Court Opinion

ID: 4417515
Source: CourtListenerOpinion
Date Created: 2019-07-17 16:04:17.539037+00
Date Added: 2024-06-11T09:27:56.280657
License: Public Domain

2019 IL App (1st) 181627
                                      No. 1-18-1627
                                Opinion filed July 16, 2019
                                                                            Second Division

                                         IN THE

                           APPELLATE COURT OF ILLINOIS

                                     FIRST DISTRICT

                                                  )
                                                  )
                                                  )
                                                  )
U.S. BANK, NATIONAL ASSOCIATION, as
                                                  )
Trustee for Credit Suisse First Boston CSFB 2005-
                                                  )     Appeal from the Circuit Court
11,
                                                  )     of Cook County.
                                                  )
        Plaintiff-Appellee,
                                                  )
                                                  )
v.
                                                  )
                                                  )
MARK LASKOWSKI; THE CITY OF
                                                  )
CHICAGO; PACIFIC REALTY GROUP, LLC,
                                                  )     No. 09 CH 977
an Illinois Limited Liability Company; AVERN C.
                                                  )
SMITH; UNKNOWN OWNERS AND
                                                  )
NONRECORD HOLDERS,
                                                  )
                                                  )
        Defendants
                                                  )
                                                  )     The Honorable Gerald V. Cleary,
(Pacific Realty Group, LLC, Petitioner-Appellant;
                                                  )     Judge, presiding.
Lawrence Wilson and U.S. Bank, National
                                                  )
Association, as Trustee for Credit Suisse First
                                                  )
Boston CSFB 2005-11, Respondents-Appellees).
                                                  )
                                                  )
                                                  )
                                                  )

       JUSTICE HYMAN delivered the judgment of the court, with opinion.
       Justices Pucinski and Mason concurred in the judgment and opinion.
     1-18-1627

                                                OPINION

¶1          Five years after a default judgment of foreclosure and six years after the sale of the

     property to a bona fide purchaser, a limited liability company (LLC) came forward to claim it

     had an equitable interest in the foreclosed property. The LLC argued that the trial court did not

     have jurisdiction over it because the method of service—publication—is not allowed under the

     Limited Liability Company Act (LLC Act) (805 ILCS 180/1 et seq. (West 2016)). As it turns

     out, after he stopped making payments on the mortgage, the mortgagor formed the LLC in the

     state of New Mexico. He also was the sole member of the LLC. In an ignoble attempt to discredit

     the foreclosure judgment, the LLC petitioned to quash service of process and vacate all void

     orders under section 2-1401(f) of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401(f)

     (West 2016)).

¶2          The lender and the bona fide purchaser successfully moved to dismiss, and we affirm.

     The Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15-1101 et seq. (West

     2016)) does not make the LLC a necessary party to the foreclosure case, so service on it was not

     required. In any event, under the facts of this case, the Foreclosure Law protects the interest of

     the bona fide purchaser as to any defect in service.

¶3                                              Background

¶4          In October 2005, Credit Suisse First Boston loaned Mark Laskowski $130,900. The loan

     was secured by a mortgage on residential property in Chicago. Laskowski stopped making

     mortgage payments in October 2008.

¶5          A “Memorandum and Affidavit of Equitable Interest,” dated November 22, 2008,

     purports to grant Pacific Realty Group, LLC (Pacific LLC) an equitable interest in the property.

     The memorandum, which only Laskowski signed, states, “[a]n Agreement was entered into

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     between the undersigned [i]n the amount of $350,000.” Laskowski filed the memorandum with

     the Cook County Recorder of Deeds in December 2010. The memorandum does not identify

     Pacific LLC’s mailing address, its registered agent, or the state where it was formed. According

     to documents filed in conjunction with Pacific LLC’s section 2-1401 petition, Pacific LLC is a

     New Mexico company, and Laskowski is its sole member. Pacific LLC’s registered agent is a

     company in New Mexico with an Albuquerque address. Pacific LLC’s capital value totaled

     $200.

