U.S. Bank National Assoc v. Hartman

2016 IL App (1st) 151556, 68 N.E.3d 1060

• Court: Appellate Court of Illinois
• Decided: December 30, 2016
• Docket: 1-15-1556
• Status: Unpublished

Opinion

2016 IL App (1st) 151556 No. 1-15-1556 Fifth Division December 30, 2016 ______________________________________________________________________________

IN THE APPELLATE COURT OF ILLINOIS FIRST DISTRICT ______________________________________________________________________________

) U.S. BANK NATIONAL ASSOCIATION, as ) Trustee for the Specialty Underwriting and Residential ) Finance Trust Mortgage Loan Asset-Backed Certificates ) Appeal from the Circuit Court Series 2006-BC3, ) of Cook County. ) Plaintiff-Appellee, ) No. 08 CH 16169 ) v. ) The Honorable ) Michael F. Otto, JOSEPH HARTMAN, ) Judge Presiding. ) Defendant-Appellant. ) ) ______________________________________________________________________________

PRESIDING JUSTICE GORDON delivered the judgment of the court, with opinion. Justices Lampkin and Reyes concurred in the judgment and opinion.

OPINION

¶1 The instant appeal arises from the trial court’s grant of summary judgment in favor of

plaintiff U.S. Bank on its foreclosure complaint and the court’s subsequent order confirming

the sale of defendant Joseph Hartman’s home. Defendant argues that the trial court erred in

granting summary judgment because plaintiff lacked standing to foreclose on defendant’s

mortgage, and further argues that plaintiff’s complaint should be stricken because it

contained a “blatant mischaracterization of fact.” For the reasons that follow, we affirm. No. 1-15-1556

¶2 BACKGROUND

¶3 On May 1, 2008, plaintiff filed a complaint to foreclose defendant’s mortgage. In setting

forth the information on the mortgage, the complaint alleges: “Name of the mortgagee,

trustee or grantee in the Mortgage: M.E.R.S., Inc., as nominee for MILA, Inc., d/b/a

Mortgage Investment Lending Associates, Inc.,” and further alleges: “Capacity in which

Plaintiff brings this suit: Plaintiff is the trustee for the holder of the Mortgage given as

security.” The complaint alleges that defendant was the mortgagor on a condominium on

Altgeld Street in Chicago and that he was in default of the monthly payments from January

2008 through the present. The complaint sought a judgment of foreclosure and sale, an order

approving the foreclosure sale, and an order granting possession of the property.

¶4 Attached to the complaint was a copy of the executed and recorded mortgage, as well as a

“lost document affidavit.” The “lost document affidavit” stated that the note could not be

located in plaintiff’s records. The “affidavit” was not signed or notarized.

¶5 On November 5, 2008, plaintiff filed a motion for an order of default against defendant,

alleging that defendant had been served, a total of 60 days had elapsed since the date of

service, and no motion or answer had been filed by defendant.

¶6 On January 2, 2009, defendant filed his appearance and an answer to the foreclosure

complaint. In the answer, defendant admitted the above-quoted allegations concerning the

“[n]ame of the mortgagee, trustee or grantee” and the “[c]apacity in which Plaintiff brings

this suit.” Defendant denied the allegations that he was in default of the mortgage.

Defendant’s answer did not contain any affirmative defenses, but only asked for an order

dismissing plaintiff’s complaint against him.

2 No. 1-15-1556

¶7 On January 9, 2009, despite defendant’s January 2 appearance, the trial court entered an

order of default against defendant, finding that he had failed to appear and/or plead. On the

same day, the court entered a judgment for foreclosure and sale. On January 30, 2009,

defendant filed a petition to vacate the default judgment, claiming that he had filed his

appearance on January 2 but mistakenly went to the wrong courtroom on January 9. The

resolution of defendant’s petition is not contained in the record on appeal, but it was

presumably granted, as further proceedings continued in the case.

