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Illinois App. Court (2nd Dist) Holds Bona Fide Foreclosure Sale Not Voided by Latent Defect in Service of Process

Foreclosure SaleThe Appellate Court of Illinois, Second District, recently held that improper service that does not affirmatively appear on the face of the record will not allow a former homeowner to void a foreclosure judgment against the bona fide purchasers of the property.

A copy of the opinion in JP Morgan Chase Bank, N.A. v. Robinson is available at:  Link to Opinion.

A mortgagee filed a foreclosure action in DuPage County against a homeowner (“prior owner”) and employed a special process server who served the prior owner via substitute service in the neighboring Cook County.

The prior owner failed to appear and default judgment of foreclosure was entered in December 2006. The property was sold at a sheriff’s sale in April 2007. The trial court approved of the sale and the sheriff’s deed was recorded in May 2007. After a couple more transfers, the property was eventually purchased by an individual (“new owner”) and a deed was recorded in September 2011 (“2011 deed”).

Seven years later, in September 2018, the prior owner filed a petition to quash service arguing that the judgment was void and he had been improperly served. Specifically, the prior owner argued “the lack of jurisdiction was apparent on the face of the record” because the trial court “did not acquire personal jurisdiction over [him] because [he] was served in Cook County, Illinois and the Circuit Court did not appoint a special process server to serve process in Cook County [as was required at the time].”

The named beneficiary of the 2011 deed, the servicer for a prior named beneficiary, and the new owner filed separate motions to dismiss the prior owner petition, primarily arguing the petition was barred by the bona fide purchaser protections of section 2-1401(e) and laches.

As you may recall, section 2-1401(e) provides that:

Unless lack of jurisdiction affirmatively appears from the record proper, the vacation or modification of an order or judgment pursuant to the provisions of this Section does not affect the right, title or interest in or to any real or personal property of any person, not a party to the original action, acquired for value after the entry of the order or judgment but before the filing of the petition, nor affect any right of any person not a party to the original action under any certificate of sale issued before the filing of the petition, pursuant to a sale based on the order or judgment.

735 ILCS 5/2-1401(e) (West 2018).

The trial court granted all three motions to dismiss and determined the property rights were protected by section 2-1401(e) of the Code because no jurisdictional defect appeared on the face of the record. Further ruling, “[The] Court takes judicial notice that Chicago is a municipality located in two different counties: Cook County and Du Page County. However, the service return states the zip code of the service address to be 60623 and does not recite the county in which the service was made. For the Court to determine which county in which this zip code is located, an investigation would be required. The Court is unable to take judicial notice of the county in which this zip code is located. Thus, the Court finds that the defect complained of is not apparent on the face of the record.”

The prior owner appealed

The Appellate Court noted that, even if it assumed that the judgment was void, the dispositive question is whether the respondents were bona fide purchasers, noting where the rights of innocent third-party purchasers have attached, a judgment can be collaterally attacked only where an alleged personal jurisdictional defect affirmatively appears in the record. State Bank of Lake Zurich v. Thill, 113 Ill. 2d 294, 312-13 (1986).

Further the Court explained: “In determining whether a lack of jurisdiction is apparent from the record, we must look to the whole record, which includes the pleadings, the return on the process, and the judgment of the court. A lack of jurisdiction is apparent from the record if it does not require inquiry beyond the face of the record. Strict compliance with the statutes governing the service of process is required before a court will acquire personal jurisdiction over the person served.”

The prior owner argued that the lack of jurisdiction due to the service defect is apparent on the face of the record because at the time the defendant was served, service of process occurred in Cook County without the trial court appointing a special process server to serve process in Cook County (which was a requirement at that time), and therefore, personal jurisdiction was never established. To establish that service took place in Cook County, the prior owner pointed to the special process-server affidavit which shows substitute service was made at 1656 S. Central Park Avenue in Chicago, 60623.

The Appellate Court rejected the prior owner’s argument noting the affidavit does not indicate whether the defendant was served in Cook or DuPage County and therefore does not establish a jurisdictional defect on its face. The Court also refused to take judicial notice that the zip code exists within Cook County as that would require the court to go beyond the face of the record.

The Appellate Court found each of the respondents were entitled to bona fide purchaser status as each mortgage was supported by consideration and secured in good faith before the petition was filed.

Accordingly, the Court affirmed the judgment of the trial court, holding because the jurisdictional defect does not affirmatively appear on the face of the record, section 2-1401(e) protects the bona fide purchasers’ rights in the property, and that laches can preclude relief in an appropriate case where prejudice is demonstrated. 

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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.