Mortg. Electronic Registration v. Thompson

Decision Date03 November 2006
Docket NumberNo. 1-05-2720.,1-05-2720.
Citation307 Ill.Dec. 332,859 N.E.2d 621
PartiesMORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC., Plaintiff-Appellee, v. Jerry THOMPSON and Mary Thompson, Defendants (Cronus Projects, LLC, Intervenor-Appellant).
CourtUnited States Appellate Court of Illinois

Stephen Richek, Chicago, for Appellant.

Kropik, Papuga & Shaw, Kenneth K. Shaw Jr., Stanley Papuga, John F. McCabe, Chicago, for Appellee.

Justice O'MALLEY delivered the opinion of the court:

Plaintiff, Mortgage Electronic Registration Systems, filed a complaint for mortgage foreclosure against defendants, Jerry and Mary Thompson, following a default judgment. Intervenor, Cronus Projects, LLC, was the high bidder for the mortgaged property at a subsequent judicial sale. After the judicial sale, but prior to the confirmation, defendants sold the property to a third party after receiving a payoff letter from plaintiff. The circuit court denied plaintiff's motion to confirm the judicial sale and subsequently dismissed the case with prejudice but awarded damages to intervenor.

Intervenor filed this timely appeal arguing that the foreclosure sale should have been confirmed and, alternatively, if the circuit court properly denied plaintiff's motion to confirm the sale, then it was error for the circuit court to deny intervenor's motion for additional damages.

For the reasons that follow, we affirm the judgment of the circuit court.

BACKGROUND

On February 1, 2002, plaintiff filed a complaint for foreclosure of a mortgage that defendants granted to plaintiff to secure financing for residential property commonly known as 6105 South Maplewood Avenue, Chicago, Illinois, 60629. A notice of foreclosure was recorded on February 13, 2002. On April 19, 2004, a judgment of foreclosure and sale was obtained following the dismissal of defendants' petition for bankruptcy in the federal district court. The Judicial Sales Corporation was appointed as the selling officer and a sale was set for December 20, 2004, wherein intervenor was the highest bidder on the property.

A hearing to confirm the sale was set for January 10, 2005, on the "uncontested court call"; however, defendant Jerry Thompson appeared personally at the hearing and indicated that he had a contract to sell the property and objected to the proceedings. The circuit court continued the hearing to January 19, 2005, to be heard in the "contested court call" of judicial sales. Prior to the January 19, 2005 hearing but after the circuit court continued the confirmation hearing, defendants requested and received a payoff letter directly from plaintiff indicating the amount and manner of payment necessary to satisfy the debt. On January 14, 2005, the property was sold to a third party at a closing for the contract price of $190,000.

On January 19, 2005, counsel for defendant Jerry Thompson appeared in court and was granted leave of court to appear as counsel on behalf of the Thompsons. On that same day, counsel for the Thompsons attempted to tender a check to plaintiff's counsel representing the balance of the delinquent mortgage. Counsel for plaintiff, however, refused the tender because the payoff amount was short by approximately $32, representing a late fee or a pro rata interest payment. On January 24, 2005, counsel for defendants filed a motion to set aside the judicial sale. Plaintiff filed a response acknowledging that a payoff letter had been issued to the Thompsons directly from plaintiff's office and without notice to plaintiff's counsel. On February 19, 2005, the circuit court denied plaintiff's motion to confirm the sale of the property and vacated the judicial sale, finding that justice would not otherwise be done pursuant to section 15-1508(b) of the Code of Civil Procedure (735 ILCS 5/15-1508(b) (West 2004)) (the Code) were it to enter a contrary ruling. After addressing the interest of all interested persons, including nonparties to the action, the circuit court ordered all sums deposited by intervenor to be returned.

On March 25, 2005, plaintiff moved the circuit court to vacate the judgment of foreclosure and dismiss the action with prejudice based on defendant's payment of the mortgage in full. On June 23, 2005, intervenor filed a verified petition for damages. The circuit court granted plaintiff's motion to vacate and dismiss with prejudice and awarded intervenor $1,000 for attorneys' fees and $940 in interest for the 66 days that the Judicial Sales Corporation retained his payment for the property. Intervenor filed this timely appeal.