¶8 On May 1, 2009, plaintiff filed a motion for summary judgment, claiming that there were

no material issues of fact and that plaintiff was entitled to summary judgment. Attached to

the motion was a “supplemental affidavit” from Chris Decker, an authorized employee of

Wilshire Credit Corporation, the current servicer of the loan. The affidavit stated, in relevant

part, that “[p]laintiff is the holder and owner of the note *** and mortgage *** granted to

M.E.R.S., Inc., as nominee for MILA, Inc., D/B/A Mortgage Investment Lending, on January

24, 2006 by [defendant], and secured by the property commonly known as *** West Altgeld

Street, Unit ***, Chicago, Illinois 60614.” The affidavit further stated that “[o]wnership of

the subject mortgage was transferred from M.E.R.S., Inc., as nominee for MILA, Inc., D/B/A

Mortgage Investment Lending to [plaintiff].” Attached to the affidavit was a copy of the

executed note, as well as a copy of the executed and recorded mortgage.

¶9 Also attached to the affidavit was a copy of an assignment of mortgage, in which

Mortgage Electronic Registration Systems, Inc. (MERS), as nominee for MILA, Inc., d/b/a

Mortgage Investment Lending, assigned defendant’s mortgage to plaintiff. The assignment is

dated April 30, 2008, one day before the filing of plaintiff’s complaint for foreclosure, and

was recorded on July 2, 2008.

3 No. 1-15-1556

¶ 10 Defendant did not file a response to the motion for summary judgment and, on July 7,

2009, the trial court granted plaintiff’s motion for summary judgment. On the same day, the

court entered a judgment for foreclosure and sale.

¶ 11 On April 27, 2012, defendant filed an emergency motion to vacate the judgment of

foreclosure and to stay the sale of the property. In the motion, defendant claimed that neither

he nor his counsel was aware of the judgment of foreclosure entered on July 7, 2009.

Defendant further claimed that the property was scheduled for a sheriff’s sale on May 1,

2012, but that he had entered into a contract for the sale of the property to the holder of the

second mortgage on the property. Defendant asked for the judgment of foreclosure to be

vacated in the interests of justice. Attached to the motion was an affidavit that was notarized

but was not signed. On April 30, 2012, an order was entered staying the sale until June 4,

2012.

¶ 12 On December 15, 2014, plaintiff filed a motion for an order of possession and approval

of the report of sale and distribution, claiming that a judicial sale of the property had been

held on November 26, 2014. The report of sale and distribution indicates that plaintiff

purchased the property.

¶ 13 On April 2, 2015, defendant filed a response to the motion to confirm the sale, claiming

that on January 24, 2006, the date of the note and mortgage, MERS was not licensed to

conduct mortgage business in Illinois, although he admitted that MILA, Inc., was licensed to

do so. Defendant further claimed that on March 1, 2010, plaintiff “took an assignment of

Note and Mortgage,” 1 but was not licensed to conduct mortgage business in Illinois.

1 We note that the assignment contained in the record on appeal indicates that the assignment was executed on April 30, 2008, not March 1, 2010. Defendant’s response alleges that Merrill Lynch 4 No. 1-15-1556

Defendant claimed that a mortgage made by an entity that lacked authorization under the

Residential Mortgage License Act of 1987 (License Act) (205 ILCS 635/1-1 et seq. (West

2004)) 2 was void as against public policy, and that “[a]ll orders in this case are void based on

a void mortgage contract and subsequent void transfers.”

¶ 14 In its reply to defendant’s response, plaintiff claimed that defendant’s attacks on the

validity of the mortgage based on the License Act were forfeited due to defendant’s failure to

raise them at any time until after the judgment of foreclosure, foreclosure sale, and motion to

confirm the sale. Plaintiff further argued that defendant was also estopped from raising such

a defense, since he had filed bankruptcy multiple times and had admitted the validity of the

mortgage in the bankruptcy proceedings by entering into postpetition plans to make

payments on the mortgage. Plaintiff also argued that defendant’s defense failed on the merits,

as MERS was not required to be licensed under the License Act.

