2020 IL App (1st) 181497-U 

 THIRD DIVISION

October 28, 2020

No. 1-18-1497 

NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent 

by any party except in the limited circumstances allowed under Rule 23(e)(1).

______________________________________________________________________________ 

IN THE

APPELLATE COURT OF ILLINOIS

FIRST JUDICIAL DISTRICT

______________________________________________________________________________ 

SPECIALIZED LOAN SERVICING, LLC, ) Appeal from the 

 ) Circuit Court of 

Plaintiff, ) Cook County. 

 ) 

 v. ) No. 14 CH 10694 

 ) 

GRACE KOVITZ; MARC A. KOVITZ; ) 

GMAC MORTGAGE CORPORATION d/b/a ) 

DITECH.COM; ILLINOIS HOUSING DEVELOPMENT ) 

AUTHORITY; UNKNOWN OWNERS; and ) 

NON-RECORD CLAIMANTS, ) 

 ) 

Defendants, ) 

 ) 

(Ditech Financial, LLC d/b/a Ditech, Third-Party Counter- ) Honorable 

defendant-Appellee; Grace Kovitz and Marc A. Kovitz, ) Anna M. Loftus, 

defendants-Counterplaintiffs-Appellants). ) Judge Presiding. 

______________________________________________________________________________ 

PRESIDING JUSTICE HOWSE delivered the judgment of the court.

Justices McBride and Ellis concurred in the judgment. 

ORDER

 

¶ 1 Held: We affirm the judgment of the circuit court of Cook County granting plaintiff’s 

motion for summary judgment of foreclosure; defendants’ affirmative defense was 

precluded by the terms of a previously entered order in the mortgage originator’s chapter 

11 bankruptcy proceeding which indemnified the purchasers of the mortgage loan and its 

successors from liability stemming from the mortgage originator’s conduct prior to the 

sale. 
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¶ 2 In 2004, Grace Kovitz and Marc A. Kovitz (collectively defendants) refinanced their 

home with GMAC Mortgage Corporation (GMAC), paid off their original first mortgage, and 

received a new mortgage and home equity loan (HELOC) with GMAC. It is uncontroverted that 

at some point defendants defaulted on their mortgage payments. Defendants exchanged a

number of letters and telephone calls with GMAC claiming GMAC fraudulently induced them to 

refinance their home by misrepresenting the value of their home. Defendants alleged GMAC 

used procedures which over estimated the value of the home and misrepresented how those 

valuations were obtained. 

¶ 3 In 2012, GMAC filed a chapter 11 bankruptcy (11 U.S.C. § 101 et seq. (West 2012)). In 

that proceeding, the bankruptcy court ordered GMAC assets, including defendants’ mortgage, to 

be sold. The order further provided and ordered that the purchasers of the assets and any 

successor purchasers be indemnified from any claims or defenses stemming from wrongdoing by 

GMAC including defaults, breaches, acts, or omissions. The bankruptcy court also ordered any 

party who had a claim for money damages against GMAC to file a proof of claim within the time 

allowed by the court or the claims against GMAC would be extinguished. The time to file 

claims lapsed and defendants did not file a claim in the bankruptcy case. 

¶ 4 In 2014, a successor owner of defendant’s mortgage filed a foreclosure complaint against 

defendants. Ditech, who shall be referred to herein as plaintiff or Ditech, became a subsequent 

purchaser of the mortgage and substituted as plaintiff in this case. Defendants filed an 

affirmative defense alleging fraudulent inducement by GMAC. Ditech, in response to the 

affirmative defense, argued the bankruptcy court sale order indemnified subsequent purchasers

of GMAC assets from claims of misconduct by GMAC. Therefore, the affirmative defense 

alleging fraud in the inducement by GMAC could not be used against them. Defendants then 
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alleged they rescinded the mortgage contract and that the mortgage contract was void. 

Defendants therefore agued the mortgage was not an asset subject to being sold at the bankruptcy 

sale and, as such, was not subject to the bankruptcy order’s indemnification protections. The 

circuit court rejected this argument and entered summary judgment for plaintiff with respect to 

the foreclosure complaint and defendants’ affirmative defense. The court subsequently entered 

an order of sale, and the sale was approved. Defendants timely appealed. For the following 

reasons we affirm the judgment of the circuit court.

¶ 5 BACKGROUND

¶ 6 On September 11, 2004, defendants executed a HELOC agreement with GMAC for 

$56,000 on their property located at 1445 Nottingham Lane, Hoffman Estates, Illinois 60195 

(Property). On December 13, 2004, defendants refinanced their existing mortgage and entered 

into a mortgage agreement (Mortgage) with GMAC for $160,000. 

