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Illinois Court Rejects Borrower’s Attempt to Undo Foreclosure, Holds Borrower Waived Proper Service of Process

IllinoisAppellateThe Illinois Appellate Court, First District, recently affirmed the dismissal of a borrower’s petition seeking to vacate a default judgment and order approving sale entered in a mortgage foreclosure action, holding that the borrower waived proper service of the foreclosure complaint.

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

The mortgagee sued to foreclose its mortgage under the Illinois Mortgage Foreclosure Law in November 2011. The borrower was served by substitute service shortly thereafter and, approximately five months thereafter, the mortgagee moved for entry of a default.

The borrower appeared at the hearing on the mortgagee’s motion for default, the mortgagee withdrew its motion, and the court gave the borrower an additional 28 days to respond to the complaint.  However, the borrower failed to do so, resulting in the eventual entry in July 2012 of a default judgment of foreclosure.

In August 2012, the borrower appeared through counsel, who filed a motion to reconsider and vacate the final judgment, attached to which was a copy of the borrower’s answer containing general denials and raising lack of standing and lack of proper service as defenses.

The borrower’s motion was never heard, however, and the collateral was sold at the judicial sale to the mortgagee as the highest bidder. The mortgagee moved to confirm the sale, but in November 2012, the borrower objected to confirmation of the sale.

In March 2013, the trial court approved the sale, but shortly thereafter, the borrower moved to reconsider and vacate the order approving the sale.

In July 2013, the borrower withdrew his motion, and thereafter filed a petition under section 2-1401 of the Illinois Code of Civil Procedure. The petition sought to vacate the default judgment of foreclosure and any subsequent order based thereon because (a) the borrower supposedly was not properly served with process; (b) the plaintiff mortgagee supposedly lacked standing to sue; (c) the trial court supposedly improperly failed to rule on a pending motion in violation of section 2-1203 of the Illinois Code of Civil Procedure; (d) the borrower was supposedly wrongfully evicted; and (e) the affidavit supporting the mortgagee’s motion for default judgment was supposedly insufficient.

In April 2014, the trial court denied and struck the petition because:  (a) the petition was filed in violation of the court’s procedures governing mortgage foreclosures; (b) proper service of the borrower’s petition was not effectuated because the plaintiff mortgagee had not waived service; (c) the court lacked jurisdiction over the petition under U.S. Bank National Ass’n v. Prabhakaran, 2013 IL App (1st) 11124; and (d) the borrower waived any objection to personal jurisdiction 60 days after he participated in the case pursuant to section 15-1505.6(a)(ii) of the Illinois Mortgage Foreclosure Law, and he did not present any new facts that were undiscoverable with the action was initially filed.

The borrower appealed, arguing that:  (1) his petition should not have been stricken because it was not ripe for adjudication under People v. Laugharn, 233 Ill. 2d 318 (2009), which requires that a petition under section 2-1401 of the Illinois Code of Civil Procedure be pending for at least 30 days before adjudication; (2) the trial court lacked personal jurisdiction over him because he was not properly served; and (3) the petition should not have been dismissed on the merits.

The Appellate Court noted that section 2-1401 of the Illinois Code of Civil Procedure allows judgments to be challenged more than 30 days after they are entered, and requires that the petition allege: (1) the existence of a meritorious defense or claim; (2) due diligence in presenting the defense or claim to the circuit court in the original action; and (3) due diligence in filing the section 2-1401 petition for relief.

The Court also noted that the purpose of a section 2-1401 petition is to bring to the attention of the circuit court facts which, if known when the judgment was entered, would have precluded its entry. Such a petition must be filed within two years after the judgment is entered, unless the petition alleges the judgment is void.  Also, when a judgment is challenged because it is void, the petitioner does not need to show due diligence or allege the existence of meritorious defense.

Turning to the borrower’s arguments, the Appellate Court first found that it could not rule on whether the trial court adjudicated the borrower’s 2-1401 petition prematurely under Laugharn because the borrower failed to submit a proper record on appeal by providing either a bystander’s report or an agreed statement of facts as to the hearing on the borrower’s 2-1401 petition. The Court noted that the borrower, as the appellant, bears the burden of providing a sufficiently complete record to support his claims or error and, in the absence of such a record, the trial court’s order is presumed to be valid and supported by a sufficient factual basis.

Next, the Appellate Court rejected the borrower’s argument that he had not been properly served with process, finding that this defense was barred by section 15-1505.6 of the Illinois Mortgage Foreclosure Law, which required the borrower to challenge service of process no later than 60 days after the earlier of (a) filing an appearance or (b) participating in a hearing without filing an appearance. Because the borrower participated in the hearing held on May 8, 2012 and failed to challenge jurisdiction until he filed his answer on August 23, 2013, more than 60 days later, he waived his ability to challenge the court’s jurisdiction over him.

The Court pointed out that even if he had filed his petition in a timely fashion, he still waived objection to personal jurisdiction because (a) the objection was contained in an answer rather than in a motion to dismiss or motion to quash service of process as required by section 2-301 of the Illinois Code of Civil Procedure; and (b) it was unclear from the record on appeal, which only contained two pages from the borrower’s motion to reconsider and vacate the judgment, whether the borrower contested jurisdiction in that motion.  Based on the limited record before it, the only basis to vacate the judgment was that borrower’s attorney was not present at the hearing. Because the record was incomplete, the Appellate Court noted that the trial court’s judgment was presumptively correct.

Finally, the Appellate Court rejected the borrower’s argument that the petition should not have been dismissed on the merits.

The Court first found that the borrower failed to show he had a meritorious defense because he only raised lack of standing in his answer, which was filed after the default judgment of foreclosure had been entered. The entry of default resulted in the borrower admitting that the plaintiff mortgagee had standing under Mortgage Electronic Registration Systems, Inc. v. Barnes, 406 Ill. App. 3d 1, 6-7 (2010), and the because the borrower forfeited his right to challenge standing, the Court did not even need to consider whether the plaintiff actually had standing, citing Nationwide Advantage Mortgage Co. v. Ortiz, 2012, IL App (1st) 112755, ¶¶’s 26, 40.

The Court next rejected the borrower’s argument that the order approving the sale was void because he filed his motion to vacate the judgment within 30 days after the judgment was entered as permitted by section 2-1301 of the Illinois Code of Civil Procedure. However, the motion included in the record on appeal was incomplete, containing only the last two pages, the prayer for relief, and the verification page, and was devoid of any citation to the specific code section under which the borrower sought relief.  Because the borrower failed to carry his burden on appeal to provide a sufficiently complete record to support his claims of error, the Appellate Court presumed that the trial court’s order was valid and had a sufficient factual basis.

The Appellate Court also rejected the borrower’s arguments that he was wrongfully evicted and that a supplementary petition or forcible entry proceeding was required, and also rejected the borrower’s argument that the plaintiff mortgagee’s affidavit in support of its motion for final judgment was insufficient, reasoning that the borrower cited no legal authority supporting his argument, thereby violating Illinois Supreme Court Rule 341(h)(7), and, in addition, the borrower once again failed to provide a sufficient record on appeal showing that plaintiff mortgagee violated the Illinois Mortgage Foreclosure Law.

Finally, after finding that the borrower did not even argue on appeal that he exercised diligence in presenting his defenses to the trial court in the original action and in filing the section 2-1401 petition for relief, the Court concluded that the borrower failed to prove by a preponderance of the evidence that he had a meritorious defense and that he exercised due diligence.

Accordingly, the Appellate Court affirmed the judgment of the trial court.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.