¶ 15 On April 22, 2015, the trial court entered an order confirming the judicial sale 3 and, on

May 22, 2015, defendant filed a notice of appeal.

¶ 16 ANALYSIS

¶ 17 On appeal, defendant raises two issues. First, he argues that plaintiff lacked standing to

file a complaint because MERS was not licensed to conduct mortgage business in Illinois at

the time the mortgage was signed. Defendant also argues that plaintiff’s complaint should be

Mortgage Investors, Inc., at some point “took an interest in the Note,” but Merrill Lynch is not a party on appeal and its alleged former interest is not at issue on appeal. 2 Section 1-3(a) of the License Act requires that “[n]o person, partnership, association, corporation or other entity shall engage in the business of brokering, funding, originating, servicing or purchasing of residential mortgage loans without first obtaining a license from the Commissioner in accordance with the licensing procedure provided in this Article I and such regulations as may be promulgated by the Commissioner.” 205 ILCS 635/1-3(a) (West 2004). 3 The order confirming the judicial sale does not appear in the record on appeal. The date of the order is taken from defendant’s notice of appeal, and there is no dispute that such an order was entered on that date. 5 No. 1-15-1556

stricken because it contains a “blatant mischaracterization of fact” so egregious that allowing

it to stand constitutes an “affront to the judicial process.” We consider each argument in turn.

¶ 18 Defendant first argues that plaintiff “lacked standing to foreclose because the mortgagee

was not licensed to conduct mortgage business in Illinois at the time the mortgage was

signed.” Plaintiff argues that this issue has been forfeited, since defendant raised it for the

first time in his response to the motion to confirm the sale of the property and standing is an

affirmative defense. Defendant, however, claims that he can raise the issue at any time

because mortgages issued by unlicensed mortgagees are void as against public policy, relying

on the Second District case of First Mortgage Co. v. Dina, 2014 IL App (2d) 130567. 4

¶ 19 We have no need to determine whether the issue was properly preserved because, even if

it was, defendant’s argument would still fail because it rests on a misapplication of the

License Act. At the time of the issuance of defendant’s mortgage, section 1-3 of the License

Act provided, in relevant part:

“No person, partnership, association, corporation or other entity shall engage in the

business of brokering, funding, originating, servicing or purchasing of residential

mortgage loans without first obtaining a license from the Commissioner in

accordance with the licensing procedure provided in this Article I and such

regulations as may be promulgated by the Commissioner.” 205 ILCS 635/1-3(a)

(West 2004).

4 We note that the License Act has since been amended to state that “[a] mortgage loan brokered, funded, originated, serviced, or purchased by a party who is not licensed under this Section shall not be held to be invalid solely on the basis of a violation under this Section. The changes made to this Section by this amendatory Act of the 99th General Assembly are declarative of existing law.” Pub. Act 99-0113 (eff. July 23, 2015) (amending 205 ILCS 635/1-3(e) (West 2014)). However, we have no need to consider whether Dina is still good law with respect to mortgages issued prior to the amendment because, as we explain, even if it is, defendant’s argument still fails on its merits. 6 No. 1-15-1556

¶ 20 The License Act further defined several of the applicable terms. “ ‘Making a residential

mortgage loan’ or ‘funding a mortgage loan’ shall mean for compensation or gain, either

directly or indirectly, advancing funds or making a commitment to advance funds to a loan

applicant for a residential mortgage loan.” 205 ILCS 635/1-4(b) (West 2004). “ ‘Loan

brokering’, ‘brokering’, or ‘brokerage service’ shall mean the act of helping to obtain from

another entity, for a borrower, a loan secured by residential real estate situated in Illinois or

assisting a borrower in obtaining a loan secured by residential real estate situated in Illinois

in return for consideration to be paid by either the borrower or the lender including, but not

limited to, contracting for the delivery of residential mortgage loans to a third party lender

and soliciting, processing, placing, or negotiating residential mortgage loans.” 205 ILCS

