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JP Morgan Chase Bank, N.A. v. Bank of America N.A.

Court of Appeals of Illinois, First District, Second Division

December 16, 2014

JP MORGAN CHASE BANK, N.A., Successor by Merger to Chase Home Finance LLC, Successor by Merger to Chase Manhattan Mortgage Corporation, Plaintiff-Appellee,
v.
BANK OF AMERICA, N.A., Successor by Merger to LaSalle Bank National Association, et al., Defendant-Appellant BCL Home Rehab, LLC, Intervenor-Appellee.

Appeal from the Circuit Court of Cook County, No. 12 CH 545 Honorable Michael Otto and Moshe Jacobius, Judges Presiding.

JUSTICE LIU delivered the judgment of the court, with opinion. Presiding Justice Simon and Justice Neville concurred in the judgment and opinion.

OPINION

LIU, JUSTICE

¶ 1 This is an appeal from a foreclosure suit brought by plaintiff, JP Morgan Chase Bank, N.A. (Chase), against several defendants, including Bank of America, N.A. (BANA), a junior mortgagee. BANA, along with the other defendants, was defaulted in the underlying action. After the foreclosure sale was conducted, BANA unsuccessfully sought to vacate the order of default and the judgment of foreclosure and sale. Subsequently, BANA filed a petition for turnover of the surplus proceeds from the sale. The circuit court denied BANA's petition and, instead, awarded the entire surplus to the intervenor, BCL Home Rehab, LLC (BCL). BANA contends that the circuit court abused its discretion in denying its petition for surplus and its motion to vacate the default judgment. For the following reasons, we affirm in part and dismiss in part.

¶ 2 BACKGROUND

¶ 3 A. The Mortgages

¶ 4 Jacek and Komila Wojtkowski (collectively, the Wojtkowskis) were borrowers involved in several loan transactions secured by mortgages on their residential property at 1807 Summerton Place, in Northbrook, Illinois. On September 22, 2001, the Wojtkowskis granted a mortgage to LaSalle Bank, N.A. (LaSalle Bank), as security for a loan in the amount of $400, 000. On September 16, 2003, they granted a mortgage to Chase Manhattan Mortgage Corporation (Chase) as security for a loan in the amount of $156, 000. Chase's 2003 mortgage, though filed later, took priority over LaSalle Bank's mortgage due to a subordination agreement executed by the banks. On September 20, 2006, a mortgage was granted in favor of Ravenswood Bank as security for a loan made to Ballard Pointe, LLC, in the amount of $6, 535, 000. On October 7, 2008, a mortgage was granted to Ravenswood Bank to secure a loan of $1, 335, 000.

¶ 5 B. 2010 Foreclosure Lawsuit

¶ 6 In November 2010, Northbrook Bank, successor in interest to Ravenswood Bank, filed a foreclosure complaint against the Wojtkowskis and Ballard Pointe. A judgment of foreclosure and sale was entered in favor of Northbrook Bank. During the judicial sale on October 23, 2012, BCL, a third-party purchaser, bid successfully on the property for $400, 000. The circuit court confirmed the sale to BCL on February 14, 2013, and entered an in rem deficiency judgment against the property in the amount of $800, 388.50. BCL ultimately took title to the property on March 13, 2013.

¶ 7 C. 2012 Foreclosure Lawsuit

¶ 8 On January 6, 2012, prior to the judicial sale in the 2010 lawsuit, Chase initiated the instant foreclosure suit, naming as defendants the Wojtkowskis, Northbrook Bank, and BANA, as successor by merger to LaSalle Bank. Both BANA and Northbrook Bank failed to file their appearances or answers to the complaint. The Wojtkowskis filed an appearance and a motion to dismiss pursuant to sections 2-606 and 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-606, 2-615 (West 2012)), but later withdrew their motion and failed to answer the complaint.

¶ 9 On March 19, 2013, the circuit court granted Chase's motion for a default against all of the defendants and entered a judgment of foreclosure and sale in favor of Chase for the amount of $146, 117.20. Because of the default entered against BANA, BANA's junior mortgage interest was not recognized and, thus, no subordinate lien was included in the judgment. The March 19 judgment order gave the mortgagors and "property owners" until June 20, 2013, to exercise their right to redeem.

¶ 10 In May 2013, BANA retained counsel to represent it in the instant proceedings. At some point, BANA's counsel filed a motion seeking an order to vacate the default, leave to file an appearance and answer, and leave to submit a prove-up and amend the judgment of foreclosure and sale. The exact date that this motion was filed cannot be ascertained because the file stamp on the motion is illegible. BANA's counsel averred in an affidavit that the motion was filed on June 12, 2013; however, there is no evidence in the record of a file-stamped copy of the motion reflecting a purported filing on June 12, 2013 or evidence that the motion was ever docketed.

¶ 11 At the judicial sale on July 1, 2013, AD Realty, LLC (AD Realty), a purported affiliate of BCL, [1] purchased the property for $627, 057. The sale resulted in a surplus of $459, 857.53. On July 18, 2013, Chase moved for an order to confirm the sale. The next day, apparently for the first time, BANA filed a notice of its motion to vacate default and obtained a hearing date of August 22, 2013.

¶ 12 On August 1, 2013, BCL filed an emergency petition for leave to intervene pursuant to section 15-1501(e)(3) of the Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15-1501(e)(3) (West 2012)). BCL asserted that it had been the owner of the property prior to and at the time of the July 1, 2013 judicial sale. BCL sought to intervene in the postsale supplementary proceeding "solely to make a claim for the surplus proceeds from the judicial sale." On August 2, 2013, the court granted BCL leave to intervene and also entered an order approving the report of sale and distribution.

¶ 13 On August 9, 2013, BANA and Northbrook Bank each filed petitions for turnover of the surplus funds from the July 1 sale. BANA claimed that it had an existing lien on the property and attached an affidavit of prove-up showing an outstanding debt of $308, 114.65. Northbrook Bank, meanwhile, claimed that it was a judgment creditor from the 2010 foreclosure case and asserted its in rem deficiency judgment of $800, 388.50.

¶ 14 On October 29, 2013, the court heard argument on BANA's motion to vacate the default and denied the motion. The court found that relief under section 2-1301 of the Code (735 ILCS 5/2-1301 (West 2012)) ceased to be available after the motion to confirm the sale had been filed. The court, nevertheless, indicated that its denial "appear[ed]" to be "without prejudice" since BANA could still file a petition for turnover of surplus proceeds.

¶ 15 On November 12, 2013, BCL filed its own petition for turnover of surplus funds. Thereafter, on December 16, 2013, the court heard argument on the competing petitions of BANA, Northbrook Bank, and BCL, and indicated that it would be ruling in favor of BCL. The court found that BANA knowingly sat on its hands in this case and had no claim for the surplus proceeds as a result of its default. The court found the instant case distinguishable from Kankakee Federal Savings & Loan Ass'n v. Mueller, 134 Ill.App.3d 943 (1985), which BANA cited in support of its argument. The case was continued to January 7, 2014, for entry of the court's formal ruling. On January 7, 2014, ...


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