Jp Morgan Chase Bank v. Fankhauser

• Decision Date: 04 June 2008
• Docket Number: No. 2-07-0140.,2-07-0140.
• Citation: 383 Ill.App.3d 254,890 N.E.2d 592
• Parties: JP MORGAN CHASE BANK, as Successor in Interest to Chase Manhattan Bank USA, N.A., Plaintiff-Appellee, v. Breck FANKHAUSER, Elaine Fankhauser, Steve L. Georgas, and Lea Georgas, Defendants (National City Mortgage Co., Defendant-Appellant; Pathfinder Holdings, LLC, Intervenor-Appellee).
• Court: United States Appellate Court of Illinois

890 N.E.2d 592

383 Ill.App.3d 254

JP MORGAN CHASE BANK, as Successor in Interest to Chase Manhattan Bank USA, N.A., Plaintiff-Appellee, v. Breck FANKHAUSER, Elaine Fankhauser, Steve L. Georgas, and Lea Georgas, Defendants (National City Mortgage Co., Defendant-Appellant; Pathfinder Holdings, LLC, Intervenor-Appellee).

No. 2-07-0140.

Appellate Court of Illinois, Second District.

June 4, 2008.

Diana Athanasopoulos, Pierce & Associates, P.C., James V. Noonan, Jonathan D. Nusgart, Noonan & Lieberman, Ltd., Chicago, for Breck Fankhauser, Elaine Fankhauser, Lea Georgas, Steve L. Georgas and National City Mortgage Co.

Kenneth Kline Shaw Jr., Stanely W. Papuga, Charanne M. Papuga, Kropik, Papuga & Shaw, Chicago, for JP Morgan Chase Bank.

Steven B. Bashaw, Steven B. Bashaw, P.C., Lisle, for Pathfinder Holdings, LLC.

Justice HUTCHINSON delivered the opinion of the court:

Plaintiff, JP Morgan Chase Bank, as successor in interest to Chase Manhattan Bank USA, N.A. (JP Morgan), filed the instant mortgage foreclosure action against defendants Breck Fankhauser, Elaine Fankhauser, Steve L. Georgas, and Lea Georgas (referred to collectively as mortgagors). JP Morgan also named as a defendant National City Mortgage Co. (National City), which also had a mortgage interest in the same property under a separate loan that National City had made to mortgagors. None of the defendants appeared in court to defend the action, and on May 12, 2006, the trial court entered a default judgment and a judgment of foreclosure and sale. On July 6, 2006, intervenor, Pathfinder Holdings, LLC (Pathfinder), was the winning bidder at the sheriff's sale. On July 28, 2006, National City moved pursuant to section 2-1301(e) of the Code of Civil Procedure (the Code) (735 ILCS 5/2-1301(e) (West 2006)) to vacate the May 12, 2006, default judgment and the order of foreclosure and sale. On November 3, 2006, the trial court granted the motion and vacated the May 12, 2006, orders. On December 1, 2006, Pathfinder moved the trial court to reconsider and argued that National City's motion to vacate should have been treated as a petition for relief pursuant to section 2-1401 of the Code (735 ILCS 5/2-1401 (West 2006)) because it was brought more than 30 days after the entry of the May 12, 2006, orders. On January 12, 2007, the trial court granted Pathfinder's motion to reconsider, vacated its November 3, 2006, order, and confirmed the sale and distribution of the property.

National City appeals from the trial court's January 12, 2007, order. National City contends that (1) the trial court erred in construing its July 28, 2006, filing as a petition to vacate pursuant to section 2-1401 of the Code rather than a motion under section 2-1301(e) of the Code; (2) even if its filing was properly characterized as a section 2-1401 petition to vacate, the trial court erred in determining that it had not satisfied the requirements for vacatur; and (3) the trial court erred in confirming the foreclosure sale. For the reasons that follow, we affirm in part, vacate in part, and remand for further proceedings.

The record documents the following proceedings relevant to the disposition of this appeal. On February 10, 2006, JP Morgan filed a foreclosure complaint against mortgagors and National City. The complaint alleged that, on June 28, 2002, mortgagors had executed and delivered to JP Morgan a $26,500 note. Mortgagors also executed and delivered to JP Morgan a mortgage on the property located at 1428 South 9th Street in St. Charles. JP Morgan alleged that mortgagors were in default on the note after failing to make installment payments for three months. JP Morgan requested the trial court to take an account of the sums owed by mortgagors and to order payment by a date certain. JP Morgan further requested that, absent payment of the amount due, the mortgaged property be sold to satisfy the indebtedness. The complaint also alleged that National City was a mortgagee under a separate mortgage recorded September 30, 2003, on the same property to secure a note of $301,500.

