Abn Amro Mortgage Group Inc. v. Mcgahan .

• Decision Date: 04 June 2010
• Docket Number: No. 107954.,107954.
• Citation: 237 Ill.2d 526,342 Ill.Dec. 7,931 N.E.2d 1190
• Parties: ABN AMRO MORTGAGE GROUP, INC., et al., Appellees, v. Nona L. McGAHAN et al., Appellants.
• Court: Illinois Supreme Court

237 Ill.2d 526

931 N.E.2d 1190

342 Ill.Dec. 7

ABN AMRO MORTGAGE GROUP, INC., et al., Appellees,

v.Nona L. McGAHAN et al., Appellants.

No. 107954.

Supreme Court of Illinois.

June 4, 2010.

COPYRIGHT MATERIAL OMITTED.

Michael T. Reagan, of Herbolsheimer, Lannon, Henson, Duncan & Reagan, of Ottawa, Patricia M. Nelson, of Chicago Volunteer Legal Services, of Chicago, for appellants.

Diane M. Kehl, Michael J. Waters, Jared C. Jodrey, of Vedder Price, P.C., of Chicago, for appellee ABN AMRO Mort. Group, Inc.

Lee Scott Perres, of Fisher & Shapiro, LLC, of Northbrook, David A. Novoselsky, Brian A. Schroeder, of Chicago, for appellee Charter One Bank.

Robert F. Harris, Charles P. Golbert, Kass A. Plain, of Office of Cook County Public Guardian, of Chicago, for amicus curiae Cook County Public Guardian.

OPINION

Justice BURKE delivered the judgment of the court, with opinion.

The question at issue here is whether a mortgagee must name a personal representative for a deceased mortgagor in a mortgage foreclosure proceeding in order for the circuit court to acquire subject matter jurisdiction. For the reasons that follow, we conclude that it must.

Background

This appeal involves two cases, ABN AMRO Mortgage Group, Inc. v. McGahan and Charter One Bank v. Hunter. The facts of each are set forth below.

ABN AMRO Mortgage Group, Inc. v. McGahan

In 2005, ABN AMRO (ABN) provided a loan to Nona McGahan, who executed a note secured by a mortgage on her property located in Chicago. On May 1, 2006, McGahan defaulted. On August 30, ABN filed a complaint in the circuit court of Cook County for foreclosure pursuant to the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq. (West 2004)). The complaint named McGahan, unknown heirs, and unknown owners. Unbeknownst to ABN, McGahan had died prior to the filing of this complaint.

On October 11, 2006, after learning from a special process server that McGahan was deceased, ABN filed a motion requesting additional time to determine whether a probate estate had been opened on behalf oF Mcgahan. thereafter, Abn was granted leave to file a petition to name a personal representative on behalf of McGahan.

On November 29, 2006, ABN advised the court that, upon further consideration, it did not intend to name a personal representative and requested leave to withdraw its earlier motion. Thereafter, the circuit court dismissed ABN's complaint pursuant to its order entered on November 2, 2006, in Wells Fargo v. McQueen, No. 05-CH-12846, 2006 WL 6085410 (November 2, 2006).

Wells Fargo v. McQueen was a mortgage foreclosure action. As in this case, the mortgagor, Allen McQueen, died prior to the filing of the complaint. In its decision in the Wells Fargo case, the circuit court noted that, generally, a circuit court lacks subject matter jurisdiction when a lawsuit is filed against a deceased person because such a suit is a nullity. To avoid this rule and confer jurisdiction on the circuit court, a plaintiff may proceed under section 13-209 of the Code of Civil Procedure and substitute the deceased party's personal representative. 735 ILCS 5/13-209(c) (West 2004). However, Wells Fargo, the mortgagee, argued this rule did not apply because foreclosure proceedings are in rem actions and it is unnecessary to name a human defendant, i.e., the mortgagor, in such actions.

The circuit court acknowledged there were cases in Illinois, dating back to 1835, holding that foreclosure proceedings are in rem actions. However, the court noted that in most cases this conclusion was reached without discussion or explanation. The circuit court also noted that, in a true in rem proceeding, the property itself is the defendant. The court then gave modern-day examples of a true in rem action, including civil forfeiture and proceedings against vessels under maritime law.

The circuit court then discussed quasi in rem proceedings, and citing Austin v. Royal League, 316 Ill. 188, 147 N.E. 106 (1925), found that a quasi in rem proceeding describes the modern-day foreclosure action. The circuit court noted that no authority had reconciled the discussion of the differences between in rem and quasi in rem actions, set forth in Austin, with older cases stating foreclosures were in rem. The circuit court concluded that foreclosure actions are better characterized as quasi in rem.

