The Illinois Appeals Court, Second District, recently affirmed a trial court’s denial of a borrower’s motion to vacate the confirmation of a foreclosure sale because the borrower forfeited his right to contest the foreclosure action by failing to appear and file an answer.
In so ruling, the Appellate Court held that standing does not affect a court’s subject matter jurisdiction as standing is merely an element of justiciability. Therefore, a party’s failure to have standing does not void a court’s judgment. The Appellate Court further held if a party wishes to vacate a sale and judgment of foreclosure, the party must have a meritorious defense to the foreclosure judgment and meet the requirements of 735 ILCS 5/15-1508(b)(iv).
A copy of the opinion can be found at:
http://www.illinoiscourts.gov/Opinions/AppellateCourt/2014/2ndDistrict/2130676.pdf
On September 8, 2011, Plaintiff Mortgagee (“Mortgagee”) filed a foreclosure action against Defendant Borrower (“Borrower”). Plaintiff also named record and all non-record claimants as defendants. One of the subordinate lienholders appeared and answered the foreclosure complaint while Borrower did neither. Mortgagee moved for summary judgment against the subordinate lienholders and defaulted Borrower.
On June 5, 2012, the trial court entered a judgment of foreclosure in favor of Mortgagee. On October 11, 2012, the subject property was sold and Mortgagee was the winning bidder.
Mortgagee proceeded to move to confirm the sale. At this point, Borrower appeared in the action for the first time and objected to the foreclosure. Specifically, Borrower argued he was present at the sale and that no public offering occurred. On April 4, 2013, the trial court confirmed the sale.
On May 3, 2013, Borrower moved to vacate the confirmation of the sale arguing that a delay in his arrival to the courtroom prevented him from arguing his motion. Borrower also asserted the original mortgagee did not properly assign the note and mortgage to Mortgagee and that Mortgagee was asserting rights “without showing whether any proper assignment occurred between [the known earlier owners of the note and mortgage] over time.” The trial court denied Borrower’s motion holding that Borrower forfeited the ability to raise his standing argument because he failed to appear and file an answer. This appeal followed.
On appeal, Borrower argued that Mortgagee failed to plead its standing, and therefore the trial court lacked subject matter jurisdiction. Borrower asserted that pursuant to the Illinois Mortgage Foreclosure Law, Mortgagee must allege the “capacity in which the plaintiff brings this foreclosure, i.e. the legal holder of the indebtedness, a pledgee, an agent, the trustee under a trust deed or otherwise.” Borrower argued that Mortgagee’s allegation that it was the mortgagee and holder of the note was not supported by the documents attached to the complaint. As a result, the trial court lacked subject matter jurisdiction and its judgment was void.
The Appellate Court rejected Borrower’s argument ruling that “even if Plaintiff had the burden to plead its standing, and even if it failed to do so, its failure to do so did not deprive the trial court of subject matter jurisdiction.”
The Appellate Court cited City National Bank of Hoopeston v. Langley, 161 Ill. App. 3d 266 (1987). In Langley, the Court observed the plaintiff was statutorily required to attach a copy of the mortgage and note to the complaint which it failed to do. As a result of the plaintiff failing to meet the statutory requirements of a foreclosure action, the Langley court determined the trial court lacked subject matter jurisdiction and voided the judgment.
Although the Court noted that Langley supported Borrower’s argument, the Court held Langley inapplicable, because it was decided under the old rule in Illinois that a court lacked subject matter jurisdiction unless all statutory requirements of a purely statutory cause of action were satisfied. However, the current law is that subject matter jurisdiction is conferred entirely by the Illinois Constitution.
Thus, the Court held, the only consideration in determining subject matter jurisdiction is whether the complaint falls within the general class of cases a court has the inherent power to hear. If a matter falls within this class, the Court held subject matter jurisdiction is present.
The Appellate Court stated the reason for its broad view of subject matter jurisdiction is that it protects the finality of judgments over alleged defects in validity. The Appellate Court explained that labeling the requirements of a statutory cause of action as jurisdictional “would permit an unwarranted and dangerous expansion of the situations where a final judgment may bet set aside on a collateral attack.” In order to prevent judgments from being collaterally attacked, “final orders should be characterized as void only when no other alternative is possible.” See Belleville Toyota v. Toyota Motor Sales, U.S.A., Inc., 19 Ill.2d 325, 341 (2002).
The Court then examined whether a court has subject matter jurisdiction in a matter where a party appears to not have standing. The Appellate Court determined a lack of standing does not affect subject matter jurisdiction as a plaintiff who lacks standing can still assert a justiciable matter. Standing may be element of justiciability, but is not a requirement for a justiciable matter. Therefore, a lack of standing does not void a judgment.
The Appellate Court rejected Borrower’s subject matter jurisdiction argument because Mortgagee presented a justiciable matter regardless of its standing. Moreover, a foreclosure case “falls within the general class of cases that the court has the inherent power to hear and determine.”
The Court did note the documents attached to the complaint contradicted Mortgagee’s allegation that it had standing to foreclose on the subject property. However, Borrower conceded the merits of the matter could only be reached if the trial court lacked subject matter jurisdiction. Because the Appellate Court determined subject matter jurisdiction existed, it did not examine whether Mortgagee had standing.
Borrower attempted to argue the Appellate Court should reach the merits of Mortgagee’s standing regardless because “the considerations of substantial justice, plain error, and/or public importance” require it to do so. The Appellate Court acknowledged it has the power to vacate a default judgment after a judicial sale if justice otherwise was not done. 735 ILCS 5/15-1508(b)(iv). However, it will not exercise this power to merely “protect an interested party against the result of his own negligence.” Wells Fargo Bank N.A. v. McCluskey, 2013 IL 115469, ¶19 quoting Shultz v. Milburn, 366 Ill. 400, 403 (1937)).
The Appellate Court held that if Borrower wished to vacate the sale and underlying judgment of foreclosure, he must have a meritorious defense to the underlying judgment and also meet the requirements of 735 ILCS 5/15-1508(b)(iv). Under 735 ILCS 5/15-1508(b)(iv), Borrower must show that justice “was not otherwise done because either the plaintiff, through fraud or misrepresentation, prevented the [Borrower] from raising his meritorious defenses to the complaint at an earlier time in the proceedings, or the defendant has equitable defenses that reveal he was otherwise prevented from protecting his property interests.”
Borrower did not attempt to satisfy the requirements of 735 ILCS 5/15-1508(b)(iv), and therefore the Appellate Court did not examine whether Mortgagee had standing to bring the foreclosure action.
The Appellate Court affirmed the trial court’s denial of Borrower’s motion to vacate the confirmation of the sale of the subject property.
Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
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