Court Opinion

ID: 6336651
Source: CourtListenerOpinion
Date Created: 2022-04-29 21:04:00.935491+00
Date Added: 2024-06-11T09:24:16.358024
License: Public Domain

2022 IL App (1st) 200588-U

                                                                             FIFTH DIVISION
                                                                             April 29, 2022

                                         No. 1-20-0588

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

1030 W. NORTH AVE. BLDG., LLC,                       )      Appeal from the Circuit Court of
an Illinois limited liability company,               )      Cook County.
                                                     )
                Plaintiff-Appellee,                  )
                                                     )
                         v.                          )
                                                     )      No. 19 L 4649
THE FIRM, LLC, d/b/a HI FI PERSONAL                  )
FITNESS, an Illinois limited liability               )
company,                                             )
                                                     )      Honorable Jerry A. Esrig,
                 Defendant-Appellant.                )      Judge Presiding.

       JUSTICE CONNORS delivered the judgment of the court.
       Justices Hoffman and Cunningham concurred in the judgment.

                                            ORDER

¶1     Held: Provisions in assignments of rents that allowed assignee to collect rents without
             possession were severable; lien created by assignments survived the foreclosure;
             plaintiff did not have standing to pursue unpaid rent from tenant; affirmed.

¶2     Plaintiff, 1030 W. North Ave. Bldg., LLC, appeals an order of the circuit court that entered

summary judgment for defendant, The Firm, LLC. Plaintiff sued defendant for payments that were

due under a lease agreement. Defendant asserted that plaintiff did not have standing because
No. 1-20-0588

plaintiff assigned its commercial leases and rents to its lender as security for a mortgage and lost

the property in a 2011 foreclosure judgment and subsequent sheriff’s sale, which left a deficiency.

On appeal, plaintiff contends that (1) the assignments of rents should not be enforced because they

are void as against public policy, and (2) the lien on rents created by the assignments was

extinguished by the foreclosure. We affirm.

¶3                                    I. BACKGROUND

¶4     Plaintiff initially filed its action to collect unpaid rent in 2010, but it was voluntarily

dismissed without prejudice in 2013. Plaintiff refiled its complaint in 2014, stating that beginning

in December 2004, defendant failed to make required payments under a lease, including rents,

utilities, and construction costs. The total amount allegedly due was $233,196.55.

¶5     On May 11, 2016, defendant filed a motion to dismiss due to plaintiff’s lack of standing.

Defendant stated that plaintiff lost the property in a previous foreclosure proceeding. The subject

mortgage included an assignment of leases and rents, and plaintiff and its lender also executed a

separate assignment of leases and rents. Defendant asserted that due to the foreclosure and

subsequent $12 million deficiency judgment that remained unpaid, plaintiff lost all rights to the

rents. Defendant clarified that it was not asserting the rights of plaintiff’s lender, and was only

demonstrating that it was the lender who held all lease, contract, and other rights associated with

the property.

¶6     The record indicates that plaintiff failed to make payments to its lender starting in June

2010. Plaintiff was served with a summons and foreclosure complaint in October 2010. On January

26, 2011, the court entered an order appointing a receiver for the property. A judgment of

foreclosure was entered on March 23, 2011. On June 1, 2011, the court entered an order approving

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No. 1-20-0588

the sheriff’s report of sale and confirming sale, which provided for a deficiency judgment of around

$12 million. The property was conveyed and title transferred to the lender by a judicial sales deed.

