In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 05-1858

AURORA LOAN SERVICES, INC.,

Plaintiff,

v.

FRANK CRADDIETH and PEGGY CRADDIETH,

Defendants-Appellees.

APPEAL OF:

MIDWEST REAL ESTATE INVESTMENT COMPANY,

Intervenor-Appellant.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 99 C 4325—Samuel Der-Yeghiayan, Judge.

____________

ARGUED OCTOBER 24, 2005—DECIDED MARCH 31, 2006

____________

Before POSNER, WILLIAMS, and SYKES, Circuit Judges.

POSNER,Circuit Judge. This appeal by Midwest Real Estate

Investment Company arises out of a diversity suit

to foreclose a mortgage that Aurora, the plaintiff, owned

on the Craddieths’ home. The substantive issues are governed by Illinois law.
2 No. 05-1858

The suit was filed, and a foreclosure judgment entered, in 1999. But for reasons that are unclear, the foreclosure sale was not conducted until October 2004. Midwest

was the high bidder, bidding $107,818.44. (The appraised

value of the property was $170,000.) However, two or three

weeks before the sale the Craddieths had obtained alternative financing that would have enabled them to retain their

home: They had arranged for a loan in the form of a

sale. They would sell their home to a third party pursuant

to an installment land contract that provided that the

“buyer” would hold the title to the property until the

Craddieths had made their final payment of the sale

price, that is, had fully repaid the loan, at which

point the title would revert the Craddieths.

On the morning of the day of the foreclosure sale, the

Craddieths’ lawyer notified the court that his clients had

made an alternative arrangement for paying back Aurora.

But he mistakenly described the alternative as a “real” sale

of the home to someone other than Midwest, rather than

as a financing arrangement that would allow the Craddieths

to keep their home. The judge, thinking that therefore the

Craddieths were “going to be out of their house no matter

what,” refused to stop the foreclosure sale, at which Midwest was the high bidder. Midwest tendered the $107,818.44

purchase price to the court official who had conducted the

sale, and the official issued Midwest a certificate of sale.

But before Midwest could take title to the property the

foreclosure sale had to be confirmed by the district court.

On November 16 the district judge convened a hearing

on Aurora’s motion to confirm the sale to Midwest. At

the hearing, at which Midwest was not present, it was

revealed that the Craddieths had indeed found a lender

who was willing to pay the amount due Aurora on the
No. 05-1858 3

mortgage. On December 21, the judge formally denied

Aurora’s motion to confirm the sale.

Eight days later, Midwest moved the district court for

leave to intervene in the foreclosure suit under Rule 24(a) of

the Federal Rules of Civil Procedure. Without ruling on the

motion, the judge vacated the foreclosure judgment,

explaining “I’m not going to allow this poor man who

has lost his house due to a fault of attorney problems

and now he’s willing to pay the amount—he’s lived there 23

years—just his house to be basically taken away from him.”

For what had seemed inevitable to the judge—the loss of the

Craddieths’ home either to Midwest or to the substitute

“buyer”—now seemed preventable. Later, the Craddieths’

lender having paid off Aurora’s mortgage, the judge

dismissed the foreclosure suit, whereupon he also dismissed

all pending motions, including Midwest’s motion to

intervene, on the ground that they were moot in light of that

dismissal.

So Midwest has appealed; but it must overcome a series of

jurisdictional obstacles before we can consider the merits of

the appeal. There is first a question whether Midwest had

standing to intervene in the district court under Rule

24(a)(2) of the civil rules. (There is no contention that it

might qualify for intervention as a matter of right under

Rule 24(a)(1), and we need not consider whether it might

have a compelling case for permissive intervention, under

Rule 24(b).) If it did not have standing, it has no right to

appeal the dismissal of the suit. “The standing Article III

requires must be met by persons seeking appellate review,

just as it must be met by persons appearing in courts of first

instance.” Arizonans for Official English v. Arizona, 520 U.S.

43, 64 (1997); see also Diamond v. Charles, 476 U.S. 54, 68
4 No. 05-1858

(1986); Korczak v. Sedeman, 427 F.3d 419 (7th Cir. 2005);

Tachiona v. United States, 386 F.3d 205, 211 (2d Cir. 2004).

Rule 24(a)(2) entitles a person to intervene who “claims an

interest relating to the property or transaction which is the

subject of the action,” provided that the outcome of the suit

would impair his ability to protect that interest and his

interest is not adequately protected by an existing party.

