Wells Fargo Bank, N.A. v. Maka

2017 IL App (1st) 153010, 72 N.E.3d 765

• Court: Appellate Court of Illinois
• Decided: February 3, 2017
• Docket: 1-15-3010
• Status: Unpublished

Opinion

2017 IL App (1st) 153010

FIFTH DIVISION February 3, 2017

No. 1-15-3010

) Appeal from the WELLS FARGO BANK, N.A., ) Circuit Court of ) Cook County Plaintiff-Appellee, ) ) v. ) ) JAN MAKA, Individually, and as Trustee Under ) Provisions of a Trust Agreement Dated 11th Day of July, ) 2005, and Known as Trust Number 1; BRIDGEVIEW ) No. 13 CH 11994 BANK GROUP; JOHN MAKASKA CUSTOM BUILT ) and/or OWNER; UNKNOWN BENEFICIARIES OF ) TRUST AGREEMENT DATED 11TH DAY OF JULY, ) 2005, and Known as Trust Number 1; VILLAGE OF ) SOUTH HOLLAND; W.L. ENGLER DISTRIBUTING, ) INC.; WILLIAM HOULIHAN; UNKNOWN OWNERS; ) Honorable and NONRECORD CLAIMANTS, ) Michael F. Otto, ) Judge Presiding. Defendants ) ) (Jan Maka, Individually, Defendant-Appellant). )

JUSTICE REYES delivered the judgment of the court, with opinion. Presiding Justice Gordon and Justice Lampkin concurred in the judgment and opinion.

OPINION

¶1 This matter arises out of a mortgage foreclosure on a property owned by defendant Jan

Maka. In numerous motions after summary judgment and judgment of foreclosure were entered

in favor of plaintiff, Wells Fargo Bank, N.A., defendant raised the issue before the circuit court

that his mortgage was void because the original lender, Alliance Mortgage Company d.b.a. BNY 1-15-3010

Mortgage (Alliance) was not licensed at the time the loan was originated pursuant to the

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

2012)). Defendant now appeals from the circuit court’s orders (specifically the order of June

2015 denying his motion to vacate the judgment of foreclosure and sale and the order of

September 2015 denying his motion to “reconsider, rehear and vacate” the court’s June 2015

order). Defendant acknowledges that the License Act was amended in July 2015, but contends on

appeal that that amendment is not applicable and the circuit court consistently failed to apply the

law that existed at the time as set forth in First Mortgage Co. v. Dina, 2014 IL App (2d) 130567.

Defendant maintains Dina is dispositive as it provided that a violation of the License Act results

in a void mortgage. Id. ¶ 18. Defendant further asserts that any retroactive application of the

amendment to the License Act is unconstitutional because it would divest him of his property

rights without due process. For the reasons that follow, we affirm.

¶2 BACKGROUND

¶3 The property that is the subject of these foreclosure proceedings is commonly known as

8340 West Berwyn Avenue in Chicago, Illinois. In October 2002, defendant executed a

mortgage in the amount of $274,000 in favor of Mortgage Electronic Registration Systems, Inc.

as nominee for the lender, Alliance. Defendant also signed the note evidencing the loan was held

by Alliance. The mortgage was later negotiated to plaintiff.

¶4 On May 6, 2013, plaintiff filed the instant complaint against defendant, among others,

seeking to foreclose the mortgage. The complaint alleged that defendant had defaulted in

payments due commencing August 1, 2012. Defendant subsequently appeared in court

represented by counsel, answered the complaint, but set forth no affirmative defenses.

Thereafter, plaintiff moved for summary judgment against him, as well as for default judgments

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against the other defendants and for a judgment of foreclosure.

¶5 Defendant, however, opposed the motion for summary judgment and asserted that the

affidavit plaintiff submitted in support of its motion failed to comply with Illinois Supreme Court

Rule 191(a) (eff. Jan. 4, 2013) and Rule 113 (eff. May 1, 2013). Defendant further argued that he

failed to receive either the grace period notice or the notice of acceleration and, therefore, entry

of summary judgment in favor of plaintiff was barred. Plaintiff denied these claims, and the

circuit court agreed with plaintiff. On February 18, 2015, orders of summary judgment, default,

and judgment of foreclosure and sale were entered in plaintiff’s favor.

