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U.S. Bank Trust National Association v. Lopez

Court of Appeals of Illinois, Second District

May 4, 2018

U.S. BANK TRUST NATIONAL ASSOCIATION, Not in Its Individual Capacity but Solely as Owner Trustee For Queen's Park Oval Asset Holding Trust, Plaintiff-Appellee,
v.
MARIO A. LOPEZ, a/k/a Mario Augusto Lopez-Franco; MARTHA D. LOPEZ; and UNKNOWN OWNERS and NONRECORD CLAIMANTS, Defendants-Appellants.

          Appeal from the Circuit Court of Du Page County. No. 14-CH-473 Honorable Robert G. Gibson, Judge, Presiding.

          JUSTICE BURKE delivered the judgment of the court, with opinion. Justices McLaren and Schostok concurred in the judgment and opinion.

          OPINION

          BURKE, JUSTICE.

         ¶ 1 Plaintiff, U.S. Bank Trust National Association, as owner trustee for Queen's Park Oval Asset Holding Trust, filed a foreclosure suit against defendants, Mario A. Lopez, a/k/a Mario Augusto Lopez-Franco, and Martha D. Lopez. Defendants raised the affirmative defense that plaintiff lacked standing when it filed the suit. Defendants also raised the affirmative defenses that plaintiff violated Illinois Supreme Court Rule 113(b) (eff. May 1, 2013) and failed to comply with Title 24, section 203.604, of the Code of Federal Regulations (Code) (24 C.F.R. § 203.604 (2014)). The trial court struck defendants' affirmative defenses, granted plaintiff summary judgment, and entered a judgment of foreclosure and sale. On appeal, defendants challenged the trial court's orders striking their affirmative defenses and granting plaintiff summary judgment. On November 14, 2017, this court filed its opinion. We reversed the judgment of foreclosure and sale, vacated the order approving the sale, and dismissed the foreclosure. Specifically, we determined that plaintiff lacked standing. Plaintiff filed a timely petition for rehearing, disputing that holding. We granted the petition for rehearing and withdrew our opinion. For the reasons that follow, we hold that the trial court did not err in striking the affirmative defenses concerning standing and Rule 113(b). However, we hold that there are factual issues regarding plaintiff's compliance with section 203.604 and that the trial court erred in striking that affirmative defense. Therefore, we vacate the judgment of foreclosure and sale and remand the cause for further proceedings.

         ¶ 2 I. BACKGROUND

         ¶ 3 A. Initial Foreclosure Proceedings and Amended Complaint

         ¶ 4 On March 11, 2014, plaintiff filed a complaint to foreclose the mortgage on property owned by defendants. The complaint attached the mortgage and the note. The note bore two indorsements, one from the original lender to Countrywide Bank, FSB (Countrywide), and the second from Countrywide to the Secretary of Housing and Urban Development (HUD), a nonparty to the case. The note included no indorsements or assignments to plaintiff. The complaint alleged in paragraph "n" that plaintiff was the "legal holder of the indebtedness."

         ¶ 5 On May 12, 2014, defendants filed an answer with affirmative defenses, claiming that plaintiff lacked standing because the note attached to the complaint was indorsed to HUD and not to plaintiff, that plaintiff failed to comply with Rule 113(b) because the note did not show an indorsement to plaintiff, and that plaintiff failed to comply with Title 24, section 203.604, of the Code.

         ¶ 6 On November 7, 2014, plaintiff amended its complaint to resolve any issue regarding the note. The allegations were substantially similar to those in the original complaint except that it alleged in paragraph "n" that "on March 11, 2014[, ] Plaintiff was a non-holder in possession of the Note with rights of a holder. Plaintiff is currently the legal holder of the Note." Also, plaintiff attached a copy of the note bearing the same two indorsements, one from the original lender to Countrywide and the second from Countrywide to HUD. The amended complaint included an "allonge to note" that was not filed with the original complaint. The allonge, which is undated, contains a special indorsement from HUD to Queen's Park Oval Asset Holding Trust, the trust for which plaintiff was the owner trustee.

         ¶ 7 B. Defendants' Motion to Dismiss the Amended Complaint

         ¶ 8 On December 24, 2014, defendants filed a motion to dismiss plaintiff's amended complaint, pursuant to section 2-619.1 of the Code of Civil Procedure (735 ILCS 5/2-619.1 (West 2014)). They repeated the arguments they raised in their affirmative defenses that plaintiff lacked standing and violated Rule 113(b). Defendants claimed that the defect could not be cured by amendment. Following arguments, the court denied defendants' motion to dismiss, without prejudice.

         ¶ 9 C. Defendants' Affirmative Defenses to the Amended Complaint

         ¶ 10 On April 16, 2015, defendants filed an answer to plaintiff's amended complaint and repeated their previous affirmative defenses. They argued again that, when the case was filed, plaintiff lacked standing, as the note attached to the complaint was indorsed to HUD and no assignment to plaintiff was attached. Defendants maintained that the allonge attached to plaintiff's amended complaint contained an indorsement executed after the filing of the original complaint. Defendants supported their answer with judicial admissions made by plaintiff throughout the proceedings that it was not in possession of an indorsed note at the time of the original filing. Defendants alleged that plaintiff violated Rule 113(b) when it amended the complaint to include the allonge. Defendants also alleged that plaintiff failed to comply with Title 24, section 203.604, of the Code, because plaintiff did not provide the required face-to-face meeting or offer defendants "an opportunity to conduct one."

         ¶ 11 D. Striking the Affirmative Defenses, Summary Judgment, and Judicial Sale

         ¶ 12 Plaintiff filed a motion to strike the affirmative defenses, pursuant to section 2-619.1. The motion attached a January 16, 2014, assignment of the mortgage from HUD to plaintiff (without the note), various affidavits, and a Federal Express (FedEx) tracking label. Plaintiff argued that the standing defense was insufficiently pleaded because defendants did not properly articulate how plaintiff lacked standing and defendants failed to support their claim that a violation of Rule 113 compelled dismissal. ...


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