There was no doubt that Midwest’s ability to protect its

interest in acquiring the Craddieths’ house would be

impaired unless it intervened and that no existing party to

the foreclosure suit would protect Midwest’s

interest—Aurora was indifferent (it was going to be paid in

full either by Midwest or by the Craddieths’ new lender)

and the Craddieths opposed. The question is whether

Midwest had the kind of “interest” that Rule 24(a)(2)

requires.

To be entitled to intervene under that provision, with the

full rights of a party including (critically in this case) the

right to appeal, the applicant’s interest must be one on

which an independent federal suit could be based, consistent with Article III’s requirement that only a case or

controversy can be litigated in a federal court at any stage of

the proceeding. Arizonans for Official English v. Arizona,

supra, 520 U.S. at 64-65; Korczak v. Sedeman, supra, 427 F.3d

at 421-22. The interest must be a claim to a legally protected

right that is in jeopardy and can be secured by the suit. E.g.,

Tachiona v. United States, supra, 386 F.3d at 211; City of

Cleveland v. Nuclear Regulatory Commission, 17 F.3d 1515,

1516-17 (D.C. Cir. 1994) (per curiam). The principle is one of

federal law but the nature and extent of the interest that a

foreclosure-sale certificate confers, and therefore whether it

can be the ground of a federal suit, depend on the law that

defines the rights that such a certificate creates. FMC Corp.
No. 05-1858 5

v. Boesky, 852 F.2d 981, 993 (7th Cir. 1988); Bochese v. Town of

Ponce Inlet, 405 F.3d 964, 981 (11th Cir. 2005); Cantrell v. City

of Long Beach, 241 F.3d 674, 684 (9th Cir. 2001). In this case,

that is the law of Illinois. So we look to that law to see

whether the holder of the certificate has the kind of stake

that Article III requires.

The right that the certificate confers resembles the

right created by a contract for the purchase of land. Such

a contract does not confer ownership of the land, but

normally one can bring a suit for specific performance if the

seller reneges, and the suit if successful will compel the

seller to hand over to the buyer the title to the property.

Resolution Trust Corp. v. Ruggiero, 994 F.2d 1221, 1225 (7th

Cir. 1993). Of course there are defenses to a suit to enforce

a contract, but no one would suppose that the fact that a

contract claim may fail deprives the suitor of a solid

“interest” in the contract, interest enough certainly to justify

intervention under Rule 24(a)(2). Otherwise Article III

would bar most federal court actions for breach of contract

even when the requirements of diversity jurisdiction were

satisfied.

Similarly, although there are defenses to the confirmation of a foreclosure sale, they are limited by statute to

lack of notice; the terms of the sale were unconscionable; the

sale was conducted fraudulently; or “justice was otherwise not done.” 735 ILCS 5/15-1508(b). The first three

defenses would be normal defenses in a contract case. The

last is pretty open-ended, though this depends in part on

what exactly “doing justice” means in this context. We

examine that issue later; suffice it here to say that it is not so

open-ended as to make the interest conferred by a

foreclosure-sale certificate illusory. It is a solid legally

protected interest, its solidity being further suggested by the
6 No. 05-1858

fact that the vast majority of foreclosure sales are confirmed

routinely. Basil H. Mattingly, “The Shift from Power to

Process: A Functional Approach to Foreclosure Law,” 80

Marquette L. Rev. 77, 114 (1996). In Colon v. Option One

Mortgage Corp., 319 F.3d 912, 921 (7th Cir. 2003), we called

the interest of the high bidder at the foreclosure sale “a

potentially binding contract,” and explained that “under

[Illinois] state law, after the completion of the judicial sale,

assuming that the redemption period has run, the purchaser

at that sale has a presumptive right to eventual ownership

of the property, a right contingent on the highly circumscribed authority of the state court to void the sale on any of

the four grounds set forth in the statute.”

Twice, Illinois appellate courts have held that the high

bidder at a foreclosure sale has a legally protected interest

even though that interest “evaporates upon the trial

court’s determination that the judicial sale will not be

confirmed.” Citicorp Savings v. First Chicago Trust Co., 645

N.E.2d 1038, 1043-45 (Ill. App. 1995); Commercial Credit

Loans, Inc. v. Espinoza, 689 N.E.2d 282, 287 (Ill. App. 1997).