¶6 On March 20, 2015, defendant filed a motion to vacate the judgment of foreclosure

pursuant to section 2-1301(e) of the Code of Civil Procedure (Code) (735 ILCS 5/2-1301(e)

(West 2012)), alleging his mortgage was void and against public policy because the originator of

the mortgage loan, Alliance, was not licensed pursuant to the License Act (205 ILCS 635/1-1

et seq. (West 2012)). In support of his motion, defendant relied on the Second District’s decision

in Dina, wherein the court held that a violation of the License Act results in a void mortgage.

Dina, 2014 IL App (2d) 130567, ¶ 18. Defendant further attached the affidavit of attorney Carla

Sherieves, in which she averred that she performed a search of the Illinois Department of

Financial and Professional Regulation’s website and generated the two documents attached to

her affidavit. Those two documents, however, neither refuted nor affirmed whether Alliance was

licensed at the time defendant’s loan was originated.

¶7 On June 3, 2015, the circuit court, “being fully advised in the premises,” deemed the

motion to be a motion to reconsider and denied defendant’s request. Shortly thereafter, defendant

filed a motion to reconsider the denial of the court’s June 3, 2015, order asserting the circuit

court erred its application of existing law, again citing Dina. The circuit court ultimately denied

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this motion as well.

¶8 The property proceeded to judicial sale with Third Coast Holdings, LLC (Third Coast) as

the highest bidder. Third Coast moved to intervene and have the sale of the property confirmed.

The circuit court granted Third Coast’s motion to intervene and allowed defendant time to

respond to the motion to confirm the sale. In response, defendant asserted that justice was not

otherwise done due to the circuit court’s failure to follow the law as set forth in Dina. On August

26, 2015, the circuit court entered the order approving the sale.

¶9 Thereafter, defendant filed a motion to “reconsider, rehear and vacate” the June 3, 2015,

order alleging the same basis as he previously asserted. On September 22, 2015, the circuit court

denied the motion and this appeal followed.

¶ 10 ANALYSIS

¶ 11 On appeal, defendant maintains that because Alliance was not licensed in Illinois when

the mortgage was originated his mortgage is void as against public policy and consequently the

judgment of foreclosure was improperly granted.

¶ 12 Initially, we address the proper standard of review. Our standard of review is usually

based on the procedural posture of the case. See, e.g., MB Financial Bank, N.A. v. Ted & Paul,

LLC, 2013 IL App (1st) 122077, ¶ 12 (reviewing the denial of a petition for relief from judgment

of foreclosure and sale and order approving sale pursuant to section 2-1401 de novo). Here,

defendant challenges (1) the circuit court’s June 3, 2015, order denying his section 2-1301(e)

motion in which he alleged that the judgment of foreclosure must be vacated because the original

mortgage lender was not licensed pursuant to the License Act, and (2) the circuit court’s

September 22, 2015, order denying defendant’s motion to reconsider the June 3, 2015, order.1

1 We observe defendant does not challenge the circuit court’s entry of summary judgment in favor of plaintiff, nor does defendant challenge the propriety of the entry of the order approving the sale. 4 1-15-3010

Defendant argues on appeal that the circuit court improperly decided his section 2-1301(e)

motion as a motion to reconsider, but asserts that regardless we must review these motions for an

abuse of discretion. While both section 2-1301 motions to vacate and motions to reconsider are

typically reviewed for an abuse of discretion (Wells Fargo Bank, N.A. v. Simpson, 2015 IL App

(1st) 142925, ¶ 32; JP Morgan Chase Bank v. Fankhauser, 383 Ill. App. 3d 254, 259 (2008)), the

primary issue raised by defendant on appeal (that a violation of the License Act renders his

mortgage void) is a purely legal one and, thus, we review the issue de novo (see Fankhauser, 383

Ill. App. 3d at 259 (we review de novo the circuit court’s determination of legal issues, even ones

raised in a motion to reconsider)).

