U.S. Bank Tr. v. Lopez

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

Decision Under Review Appeal from the Circuit Court of Du Page County, No. 14-CH-473; the Hon. Robert G. Gibson, Judge, presiding. Judgment Affirmed in part and vacated in part.
Cause remanded. Counsel on Appeal Daniel S. Khwaja, of Chicago, for appellants. Louis J. Manetti Jr., Margaret A. Manetti, Gregory J. Moody, and Lauren T. Riddick, of Codilis & Associates, P.C., of Burr Ridge, for appellee. Panel JUSTICE BURKE delivered the judgment of the court, with opinion.
Justices McLaren and Schostok concurred in the judgment and opinion.

¶ 1 Plaintiff, U.S. Bank Trust National Association, as owner trustee for Queen's Park Oval Asset Holding Trust, filed a foreclosure suit against defendants, Mario A. Lopez, a/k/a Mario Augusto Lopez-Franco, and Martha D. Lopez. Defendants raised the affirmative defense that plaintiff lacked standing when it filed the suit. Defendants also raised the affirmative defenses that plaintiff violated Illinois Supreme Court Rule 113(b) (eff. May 1, 2013) and failed to comply with Title 24, section 203.604, of the Code of Federal Regulations (Code) (24 C.F.R. § 203.604 (2014)). The trial court struck defendants' affirmative defenses, granted plaintiff summary judgment, and entered a judgment of foreclosure and sale. On appeal, defendants challenged the trial court's orders striking their affirmative defenses and granting plaintiff summary judgment. On November 14, 2017, this court filed its opinion. We reversed the judgment of foreclosure and sale, vacated the order approving the sale, and dismissed the foreclosure. Specifically, we determined that plaintiff lacked standing. Plaintiff filed a timely petition for rehearing, disputing that holding. We granted the petition for rehearing and withdrew our opinion. For the reasons that follow, we hold that the trial court did not err in striking the affirmative defenses concerning standing and Rule 113(b). However, we hold that there are factual issues regarding plaintiff's compliance with section 203.604 and that the trial court erred in striking that affirmative defense. Therefore, we vacate the judgment of foreclosure and sale and remand the cause for further proceedings.

¶ 4 On March 11, 2014, plaintiff filed a complaint to foreclose the mortgage on property owned by defendants. The complaint attached the mortgage and the note. The note bore two indorsements, one from the original lender to Countrywide Bank, FSB (Countrywide), and the second from Countrywide to the Secretary of Housing and Urban Development (HUD), a nonparty to the case. The note included no indorsements or assignments to plaintiff. The complaint alleged in paragraph "n" that plaintiff was the "legal holder of the indebtedness." ¶ 5 On May 12, 2014, defendants filed an answer with affirmative defenses, claiming that plaintiff lacked standing because the note attached to the complaint was indorsed to HUD and not to plaintiff, that plaintiff failed to comply with Rule 113(b) because the note did not show an indorsement to plaintiff, and that plaintiff failed to comply with Title 24, section 203.604, of the Code. ¶ 6 On November 7, 2014, plaintiff amended its complaint to resolve any issue regarding the note. The allegations were substantially similar to those in the original complaint except that it alleged in paragraph "n" that "on March 11, 2014[,] Plaintiff was a non-holder in possession of the Note with rights of a holder. Plaintiff is currently the legal holder of the Note." Also, plaintiff attached a copy of the note bearing the same two indorsements, one from the original lender to Countrywide and the second from Countrywide to HUD. The amended complaint included an "allonge to note" that was not filed with the original complaint. The allonge, which is undated, contains a special indorsement from HUD to Queen's Park Oval Asset Holding Trust, the trust for which plaintiff was the owner trustee.

¶ 8 On December 24, 2014, defendants filed a motion to dismiss plaintiff's amended complaint, pursuant to section 2-619.1 of the Code of Civil Procedure (735 ILCS 5/2-619.1 (West 2014)). They repeated the arguments they raised in their affirmative defenses that plaintiff lacked standing and violated Rule 113(b). Defendants claimed that the defect could not be cured by amendment. Following arguments, the court denied defendants' motion to dismiss, without prejudice.

¶ 10 On April 16, 2015, defendants filed an answer to plaintiff's amended complaint and repeated their previous affirmative defenses. They argued again that, when the case was filed, plaintiff lacked standing, as the note attached to the complaint was indorsed to HUD and no assignment to plaintiff was attached. Defendants maintained that the allonge attached to plaintiff's amended complaint contained an indorsement executed after the filing of the original complaint. Defendants supported their answer with judicial admissions made by plaintiff throughout the proceedings that it was not in possession of an indorsed note at the time of the original filing. Defendants alleged that plaintiff violated Rule 113(b) when it amended the complaint to include the allonge. Defendants also alleged that plaintiff failed to comply with Title 24, section 203.604, of the Code because plaintiff did not provide the required face-to-face meeting or offer defendants "an opportunity to conduct one."