Citing Citicorp, the court in Espinoza said that “as certified

high bidders in the foreclosure sale of Espinoza’s property,

appellants have some interest in litigation involving the

property. High bidders should be able to pursue their

appeal.” Id. The court in Citicorp had said that “it is settled

law that a non-party may bring an appeal when that person

has a direct, immediate and substantial interest in the

subject matter, which would be prejudiced by judgment

or benefited by its reversal. . . . [I]t cannot be disputed that

the Bilanzics were adversely affected by the trial court’s

order or that they will have the right to the property should

the sale be confirmed. This is sufficient to allow the

Bilanzics to bring this appeal regardless of the decision by

the trial court to deny intervention.” 645 N.E.2d at 1044.
No. 05-1858 7

The quoted language has, it is true, a procedural rather

than a substantive flavor. If all it means is that Illinois

procedure allows intervention by high bidders, this

cannot rule our decision, because Illinois is under no

obligation to conform its criteria for intervention to those of

federal law. But what underlies the procedural judgments

in these cases is a determination that the high bidder really

does have a solid interest, an inference anyway compelled

by the statute that delimits the defenses to confirmation of

a foreclose sale.

The Craddieths do not contend otherwise. Rather, pointing to the statement in the Espinoza and Citicorp opinions

that “what the trial court decides to do with the property

after it determines the sale will not be confirmed is a matter

in which the [high bidders] have no discernible legal

interest,” Commercial Credit Loans, Inc. v. Espinoza, supra, 689

N.E.2d at 287; Citicorp Savings v. First Chicago Trust Co.,

supra, 645 N.E.2d at 1045, they argue that Midwest lacks

standing to challenge the district court’s order that vacated

the judgment of foreclosure and by doing so cut the ground

out from under Midwest’s claim. But in both Espinoza and

Citicorp the appellate court reached the conclusion about the

high bidder’s lack of standing to challenge the reinstatement

of the defendant’s mortgage only after the court determined

that the trial court had properly refused to confirm the foreclosure sale—it was that determination that extinguished the

high bidder’s interest in the property. Id.; Commercial Credit

Loans, Inc. v. Espinoza, supra, 689 N.E.2d at 287. Until then he

had a legally protected interest. A contrary ruling—a ruling

confirming the sale—would have perfected rather than

extinguished the high bidder’s interest, and thus, according to the logic of these cases, would have allowed him

to challenge any subsequent reinstatement of the mortgage.

The high bidder must be allowed to challenge a rejection of
8 No. 05-1858

the sale in order to establish that he indeed has a legally

protected interest, namely in obtaining the property for

which he was the high bidder.

The point is not that to establish standing a plaintiff

must establish that a right of his has been infringed;

that would conflate the issue of standing with the merits

of the suit. It is that he must have a colorable claim to such a

right. It is not enough that he claims to have been injured by

the defendant’s conduct. “The alleged injury must be legally

and judicially cognizable. This requires, among other things,

that the plaintiff have suffered ‘an invasion of a legally

protected interest.’ ” Raines v. Byrd, 521 U.S. 811, 819 (1997),

quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560

(1992); see also Reid L. v. Illinois State Board of Education, 358

F.3d 511, 515-16 (7th Cir. 2004); Tachiona v. United States,

supra, 386 F.3d at 211; City of Cleveland v. Nuclear Regulatory

Commission, supra, 17 F.3d at 1516-17. “[T]here is a sense

in which I am ‘injured’ when I become upset by reading

about the damage caused that fine old vineyard in Burgundy by a band of marauding teetotalers, yet that injury

would not be an injury” that conferred standing to sue

under Article III. Depuy, Inc. v. Zimmer Holdings, Inc., 384

F. Supp. 2d 1237, 1240 (N.D. Ill. 2005). The injury must

be to the sort of interest that the law protects when it is

wrongfully invaded. The cases simply require litigants to

possess such an interest, which is quite different from

requiring them to establish a meritorious legal claim.