On February 15, 2006, National City was served with notice of the complaint through its agent, CT Corporation System. On February 24, 2006, and March 3, 2006, mortgagors received service of the complaint.

On May 12, 2006, after notice was given and after neither mortgagors nor National City appeared in court to defend the action, the trial court granted JP Morgan's motion for default. The trial court also entered a judgment of foreclosure providing that mortgagors owed JP Morgan $31,050.23 in principal, interest, fees, and costs. The order provided that the period of redemption would expire on June 13, 2006, at which time the property could be sold at public auction. The order further provided that "there is no just cause for delaying the enforcement of this Judgment, or an appeal therefrom." The order additionally provided that the trial court "retain[ed] jurisdiction * * * for the purpose of enforcing this Judgment, for the purpose of amending the amounts due to [JP Morgan] to reflect receipts, disbursements and charges which are made or accrue after the entry of this judgment and prior to sale and for the purpose of appointing or continuing a Receiver herein during the period of redemption."

On June 28, 2006, JP Morgan gave notice to mortgagors and National City that the property would be sold by sheriff's sale on July 6, 2006.

On July 14, 2006, JP Morgan moved the trial court to confirm the sale and to enter an order for possession. Attached to the motion was a sheriff's report of sale indicating that the property had been sold to Pathfinder for the sum of $32,212.40.

On July 28, 2006, National City moved pursuant to section 2-1301(e) of the Code to vacate the default judgment and the judgment of foreclosure and sale. National City further requested the trial court to void the foreclosure sale and to grant it leave to file an answer to JP Morgan's complaint. National City argued that it did not become aware of the entry of the default judgment until July 17, 2006, when it received JP Morgan's motion to confirm the sale. National City argued that the trial court had the discretion to vacate the default judgment because it had not yet entered a final order disposing of the case. National City argued that a judgment of foreclosure was not a final judgment; instead, National City argued that the final judgment in a foreclosure action is the order confirming or denying the foreclosure sale. National City further argued that it had a meritorious defense to the complaint in that its mortgage interest was superior to JP Morgan's. Finally, National City argued that the $32,212.40 bid at the sheriff's sale was grossly inadequate in view of the fair market value of the property.

In support of its motion, National City attached the affidavit of Dorothy Thomas, the supervisor of National City's default litigation department. National City also attached a copy of a motion filed by JP Morgan in Breck and Elaine Fankhauser's bankruptcy proceeding in which it stated that its mortgage lien was a "SECOND mortgage lien." National City also attached a copy of the settlement statement prepared at the closing on National City's loan transaction, which indicated that National City had loaned mortgagors $301,500. The settlement statement reflected that a portion of the loan proceeds was used to pay off JP Morgan's loan. National City also attached a July 26, 2006, broker's price opinion indicating that the fair market value of the property was $385,000. Finally, National City attached a copy of Breck and Elaine Fankhauser's August 2005 bankruptcy petition filed in federal court, indicating that the property had a market value of $325,000.

On August 9, 2006, the trial court granted Pathfinder leave to file an appearance as an intervenor.

On November 3, 2006, the trial court granted National City's motion to vacate and entered an order vacating the judgments of default and foreclosure. The trial court further vacated the July 6, 2006, judicial sale. The trial court granted National City leave to file an answer or otherwise plead to JP Morgan's complaint.

On December 1, 2006, Pathfinder filed a motion requesting the trial court to reconsider its November 3, 2006, order. In its motion, Pathfinder argued that National City's motion to vacate should have been brought under section 2-1401 of the Code rather than section 2-1301(e) of the Code. Pathfinder noted that the trial court's May 12, 2006, default and foreclosure judgments contained language pursuant to Supreme Court Rule 304(a) (210 Ill.2d R. 304(a)), making them immediately enforceable and appealable. Because National City did not file its motion to vacate until 60 days after the entry of the May 12, 2006, order, Pathfinder argued that National City had to comply with the requirements of section 2-1401 of the Code to obtain any relief. Pathfinder argued that National City failed to allege that it had exercised due diligence in the proceeding or that it had a meritorious defense to the underlying complaint.

On January 12, 2007, the trial court granted Pathfinder's motion to reconsider and vacated its November 3, 2006, order. The trial court also confirmed the sheriff's sale. In its written order, the trial court indicated that its ruling was based upon section 2-1401 of the Code. The trial court's order further reflected that its ruling was based on the "pleadings and oral arguments." National City filed a timely notice of appeal.

National City first contends that the trial court erred on reconsideration when it construed its motion to vacate as a petition brought pursuant to section 2-1401 of the Code. National City argues that section 2-1401 governs a petition seeking relief from a final judgment more than 30 days after judgment was entered. National City argues that the trial court's judgment of foreclosure was not final and appealable until such time as the...