¶7     Plaintiff’s mortgage was recorded in 2004. A section of the mortgage titled “Assignment

of Rents; Appointment of Receiver; Lender in Possession” stated in part:

                “As part of the consideration for the indebtedness evidenced by the Note, Borrower

                hereby presently, absolutely and unconditionally assigns and transfers to Lender all

                the rents and revenues of the Property, including those now due, past due, or to

                become due by virtue of any lease or other agreement for the occupancy or use of

                all or any part of the Property *** [P]rior to an Event of Default, Borrower shall

                collect and receive all rents and revenues of the Property as trustee for the benefit

                of Lender and Borrower, *** it being intended by Borrower and Lender that this

                assignment of rents constitutes an absolute assignment and not an assignment for

                additional security only. Upon occurrence of an Event of Default, and without the

                necessity of Lender entering upon and taking and maintaining full control of the

                Property in person, by agent or by a court-appointed receiver, Borrower’s license

                to collect the rents and revenues shall immediately cease and terminate, and Lender

                shall immediately be entitled to possession of all rents and revenues of the Property

                as specified in this Section as the same become due and payable, including, but not

                limited to, rents due and unpaid ***.

                       ***

                       Upon occurrence of an Event of Default, *** Lender shall be entitled to

                the appointment of a receiver for the Property *** and Lender may in person, by

                agent or by a court-appointed receiver, *** enter upon and take and maintain full

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No. 1-20-0588

                control of the Property in order to perform all acts necessary and appropriate for

                the operation and maintenance thereof ***.

                       All rents and revenues *** shall be applied first to the costs, if any, of

                taking control of and managing the Property and collecting the rents, including

                *** costs of repairs to the Property ***.”

¶8     The mortgage referred to the Illinois Mortgage Foreclosure Law (Foreclosure Law) (735

ILCS 5/15-1101 et seq.) (West 2010)), stating in part:

                               “It is the express intention of the Borrower and Lender that the

                       rights, remedies, powers and authorities conferred upon the Lender pursuant

                       to this Instrument shall include all rights, remedies, powers and authorities

                       that a mortgagor may confer upon a lender under the Illinois Mortgage

                       Foreclosure Law [citation] *** and/or as otherwise permitted by applicable

                       law, as if they were expressly provided for herein. In the event that any

                       provision in this Instrument shall be inconsistent with any provision in the

                       [Foreclosure Law], the provisions of the [Foreclosure Law] shall take

                       precedent over the provisions of this Instrument, but shall not invalidate or

                       render unenforceable any other provision of this Instrument that can be

                       construed in a manner consistent with the [Foreclosure Law].

                               ***

                       To the extent the [Foreclosure Law] may limit the powers, authorities and

                       duties purportedly conferred hereby, such power, authorities and duties

                       shall include those allowed, and be limited as proscribed by the

                       [Foreclosure Law] at the time of their exercise or discharge.”

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No. 1-20-0588

¶9     The mortgage further contained a provision that addressed severability:

                      “In the event that any provision of this Instrument or the Note conflicts with

                      applicable law, such conflict shall not affect other provisions of this

                      Instrument or the Note which can be given effect without the conflicting

                      provisions, and to this end the provisions of this Instrument and the Note

                      are declared to be severable.”

¶ 10   As noted above, plaintiff and its lender also executed a separate assignment of leases and

rents, which was recorded in 2004. The assignment stated in part:

                             “Assignor does hereby and absolutely and unconditionally grant ***

                      as security for the indebtedness secured by the Instrument, all of the right,

                      title and interest of the Assignor in, to and under the Leases, together with

                      all rents, earnings, income, profits, benefits and advantages arising from the

                      Property and from said Leases and all other sums due or to become due

                      under and pursuant thereto, and *** the immediate and continuing right to

                      receive and collect all rents, income, revenues, issues, profits,

                      condemnation awards, insurance proceeds, moneys and security payable or

                      receivable under the Leases *** It is intended by Assignor that this

                      Assignment constitute a present, absolute assignment of the Leases, and not

                      an assignment for additional security only. *** [S]o long as no Event of

                      Default has occurred, Assignor shall have the revocable right and revocable

                      license to occupy the Property as landlord or otherwise and to collect, use

                      and enjoy the rents, issues and profits and other sums payable under and by

                      virtue of any Lease *** provided that after any such Event of Default, any

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No. 1-20-0588

                amounts collected by Assignor shall be held by Assignor in trust for the

                benefit of Assignee for use in the payment of all sums due on the Loan.