We next consider whether the fact that Midwest is a

citizen of the same state as the defendants blocks it

from intervening, on the theory that its presence as a

party to the foreclosure suit would eliminate the complete diversity that is required to maintain a diversity suit in

federal court. Considerations of judicial economy allow a

federal court to exercise ancillary (now a part of what is
No. 05-1858 9

called “supplemental”) jurisdiction over claims that could

not be litigated in federal court were it not for their relation

to a claim, party, etc., properly before the court. The basic

standard is stated in 28 U.S.C. § 1367(a): a district court

having original jurisdiction of a case “shall

have supplemental jurisdiction over all other claims that are

so related to claims in the action within such original

jurisdiction that they form part of the same case or controversy under Article III.” The next subsection states, however, that the supplemental jurisdiction does not extend to

“persons . . . seeking to intervene as plaintiffs under Rule

24” if, as in this case, the only basis of the federal court’s

original jurisdiction is diversity and if “exercising supplemental jurisdiction over such claims would be inconsistent with the jurisdictional requirements of section 1332

[the diversity statute].” 28 U.S.C. § 1367(b). This provision

might appear to doom Midwest’s quest to intervene, since it

is a citizen of Illinois, as are the Craddieths.

The evident purpose of the provision, however, is to

prevent a two-step evasion of the requirement of complete

diversity of citizenship by a person who, being of the

same citizenship as the defendant, waits to sue until a

diverse party with which it is aligned sues the defendant, and then joins the suit as an intervening plaintiff. See

Stromberg Metal Works, Inc. v. Press Mechanical, Inc., 77 F.3d

928, 931-32 (7th Cir. 1996); State National Ins. Co. v. Yates, 391

F.3d 577, 581 (5th Cir. 2004); Viacom International, Inc. v.

Kearney, 212 F.3d 721, 726-27 (2d Cir. 2000). Section “1367(b)

reflects Congress’ intent to prevent original

plaintiffs . . . from circumventing the requirements of

diversity.” Id. (emphasis added).

That is not what happened here. When Aurora’s foreclosure suit began, Midwest had no claim against the
10 No. 05-1858

Craddieths. Its claim arose in the course of the foreclosure

proceeding, after it obtained the certificate of sale and

Aurora, repayment of its loan assured, abandoned the

suit. Jurisdiction is not defeated by the intervention of a

party who had “no interest whatsoever in the outcome

of the litigation until sometime after suit was commenced.”

Freeport-McMoRan, Inc. v. K N Energy, Inc., 498 U.S. 426,

428 (1991) (per curiam); American National Bank & Trust Co.

v. Bailey, 750 F.2d 577, 582-83 (7th Cir. 1984); Salt Lake

Tribune Publishing Co. v. AT & T Corp., 320 F.3d 1081, 1095-96

(10th Cir. 2003). Section 1367(b)’s purpose of preventing plaintiffs who would have destroyed federal jurisdiction

had they joined a suit at its outset from using Rule 24 to

circumvent the requirement of complete diversity has no

application to a party forced to intervene to protect an

interest that arose during the course of a federal litigation in

which he had no stake at the outset. Such a party has no say

in deciding where the suit is brought and so cannot be

gaming the system. See MCI Telecommunications Corp. v.

Logan Group, Inc., 848 F. Supp. 86, 88-89 (N.D. Tex. 1994).

This conclusion is further entailed by the rule that federal jurisdiction is (with immaterial exceptions) determined

as of the date the complaint is filed. If on that date there is a

claimant lurking in the wings—an indispensable party

with a nondiverse claim that he hopes to attach to a diversity suit, as when “two parties (one from Illinois, one from

Indiana) who claim an interest in the same property want to

adjudicate their rights against a third party, a citizen of

Illinois,” Stromberg Metal Works, Inc. v. Press Mechanical, Inc.,

supra, 77 F.3d at 932—his later effort to intervene will be

blocked. See also Salt Lake Tribune Publishing Co. v. AT & T

Corp., supra, 320 F.3d at 1095-96. But, to repeat, at the time

Aurora sued, Midwest had no claim at all. It did not enter
No. 05-1858 11

the picture until the foreclosure sale five years later. Midwest was not, and could not have been, an original plaintiff

in Aurora’s suit against the Craddieths. It is difficult to see

how Midwest could vindicate its claim to the Craddieths’

property but by intervening.

