Adler v. Bayview Loan Servicing, LLC

2020 IL App (2d) 191019

Opinion

2020 IL App (2d) 191019 No. 2-19-1019 Opinion filed December 29, 2020 ______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT ______________________________________________________________________________

RONALD ADLER and LISA ADLER, ) Appeal from the Circuit Court ) of Kendall County. Plaintiffs-Appellants, ) ) v. ) No. 19-L-31 ) BAYVIEW LOAN SERVICING, LLC, ) and THE BANK OF NEW YORK ) MELLON, ) Honorable ) Stephen L. Krentz, Defendants-Appellees. ) Judge, Presiding. ______________________________________________________________________________

JUSTICE BRENNAN delivered the judgment of the court, with opinion. Justices McLaren and Jorgensen concurred in the judgment and opinion.

OPINION

¶1 Defendant the Bank of New York Mellon (BONY), at a prior foreclosure proceeding

against plaintiffs, Ronald and Lisa Adler, obtained a judgment of foreclosure and an order

confirming the judicial sale of plaintiffs’ home. Plaintiffs then filed claims under the Real Estate

Settlement Procedures Act of 1974, as amended (RESPA) (12 U.S.C. § 2605 (2012); 12 C.F.R.

§§ 1024.36, 1024.41 (2014)) and the Consumer Fraud and Deceptive Business Practices Act

(Fraud Act) (815 ILCS 505/2 (West 2014)) alleging that BONY and defendant Bayview Loan

Servicing, LLC (Bayview), engaged in misconduct arising out of the foreclosure proceeding.

Defendants filed a motion to dismiss under section 2-619 of the Code of Civil Procedure (735 2020 IL App (2d) 191019

ILCS 5/2-619 (West 2018)) on the grounds that plaintiffs’ claims were barred by section 15-

1509(c) of the Illinois Mortgage Foreclosure Law (id. § 15-1509(c)) and by res judicata. The trial

court granted defendants’ motion to dismiss on both grounds. We affirm on the basis that plaintiffs’

claims are barred by section 15-1509(c), and we do not reach the res judicata arguments.

¶2 I. BACKGROUND

¶3 In 2005, plaintiffs executed a mortgage loan to purchase a home. The interest in the

mortgage was eventually assigned to BONY. After plaintiffs defaulted, BONY filed a foreclosure

action in 2010 and obtained a judgment of foreclosure in 2012. In February 2013, plaintiffs filed

for Chapter 7 bankruptcy and, in May 2013, obtained a discharge of their obligation, forestalling

the sale of their home by BONY.

¶4 In October 2013, Bayview acquired servicing rights to the mortgage loan and plaintiffs

submitted a loan-modification application to Bayview. In July 2014, plaintiffs submitted a second

loan-modification application to Bayview, which approved a “Trial Period Plan” requiring

plaintiffs to pay three installments of $2590.93 from September 2014 to November 2014 prior to

receiving a permanent loan-modification offer. Plaintiffs timely made the required three payments.

¶5 In December 2014, Bayview sent plaintiffs a permanent loan-modification offer that

referenced a monthly escrow payment but did not mention plaintiffs’ bankruptcy discharge.

Plaintiffs requested a breakdown of the proposed monthly payment and the addition of language

in the modification offer “to the effect that Bayview will not attempt to re-establish any personal

liability for the underlying debt as a result of the bankruptcy discharge.”

¶6 In April 2015, Bayview sent a letter indicating that the monthly payment amount in its

offer included a private mortgage insurance (PMI) premium, property taxes, and hazard insurance.

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Bayview also declined to add plaintiffs’ requested language to its offer, stating, “Bayview must

adhere to the investor guideline and as such, we cannot issue any forgiveness of debt.”

¶7 Plaintiffs sent a response, again requesting the added language, to which Bayview did not

reply. Instead, on August 18, 2015, plaintiffs received a notice that their home was to be sold at a

sheriff’s sale on September 28, 2015.

