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Household Finance Corp. v. Buber

August 18, 2004

HOUSEHOLD FINANCE CORPORATION III, PLAINTIFF AND COUNTERDEFENDANT-APPELLEE,
v.
GEORGE D. BUBER AND JUDITH A. BUBER, DEFENDANTS AND COUNTERPLAINTIFFS-APPELLANTS
(HOUSEHOLD FINANCE, MILLENNIUM FINANCIAL, MBNA AMERICA, AND INTEGRATED REAL ESTATE PROCESSING, COUNTERDEFENDANTS).



Appeal from the Circuit Court of Du Page County. No. 02-CH-101. Honorable Bonnie M. Wheaton, Judge, Presiding.

The opinion of the court was delivered by: Presiding Justice O'malley

PUBLISHED

Defendants and counterplaintiffs, George and Judy Buber (defendants), appeal the order of the circuit court of Du Page County, granting the motion of plaintiff and counterdefendant, Household Finance Corporation III (plaintiff), to stay court proceedings pending arbitration. Defendants argue that plaintiff waived its rights to arbitration by failing to timely assert its right to arbitration and, instead, participating in litigation in the circuit court. We affirm.

The following undisputed facts are taken from the record on appeal. On December 7, 2000, defendants executed a mortgage in favor of counterdefendant MBNA America on their residence in the amount of about $208,750. On December 18, 2000, defendants executed a loan repayment and security agreement in favor of MBNA in the amount of about $10,310. Plaintiff is the assignee of the two loans. Both loans included a two-page arbitration rider. The arbitration rider provided that either party could elect to submit to binding arbitration any dispute arising from the loans.

Subsequently, defendants filed for bankruptcy. On November 20, 2001, defendants were discharged from bankruptcy. On January 17, 2002, plaintiff filed suit to foreclose the mortgages on defendants' residence. Plaintiff alleged that, with respect to the December 7 loan, defendants failed to make any payments beginning with the payment due on August 7, 2001. On March 29, 2002, defendants' counsel filed an appearance. Plaintiff filed a motion seeking to default defendants for failing to timely answer the foreclosure complaint. The matter was continued and plaintiff filed three more motions seeking to default defendants. On July 11, 2002, the trial court gave defendants until July 25, 2002, to answer or otherwise plead to the foreclosure complaint.

On August 2, 2002, defendants filed an answer and counterclaim to the foreclosure complaint. The counterclaim alleged that, in September 1999, defendants employed counterdefendant Millennium Financial as a mortgage broker to seek favorable terms to refinance their existing mortgage on their residence. Defendants alleged that plaintiff agreed to provide the refinancing loan even though plaintiff knew that defendants were not receiving income due to illnesses experienced by the breadwinners in the family. Defendants alleged that, after they fell behind in payments on the September 1999 loan, another mortgage broker, plaintiff, and MBNA induced them to refinance again, even though counterdefendants all knew that the monthly payment was in excess of defendants' monthly income. The counterclaim contained five counts and sought rescission of the mortgages, a declaration that the mortgages were void, actual and punitive damages, and attorney fees and costs. Also on August 2, 2002, defendants filed a motion to dismiss, arguing that the mortgages were not in default. On September 19, 2002, the trial court struck the motion to dismiss, but on November 7, 2002, defendants' motion to dismiss was reinstated.

On November 1, 2002, plaintiff filed a motion for summary judgment, arguing that defendants did not have standing to pursue the counterclaim because they did not list the counterclaim as an asset in their bankruptcy schedules. Plaintiff argued that the counterclaim properly belonged to the bankruptcy trustee, leaving defendants without standing to raise their claims in the circuit court.

On February 4, 2003, the trial court denied defendants' motion to dismiss the foreclosure complaint and granted, without prejudice, plaintiff's motion for summary judgment. The trial court allowed defendants to go back to the bankruptcy court in order to bring in a proper party to pursue the allegations in the counterclaim. Defendants, over plaintiff's opposition, managed to personally purchase the counterclaim from the bankruptcy trustee and, on August 13, 2003, refiled the counterclaim.

On September 19, 2003, plaintiff served its notice of election of arbitration and filed a motion to stay the matter pending the resolution of the arbitration. On December 11, 2003, the trial court granted plaintiff's motion to stay, stating:

"Considering all the things that have transpired in this case, I cannot make a determination that there has been a waiver of any rights on the part of [plaintiff]. I know I sent you to the bankruptcy court and back again, and that took a great deal of time. But I believe that the terms of the loan documents are very clear, and they do offer the right of arbitration."

Defendants timely appeal pursuant to Supreme Court Rule 307(a)(1) (Official Reports Advance Sheet No. 5 (March 5, 2003), R. 307(a), eff. January 1, 2003).

On appeal, defendants contend that plaintiff waived its right to submit the counterclaim to binding arbitration. Defendants argue that, by filing the foreclosure action on January 17, 2002, plaintiff manifested an intent to abandon its rights to arbitration. According to defendants, plaintiff further demonstrated its intent to abandon the right to arbitrate this matter by "engaging in a series of legal maneuvers in an attempt to avoid having to respond to the counterclaims." Defendants suggest that they have been prejudiced by plaintiff's delay in asserting its right to arbitration. Defendants conclude that the trial court erred by granting plaintiff's motion to stay the proceedings pending the outcome of arbitration. We disagree.

Initially, we note that, while the parties correctly agree that this matter was properly and timely appealed pursuant to Supreme Court Rule 307(a)(1), which allows an interlocutory appeal from a judgment involving an injunction, the parties disagree over the standard of review to employ in considering whether the trial court properly granted plaintiff's motion. Defendants urge that we employ a de novo review, relying on LAS, Inc. v. Mini-Tankers, USA, Inc., 342 Ill. App. 3d 997, 1001 (2003). Plaintiff, on the other hand, notes that, ordinarily, the proper standard of review for an appeal brought under Rule 307(a)(1) is whether the trial court abused its discretion. Schroeder Murchie Laya Associates, Ltd. v. 1000 West Lofts, LLC, 319 Ill. App. 3d 1089, 1092 (2001). We agree with the LAS court, however, and believe that "the proper standard of review is dictated by the nature of the question presented to the trial court." LAS, 342 Ill. App. 3d at 1001. Here, as in LAS, there were no disputed facts presented to the trial court, which was called upon to decide whether those undisputed facts established that plaintiff waived its right to arbitration as a matter of law. Because a reviewing court conducts a de novo review of a legal question (LAS, 342 Ill. App. 3d at 1001), we will review de novo the issue that defendants raise on appeal.

Our examination of the record shows that plaintiff did not waive its right to submit the matter to arbitration. To establish a waiver of the right to arbitration, a court must find that the party has acted so inconsistently with the assertion of its right to arbitrate as to demonstrate that the party has abandoned its right. Liberty Chevrolet, Inc. v. Rainey, 339 Ill. App. 3d 949, 953 (2003). Among the things to be considered are the party's conduct, the party's delay in asserting its ...


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