The circuit court then addressed the consequences of concluding that a foreclosure is quasi in rem. First, the court noted that mortgage foreclosures were adversarial and, pursuant to the Mortgage Foreclosure Law, the mortgagor is a necessary party who has the right to defend against the action. See 735 ILCS 5/15-1501 (West 2004). However, the circuit court found that the Mortgage Foreclosure Law does not address the consequences of a mortgagor's death and, therefore, it had to look to the rules applicable to civil actions generally. The court revisited the rule that a lawsuit against a deceased person is a nullity. The circuit court found there was nothing in Illinois law to indicate foreclosure actions were exempt from this general rule.

Turning to section 13-209 of the Code of Civil Procedure (735 ILCS 5/13-209(c) (West 2004)), the provision governing the appointment of personal representatives, the circuit court considered whether a foreclosure was an “action” within the meaning of section 13-209, and found that previous cases had answered this question in the affirmative. Thus, the circuit court concluded that a mortgagee is required to name a personal representative for a deceased mortgagor in order for the circuit court to obtain subject matter jurisdiction. The circuit court noted also that a mortgagee could, alternatively, proceed under the Probate Act as it was an “interested person” like any other creditor. See 755 ILCS 5/1-2.11 (West 2004).

In light of the decision in the Wells Fargo case, the circuit court held in the McGahan case that, because ABN failed to name a personal representative as a substitute for McGahan, it lacked subject matter jurisdiction. Accordingly, ABN's complaint was dismissed.

Charter One Bank v. Hunter

The pertinent facts of the Hunter case are essentially the same as in the McGahan case. Margaret Hunter executed a note securing a mortgage on her property in 2002. Charter One Bank (Charter One) filed a complaint for foreclosure in 2006. After learning that Hunter was deceased, Charter One was granted leave to file an amended complaint to name as defendants unknown owners, nonrecord claimants, and unknown heirs and devisees. Subsequently, the circuit court entered a judgment of default against defendants and an order for foreclosure and sale. However, thereafter, pursuant to its decision in the Wells Fargo case, the circuit court vacated those orders and dismissed Charter One's complaint for lack of subject matter jurisdiction.

ABN and Charter One appealed and the cases were consolidated. No one appeared on behalf of McGahan, Hunter, or any other appellee. However, the appellate court granted leave to the Chicago Volunteer Legal Service Foundation (Foundation) to file an amicus curiae brief in support of the trial court's decision.

The appellate court reversed and remanded, finding that this court had “consistently” labeled foreclosures as in rem actions, and that it was bound by these determinations. 388 Ill.App.3d 900, 902, 329 Ill.Dec. 176, 906 N.E.2d 21. The appellate court further concluded that foreclosure proceedings determine rights as against the whole world, not merely against certain individuals, and, therefore, logically are in rem actions. Although the appellate court acknowledged that several of our past cases have stated that foreclosure proceedings are quasi in rem actions, the appellate court found the discussions in those cases dicta and, therefore, not controlling. Accordingly, the appellate court held that, because a foreclosure is an in rem action, plaintiffs' failure to name a personal representative in the foreclosure action did not divest the circuit court of jurisdiction and the circuit court erred in dismissing ABN and Charter One's complaints.

On February 23, 2009, we granted the Foundation's motion for leave to file a petition for leave to appeal instanter as amicus curiae. ¹ We later granted the Cook County public guardian leave to file an amicus brief.

Analysis

Section 15-1501 of the Mortgage Foreclosure Law identifies those who must be joined as party defendants in foreclosure proceedings. Relevant here, the mortgagor is a “necessary party.” 735 ILCS 5/15-1501(a)(i) (West 2004). Although the Mortgage Foreclosure Law mandates that a mortgagor must be made a party in any foreclosure action, it fails to address what procedure a mortgagee must follow or who must be named, if anyone, in lieu of the mortgagor, when the mortgagor is deceased. Because the act is silent as to the requirements to follow in the event the mortgagor is deceased, we would normally look to the general rules of civil procedure to ascertain what would be required. However, Charter One and ABN contend this is not appropriate because foreclosure proceedings are in rem actions and, therefore, neither a deceased mortgagor's estate nor a personal representative need be named.

“ In rem ” jurisdiction is “[a] court's power to adjudicate the rights to a given piece of property, including the power to seize and hold it.” Black's Law Dictionary 856 (7th ed. 1999). “[A] proceeding in rem is one which is taken directly against property or one which is brought to enforce a right in the thing itself.” Austin v. Royal League, 316 Ill. 188, 193, 147 N.E. 106 (1925). The legal fiction underlying an in rem proceeding is that the “property, not the owner of the property, is liable to the complainant. It treats property, therefore, as the defendant, susceptible of being tried and condemned, while the owner merely gets notice, along with the rest of the world, and may appear for his property or not.” R. Waples, Treatise...