¶8 On September 8, 2015, plaintiffs filed motions to stay the sale and for leave to file a

counterclaim against BONY for breach of contract in the foreclosure court. In their proposed

counterclaim, plaintiffs alleged the following: (1) Bayview’s Trial Period Plan offer constituted a

contract offer, (2) plaintiffs’ timely payments under the plan constituted an acceptance, forming a

valid contract, (3) plaintiffs attempted to negotiate and clarify terms in Bayview’s subsequent

permanent loan modification offer, (4) Bayview refused to discuss further the terms of the new

offer, and (5) this refusal violated the implied covenants of good faith and fair dealing and

constituted a breach of contract. Thus, plaintiffs’ proposed counterclaim was premised on charges

that Bayview engaged in improper conduct during communications between plaintiffs and

Bayview from December 2014 to June 2015 regarding Bayview’s permanent loan-modification

offer.

¶9 As an aside, we note that plaintiffs attempted to file their counterclaim against BONY in

the foreclosure proceeding, where Bayview was not a named party. The proposed counterclaim,

however, alleged that Bayview breached its contract with plaintiffs. Further, BONY’s counsel

opposed plaintiffs’ motion for leave to file their proposed counterclaim but did not draw a

distinction between the legal interests of BONY and Bayview. and both parties are represented

jointly by counsel on appeal. We recognize, as do plaintiffs in their pleadings, that Bayview was

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acting as BONY’s agent during the time period relevant to plaintiffs’ RESPA and Fraud Act

claims.

¶ 10 On September 16, 2015, the foreclosure court held a hearing on plaintiffs’ motions.

Concluding that plaintiffs had become aware of defendants’ purported misconduct at least five

months before filing their motions, the foreclosure court denied both the request to stay the sale

and for leave to file a counterclaim, due to untimeliness. BONY subsequently purchased the home

at the judicial sale. The foreclosure court confirmed the sale on November 2, 2015, and BONY

was issued a deed on November 6, 2015.

¶ 11 On September 17, 2017, plaintiffs filed a complaint against BONY and Bayview in the

United States District Court for the Northern District of Illinois, alleging defendants violated

RESPA and the Fraud Act. Defendants filed a motion to dismiss on the ground that the federal

court lacked jurisdiction under the Rooker-Feldman doctrine, which prevents a federal court from

hearing a claim that is “inextricably intertwined” with a prior state court judgment when “the

plaintiff had a reasonable opportunity to raise the issue in state court proceedings.” Jakupovic v.

Curran, 850 F.3d 898, 902 (7th Cir. 2017). On September 18, 2018, the district court granted

defendants’ motion to dismiss on the ground that it lacked subject-matter jurisdiction under

Rooker-Feldman. Adler v. Bayview Loan Servicing, LLC, No. 17-c-6735, 2018 WL 4466394, at

*4 (N.D. Ill. Sept. 18, 2018). The court based its judgment, in part, on its finding that plaintiffs’

claimed injuries resulted from the foreclosure proceedings and that plaintiffs had a reasonable

opportunity to bring their claims in the foreclosure proceedings. Id.

¶ 12 On March 18, 2019, plaintiffs filed their complaint in this case in the circuit court. Plaintiffs

alleged that defendants violated (1) RESPA by conducting a foreclosure sale without following

the act’s procedural requirements (12 U.S.C. § 2605(k)(1)(E) (2012); 12 C.F.R. § 1024.41(g)

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(2014)), by failing to timely acknowledge receipt of various written information requests (12

U.S.C. § 2605(e)(1) (2012); 12 C.F.R. § 1024.36(a), (c) (2014)), and by failing to timely respond

to various written information requests (12 U.S.C. § 2605(e)(2) (2012); 12 C.F.R. § 1024.36(d)

(2014)); and (2) the Fraud Act by engaging in various unfair acts while plaintiffs sought a

permanent loan-modification offer following their default (815 ILCS 505/2 (West 2014)).