¶ 7 GMAC’s Bankruptcy

¶ 8 On May 14, 2012, GMAC filed for bankruptcy under chapter 11 in the United States 

Bankruptcy Court for the Southern District of New York (Bankruptcy Action). On November 

21, 2012, the bankruptcy court entered an order approving the sale of GMAC’s assets, 

specifically, its mortgage origination and servicing platform, to Ocwen Loan Servicing, LLC 

(Ocwen) pursuant to an asset purchase agreement (Bankruptcy Sale Order). The Bankruptcy 

Sale Order set out terms and conditions for the authorization of the sale and provided certain 

indemnifications to Ocwen and its successors against GMAC’s claims and liabilities occurring 

prior to the sale closing. The fifty-four page order entered under various sections of the 

Bankruptcy Code including section 363 (11 U.S.C.A. § 363 (West 2012)) made findings that the 

bankruptcy court had jurisdiction, the relevant statutory predicates had been met, notice had been 
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provided with respect to the Bankruptcy Action as well as the sale of assets to include by 

publication, the sale was an arm’s length transaction by a good faith purchaser and was in the 

best interests of the debtors, creditors, and other parties in interest. The Bankruptcy Sale Order 

further provides for the indemnification of Ocwen and its successors from claims against GMAC 

originating prior to the sale as follows: 

“Necessity of Order. The Purchaser would not have entered into the Ocwen 

APA [Asset Purchase Agreement] and would not consummate the Transactions 

without all of the relief provided for in this Order (including that (1) the transfer 

of the Purchased Assets to Purchaser be free and clear of all Interests and 

including rights or Claims based upon successor or transferee liability, Claims or 

Liabilities relating to any act or omission of any originator, holder or servicer of 

Mortgage Loans prior to the Closing Date, and any indemnification Claims or 

Liabilities relating to any act or omission of the Sellers or any other Person prior 

to the Closing Date, and (2) the Purchaser not be liable for any Cure Amounts or 

any other pre-Closing liabilities with respect to any Assumed Contracts). The 

consummation of the Transactions pursuant to this Order and the Ocwen APA is 

necessary for the Debtors to maximize the value of their estates for the benefit of 

all creditors and other parties in interest. The Purchaser has agreed to this 

Transaction with the intent of purchasing the Purchased Assets and does not and 

would not agree to assume anything other than the Assumed Liabilities.

 * * * * 

NOW THEREFORE, IT IS HEREBY ORDERED, ADJUDGED, AND 

DECREED THAT: 
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 * * * * 

Injunction. *** No Person shall assert, and the Purchaser and the Purchased 

Assets shall not be subject to, any defaults, breaches, counterclaims, offsets, 

defenses (whether contractual or otherwise, including, without limitation, any 

right of recoupment), Liabilities, Claims, and Interests, or basis of any kind or 

nature whatsoever to delay, defer, or impair any right of the Purchaser of the 

Debtors, or any obligation of any other party, under or with respect to, any 

Purchased Assets (including, without limitation, an Assumed Contract), with 

respect to any act or omission that occurred prior to the Closing or with respect to 

any Other Agreement or any obligation to Debtors that is not an Assumed 

Liability. 

 * * * * 

No Successor Liability. Neither the Purchaser, nor any of its successors or 

assigns, or any of their respective affiliates shall have any liability for any Interest 

that arose or occurred prior to the Closing, or otherwise is assertable against the 

Debtors or is related to the Purchased Assets prior to the Closing.” 

¶ 9 The sale to Ocwen closed on February 15, 2013. 

¶ 10 Circuit Court Foreclosure Proceedings Against Defendants

¶ 11 On June 26, 2014, foreclosure proceedings were initiated against defendants and others 

by Ocwen alleging defendants had defaulted on the monthly mortgage payment on February 1, 

2013. Defendants appeared through counsel and answered the complaint on September 24, 2014 

asserting certain affirmative defenses which were voluntarily dismissed by defendants on June 4, 

2015. 
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¶ 12 On July 22, 2015, Residential Credit Solutions Inc. (RCS) substituted into the case for 

Ocwen as plaintiff after acquiring the servicing rights on the subject Mortgage. 

¶ 13 On October 13, 2015, defendants filed their first amended answer, affirmative defense, 

and counterclaim against plaintiff (Ditech) who was named as a third-party defendant. 

Defendants counterclaims were subsequently withdrawn. Defendants’ affirmative defense 

incorrectly identified plaintiff as the broker of the Mortgage but subsequently acknowledged 

Ditech.com was the Mortgage broker and a different entity than plaintiff. In their affirmative 

defense, defendants alleged they were fraudulently induced to execute the Mortgage with GMAC 

making the Mortgage voidable and unenforceable. On that basis, defendants argued plaintiff’s 

foreclosure complaint should be dismissed. Attached to the amended answer was one of the 

defendants’, Marc Kovitz’s (Kovitz), affidavit. Kovitz’s affidavit described the origination of 

the Mortgage and HELOC in 2004, his receipt of notices that GMAC had filed for bankruptcy as 

well as concerns regarding perceived “deceptive, false, and misleading statements” made by 

GMAC in procuring the Mortgage and HELOC and defendant’s actions in response beginning 

with his December 19, 2012 correspondence to the U.S. Attorney General’s Office requesting an 

investigation. 

¶ 14 On September 8, 2016, GMAC filed a notice of bankruptcy notifying the circuit court of 

the Bankruptcy Action and Bankruptcy Sale Order. The notice alleged defendants had not filed a 

proof of claim in the Bankruptcy Action and that the bankruptcy court’s various orders including 

the Bankruptcy Sale Order enjoined them from seeking monetary relief against GMAC and 

plaintiff. 

¶ 15 On September 14, 2016, after acquiring RCS’ interest in the Mortgage, plaintiff (Ditech) 

substituted in as plaintiff. The following day, plaintiff filed its answer to defendants’ affirmative 
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defenses generally denying the allegations. Concluding that the counterclaims did not apply to 

it, plaintiff did not respond to those allegations. 

