2014 IL App (3d) 130107
Opinion filed January 30, 2014
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2014
CITIMORTGAGE, INC., Assignee of ) Appeal from the Circuit Court Mortgage Electronic Registration Systems, ) of the 12th Judicial Circuit, Inc., as Nominee for Draper and Kramer ) Will County, Illinois Mortgage Corporation, ) ) Plaintiff-Appellee, ) ) v. ) ) Appeal No. 3-13-0107 SHERRIE L. SHARLOW, ) Circuit No. 09-CH-6246 ) Defendant-Appellant ) ) (American General Financial Services of ) Illinois, Inc., Under Mortgage Recorded as ) Document Number R2006087225; and ) Marquette's Estates Homeowners ) Honorable Association, ) Richard J. Siegel, ) Judge, Presiding. Defendants).
JUSTICE CARTER delivered the judgment of the court, with opinion. Justice Holdridge concurred in the judgment and opinion. Justice O'Brien dissented, with opinion.
OPINION
¶1 About 22 months after the judicial foreclosure sale of her property was confirmed by the
trial court, defendant, Sherrie L. Sharlow, filed a petition under section 2-1401 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West 2012)) to modify the order confirming the
sale, alleging that a surplus existed from the sale of her property and that she was entitled to that
surplus. Plaintiff, the mortgagee that had foreclosed upon the property and that had purchased
the property at the sheriff's sale, opposed the petition, claiming that no surplus existed and that
the unallocated amount, over $10,000, was attributable to accrued postjudgment interest and
additional costs and advances that plaintiff was due. Following a hearing, the trial court denied
defendant's section 2-1401 petition. Defendant appeals. We affirm the trial court's judgment.
¶2 FACTS
¶3 Defendant owned certain real property in Romeoville, Will County, Illinois. The
property had a mortgage on it, upon which defendant defaulted. Plaintiff received an assignment
of the mortgage and later, in December 2009, filed a complaint to foreclose upon the mortgage.
During the foreclosure proceedings, defendant was personally served, did not appear, and was
eventually defaulted. On February 25, 2010, the trial court entered a judgment of foreclosure
and order of sale of the property (collectively referred to as the judgment, the judgment of
foreclosure, or the foreclosure judgment). The judgment listed the total amount of indebtedness
as $208,189.93, which included principal of $183,786.61; accrued interest of $13,042.15; and
certain fees, costs, and advances of $11,361.17. Included in the total amount of the indebtedness
listed was plaintiff's reasonable attorney fees of $1,125. In addition, the foreclosure judgment
provided that plaintiff was entitled to collect any nonreimbursed postjudgment costs that it
incurred in connection with the sale of the property and the perfection of the certificate of sale
and was also entitled to collect postjudgment interest of 9% per year from the date of the
foreclosure judgment until the date of sale. Furthermore, the foreclosure judgment contained
language pursuant to Illinois Supreme Court Rule 304(a) (eff. Jan. 1, 2006) that there was no just
2 reason to delay enforcement or appeal of the judgment.
¶4 The redemption period expired on June 27, 2010. On August 25, 2010, the property was
sold at a sheriff's sale. Prior to the sale, a notice was mailed to defendant, although there is no
indication in the record as to whether that notice was received. Notice was also given by
publication, and a certificate of publication was filed in the trial court. Plaintiff purchased the
property at the sale with a winning bid of $219,624.17, and later assigned the certificate of sale
to the United States Department of Housing and Urban Development (HUD). The sheriff's
report from the sale indicated that the money received was to be distributed as follows: $15 to
the clerk of the court; $1,146.73 to the sheriff's office for various fees, commissions, and
expenses; $25.75 to the recorder of deeds; and the remaining balance of $218,436.69 to plaintiff,
which included attorney fees of $1,125 per the judgment of foreclosure and postjudgment
advances of $1,006.55.