635/1-4(o) (West 2004). “ ‘Servicing’ shall mean the collection or remittance for or the right

or obligation to collect or remit for any lender, noteowner, noteholder, or for a licensee’s own

account, of payments, interests, principal, and trust items such as hazard insurance and taxes

on a residential mortgage loan in accordance with the terms of the residential mortgage loan;

and includes loan payment follow-up, delinquency loan follow-up, loan analysis and any

notifications to the borrower that are necessary to enable the borrower to keep the loan

current and in good standing.” 205 ILCS 635/1-4(q) (West 2004). “ ‘Purchasing’ shall mean

the purchase of conventional or government-insured mortgage loans secured by residential

real estate situated in Illinois from either the lender or from the secondary market.” 205 ILCS

635/1-4(s) (West 2004). Finally, “ ‘[o]riginating’ shall mean the issuing of commitments for

and funding of residential mortgage loans.” 205 ILCS 635/1-4(u) (West 2004).

¶ 21 In the case at bar, the mortgage names defendant as the borrower and “MILA, Inc., DBA

Mortgage Investment Lending Associates, Inc.” as the lender. Similarly, the note lists MILA,

7 No. 1-15-1556

Inc., as the lender whom defendant promises to pay. With respect to MERS, the mortgage

states that “ ‘MERS’ is Mortgage Electronic Registration Systems, Inc. MERS is a separate

corporation that is acting solely as a nominee for Lender and Lender’s successors and

assigns. MERS is the mortgagee under this Security Instrument.” The mortgage further

provides that “Borrower understands and agrees that MERS holds only legal title to the

interests granted by Borrower in this Security Instrument, but, if necessary to comply with

law or custom, MERS (as nominee for Lender and Lender’s successors and assigns) has the

right: to exercise any or all of those interests, including, but not limited to, the right to

foreclose and sell the Property; and to take any action required of Lender including, but not

limited to, releasing and canceling this Security Instrument.”

¶ 22 Comparing the plain statutory language to MERS’ role in the mortgage transaction

reveals that MERS did not engage in any conduct that would require it to be licensed under

the License Act. MERS did not “engage in the business of brokering, funding, originating,

servicing or purchasing” (205 ILCS 635/1-3(a) (West 2004)) of defendant’s mortgage such

that it would be required to be licensed under the License Act. Instead, it was listed on the

mortgage as the mortgagee, acting as the nominee for MILA, Inc., the lender. A “nominee”

in this context is “[a] party who holds bare legal title for the benefit of others[.]” Black’s Law

Dictionary 1076 (8th ed. 1999). “MERS is well known in the foreclosure setting as a

membership organization that typically records, trades, and forecloses loans on behalf of

many lenders, acting for lender accounts rather than their own.” Deutsche Bank National

Trust v. Cichosz, 2014 IL App (1st) 131387, ¶ 3 (citing Mortgage Electronic Registration

Systems, Inc. v. Estrella, 390 F.3d 522, 524-25 (7th Cir. 2004)). The License Act does not

impose any requirements for the “mortgagee” or a “nominee” to be licensed; by its plain

8 No. 1-15-1556

terms, it applies only to those who “engage in the business of brokering, funding, originating,

servicing or purchasing” (205 ILCS 635/1-3(a) (West 2004)) residential mortgage loans.

Defendant admitted in his response to the motion to confirm sale that the party that was

engaged in such conduct with respect to defendant’s mortgage, namely, MILA, Inc., was

licensed at the time of the execution of the mortgage. Accordingly, even if defendant’s

argument was properly before this court and was not forfeited, it would still not provide a

basis for reversing the trial court’s judgment, as it fails on its merits.

¶ 23 We are similarly unpersuaded by defendant’s second argument on appeal. Defendant

argues that plaintiff mischaracterized facts to the trial court amounting to “an affront to

justice.” Defendant acknowledges that he did not raise this issue below, but argues that we

should nevertheless review his contentions under the plain-error doctrine.

