"At common law, it was strictly held that the mortgagee must take actual possession before he was entitled to rents." Comerica Bank–Illinois v. Harris Bank Hinsdale , 284 Ill. App. 3d 1030, 1033, 220 Ill.Dec. 468, 673 N.E.2d 380 (1996). "The possession requirement reflects the public policy in Illinois that seeks to prevent mortgagees from stripping the rents from the property and leaving the mortgagor and the tenants without resources for maintenance or repair."
The court noted that the forbearance agreement did not run afoul of the rents-and-profit doctrine, because the contract dictated that all management expenses were to be deducted before any net rents were transmitted to Rockford. See Comerica Bank-Illinois v. Harris Bank Hinsdale , 284 Ill.App.3d 1030, 1034-35, 220 Ill.Dec. 468, 673 N.E.2d 380 (1996) (rent assignment unenforceable absent actual or constructive possession by lender, the latter of which must include court authorization; public policy seeks to prevent mortgagee from leaving the mortgagor and tenants without resources for maintenance or repair). Finally, the court rejected BMO's assertion that the forbearance agreement violated the restraining provisions of the JCI and Briargate citations, distinguishing case law BMO cited that addressed rent assignments. See Comerica , 284 Ill.App.3d at 1034-35, 220 Ill.Dec. 468, 673 N.E.2d 380 ; In re Wheaton Oaks Office Partners Limited Partnership , 27 F.3d 1234, 1241, 1245 (7th Cir. 1994) (lender seeking to enforce rent assignment will usually have to obtain preforeclosure possession by being placed in actual possession or through appointment of receiver; mortgagee must take certain steps to enforce lien; "failure to enforce an assignment of rents does not destroy the legal existence of an effective, enforceable security interest
Plaintiff also states that defendant has not provided a lease proving otherwise. However, we need not make a finding on whether defendant has standing to assert tortious interference, because his claim fails for other reasons. ¶ 45 Defendant's claim of tortious interference relies on Comerica Bank-Illinois v. Harris Bank Hinsdale, 284 Ill. App. 3d 1030 (1996). In Comerica Bank-Illinois, a mortgagor defaulted on its mortgage and the mortgagee, Comerica, began to exercise its assignment of rents, granted by the mortgagor as security for the loan, without foreclosing the mortgage, seeking the appointment of a receiver, or seeking approval from a court.
¶ 26 Illinois requires mortgagees to take possession of the property before collecting rents, which reflects the public policy that "seeks to prevent mortgagees from stripping the rents from the property and leaving the mortgagor and tenants without resources for maintenance or repair." Comerica Bank-Illinois v. Harris Bank Hinsdale, 284 Ill.App.3d 1030, 1033 (1996). Possession may be actual or constructive.
Under Illinois law, an assignment of rents creates a lien upon rents of the land that may be enforced upon default by taking affirmative steps to acquire possession of the land by the mortgagee or a receiver appointed on the mortgagee's behalf. Id. at 1241-42; Comerica Bank-Ill. v. Harris Bank Hinsdale, 673 N.E.2d 380, 382-83 (Ill. App. Ct. 1996). This interest is perfected upon recordation in the real estate records in the county in which the property is located, granting the mortgagee priority "against all parties whose claims or interests arise or are perfected thereafter."
In addition to Illinois cases, our review included federal decisions that interpret Illinois law, which are persuasive authority. See Asset Exchange II, LLC v. First Choice Bank, 2011 IL App (1st) 103718, ¶ 19 (lower federal court decisions are not binding, but may be considered persuasive authority); Comerica Bank-Illinois v. Harris Bank Hinsdale, 284 Ill. App. 3d 1030, 1033 (1996) (in analyzing assignment of rents issue, court relied on Illinois law, bankruptcy decisions, and federal case law). Having thoroughly reviewed the certified question and the parties' arguments, we conclude that we cannot provide an answer because the question is worded incorrectly and requires resolving matters that are beyond the scope of a Rule 308 appeal.¶ 13 The certified question confuses the perfection and enforcement of a lien.
It is also settled Illinois law that under an Assignment of Rents — the agreement that Gizynski and Banco Popular entered into with respect to the property at 4944 W. Belmont — the mortgagor (in this case, Gizynski) is entitled to keep the rents until the mortgagee (here, Banco Popular) obtains possession of the property. See id. at 1242; see also Comerica Bank-Illinois v. Harris Bank Hinsdale, 284 Ill. App. 3d 1030, 1035, 673 N.E.2d 280, 220 Ill. Dec. 468 (1996) (affirming the trial court's ruling that "the rents collected properly belong to the mortgagor" because they were "collected during the time that the mortgagor was in possession of the property"). Therefore, although Banco Popular has a lien on the rental payments at 4944 W. Belmont under the Assignment of Rents, the cash Gizynski deposited with Banco Popular was technically personal property possessed by Gizynski that was subject to the Banco Citation and the Gizynski Citation.
Rather, the modern trend is to permit a "mortgagee to collect rents once it has taken constructive, as opposed to actual, possession of the property."Comerica Bank-Illinois v. Harris Bank Hinsdale, 284 Ill. App. 3d 1030, 1034, 673 N.E.2d 380, 382 (1996). For example, courts have allowed mortgagees to collect rents after the mortgagees have taken affirmative action to take possession of the property, by obtaining an injunction or by having a receiver appointed.Comerica Bank, 284 Ill. App. 3d at 1034, 673 N.E.2d at 382-83;see also De Kalb Bank v. Purdy, 166 Ill. App. 3d 709, 716, 520 N.E.2d 957, 962 (1988).
To take full advantage of an assignment, a creditor must arrange for the tenants to pay it directly through a lockbox, or for a third party such as a receiver to take possession for the lender's benefit. See Comerica Bank–Illinois v. Harris Bank Hinsdale, 284 Ill.App.3d 1030, 1035, 220 Ill.Dec. 468, 673 N.E.2d 380 (1996). When as in Bloomfield State Bank the dispute concerns the priority of interests in rent not yet due, the status of rentals in the debtor's possession is unimportant; but here the only sums in dispute are those that found their way into Gizynski's hands before being applied to his loans at the Bank.
This indicates that a court order, not just initiation of a lawsuit, is necessary for constructive possession. See Comerica Bank-Ill. v. Harris Bank Hinsdale, 284 Ill. App. 3d 1030, 1034, 673 N.E.2d 380, 382-83 (1996) ("Courts have recently allowed mortgagees to collect rents after taking some affirmative action . . . such as obtaining judicial intervention by way of injunctive relief [and] once a receiver has been appointed."); Matter of Wheaton Oaks Office Partners Ltd. P'ship, 27 F.3d 1234, 1242 (7th Cir. 1994) ("[To] allow creditors the opportunity to reach the rents sooner than the completion of foreclosure proceedings, Illinois allows mortgagees . . . to authorize the appointment of a receiver through whom the mortgagee can begin collecting rents."). The other cases that Jefferson-Pilot cites similarly concern mortgagees that had actually obtained judicial relief. See DeKalb Bank v. Purdy, 166 Ill. App. 3d 709, 716, 520 N.E.2d 957, 961 (1988) (defendant was "ordered to pay into the court future rent received"); State Bank & Trust Co. v. Massion, 279 Ill. App. 234, 236 (1935).