Mark A. Laws Argues to the Illinois Supreme Court

Oral arguments were heard in the case of Wells Fargo v. McCluskey two weeks ago in front of the highest court in the state of Illinois.  The Supreme Court took the case to decide an important issue for mortgage foreclosure cases within the state.  That issue: Can homeowners (defendants in mortgage foreclosure cases) bring motions to vacate (allowed under Illinois Code of Civil Procedure Section 2-1301) in mortgage foreclosure cases, after the lender (plaintiffs) has already sold a home at a judicial sale?

This ruling in this case will determine several important milestones for both sides in mortgage foreclosure cases.  The court could potentially decide the case on a few different issues.  The conflict arises between the code of civil procedure and the Illinois Mortgage Foreclosure Law (IMFL).  McCluskey, represented by Mark A. Laws, argued that the Code of Civil Procedure allows litigants in any civil law suit to bring a motion to vacate, under section 2-1301 of the code, at any time up until 30 days after the final judgment.  In a mortgage foreclosure case, the final judgment is the last order entered by the court - the order confirming the judicial sale.  Wells Fargo, represented by James Noonan of Noonan and Lieberman, argued that the IMFL is more restrictive and thus inconsistent with the general rules for the code of civil procedure.  Furthermore, that the IMFL must control over the Code of Civil Procedure.

Oral arguments were held on this matter before the Supreme Court of Illinois on September 17, 2013, The case number is 115469.  The full video of these arguments can be access on the Illinois Supreme Court website at:

http://www.state.il.us/court/media/on_demand.asp

The Case was also feature in the Chicago Law Bulletin on September 18, 2013.  The full article below:

High court takes look at foreclosure dispute

By Andrew Maloney 

Law Bulletin staff writer

The Illinois Supreme Court heard a dispute Tuesday over foreclosure proceedings in a case that could reshape the timetable for homeowners looking to challenge a default judgment.

The case stems from the actions of defendant Katie McCluskey, who stopped paying her mortgage in April 2010, prompting her bank, Wells Fargo, to file a motion to foreclose.

On Feb. 24, 2011 — the day the home was slated for auction — McCluskey filed a motion asking a court to vacate the default order and halt the sale.

Both she and the bank agreed in court to delay the sale until May 12, 2011, a 75-day period during which both parties would attempt to renegotiate the mortgage. No deal was reached, however, and Wells Fargo subsequently took over the home once the deadline had expired.

About a month later, McCluskey filed a second motion to vacate the default, which DuPage County Associate Judge Robert G. Gibson denied in August 2011, ruling that the defendant had waived her right to file such a motion after the initial compromise to delay the home sale.

McCluskey disputed that notion, arguing that her new challenge was still timely because a trial court had not yet confirmed and entered a final order on the bank’s takeover of her home.

In an opinion by Justice Mary Seminara Schostok, the 2nd District Appellate Court reversed the trial court ruling and backed McCluskey by saying that she did not waive her right to bring a second motion after the parties’ initial agreement.

“Here, the agreed order that the trial court entered on Feb. 24, 2011, did not make any reference to the defendant’s forgoing any right to bring a second … motion at a later stage in the proceedings. We believe that the waiver of this right would have been a material term in the parties’ agreement,” Schostok wrote.

James V. Noonan, a partner at Noonan & Lieberman Ltd. who represented the bank before the high court, told the justices that a homeowner essentially loses his or her stake in the property once the sale occurs.

“Our position is that the borrower’s right to vacate a default can’t be brought after the hammer falls on the sale,” Noonan said. “He or she has no rights left to protect.”

To allow challenges like the one in this case to linger after the sale would discourage buyers and make the process even more confusing, he added.

Mark A. Laws, a sole practitioner who argued on behalf of McCluskey, said in crafting mortgage and foreclosure laws, the Illinois legislature wanted a system in which the courts had broad discretion to accept and review complaints before or after the home is sold.

“I disagree with counsel. I think they have rights on the property up until the final order by the court,” Laws told the justices. “The point is, we want our trial court judges to have that discretion, and exercise that.”

One thing the parties agreed on was the existence of a conflict between the state’s Code of Civil Procedure and the Illinois Mortgage Foreclosure Law.

The former grants a court power to “set aside any default … upon any terms and conditions that shall be reasonable” while the latter limits a court’s ability, after a sale occurs, to dismiss defaults unless “(i) a required notice (of sale) was not given, (ii) the terms of the sale were unconscionable, (iii) the sale was conducted fraudulently, or (iv) justice was otherwise not done.”

Justice Charles E. Freeman asked whether that fourth provision “aims to accomplish the same goal to promote fairness, and if that is true, then why shouldn’t (it) be available as a remedy?”

Noonan responded that giving the civil code statute more weight would be akin to “basically putting a restart in the litigation” whereas, under the foreclosure law, “all it does is disallow the sale, it does not restart the foreclosure” process.