ANALYSIS
I. STANDARD OF REVIEW

When confirming a judicial sale, the circuit court has broad discretion in approving or disapproving sales. Citicorp Savings of Illinois v. First Chicago Trust Company of Illinois 269 Ill.App.3d 293, 300, 206 Ill.Dec. 786, 645 N.E.2d 1038 (1995); In re Application of Rosewell, 236 Ill.App.3d 473, 476-77, 177 Ill.Dec. 683, 603 N.E.2d 753 (1992); Berber v. Hass, 57 Ill.App.2d 109, 207 N.E.2d 96 (1965). In Illinois it is clear that a judicial sale is not complete until it has been approved by the trial court. Citicorp, 269 Ill.App.3d at 300, 206 Ill.Dec. 786, 645 N.E.2d 1038, citing In re Application of Rosewell, 236 Ill.App.3d 473, 177 Ill.Dec. 683, 603 N.E.2d 753. The highest bid received by a sheriff at a judicial sale is merely an irrevocable offer to purchase the property, and acceptance of the offer takes place when the court confirms the sale. Citicorp, 269 Ill.App.3d at 300, 206 Ill.Dec. 786, 645 N.E.2d 1038, citing Straus v. Anderson, 366 Ill. 426, 9 N.E.2d 205 (1937). Until the court confirms the sheriff's proceedings, there is not a true sale in the legal sense. Citicorp, 269 Ill.App.3d at 300, 206 Ill.Dec. 786, 645 N.E.2d 1038, citing Levy v. Broadway-Carmen Building Corp., 366 Ill. 279, 8 N.E.2d 671 (1937). A court is justified in refusing to approve a judicial sale if unfairness is shown that is prejudicial to an interested party. Citicorp, 269 Ill.App.3d at 300, 206 Ill.Dec. 786, 645 N.E.2d 1038, citing Evans v. Hunold, 393 Ill. 195, 65 N.E.2d 373 (1946).

II. CONFIRMATION OF JUDICIAL SALE

Intervenor contends that the circuit court erred by not confirming the judicial sale of the property because the action taken by defendant occurred following the sale and prior to the confirmation. Intervenor further argues that allowing the circuit court's ruling to stand will destabilize and wreak havoc upon judicial sales. We disagree and find that the circuit court did not abuse its discretion in denying plaintiff's motion to confirm the sale.

Intervenor characterizes the issue before this court as whether a third-party purchaser and lender may rely on a payoff letter when a lis pendens notice has been properly recorded. This characterization is, however, incorrect and the proper question before this court is whether the circuit court abused its broad discretion in denying plaintiff's motion to confirm the judicial sale. Fleet Mortgage Corp. v. Deale, 287 Ill.App.3d 385, 388, 222 Ill.Dec. 628, 678 N.E.2d 35 (1997). Relative to the circuit court's exercise of discretion, intervenor argues that it was an abuse for the circuit court to consider the interests of two lien-holders that were paid off in the sale by the Thompsons and the third party purchasers who would be unfairly prejudiced as a result of the confirmation.

First, we point out that this court has held that the circuit court is justified in refusing to approve a judicial sale if unfairness is shown that is prejudicial to an interested party even if the party is not named in the proceedings. Fleet Mortgage Corp., 287 Ill.App.3d at 392, 222 Ill. Dec. 628, 678 N.E.2d 35 (holding that a trial court is expressly required to consider the interests of all parties, including mortgagors who were not part of the proceedings, before ruling on a petition to confirm). Contrary to intervenor's assertions, the circuit court did not err in considering the third-party purchasers, two additional lenders and the Thompsons because each had an interest in the property. Second, the circuit court acted consistently with the policy of Illinois foreclosure law that favors protection of equity in the home of a mortgagor and allows redemption. We point out that this court has balanced the competing policy goals which must be taken into consideration in such matters. In Fleet Mortgage, we stated:

"We recognize and acknowledge the need to promote stability in the conduct of a judicial sale. See Abbott v. Beebe, 226 Ill. 417, 420, 80 N.E. 991, 992 (1907), quoting Conover v. Musgrave, 68 Ill. 58 (1873) (`"Public policy requires stability in all judicial sales and that they should not be disturbed for slight causes. To do so would impair that confidence so essentially necessary to induce persons to become purchasers when real estate is offered for sale under a judgment or decree of a court."'). However, that policy cannot be given ascendancy over the articulated purpose of the Illinois Mortgage Foreclosure Law to protect the equity of a mortgagor by permitting mortgage redemptions prior to forced sales and thereby to protect against the forced sale of property at prices well below fair market value." (Emphasis added.) Fleet Mortgage Corp., 287 Ill. App.3d at 389-90, 222 Ill.Dec. 628, 678 N.E.2d 35.

In the instant case, the circuit court held that justice would not otherwise be done if the sale were confirmed based on the facts before it. The circuit court was present for and carefully considered the motions, briefs and arguments and assessed the credibility of all parties seeking relief. A circuit court has abused its discretion when it acts arbitrarily without the employment of conscientious judgment or if its decision exceeds the bounds of reason and ignores principles of law such that substantial prejudice has resulted. Merchants Bank v. Roberts, 292 Ill.App.3d 925, 930, 227 Ill.Dec. 46, 686 N.E.2d 1202 (1997), citing Venzor v. Carmen's Pizza...

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