This morning, the Illinois Supreme Court filed its opinion in Wells Fargo Bank, N.A. v. McCluskey, holding that once a motion to confirm a judicial sale in a foreclosure action has been filed, the generous grounds set forth in the Code of Civil Procedure for setting aside a default no longer apply, and the Foreclosure Act governs. Our detailed summary of the facts and lower court opinions in Wells Fargo is here.

Plaintiff initiated foreclosure proceedings pursuant to the Foreclosure Law on defendant’s residential mortgage in 2010. The defendant was served with process, but failed to appear. Three months after the complaint was filed, the circuit court entered the defendant’s default and a judgment of foreclosure. The defendant finally appeared seven months later, on the date set for the judicial sale, moving to stay the sale and vacate the default. The plaintiff agreed to put off the sale for 75 days to give defendant time to try to negotiate a loan modification agreement. When those negotiations were unsuccessful, the judicial sale went forward, with the plaintiff buying the property. Two weeks after that, the defendant moved once again to set aside the default. Defendant’s second motion was made pursuant to Section 2-1301(e) of the Code of Civil Procedure, and purported to set forth various asserted defenses to foreclosure. The circuit court denied the motion to vacate, holding that the defendant had waived any objections to the default by withdrawing her original motion to vacate in return for a delay in the sale. The court confirmed the sale, and the defendant appealed.  The Appellate Court reversed, holding that a foreclosure defendant could get a foreclosure judgment vacated pursuant to the general provisions of Section 2-1301 merely by showing a compelling excuse for her lack of diligence and some potentially meritorious defense.

In an opinion by Justice Mary Jane Theis, the Supreme Court unanimously reversed. The case turned on the relationship between the general provisions of Section 2-1301, which applied to civil actions in general, and the specific provisions of Section 15-1508(b) of the Foreclosure Law, which provided that a defendant may oppose an order confirming a foreclosure sale only on certain enumerated grounds, including lack of proper notice, unconscionable sale terms and a fraudulently conducted sale.

Once a motion to confirm a judicial sale has been filed, the balance of interests between the parties has shifted, the Court noted. Although Section 15-1508(b) permitted a court to refuse to confirm a sale because “justice was not done,” that power did not extend to protecting a defendant against his or her own negligence in failing to timely appear and defend the suit. Allowing the borrower to unravel everything at the eleventh hour – long after receiving notice and “ample statutory opportunity to respond to the allegations” would be “inconsistent with the need to establish stability” in the process, the Court held. Besides, the Foreclosure Law expressly provided time limitations for the right of redemption and reinstatement – time limitations which would be rendered relatively meaningless if the defendant was allowed to take advantage of Section 2-1301. Therefore, the Court held that until a motion to confirm the sale is filed, a defendant could proceed under Section 2-1301. But once the motion is filed, the more restrictive provisions of Section 15-1508(b) of the Foreclosure Law kick in.

Since the defendant’s Section 2-1301 was filed before the motion to confirm the sale was, the Court held that the defendant could proceed under the looser standard. Nevertheless, the Court held that the defendant’s motion to vacate was properly denied. Defendant was properly served and had notice of the default, judgment of foreclosure and sale. Still, the defendant waited ten months to appear and raise her purported defenses. The defendant’s lack of diligence was not excusable, the Court found, and confirmation of the sale was correctly entered.