¶ 16 On November 15, 2016, plaintiff filed its motion for summary judgment on both its 

foreclosure claim and defendants’ affirmative defense. Plaintiff’s summary judgment motion, 

supported by affidavit and other documents, alleged its standing to foreclose on the Mortgage, 

defendants’ default thereon, and the amounts due and owing on the Mortgage. In the motion, 

plaintiff also alleged defendants’ affirmative defense was incorrectly plead against it because 

GMAC, doing business as ditech.com, was the originating broker on the Mortgage and a 

different entity than plaintiff. Accordingly, plaintiff argued the affirmative defense was without 

merit and did not create a genuine issue of material fact that would preclude summary judgment. 

¶ 17 Defendants responded to plaintiff’s summary judgment motion and argued plaintiff was 

liable for the fraudulent inducement of the Mortgage on a theory of assignee (successor) liability 

and, as such, summary judgment was not appropriate where plaintiff failed to offer evidence to 

rebut their fraudulent inducement defense. Defendants did not challenge plaintiff’s standing, the 

Mortgage default, or the amounts alleged to be due and owing on the Mortgage. 

¶ 18 Plaintiff replied acknowledging that while an assignee is generally subject to defenses 

that can be raised against the assignor, the Bankruptcy Sale Order superseded that rule to protect 

assignees such as plaintiff and, as such, summary judgment was warranted. Specifically, 

plaintiff pointed to the indemnification language in the Bankruptcy Sale Order. Plaintiff argued 

the Mortgage was a purchased asset subject to the protection of the Bankruptcy Sale Order which 

precluded defendants from asserting a fraudulent inducement defense to plaintiff’s foreclosure 

action. 
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¶ 19 Defendants filed a sur-response in which it argued the Mortgage was not a “Purchased 

Asset” subject to the Bankruptcy Sale Order because it was “procured by fraud” and “invalidated 

by such fraud.” Defendants also argued the Bankruptcy Sale Order did not apply to defendants 

“under the ‘discovery rule’ related to fraud claims/defenses” because they alleged the fraud was 

not discovered until approximately January 28, 2013 and their injury was not discovered until 

February 2013—after the Bankruptcy Action was filed, the November 2012 deadline for 

“claims” in the Bankruptcy Action, the entry of the Bankruptcy Sale Order on November 21, 

2012, and the February 15, 2013 sale closing when the Mortgage was transferred from GMAC to 

Ocwen. Defendants argued the validity of the Mortgage created a genuine issue of material fact 

precluding summary judgment. 

¶ 20 Plaintiff filed a sur-reply arguing under Illinois law, a contract induced by fraud is 

voidable, not void ab initio, and would be part of the GMAC bankruptcy estate at the time of the 

sale of assets to Ocwen and that the Bankruptcy Sale Order applied to all alleged misconduct 

prior to the closing date of the sale of GMAC’s assets to Ocwen, regardless of when the claim 

was discovered. Thus, plaintiff maintained defendants’ alleged fraudulent inducement defense

stemming from GMAC’s origination of the Mortgage in 2004—prior to the February 15, 2013 

closing—could not be raised as a defense to plaintiff’s foreclosure action. 

¶ 21 During argument on the summary judgment motion, defendants conceded that the 

Mortgage was not void ab initio, but argued they validly rescinded the mortgage prior to the 

February 15, 2013 sale and, as such, the mortgage no longer existed and was not an asset subject 

to the Bankruptcy Sale Order’s protections. Defendants pointed to a February 4, 2013 telephone 

conversation between a GMAC representative and one of the defendants (Kovitz) advising 

GMAC he would no longer pay on the mortgage. Defendants also cited letters written by Kovitz 
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to GMAC on February 8, 2013, February 12, 2013, and February 22, 2013 as further evidence of 

the rescission. 

¶ 22 Kovitz’s February 8, 2013 correspondence to GMAC alleged fraud but did not indicate 

any intention to rescind the Mortgage contract. The only reference in the correspondent to 

potential relief sought was the restatement of Kovitz’s prior oral statement to a GMAC employee 

that he was seeking financial compensation for damages in the amount of two million dollars. 

¶ 23 In his February 12, 2013 correspondence to GMAC, Kovitz reiterated his allegations of 

fraud, but did not indicate any intention to rescind the Mortgage contract nor was any other relief 

sought. Instead, Kovitz asked GMAC what they intended to do to correct the alleged injury. 

¶ 24 In Kovitz’s February 22, 2013 correspondence to GMAC, he stated, 

“we feel it is appropriate to suspend all future first mortgage and HELOC 

payments and void your contracts. 

 * * * * 

In conclusion, we are demanding that you tear up the first mortgage and HELOC 

contracts, release your liens and any future claims to our property and pay us 

compensatory and punitive payment of $250,000 immediately.” (Emphasis 

omitted.) 

¶ 25 The correspondence concluded, “I look forward to your prompt reply ***.” 

¶ 26 Defendants’ counsel further argued defendants did not receive notice of the Bankruptcy 

Action stating “[defendants] didn’t receive any formal notice and also I think the bankruptcy 

order—the claims—referring to, they don’t even qualify as a claimant under that bankruptcy 

order.” 
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¶ 27 On May 16, 2017, the circuit court granted plaintiff’s motion for summary judgment on 

both plaintiff’s foreclosure complaint and defendants’ fraudulent inducement affirmative 

defense. In its reasoning, the court explained there was no evidence of rescission of the 

Mortgage by defendants where there was no evidence of any intention to tender the loan 

proceeds back to GMAC which would be required if the contract was rescinded. The court 

further reasoned that even if defendants had properly elected to rescind the Mortgage it would 

not automatically become void on the date of defendants’ February 2013 correspondences such 

that it would no longer be an asset subject to the Bankruptcy Sale Order. The court subsequently 

entered a judgment of foreclosure and sale. 