                        This Assignment is made and given and shall remain in full force

                and effect until: (a) the payment in full of all principal, interest and other

                sums due under the Note; and (b) the performance and observance by

                Assignor of all the terms, covenants and conditions to be performed or

                observed by Assignor under the Note and the other Loan Documents.

                                                ***

                        Upon the occurrence of an Event of Default, *** Assignee, at its

                option, shall have the complete right, power, and authority (a) without

                taking possession, to demand, collect and receive and sue for the rents and

                other sums payable under the Leases and, after deducting all reasonable

                costs and expenses of collection *** as determined by Assignee, apply the

                net proceeds thereof to the payment of any indebtedness secured hereby

                *** and (c) without regard to the adequacy of the security, with or without

                process or law, personally or by agent or attorney, or by a receiver to be

                appointed by court, then and thereafter to enter upon, take and maintain

                possession of and operate the Property, or any part thereof, *** and hold,

                operate, manage and control the Property, *** and at the expense of

                Assignor, from time to time cause to be made all necessary or proper

                repairs, renewals, replacements, useful alterations, additions, betterments

                and improvements to the Property ***.

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No. 1-20-0588

                        After payment of all proper charges and expenses, including the

                just and reasonable compensation for the services of Assignee *** in

                connection with the operation, management and control of the Property

                and the conduct of the business thereof, *** Assignee may *** credit the

                net amount of income which Assignee may receive by virtue of this

                Assignment and from the Property to any and all amounts due or owing to

                Assignee from Assignor under the terms and provisions of the Note and

                the Loan Documents.”

                                                  ***

                        The rights and remedies of Assignee hereunder are cumulative and

                not in lieu of, but are in addition to, any rights or remedies which Assignee

                shall have under the Note, any of the Loan Documents, or at law or in

                equity ***.

                                                  ***

                        In addition to the above, upon the occurrence of an Event of

                Default, Assignor expressly consents to the appointment of a receiver for

                the Property, without notice, either by the Assignee or a court of

                competent jurisdiction, to take all acts in connection with the Property

                permitted by law or in equity and to deduct from any and all rents received

                from the Leases an amount approved by the court to compensate such

                receiver for its actions.

                                                  ***

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No. 1-20-0588

                               If any one or more of the provisions of this Assignment, or the

                       applicability of any such provision to a specific situation, shall be held

                       invalid or unenforceable, such provision shall be modified to the minimum

                       extent necessary to make it or its application valid and enforceable, and

                       the validity and enforceability of all other provisions of this Assignment

                       and all other applications of any such provision shall not be affected

                       thereby.

                                                       ***

                               If there is any conflict between the terms of this Assignment and

                       the provisions pertaining to assignment of rents and leases in the

                       Instrument, Assignee shall have the right to select the applicable

                       provision.”

¶ 11   In response to defendant’s motion to dismiss, plaintiff asserted that it had the right to any

rent owed while it was in possession. Further, only the mortgagee could enforce the lien created

by the assignment of rents, and further, the lien created by the assignment was extinguished after

the foreclosure judgment was entered.

¶ 12   On July 6, 2016, the court denied defendant’s motion to dismiss. The court stated in a

written order that plaintiff had the right to collect any rent that was due before January 2011, and

plaintiff’s lender could recover rent that accrued after the receiver took possession. The court later

denied defendant’s motion to reconsider in part because the court was “not convinced that the lien

established when Plaintiff’s lender perfected its assignment in the foreclosure action continues in

perpetuity.”

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No. 1-20-0588

¶ 13   Defendant moved for a Rule 308 finding and certification (Ill. S. Ct. R. 308 (eff. Jan. 1,

2016)), asserting that there was no clear guidance from the appellate court on the standing matter

at issue. The court granted the motion on November 4, 2016, and certified the following question

for appeal:

                               “Does a mortgage lender which has perfected its assignment of

                       leases and rents lien by foreclosing on and taking possession of the pledged

                       real estate, or its borrower against whom the foreclosure was entered, have

                       standing to sue under one of the assigned leases to collect rent which

                       allegedly accrued prior to the date the mortgage lender took possession of

                       the real estate?”