After the enactment of section 1367, the Supreme Court

reaffirmed that “if jurisdiction exists at the time an action is

commenced, such jurisdiction may not be divested by

subsequent events.” Freeport-McMoRan, Inc. v. K N Energy,

Inc., supra, 498 U.S. at 428, citing with approval the following language from Wichita Railroad & Light Co. v. Public

Utilities Commission, 260 U.S. 48, 54 (1922): “Jurisdiction once

acquired . . . is not divested by a subsequent change in the

citizenship of the parties. Much less is such jurisdiction

defeated by the intervention, by leave of the court, of a party

whose presence is not essential to a decision of the controversy between the original parties.”

Language in some subsequent lower-court cases could

be read by an insensitive interpreter to suggest that a

nondiverse party may never intervene in a diversity suit.

See, e.g., TIG Ins. Co. v. Reliable Research Co., 334 F.3d 630,

634 (7th Cir. 2003); Development Finance Corp. v. Alpha

Housing & Health Care, Inc., 54 F.3d 156, 159 (3d Cir. 1995).

But it is a disservice to judges and a misunderstanding of

the judicial process to wrench general language in an

opinion out of context. Those were not cases in which the

occasion for intervention arose after the suit was brought.

They were cases within the intended scope of section

1367(b).

The Craddieths further argue that the case has become

moot. The case is not moot if, were Midwest a party, the

district court could grant it relief. As a party, Midwest
12 No. 05-1858

would be arguing that the judgment of foreclosure

should not have been set aside. If the judgment were

reinstated, along with the sale, Midwest would be entitled to a title deed to the property.

It is true that the rule in Illinois, as elsewhere, is that in the

absence of a stay, a sale of real property to a third party bars

an appeal from the judgment authorizing the sale. Ill. Sup.

Ct. R. 305(k); see Duncan v. Farm Credit Bank, 940 F.2d 1099,

1103-04 (7th Cir. 1991) (Illinois law); FDIC v. Meyer, 781 F.2d

1260, 1263-64 (7th Cir. 1986); Town of Libertyville v. Moran,

535 N.E.2d 82, 86 (Ill. App. 1989); see also Oakville Development Corp. v. FDIC, 986 F.2d 611, 613-14 (1st Cir. 1993). We

can assume that this rule, concerned as it is with settling

title to property, is binding on federal courts in a diversity

suit governed by Illinois substantive law. See S.A. Healy Co.

v. Milwaukee Metropolitan Sewerage District, 60 F.3d 305, 311

(7th Cir. 1995); Barron v. Ford Motor Co., 965 F.2d 195, 199

(7th Cir. 1992). We can even assume that it applies to the

faux sale—really a loan—involved in this case. The rule

applies, however, only to “property that is acquired after the

judgment becomes final.” Ill. Sup. Ct. R. 305(k). The (nominal) purchase of the Craddieths’ property occurred before

the judgment in the foreclosure suit became final by virtue

of the district court’s dismissal of it, so the rule is inapplicable.

Of course the effect on the third party of undoing the

“sale” to (actually loan from) that party, who bailed out

the Craddieths, would have to be considered, In re

Envirodyne Industries, Inc., 29 F.3d 301, 304 (7th Cir. 1994), a

further complication being that he was never made a party

to the suit. Duncan v. Farm Credit Bank, supra, 940 F.2d at

1102 n. 3; see also Paris v. United States Department of Housing

& Urban Development, 713 F.2d 1341, 1344-45 (7th Cir. 1983);
No. 05-1858 13

Bastian v. Lakefront Realty Corp., 581 F.2d 685, 691-92 (7th Cir.

1978). But he can easily be joined, Fed. R. Civ. P. 19(a),

without depriving the district court of jurisdiction, in the

remand proceedings that we are ordering for reasons

explained below.

We conclude, at long last, that the district court had

jurisdiction over Midwest’s motion to intervene. The

question is then whether denial of the motion can be

sustained on some ground other than the district

judge’s ground for dismissing it, which was that the motion

was moot in light of his dismissal of the underlying suit.

That ground was no good, because the purpose of the

motion was to enable Midwest to stave off dismissal so that

the foreclosure sale would go through. It would be as if the

plaintiff moved for a jury trial and the judge, without ruling

on the motion, conducted a bench trial, rendered judgment

for the defendant, and then dismissed the plaintiff’s motion

as moot.