¶6           In 2009, U.S. Bank, National Association (U.S. Bank), filed a complaint to foreclose the

     mortgage. U.S. Bank named Laskowski and Pacific LLC as defendants. (The City of Chicago,

     unknown owners and nonrecord claimants, and another individual were also named defendants

     but are not relevant to the appeal.)

¶7           U.S. Bank filed an affidavit for service by publication on Laskowski and Pacific LLC,

     stating that, after diligent inquiry, it was unable to locate them. Between February 17, 2009, and

     March 3, 2009, U.S. Bank published the notice to Laskowski and Pacific LLC in the Chicago

     Daily Law Bulletin. The notice then was filed in the circuit court and mailed to Laskowski at

     four different addresses. Later, the special process server filed an affidavit, dated April 27, 2009,

     stating he had served “Pacific Realty Group, LLC” “c/o President Ike Hong, 11 Broadleys Ct.

     Deerfield, IL 60015.” According to the affidavit, “Pacific Realty Group, LLC” was served by

     leaving a copy of the process with Grace Hong, as authorized agent for service.

¶8           In October 2009, U.S. Bank filed a motion for a default order. In a certificate filed with

     the motion, U.S. Bank asserted it served Laskowski by publication and Pacific LLC by corporate

     service. In May 2010, after Laskowski and Pacific LLC failed to answer or otherwise plead, the

     trial court entered an order of default and a judgment of foreclosure. The property was sold at a

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       sheriff’s sale, and the trial court approved the sale. A week later, the property was conveyed to

       U.S. Bank by judicial deed. After several more conveyances, in August 2011, Seaway Bank and

       Trust Company conveyed the property to respondent Lawrence Wilson.

¶9            More than five years passed. In November 2016, Pacific LLC filed an appearance and a

       petition to quash service of process and vacate all void orders under section 2-1401(f) of the

       Code (735 ILCS 5/2-1401(f) (West 2016)). Pacific LLC argued that U.S. Bank had served the

       wrong entity—Pacific LLC had no connection whatsoever with the similarly named Illinois

       corporation and Hong. Rather, it is a foreign LLC registered in the state of New Mexico.

¶ 10          Wilson moved to dismiss the petition under section 2-619(a)(2) and (a)(9) of the Code

       (735 ILCS 5/2-619(a)(2), (a)(9) (West 2016)), arguing (i) Pacific LLC had been properly served

       by publication, (ii) Pacific LLC could not bring the petition having never registered to transact

       business in Illinois, (iii) Pacific LLC lacks standing to challenge the judgment as it has no

       bona fide title or interest in the property, (iv) Pacific LLC was on notice of the foreclosure

       proceeding because Laskowski, its sole member, appeared, and (v) section 2-1401(e) of the Code

       protects the interest of Wilson in the property because he is a bona fide purchaser for value. U.S.

       Bank filed a motion to dismiss, adopting Wilson’s motion in its entirety. U.S. Bank also argued

       Pacific LLC’s equitable interest in the property was a sham and that Pacific LLC was an alter

       ego of Laskowski.

¶ 11          In response, Pacific LLC argued (i) the LLC Act does not permit service by publication,

       (ii) it was not required to register under the LLC Act because merely owning property in Illinois

       does not constitute transacting business under the Act, (iii) the special process server did not

       serve it, (iv) its standing to challenge the foreclosure judgment arises from its equitable interest

       in the property, (v) a void judgment may be attacked at any time, and (vi) Wilson was not a

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       bona fide purchaser and his interest was not protected under section 2-1401(e) because lack of

       jurisdiction was apparent from the record.

¶ 12               After briefing, the trial court granted the motions to dismiss Pacific LLC’s petition to

       quash, finding that section 2-206 of the Code and the “catchall” provision of the LLC Act (805

       ILCS 180/1-50(d) (West 2016)) permitted service by publication. Pacific LLC filed a motion to

       reconsider, which the trial court denied.

¶ 13                                                  Analysis

¶ 14                                          Standard of Review

¶ 15          Section 2-1401 of the Code allows a court to vacate a final judgment after more than 30

       days. People v. Vincent, 226 Ill. 2d 1, 7 (2007) (citing 735 ILCS 5/2-1401 (West 2002)). Under

       section 2-1401, the petitioner bears the burden of establishing his or her right to relief. Smith v.