¶ 14   This court denied defendant’s petition for leave to appeal, whereupon defendant filed a

petition for leave to appeal to the Illinois Supreme Court. On May 24, 2017, our supreme court

denied the petition for leave to appeal and entered a supervisory order that instructed this court to

allow leave to appeal and consider the appeal on the merits.

¶ 15   On August 3, 2018, this court issued a Rule 23 order (Ill. S. Ct. R. 23 (eff. Apr. 1, 2018))

that dismissed the appeal and remanded the case to the circuit court for further proceedings. 1030

W. North Ave. Bldg., LLC v. The Firm, LLC, 2018 IL App (1st) 163221-U. In part, this court found

that the certified question was improperly worded because it confused the perfection and

enforcement of a lien. Id. ¶ 13. Also, answering the certified question would have required this

court to examine the language of the assignment and apply the law to it, which was beyond the

scope of a Rule 308 appeal. Id. ¶ 16. We further noted that the assignment may violate public

policy because it allowed the lender to collect rents and revenues without possession, but that issue

was not briefed by the parties. Id. ¶ 17.

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No. 1-20-0588

¶ 16    Returning to the circuit court, defendant filed a motion to reconsider the refusal to dismiss

for lack of standing. Defendant stated that BMO Harris Bank N.A. v. Joe Contarino, Inc., 2017 IL

App (2d) 160371, resolved any uncertainty about the viability of the assignment lien held by

plaintiff’s lender.

¶ 17    Per the court’s request, defendant presented its arguments in a motion for summary

judgment. In part, defendant asserted that the assignments were consistent with Illinois public

policy. Even if the assignments included problematic self-help language, the lender properly

enforced the assignments through court-supervised foreclosure proceedings. Also, any offending

language in the assignments should be severed or disregarded.

¶ 18    In response, plaintiff stated in part that there was no evidence that the receiver took any

action to collect rent. Further, the judgment of foreclosure and the sheriff’s sale of the property

extinguished all liens on the property, including the assignment of rents.

¶ 19    At a hearing on March 4, 2020, the court stated that a mortgagee’s enforcement of its rights

does not depend on whether the receiver discharges its duty to collect rents because the receiver’s

actions are outside the mortgagee’s control. Also, rather than invalidate assignment of rents clauses

that offend public policy, courts impose restrictions to protect the public interest. Even an

offending assignment will be enforced if the assignee actually exercised its rights consistent with

the public interest, which occurred here. Also, the documents here included severability clauses.

The court found that plaintiff did not have standing to bring its claim for unpaid rent, and granted

defendant’s motion for summary judgment. Judgment was entered in favor of defendant and

against plaintiff.

¶ 20    Plaintiff timely appealed.

¶ 21                                    II. ANALYSIS

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No. 1-20-0588

¶ 22   On appeal, plaintiff contends that the assignment of rents is void as against public policy

and the assignment did not survive the foreclosure. Thus, plaintiff still has an interest in the unpaid

rents and has standing to maintain its suit.

¶ 23   This is an appeal from a grant of summary judgment, which is proper where, when viewed

in the light most favorable to the nonmoving party, the pleadings, depositions, and admissions on

file, along with any affidavits, show that there is no genuine issue as to any material fact and the

moving party is entitled to judgment as a matter of law. Gold Realty Group Corp. v. Kismet Café,

Inc., 358 Ill. App. 3d 675, 678-79 (2005). Standing, the grounds on which summary judgment was

granted, requires some injury in fact to a legally cognizable interest. Nationwide Advantage

Mortgage Co. v. Ortiz, 2012 IL App (1st) 112755, ¶ 24. The doctrine of standing is designed to

preclude people and entities with no interest in a controversy from bringing suit. Deutsche Bank

National Trust Co. v. Gilbert, 2012 IL App (2d) 120164, ¶ 15. A lack of standing is an affirmative

defense that is the defendant’s burden to plead and prove. Nationwide Advantage Mortgage Co.,

2012 IL App (1st) 112755, ¶ 24. Whether a party has standing is a question of law that we review

de novo. Cashman v. Coopers & Lybrand, 251 Ill. App. 3d 730, 733 (1993).