¶ 13 On August 2, 2019, defendants filed a motion to dismiss the complaint on three grounds:

(1) the claims were barred by a prior judgment, specifically the vesting of title by delivery of the

deed upon the sale of the home (735 ILCS 5/2-619(a)(4), (a)(9), 15-1509(c) (West 2018)); (2) the

claims were barred by res judicata (id. § 2-619(a)(4), (9)); and (3) the claims were barred by the

applicable statutes of limitations (id. § 2-619(a)(5); 12 U.S.C. § 2614 (2018); 815 ILCS 505/10a(e)

(West 2018)). On October 24, 2019, the trial court granted defendants’ motion to dismiss on the

grounds that plaintiffs’ claims were barred by section 15-1509(c) and by res judicata. Plaintiffs

timely appealed.

¶ 14 II. ANALYSIS

¶ 15 Plaintiffs raise several arguments on appeal. First, they argue that the trial court erred by

granting the motion to dismiss pursuant to section 15-1509(c) of the Mortgage Foreclosure Law,

because that provision bars only claims that challenge the foreclosure judgment or the order

confirming the judicial sale in the underlying foreclosure proceeding. Plaintiffs insist that their

RESPA and Fraud Act claims did neither. Plaintiffs also argue that the trial court erred by granting

the motion to dismiss on res judicata grounds and that, alternatively, defendants should be

judicially estopped from arguing for the application of res judicata. Because we conclude that

plaintiffs’ claims were barred by section 15-1509(c) and affirm, we do not address the res judicata

ruling.

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¶ 16 We review de novo the trial court’s dismissal of a complaint under section 2-619 of the

Code of Civil Procedure. Dinerstein v. Evanston Athletic Clubs, Inc., 2016 IL App (1st) 153388,

¶ 13. Further, “the court is obligated to construe the pleadings and supporting documents in the

light most favorable to the nonmoving party, and to accept as true all well-pleaded facts in the

plaintiff’s complaint.” Sandler v. Sweet, 2017 IL App (1st) 163313, ¶ 9. The trial court granted

defendants’ motion to dismiss pursuant to section 2-619(a)(9) on the ground that the claims were

barred by the vesting of title by delivery of the deed under section 15-1509(c) of the Mortgage

Foreclosure Law and pursuant to section 2-619(a)(4) on the ground that the claims were barred by

res judicata.

¶ 17 Initially, we consider whether the trial court erred in concluding that section 15-1509(c) of

the Mortgage Foreclosure Law bars plaintiffs’ claims. Plaintiffs contend that a commonsense

reading of section 15-1509(c) bars only subsequent attacks on the foreclosure judgment.

Defendants counter that the plain language of section 15-1509(c), barring “all claims,” means

exactly what it says. We review de novo issues of statutory construction. Dynak v. Board of

Education of Wood Dale School District 7, 2020 IL 125062, ¶ 15 (plurality opinion).

¶ 18 When interpreting a statute, the court’s primary goal is to give effect to the legislature’s

intent. Id. ¶ 16. The plain language is the best indicator of legislative intent, but courts should

consider language in the context of the entire statute rather than read it in isolation. United States

v. Glispie, 2020 IL 125483, ¶¶ 9-10. Courts should also “consider the reason for the law, the

problem sought to be remedied, the goals to be achieved, and the consequences of construing the

statute one way or another.” Id. ¶ 10. If language is unambiguous, it should be applied as written,

but courts presume that the legislature did not intend inconvenience, injustice, or absurdity to

result. Dynak, 2020 IL 125062, ¶ 16.

