No Special Rep Required When Deceased Mortgagor Has Transferred All Interest

Mortgage Law Roundup

Sharp Thinking

No. 155      Perspectives on Developments in the Law from Sharp-Hundley, P.C.    June 2018

No Special Rep Required When Deceased

Mortgagor Has Transferred All Interest

            It is not necessary for the court in a foreclosure action to appoint a special representative for a deceased mortgagor when that mortgagor transferred all interest in the property to another before his death, a panel in the Appellate Court in Chicago has concluded.

            Ruling in Deutsche Bank Nat’l Trust Co. v. Estate of Schoenburg, 2018 IL App (1st) 160871, the court dealt with the situation where the mortgagor had put the property into a land trust with a bank as trustee after making the mortgage.  Finding that beneficiaries of land trusts are permissible but not necessary parties, the panel rejected jurisdictional challenges to the foreclosure action before addressing whether the trial court erred in not appointing a special representative. 

            The panel ruled that Pub. Act 99-0024, which amended § 15-1501(h) of the Mortgage Foreclosure Law while the case was in the trial court, applied retroactively to provide that the trial court did not have to appoint a special representative for a deceased mortgagor if a trust was conveyed the property prior to his death.  However, it appears the panel would have reached the same result without the amendment.

            It distinguished ABN Amro Mortgage Group, Inc. v. McGahan, 237 Ill. 2d 526 (2010), as “only address[ing] the situation where the mortgagor is fully possessed of an interest in the property at the time of her death.

Receiver May Increase Rent Rates To Lessees 

            A foreclosure court may permit a receiver to increase rental rates to lessees where necessary to operate, manage and conserve the mortgaged real estate, but that does not imply that the receiver is entitled to collect market rates in such cases. 

            So held a unanimous panel of the Appellate Court in Chicago recently in LOMTO Fed. Credit Union v. 6500 Western LLC, 2018 IL App (1st) 173106.

            In LOMTO, defendant landlord’s manager was president of both of the lessees, and the leases at issue were executed after plaintiff filed its foreclosure complaint and motion for appointment of a receiver.  They were sweetheart deals; no security deposit was required, and the rent was about 1/5 of the receiver’s operating costs. 

            Receiver sought, and the trial court granted, permission to raise the lease rates to market rates.  The Appellate Court reversed on that point, construing 735 ILCS 5/15-1704(g) to permit rent increases for lessees only to the extent “necessary to operate, manage, and conserve the mortgaged real estate.”  It remanded for calculation of what the rate should be. 

 Welcoming Michael Duhn

Sharp-Hundley, P.C. is pleased to announce that Michael A. Duhn, formerly of Chicago, has joined the firm as an associate.

An Evansville, IN, native, Duhn holds both Juris Doctor and Doctor of Legal Letters degrees from the John Marshall Law School in Chicago.  He also holds a Master of Public Administration from Wichita State University and a Master of Business Administration from Salem International University.  He did his undergraduate work at Benedictine College, concentrating in business administration and pre-law. 

While at John Marshall, Duhn was a founding board member of the Intellectual Property Law Society, a member of the Business Enterprise Law Clinic, a representative on the Student Bar Association, and a moot court and mock trial participant.  He also concentrated his studies in international trade, corporate and finance law. 

While at Benedictine, he was the founder of the wrestling club and captain of the cross country team. 

“We are very happy that Michael is joining us,” said Sharp-Hundley President John Hundley.  “We look forward to his many contributions to our practice and our clients.” 

At Sharp-Hundley, Duhn will concentrate his practice in business transactions, creditors’ rights, real estate, estate planning, probate and related matters.  He may be reached at our Mt. Vernon office, 618-242-0200, Mduhn@sharp-hundley.com.

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            The court’s holding applied only to tenants with leases.  It noted that under 735 ILCS 5/15-1704(b)(1), a receiver may execute new leases on “terms …  reasonable and customary for the type of use involved”.

            On appeal, the receiver challenged the validity of the sweetheart leases, but the panel said it could not hear that challenge because of the limited scope of review in such middle-of-the-case appeals. 

Quash Deadline Tolled While Case Is DWP

            The deadline to file a motion to quash in a residential foreclosure case (735 ILCS 5/15-1505.6(a)) is tolled while a case is dismissed for want of prosecution, the Illinois Supreme Court has held.

            Ruling in Bank of N.Y. Mellon v. Laskowski, 2018 IL 121995, the court said the statute, which requires that a motion to quash be filed within 60 days of a defendant’s first appearance in a case, necessarily requires that the residential foreclosure case be pending for those 60 days.  In Laskowski, the trial court DWP’d the case for some 45 days, making the defendant’s motion on the 90th day timely. 

                                                                               – John T. Hundley, john@sharp-hundley.com, 618-242-0200

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