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In re Application of County Collector

Court of Appeals of Illinois, Third District

November 1, 2016

In re APPLICATION OF THE COUNTY COLLECTOR, for Judgment and Order of Sale Against Lands and Lots Returned Delinquent for Nonpayment of General Taxes and/or Special Assessments for the Yearand Prior Years
v.
Mark Varboncouer, Ioana Furnea, Municipal Trust Savings Bank, Interstate Funding Corp., and Galaxy Sites, LLC, Respondents-Appellees. Stolat Financial, LLC, Petitioner-Appellant

         Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois. Circuit No. 13-TX-227 The Honorable John C. Anderson, Judge, presiding.

          JUSTICE CARTER delivered the judgment of the court, with opinion. Justice Holdridge concurred in the judgment and opinion. Justice McDade dissented, with opinion.

          OPINION

          CARTER, JUSTICE

         ¶ 1 Petitioner, Stolat Financial, LLC (Stolat), filed a petition pursuant to section 2-1401(f) of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401(f) (West 2014)) to set aside a tax deed that had been issued on certain real property in Peotone, Will County, Illinois. The current owners of the property and other interested parties filed motions to dismiss the petition pursuant to sections 2-615 and 2-619(a)(9) of the Code (735 ILCS 5/2-615, 2-619(a)(9) (West 2014)). After a hearing, the trial court granted the motions to dismiss. Stolat appeals. We affirm the trial court's judgment.

         ¶ 2 FACTS

         ¶ 3 In June 2009, Richard and Sylvia Modla executed a note and mortgage in favor of the Peotone Bank and Trust Company (Peotone Bank). The mortgage was recorded the following month against certain real property owned by the Modlas in Peotone, Will County, Illinois. The Modlas later defaulted on their obligations under the note and mortgage.

         ¶ 4 In April 2010, the Peotone Bank was closed by the Illinois Department of Financial and Professional Regulation, and the Federal Deposit Insurance Corporation (FDIC) was appointed as the receiver. A notice of the receivership was published in the Federal Register.

         ¶ 5 In November 2010, Interstate Funding Corporation (Interstate) purchased the 2009 delinquent property taxes on the subject property at the annual tax sale and was issued a certificate of purchase. The FDIC was not notified of, and did not consent to, the sale of the delinquent taxes.

         ¶ 6 In February 2012, the FDIC created the FDIC 2011-N1 Asset Trust (the trust), in which it pooled various assets from failed banks. The Bank of New York Mellon Trust Company, N.A. (Bank of New York), was retained as the trustee of the trust. One of the assets that was assigned to the trust was the Modla mortgage. The assignment of the Modla mortgage was made in February 2012 and was recorded two months later. The recorded assignment stated that the FDIC as the receiver for the Peotone Bank did "convey, grant, sell, assign, transfer and set over the described mortgage/deed of trust with all interest secured thereby, all liens, and any rights due or to become due thereon" to the Bank of New York, in its capacity as the trustee of the trust, with its address listed as being in care of Nationstar Mortgage (presumably the loan servicer). There was no reservation of rights contained in the assignment.

         ¶ 7 In July 2012, the Bank of New York, as trustee of the trust, filed suit in Will County to foreclose upon the Modla mortgage. A judgment of foreclosure and sale was later entered in favor of the Bank of New York, but no further action was taken in the case.

         ¶ 8 In July 2013, Interstate filed a petition in the trial court for a tax deed to the subject property. A copy of the petition was served upon the Bank of New York, its attorneys, and upon the loan servicer. Neither the Bank of New York nor the FDIC appeared in the proceedings or consented to the issuance of a tax deed. An attorney for the loan servicer did, however, appear at least one time in the tax deed proceedings but did not file a formal appearance or any type of pleading with the court.

         ¶ 9 In January 2014, after the tax redemption period had expired, Interstate filed an application with the trial court for an order directing the county clerk to issue a tax deed on the subject property. A hearing was held later that same month. At the conclusion of the hearing, the trial court granted Interstate's request and entered an order directing the county clerk to issue a tax deed to the subject property to Galaxy Sites, LLC (Galaxy), as Interstate's assignee. The tax deed was issued and recorded shortly thereafter.

         ¶ 10 In July 2014, Galaxy sold the subject property to Mark Varboncouer for $460, 000, pursuant to a special warranty deed. The funding for the purchase was arranged through Municipal Savings Bank, who held a mortgage on the property as part of the transaction. The deed conveying the property from Galaxy to Varboncouer was recorded later that same month.

         ¶ 11 In October 2014, the FDIC sold and assigned its rights in the Modla mortgage to Stolat. In January 2015, Stolat filed a section 2-1401(f) petition to set aside the tax deed on the property. The petition was later amended (referred to simply as the petition). In the petition, Stolat alleged that the tax deed was void because the FDIC did not consent to the sale of the delinquent taxes (or to the issuance of a tax deed on the subject property) as required under federal statute. In response, Mark Varboncouer; his wife, Ioana Furnea; and their lender, Municipal Savings Bank (collectively referred to hereinafter as the Varboncouers) filed a motion to dismiss the petition pursuant to section ...


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