¶ 28 On June 15, 2017, defendants filed a motion to reconsider arguing the circuit court erred 

in its application of the law in granting plaintiff’s summary judgment motion. Specifically, 

defendants argued the circuit court erred in applying the law where it (1) considered on summary 

judgment “the question of whether *** Defendants properly rescinded the subject mortgage loan 

prior to GMAC’s sale of assets” in the Bankruptcy Action because this was an issue of material 

fact reserved for trial[;]” (2) found defendants had not rescinded the Mortgage contrary to 

“prevailing law concerning rescission of voidable contracts[;]” and (3) awarded summary 

judgment where genuine issues of material fact existed concerning whether the Mortgage was 

“legally valid and enforceable before being purportedly ‘sold’ to Ocwen on February 15, 2013 

pursuant to the November 21, 2011 GMAC Bankruptcy Order.” On August 22, 2017, the circuit 

court denied defendants’ motion to reconsider. 

¶ 29 On February 26, 2018, the Property was sold back to plaintiff at the judicial sale. On 

May 29, 2018, the circuit court entered an order which approved the report of sale and 

distribution and also confirmed the sale. 
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¶ 30 Defendants’ timely filed their appeal. This appeal followed. 

¶ 31 ANALYSIS

¶ 32 On appeal, defendants first argue the circuit court erred in in granting plaintiff’s motion 

for summary judgment contending the question of whether defendants’ effectively rescinded the 

Mortgage prior to the sale of GMAC’s assets in the Bankruptcy Action raises a genuine issue of 

material fact that cannot be decided on summary judgment. Defendants additionally argue the 

circuit court incorrectly concluded defendants failed to effectuate rescission of the voidable 

Mortgage contract because they did not return, or state their intention to return, the loan proceeds 

of the Mortgage back to GMAC finding defendants’ telephone conversations and three February 

2013 correspondences to GMAC insufficient to effectuate rescission. Defendants further argue 

the circuit court ruled on genuine issues of material fact with respect to whether GMAC had a 

right to enforce the contract against defendants prior to the February 15, 2013 closing of 

GMAC’s asset sale in the Bankruptcy Action and whether defendants received timely notice of 

the Bankruptcy Action in order to adjudicate their fraudulent inducement claim in that 

proceeding. 

¶ 33 Standard of Review

¶ 34 The parties dispute the appropriate standard of review on appeal. Defendants argue the 

applicable standard of review of a circuit court’s granting of summary judgment is de novo citing 

Direct Auto Insurance Co. v. Beltran, 2013 IL App (1st) 121128, ¶ 43. While acknowledging 

this court reviews the granting of summary judgment de novo, plaintiff argues that because 

defendants’ arguments were pursued for the first time in their motion to reconsider, the circuit 

court’s denial of the motion to reconsider should be reviewed for an abuse of discretion citing 
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Greer v. Yellow Cab Company, 221 Ill. App. 3d 908, 915 (1991); Freeman v. Augustine’s, Inc., 

46 Ill. App. 3d 230, 236 (1977); and In re Marriage of Wilson, 193 Ill. App. 3d 473, 478 (1990). 

¶ 35 Plaintiff also argues these “rescission-related arguments” developed for the first time in 

defendants’ motion to reconsider are forfeited on appeal. We begin by addressing plaintiff’s 

forfeiture argument as our conclusion on this point informs the applicable standard of review. 

¶ 36 We disagree with plaintiff that defendants’ arguments were forfeited as they were

sufficiently raised prior to the circuit court’s summary judgment ruling. Here, we acknowledge 

the circuit court’s comment that throughout the proceedings both parties’ arguments morphed 

into very different arguments each time they were presented at oral arguments. We also note the 

circuit court has discretion to hear arguments even if raised for the first time in a motion to 

reconsider where there is a reasonable explanation why the issue was not raised earlier. In re 

Marriage of Ostrander, 2015 IL App (3d) 130755, ¶ 17. In any event, plaintiff did not argue 

waiver or forfeiture before the circuit court and thus plaintiff’s waiver arguments would be 

forfeited even if defendants had only raised them for the first time in their motion to reconsider 

which, as we stated above, is not the case. See In re Marriage of Eberhardt, 387 Ill. App. 3d 

226, 236 (2008) (holding “The doctrine of wavier applied to arguments raised for the first time 

on appeal.”). 

¶ 37 Because we disagree defendants’ arguments on appeal were raised for the first time in 

their motion to reconsider, we review defendants’ claims on appeal de novo. See Belluomini v. 

Zaryczny, 2014 IL App (1st) 122664, ¶ 20 (explaining that “where a motion to reconsider only 

asks the trial court to reevaluate its application of the law to the case as it existed at the time of 

judgment, the standard of review is de novo.”); see also Williams v. Manchester, 228 Ill. 2d 404, 

417 (2008) (stating “In appeals from summary judgment rulings, review is de novo.”). “Because 
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we review the grant of summary judgment de novo, we may affirm the circuit court’s decision on 

any ground in the record, regardless of whether the court relied on that ground or whether the 

court’s reasoning was correct.” Illinois State Bar Ass’n Mutual Insurance Co. v. Coregis 

Insurance Co., 355 Ill. App. 3d 156, 163 (2004). 