¶ 24 There is case law permitting a reviewing court to consider a forfeiture under the plain-

error doctrine in civil cases. Wilbourn v. Cavalenes, 398 Ill. App. 3d 837, 855-56 (2010)

(citing Palanti v. Dillon Enterprises, Ltd., 303 Ill. App. 3d 58, 66 (1999), citing Belfield v.

Coop, 8 Ill. 2d 293, 313 (1956)); Matthews v. Avalon Petroleum Co., 375 Ill. App. 3d 1, 8

(2007); In re Marriage of Saheb, 377 Ill. App. 3d 615, 627 (2007). Although the doctrine

may be applied in civil cases, it finds much greater application in criminal cases. Arient v.

Shaik, 2015 IL App (1st) 133969, ¶ 37; Wilbourn, 398 Ill. App. 3d at 856 (citing Gillespie v.

Chrysler Motors Corp., 135 Ill. 2d 363, 375 (1990)).

¶ 25 The cases that have applied it have held that the plain-error doctrine may be applied in

civil cases only where the act complained of was a prejudicial error so egregious that it

deprived the complaining party of a fair trial and substantially impaired the integrity of the

judicial process itself. Arient, 2015 IL App (1st) 133969, ¶ 37; Wilbourn, 398 Ill. App. 3d at

9 No. 1-15-1556

856; Matthews, 375 Ill. App. 3d at 8; Saheb, 377 Ill. App. 3d at 627. This court has observed

that the application of the plain-error doctrine to civil cases should be “exceedingly rare.”

Arient, 2015 IL App (1st) 133969, ¶ 37; Wilbourn, 398 Ill. App. 3d at 856 (citing Palanti,

303 Ill. App. 3d at 66).

¶ 26 The question, then, is whether the case before us is the “exceedingly rare” civil case that

requires application of the plain-error doctrine. Arient, 2015 IL App (1st) 133969, ¶ 37. We

agree with plaintiff that it is not.

¶ 27 Defendant argues that there were several “blatant mischaracterization[s] of facts” by

plaintiff, which requires application of the plain-error doctrine to the instant case. See

Gillespie, 135 Ill. 2d at 377 (noting that cases in which the plain-error doctrine had applied

“involved blatant mischaracterizations of fact, character assassination, or base appeals to

emotion and prejudice”). First, defendant claims that plaintiff filed its complaint without

providing any proof that it was entitled to initiate the claim against defendant and, “[i]n order

to fool the trial Court and the Defendant,” plaintiff attached an unsigned affidavit “to prove it

was the proper Plaintiff.” Defendant then claims that “[b]y the time [plaintiff] presented its

Motion for Summary Judgment it miraculously found the assignment to prove its standing,”

which was “conveniently dated the day before the Complaint was filed.” Defendant claims

that “[n]o explanation was made for why the assignment went missing for one day, the day

after it was allegedly executed. No explanation was made for why it arrived months later, at a

time it best served the Plaintiff.” Finally, defendant claims that “[n]o explanation was given

for why [the assignment] was recorded several months after the date it purports to have been

executed. And no explanation was given for why there were no dates on the signature page

and notary seal of the purported assignment. No explanation was given, because there is no

10 No. 1-15-1556

reasonable explanation.” None of the “facts” defendant points to appear to be

mischaracterizations of fact, must less “blatant” ones such that the plain-error doctrine should

apply.

¶ 28 First, as to the complaint, it is true that plaintiff attached a “lost document affidavit”

which was unsigned and unsworn, meaning that it was not an affidavit at all. See Roth v.