¶5 Plaintiff moved to confirm the sale and provided notice by mail to defendant, although
there is no indication in the record as to whether that notice was received. On October 21, 2010,
an order was entered confirming the sale and approving the disbursement of the proceeds as
provided for in the sheriff's report. The order indicated that the trial court found that there was
no surplus or deficiency from the sale and that the proceeds of the sale were sufficient to pay the
amount due to plaintiff in full. The order also contained a Rule 304(a) finding that there was no
just reason to delay enforcement or appeal of the order. After the sale was confirmed, the sheriff
issued a deed to the subject property to HUD on January 3, 2011, and HUD later recorded the
deed on March 25, 2011.
¶6 On August 9, 2012, defendant filed a section 2-1401 petition to modify the order
3 confirming the sale.1 In the petition, defendant alleged that she was initially unaware that the
property had been sold; that during the spring and summer of 2010, she had participated in loan
modification discussions with plaintiff and had obtained permission to complete a short sale of
the property; that she had contacted a real estate agent in July 2010 to list the property and was
later told by the agent that the property had been sold; that upon inquiring further, defendant was
assured by plaintiff that no sale had been conducted; that an examination of the sheriff's report
and the order confirming the sale showed that there was a surplus of over $10,000 from the sale
of the subject property; that despite that surplus, the order confirming the sale incorrectly stated
that there was no surplus or deficiency; that defendant was not notified of the surplus or aware of
the sale or the surplus; that sometime later, defendant received a federal income tax notice
relating to the sale of the subject property; and that as a result of the federal tax notice, defendant
was required to amend her tax filings and to pay income tax on a surplus from the sale, which
she never received. Defendant also alleged that because her petition was in the nature of a bill of
review to correct an obvious legal error, she was not required to establish due diligence.
Defendant attached to her petition an affidavit in which she attested to the facts set forth in the
petition. Defendant also attached a copy of the tax notice she received.
¶7 Plaintiff filed a response and opposed the petition. In its response, plaintiff alleged that
defendant had failed to show due diligence, that no surplus had been generated, and that the
unallocated discrepancy in the amount was attributable to accrued interest of $9,240.21 and
additional postjudgment fees, costs, and advances of $1,006.55 to which plaintiff was entitled.
1 It appears that the same section 2-1401 petition was filed again in the trial court on
October 5, 2012.
4 Plaintiff attached to the response an itemized list of its fees, costs, advances.
¶8 Defendant filed a reply and asserted that she had filed the section 2-1401 petition within
a reasonable time after she had learned that a sale of the property had supposedly provided her
with taxable income; that she was not required to establish due diligence since she was only
raising errors of law and other matters appearing of record; that plaintiff was not allowed to
collect postjudgment interest under the law; that plaintiff could not explain away the surplus or
why it reported a surplus to the Internal Revenue Service; and that plaintiff's explanation
included additional prejudgment fees, costs, and advances of $1,521.50 that were not made a part
of the record until plaintiff responded to the petition and postjudgment interest of $9,240.21 that
was not permitted under the law.2
¶9 A hearing was held on the petition over two days in November 2012 and January 2013.
No evidence was presented at the hearing, other than the information from the sheriff's files in
the case, which had been requested by the trial court. After listening to the arguments of the
attorneys, the trial court found that defendant was not required to establish due diligence but
ultimately denied defendant's section 2-1401 petition. Defendant appealed.
2 In calculating the amount that plaintiff received from the sale, it appears that defendant
counted the amount of plaintiff's attorney fees twice. That amount was already included in the
total amount of the indebtedness listed in the foreclosure judgment. Thus, we believe that the
two amounts that plaintiff received that are in dispute in this appeal are $9,240.21 in
postjudgment interest and $1,006.55 in postjudgment costs and advances. Other than when
referencing defendant's argument on appeal, we will use those two amounts throughout this
opinion as the amounts that are in dispute.
5 ¶ 10 ANALYSIS
¶ 11 Defendant argues on appeal that the trial court erred in finding that there was no surplus
from the sheriff's sale of the property and in denying on that basis defendant's section 2-1401
petition to modify the order confirming the sale. Defendant asserts that a surplus existed and
that her petition should have been granted because the unallocated amount in the sheriff's report
at the confirmation hearing could not have been attributed to plaintiff's postjudgment interest and
costs since postjudgment interest was not allowable under the law and since plaintiff presented
no evidence as to any additional costs that it had incurred. Defendant asks, therefore, that we
reverse the trial court's order dismissing or denying her section 2-1401 petition and that we
remand this case for further proceedings, which would include the trial court issuing the surplus
amount to defendant.
