Sunday, July 22, 2012

FYI: Ill App Ct Invalidates Foreclosure Based on Allegedly Faulty Publication Notice Affidavit

The Illinois Appellate Court, First District, recently held that a default judgment in a mortgage foreclosure action was void for lack of personal jurisdiction, where affidavits in filed support of service of process by publication failed to indicate that the affiants personally took the steps listed in the affidavits for attempting to first personally serve the mortgagor.  The court further ruled that, on remand, the trial court was to hold an evidentiary hearing to determine which specific steps the affiants personally took to locate and serve process on the mortgagor.
A copy of the opinion is available at: 
Defendant borrower ("Borrower") defaulted on a residential mortgage loan on a condominium located in Chicago, Illinois.  In the ensuing foreclosure action against Borrower, plaintiff loan owner ("Loan Owner") sought to serve process on Borrower at her residence, the mortgaged condominium.  After supposedly making repeated and unsuccessful attempts to serve process on Borrower through a special process server, the Loan Owner sought leave from the court to serve process on Borrower by publication.
To support its motion, the Loan Owner submitted affidavits of employees of the special process server, stating, among other things, that "attempts were made" to serve Borrower at the condominium and that "it was discovered that no contact could be made" with Borrower even after "we attempted to locate the defendant by searching" various public and confidential databases for a current address. 
The Loan Owner's attorney also supposedly signed an affidavit swearing that Borrower "on due inquiry cannot be found" and, further, that Borrower's place of residence "[is] not known to the plaintiff, and upon diligent inquiry . . .  cannot be ascertained."
Relying on the affidavits, the trial court allowed publication service and eventually entered a default judgment against Borrower. Loan Owner purchased the property at the subsequent foreclosure sale.
Following the court's approval of the foreclosure sale, Borrower moved to quash service of process by publication and to void the judgment and sale of the condominium for lack of jurisdiction.  Borrower swore that had she lived at the condominium at all times relevant to the foreclosure action and that with reasonable efforts the process servers could have found her there.  The trial court denied the motion, ruling that Loan Owner adequately proved that it had satisfied the requirements for service by publication.  Borrower appealed.
The Appellate Court reversed, ruling in part that publication service was improper in this case, because the Loan Owner failed to show due inquiry in strict compliance with the circuit court's rule regarding affidavits in support of publication service in foreclosure cases. 
As you may recall, Section 2-206 of the Illinois Code of Civil Procedure provides in part:  "Whenever, in any action affecting property . . . within the jurisdiction of the court . . . plaintiff . . . shall file . . . an affidavit showing that the defendant . . on due inquiry cannot be found . . .  so that process cannot be served upon him or her, and stating the place of residence of the defendant, if known, or that upon diligent inquiry his or her place of residence cannot be ascertained, the clerk shall cause publication to be made in some newspaper in the county in which the action is pending."  735 ILCS 5/2-206(a).
Rule 7.3 of the Circuit Court of Cook County expands on Section 2-206 by requiring that, in mortgage foreclosure actions, all affidavits in support of publication service "be accompanied by a sworn affidavit by the individual(s) making such 'due inquiry' setting forth with particularity the action taken to demonstrate an honest and well directed effort to ascertain the whereabouts of the defendant(s) by inquiry as full as circumstances permit prior to placing any service of summons by publication."   Cook Co. Cir. Ct. R. 7.3.
Moreover, Section 15-1509(c) of the Code of Civil Procedure provides in part that relief from an erroneous foreclosure judgment and sale is limited to a claim for the proceeds from the sale.  735 ILCS 5/15-1509(c). 
Noting that Section 2-206 requires "strict compliance" with its requirements for publication service and that Cook County Rule 7.3 adds to those requirements by requiring affiants to set forth "with particularity" the actions affiants took to find and serve process on the defendant, the Appellate Court pointed out that the affidavits in this case failed to identify who attempted to serve process on Borrower or who took the steps listed in the affidavits to locate her at other addresses.  In so doing, the Court remarked that the use of the passive voice in the affidavits implied that someone else took those steps, and also noted that statements such as "we . .. search[ed] public . . . databases" similarly failed to identify the person who performed the searches. 
The Appellate Court thus ruled that Loan Owner's affidavits failed to indicate that the affiants had any personal knowledge of the attempts to serve process on Borrower, and that the affidavits consequently did not meet Rule 7.3's requirement that affiants swear that they personally undertook the actions listed in the affidavits to locate and serve Borrower. 
In so ruling, the Appellate Court rejected Loan Owner's assertions that:  (1) Rule 7.3 conflicted with Section 2-206;  (2) Illinois Civil Code Section 15-1509(c) barred any challenge to a foreclosure and sale; and  (3) Borrower had actual knowledge of the lawsuit, as evidenced by her communications to Loan Owner for reinstatement figures. 
Concluding that Loan Owner failed to strictly comply with Cook County Rule 7.3, the Appellate Court ruled that the lower court had improperly allowed publication service in this case, and that the trial court thus lacked jurisdiction to enter a default judgment or approve the foreclosure sale.   The Appellate Court further ruled that section 15-1509's provision limiting recovery following foreclosure sale to sale proceeds did not validate the void judgments.
In response to Loan Owner's request for clarification as to the proceedings required on remand, the Appellate Court explained that Loan Owner would be permitted to prove that it took adequate steps to justify service by publication, "even though it did not file affidavits showing that it took such steps, because trial courts prior to this opinion may have permitted service by publication based on insufficient affidavits that did not meet the requirements of section 2-206 and Rule 7.3 . . . ."  The Appellate Court specified that such evidence must come from the individuals who actually took the steps to locate and serve Borrower.

Ralph T. Wutscher
McGinnis Tessitore Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
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