¶ 38 Summary Judgment 

¶ 39 Section 2-1005 of the Illinois Code of Civil Procedure (Code), 735 ILCS 5/2-1005 (West 

2016), provides for summary judgment and is considered “a drastic means of disposing of the 

litigation” which should only be allowed “where the right of the moving party is clear and free 

from doubt.” Williams, 228 Ill. 2d at 417. Nevertheless, summary judgment is appropriate 

where “the plaintiff fails to establish any element of the cause of action” or where, 

“the pleadings, depositions, and admissions on file, together with the affidavits, if 

any, show that there is no genuine issue as to any material fact and that the 

moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005 

(West 2016). 

¶ 40 To decide whether a genuine issue as to any material facts exists, 

“a court must construe the pleadings, depositions, admissions, and affidavits 

strictly against the movant and liberally in favor of the opponent. A triable issue 

precluding summary judgment exists where the material facts are disputed or 

where, the material facts being undisputed, reasonable persons might draw 

different inferences from the undisputed facts.” Williams, 228 Ill. 2d at 417. 

¶ 41 Question of a Contract’s Rescission is Subject to Summary Judgment

¶ 42 Defendants cite Solomon Iron & Metal Co. v. Bradford, 33 Ill. App. 2d 452 (1962), and 

argue “whether a contract has been forfeited or rescinded by a party is a question of fact for trial, 
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which may be deduced from circumstances or course of conduct clearly showing such rescission 

or forfeiture.” Based on this statement defendants contend the question of whether a contract 

was rescinded can never be appropriately resolved on summary judgment. Defendants reliance 

on Solomon Iron & Metal is misplaced as the issues in that case did not involve summary 

judgment but review of the trial court’s ruling on the evidence following a bench trial and 

evidence concerning the parties’ actions resulting in a forfeiture of their contract under the 

contract’s forfeiture clause. See id. at 455-58. In its ruling, the Solomon Iron & Metal court 

reiterated one of the party’s arguments raised on appeal: “that whether a contract has been 

forfeited or rescinded *** is a question of fact which may be deduced from the circumstances or 

course of conduct clearly showing recission or forfeiture[.]” Id. at 455. However, this statement 

is not a blanket preclusion to summary judgment. This is particularly true where here, unlike in 

Solomon Iron & Metal, a party is seeking summary judgment and has alleged “there is no 

genuine issue as to any material fact” on the question of rescission and “the moving party is 

entitled to a judgment as a matter of law” pursuant to section 2-1005 of the Code. See 735 ILCS 

5/2-1005 (West 2016) (Summary judgment is appropriate where “the pleadings, depositions, and 

admissions on file, together with the affidavits, if any, show that there is no genuine issue as to 

any material fact and that the moving party is entitled to a judgment as a matter of law.”). 

¶ 43 As plaintiff highlights, there have been a number of cases affirming a circuit court’s grant 

of summary judgment on the issue of whether rescission of a contract has occurred. By way of 

example, in Freedberg v. Ohio National Insurance Co., 2012 IL App (1st) 110938, this court 

affirmed the circuit court’s grant of summary judgment on the issue of rescission finding, based 

on incontrovertible judicial admissions, the life insurance policy at issue had not been rescinded 

due to the plaintiff’s unreasonable delay. Id. at ¶¶ 28, 31-34, 38. In Illinois State Bar Ass’n
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Mutual Insurance Co. v. Coregis Insurance Co., 355 Ill. App. 3dat 172, this court affirmed the 

circuit court’s grant of summary judgment on the issue of rescission finding the voidable 

insurance policy properly rescinded based on a material misrepresentation made to the 

defendant. Id. 

¶ 44 Accordingly, we find that where no genuine issue exists as to any material fact 

concerning whether rescission occurred, summary judgment is appropriate. See 735 ILCS 5/2-

1005 (West 2016). There is no question the Bankruptcy Sale Order indemnified plaintiff from 

any actions, omissions, or other wrongdoing doing by GMAC prior to the bankruptcy sale if its 

assets. The issue of whether there was a rescission before the bankruptcy sale turns on the 

question of whether defendants returned the money it received from GMAC or offered to return 

it, or where return was impossible, whether an order awarding rescission had been obtained by 

defendants prior to the bankruptcy sale. It is undisputed that the Mortgage proceeds were not 

returned and return was not offered. It is also undisputed defendants never obtained a court 

order awarding rescission of the Mortgage contract prior to the bankruptcy sale. Accordingly, 

there are no disputed issues of fact so the issue of whether a rescission of the contract occurred 

prior to the bankruptcy sale such that the Mortgage would not be an asset subject to the 

Bankruptcy Sale Order is a legal question that can be resolved by summary judgment. 

¶ 45 Defendants argue the circuit court erred in finding defendants were required to reinstate 

the status quo by returning or stating their intention to return the Mortgage proceeds to GMAC to 

effectuate rescission of the Mortgage contract. Defendants concede this was not done but argue 

it was an impossibility due to no fault of their own. Accordingly, they argue this return of the 

status quo was unnecessary to effectuate rescission. As we explain below, while we agree with 

defendants that a return of the status quo does not always preclude rescission, we still find 
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defendants failed to rescind the Mortgage contract prior to the February 15, 2013 closing on the 

sale of GMAC’s assets in bankruptcy as would be necessary to avoid the effect of the 

Bankruptcy Sale Order’s indemnification language barring defendants’ affirmative defense. 

