Tuesday, July 10, 2012

FYI: Ill App Ct Holds Non-Borrower Occupant Could Not Raise Foreclosure Standing Defense in Post-Foreclosure Eviction

The Illinois Appellate Court, Third District, recently held that a non-borrower occupant in a post-foreclosure eviction action could not assert a defense based on an alleged lack of standing of the plaintiff to foreclose, because such assertion was not "germane" to the issue of who was entitled to immediate possession of the property.
A copy of the opinion is available at: 
Defendant ("Occupant") sold his residence in Will County, Illinois, to a relative ("Borrower") who funded the purchase with a mortgage loan with Mortgage Electronic Registration System, Inc. ("MERS"), as the mortgagee with power to foreclose on the property.   Following the sale, Occupant continued to live at the residence with Borrower.  
Borrower defaulted on the loan and plaintiff ("Plaintiff Bank") filed a foreclosure action against Borrower alleging that it was the mortgagee and holder of the note.   Moving for summary judgment, Plaintiff Bank submitted documentation to the court indicating that MERS, as lender's nominee, assigned the mortgage to Plaintiff Bank some time prior to the filing of the foreclosure action.   However, the assignment of the mortgage in favor of Plaintiff Bank was not recorded in the county recorder's office until over a month after the start of the foreclosure proceedings.
The trial court granted summary judgment for Plaintiff Bank, which purchased the property at the subsequent foreclosure sale.    Three months later, the sale was approved and the final foreclosure judgment entered.  The final judgment provided that Plaintiff Bank was entitled to possession of the property and that the sheriff was to evict Borrower from the premises. Borrower did not appeal the foreclosure judgment.
Plaintiff Bank filed a separate forcible entry and detainer action against Occupant, seeking an order of possession of the property against Occupant.  Plaintiff Bank attached to its complaint an unsigned and undated copy of the foreclosure judgment from the prior foreclosure action against Borrower.  Moving for summary judgment, Plaintiff Bank submitted various documents including an additional copy of the foreclosure judgment, as well as copies of the demand for possession and proofs of service. 
Occupant opposed the summary judgment motion, arguing that Plaintiff Bank lacked standing in the previous mortgage foreclosure action because the complaint had been filed before Plaintiff Bank had been assigned the mortgage and that Plaintiff Bank had thus committed a fraud upon the court. 
Following a hearing, the trial court granted Plaintiff Bank's motion for summary judgment.  Occupant appealed and filed an emergency motion to stay the eviction pending appeal.  The Appellate Court denied the motion to stay and affirmed the trial court's judgment.
Rejecting Occupant's assertions that there were outstanding issues as to whether Plaintiff Bank had standing to file the prior mortgage foreclosure action, and whether Plaintiff Bank had committed a fraud on the court, the Appellate Court noted that the summary nature of forcible entry and detainer actions precluded raising matters that are not germane to the issue of who is entitled to immediate possession of the property.  
In so doing, the Appellate Court noted that Illinois case law defined "germane matters" as those closely connected and relevant to the issue of possession, such as claims that: (1) assert a paramount and superior right of possession;  (2) deny the breach of the agreement vesting possession in the plaintiff;  (3) challenge the validity or enforceability of the agreement on which the plaintiff bases the right to possession; or  (4) question the plaintiff's motivation for bringing the action.  See, e.g., Department of Transportation v. Walliser, 258 Ill. App. 3d 782, 788 (1994).
Observing in part that Occupant never presented any evidence that he had a legal interest in the property or was somehow entitled to possession, the Appellate Court ruled that Occupant's allegations of fraud and lack of standing were separate and distinct from, and therefore not germane to, the issue of possession. 
Accordingly, the Appellate Court ruled that the trial court properly granted summary judgment in favor of Plaintiff Bank.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
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Chicago, Illinois 60602
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