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Illinois App. Court (3rd Dist) Rejects Arguments by Mortgagee to Undo Tax Sale

real estateThe Appellate Court of Illinois, Third District, recently upheld summary judgment in favor of a purchaser of delinquent real estate taxes in an action by a mortgagee for relief from a tax deed.

A copy of the opinion in County Treasurer v. MidFirst Bank is available at:  Link to Opinion.

The matter arose out of a special assessment tax on a single-family residence. After the 2012 special assessment installment from a municipality was not paid, the county treasurer filed an application for judgment and an order of sale for the delinquent taxes.

The county’s filing consisted of an affidavit from the county treasurer, a form judgment and order of sale to be signed by the court, a certification signed by the circuit clerk, and 15 pages listing delinquent tax assessments due to the county. The 15 pages did not include the subject residence.

On the same date, the collector for the municipality filed a seven-page list of properties with delinquent special assessments, an affidavit stating the list contained the properties with delinquent assessments and attesting that the notice required by law had been given.

The subject residence was on the seven-page list. The filing also included an advertisement published on Oct. 15, 2013, but the advertisement was not filed at that time.

The judgment and order of sale was signed in October of 2013. On November 2013, the delinquent taxes were sold to a third-party (“Purchaser”).

In 2016, Purchaser filed a petition for a tax deed. In the interim, the mortgage on the residence had been assigned to a mortgagee and recorded in December 2014. After mortgagee was served with the tax notice in July 2016, the existing mortgagee assigned the mortgage to another party (“Current Mortgagee”).

Neither the prior mortgagee nor Current Mortgagee redeemed the delinquent special assessments for the property and neither appeared at the December 2016 hearing.  The trial court entered an order directing the county clerk to issue a tax deed. Neither the prior mortgagee nor Current Mortgagee filed any objection to the issuance of the tax deed. The deed was executed and delivered to Purchaser and recorded in March 2017.

In December 2017, Current Mortgagee filed a petition for relief from the judgment.  The Current Mortgagee argued that the order granting the tax deed was void.  The trial court denied the Current Mortgagee’s petition.

The Current Mortgagee and Purchaser then filed cross-motions for summary judgment. The Current Mortgagee’s motion was denied, and Purchaser’s motion was granted. The trial court found the tax sale proceedings were informal, but the October 2013 order included the municipality’s delinquent special assessment taxes. The Current Mortgagee’s motion to reconsider was denied, and this appeal followed.

On appeal, the Current Mortgagee argued that the county collector did not properly apply for a judgment for the special assessments because the county filing did not include the delinquent special assessments from the municipality. Thus, the Current Mortgagee argued, the judgment and order did not authorize the sale of the special assessments, and absent the order authorizing the sale, the order directing the issuance of the tax deed was void.

Purchaser argued that the county and municipality followed an informal process, but the municipality’s list was filed by the county collector with her affidavit and list of delinquent real estate taxes. Thus, Purchaser argued, the municipality’s list was included as part of the “foregoing” list referenced by the county collector in her application.

The Appellate Court noted that the grounds for vacating an order for tax deed are limited to those set forth in section 22-45 of the Illinois Property Tax Code. 35 ILCS 200/22-45 (West 2016); Application of County Treasurer (Congua), 92 Ill. 2d 400 (1982).

The Current Mortgagee did not allege that Purchaser failed to notify and serve all interested parties nor did it allege any of the statutory grounds for vacating an order for a tax deed. However, the Court also noted, that a void tax deed can be attacked at any time.

Pursuant to Section 21-160 of the Illinois Property Tax Code, a collector “shall transcribe into a record prepared for that purpose, and known as the annual tax judgment, sale, redemption and forfeiture record, the list of delinquent properties.” 35 ILCS 200/21-160 (West 2016).

The Appellate Court found that the municipality’s collector provided a report in the form provided by section 9-2-85 of the Illinois Municipal Code of the properties with delinquent assessment to the county collector, and the county collector applied for the judgment against all the delinquent properties in accordance with the Illinois Property Tax Code.  The Court further found that the municipality’s special assessments were included in the “foregoing list” that the county collector referenced in seeking judgment.

Finally, the Court found that the errors and informalities, namely, the failure to physically attach the municipality’s affidavit and delinquent tax list to the county’s application and the failure to attach the advertisement that the municipality’s collector attested was published, did not invalidate the tax sale. See 35 ILCS 200/21-185 (West 2016); cf. People v. Jennings, 3 Ill. 2d 125 (1954) (failure to publish was a valid objection to the tax where there was no attempt to comply with the law regarding publishing the list).

The Current Mortgagee also argued that the trial court never acquired jurisdiction over the property since the municipality’s publication notice was insufficient.

The Appellate Court quickly dispensed with this argument as tax proceedings are in rem in nature and the court acquires jurisdiction after the county collector makes his application for judgment and order of sale. In re Application of the 7 County Collector, 2011 IL App (3d) 100181, ¶ 13.  Because jurisdiction over the land itself grants the court power to act, thus, the notice requirements sufficiency only brings into question whether the court should order the tax deed issued. In re County Treasurer & Ex-Officio County Collector of Cook County, 386 Ill. App. 3d 906, 909 (2008).

In addition, the Appellate Court found that the municipality complied with the publication requirements. The affidavit filed by the county collector contained the requisite oath that the advertisement was published, and the municipality’s publication notice was in the record and certified that the “attached advertisements” were published. A list of the delinquent properties was also included. Additionally, Purchaser included a certificate of the publisher, and a copy of the printed advertisement which included the property number.

The Appellate Court found that the failure to attach a printed copy of the advertisement to the county collector’s affidavit was not enough to deem the municipality had failed with the publication requirements.

Thus, the Appellate Court held the tax deed was authorized and as such, found no basis to find the order void and affirmed the trial court’s ruling.

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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.

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