¶ 46 “Rescission is the cancelling of a contract so as to restore the parties to their initial 

status.” (Internal quotation marks omitted.) Freedberg, 2012 IL App (1st) 110938, ¶ 27. 

“Where a contract is rescinded, the rights of the parties under that contract are vitiated or 

invalidated.” Corgis Insurance Co., 355 Ill. App. 3d at 165. 

¶ 47 Defendants argue “[GMAC] fraudulently induced them into the Mortgage agreement by 

falsely stating their property was appraised by a certified appraiser and valued at $268,000” and 

this fraud was the basis for their rescission of the Mortgage contract. 

¶ 48 The parties do not dispute the premise that “[a] contract induced by fraud is not void but 

is voidable at the election of the party claiming to have been defrauded.” 23-25 Building 

Partnership v. Testa Produce, Inc., 381 Ill. App. 3d 751, 757 (2008). Where a contract is 

“merely voidable, the innocent party can either opt to void the contract based upon that defect, or 

choose, instead, to waive that defect and ratify the contract despite it.” Corgis Insurance Co., 

355 Ill. App. 3d at 164-65; 23-25 Building Partnership, 381 Ill. App. 3d at 757. 

¶ 49 “One seeking to rescind a transaction on the ground of fraud or misrepresentation must 

elect to do so promptly after learning of the fraud or misrepresentation, must announce his 

purpose and must adhere to it.” (Internal quotation marks omitted.) Freedberg, 2012 IL App 

(1st) 110938, ¶ 27. Common law “rescission traditionally required either that the rescinding 

party return what he received before a rescission could be effected (rescission at law), or at least 

that a court affirmatively decree recission (recission in equity). Jesinoski v. Countrywide Home 

Loans, Inc., 574 U.S. 259, 264 (2015). Thus, “a party seeking rescission must restore the other 
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party to the status quo existing at the time the contract was made” or obtain from a court of 

equity “the remedy of rescission[.]” (Internal quotation marks omitted.) Corgis Insurance Co., 

355 Ill. App. 3d at 165. 

¶ 50 Defendants point out, “[r]estoration of the status quo ante will not be required when 

restoration had been rendered impossible by circumstances not the fault of the party seeking 

rescission, and the party opposing the rescission has obtained a benefit from the contract.” 23-25 

Building Partnership, 381 Ill. App. 3d at 757. Nevertheless, an unreasonable delay in taking the 

necessary steps to set aside a fraudulent contract will have the effect of affirming it. [Citation.]” 

Coregis Insurance Co., 355 Ill. App. 3d at 165. 

¶ 51 Defendants’ Actions were Not a Recission of the Mortgage Contract 

¶ 52 Defendants argue rescission of the Mortgage contract was effected prior to the February 

15, 2013 bankruptcy sale because (1) “Defendants clearly declared their intention to cancel the 

mortgage transaction and suspend any future payments when they called GMAC on February 4, 

2013 and February 12, 2013 which was a matter of days after Defendants discovered GMAC’s 

fraud” and “made no further mortgage payments after February 2013” consistent with their 

repudiation of the Mortgage contract. Defendants further argue they “were not required to tender 

back, or even offer to tender back, the loan proceeds they received nine years earlier in order to 

rescind the Mortgage because it was impossible for them to do so through no fault of their own.” 

¶ 53 Even if we were to accept as true that GMAC fraudulently induced defendants to execute 

the Mortgage contract; defendants’ February 4 and 12, 2013 telephone calls to GMAC and 

subsequent correspondence were a sufficient announcement of their intention to rescind the 

Mortgage contract; and it was impossible for defendants to restore the status quo due to no fault 

of their own, we still could not conclude the Mortgage contract had been rescinded prior to the 
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February 15, 2013 closing of GMAC’s asset sale. This is because pursuant to Illinois law, upon 

learning of the alleged fraud and voidability of their Mortgage contract, defendants had two 

options: (1) restore the status quo or (2) obtain from a court of equity the remedy of rescission. 

See Corgis Insurance Co., 355 Ill. App. 3d at 165; see also Jesinoski, 574 U.S. at 264. It is 

undisputed in the record defendants did neither and thus failed to effectuate rescission of the 

Mortgage contract. 

¶ 54 Defendants specifically argue they “never actually possessed any of the loan proceeds 

from the subject mortgage loan[—the proceeds having been immediately disbursed from the 

previous mortgage creditor to GMAC upon refinance—] and, therefore, it was factually 

impossible for Defendants to return said loan proceeds to GMAC through no fault of 

Defendants.” In this situation, defendants only other option for effectuating rescission was to 

obtain the remedy of rescission from a court of equity after proving “there has been some fraud 

in the making of a contract, such as an untrue statement or the concealment of a material fact, or 

where one party enters into a contract relying on the other party’s innocent misrepresentation.” 

Corgis Insurance Co., 355 Ill. App. 3d at 165; see also Jesinoski, 574 U.S. at 264. 