The Craddieths argue that the denial of intervention

can be sustained on the ground that Midwest’s motion

was untimely, because although it was filed only eight days

after the hearing at which the judge refused to confirm the

sale to Midwest, Midwest was on notice that this might

happen. After the judge’s decision on November 16 to

postpone the hearing on whether to confirm the sale to

Midwest, the Craddieths negotiated with Midwest in hopes

of reaching a settlement. The Craddieths’ alternative

financing, which could and indeed later did lead the district

court to refuse to confirm the sale, is likely to have come up

in those negotiations. Aurora suggested to Midwest that it

attend the hearing that the judge had scheduled for December 8, and Midwest failed to attend. Midwest did not move

to intervene until December 29, which may have been as
14 No. 05-1858

much as six weeks after it got wind of the Craddieths’

alternative financing.

It would have been prudent for Midwest to have

moved earlier to intervene. But in the absence of any

indication of prejudice to the Craddieths or their third-party

buyer-lender, the motion cannot be adjudged untimely as a

matter of law. We don’t want a rule that would require a

potential intervenor to intervene at the drop of a hat; that

would just clog the district courts with motions to intervene.

For some period of time after November 16 the need for

intervention would have remained speculative, and once the

need became urgent the preparation of the motion would

take several days. So the arguably culpable delay was less

than six weeks and in the absence of prejudice a six-week

delay would not necessarily be untimely. Cf. Reich v.

ABC/York-Estes Corp., 64 F.3d 316, 321-22 (7th Cir. 1995);

United States v. City of Chicago, 870 F.2d 1256, 1263 (7th Cir.

1989). The reason for requiring promptness is “to prevent a

tardy intervenor from derailing a lawsuit within sight of the

terminal.” Lefkovitz v. Wagner, 395 F.3d 773, 778 (7th Cir.

2005), quoting United States v. South Bend Community School

Corp., 710 F.2d 394, 396 (7th Cir. 1983). No “derailment”

appears to have resulted from Midwest’s intervening six

weeks rather than, say, two weeks after it learned about the

Craddieths’ alternative financing.

The Craddieths further argue that even if Midwest’s

motion to intervene was timely and should have been

granted, Midwest must be denied ultimate relief (the

reinstatement of the result of the foreclosure sale) under the

“justice was not otherwise done” (by the foreclosure)

provision of the Illinois mortgage-foreclosure statute. 735

ILCS 5/15-1508(b)(iv). The only reason they give, however, is that they have come up with the money due Aurora,
No. 05-1858 15

and that though they failed to inform Aurora and Midwest of this before Midwest laid out its $107,000-odd dollars

to buy the property, the fault was not theirs but their

lawyer’s.

Now it is true that Illinois like other states confers on

mortgagors an “equity of redemption,” which enables

the mortgagor to redeem his property after he has defaulted.

There is both a statutory and an equitable right of redemption. Colon v. Option One Mortgage Corp., supra, 319 F.3d at

919-20 and n. 7 (Illinois law). The deadline for statutory

redemption is the later of three months after the foreclosure

judgment or seven months after the mortgagor submits to

the jurisdiction of the court. 735 ILCS 5/15-1603(b). The

deadline (also set by statute) for equitable redemption is the

foreclosure sale. 735 ILCS 5/15-1605. Both deadlines had

expired by the time the Craddieths came up with their

alternative financing and thus, had it not been for the

deadlines, could have redeemed. The “justice was not

otherwise done” provision does not extend the deadlines.

“[O]nce expired, the [statutory] right of redemption shall

not be revived.” 735 ILCS 5/15-1603(c)(1) (citations omitted). And “no equitable right of redemption shall exist or be

enforceable under or with respect to a mortgage after a

judicial sale of the mortgaged real estate.” 735 ILCS 5/15-

1605; see also First Illinois National Bank v. Hans, 493 N.E.2d

1171, 1174 (Ill. App. 1986).

Nor are clients allowed to shift the burden of their lawyers’ mistakes to innocent third parties. In civil matters, the

action of one’s lawyer binds one, and if the action was a

species of professional malpractice, the client’s remedy lies

against the lawyer, not against a third party.

The district judge treated the “justice was not otherwise

done” provision as an invitation to him to exercise an
16 No. 05-1858

untrammeled judicial discretion—so untrammeled that the

length of time the mortgagors had lived in their house

and the incompetence of the lawyer they had chosen to

represent them were grounds for refusing to confirm the

foreclosure sale. Such a reaction to the unfortunate circumstances of the case has a human appeal, but if permitted

would inject great uncertainty into foreclosure proceedings.