¶ 24   A party’s standing is assessed as of the time the suit is filed. Deutsche Bank National Trust

Co. v. Iordanov, 2016 IL App (1st) 152656, ¶ 34. Plaintiff’s first action was voluntarily dismissed

without prejudice in 2013. Plaintiff refiled its complaint in 2014. Because a refiling after a

voluntarily dismissal without prejudice is a separate cause of action (Kahle v. John Deere Co., 104

Ill. 2d 302, 306 (1984)), we will examine plaintiff’s standing as of when it filed its 2014 complaint.

¶ 25   Plaintiff’s standing depends on whether it lost the right to collect unpaid rents via the

assignment in the mortgage and the separate assignment. As background on those documents,

Illinois has adopted the lien theory of mortgages (Kelly/Lehr & Associates, Inc. v. O’Brien, 194

                                                 -11-
No. 1-20-0588

Ill. App. 3d 380, 386 (1990)), in which the mortgage is only a lien on the property, rather than a

conveyance of title from the mortgagor to the mortgagee (In re Cadwell’s Corners Partnership,

174 B.R. 744, 750 (Bankr. N.D. Ill. 1994)). For nonresidential property, a mortgage often includes

an assignment of rents, “which creates a lien on rents and profits generated from the mortgaged

property as additional security for the debt.” Id. at 752. Assignments allow creditors to reach rents

sooner than the completion of foreclosure proceedings. Matter of Wheaton Oaks Office Partners

Ltd. Partnership, 27 F.3d 1234, 1242 (7th Cir. 1994). Most lien theory jurisdictions do not

recognize absolute assignments of rent, in which the assignor presently sells and disposes of all of

its title and interest in a property’s rents and profits. M. Ecker & Co. v. LaSalle National Bank,

268 Ill. App. 3d 874, 879 (1994).

¶ 26   Illinois requires mortgagees to take possession of the property before collecting rents,

which reflects the public policy that “seeks to prevent mortgagees from stripping the rents from

the property and leaving the mortgagor and tenants without resources for maintenance or repair.”

Comerica Bank-Illinois v. Harris Bank Hinsdale, 284 Ill. App. 3d 1030, 1033 (1996). Possession

may be actual or constructive. Id. at 1034. Constructive possession includes a circuit court’s

affirmative ruling on a request to appoint a receiver. Id. at 1035. The security interest created by

the assignment is enforced when the mortgagee takes possession. BMO Harris Bank N.A. v. Joe

Contarino, Inc., 2017 IL App (2d) 160371, ¶ 44.

¶ 27   With these principles in mind, we turn to the two assignments at issue. The assignment in

the mortgage states in part that as part of the consideration for the indebtedness evidenced by the

note, the borrower “absolutely and unconditionally assigns and transfers” to the lender “all the

rents and revenues of the property.” The assignment permits the lender to collect rents without

possession, but also states that the lender “shall be entitled to the appointment of a receiver” for

                                                -12-
No. 1-20-0588

the property, who can take and maintain full control of the property “to perform all acts necessary

and appropriate for the operation and maintenance thereof.” Similar to the assignment in the

mortgage, the separate assignment states that it is “a present, absolute assignment of the Leases.”

On default, the assignee may collect rent without taking possession, but a receiver may be

appointed by the court to take possession and operate the property.

¶ 28   Both assignments state that they are absolute, which as stated above, are not recognized in

most lien theory states. See M. Ecker & Co., 268 Ill. App. 3d at 879. And, the assignments contain

language that runs afoul of the requirement that the assignee take actual or constructive possession

before collecting rents. See Comerica Bank, 284 Ill. App. 3d at 1034. But those matters do not

invalidate the entire assignment.