¶ 55 It is undisputed in the record that defendants never sought from a court the remedy of 

rescission prior to the February 15, 2013 sale. There has never even been a determination that 

defendants were fraudulently induced such that the remedy of rescission would be appropriately 

awarded to defendants. Because there was no rescission of the Mortgage contract by defendants 

prior to the February 15, 2013 closing on the bankruptcy sale of GMAC’s assets, the Mortgage 

was part of the assets sold by GMAC in the Bankruptcy Action and subject to the Bankruptcy 

Sale Order. The Bankruptcy Sale Order specifically precludes defendants’ affirmative defense to 
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avoid foreclosure were the injury alleged is based on GMAC’s actions in originating the 

Mortgage contract in 2004—well before the 2013 bankruptcy sale. 

¶ 56 Defendants citations to John Burns Construction Co. v. Interlake, Inc., 105 Ill. App. 3d 

19 (1982); 23-25 Building Partnership, 381 Ill. App. 3d at 751; Hakala v. Illinois Dodge City 

Corp., 64 Ill. App. 3d 114 (1978); International Insurance Co. v. Sargent & Lundy, 242 Ill. App. 

3d 614 (1993); and Rigdon v. Walcott, 43 Ill. App. 352 (1891) do not cure the fatal defect in 

defendants’ argument here. In all of the cases cited by defendants, rescission of the various 

contracts at issue was sought from the trial court as a remedy. Here, the unique facts of this case 

require a rescission effective prior to the February 15, 2013 closing of GMAC’s asset sale to 

avoid the effects of the Bankruptcy Sale Order. Accordingly, defendants impermissibly seek a 

retroactive award of rescission. 

¶ 57 Defendants’ stated in their sur-response to plaintiff’s summary judgment reply they 

discovered the alleged fraud on January 28, 2013. Defendants stopped paying the mortgage in 

February 2013 and continued to reside in their home receiving the benefit of the Mortgage loan 

for over a year and seven months when on September 24, 2014 they—for the first time—raised 

GMAC’s alleged fraud in a court proceeding as an affirmative defense to the instant foreclosure 

action. However, even in their initial affirmative defense filed on September 24, 2014, 

defendants did not allege rescission but merely argued fraud made the Mortgage contract 

voidable and, on that basis, sought dismissal of the foreclosure action. While we acknowledge 

defendants engaged in communications with GMAC and its successors in interest about the 

alleged fraud after they contend it was discovered, defendants do not argue nor does the record 

reveal any of these entities acknowledged the fraud or agreed to a rescission of the Mortgage 

contract—the opposite. 
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¶ 58 We find that no genuine issue of material fact existed concerning the issue of rescission

and that no such rescission was effectuated prior to GMAC’s sale of assets in the Bankruptcy 

Action. Accordingly, the Mortgage contract was part of the assets sold and subject to the 

Bankruptcy Sale Order preluding defendants’ affirmative defense. Thus, summary judgment 

was appropriate. 

¶ 59 In the Bankruptcy Action GMAC sold to Ocwen assets including defendants’ Mortgage 

contract. Ultimately plaintiff became a successor of Ocwen and, pursuant to the terms of the 

Bankruptcy Sale Order, is also expressly entitled to the indemnifications set forth in the order. 

Defendants’ fraudulent inducement claim stems from GMAC’s alleged conduct in originating 

the Mortgage loan in 2004. As set forth in the Bankruptcy Sale Order, the bankruptcy court 

entered the order pursuant to various sections of the Bankruptcy Code including section 363 of 

the Bankruptcy Code (11 U.S.C.A. § 363 (West 2012)). 

¶ 60 The Bankruptcy Sale Order expressly precludes defendants’ affirmative defenses stating:

“No Person shall assert, and the Purchaser and the Purchased Assets shall 

not be subject to, any *** defenses (whether contractual or otherwise, including, 

without limitation, any right of recoupment), Liabilities, Claims, and Interests, or 

basis of any kind or nature whatsoever to delay, defer, or impair any right of the 

Purchaser of the Debtors, or any obligation of any other party, under or with 

respect to, any Purchased Assets (including, without limitation, an Assumed 

Contract), with respect to any act or omission that occurred prior to the Closing or 

with respect to any Other Agreement or any obligation to Debtors that is not an 

Assumed Liability. 

 * * * * 
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Neither the Purchaser, nor any of its successors or assigns, or any of their 

respective affiliates shall have any liability for any Interest that arose or occurred 

prior to the Closing, or otherwise is assertable against the Debtors or is related to 

the Purchased Assets prior to the Closing.” 

¶ 61 The Bankruptcy Sale Order controls to preclude defendants’ fraudulent inducement 

affirmative defense stemming from GMAC’s actions in originating the Mortgage loan in 2004 

asserted against plaintiff’s foreclosure action. While not binding on this court, we note other 

courts have affirmed the granting of summary judgment precluding claims against GMAC’s 

successors in interest where the successor came to service the mortgage at issue through the asset 

purchase agreement approved in GMAC’s Bankruptcy Action based on the Bankruptcy Sale 

Order’s language indemnifying the successor from claims based on GMAC’s conduct and where 

said claims originated prior to the asset sale. See Ishee v. Federal National Mortgage Ass’n, 641 

Fed. Appx 438, 444 (2016); see also Harrington v. Federal National Mortgage Ass’n, 2016 WL 

3561858, *8 (2016). 

