U.S. Bank Trust Nat'l Ass'n v. Hernandez

• Decision Date: 12 October 2017
• Docket Number: No. 2–16–0850,2–16–0850
• Citation: 88 N.E.3d 1056,2017 IL App (2d) 160850
• Parties: U.S. BANK TRUST NATIONAL ASSOCIATION, as Owner Trustee FOR QUEEN'S PARK OVAL ASSET HOLDING TRUST, Plaintiff–Appellee, v. Jose HERNANDEZ and Maria Hernandez, Defendants–Appellants.
• Court: United States Appellate Court of Illinois

2017 IL App (2d) 160850
88 N.E.3d 1056

U.S. BANK TRUST NATIONAL ASSOCIATION, as Owner Trustee FOR QUEEN'S PARK OVAL ASSET HOLDING TRUST, Plaintiff–Appellee,
v.
Jose HERNANDEZ and Maria Hernandez, Defendants–Appellants.

No. 2–16–0850

Appellate Court of Illinois, Second District.

Opinion filed October 12, 2017

Daniel S. Khwaja, of Chicago, for appellants.

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

JUSTICE BIRKETT delivered the judgment of the court, with opinion.

¶ 1 Defendants, Jose Hernandez and Maria Hernandez, appeal the summary judgment entered in favor of plaintiff, U.S. Bank Trust National Association, on its complaint to foreclose a mortgage. Defendants argue that material questions of fact exist on two issues: (1) whether plaintiff lacked standing to foreclose on the mortgage and (2) whether plaintiff complied with a federal regulation, specifically Title 24, section 203.604, of the Code of Federal Regulations (Code) ( 24 C.F.R. § 203.604 (2014) ), prior to initiating the foreclosure proceeding. We hold that plaintiff's standing was established as a matter of law but that material questions of fact remain on whether plaintiff complied with section 203.604. Therefore, we vacate the summary

88 N.E.3d 1058

judgment and remand for further proceedings.

¶ 2 I. BACKGROUND

¶ 3 On January 2, 2014, plaintiff filed its complaint to foreclose a mortgage on property owned by defendants. Plaintiff identified the original mortgagee as "Mortgage Electronic Registration Systems, Inc. as Nominee for Franklin American Mortgage Company." Plaintiff attached a copy of the subject mortgage, dated June 9, 2008. In support of its claim to be the current mortgagee, plaintiff attached a copy of a note, also dated June 9, 2008 (the Note). The Note bore two indorsements. The first was an indorsement from Franklin American Mortgage Company to Countrywide Bank, FSB (Countrywide). The second was a blank indorsement from Countrywide, signed by its senior vice-president, Laurie Meder. Neither indorsement was dated.

¶ 4 After the trial court struck without prejudice defendants' initial affirmative defenses, defendants refiled their answer and affirmative defenses. Their first affirmative defense was that plaintiff lacked standing because the indorsements on the Note were inadequate to show that plaintiff held the debt when it filed its complaint. Their second defense was that plaintiff failed to comply with section 203.604, which required plaintiff to have, or reasonably attempt to have, a face-to-face meeting with defendants before seeking foreclosure. Id.

¶ 5 In February 2016, plaintiff moved for summary judgment, attaching several documents that bear on the issues in this appeal. First, plaintiff attached several affidavits from Kacy Prather, who identified herself as a foreclosure supervisor with Roundpoint Mortgage Servicing Corporation (Roundpoint). The affidavits were all dated in 2015. According to Prather, Roundpoint was "currently servic[ing] [defendants'] loan on behalf of Plaintiff" and had "acquired the servicing rights for [the] loan on 09/16/13 from Bank of America N.A." Prather averred that, in April 2012, plaintiff's agents "visited the subject property" in an attempt to have a face-to-face meeting with defendants. Prather also attached a copy of an April 2012 letter addressed to defendants at the subject property. The sender was Titanium Solutions (Titanium), identifying itself as the mortgage servicer for Bank of America, N.A. The letter advised defendants that a representative from Titanium would attempt to visit defendants regarding their loan. Prather attached what she claimed was "a copy of the FedEx Label for the package in which the letter was sent." The label, which was computer-generated, showed a "ship date" of April 20, 2012, included a tracking number, and bore the instruction, "LEAVE AT ADDRESS. DON'T RETURN."

¶ 6 In addition to Prather's affidavits, plaintiff attached copies of two assignments of the subject mortgage. The first was an August 15, 2013, assignment from "Bank of America N.A., successor by merger to BAC Home Loans Servicing, LP FKA Countrywide Home Loans Servicing, LP" to the Secretary of Housing and Urban Development (HUD). The assignment specified that it included "the Note or Notes *** described" in the subject mortgage. The second assignment was a January 16, 2014, assignment from HUD to plaintiff. This assignment did not reference any underlying debt.