¶ 29   The validity of absolute assignments and the possession requirement set out in Comerica

Bank may both be affected by section 31.5 of the Conveyances Act (765 ILCS 5/31.5 (West 2012)),

which was made effective in 1996 and states in part:

                “(b) If an instrument assigning the interest of the assignor in rents arising from the

                real property described in the instrument is recorded, pursuant to this Act, in the

                county in which the real property is situated, then the interest of the assignee in

                those rents is perfected upon that recordation without the assignee taking any other

                affirmative action.

                        ***

                (c) This Section applies whether the assignment is absolute, conditional, or intended

                as security.

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No. 1-20-0588

                (d) Unless otherwise agreed to by the parties, the mere recordation of an assignment

                does not affect who is entitled, as between the assignor and the assignee, to collect

                or receive rents until the assignee enforces the assignment under applicable law.”

Because they are included in section 31.5(c), absolute assignments may indeed be valid in Illinois.

Also, the language “[u]nless otherwise agreed to by the parties” in section 31.5(d) “could be

construed to mean that if agreed to by the parties, recording an assignment-of-rents agreement can

‘affect who is entitled, as between the assignor and the assignee, to collect or receive rents,’ ”

which would be inconsistent with Comerica Bank. Robert C. Feldmeier, Enforcing Assignment-

of-Rents Provisions in Illinois, 86 Ill. B.J. 436, 439 (1998). Under Comerica Bank—which was

issued after section 31.5 became effective, but did not address its impact—just recording an

assignment is insufficient to collect rents on default. The assignee must take actual or constructive

possession. In contrast, section 31.5(d) allows parties to enforce an assignment other than pursuant

to applicable law (Joe Contarino, Inc., 2017 IL App (2d) 160371, ¶ 59), and so a provision that

allows for rent without possession may be valid.

¶ 30   Still, when however parties agree to enforce an assignment, it must be consistent with the

public policy requiring assignees to accept the benefits and the maintenance and repair burdens of

the property. See id. ¶ 65 (if agreements to collect rent without court authority had not accounted

for management expenses, arguable that agreements would have been void as against public

policy). Both assignments here addressed that policy goal. The assignment in the mortgage stated

that all rents and revenues would first be applied to the costs of taking control of and managing

the property, including the costs of repairs. The separate assignment stated that before paying the

assignee what is due under the note, the assignee first pays for expenses “in connection with the

operation, management and control of the Property.”

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No. 1-20-0588

¶ 31    Defendant also asserts that problematic language in an assignment may be disregarded as

long as the lender followed proper enforcement procedure, which the lender did here by having

the court appoint a receiver and transfer title away from plaintiff.

¶ 32   In Comerica Bank, 284 Ill. App. 3d at 1034, after stating that it would not recognize a

provision of an assignment agreement that allowed the mortgagee to collect rents without

possession, the court considered an argument from the party seeking to uphold the assignment that

it took proper steps to enforce the assignment. However, the party’s actions fell short of what was

required—it requested a receiver, but a court did not grant that request. Id. So, Comerica Bank

does not definitively resolve the question of whether problematic language that allows for

collecting rents without possession can be disregarded as long as the lender follows the proper

enforcement procedure.

¶ 33   Ultimately, we do not need to resolve with certainty the questions about the impact of

section 31.5 of the Conveyances Act and whether an assignee’s actions can save a problematic

assignment that allows for collecting rents without possession. Even if the provisions allowing

rents without possession are invalid, that language is severable from both documents. When a

portion of a contract is unenforceable as against public policy, “a court may nevertheless enforce

the rest of the agreement in favor of a party who did not engage in serious misconduct if the

performance as to which the agreement is unenforceable is not an essential part of the agreed

exchange.” (Internal quotation marks omitted.) Kepple & Co. v. Cardiac, Thoracic &

Endovascular Therapies, S.C., 396 Ill. App. 3d 1061, 1066 (2009) (quoting Restatement (Second)

of Contracts, § 184(1), at 30 (1981)). An enforceable provision is severable unless it is so closely

connected with the rest of the contract that to enforce the valid provisions of the contract without

it “would be tantamount to rewriting the agreement.” (Internal quotation marks omitted.)