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¶ 19 Section 15-1509, titled “Transfer of Title and Title Acquired,” specifically provides

procedures for the transfer of title after confirmation of a judicial sale. 735 ILCS 5/15-1509 (West

2018). Subsection (c) bars claims after a deed is transferred following a judicial sale, providing as

follows:

“(c) Claims Barred. Any vesting of title by a consent foreclosure pursuant to

Section 15-1402 or by deed pursuant to subsection (b) of Section 15-1509, unless otherwise

specified in the judgment of foreclosure, shall be an entire bar of (i) all claims of parties

to the foreclosure and (ii) all claims of any nonrecord claimant who is given notice of the

foreclosure in accordance with paragraph (2) of subsection (c) of Section 15-1502,

notwithstanding the provisions of subsection (g) of Section 2-1301 to the contrary. Any

person seeking relief from any judgment or order entered in the foreclosure in accordance

with subsection (g) of Section 2-1301 of the Code of Civil Procedure may claim only an

interest in the proceeds of sale.” (Emphases added and emphasis in original.) Id. § 15-

1509(c).

¶ 20 Defendants contend that section 15-1509(c) is unambiguous and clearly bars “all claims”

of parties to the foreclosure following vesting of title by delivery of the deed in a foreclosure suit,

including those of the plaintiffs here. In support they cite various circumstances under which courts

have applied the section 15-1509(c) claim bar. Following a judgment of foreclosure and an order

confirming the judicial sale, section 15-1509(c) has been held to bar challenges to (1) orders

substituting the plaintiff (see Taylor v. Bayview Loan Servicing, LLC, 2019 IL App (1st) 172652,

¶ 17); (2) orders confirming the judicial sale (see id.; U.S. Bank National Ass’n v. Prabhakaran,

2013 IL App (1st) 111224, ¶ 30); (3) deficiency judgments (see Taylor, 2019 IL App (1st) 172652,

¶ 17; BMO Harris Bank National Ass’n v. LaRosa, 2017 IL App (1st) 161159, ¶ 22); and (4) the

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foreclosure judgment itself (see Prabhakaran, 2013 IL App (1st) 111224, ¶ 30). Defendants assert

that plaintiffs’ claims for money damages pursuant to RESPA and the Fraud Act should be

similarly barred under the plain language of section 15-1509(c).

¶ 21 Plaintiffs counter that such a reading is unjust and would result in absurdities. For example,

they argue that the reading urged by defendants would prohibit a bank from enforcing its rights

under an entirely separate mortgage executed by the same parties. This example, however, is

somewhat fanciful, as “all claims” is clearly limited to claims relating to the mortgage and property

specifically subject to the foreclosure proceeding at issue.

¶ 22 Turning to the text itself, plaintiffs suggest that section 15-1509(c) limits the scope of its

“all claims” language by clarifying in its last sentence that “[a]ny person seeking relief from any

judgment or order entered in the foreclosure *** may claim only an interest in the proceeds of

sale.” 735 ILCS 5/15-1509(c) (West 2018). Plaintiffs argue that the proceeds-litigation exception

to the claim bar demonstrates that the claim bar applies only to claims seeking relief from a

foreclosure judgment or an order confirming a judicial sale. This less expansive reading would

avoid the injustice of precluding plaintiffs from pursuing redress for the money damages they

suffered due to defendants’ purported RESPA and Fraud Act violations. Under plaintiffs’

construction of the statute, then, the above-referenced cases LaRosa, Taylor, and Prabhakaran are

inapplicable because plaintiffs are not in any way seeking to challenge the foreclosure judgment,

the judicial sale, or a deficiency judgment. Rather, they are seeking monetary damages based on

defendants’ conduct during the foreclosure proceedings, pursuant to RESPA and the Fraud Act.

¶ 23 To the extent that the proceeds-litigation exception in section 15-1509(c) renders the

meaning of “all claims” ambiguous, as plaintiffs argue, we consider section 15-1509(c) in the

context of the entire statute to ascertain the meaning of the “all claims” bar. See Glispie, 2020 IL

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125483, ¶¶ 9-10. The Mortgage Foreclosure Law provides that “ ‘[f]oreclosure’ means an action

commenced under this Article and ‘to foreclose’ means to terminate legal and equitable interests

in real estate pursuant to a foreclosure.” 735 ILCS 5/15-1203 (West 2018). Appearing under the

heading for part 14, “Methods of Terminating Mortgagor’s Interest in Real Estate,” section 15-

1404 provides as follows:

“Judicial Foreclosure. Except as provided in subsection (d) of Section 15-1501, the interest

in the mortgaged real estate of (i) all persons made a party in such foreclosure and (ii) all

nonrecord claimants given notice in accordance with paragraph (2) of subsection (c) of

Section 15-1502, shall be terminated by the judicial sale of the real estate, pursuant to a

judgment of foreclosure, provided the sale is confirmed in accordance with this Article.”