The case is Wells Fargo Bank N.A. v. Katie McCluskey, No. 115469.

New Illinois Supreme Court Rules Relating to Mortgage Foreclosure Cases

On April 11, 2011, the Illinois Supreme Court created the Special Supreme Court Committee on Mortgage Foreclosures and charged it with the following tasks: investigating the procedures used throughout the State of Illinois in mortgage foreclosure proceedings; studying relevant Illinois Supreme Court Rules and local rules that directly or indirectly affect such proceedings; analyzing the procedures adopted in other states in response to the unprecedented number of foreclosure filings nationwide; and reviewing legislative proposals pending in the Illinois General Assembly that may impact the mortgage foreclosure rules for the state. To meet this charge, the Committee established subcommittees, one of which was the Practice and Procedures Subcommittee. The Practice and Procedures Subcommittee submitted proposals for changes to the practice and procedures for mortgage foreclosure cases for discussion at a public hearing held on April 27, 2012. After consideration of comments and discussion at the public hearing, the Committee proposed new rules governing mortgage foreclosure practice and procedure in Illinois.

This article will highlight those sections of the new Rules that deal with the foreclosure of residential properties in Illinois.  More specifically, information that is helpful and relevant to homeowners who are defendants in foreclosure in Illinois.

RULE 113: Practice and Procedure in Mortgage Foreclosure cases

To read the complete rule follow this link

This rule relates to the documents that are required in order to support a mortgage foreclosure case filed in Illinois.  It is meant to supplement current existing Illinois Law.

The first part of the rule provides a "Form Prove-up Affidavit" which is an example of the affidavit that foreclosing parties (banks) must attach in support of a judgment for foreclosure.  Most relevant here is that it required that the signature page (which is to be signed by a bank agent/representative) must not be standalone.  Furthermore, this rule lays out all of the minimum requirements of a prove-up affidavit.  This forces the foreclosing party to substantiate and support the records and figures used against the defendant-homeowner.  This includes laying a proper foundation for any computer records that were used while creating the affidavit.  It goes on to clearly state the amounts that are being claimed as due or past due and owed by the homeowner.

The next part of this rule deals with default judgments.  A default judgment is where a plaintiff (here the bank) obtains a judgment (of foreclosure) against a defendant in the defendant's absence.  This is usually because the defendant failed to appear in court or hire an attorney.  In Illinois and especially Cook County, it is very common for a lender to foreclose by default and obtain judgments against absentee homeowners.  Part (d) of Rule 113 requires that the Circuit Court Clerk shall mail copies of any default judgments to the property address of the homeowner.  It is important to note that this notice is only mailed out AFTER the default judgment has been entered.  The entry of a judgment is a pivotal step in a foreclosure case and should not be taken lightly.

The next relevant section for purposes of this article is section (f) of Rule 113.  This section deals with judicial sales of foreclosed properties.  After a judgment of foreclosure has entered, the bank typically proceeds to a judicial sale (informal auction - usually held in an office building downtown).  This usually happens about 3 months after the judgment.  Section (f) requires that notice of this sale be sent to all defendants at least 10 days before the sale is to occur.  This notice shall include the date, time and location of the sale.

The remaining sections of rule 113 are not relevant to this article but the full text can be found at the link above.

RULE 114: Loss Mitigation Affidavit

This rule, is in my opinion, the best new rule to be adopted relating to mortgage foreclosures period.  Part (a) of this Rule reads as follows:

(a) Loss Mitigation. For all actions filed under the Illinois Mortgage Foreclosure Law, and where a mortgagor has appeared or filed an answer or other responsive pleading, Plaintiff must, prior to moving for a judgment of foreclosure, comply with the requirements of any loss mitigation program which applies to the subject mortgage loan.

This means that it is now a Supreme Court Rule in Illinois for banks to comply with loss mitigation efforts.  Furthermore, the bank is required to complete and file with the court, and affidavit which verifies what loss mitigation steps were taken.  A form affidavit is provided in the text of the Rule.

Section (d) of this rule provides the teeth for the homeowner:

 (d) Enforcement. The court may, either sua sponte or upon motion of a mortgagor, stay the proceedings or deny entry of a foreclosure judgment if Plaintiff fails to comply with the requirements of this rule.

This means that court may, on its own, or at the request of the homeowner, stay the foreclosure case if the bank is not in compliance with this rule.  Stop the case!

Conclusion

These new rules are great victories for justice and fairness in the foreclosure process in Illinois.  There is still disagreement among some of my colleagues as to the effectiveness (or should I say potential effectiveness) of these rules, but for now they look like strong consumer protection provisions.  The Supreme Court recently pushed back the effective date of these rules to May 1, 2013 in order to better assess applicability.  Even still, they should be going live on that date.  

I applaud the work of the Illinois Supreme Court and the work done by the committee relating to these rules.  It is a tribute to Illinois homeowners and another historic milestone on the road to recovery for the American family.