       Airoom, Inc., 114 Ill. 2d 209, 221 (1986). “[A] section 2-1401 petition can present either a

       factual or legal challenge to a final judgment or order,” and “the nature of the challenge

       presented in a section 2-1401 petition is critical because it dictates the proper standard of review

       on appeal.” Warren County Soil & Water Conservation District v. Walters, 2015 IL 117783,

       ¶ 31. When a section 2-1401 petition advances a purely legal challenge to a judgment by alleging

       that the judgment is void, as here, we review the trial court’s ruling on the petition de novo. Id.

       ¶ 47. When the trial court dismisses a petition we review the trial court’s judgment, not its

       rationale, and may affirm for any reason supported by the record regardless of the reasons cited

       by the trial court. D’Attomo v. Baumbeck, 2015 IL App (2d) 140865, ¶ 30.

¶ 16                                               Necessary Party

¶ 17          Wilson and U.S. Bank argue the trial court did not err in dismissing Pacific LLC’s

       section 2-1401 petition because it was not a necessary party. They acknowledge not raising this

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       argument before the trial court (they did argue, however, that Pacific LLC had no bona fide title

       to the property and thus lacked standing to challenge the foreclosure judgment). While an

       appellant who fails to raise an issue in the trial court waives that issue, an appellee may raise an

       issue on review that was not presented to the trial court to sustain the judgment, as long as the

       issue’s factual basis was laid before the trial court. DOD Technologies v. Mesirow Insurance

       Services, Inc., 381 Ill. App. 3d 1042, 1050 (2008). The factual basis for the appellees’ necessary

       party argument, that Pacific LLC had no valid interest in the property, was before the trial court.

       Thus, we may consider the argument.

¶ 18          Section 15-1501 of the Foreclosure Law sets out the necessary parties to a mortgage

       foreclosure action: “(i) the mortgagor and (ii) other persons (but not guarantors) who owe

       payment of indebtedness or the performance of other obligations secured by the mortgage and

       against whom personal liability is asserted.” 735 ILCS 5/15-1501(a) (West 2016). “Other

       persons, such as other mortgagees or claimants, may be joined, although they are not necessary

       parties.” (Emphasis in original.) React Financial v. Long, 366 Ill. App. 3d 231, 236 (2006)

       (citing 735 ILCS 5/15-1501(b)(10) (West 2004)). Failure to include permissive parties to a

       foreclosure action does not affect the trial court’s jurisdiction. Deutsche Bank National Trust Co.

       v. Estate of Schoenberg, 2018 IL App (1st) 160871, ¶ 18.

¶ 19          In its complaint, U.S. Bank sought a deficiency judgment solely against Mark Laskowski.

       That means Pacific LLC was not a party “against whom personal liability is asserted.” Nor was

       Pacific LLC a mortgagor. A mortgagor is “(i) the person whose interest in the real estate is the

       subject of the mortgage and (ii) any person claiming through a mortgagor as successor.” 735

       ILCS 5/15-1209 (West 2016). Laskowski was the mortgagor, as evidenced by the mortgage

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       documents, the foreclosure complaint, Laskowski’s own sworn affidavit, and the sworn affidavit

       submitted by U.S. Bank’s vice president of loan documentation.

¶ 20          Pacific LLC purports to have an equitable interest evidenced by the “Memorandum and

       Affidavit of Equitable Interest.” An “equitable interest” or “equitable title” is a “title that

       indicates a beneficial interest in property *** that gives the holder the right to acquire formal

       legal title.” Black’s Law Dictionary (11th ed. 2019). A beneficial interest refers to the “right or

       expectancy in something (such as a trust or an estate), as opposed to legal title to that thing.”

       Black’s Law Dictionary (11th ed. 2019).

