Wells Fargo Bank, N.A. v. Simpson

• Decision Date: 01 June 2015
• Docket Number: No. 1–14–2925.,1–14–2925.
• Parties: WELLS FARGO BANK, N.A., Plaintiff–Appellee, v. Bernadette Dillard SIMPSON, Defendant–Appellant (Unknown Heirs and Legatees of Paula Dillard, Deceased; Unknown Owners and Nonrecord Claimants; Gerald Nordgren as Personal Representative for Paula Dillard, Deceased, Defendants).
• Court: United States Appellate Court of Illinois

36 N.E.3d 266

WELLS FARGO BANK, N.A., Plaintiff–Appellee

v.Bernadette Dillard SIMPSON, Defendant–Appellant (Unknown Heirs and Legatees of Paula Dillard, Deceased; Unknown Owners and Nonrecord Claimants; Gerald Nordgren as Personal Representative for Paula Dillard, Deceased, Defendants).

No. 1–14–2925.

Appellate Court of Illinois, First District, First Division.

June 1, 2015.

Rehearing Denied June 30, 2015.

Modified upon Denial of Rehearing Aug. 3, 2015.

David J. Piell, Buffalo Grove, for appellant.

Fidelity National Law Group, Chicago (Kerry Walsh, of counsel), for appellee.

OPINION

Presiding Justice DELORT delivered the judgment of the court, with opinion.

¶ 1 This case presents two questions regarding property law. The first issue involves the rights of heirs of deceased mortgagors under consumer-oriented mortgage foreclosure loss mitigation programs pursuant to our supreme court's ruling in ABN AMRO Mortgage Group, Inc. v. McGahan, 237 Ill.2d 526, 342 Ill.Dec. 7, 931 N.E.2d 1190 (2010), a case which precipitated the adoption of Illinois Supreme Court Rule 113 (Ill. S.Ct. R. 113 (eff. May 1, 2013)). The second is a quirky deed recording issue which has vexed title examiners, real estate lawyers, and courts since time immemorial. It involves the lien priority of a mortgagee when its mortgagor executes successive deeds to different grantees, but then records them out of chronological order.

¶ 2 Paula Dillard purchased a home located in Buffalo Grove, Illinois in 1991. She died in 2008. In 2011, her mortgage lender filed this foreclosure lawsuit because the loan was delinquent. The lawsuit was eventually amended to name Dillard's granddaughter, Bernadette Dillard Simpson, as a defendant. Simpson claimed that ownership of the home had passed to her on Dillard's death. Simpson filed an answer to the amended complaint, but she failed to respond to the lender's summary judgment motion and lost the case. She tried to undo the resulting foreclosure by filing several motions to vacate and challenging the sale of the property at the judicial sale. We agree with the circuit court that she has provided an insufficient basis to vacate the foreclosure or invalidate the sale, and therefore affirm.

¶ 3 BACKGROUND

¶ 4 In the 17 years between 1991 and her death in 2008, Dillard executed no less than 10 successive mortgages with various lenders.¹ The chain of title reveals that each mortgage, except the last one involved in this case, was released at or about the time the next was executed, indicating that the 10 mortgages represented a continuous series of refinancings. In 2003, a few months after executing the seventh mortgage in her individual capacity, she deeded the property into a trust wherein she was named as the trustee, apparently as part of an estate plan.

¶ 5 Although this case involves the foreclosure of Dillard's tenth mortgage, her actions around the time she signed the eighth mortgage in 2004 frame the issues before us. Simpson argues that an out-of-order recording happened through no fault of her own, but rather by a sluggish lender or title company. The record, however, does not reveal whether Dillard personally undertook these actions, or whether they were done by someone else on her behalf or at her direction. For simplicity of expression only, we attribute them all to her. We also follow the presumption that Dillard (personally or as trustee) executed and delivered the deeds to the respective grantees on the dates shown on the face of the deeds. Calligan v. Calligan, 259 Ill. 52, 59, 102 N.E. 247 (1913) (in the absence of proof to the contrary, the presumption is that a deed was executed and delivered on the day it is dated); Berigan v. Berrigan, 413 Ill. 204, 214, 108 N.E.2d 438 (1952) (applying Calligan ).

¶ 6 The relevant actions are as follows:

Date Action

July 22, 2004	Dillard, as trustee, executes a deed from the trust to herself personally, but does not record it immediately (first deed).
August 5, 2004	Dillard, in her personal capacity, executes a quit claim deed back to the trust, but does not record it immediately (second deed).
August 12, 2004	Dillard records the second deed.
August 24, 2004	Despite the fact she had already signed the second deed transferring the property back into the trust on August 5 and recorded it on August 12, Dillard now records the first deed. The recording number is 0423705368.
August 24, 2004	Dillard records the eighth mortgage on the property with MERS2 as mortgagee. The mortgage receives recording number 0423705369, indicating that it was recorded just after the first deed as part of the closing of the eighth mortgage. This mortgage was released on May 24, 2006.
April 26, 2006	Dillard signs a ninth mortgage in her personal capacity. This mortgage was released on July 30, 2007.
July 24, 2007	Dillard signs a tenth mortgage with Wachovia Mortgage Company in her personal capacity. That is the mortgage at issue in this case. On November 18, 2009, Wachovia assigned the mortgage to plaintiff Wells Fargo Bank, N.A. (Wells Fargo).