¶ 13 Turning to the case at hand, the License Act generally requires that certain entities

involved in residential mortgage lending first obtain a license from the State of Illinois prior to

engaging in any business activities. 205 ILCS 635/1-3(a) (West 2012). The License Act further

sets forth numerous exemptions for this requirement, including but not limited to, entities

engaged solely in commercial lending or individuals acting as mortgage loan originators who are

not employed by or acting for any entity described in the section. Id. The consequences for

violating the License Act include an injunction or a fine in an amount not to exceed $25,000.

205 ILCS 635/1-3(c), (e) (West 2012). The License Act further provides that, after written notice

to a licensee by the Department of Financial and Professional Regulation, an entity may have its

license revoked or suspended, or be placed on probation or reprimanded. 205 ILCS 635/4-5

(West 2012); see 205 ILCS 635/1-4(n) (West 2012) (stating that after April 6, 2009, all

references in the Act to the “Commissioner” is a reference to the “Secretary of Financial and

Professional Regulation” including “the Director of the Division of Banking of the Department

of Financial and Professional Regulation”). The Department of Financial and Professional

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Regulation may further deny the issuance of a license on certain enumerated grounds. 205 ILCS

635/7-3 (West 2012). The licensee, however, may request a hearing before a hearing officer

regarding that decision. 205 ILCS 635/4-12 (West 2012).

¶ 14 In support of his argument, defendant relies solely on the Second District case of Dina,

which considered the question of whether a violation of the License Act would result in a void

mortgage. Dina, 2014 IL App (2d) 130567, ¶ 18. For the reasons that follow, we find Dina is no

longer viable in Illinois.

¶ 15 We first observe that the procedural posture of Dina varies from the procedural posture of

the present case. In Dina, the defendants raised the issue that their mortgage lender was not

licensed under the License Act in response to the plaintiff’s motion for summary judgment.

Id. ¶ 5. On appeal, the Dina court held that summary judgment was improperly entered against

the defendants where there was a genuine issue of material fact regarding whether their mortgage

lender was licensed under the License Act. Id. ¶ 13. Although the Dina court determined

summary judgment was improvidently granted, it went on to consider the consequences of the

mortgage lender’s failure to establish it was not subject to the License Act and determined that

such a failure would result in a void mortgage. Id. ¶ 18. In contrast, defendant here did not assert

this claim until after the motion for summary judgment had already been granted and the

judgment of foreclosure entered.

¶ 16 Second, in reaching its conclusion, the Dina court set forth the law as articulated in our

supreme court’s opinion Chatham Foot Specialists, P.C. v. Health Care Service Corp., 216 Ill.

2d 366 (2005), namely that:

“ ‘It is well settled that “courts will not aid a plaintiff who bases his cause of

action on an illegal act.” [Citation.] More specifically, “courts will not enforce a contract

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involving a party who does not have a license called for by legislation that expressly

prohibits the carrying on of the particular activity without a license where the legislation

was enacted for the protection of the public, not as a revenue measure.” [Citations.]

Accordingly, a “contract made by an unlicensed individual calling for his personal

services *** is unenforceable.” [Citations.]’ ” Dina, 2014 IL App (2d) 130567, ¶ 18

(quoting Chatham Foot Specialists, P.C., 216 Ill. 2d at 380-81).

The Chatham court, however, ultimately determined that section 12 of the Professional Service

Corporation Act (805 ILCS 10/12 (West 2000)), which required professional service

corporations to obtain a certificate of registration, “was not enacted as a regulatory measure to

protect the public health, safety and welfare.” Chatham Foot Specialists, P.C., 216 Ill. 2d at 389.

Notably, our supreme court reasoned in part that “nowhere in the [Professional Service

Corporation] Act did the legislature suggest that contracts with an otherwise valid professional

service corporation should be voided because the corporation did not maintain a current

certificate of registration.” Id. at 398.