¶ 12 Plaintiff argues that the trial court's ruling was proper and should be affirmed. In support
of its argument, plaintiff asserts that: (1) defendant's petition was barred as a matter of law under
section 15-1509(c) of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1509(c) (West
2012)) because title to the property had already been transferred to HUD; (2) defendant's petition
was properly dismissed or denied as a matter of law because defendant failed to establish that
she had exercised due diligence in presenting her claim in the original action or in filing her
section 2-1401 petition; (3) plaintiff was entitled to 9% postjudgment interest as provided for in
the foreclosure judgment and as allowed under the law; and (4) the evidence in the record was
sufficient to establish that the indebtedness due on the date of the sale was the exact amount that
was bid by plaintiff and that the unallocated amount was attributable to additional funds that
were due to plaintiff for postjudgment interest and costs.
¶ 13 As to the application of section 15-1509(c), defendant responds first that plaintiff has
6 forfeited that assertion by failing to raise it in the trial court. Second, and in the alternative,
defendant responds that even if plaintiff's assertion is not forfeited, defendant should still prevail
because, although section 15-1509(c) prevents a party from contesting title, it does not prevent a
party from contesting the distribution of the sale proceeds, which is what defendant is seeking to
do in the instant case. As to plaintiff's due-diligence assertion, defendant responds first that due
diligence was not required because her petition was in the nature of a bill of relief, and, second,
and in the alternative, that if due diligence was required, she presented sufficient factual
information to establish that she acted diligently upon learning that she was being assessed a tax
liability due to an alleged surplus generated from the sale. In making those responses, defendant
notes that the trial court agreed with her and found that due diligence was not required.
Defendant notes further that under the law, the due-diligence requirement may be relaxed where
justice so requires.
¶ 14 The appellate court applies a de novo standard of review in cases in which the trial court
either dismissed a section 2-1401 petition or ruled on the petition based on the pleadings alone,
without an evidentiary hearing. People v. Vincent, 226 Ill. 2d 1, 18 (2007). As the trial court's
denial of the section 2-1401 petition in the present case was made without an evidentiary
hearing, we will apply a de novo standard of review. See id. In addition, to the extent that we
are called upon to resolve questions of statutory interpretation in our resolution of this issue, we
will consider those questions under a de novo standard of review as well. See Gaffney v. Board
of Trustees of the Orland Fire Protection District, 2012 IL 110012, ¶ 50.
¶ 15 As a preliminary matter, we must first address plaintiff's assertion on appeal that
defendant's section 2-1401 petition was barred as a matter of law under section 15-1509(c) of the
Mortgage Foreclosure Law (735 ILCS 5/15-1509(c) (West 2012)) because prior to the filing of
7 the section 2-1401 petition, a deed to the property had been issued by the sheriff to HUD and had
been recorded. As defendant correctly points out, however, plaintiff has forfeited that assertion
by failing to raise it in the trial court proceedings. Norway Tree Farm, Inc. v. Baugher, 8 Ill.
App. 3d 1061, 1062 (1972) ("issues, questions, points or contentions not presented in the trial
court and properly preserved for review will not be considered on appeal"). Even if that
assertion had not been forfeited, we would have rejected it as defendant did not seek to set aside
the foreclosure judgment or the sale of the property. Defendant's only claim was as to the
proceeds from the sale, a claim that was not barred by section 15-1509(c). See First Bank &
Trust Co. of O'Fallon v. King, 311 Ill. App. 3d 1053, 1058-60 (2000) (in a mortgage foreclosure
proceeding, the appellate court pointed out that under section 15-1509(c) of the Mortgage
Foreclosure Law, the debtor could only claim an interest in the proceeds of the sale, not an
interest in the property itself). To the extent that plaintiff relies upon U.S. Bank National Ass'n v.