¶ 7 It appears that the lender for the eighth mortgage required Dillard to temporarily deed the property out of the trust to ensure that title was vested in Dillard personally when she signed that mortgage. The problem before us was created when the second deed, back to her trust, was recorded out of chronological order. While the first deed “sat in a drawer,” it was supplanted by the second deed, which was recorded first. Accordingly, when Dillard signed the eighth mortgage in her personal capacity, she had already deeded the property back to her trust and that deed had been recorded. Common loan closing procedures contain safeguards to ensure this is not supposed to happen. Presumably, when Dillard signed the eighth mortgage in her personal capacity, she simultaneously executed a standard affidavit of title incorrectly (or falsely) certifying she was unaware of any unrecorded deeds. See generally Joseph R. Fortunato, Jr., Representing the Seller, in Residential Real Estate § 2.33 (Ill. Inst. for Cont. Legal Educ. 2011). Apparently due to the closeness in time between August 12 and August 24, and in reliance on the affidavit of title, the loan for the eighth mortgage closed without MERS or the title insurer noticing that Dillard had already deeded the property back to the trust. The recorded chain of title showed Dillard, not the trust, as the last grantee. That remains the status quo even today. Accordingly, Dillard proceeded to sign and obtain a ninth and tenth mortgage in her personal capacity notwithstanding the fact that the last executed deed granted the property to her trust.

¶ 8 When Wells Fargo sued to foreclose the tenth mortgage in 2011, it did not know that Dillard was deceased. After it learned of her demise, it determined that there was no probate estate opened for her—despite the fact that she had died three years earlier. Accordingly, it moved to amend the complaint to name defendant Gerald Nordgren as a special representative in her stead. See 735 ILCS 5/13–209 (West 2010). On January 31, 2012, the court granted that motion and specifically substituted Nordgren, in his representative capacity, as a defendant in place of Dillard. Nordgren conducted an investigation which confirmed that there was no probate estate opened for Dillard. He also discovered a published obituary which stated that Dillard was survived by unnamed “children, grandchildren, and great-grandchildren.” Nordgren located only two possible heirs whom he could identify by name: Alan Dillard, a son, and Simpson, whom he discovered was living at her dead grandmother's property, and whom Nordgren's associate actually interviewed. Based on his investigation and the fact that no one had stepped forward to defend the foreclosure case, Nordgren recommended the case proceed as a default. Wells Fargo then filed a second amended complaint on July 3, 2012 which added Simpson as a defendant. See 735 ILCS 5/15–1501(b) (West 2012) (providing that a resident or tenant is a permissible party to a foreclosure case). The record does not reveal why Alan Dillard was not also named as a defendant in the second amended complaint.

¶ 9 Simpson filed a pro se appearance and an answer, in which she admitted most of the allegations of the second amended complaint but claimed lack of knowledge regarding the allegation that the mortgage was in default. The answer contained no affirmative defenses whatsoever. Particularly absent from her answer was any defense relating to the out-of-order deed and the void lien issue which forms the basis for her present appeal. We recognize that in her second motion to vacate (but not her first), Simpson's counsel requested leave to file an amended answer. However, that request was fatally flawed because it did not contain a proposed amended answer. See First Robinson Savings & Loan v. Ledo Construction Co., Inc., 210 Ill.App.3d 889, 892, 155 Ill.Dec. 304, 569 N.E.2d 304 (1991) (“[A] motion for leave to amend a pleading must be in writing, state the reason for the amendment, set forth the amendment that is being proposed, show the materiality and propriety of the proposed amendment, explain why the proposed additional matter was omitted from earlier pleadings, and be supported by an affidavit.”). She also filed an application to sue as a poor person, stating she had been unemployed since 2008, which the court granted.

¶ 10 On February 22, 2013, while this case was pending below, our supreme court promulgated Rule 114 (Ill. S.Ct. R. 114 (eff. May 1, 2013)). This rule requires that motions for judgment in a foreclosure case include a loss mitigation affidavit attesting to the efforts expended to comply with any specifically required loss mitigation programs. On March 21, 2013, before the rule's May 1 effective date, Wells Fargo filed a motion for summary judgment which did not include a Rule 114 affidavit. Simpson's counsel set the motion for hearing on May 21, 2013. In the meantime, on ...