Saturday, October 7, 2017

FYI: Ill App Ct (1st Dist) Rejects Land Trust Beneficiary's Effort to Challenge Foreclosure

The Appellate Court of Illinois, First District, recently held that where the beneficiary of a land trust filed a motion to intervene in a foreclosure, the trial court did not abuse its discretion in denying the motion to intervene because the beneficiary filed the motion after the trial court had entered the order confirming the foreclosure sale.


A copy of the opinion is available at:  Link to the Opinion


A mother and father created a land trust for their residence with the property rights to transfer to their four adult children after their deaths.  The parents obtained a mortgage loan secured by the residence.


After the parents died, the loan went into default and the mortgagee filed a foreclosure lawsuit, naming as defendants the trustee, the deceased parents, unknown owners, and non-record claimants. The mortgagee posted notice in a local newspaper and then filed for a default judgment. The mortgagee filed a motion dismissing the deceased parents as defendants and a motion for a judgment of foreclosure and to appoint a judicial sale officer, all of which the court granted.


After the property was sold and the trial court entered an order confirming the sale, one of the daughters filed an emergency motion for leave to intervene and to stay possession and judicial sale. She argued that the trust could not protect her interests and that she would be irreparably harmed and prejudiced if her motion was not granted.


The daughter also filed a motion to vacate the default judgment and the order confirming the sale. The daughter argued that the mortgagee's failure to name her in the foreclosure complaint as a necessary party rendered her unable to defend her interests and that because the trust could not defend the beneficiaries in the foreclosure, she would be prejudiced if the property was foreclosed without her participation in the proceedings.


The trial court denied the daughter's motions, and she appealed.


First, the daughter contended on appeal that the lower court lacked subject matter jurisdiction over the deceased parents as defendants in the foreclosure lawsuit because "a suit against a dead person is a nullity".


The Appellate Court pointed out that the mortgagee had dismissed the deceased parents from the foreclosure lawsuit and entered the orders against the trust, unknown owners, and record claimants. The Court further explained that subject matter jurisdiction exists as a matter law "if the matter brought before the court by the plaintiff…is justiciable…," which means it "…is a controversy appropriate for review by the court, in that it is definite and concrete, as opposed to hypothetical or moot, touching upon the legal relationship of parties having adverse legal interests." Thus, the Appellate Court found the foreclosure orders were not void.


Second, the daughter argued that the lower court erred in denying her petition for intervention because it did not provide her the opportunity for an evidentiary hearing. The Appellate Court rejected this argument as unsupported by legal authority, and explained that the standard of review for intervention in foreclosure proceedings specifically (735 ILCS 5/15-1501(d)), and for intervention generally under Illinois Code (735 ILCS 5/2-408(a)-(b)) was abuse of discretion.


The Appellate Court rejected the daughter's three arguments that the trial court should have granted her motion to intervene. As to the daughter's contention that the motion to intervene should have been granted because the trustee did not protect her interest in the land trust, the Court held this argument failed because the daughter did not timely file the motion to intervene and did not offer any legal basis upon which the court could vacate any of its orders.


The daughter's second argument, that denial of her motion to intervene permitted the mortgagee to sell the property to itself for less than fair market value, was irrelevant because the daughter filed the motion to intervene too late.   The Court explained that Illinois intervention law permits a person with an interest in real estate an unconditional right to appear prior to judgment, but, after judgment, a person may only appear at the discretion of the court, or later if its prior to an order confirming the sale. 735 ILCS 5/15-1501(d), (e)(1)-(3).


For her third argument, the daughter claimed that she would be forced to file a separate lawsuit against the trustee because the trial court denied her motion to intervene. The Appellate Court rejected this argument as well, explaining that, although separate litigation might occur because the motion to intervene failed, it was not a reason to allow it, and that the Illinois Mortgage Foreclosure Law "strikes the proper balance between the interest in judicial economy and finality of judgment in the context of mortgage foreclosures."


The Appellate Court noted that the record revealed that the daughter was aware of the foreclosure lawsuit and the trust's intent not to defend against it, but did not file the motion to intervene until after the confirmation of the judicial sale.


The Court held that because the daughter had filed her motion to intervene after the foreclosure court had entered the order confirming the sale, the daughter had failed to comply with the Illinois Mortgage Foreclosure Law's governing provisions. Thus, the trial court did not abuse its discretion in denying the motion to intervene.


Accordingly, the trial court's ruling was affirmed. 




Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
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Mobile:  (312) 493-0874


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