Prabhakaran, 2013 IL App (1st) 111224, in support of its assertion to the contrary, we believe
that plaintiff's reliance is misplaced. Unlike defendant in the present case, the mortgagor in
Prabhakaran sought to vacate the foreclosure decree and the order confirming sale and did not
limit her claim to only an interest in the proceeds from the sale. See Prabhakaran, 2013 IL App
(1st) 111224, ¶¶ 1, 16. Thus, we believe that the facts of Prabhakaran are distinguishable from
the facts of the instant case.
¶ 16 As a second preliminary matter, we must also address plaintiff's claim on appeal that
defendant's section 2-1401 petition was properly denied or dismissed as a matter of law because
defendant failed to establish due diligence. While it is true that in general, a section 2-1401
petitioner must establish due diligence in both contesting the underlying action and in bringing
the section 2-1401 petition (Paul v. Gerald Adelman & Associates, Ltd., 223 Ill. 2d 85, 94
8 (2006)), we agree with the trial court and with defendant that due diligence is not required under
the law when the section 2-1401 petition is in the nature of a bill of review (Aurora Loan
Services, LLC v. Pajor, 2012 IL App (2d) 110899, ¶ 19). In reaching that conclusion, we note,
however, that if due diligence had been required in this case, we would have found that
defendant had satisfied that requirement. The evidence established that defendant, who
apparently had no intention of contesting the foreclosure or the sale of her property, promptly
filed her section 2-1401 petition after she received a tax notice from the plaintiff relating to the
sheriff's sale and learned that there was a possible surplus from the sale and that she had a
potential tax liability from that surplus.
¶ 17 Having determined that defendant's section 2-1401 petition was not barred by section 15-
1509(c) of the Mortgage Foreclosure Law or by the due diligence requirement, we turn now to
the more substantive questions raised in the issue presented. The first of which is whether
plaintiff was legally entitled to collect postjudgment interest, which had allegedly accrued from
the date of the foreclosure judgment to the date of the sheriff's sale.3 Under the Mortgage
Foreclosure Law, there is no specific statutory section that provides for the collection of
postjudgment interest from the date of the foreclosure judgment to the date of the sheriff's sale.
Postjudgment interest is not specifically referenced, or even implied, in the statutory sections
that address the foreclosure judgment itself (735 ILCS 5/15-1506 (West 2012)), the sheriff or
judicial sale (735 ILCS 5/15-1507 (West 2012)), the report of and confirmation of that sale (735
ILCS 5/15-1508 (West 2012)), or the application of the sale proceeds (735 ILCS 5/15-1512
3 Defendant does not dispute the total amount of the interest or the interest rate but only
whether plaintiff was legally entitled to collect that interest in the first place.
9 (West 2012)). Postjudgment interest, however, is addressed in the statutory section on
redemption (735 ILCS 5/15-1603 (West 2012)). Under that section, a person who redeems the
property within the redemption period must pay postjudgment interest for the period from the
date of the foreclosure judgment to the date of redemption at the contract interest rate provided
for in the mortgage documents or loan agreement. 735 ILCS 5/15-1603(d)(1)(vi) (West 2012).
¶ 18 The Mortgage Foreclosure Law, however, also incorporates and includes application of
the provisions of article II of the Code to the extent that those provisions are not contrary to the
provisions of the Mortgage Foreclosure Law. See 735 ILCS 5/15-1107(a) (West 2012). Under
article II of the Code, there is a statutory section that specifically addresses postjudgment
interest. Section 2-1303 of the Code provides that "[j]udgments recovered in any court shall
draw interest at the rate of 9% per annum from the date of the judgment until satisfied." 735
ILCS 5/2-1303 (West 2012). Thus, the question in this case becomes whether the foreclosure
judgment was a judgment as referenced in section 2-1303 of the Code, upon which postjudgment
interest could be collected. The answer to that question, as framed by the parties' arguments in
this case, is controlled by whether the judgment of foreclosure is a final and appealable
judgment.
