Mortgage Law Roundup

Sharp  Thinking

No. 188 _Perspectives on Developments in the Law from Sharp-Hundley, P.C. _ September 2020

Attacks On Void Judgment Rule Continue Apace

By John T. Hundley, john@sharp-hundley.com

Attacks on the principle that a void judgment may be attacked at any time continue apace in the Appellate Court’s Second District.

In April, JPMorgan Chase Bank, N.A. v. Robinson, 2020 IL App (2d) 190275, limited the doctrine where defendant to a mortgage foreclosure action claimed service upon him was invalid because the process server served the summons without a special appointment.  The Second District follows the rule that the place of service, not the place of issuance, controls on whether the server must be appointed, as required in Cook County.  See Sharp Thinking No. 185 (July 2020). In Robinson, the Second District said the voidness rule only applied where the lack of jurisdiction was apparent from the face of the court file – and since other materials were required to know that Chicago, IL 60623 was in Cook County, the voidness rule did not apply.

Then, on August 28, 2020, a panel said the voidness rule was inapplicable where the file reflected that a process server served summons three days before the appointment order was entered.  PNC Bank, N.A. v. Kusmierz, 2020 IL App (2d) 190521.  Taking a page from Robinson, Kusmierz said that a “request that we take judicial notice that Palatine’s 60067 zip code lies exclusively in Cook County requires us to go beyond the face of the record.” Foreshadowing Federal Nat’l Mort. Ass’n v. Altamirano, 2020 IL App (2d) 190198, decided three days later, Kusmierz utilized the doctrine of laches and the fact of a six-year delay to defeat an attack upon the bank that foreclosed.

Finally, in Altamirano the Second District held that the rule that an “et al.” summons (i.e., a summons that does not name all defendants) is invalid and results in a void judgment (see Sharp Thinking No. 135 (October 2016)) was subject to avoidance under the doctrine of laches. 

            Admittedly, the facts in Altamirano were egregious.  Apparently none of the defendants denied that they actually were served in the foreclosure proceedings.  And they waited until six years after they had been evicted in post-judgment proceedings before challenging the foreclosure judgment and confirmation under the void judgment rule.  Still, the defect at issue – the et al. summons – would have been apparent in the court file and one would have thought that “at any time” meant at any time.

Not according to the Second District panel.  “Recent cases from this district have recognized the possibility that a party’s lack of diligence could deprive them [sic] of the ability to raise the issue of whether a judgment is void,” it said.  Moreover, it reasoned, “the mere fact that petitioners [in proceedings under 735 ILCS 5/2-1401] contend the underlying judgment is void does not render laches inapplicable.”

Furthermore, the panel said “laches is a species of estoppel” and “petitioners are being estopped from asserting the invalidity of the judgment by their lack of diligence and the prejudice it caused” (third parties had purchased the property in the interim).  “In short,” it said, “we hold that petitioners’ claim is barred by laches regardless of whether the trial court’s judgment was void because the court lacked personal jurisdiction over petitioners.”

Deed Delivery Precludes Review Of Confirmation Issue: Court

Delivery of the deed to a third-party buyer following a foreclosure sale bars review of an allegedly erroneous confirmation of sale, a panel of the Appellate Court in Chicago has ruled.

Acting in Deutsche Bank Nat’l Trust Co. v. Cortez, 2020 IL App (1st) 192234, the panel dealt with a situation where the debtor-defendant argued he had a mortgage modification agreement with the creditor and the panel agreed that “confirming a judicial sale where such an agreement was in place would be inequitable and would arguably fall within the ‘justice not otherwise done’ clause of [735 ILCS 5/15-1508(b)(iv)].”  It said the proper course of action “would have been for the circuit court to conduct an evidentiary hearing regarding the status of defendant’s loan modification prior to confirming the sale”.

However, it declined to order such proceedings in light of the prompt issuance of the deed to the confirmed buyer.  “Therefore, ‘all claims of the parties to the foreclosure’ are barred,” the panel said, quoting 735 ILCS 5/15-1509(c). “This includes defendant’s claim that the circuit court abused its discretion when it confirmed the sale of the property, despite questions remaining regarding whether a final loan modification agreement had been executed”.  Because of § 15-1509(c), it said “we are precluded from vacating the order approving the sale”.

Cortez highlights how the Illinois Mortgage Foreclosure Law (IMFL) effectively cuts off a debtor’s appeal rights, perhaps more than the legislature intended.  The foreclosure judgment is not appealable, only the confirmation order is (EMC Mortgage Corp. v. Kemp, 2012 IL 113419).  But “promptly” after confirmation, the deed shall be issued to the buyer (§ 15-1509(a)).  And issuance of the deed to the buyer cuts off appellate review of the confirmation order (Cortez).  If Cortez is right, the debtor with a meritorious objection to the foreclosure proceedings needs an emergency motion to stay issuance of the deed – which hardly seems to be the result the legislature would have intended.

There is reason to think the legislature did not so intend.  IMFL § 15-1509(a) provides that “[i]f the deed issues to a grantee prior to expiration of the period for appealing the confirmation of the sale, and the grantee conveys title to another within that period, that other party will not be deemed a bona fide purchaser unless and until such period expires without an appeal having been filed or, an appeal having been filed, such appeal is denied or withdrawn.”  That seems to suggest that foreclosure buyers are presumed to take subject to the defendant’s appeal rights.