent a record of how the trial court considered the mortgagors' objections to the sale, the Appellate Court could not conclude that the trial court acted unreasonably or arbitrarily by confirming the sale. See, e.g., Bermudez, 2014 IL App (1st) 122824, ¶ 69.
In a last-ditch effort, the mortgagors also argued that justice was otherwise not done with the foreclosure sale of the property. The "justice clause" contained in the Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1508(b)(iv), provides a narrow window for a court to reverse a sale when there are serious defects involved in the sale. However, because the mortgagors' objections did not specifically address the process by which mortgagee procured bids, it did not justify setting aside the sale.
Accordingly, the Appellate Court affirmed the judgment of the trial court.
Ralph T. Wutscher
Maurice Wutscher LLP
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