It might even depress the prices paid at foreclosure sales,

thus increasing the size of the deficiency judgments entered

against mortgagors, by reducing the expected value of

bidding at such a sale. Michael H. Schill, “An Economic

Analysis of Mortgagor Protection Laws,” 77 Va. L. Rev. 489,

534 (1991). The high bidder would be purchasing not only

a property but also a standardless litigation. Moreover, what

is sauce for the goose is sauce for the gander; purchasers at

a foreclosure sale could invoke the “justice was not otherwise done” provision to get out of the sale, New Century

Mortgage Corp. v. Pinto, 2002 WL 31455969, at *1-2 (N.D. Ill.

Oct. 31, 2002), and the sequel might be a subsequent sale at

a lower price, resulting in a larger deficiency judgment

against the mortgagor.

We do not put too much weight on this theoretical

analysis of the economics of foreclosure sales. The reality

appears to be that foreclosure is usually just a means by

which mortgagees take title to their collateral. Mattingly,

supra, at 101. In most foreclosure sales, though not in the one

in this case, the mortgagee is the only bidder and, despite

having no competition, almost always bids the full amount

of the foreclosure judgment, which suggests a lack of

interest in seeking a deficiency judgment. Even where the

high bid is less than the foreclosure judgment, mortgagees

rarely seek deficiency judgments, though they usually lose

money on the resale of foreclosed properties. Debra

Pogrund Stark, “Facing the Facts: An Empirical Study of the
No. 05-1858 17

Fairness and Efficiency of Foreclosures and a Proposal for

Reform,” 30 U. Mich. J. L. Reform 639, 663-65 (1997) (analysis

of 860 Illinois foreclosures in 1993 and 1994).

Nevertheless, the confusion that would be injected into

the law were the confirmation of foreclosure sales a

matter of judicial whim would increase the cost of mortgage

financing, to the detriment of lenders and borrowers alike.

It is therefore no surprise that the case law does not support

the district judge’s free-wheeling approach. In the Espinoza

case, which we cited earlier, the mortgagee engaged in

conduct that seems to have been designed to prevent the

mortgagor from redeeming the property. 689 N.E.2d at 286.

And in Citicorp, also cited earlier, the mortgagee conducted

the foreclosure sale after promising to cancel it if the

mortgagor tendered full payment before a specified

date—which the mortgagor did. 645 N.E.2d at 1045. Fleet

Mortgage Corp. v. Deale, 678 N.E.2d 35, 37-39 (Ill. App. 1997),

is a similar case. These cases turn on conventional notions

of estoppel rather than on undefined concepts of justice. See

also Gordon Grossman Building Company v. Elliott, 171

N.W.2d 441, 444-45 (Mich. 1969); but see Crane v. Bielski, 104

A.2d 651, 654 (N.J. 1954).

This is further suggested by Firstar Bank NA v. Goldman,

2004 WL 1212099, at *4 (N.D. Ill. June 2, 2004) (applying

Illinois law), where the court refused to deny confirmation when the mortgagors’ attorney failed to inform them

about the foreclosure sale; the court remarked that “defendants voluntarily chose this particular attorney to

represent them in this matter. The fact that he did a poor

job, or in this case nothing at all, does not change the fact

that Judgment of Foreclosure was properly entered. Nor

does it change the fact that the sale was properly conducted

and the Intervenors acted appropriately.” And likewise in
18 No. 05-1858

Bankers Trust Co. v. Powers, 1995 WL 616752, at *3-4 (N.D.

Ill. Oct. 18, 1995), the disability of the mortgagor’s wife,

which precipitated the default, was held not to be a sufficient reason to deny confirmation.

Although we would like to terminate this protracted

litigation today rather than order a remand, we cannot

do so. The reason is that there has never been a hearing

on Midwest’s motion to intervene. On the limited record

before us, there is no reason to suppose the motion untimely; but there are no findings on when Midwest learned

about the Craddieths’ alternative financing. Perhaps too

there was some prejudice from Midwest’s delay that is

not reflected in the limited record. Similarly, although it

is not obvious what valid ground the district court

might have for refusing to confirm the foreclosure sale,

that issue too has not been explored.

The denial of the motion to intervene is reversed and the

case remanded for further proceedings consistent with

this opinion.

REVERSED AND REMANDED.
No. 05-1858 19

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—3-31-06