Court Opinion

ID: 4445089
Source: CourtListenerOpinion
Date Created: 2019-10-08 17:03:58.411073+00
Date Added: 2024-06-11T13:33:31.069025
License: Public Domain

Digitally signed
                                                                            by Reporter of
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                                                                            document
                                   Appellate Court                          Date: 2019.10.08
                                                                            11:23:33 -05'00'

           U.S. Bank, National Ass’n v. Laskowski, 2019 IL App (1st) 181627

Appellate Court        U.S. BANK, NATIONAL ASSOCIATION, as Trustee for Credit
Caption                Suisse First Boston CSFB 2005-11, Plaintiff-Appellee, v. MARK
                       LASKOWSKI; THE CITY OF CHICAGO; PACIFIC REALTY
                       GROUP, LLC, an Illinois Limited Liability Company; AVERN C.
                       SMITH; UNKNOWN OWNERS AND NONRECORD HOLDERS,
                       Defendants (Pacific Realty Group, LLC, Petitioner-Appellant;
                       Lawrence Wilson and U.S. Bank, National Association, as Trustee for
                       Credit Suisse First Boston CSFB 2005-11, Respondents-Appellees).

District & No.         First District, Second Division
                       No. 1-18-1627

Filed                  July 16, 2019

Decision Under         Appeal from the Circuit Court of Cook County, No. 09-CH-977; the
Review                 Hon. Gerald V. Cleary, Judge, presiding.

Judgment               Affirmed.

Counsel on             Carla Sherieves, of CMS Law, LLC, of Chicago, for appellant.
Appeal

                       Kimberly A. Jansen, of Hinshaw & Culbertson LLP, of Chicago, for
                       appellee Lawrence Wilson.
                               Lucia Nale, Michael H. Bornhorst, and Geoffrey M. Pipoly, of Mayer
                               Brown LLP, of Chicago, for other appellee.

     Panel                     JUSTICE HYMAN delivered the judgment of the court, with opinion.
                               Justices Pucinski and Mason concurred in the judgment and opinion.

                                                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
      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.)

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¶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 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
       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.

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¶ 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
       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
       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

                                                   -4-
       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
¶ 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
       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

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       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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