Mortgage Law Roundup

Sharp Thinking

No. 125  Perspectives on Developments in the Law from Sharp-Hundley, P.C.    January 2015

Plaintiff Must Show Due Inquiry Before Publication

           Three attempts to serve process at approximately the same hour over a four-day period do not “demonstrate a well-directed effort to ascertain the whereabouts of defendant by inquiry ‘as full as circumstances permit’” and hence fail the law’s preconditions for resort to publication service, a panel of the Appellate Court in Chicago has ruled.

           Ruling in JPMorgan Chase Bank, N.A. v. Ivanov, 2014 IL App (1st) 133553, the court said that a mortgage foreclosure judgment based upon publication service which in turn was based upon such insufficient service efforts was void.

           Characterizing the plaintiff’s efforts to find and serve the owner as “casual, routine, and spiritless,” the court said 735 ILCS 5/2-206 requires the plaintiff to file a sufficient affidavit before service by publication is justified and “a defendant is not required to file affidavits in order for the trial court to find a plaintiff’s affidavits insufficient.”

Eviction Statute Does Not Trump IMFL On Possession

           No provision of law allows a junior lienholder to trump the rights of the mortgagee under the Illinois Mortgage Foreclosure Law (IMFL) and hence a lienholder which had gained possession via a forcible entry and detainer action must yield possession to a mortgagee entitled to possession under 735 ILCS 5/15-1701.                    

           So has held a panel of the Appellate Court’s First District. Urban Partnership Bank v. Winchester-Wolcott, LLC, 2014 IL App (1st) 133556.

           The adverse claimant in Urban was a condominium association, which argued that because it (not the mortgagor) was in possession, the possession rules of IMFL § 15-1701 did not apply.  The court rejected that argument.

Surplus May Not Be Allocated To Post-Sale Tax Payment

            A putative surplus at a foreclosure sale may not be awarded to the plaintiff-purchaser to reimburse it for a real estate tax payment made after the sale, a panel of the Appellate Court’s Second District has held.

            Ruling in Bank of America, N.A. v. Higgin, 2014 IL App (2d) 131302, the panel invoked provisions of the Illinois Mortgage Foreclosure Law (IMFL) as well as the general principle that a foreclosure bidder takes subject to all liens.

            The plaintiff-purchaser argued it had bid too much because it mistakenly thought it had paid the taxes before the sale.

            Noting that IMFL § 15-1505 permits the mortgagee to make tax payments “prior to sale,” that IMFL § 15-1512(b) permits the recovery of expenses of securing possession “before sale,” and that taxes are not fees and costs (which are recoverable clear up to the confirmation hearing), the panel rejected the mortgagee’s argument.

            Also rejected was an argument that the tax payments should be recoverable because the foreclosure judgment appeared to allow such expenses “between entry of Judgment and confirmation of sale.” The panel said that that provision was inconsistent with IMFL and an abuse of discretion.

Court Orders $13,505 In Sanctions

            The Appellate Court panel hearing Bank of Am., N.A. v. Basile, 2014 IL App (3d) 130204 (see Sharp Thinking No. 116 (June 2014)), has imposed sanctions totaling $13,505 against mortgagors and their counsel for making a frivolous appeal in a mortgage foreclosure case.     

            In a supplemental opinion filed last month, the Third District soundly rejected defendants’ arguments against imposing sanctions but found that the $43,104 sought by Bank of America was excessive.  It awarded $10,000 in attorney fees and $3,505 in costs, and ordered that those amounts be paid 50% by the mortgagors and 50% by their counsel. 

Confirmation Objection Grounds Limited

            A foreclosure defendant may not oppose a motion to confirm the foreclosure sale merely by attacking the underlying judgment, a panel in the Appellate Court’s First District has held.

            Relying on Wells Fargo Bank, N.A. v. McCluskey, 2013 IL 115469 (see Sharp Thinking No. 107 (January 2014)), the court in DLJ Mortg. Capital, Inc. v. Frederick, 2014 IL App (1st) 123176, said a defendant is limited to the four grounds for refusing confirmation set forth in 735 ILCS 5/15-1508(b).  Moreover, referring to the fourth ground stated in that statute, the panel said that “[t]o show that justice was not otherwise done, a party must establish that the lender, through fraud or misrepresentation, prevented the borrower from raising the meritorious defense to the complaint, or the borrower was otherwise prevented from protecting his property interests.” 

Full Payment Doesn’t Automatically Release Mortgage

            Receipt of full payment creates an obligation to release a mortgage but does not by itself release the mortgage, a panel in the Appellate Court in Chicago has opined.

            Writing in North Shore Community B. & T. Co. v. Sheffield Wellington LLC, 2014 IL App (1st) 123784, the panel said that under the Mortgage Act (765 ILCS 905/2) receipt of full payment created an obligation to “make, execute and deliver” a release, a release was not effected until such a writing was delivered and the bank’s alleged receipt of full payment did not by itself operate as a release depriving it of standing in the case.

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