(Emphases added.) Id. § 15-1404.

Certainly, the contemplated termination of a mortgagor’s legal and equitable interests in the real

estate after a judicial sale is consistent with section 15-1509(c)’s claim bar.

¶ 24 We further consider section 15-1508, which provides a mechanism to contest a judicial

sale on various grounds that may be asserted after the sale but prior to the confirmation. Id. § 15-

1508. Subsection (b) permits a party to contest the sale on the grounds of improper notice,

unconscionable sale terms, fraud sale terms, or where “justice was otherwise not done.” (Emphasis

added.) Id. § 15-1508(b). Further, subsection (d-5) requires the court to set aside a sale prior to its

confirmation if, upon motion, “the mortgagor proves by a preponderance of the evidence that

(i) the mortgagor has applied for assistance under the Making Home Affordable Program *** and

(ii) the mortgaged real estate was sold in material violation of the program’s requirements for

proceeding to a judicial sale.” Id. § 15-1508(d-5). Collectively, subsections (b) and (d-5) provide

a statutory remedy under which a court may set aside a judicial sale if all statutory requirements

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are not met or if justice was otherwise not done. See MidFirst Bank v. Riley, 2018 IL App (1st)

171986, ¶ 39.

¶ 25 Considering the various provisions of the Mortgage Foreclosure Law together, we

conclude that the legislature intended section 15-1509(c) to preclude all claims of parties to the

foreclosure related to the mortgage or the subject property, except for claims regarding the interest

in the proceeds of a judicial sale. We also observe that judgments in a foreclosure proceeding

entered without subject-matter jurisdiction or personal jurisdiction over an aggrieved party are

invalid and thus unshielded by section 15-1509(c). Deutsche Bank National Trust Co. v. Brewer,

2012 IL App (1st) 111213, ¶ 15. The asserted unfairness of this interpretation is belied by the

various provisions in section 15-1508 for addressing “injustice” issues that might arise in the

course of foreclosure proceedings. Indeed, we note that plaintiffs sought to file a counterclaim in

the original foreclosure action, asserting breach of contract against Bayview based on Bayview’s

purported bad-faith refusal to negotiate the terms of its permanent loan-modification offer after

plaintiffs completed the Trial Period Plan. Leave to file this counterclaim, which raised the same

conduct alleged in the instant RESPA and Fraud Act actions, was denied on timeliness grounds

because plaintiffs waited until 20 days before the scheduled judicial sale, and at least five months

after they became aware of the facts that constituted the purported contract breach, to request leave.

Plaintiffs did not appeal the trial court’s ruling. We note that the proper time to raise the issues

plaintiffs now seek to litigate was in fact between the judgment of foreclosure and the confirmation

of the sale, as contemplated in section 15-1508. To the extent that plaintiffs did not pursue these

claims as contemplated, they are claim-barred pursuant to section 15-1509(c).

¶ 26 III. CONCLUSION

¶ 27 For the reasons stated, we affirm the judgment of the circuit court of Winnebago County.

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¶ 28 Affirmed.

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No. 2-19-1019

Decision Under Review: Appeal from the Circuit Court of Kendall County, No. 2019-L- 000031; the Hon. Stephen L. Krentz, Judge, presiding.

Attorneys Daniel Brown, of Main Street Attorney, LLC, of Chicago, for for appellants. Appellant:

Attorneys James V. Noonan and Robert E. Haney, of Noonan & for Lieberman, Ltd., of Chicago, for appellees. Appellee:

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