¶ 17 The Dina court’s determination regarding the License Act primarily rested on the

legislature’s statement that, “ ‘[t]he purpose of this Act is to protect Illinois consumers seeking

residential mortgage loans and to ensure that the residential mortgage lending industry is

operating fairly, honestly and efficiently, free from deceptive and anti-competitive practices.’ ”

Dina, 2014 IL App (2d) 130567, ¶ 19 (quoting 205 ILCS 635/1-2(b) (West 2006)). “A keystone

principle of statutory construction is to view all provisions of a statutory enactment as a whole.

Accordingly, words and phrases should not be construed in isolation, but must be interpreted in

light of other relevant provisions of the statute.” Chatham, 216 Ill. 2d at 382 (citing Michigan

Avenue National Bank v. County of Cook, 191 Ill. 2d 493, 504 (2000)). The Dina court failed to

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consider the License Act as a whole, for if it had, it would have found that, like the Professional

Service Corporation Act at issue in Chatham, the legislature did not suggest in the License Act

contracts with an otherwise valid entity should be voided because the entity did not maintain a

license. See Chatham, 216 Ill. 2d at 398; 205 ILCS 635/1-1 et seq. (West 2012).

¶ 18 Moreover, after the Second District rendered its decision in Dina and while this matter

was pending in the circuit court, legislation was enacted which clarified that the General

Assembly did not intend for violations of the License Act to result in a void mortgage. Public

Act 99-113, effective July 23, 2015, amended section 1-3(e) of the License Act, which now reads

as follows:

“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.” 205 ILCS 635/1-3(e) (West

Supp. 2015).

¶ 19 Given that the amendment became effective while this matter was pending in the circuit

court, we must determine whether it applies to the facts before us. As aptly stated by our

supreme court in K. Miller Construction Co. v. McGinnis, 238 Ill. 2d 284, 298-99 (2010):

“ ‘A subsequent amendment to a statute may be an appropriate source for discerning

legislative intent.’ [Citation.] As we have explained, while an amendatory change in the

language of a statute creates a presumption that it was intended to change the law as it

previously existed, ‘ “the presumption is not controlling [citations] and may be overcome

by other considerations.” ’ [Citation.] ‘The circumstances surrounding the amendment

should be considered and: “If they indicate that the legislature intended only to interpret

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the original act, the presumption of an intention to change the law is rebutted.” ’

[Citation.] A number of factors may indicate whether an amendment is merely a

clarification rather than a substantive change in the law: ‘whether the enacting body

declared that it was clarifying a prior enactment; whether a conflict or ambiguity existed

prior to the amendment; and whether the amendment is consistent with a reasonable

interpretation of the prior enactment and its legislative history.’ [Citations.]”

¶ 20 We initially observe that the amendment stated in plain language that, “The changes

made to this Section by this amendatory Act of the 99th General Assembly are declarative of

existing law.” (Emphasis added.) 205 ILCS 635/1-3(e) (West Supp. 2015); see Harris Bank St.

Charles v. Weber, 298 Ill. App. 3d 1072, 1080 (1998) (holding that an amendment made to the

Code was merely a clarification of existing law where the legislature specified in the amendment

that it was intended as a clarification of existing law and not as a new enactment). Moreover, this

amendment is consistent with the preexisting provisions of the License Act which do not provide

for any private remedies for violations of its licensing requirements, such as a private right of

action or the right of a mortgagor to avoid a mortgage obtained by an unlicensed lender. See

Richardson v. JPMorgan Chase Bank, N.A. (In re Jordan), 543 B.R. 878, 883 (Bankr. C.D. Ill.

2016). Thus, as the amendment makes clear, there is not (and has never been) a right to void a

mortgage that violates the Licensing Act.

¶ 21 Further, at the time when the General Assembly was considering House Bill 2814 (the

bill which would become Public Act 99-113), Dina had been rendered just a year prior. No other

precedential case law interpreting the Licensing Act had been issued. The existence of the

judicial precedent in Dina serves to negate the presumption that the amendment to section 1-3(e)

of the Licensing Act was a change in the law. See Puss N Boots, Inc. v. Mayor’s License

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Comm’n, 232 Ill. App. 3d 984, 988 (1992) (the presumption does not apply where the legislature

enacted an amendment “soon after” a judicial interpretation); Pielet v. Pielet, 2012 IL 112064,

¶ 48 (the legislature is presumed to be aware of judicial decisions interpreting legislation). It

therefore follows that Public Act 99-113 was meant to clarify the previous law and make clear

that a violation of the Licensing Act does not render a mortgage void. See K. Miller Construction

Co., 238 Ill. 2d at 300.

