BMO Harris Bank Nat'l Ass'n v. LaRosa

• Decision Date: 17 April 2017
• Docket Number: No. 1-16-1159,1-16-1159
• Citation: 78 N.E.3d 511,2017 IL App (1st) 161159
• Parties: BMO HARRIS BANK NATIONAL ASSOCIATION f/k/a Harris N.A., Plaintiff-Appellee, v. Joseph LAROSA, a/k/a Joseph LaRosa, Jr., Kelly LaRosa, a/k/a Kelly Renee Matthiesen-Sipple, McKinley Park Lofts Condominium Association, and Unknown Owners and Nonrecord Claimants, Defendants (Joseph LaRosa and Kelly LaRosa, Defendants-Appellants).
• Court: United States Appellate Court of Illinois

2017 IL App (1st) 161159
78 N.E.3d 511

BMO HARRIS BANK NATIONAL ASSOCIATION f/k/a Harris N.A., Plaintiff-Appellee,
v.
Joseph LAROSA, a/k/a Joseph LaRosa, Jr., Kelly LaRosa, a/k/a Kelly Renee Matthiesen-Sipple, McKinley Park Lofts Condominium Association, and Unknown Owners and Nonrecord Claimants, Defendants

(Joseph LaRosa and Kelly LaRosa, Defendants-Appellants).

No. 1-16-1159

Appellate Court of Illinois, First District, FIRST DIVISION.

April 17, 2017

Robert Habib, of Chicago, for appellants.

Louis J. Manetti, Jr., of Codilis & Associates, P.C., of Burr Ridge, for appellee.

78 N.E.3d 512

OPINION

PRESIDING JUSTICE CONNORS delivered the judgment of the court, with opinion.

¶ 1 Defendants, Joseph and Kelly LaRosa, appeal an order of the circuit court that struck and dismissed their petition for relief pursuant to section 2-1401 of the Code of Civil Procedure (Code) (735 ILCS 5/2-1401 (West 2012) ). Defendants had sought to vacate the personal deficiency judgment that was entered against them as part of a foreclosure. On appeal, defendants contend that their section 2-1401 petition was not barred by section 15-1509(c) of the Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15-1509(c) (West 2012)). We affirm.

¶ 2 The record reveals that on January 21, 2014, plaintiff, BMO Harris Bank National Association (BMO Harris), brought a mortgage foreclosure lawsuit against defendants relating to a condominium unit located at 2323 West Pershing Road in Chicago. In its complaint, BMO Harris stated that defendants had not made payments since August 1, 2013. Among other relief, BMO Harris sought a judgment of foreclosure and sale and a personal deficiency judgment. The note attached to the complaint stated that defendants initially borrowed $228,700. The record indicates that on January 28, 2014, Joseph LaRosa was personally served at an alternate address and accepted substitute service on behalf of Kelly LaRosa, his wife.

¶ 3 On April 4, 2014, BMO Harris filed a motion for entry of an order of default and judgment of foreclosure and sale, stating that no appearances or answers had been filed. On the same day, BMO Harris also filed a petition to shorten the redemption period. BMO Harris asserted that per an attached affidavit, it appeared that defendants had no intention of occupying the property and appeared to have abandoned it. The affidavit stated that defendants had indicated that they were pursuing a short sale.

¶ 4 On April 28, 2014, the court entered an order of default against defendants and an order shortening the redemption period. The court also entered a judgment for foreclosure and sale, which stated that BMO Harris was owed $235,232.90. This amount included principal, accrued interest, advances by BMO Harris, costs of the suit, attorney fees, and additional interest.

¶ 5 At a sale held on June 11, 2014, an entity known as PKL City, LLC purchased the property for $58,000. The report of sale and distribution indicated that there was a deficiency of $180,697.22.

¶ 6 On July 14, 2014, the court entered an order approving the report of sale and distribution, confirming the sale, and ordering possession. The order stated that there was an in personam deficiency judgment for $180,697.22 entered against defendants. Also on July 14, the court entered a memorandum of judgment against defendants.

¶ 7 On November 16, 2015, defendants filed a petition pursuant to section 2-1401 of the Code (735 ILCS 5/2-1401 (West 2012) ) to "vacate the personal judgment entered July 14, 2014." In the petition, defendants stated in part that the court's order that shortened the redemption period was clearly erroneous because defendants' whereabouts were known and they had not abandoned their right to the property, given that they had been trying to sell it. Defendants also raised a challenge based on BMO Harris's conduct around the deficiency judgment. Defendants contended that they did not receive notice of the personal default judgment in the amount of $180,697.22 and were "totally unaware" of it. Defendants further stated that BMO Harris subsequently issued a

78 N.E.3d 513

form 1099-C, "Cancellation of Debt," which informed defendants that $160,060 was discharged.¹ According to defendants, BMO Harris took advantage of "whatever tax benefits a [b]ank gains" when it issues a form 1099-C, while defendants filed their 2014 tax returns and reported the cancellation of debt to the IRS. Defendants asserted that they did not learn of the judgments entered against them until October 26, 2015, when they heard from a collection agency. Defendants contended that BMO Harris acted dishonestly and fraudulently by taking a judgment against defendants, reporting to the IRS and defendants that the debt had been cancelled, and then trying to collect the debt. Defendants further stated that they had a meritorious defense because they never abandoned the property and showed due diligence in that they filed the petition as soon as they learned of the judgment against them.

¶ 8 The aforementioned form 1099-C was attached to the section 2-1401 petition. The form was issued to Kelly LaRosa on January 12, 2015, and stated that the amount of debt discharged was $162,060. Also attached to the section 2-1401 petition was a letter dated October 21, 2015, from a collection agency to Joseph LaRosa that stated that he had an outstanding balance of $202,781.61 due to the original creditor, Harris N.A.

¶ 9 On February 5, 2016, BMO Harris filed a motion to strike and dismiss defendants' section 2-1401 petition. BMO Harris contended that the petition was barred by the plain language of section 15-1509(c) of the Foreclosure Law (735 ILCS 5/15-1509(c) (West 2012)), which acts as a complete bar to a defendant in a mortgage foreclosure matter once the title has vested by deed. BMO Harris stated that title to the foreclosed property vested by a deed that was recorded on July 17, 2014. Additionally, BMO Harris contended that defendants did not plead a meritorious defense and did not show due diligence before or after entry of the final judgment.

¶ 10 In response to the motion to strike and dismiss, defendants asserted that section 15-1509 does not contain language that bars a section 2-1401 petition as to a personal deficiency judgment. Defendants stated that section 15-1509 was intended to protect the validity of titles transferred during foreclosure, and nothing in the statute speaks to the infallibility of deficiency judgments. Defendants further stated that other sections of the Foreclosure Law that mention deficiency judgments also do not contain any language barring a section 2-1401 petition.

¶ 11 On April 1, 2016, the court entered a written order that granted BMO Harris's motion to strike and dismiss "on the ground that 735 ILCS 5/15-1509(c) bars the Section 2-1401 Petition." The court further stated that it "does not consider any of the other issues raised in the Motion to Strike." There is no transcript for this proceeding, but the order stated that the court entered the order having been fully briefed, having heard the arguments of counsel,...