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No. 1-20-0588

Wigginton v. Dell, Inc., 382 Ill. App. 3d 1189, 1198 (2008) (quoting Abbott-Interfast Corp. v.

Harkabus, 250 Ill. App. 3d 13, 21 (1993)).

¶ 34   Here, both the mortgage and separate assignment had severability clauses, which “certainly

strengthens the case for the severance of the unenforceable provisions because [they] indicate that

the parties intended for the lawful portions of the contract to be enforced in the absence of the

unlawful portions.” Abbott-Interfast Corp., 250 Ill. App. 3d at 21. As defendant notes, plaintiff’s

lender followed the proper procedure to enforce the assignment by having a court authorize the

appointment of a receiver. The mortgage also provides that the Foreclosure Law takes precedence

over any inconsistent provisions, so the protections of the Foreclosure Law are part of the

mortgage. Sections 15-1704(c) and (d) of the Foreclosure Law list the duties of a receiver

appointed during foreclosure proceedings, which includes a number of steps to maintain the

property. 735 ILCS 5/15-1704(c), (d) (West 2010)). As for the separate assignment, even in

Comerica Bank, 284 Ill. App. 3d at 1034, the court did not invalidate the entire assignment

agreement due to its problematic language—it refused to recognize “that provision of the

agreement.” Both the mortgage and separate assignment have numerous provisions that are

unrelated to the assignee collecting rents without possession. We will not give effect to the

language that allows collecting rents without possession, but the rest of the assignments are

unaffected.

¶ 35   The next question is whether, once the assignments were enforced, plaintiff had an interest

in the past due rents that accrued before default. An assignment is a contract and is construed

according to the rules of contract construction, including that the parties’ intent is discerned from

the contract language. CNA International, Inc. v. Baer, 2012 IL App (1st) 112174, ¶ 48.

Unambiguous language is given its plain and ordinary meaning. Id. The mortgage assigned to the

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No. 1-20-0588

lender “all rents and revenues ***, including those now due, past due, or to become due by virtue

of any lease or other agreement.” On default, the lender was entitled to “all rents and revenues

***, including, but not limited to, rents then due and unpaid.” The separate assignment covered

“all rents, earnings, income, profits, *** and all other sums due or to become due” under the leases.

Based on the plain language of the assignments, on default, the assignee—plaintiff’s lender—was

entitled to unpaid rent that accrued before default, which included the rent that plaintiff sought in

its complaint. See In re Randall Plaza Center Associates, L.P., 326 B.R. 133, 141 (Bankr. N.D.

Ill. 2005) (where mortgage provided that on default, mortgagee had the right to collect the rents

and profits, “including those past due and unpaid,” the mortgagee could collect any unpaid rent

that was due on the date of the notice of default or anytime thereafter).

¶ 36   Plaintiff asserts that it nonetheless has standing because the equitable lien on rent was

extinguished by the foreclosure. Plaintiff argues that if an assignment of rents is a lien recorded to

support the mortgage, then the lien dies once the security to which it is attached ceases to exist.

Plaintiff states that the debt merged into the deficiency judgment and there are no other rents to

collect to pay down the debt.

¶ 37   Plaintiff is incorrect. “An express pledge of rents is not extinguished by a foreclosure sale

which merges the title and the debt in the same party.” Id. (citing Liss v. Harris, 304 Ill. App. 173

(1940)). In Randall Plaza, a creditor’s purchase of a property after a foreclosure extinguished the

mortgage debt, but not the lien on the rents. Id. We are aware, as plaintiff notes, that lower federal

court decisions are not binding on Illinois courts, but those decisions may be considered persuasive

authority. Asset Exchange II, LLC v. First Choice Bank, 2011 IL App (1st) 103718, ¶ 19. Randall

Plaza has been cited in an Illinois case, Joe Contarino, Inc., 2017 IL App (2d) 160371, ¶ 75, where

a consent foreclosure did not waive a lien on rents. We are unpersuaded by plaintiff’s insistence

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No. 1-20-0588

that the case on which Randall Plaza relied, Liss, 304 Ill. App., was wrongly decided. Liss has

been cited approvingly by other cases. See Matter of Wheaton Oaks Office Partners Ltd.