¶ 19 The general rule in Illinois is that a foreclosure judgment (and order of sale) is not a final
and appealable judgment because it does not dispose of all of the issues between the parties and
does not terminate the litigation. In re Marriage of Verdung, 126 Ill. 2d 542, 555-56 (1989);
Wells Fargo Bank, NA v. Heritage Bank of Central Illinois, 2013 IL App (3d) 110706, ¶ 11; JP
Morgan Chase Bank v. Fankhauser, 383 Ill. App. 3d 254, 260 (2008). Rather, it is the order
confirming or approving the sale that conclusively establishes the purchaser's right to the
property and gives final approval to the proposed distribution of the sale proceeds and that
10 constitutes the final and appealable order in a foreclosure case. Id. That general rule, however,
does not apply where the trial court has made a Rule 304(a) finding that there is no just reason to
delay enforcement or appeal of the foreclosure judgment. See id. Under those circumstances, a
judgment of foreclosure is a final and appealable judgment. Verdung, 126 Ill. 2d at 555-56;
Fankhauser, 383 Ill. App. 3d at 260.
¶ 20 In the present case, the foreclosure judgment contained Rule 304(a) language and was,
therefore, a final and appealable judgment. See id. Because there is no provision in the
Mortgage Foreclosure Law barring the collection of postjudgment interest and because the
Mortgage Foreclosure Law specifically incorporates article II of the Code, section 2-1303
applies and, pursuant to that section, plaintiff was entitled to collect postjudgment interest from
the date of the foreclosure judgment until the date of the sale.4 See Carson v. Rebhan, 294 Ill.
App. 180, 182-83 (1938) (in a mortgage foreclosure case, the appellate court held that interest
should have been calculated on the principal at the contract rate until the date of the foreclosure
decree and at the statutory legal rate for judgments after that date); In re Daniels, 102 B.R. 680,
683 (Bankr. N.D. Ill. 1989) (the district court recognized that under Illinois law in a mortgage
4 We take no position on whether plaintiff's collection of interest from the date of the
foreclosure judgment to the date of the sheriff's sale would have been proper without the addition
of a Rule 304(a) finding in the foreclosure judgment, as that issue has not been presented to this
court in this case. See Illinois State Toll Highway Authority v. Heritage Standard Bank & Trust
Co., 157 Ill. 2d 282, 295-301 (1993) (discussing prejudgment and postjudgment interest under
section 2-1303 of the Code).
11 foreclosure proceeding, interest accrues at the contract rate until the judgment of foreclosure and
at the statutory legal rate under section 2-1303 of the Code after that point).
¶ 21 In reaching the conclusion that plaintiff was legally entitled to collect the postjudgment
interest in question, we must comment upon the case of Standard Bank & Trust Co. v.
Callaghan, 215 Ill. App. 3d 76 (1991), a case which is heavily relied upon by defendant on
appeal. Although as defendant correctly points out, the appellate court in Standard Bank
rejected a mortgagee's claim for statutory postjudgment interest under section 2-1303 of the
Code, it did so based upon a prior version of the mortgage law in Illinois, which allowed for the
entering of a conditional judgment of balance due when a deficiency existed. See Standard
Bank, 215 Ill. App. 3d at 81. According to the appellate court in that case, the conditional
judgment was not considered to be a judgment for which the borrower was personally liable (a
personal judgment against the borrower) but, rather, was to be interpreted as an alternative
decree as to the amount the borrower had to pay to avoid a foreclosure sale of the property. See
id. That holding has no application in the present case where neither a conditional judgment nor
a deficiency is involved.
¶ 22 The other substantive question raised in the issue presented is whether plaintiff was
entitled to certain postjudgment costs and advances without presenting any evidence at or prior
to the time of the order confirming the sale as to what specifically those costs or advances were.
We believe that under the facts of the particular case, reimbursement of plaintiff's postjudgment
costs and advances was appropriate. Under section 15-1508 of the Mortgage Foreclosure Law,
the order confirming the sale of foreclosed property may also approve the mortgagee's
postjudgment fees and costs to the extent that they are provided for in the note and mortgage and
sought by the mortgagee in the proceedings. 735 ILCS 5/15-1508(b)(1), 15-1504 (West 2012).
