Illinois Mortgagor’s Barred From Attacking Foreclosures Once The Mortgagee Moves To Approve The Sale

The issue at stake in Wells Fargo Bank, N.A. v. McCluskey, 2013 IL 115469 (Illinois Supreme Court, Nov. 21, 2013) directly affects a mortgagor’s ability to set aside a foreclosure sale by an eleventh hour request to vacate the underlying judgment. The Supreme Court of Illinois reversed a decision that was in direct conflict with a decision from another appellate district. The issue in th case was whether Illinois’ mortgage foreclosure law trumped the state’s Civil Practice Act (CPA) when it came to a trial court’s power and authority to vacate default judgments. The Court observed that the CPA allows the trial court wide latitude to set aside non-final and (within thirty days) final orders of default. The overriding concern is that the defendant have a meritorious defense and that substantial justice be done. However, the foreclosure law is more restrictive. A party seeking to vacate a default judgment of foreclosure after the judicial sale of the mortgaged property must necessarily also seek to set aside the judicial sale. The foreclosure law limits a court’s ability to set aside the sale to one of four specifically enumerated grounds. One of the four grounds is if justice was not done which, the Court noted, is essentially the same language that justifies vacating defaults under the CPA. This language merely codifies the long-standing discretion of the courts of equity to refuse to confirm a judicial sale where unfairness is shown that is prejudicial to an interested party. But that discretion is not unlimited. To allow the borrower to utilize the lax standards to both set aside the judicial sale and also unravel the underlying foreclosure judgment would be inconsistent with the need to establish stability in the judicial sale process. It would also allow the revival of the mortgagor’s expired redemption rights which is expressly prohibited by foreclosure law. Because the justice provision under the foreclosure law acts as a safety valve to allow the court to vacate the judicial sale and, in rare cases, the underlying judgment, based on traditional equitable principles, the mortgagor must therefore show that justice was not otherwise done because either the lender, through fraud or misrepresentation, prevented the borrower from raising his meritorious defenses to the complaint at an earlier time in the proceedings, or the borrower has equitable defenses that reveal he was otherwise prevented from protecting his property interests. This interpretation is consistent with the carefully constructed legislative policy of balancing the competing objectives of efficiency and stability in the sale process with fairness in protecting the borrower’s equity in the property and preserving the integrity of the sale. After a motion to confirm the judicial sale has been filed, therefore, a mortgagor seeking to set aside a default judgment of foreclosure may only do so by filing an objection to the confirmation of the sale under the provisions of the foreclosure law.

Download Related Document