Tuesday, July 29, 2014

FYI: Ill App Ct Rejects Challenge to Foreclosure Based on Alleged Alteration of Note

The Appellate Court of Illinois, First District, recently affirmed a trial court’s ruling in favor of a mortgagee, rejecting the borrower’s arguments that the note at issue had been altered because an indorsement stamp was blurred and the name of the payee was smudged. 


A copy of the opinion is available at: http://www.illinoiscourts.gov/Opinions/AppellateCourt/2014/1stDistrict/1130023.pdf


The trial apparently believed that the smudge indicated the possibility that someone had erased the name of the original payee and substituted the mortgagee’s name. 


However, the trial court still granted summary judgment in the mortgagee’s favor because: (1) the mortgagee produced an affidavit of its document control officer, who identified the mortgagee as the holder of the note; (2) the mortgagee produced the original note in court for examination by defense counsel; (3) it was undisputed that the mortgagee was the mortgagee of record by virtue of an assignment of the mortgage from MERS; and (4) the borrower failed to adduce any competent evidence that the endorsement on the note had been altered.


The Appellate Court affirmed the trial court’s ruling, and held that because the mortgagee produced the original of the note in open court, it was the holder of the note.  In addition, the Appellate Court held that any issue regarding the manner in which the mortgagee acquired the note does not affect its undisputed status as the holder. 


The Appellate Court also held that because it was the borrower who raised an issue regarding the manner in which the borrower’s acquired the note, it was the borrower’s burden to present evidence that would raise a genuine issue of material fact that some other person or entity was the holder of the note, and because no such evidence was presented, the borrower’s argument failed. 


Because there was no such evidence in the record, the Appellate Court ruled that the case was not governed by Ruwaldt v. W.C. McBridge, Inc., 338 Ill. 285, 292-93 (1944), which established the rule that “[w]here an alteration in a deed is … established by inspection, the burden of proof shifts to the person claiming the benefit of the instrument, as altered, to show the alteration was made under circumstances rendering it lawful.”


This Appellate Court’s opinion supports the rule that a party who can produce an original note in open court is the holder of the note.  The ruling also places the burden on the borrower to present facts related to alteration, even if a cursory inspection by the trial court indicates that the note was altered in some way.  Finally, the opinion supports the rule in Illinois that proof of assignment of mortgage, combined with an affidavit identifying the holder of the note, is sufficient to establish that the mortgagee is entitled to foreclose.  





Ralph T. Wutscher
McGinnis Wutscher Beiramee LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: RWutscher@mwbllp.com


Admitted to practice law in Illinois



          McGinnis Wutscher Beiramee LLP





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