12 In its complaint for foreclosure in the present case, plaintiff sought to be reimbursed for its
reasonable attorney fees, costs, and advances. Plaintiff's attorney fees and its prejudgment costs
and advances were included in the amount of the indebtedness listed in the foreclosure judgment.
In addition, pursuant to section 15-1508 and the provisions of the foreclosure judgment, plaintiff
was allowed to be reimbursed for its postjudgment costs and advances. See 735 ILCS 5/15-1508
(West 2012). The amount of the postjudgment costs and advances, although not itemized, was
specifically listed in the sheriff's report and approved by the trial court when the trial court
approved and confirmed the sale of the property and the disbursement of the proceeds. Thus, we
find that the reimbursement of plaintiff's costs and advances from the proceeds of the sheriff's
sale was proper in the present case and we reject defendant's argument to the contrary.
¶ 23 CONCLUSION
¶ 24 For the foregoing reasons, we affirm the judgment of the circuit court of Will County.
¶ 25 Affirmed.
¶ 26 JUSTICE O'BRIEN, dissenting.
¶ 27 I dissent from the majority because I do not believe postjudgment interest can accrue
until it is determined whether the collateral is sufficient to satisfy the debt secured by the
mortgage.
¶ 28 I agree that mortgagees are entitled to postjudgment interest under section 2-1303 of the
Code of Civil Procedure (735 ILCS 5/2-1303 (West 2010)). My disagreement with the majority
opinion stems from the point of time when postjudgment interest may begin to accrue in this
setting. Pursuant to the statute on judgment interest, interest shall be computed and charged only
on the unsatisfied portion of the judgment. 735 ILCS 5/2-1303 (West 2010).
13 ¶ 29 In a mortgage foreclosure case, there is no determination about whether there is an
outstanding judgment until such time as the mortgaged property is sold in accordance with the
mortgage foreclosure statute. See 735 ILCS 5/15-1508(b)(2) (West 2010) (it is the order
confirming sale that may provide for a personal judgment against any party for a deficiency).
Only after the sheriff's sale can it be determined whether the debt will be satisfied or whether
there is some portion that remains due and owing to the mortgagee to which postjudgment
interest can be applied. See Standard Bank & Trust Co. v. Callaghan, 215 Ill. App. 3d 76
(1991); see also Thatch v. Missouri Pacific R.R. Co., 69 Ill App. 3d 48 (1979) (a defendant
should not be held responsible for a judgment and its accrued interest until the extent of that
liability is settled).
¶ 30 In cases where the proceeds from the sheriff's sale of the mortgaged property do not
satisfy the debt owed to the mortgagee, it is entirely appropriate to calculate postjudgment
interest commencing with the date of the entry of the judgment of foreclosure. This is because
the sheriff's sale has determined the fair market value of the property. See Weiner v. Landry,
131 Ill. App.2d 221 (1970). If, however, the sale of the mortgaged property fully satisfies the
debt, the judgment is likewise satisfied and it is inappropriate to invoke the provisions of the
postjudgment interest act. That is what happened here.
¶ 31 Once the judgment for foreclosure was entered in this case, the mortgagee obtained the
right to the mortgaged property, subject only to the right of redemption of the defendant (which
too would have guaranteed full satisfaction of the debt to the mortgagee). Since the defendant
did not redeem, the mortgagee exercised its right to sell the mortgaged property and apply the
sale proceeds to the debt. In an unusual turn of events, the mortgaged property was sold for an
amount that exceeded the amount of the debt. As such, there was no unsatisfied judgment owed
14 by the defendant. Generally, when there is a default upon a debt secured by a mortgage, the
lender should be made whole but not better than he or she would have been had the contract been
fully performed. 55 Am. Jur. 2d Mortgages § 573 (2013). Because the mortgaged property was
of sufficient value to make the mortgagee whole, I would find the award of postjudgment
interest inappropriate. To that end, I would reverse the judgment of the trial court and remand to
the trial court for a hearing to determine the proper allocation of the proceeds from the sale of
the property.