Partnership, 27 F.3d at 1243; Chicago Title & Trust Co. v. National Bank of Albany Park in

Chicago, 17 Ill. App. 3d 721, 727-28 (1974). We see no reason to depart from Randall Plaza’s

and Joe Contarino’s statements that a lien on rents is not extinguished by a foreclosure.

¶ 38    In a further attempt to argue that the lien was extinguished, plaintiff cites to cases applying

the merger doctrine. See BAC Home Loans Servicing, LP v. Popa, 2015 IL App (1st) 142053,

¶ 36 (on entry of a foreclosure judgment, the mortgage merges into the judgment and eliminates

the contract); Poilevey v. Spivack, 368 Ill. App. 3d 412, 414 (2006) (when a judgment based on a

contract or instrument is obtained, the instrument is entirely merged into the judgment). Plaintiff

overlooks that the merger doctrine only applies “to causes of action to bar relitigation of the same

cause.” (Internal quotation marks omitted.) Kenny v. Kenny Industries, Inc., 2012 IL App (1st)

111782, ¶ 16 (quoting Stein v. Spainhour, 196 Ill. App. 3d 65, 70 (1990)). The merger doctrine

would not apply to the lien created by the assignments because the assignments were not

necessarily at issue in the foreclosure proceeding. See State Bank of Piper City v. A Way, Inc., 135

Ill. App. 3d 1010, 1012-13 (1985) (merger did not extinguish right to enforce lien created by

security agreements where it did not appear that documents securing notes were necessarily at

issue in the earlier action). Plaintiff also states that an assignment of rights is a lien that must attach

to a res. However, an assignment of rents is different from a perfected lien that gives a creditor an

interest in a specific piece of property. In re J.D. Monarch Development Co., 153 B.R. 829, 833

(Bankr. S.D. Ill. 1993). The lien created by the assignments of rents survived the foreclosure, and

after default, plaintiff lost its interest in the rents due and unpaid under the lease with defendant.

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¶ 39    Plaintiff further contends that defendant does not have standing to raise the assignment of

rents issue. According to plaintiff, defendant is trying to borrow the shoes of the mortgagee to bar

this action, but defendant is not a third-party beneficiary under the assignments. Plaintiff

misconstrues defendant’s position. Defendant is not trying to collect the rents. Rather, defendant

is asserting that plaintiff has no legally cognizable interest in the rents because it lost that interest

through the assignments. See Nationwide Advantage Mortgage Co., 2012 IL App (1st) 112755,

¶ 24 (standing requires an injury in fact to a legally cognizable interest).

¶ 40    Lastly, plaintiff asserts that it has sufficient standing because rental debt that matured

before a transfer of title is owed to the former landlord, citing A.M. Realty Western, L.L.C. v.

MSMC Realty, L.L.C., 2012 IL App (1st) 121183. In that case, the plaintiff had standing to sue for

payments from a tenant that accrued before the building was sold. Id. ¶ 43. The tenant’s debt did

not pass on to the subsequent owners of the property. Id. ¶ 45. The tenant’s lease ended before the

building was sold and the lease was not assigned to the subsequent owners of the property.

Id. ¶ 47. A.M. Realty did not involve a foreclosure and assignment of rents and leases, which as

explained above, transferred the right to collect unpaid rents to the assignee on default. A.M. Realty

concerns an entirely different scenario.

¶ 41                                    III. CONCLUSION

¶ 42    For the foregoing reasons, the judgment of the circuit court is affirmed.

¶ 43    Affirmed.

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