Illinois appellate court recognizes that mortgagor has viable defense for tortious interference where lender tries to collect rent before it has possession

In a recent First District decision a mortgagor of commercial rental property was nearly successful in arguing that the lender tortiously interfered with a lease he had with a tenant. Immediately following the filing of foreclosure action in Bank Financial FSB v. Brandwein, 2015 IL App (1st) 143956 (June 26, 2015) , an officer of the lender visited the premises and told the tenants not to pay the monthly rent to the mortgagor but to pay the rent to the lender instead. However, despite having an assignment of rents, the lender did not obtain constructive possession of the property until five months later. The mortgagor asserted as a defense to the foreclosure that by demanding rent from the tenant, the lender prevented the mortgagor from paying the delinquent amounts due under the Note. The wrongful demand for rent, and the resulting inability of the mortgagor to use the rent to bring the loan current, resulted in the property being foreclosed and sold at a judicial sale. The trial court denied the mortgagor’s argument and was affirmed on appeal. The appellate court observed that the mortgagor was correct that the lender had no right to enter the premises and demand rent from the mortgagor’s tenants unless it was in constructive possession of the property. Constructive possession could be obtained through the judicial appointment of a receiver, but a receiver was not appointed until after the demand for rents was made. So the lender had no right to demand the rent. However, the tortious interference claim failed because the mortgagor had no evidence he was damaged by the alleged interference, or even that the tenants broke their contract by not paying rent. Even if the rent was difficult to collect, if the tenants did pay defendant, then there was no breach of contract, no cognizable harm, and thus no tortious interference. The court also noted that defendant no longer had the option of bringing the loan current at that time that the alleged interference occurred. The full loan amount was due. Thus, the idea that plaintiff could have used the rent from the period between when the mortgagor contacted the tenants and when the court appointed a receiver, approximately five months, to bring the loan current is not a bona fide factual issue.