Our reports on the oral arguments of the Illinois Supreme Court's September term continue with EMC Mortgage Corp. v. Kemp. Kemp presents the question of when a home foreclosure may be appealed.
The facts and lower court opinions in Kemp are described in detail here. Based upon the Court's questions, it seems reasonably likely that the Court will affirm the Appellate Court and require the plaintiff to pursue her objections to the foreclosure after the order confirming the sale is entered.
Plaintiff filed its foreclosure complaint six years ago. The defendant responded by denying the plaintiff's standing, first in an answer, and later in a counterclaim. Finally, nearly three years after the action was filed, the trial court entered a judgment of foreclosure. After reconsideration was denied, the defendant filed for bankruptcy. Over a year after the judgment was entered, the defendant mounted a new attack on the sale, filing a motion under Section 2-1401 of the Code of Civil Procedure alleging that the plaintiff was trying to foreclose a mortgage it didn't own at the time of filing. The trial court refused to overturn the sale, but authorized an interlocutory appeal under Supreme Court Rule 304. The defendant moved for reconsideration, the trial court denied the motion, but once again, the court included Rule 304 language in its order.
Section 2-1401 petitions lie only to challenge final orders. Rule 304 language isn't a magic wand of appealability for purely interlocutory orders; it confers appellate jurisdiction over an order which finally disposes of less than all claims, or less than all parties. So the question in Kemp was -- was there a final order under all this civil procedure? If not, none of it mattered.
Counsel for the defendant began his argument by emphasizing the importance and novelty of the underlying issues, should the Court find appealability. Justice Garman asked counsel whether the issue of standing can be forfeited; counsel responded that the defendant was arguing that the order of foreclosure was void, meaning that it could be challenged at any time. Justice Theis pointed out that defendant had filed a Section 2-1401 petition, so where was the final order? Counsel responded that Section 2-1401 petitions were also proper to attack void orders, and pointed out that the trial court had expressly agreed to add Rule 304 language to the order of foreclosure. Justice Theis noted that while Rule 304(b) expressly authorizes an appeal from a true Section 2-1401 petition, the trial court had authorized Rule 304(a) interlocutory appeal language. Counsel responded that this was the dilemma; it was often too late to present meritorious defenses if a defendant awaited an order confirming the sale. In response to a follow-up question from Justice Theis as to whether the court could have modified the order of foreclosure, counsel argued that once defendant's motion to reconsider was denied, the order of foreclosure became final. At that point, given the Section 2-1401 petition, appellate jurisdiction existed.
Justice Freeman asked what would prevent defendant from appealing after entry of the final order confirming the sale; counsel cited to judicial economy, again arguing that such final orders were often too late to challenge foreclosures. Justice Thomas asked how lack of standing could make an order void if standing could be waived, and counsel pointed out that the defendant had asserted lack of standing from start to finish of the litigation.
Justice Theis asked counsel for the plaintiff how it could be true that there were cases holding that a judgment of foreclosure can be appealed if Rule 304(a) language is included in the judgment; counsel responded that occasionally, there are foreclosures involving multiple parties or multiple claims which could become appealable with 304(a) language. Chief Justice Kilbride asked whether foreclosure and the confirmation of sale involve separate judgments, but counsel responded that he had never seen the final order called a judgment. Justice Theis asked whether counsel had ever seen Rule 304 language added to a judgment of foreclosure; counsel answered that in Cook County, such language was very difficult to obtain in foreclosures. Following up on a question to the defendant by Justice Freeman, counsel concluded by arguing that the plaintiff had established its standing to sue from the outset of the suit by attaching a copy of the underlying promissory note with a blank endorsement. Such an endorsement turns the note into bearer paper under the U.C.C., meaning that the plaintiff had standing to enforce the note, even if it didn't technically own the note.