¶ 21          Pacific LLC’s purported equitable interest does not transform it into a mortgagor. Unlike

       a lienholder or the grantee in a quitclaim deed, Pacific LLC did not hold any actual interest to the

       property that was the subject of the mortgage. As a result, Pacific LLC may have been a

       permissive party, not a necessary party. React Financial, 366 Ill. App. 3d at 236. And the failure

       to make Pacific LLC a party did not divest the trial court of authority to enter the foreclosure

       judgment and confirm the sale. Schoenberg, 2018 IL App (1st) 160871, ¶ 17.

¶ 22          Pacific LLC argues that as a defendant in the foreclosure complaint, U.S. Bank had to

       properly serve it, otherwise, the court did not have jurisdiction to enter any valid orders against

       it. Alternatively, Pacific LLC argues that if U.S. Bank believed Pacific LLC had no valid interest

       in the property, U.S. Bank should have dismissed Pacific LLC. Pacific LLC cites no authority for

       either proposition, and we know of none. U.S. Bank was not required to serve process on Pacific

       LLC and the trial court did not err in dismissing the section 2-1401 petition to quash service and

       vacate the default judgment.

¶ 23                                   Wilson is a Bona Fide Purchaser

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¶ 24           Moreover, a bona fide purchaser for value, like Wilson, is protected by section 2-1401(e)

       of the Code. See In re Application of the County Collector, 397 Ill. App. 3d 535, 549 (2009).

       Section 2-1401(e) embodies the public policy respecting third-party purchasers of property and

       protecting them from the effects of an order setting aside a judgment affecting title to property.

       Christiansen v. Saylor, 297 Ill. App. 3d 719, 724 (1998). A bona fide purchaser’s interest in real

       property gains protection as long as the defect in service is not apparent from the face of the

       record and the bona fide purchaser was not a party to the original action but acquired title before

       the filing of the petition. Id.

¶ 25           We consider the whole record, including the pleadings, the return of process, and the

       judgment of the trial court. Concord Air, Inc. v. Malarz, 2015 IL App (2d) 140639, ¶ 33. For a

       defect in service to be apparent, the inquiry must not go beyond the face of the record itself. See

       State Bank of Lake Zurich v. Thill, 113 Ill. 2d 294, 314 (1986). If the jurisdictional defect was

       not apparent from the face of the record at the time of the intervention of the bona fide purchaser,

       the petitioning party will be denied relief even from an otherwise void judgment or order. JoJan

       Corp. v. Brent, 307 Ill. App. 3d 496, 505 (1999).

¶ 26           Pacific LLC argues Wilson was not a bona fide purchaser because the record shows that

       Pacific LLC, a foreign limited liability company, was served by publication, which was not a

       method of service permitted by law. We disagree. Even assuming service by publication is not

       permitted on an LLC (an issue we need not address), U.S Bank served a Grace Hong, who is

       identified on the special process server’s affidavit as the authorized agent for “Pacific Realty

       Group, LLC.” For Wilson to determine that the special process server did not properly serve

       petitioner, he would have had to go beyond the face of the record. Wilson would have had to

       check the Illinois Secretary of State’s corporate records to determine that the “Pacific Realty

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       Group, LLC,” indicated on the process server’s affidavit, constitutes Pacific Realty Group, Inc.,

       a different entity than petitioner, and that Grace Hong was not “Pacific Realty Group, LLC’s”

       registered agent. Wilson also would have had to search New Mexico records to determine that

       Pacific LLC was actually an LLC registered in that state. This information would have been

       extremely difficult to ascertain, as the memorandum of equitable interest does not provide an

       address for Pacific LLC or indicate where it was registered. Unquestionably, a purposeful

       decision on Laskowski’s part.

¶ 27          Wilson was not a party to the original foreclosure action. And Wilson could not tell from

       the record that the trial court did not have jurisdiction over Pacific LLC due to improper service

       until Pacific LLC filed its section 2-1401 petition, attaching as exhibits the Illinois Secretary of

       State documents and the New Mexico documents. Because Wilson was a bona fide purchaser,

       Pacific LLC cannot collaterally attack the foreclosure judgment. Accordingly, we affirm the trial

       court’s dismissal of the section 2-1401 petition.

¶ 28          We need not address the other issues raised by the parties.

¶ 29          Affirmed.

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