¶ 62 We also find no genuine issue of material fact existed concerning plaintiff’s right to 

foreclosure. Defendants do not dispute the allegations contained in plaintiff’s foreclosure 

complaint, supporting documents, and affidavits including those attached to plaintiff’s motion 

for summary judgment. Defendants only claim the Mortgage contract is not enforceable and the 

Bankruptcy Sale Order inapplicable because defendants rescinded the Mortgage contract prior to 

the February 15, 2013 closing. However, as discussed above, in construing the pleadings, 

depositions, admissions, and affidavits strictly against plaintiff and liberally in favor of 

defendants, there is no dispute the Mortgage contract was not rescinded prior to the sale of 
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GMAC’s assets in the Bankruptcy Action and is thus subject to the Bankruptcy Sale Order and 

its indemnification language. See Williams, 228 Ill. 2d at 417. 

¶ 63 Plaintiff’s uncontradicted allegations in support of its foreclosure complaint include all 

pertinent information concerning the Mortgage at issue, the date of the Mortgage, identification 

of the parties to the Mortgage, a legal description of the mortgaged premises, and a statements as 

to defendants’ default. Plaintiff identified itself as the current legal holder of the Mortgage 

which defendants also do not dispute and requested a judgment of foreclosure and sale of the 

Property. True copies of the Mortgage and note at issue were attached to plaintiff’s complaint. 

Plaintiff’s complaint, supported by affidavits, was tailored to the specific facts and circumstances 

of defendants’ Mortgage and default and the specific relief sought and satisfied the pleading 

requirements of the Foreclosure Law (735 ILCS 5/15-1501 et seq. (West 2014)). Defendants’ 

filings did not give rise to any genuine issue of material fact regarding their default and thus 

summary judgment was properly awarded. See PNC Bank, National Ass’n v. Zubel, 2014 IL 

App (1st) 130976, ¶¶ 15, 19, 23 (affirming the circuit court’s award of summary judgment to a 

bank in a foreclosure action where record contained sufficient evidence to establish a prima facie

case for foreclosure and defendant failed to allege any competent evidence to rebut those 

claims). 

¶ 64 Notice of Bankruptcy Proceeding 

¶ 65 Defendants argue “Plaintiff failed to demonstrate there were no genuine issues of 

material fact concerning whether or not Defendants received timely notice of the GMAC 

bankruptcy proceeding to properly avail them of the bankruptcy framework to adjudicate their 

defense of fraudulent inducement in respect to their constitutional due process rights.” We 

disagree that this presents a genuine issue of material fact precluding summary judgment. 
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¶ 66 We begin by noting Kovitz’s October 8, 2015 affidavit contradicts his notice argument as 

he states therein that sometime after January 24, 2012, but before January 30, 2013, “we received 

another notice from GMAC Mortgage Company (“GMACM”) stating that GMACM filed for 

bankruptcy protection and that the new loan service for our mortgage loan would be Ocwen 

Loan Servicing.” (Emphasis added.) 

¶ 67 Moreover, as set forth in the Bankruptcy Sale Order, notice of the sale of GMAC’s assets 

was published in The Wall Street Journal and The New York Times prior to the sale. 

Additionally, in correspondences dated March 7, 2013 and April 9, 2013, on which defendants 

were copied, reference is made not only to GMAC’s Bankruptcy Action but also the February 

15, 2013 sale of GMAC’s assets such that defendants were aware of the proceedings which 

remained ongoing at the time. 

¶ 68 Moreover, defendants cite no authority to support the allegation that a failure to provide 

statutory notice occurred which would defeat the effect of the Bankruptcy Sale Order and its 

indemnification of plaintiff against defendants’ affirmative defense. See Ill. S. Ct. R. 341(h)(7) 

(eff. May 25, 2018) (requiring “contentions of the appellant and the reasons therefor, with 

citation of the authorities *** relied on” to be set forth in appellants brief and further stating 

“[p]oints not argued are forfeited”). 

¶ 69 As plaintiff points out, defendants’ arguments here amount to a collateral attack of the 

Bankruptcy Sale Order. While we recognize “a judgment rendered by a court which fails to 

acquire jurisdiction of either the parties or the subject matter of the litigation may be attacked 

and vacated at any time or in any court, either directly or collaterally” (see State Bank of Lake 

Zurich v. Thill, 113 Ill. 2d 294, 309 (1986); see also In re Marriage of Verdung, 126 Ill. 2d 542, 

547 (1989); see also Morey Fish Co. v. Rymer Foods, Inc., 158 Ill. 2d 179, 186-87 (1994)), 
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defendants failure to develop this argument and provide authority for such an attack precludes 

our consideration of the issue. See CitiMortgage, Inc. v. Bukowski, 2015 IL App (1st) 140780, ¶ 

19 (holding an unsupported claim is insufficient to create a genuine issue of material fact); see 

also International Insurance Co., 242 Ill. App. 3d at 630 (1993) (stating “The facts establishing 

an affirmative defense must be pleaded with the same degree of specificity required by a plaintiff 

to establish a cause of action.”); see also Ill. S. Ct. R. 341(h)(7) (eff. May 25, 2018); see also 

People v. Pope, 2020 IL App (4th) 180773, ¶ 75 (holding reviewing courts are entitled to have 

issues clearly defined with citation to pertinent authority and are not simply depositories into 

which the appealing party may dump the burden of argument and research). 

¶ 70 Therefore, we find no genuine issue of material fact existed with respect to notice to 

defendants of the Bankruptcy Action that would preclude summary judgment here. 

¶ 71 Accordingly, we affirm the circuit court’s award of summary judgment in favor of 

plaintiff on both plaintiff’s complaint for foreclosure as well as defendants’ affirmative defense.

¶ 72 CONCLUSION

¶ 73 For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed. 

¶ 74 Affirmed.