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U.S. Bank, N.A. v. Laskowski

Court of Appeals of Illinois, First District, Second Division

July 16, 2019

U.S. BANK, NATIONAL ASSOCIATION, as Trustee for Credit Suisse First Boston CSFB 2005-11, Plaintiff-Appellee,
MARK LASKOWSKI; THE CITY OF CHICAGO; PACIFIC REALTY GROUP, LLC, an Illinois Limited Liability Company; AVERN C. SMITH; UNKNOWN OWNERS AND NONRECORD HOLDERS, Defendants Pacific Realty Group, LLC, Petitioner-Appellant; Lawrence Wilson and U.S. Bank, National Association, as Trustee for Credit Suisse First Boston CSFB 2005-11, Respondents-Appellees.

          Appeal from the Circuit Court of Cook County. No. 09 CH 977 The Honorable Gerald V. Cleary, Judge, presiding.

          JUSTICE HYMAN delivered the judgment of the court, with opinion. Justices Pucinski and Mason concurred in the judgment and opinion.


          HYMAN, JUSTICE

         ¶ 1 Five years after a default judgment of foreclosure and six years after the sale of the property to a bona fide purchaser, a limited liability company (LLC) came forward to claim it had an equitable interest in the foreclosed property. The LLC argued that the trial court did not have jurisdiction over it because the method of service-publication-is not allowed under the Limited Liability Company Act (LLC Act) (805 ILCS 180/1 et seq. (West 2016)). As it turns out, after he stopped making payments on the mortgage, the mortgagor formed the LLC in the state of New Mexico. He also was the sole member of the LLC. In an ignoble attempt to discredit the foreclosure judgment, the LLC petitioned to quash service of process and vacate all void orders under section 2-1401 (f) of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401(f) (West 2016)).

         ¶ 2 The lender and the bona fide purchaser successfully moved to dismiss, and we affirm. The Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15-1101 et seq. (West 2016)) does not make the LLC a necessary party to the foreclosure case, so service on it was not required. In any event, under the facts of this case, the Foreclosure Law protects the interest of the bona fide purchaser as to any defect in service.

         ¶ 3 Background

         ¶ 4 In October 2005, Credit Suisse First Boston loaned Mark Laskowski $130, 900. The loan was secured by a mortgage on residential property in Chicago. Laskowski stopped making mortgage payments in October 2008.

         ¶ 5 A "Memorandum and Affidavit of Equitable Interest," dated November 22, 2008, purports to grant Pacific Realty Group, LLC (Pacific LLC) an equitable interest in the property. The memorandum, which only Laskowski signed, states, "[a]n Agreement was entered into between the undersigned [i]n the amount of $350, 000." Laskowski filed the memorandum with the Cook County Recorder of Deeds in December 2010. The memorandum does not identify Pacific LLC's mailing address, its registered agent, or the state where it was formed. According to documents filed in conjunction with Pacific LLC's section 2-1401 petition, Pacific LLC is a New Mexico company, and Laskowski is its sole member. Pacific LLC's registered agent is a company in New Mexico with an Albuquerque address. Pacific LLC's capital value totaled $200.

         ¶ 6 In 2009, U.S. Bank, National Association (U.S. Bank), filed a complaint to foreclose the mortgage. U.S. Bank named Laskowski and Pacific LLC as defendants. (The City of Chicago, unknown owners and nonrecord claimants, and another individual were also named defendants but are not relevant to the appeal.)

         ¶ 7 U.S. Bank filed an affidavit for service by publication on Laskowski and Pacific LLC, stating that, after diligent inquiry, it was unable to locate them. Between February 17, 2009, and March 3, 2009, U.S. Bank published the notice to Laskowski and Pacific LLC in the Chicago Daily Law Bulletin. The notice then was filed in the circuit court and mailed to Laskowski at four different addresses. Later, the special process server filed an affidavit, dated April 27, 2009, stating he had served "Pacific Realty Group, LLC" "c/o President Ike Hong, 11 Broadleys Ct. Deerfield, IL 60015." According to the affidavit, "Pacific Realty Group, LLC" was served by leaving a copy of the process with Grace Hong, as authorized agent for service.

         ¶ 8 In October 2009, U.S. Bank filed a motion for a default order. In a certificate filed with the motion, U.S. Bank asserted it served Laskowski by publication and Pacific LLC by corporate service. In May 2010, after Laskowski and Pacific LLC failed to answer or otherwise plead, the trial court entered an order of default and a judgment of foreclosure. The property was sold at a sheriff's sale, and the trial court approved the sale. A week later, the property was conveyed to U.S. Bank by judicial deed. After several more conveyances, in August 2011, Seaway Bank and Trust Company conveyed the property to respondent Lawrence Wilson.

         ¶ 9 More than five years passed. In November 2016, Pacific LLC filed an appearance and a petition to quash service of process and vacate all void orders under section 2-1401(f) of the Code (735 ILCS 5/2-1401(f) (West 2016)). Pacific LLC argued that U.S. Bank had served the wrong entity-Pacific LLC had no connection whatsoever with the similarly named Illinois corporation and Hong. Rather, it is a foreign LLC registered in the state of New Mexico.

         ¶ 10 Wilson moved to dismiss the petition under section 2-619(a)(2) and (a)(9) of the Code (735 ILCS 5/2-619(a) (2), (a)(9) (West 2016)), arguing (i) Pacific LLC had been properly served by publication, (ii) Pacific LLC could not bring the petition having never registered to transact business in Illinois, (iii) Pacific LLC lacks standing to challenge the judgment as it has no bona fide title or interest in the property, (iv) Pacific LLC was on notice of the foreclosure proceeding because Laskowski, its sole member, appeared, and (v) section 2-1401(e) of the Code protects the interest of Wilson in the property because he is a bona fide purchaser for value. U.S. Bank filed a motion to dismiss, adopting Wilson's motion in its entirety. U.S. Bank also argued Pacific LLC's equitable interest in the property was a sham and that Pacific LLC was an alter ego of Laskowski.

         ¶ 11 In response, Pacific LLC argued (i) the LLC Act does not permit service by publication, (ii) it was not required to register under the LLC Act because merely owning property in Illinois does not constitute transacting business under the Act, (iii) the special process server did not serve it, (iv) its standing to challenge the foreclosure judgment arises from its equitable interest in the property, (v) a void judgment may be attacked at any time, and (vi) Wilson was not a bon ...

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