Illinois Farmers Insurance Co., 202 Ill. 2d 490, 494 (2002) (“an affidavit must be sworn to,

and statements in a writing not sworn to before an authorized person cannot be considered

affidavits”). However, there is no evidence whatsoever to suggest that this was done “[i]n

order to fool the trial Court and the Defendant.” Plaintiff did ultimately attach a copy of the

note to its motion for summary judgment. Furthermore, in his answer, defendant admitted

that plaintiff brought the suit in its capacity as “the trustee for the holder of the Mortgage

given as security,” thus admitting that plaintiff was entitled to file the lawsuit. See Deutsche

Bank National Trust Co. v. Iordanov, 2016 IL App (1st) 152656, ¶ 34 (“An action to

foreclose upon a mortgage may be filed by a mortgagee or by an agent or successor of a

mortgagee.”).

¶ 29 Next, defendant’s arguments as to the assignment mischaracterize the record on appeal.

Defendant claims that plaintiff “miraculously found the assignment to prove its standing,”

but that “[n]o explanation was made for why the assignment went missing for one day, the

day after it was allegedly executed.” These statements imply that the assignment was

missing. However, the “lost document affidavit” stated only that the note was missing—it

said nothing about the assignment. Plaintiff was not required to attach the assignment to the

complaint. See Iordanov, 2016 IL App (1st) 152656, ¶ 37 (“Although plaintiff did not attach

a copy of the assignment to its pleadings, it is of no consequence as the [Illinois Mortgage

11 No. 1-15-1556

Foreclosure Law (735 ILCS 5/15-1501 et seq. (West 2008))] does not expressly require an

assignment be attached to the complaint.”). Thus, the fact that plaintiff attached the

assignment to the motion for summary judgment but not to the complaint lends no support to

defendant’s argument.

¶ 30 Finally, defendant’s challenges to the dates of the assignment are irrelevant and

unpersuasive. First, defendant’s statement that “no explanation was given for why there were

no dates on the signature page and notary seal of the purported assignment” is misleading, as

it implies that there was information missing from the assignment or that the signature page

was from a different document. However, the assignment itself is fully completed. The date

of the assignment appears on the first page of the assignment, and the notary seal indicates

that the individuals who executed the assignment “personally appeared before me this day,”

referencing back to the date from the first page. Thus, the date of the assignment is clearly set

forth and there is no evidence whatsoever to suggest that the signature page was not attached

to the proper document. Additionally, with respect to defendant’s comments that the

assignment was “conveniently dated the day before the Complaint was filed,” again implying

some sort of wrongdoing, defendant presents no evidence to show that the assignment was

not actually executed prior to the filing of the complaint. See Iordanov, 2016 IL App (1st)

152656, ¶ 41 (in order to demonstrate that the plaintiff lacked standing, the defendant

“needed to present evidence that the assignment did not occur before the complaint was

filed” (emphasis added)). Whether the assignment was executed one day or one year before

the filing of the complaint is irrelevant—the important fact is that it was, in fact, executed

prior to the filing of the complaint. Defendant’s speculation concerning the reasons for the

nine-week delay between the execution and recording of the assignment is similarly

12 No. 1-15-1556

irrelevant. The assignment occurs when there is a transfer of an identifiable interest from the

assignor to the assignee (Klehm v. Grecian Chalet, Ltd., 164 Ill. App. 3d 610, 616 (1988)),

while the recording serves to establish a lien and give third parties the opportunity to

determine the status of the property’s title (Federal National Mortgage Ass’n v. Kuipers, 314

Ill. App. 3d 631, 634 (2000)). Thus, the relevant date was the date of the assignment, not the

date of the recording. Further, as a practical matter, the delay can be at least partially

explained by the fact that the assignment was executed in Oregon but recorded in Illinois.

Thus, there is nothing in defendant’s claims that is a mischaracterization of fact at all, much

less such a “blatant” one that would require the application of the plain-error doctrine to this

case. Accordingly, there is no basis for vacating any of the trial court’s orders, and we

therefore affirm the trial court’s judgment granting the motion to confirm the sale of

defendant’s home.

¶ 31 CONCLUSION

¶ 32 For the reasons set forth above, there is no basis to vacate any of the trial court’s orders,

and we therefore affirm the trial court’s judgment granting plaintiff’s motion to confirm the

sale of defendant’s home.

¶ 33 Affirmed.