¶ 7 Defendants filed a response, contending that the August 2013 assignment to HUD raised an issue of material fact whether plaintiff owned the debt on January 2, 2014, when it filed its complaint. Defendants also claimed that the January 16, 2014, assignment was immaterial to

88 N.E.3d 1059

whether plaintiff owned the debt at an earlier date.

¶ 8 Defendants further asserted that a triable question of fact existed as to plaintiff's compliance with section 203.604(d) because, according to Prather, plaintiff's April 2012 letter was sent by Federal Express when section 203.604(d) expressly provides that the letter offering a face-to-face meeting should be sent through the United States Postal Service. See 23 C.F.R. § 203.604(d) (2014) ("A reasonable effort to arrange a face-to-face meeting with the mortgagor shall consist at a minimum of one letter sent to the mortgagor certified by the Postal Service as having been dispatched."). Defendants attached an affidavit from defendant Maria Hernandez (Maria), who asserted in relevant part:

"10. I have never received a certified letter by mail from Plaintiff, U.S. Bank Trust National Association, the purported previous note holder, Bank of America, N.A.; one of their servicers, or affiliates, for notice of available counseling, or been offered a face-to-face meeting at either the Plaintiff's or the previous lender's local banks, or other H.U.D. related servicing office."

¶ 9 The trial court granted summary judgment for plaintiff and entered a judgment of foreclosure and sale. Defendants filed a motion to reconsider, to which they attached a document from the Federal Deposit Insurance Corporation indicating that Countrywide was inactive as of April 27, 2009, having merged on that date into Bank of America. Defendants concluded that the blank indorsement by Countrywide could have been executed no later than April 2009 and was, accordingly, "mooted" by the later August 2013 assignment from Bank of America to HUD. The trial court denied the motion to reconsider.

¶ 10 Subsequently, plaintiff purchased the subject property at a judicial sale and moved the court to approve the sale. Defendants filed an objection. They attached documentation showing that the August 2013 assignment of the subject mortgage from Bank of America to HUD was recorded on January 23, 2014, several days after plaintiff instituted this foreclosure proceeding. The trial court rejected defendants' arguments and entered an order confirming the sale.

¶ 11 Defendants filed this timely appeal.

¶ 12 II. ANALYSIS

¶ 13 A. General Principles

¶ 14 Defendants claim that the trial court erred by entering summary judgment in favor of plaintiff. Summary judgment is appropriate where "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." 735 ILCS 5/2–1005(c) (West 2014). Thus, the purpose of summary judgment is not to try a question of fact but rather to determine whether a genuine issue of material fact exists. Adams v. Northern Illinois Gas Co., 211 Ill. 2d 32, 42–43, 284 Ill.Dec. 302, 809 N.E.2d 1248 (2004). In determining whether such a question exists, a court must construe the pleadings, depositions, admissions, and affidavits strictly against the movant and liberally in favor of the opponent. Id. at 43, 284 Ill.Dec. 302, 809 N.E.2d 1248. "A triable issue precluding summary judgment exists where the material facts are disputed, or where, the material facts being undisputed, reasonable persons might draw different inferences from the undisputed facts." Id. Summary judgment is appropriate only where the right of the movant is clear and free from doubt. Id. Our review of a summary-judgment ruling is de novo. Id.

88 N.E.3d 1060

¶ 15 B. Standing

¶ 16 Defendants claim that a material question of fact exists as to whether plaintiff had standing to foreclose on the mortgage. We disagree.

¶ 17 "The doctrine of standing is designed to preclude persons who have no interest in a controversy from bringing suit." Raintree Homes, Inc. v. Village of Long Grove, 209 Ill. 2d 248, 262, 282 Ill.Dec. 815, 807 N.E.2d 439 (2004). A party's standing must be determined as of the time the suit is brought. Deutsche Bank National Trust Co. v. Gilbert, 2012 IL App (2d) 120164, ¶ 15, 367 Ill.Dec. 665, 982 N.E.2d 815. Lack of standing is an affirmative defense that the defendant must plead and prove. Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252, 341 Ill.Dec. 381, 930 N.E.2d 895 (2010).

¶ 18 Plaintiff's claim of authority to foreclose on the subject mortgage was based on its possession of the Note with its blank indorsement. A note indorsed in blank is payable to the bearer. See 810 ILCS 5/3–205(b) (West 2014) ("When indorsed in blank, an instrument becomes payable to the bearer and may be negotiated by transfer of possession alone until specially indorsed."). A transfer of a note constitutes an assignment of the mortgage securing the debt, and thus the bearer of the note is deemed the mortgagee, authorized to bring foreclosure proceedings. US Bank, National Ass'n v. Avdic, 2014 IL App (1st) 121759, ¶ 35, 381 Ill.Dec. 254, 10 N.E.3d 339 ; Federal National Mortgage Ass'n v. Kuipers, 314 Ill. App. 3d 631, 635, 247 Ill.Dec. 668, 732 N.E.2d 723 (2000) ; see 735 ILCS 5/15–1208 (West 2014) (defining "mortgagee" as "(i) the holder of an indebtedness or obligee of a...