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Illinois App. Court (5th Dist) Rejects Borrower’s Challenge to Foreclosure Based on Error in Prior Foreclosure

illinois mortgage lawThe Appellate Court of Illinois, Fifth District, recently held that, because the defendant borrowers failed to file their petition for relief from a foreclosure judgment in the same proceeding in which the allegedly void order was entered, as required under Illinois procedural rules, the petition should have been dismissed without prejudice.

A copy of the opinion in First Midwest Bank v. Allen is available at:  Link to Opinion.

A mortgagee filed a foreclosure action against the borrowers in Illinois state court. The mortgagee previously filed a foreclosure action against the same borrowers in the same court, but that case was dismissed, and the foreclosure judgment vacated on the mortgagee’s motion after the borrowers became current on their monthly payments.

During the course of the second foreclosure action, the borrowers filed a petition for relief from an allegedly void order entered in the first action. The order in question vacated the foreclosure judgment in the first action. The borrowers alleged that the vacation order was void because the previous foreclosure judgment included a finding that there was no just reason to delay enforcement or appeal of the judgment; that the judgment became final and immediately appealable upon the denial of the borrowers’ motion to reconsider; and that the trial court in the first action lost jurisdiction to amend or vacate the judgment.

The trial court denied the borrowers’ petition, finding that Illinois law, 735 ILCS 5/2-1401(b) (“Section 2-1401”), requires such a petition to be filed in the same proceeding in which the challenged order was entered. In its written order, the trial court went on to hold that, even if the borrowers’ arguments were considered on the merits, the ultimate conclusion was that the order from the prior action was not void. The borrowers timely appealed.

Section 2-1401 provides a comprehensive statutory procedure for obtaining relief from a final order or judgment more than 30 days after it was entered. 735 ILCS 5/2-1401; Warren County Soil & Water Conservation District v. Walters, 2015 IL 117783, ¶ 31. Furthermore, a section 2-1401 petition may be brought to attack a judgment as void. 735 ILCS 5/2-1401(f); Sarkissian v. Chicago Board of Education, 201 Ill. 2d 95, 104 (2002).

However, the Fifth District noted that subsection 2-1401(b) provides that section 2-1401 petitions for relief, including petitions brought on voidness grounds, “must be filed in the same proceeding in which the order or judgment was entered.” 735 ILCS 5/2-1401(b). Moreover, the Appellate Court observed that Illinois courts have long held that section 2-1401 requires that a post judgment petition be filed in the same proceeding in which the challenged judgment was entered and, when possible, heard by the same judge who rendered the judgment. See, e.g., Price v. Philip Morris, Inc., 2015 IL 117687, ¶¶ 35-37.

Here, the Fifth District agreed with the trial court that the borrowers erroneously failed to file their section 2-1401 petition for relief in the same proceeding in which the allegedly void order was entered.

However, the Appellate Court held that the trial court should have dismissed the petition without prejudice on this basis, instead of denying the petition and coming to the ultimate conclusion that the order was not void. The Appellate Court reasoned that this extra step was improper because the trial court did not have the complete record of proceedings in the prior action.

Accordingly, the Fifth District vacated the trial court’s order denying the borrowers’ section 2-1401 petition with prejudice and remanded the case to the trial court with instructions to dismiss the petition without prejudice.

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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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