¶ 22 The legislative history supports this conclusion. During the debate on House Bill 2814,

Representative Nekritz, one of the House sponsors of the bill, stated:

“ ‘House Bill 2814 states the... that a mortgage is enforceable in Illinois regardless of

whether the person issuing the... the mortgagor is licensed in Illinois. We have remedies

for failure to license in Illinois through the Department of Financial and Professional

Regulation, but that is... and that’s the remedy that should remain. This is to clarify that

the... a change that resulted from an Appellate Court case. So, I’d ask for your

support.’ ” (Emphases added.) 99th Ill. Gen. Assem., House Proceedings, Mar. 17, 2015,

at 27 (statements of Representative Nekritz).

The House debates further evidence the legislature’s stance that the amendment did not serve to

change the penalties or consequences for a violation of the Licensing Act:

“Franks: ‘So, this Bill would say that if you weren’t licensed that the mortgage

would still stand?’

Nekritz: ‘Correct.’

Franks: ‘Why would we do that?’

Nekritz: “Well, it’s a matter of certainty in the marketplace actually, because if

the... you know, the mortgage is a record and if someone is... a title company or some

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other lienholder is relying on that, they ought to be able to rely on that public record and

not have to go behind it and figure out whether they’re... whether that individual’s

licensed. And again, we have the Department of Financial and Professional Regulation to

enforce those, to impose a fine, do whatever the remedy is there, but someone borrowed

the money and someone owes the money and we ought to be able to still enforce that.’

Franks: ‘But this would not alleviate any penalties for someone who would sell or

create a mortgage in Illinois who is not licensed to do so.’

Nekritz: ‘That’s correct. No, it does not impact any of that.’ ” Id. at 28 (statements

of Representatives Franks and Nekritz).

¶ 23 In light of the foregoing, we conclude that Public Act 99-113 is a clarification of the prior

statute and must be accepted as a legislative declaration of the meaning of the original provision

in the Licensing Act. There is, therefore, no public policy requiring that mortgage contracts be

held void when an entity is not licensed pursuant to the Licensing Act. See K. Miller

Construction Co., 238 Ill. 2d at 301. Accordingly, the circuit court correctly entered the

judgment of foreclosure as well as the order approving the sale and correctly denied defendant’s

motions to vacate and reconsider.

¶ 24 Defendant also argues on appeal that the amendment of section 1-3(e) is unconstitutional

because it violates the due process clause and deprived him of his vested property rights. Plaintiff

correctly notes that defendant failed to raise this issue before the circuit court. It is well settled

that a party that does not raise an issue in the trial court forfeits that issue and may not raise it for

the first time on appeal. 1010 Lake Shore Ass’n v. Deutsche Bank National Trust Co., 2015 IL

118372, ¶ 14 (declining to consider an argument that party failed to raise before the trial and

appellate courts). Indeed, our supreme court has emphasized the need for judicial restraint in this

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regard:

“[W]e believe it appropriate to caution courts of review—particularly when constitutional

issues are involved—that they are not free rangers riding about the legal landscape

looking for law to make. Judicial restraint is a principle of review that the justices of the

Supreme Court strive to observe. *** Our precedent counsels such adherence as well. We

expect appellate panels to do the same.” People v. White, 2011 IL 109689, ¶ 153.

Thus, the White court explicitly found that it was inappropriate for the appellate court to address

the defendant’s constitutional contentions where the defendant’s counsel chose not to raise such

issues before the circuit court. Id. ¶¶ 153-54. Similarly, in this case, defendant failed to make any

due process argument below. Accordingly, in light of the White decision, we shall not reach the

merits of this forfeited issue.

¶ 25 CONCLUSION

¶ 26 For the reasons stated above, the judgment of the circuit court of Cook County is

affirmed.

¶ 27 Affirmed.