Opinion
2-21-0476
07-07-2022
BMO HARRIS BANK, N.A., Plaintiff-Appellant, v. JOHN KELLEY, Defendant-Appellee.
This order was filed under Supreme Court Rule 23(c)(2) and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Modified Upon Denial of Rehearing September 21, 2022
Appeal from the Circuit Court of Lake County. No. 19-L-886 Honorable Joseph V. Salvi, Judge, Presiding.
HUTCHINSON, JUSTICE delivered the judgment of the court. Justices Jorgensen and Hudson concurred in the judgment.
Justice Bridges participated in the original disposition in this case, but he has since been reassigned to the Fourth District Appellate Court. Justice Jorgensen has replaced Justice Bridges in this cause, and she concurs in the disposition as modified on denial of rehearing.
ORDER
HUTCHINSON, JUSTICE
¶ 1 Held: Plaintiff creditor's claims as junior lien holder were barred as plaintiff could have, but failed to, assert claims in underlying foreclosure proceeding.
¶ 2 This case presents a straightforward application of our recent decision in Adler v. Bayview Loan Servicing, LLC, 2020 IL App (2d) 191019, and section 15-1509(c) of the Illinois Mortgage Foreclosure Law (the Act) (735 ILCS 5/15-1509(c) (West 2020)). Defendant, BMO Harris, N.A., appeals from the dismissal of its breach-of-contract suit against its former mortgagee, John Kelley. For the reasons that follow, we affirm.
¶ 3 I. BACKGROUND
¶ 4 The relevant facts are not in dispute. Kelley was the owner of a roughly 10-acre property, with a three-car garage and a three-bedroom house, on the Illinois side of State Line Road in Antioch. In February 2008, Kelley took out a home equity line of credit with BMO Harris, N.A., with a limit of $51,250, secured as a junior mortgage on the property. (Although the record is not definitive on this point, it would appear that Kelley borrowed most, if not all, of his credit line.)
¶ 5 In March 2010, Fifth Third Mortgage Company, which held Kelley's primary mortgage, filed a foreclosure complaint. Fifth Third Bank v. Kelley, No. 10-CH-1651 (Cir. Ct. Lake County). Fifth Third named BMO Harris as a defendant in the foreclosure action due to its junior lien. No defendants responded and, in November 2010, the circuit court entered a default judgment against BMO Harris and Kelley. A foreclosure sale was held and confirmed by the court in June 2011. A sheriff's deed was issued and recorded in July 2011.
¶ 6 In November 2019, or eight years later, BMO Harris filed its complaint in this case, which alleged that Kelley had defaulted on his equity-line loan and now, with interest, owed around $75,000. Kelley responded that BMO Harris's claim was barred by 735 ILCS 5/15-1509(c). Specifically, Kelley noted that section 15-1509(c)(i) states that the act of vesting title by deed to a bona fide purchaser, "unless otherwise specified in the judgment of foreclosure, shall be an entire bar of all claims of parties to the foreclosure ***." Id. § 15-1509(c)(i). BMO Harris sought judgment on the pleadings.
¶ 7 The circuit court found that BMO Harris was estopped from seeking payment because it failed to assert any claims in Fifth Third's foreclosure case. The circuit court noted that it had considered an unpublished bankruptcy court decision, In re Dancel, 2019 WL 521177 (Bkrtcy.N.D.Ill., 2019), which applied section 15-1509(c)(i) of the Act in a similar circumstance to extinguish a junior lien. The court granted judgment in favor of Kelley and dismissed BMO Harris's complaint with prejudice.
¶ 8 BMO Harris filed a motion to reconsider in which it admitted that it was named as a defendant in Fifth Third's foreclosure but stated that extinguishing its junior lien was an "absurd result" granting a "bizarre windfall" to Kelley. BMO Harris also asserted that Fifth Third's foreclosure had only extinguished BMO Harris's lien, not "its Note." Then, BMO Harris filed a reply which mentioned our decision in Adler, 2020 IL App (2d) 191019-although BMO Harris's representation of our holding in that case was something less than a full verity. BMO Harris then urged the circuit court to apply Adler and reject Dancel as if the two decisions were in conflict.
¶ 9 The circuit court entered a short order stating that Adler and Dancel were consistent with each other and with the Act. The court denied BMO Harris's motion to reconsider. BMO Harris appeals that decision and we affirm.
¶ 10 II. ANALYSIS
¶ 11 In Adler, 2020 IL App (2d) 191019, we held 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." Id. ¶ 25. We also noted that, under the Act, "the proper time" to raise the interests of a junior lienholder (by filing a counterclaim in the initial foreclosure proceeding) is "between the judgment of foreclosure and the confirmation of the sale" as section 15-1508 of Act sets forth numerous grounds for raising such an objection. Id. ¶ 24. As in Adler, because BMO Harris failed to raise its claim under section 15-1508, it is now barred from doing so under section 15-1509(c).
¶ 12 BMO Harris asserts that it did not "need preserve its right to sue on its Note" and that its suit only became ripe when Kelley missed the final balloon payment in February 2018. Both assertions miss the mark. BMO Harris's credit agreement stated that it could accelerate and foreclose on the loan any time the agreement was breached, which would at the very least include the borrower's impairment of the security for the junior mortgage by failing to pay the primary mortgage. Accordingly, BMO Harris could have pursued its note as early as March 2010, when it was notified of the foreclosure action. Instead, BMO Harris waited until November 2019, long after the foreclosure case went to judgment, to seek repayment. Claim preservation was not the issue, section 1509(c) was.
¶ 13 Finally, BMO Harris cites only Adler and Dancel for support, but both decisions are plainly contrary to BMO Harris' position. True enough, nothing prevented BMO Harris from filing this suit against Kelley, and Kelley could have waived his affirmative defense under section 1509(c). But he did not. He properly raised it with leave of court, and the circuit court correctly applied the Act's plain language when it determined that BMO Harris' claim was barred.
¶ 14 III. CONCLUSION
¶ 15 For the reasons stated, we affirm the judgment of the circuit court of Lake County.
¶ 16 Affirmed.