¶ 12 Plaintiff filed a motion to strike the affirmative defenses, pursuant to section 2-619.1. The motion attached a January 16, 2014, assignment of the mortgage from HUD to plaintiff (without the note), various affidavits, and a Federal Express (FedEx) tracking label. Plaintiff argued that the standing defense was insufficiently pleaded because defendants did not properly articulate how plaintiff lacked standing and defendants failed to support their claim that a violation of Rule 113 compelled dismissal. Plaintiff maintained that the assignment established its legal capacity as a nonholder with the rights of a holder when the original complaint was filed. ¶ 13 At the hearing on the motion to strike, plaintiff produced the original note, and the trial court read a description of it into the record. The trial court determined that plaintiff was a nonholder with the rights of a holder. Following the hearing, the trial court granted plaintiff's motion and struck the affirmative defenses with prejudice. ¶ 14 With the affirmative defenses stricken, the trial court granted plaintiff's motion for summary judgment and entered a judgment of foreclosure and sale on July 18, 2016. The judicial sale occurred, and the court granted plaintiff's motion to confirm the sale on November 7, 2016. Defendants timely appeal from the court's orders striking their affirmative defenses and granting plaintiff summary judgment.

¶ 16 Defendants argue that plaintiff lacked standing to sue, violated Rule 113(b), and failed to strictly adhere to the mandated servicing guidelines of Title 24, section 203.604, of the Code. We examine each issue in turn. ¶ 17 Plaintiff's motion to strike defendants' affirmative defense of standing was brought pursuant to section 2-619.1 of the Code of Civil Procedure (735 ILCS 5/2-619.1 (West 2016)). A motion under section 2-619.1 allows a party to combine a section 2-615 (735 ILCS 5/2-615 (West 2016)) motion to dismiss based upon insufficient pleadings with a section 2-619 (735 ILCS 5/2-619 (West 2016)) motion to dismiss based upon certain defects or defenses. 735 ILCS 5/2-619.1 (West 2016); Carr v. Koch, 2011 IL App (4th) 110117, ¶ 25 (citing Edelman, Combs & Latturner v. Hinshaw & Culbertson, 338 Ill. App. 3d 156, 164 (2003)). When the legal sufficiency of a complaint is challenged by a section 2-615 motion to dismiss, all well-pleaded facts in the complaint are taken as true and a reviewing court must determine whether the allegations of the complaint, construed in the light most favorable to the plaintiff, are sufficient to establish a cause of action upon which relief may be granted. King v. First Capital Financial Services Corp., 215 Ill. 2d 1, 11-12 (2005). On the other hand, a motion to dismiss under section 2-619 admits the legal sufficiency of the complaint but asserts an affirmative matter that defeats the claim. Id. at 12. If a cause of action is dismissed due to the affirmative matter asserted in a section 2-619 motion to dismiss, the questions on appeal are whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Illinois Graphics Co. v. Nickum, 159 Ill. 2d 469, 494 (1994). We review de novo an order striking a pleading pursuant to section 2-619.1. Carr, 2011 IL App (4th) 110117, ¶ 25. ¶ 18 The doctrine of standing requires that a party have a real interest in the action and its outcome. Wexler v. Wirtz Corp., 211 Ill. 2d 18, 23 (2004). A party's standing to sue must be determined as of the time the suit is filed. Deutsche Bank National Trust Co. v. Gilbert, 2012 IL App (2d) 120164, ¶ 24. "[A] party either has standing at the time the suit is brought or it does not." Village of Kildeer v. Village of Lake Zurich, 167 Ill. App. 3d 783, 786 (1988). An action to foreclose upon a mortgage may be filed by a mortgagee or by an agent or successor of a mortgagee. Gilbert, 2012 IL App (2d) 120164, ¶ 15. ¶ 19 Typically, lack of standing to bring an action is an affirmative defense, and the burden of proving the defense is on the party asserting it. Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252 (2010); Bayview Loan Servicing, LLC v. Cornejo, 2015 IL App (3d) 140412, ¶ 12. In Gilbert, however, we stated that, once the defendant "made out a prima facie showing that [the plaintiff] lacked standing, the burden shifted to [the plaintiff] to refute this evidence or demonstrate a question of fact." Gilbert, 2012 IL App (2d) 120164, ¶ 17 (citing Triple R Development, LLC v. Golfview Apartments I, L.P., 2012 IL App (4th) 100956, ¶ 12). In Rosestone Investments, LLC v. Garner, 2013 IL App (1st) 123422, ¶ 28, the First District criticized our statement in Gilbert as violating the principle that "lack of standing is an affirmative defense, which [the] defendant alone has the burden to plead and prove." The First District noted that Triple R Development "concerned neither standing nor foreclosure proceedings" but, rather, "the burden of persuasion on a motion for summary judgment." (Emphasis in original.) Id. The First District concluded, "It is unclear what result the Gilbert support its position. Further, the affidavit of Kacy Prather does not explain how the "screenprint" establishes the dispatch. ¶ 38 Furthermore, in his affidavit, Mario Lopez specifically denied that he received a letter by certified mail from plaintiff and denied being "offered a face-to-face meeting at a local Housing and Urban Development office, one of plaintiff's local banks, or other H.U.D. related servicing office." Construing his affidavit in the light most favorable to defendants, as we must (see Floyd v. Rockford Park District, 355 Ill. App. 3d 695, 699 (2005)), we read it as denying that he received any letter offering defendants a face-to-face meeting. See Hernandez, 2017 IL App (2d) 160850, ¶ 34. ¶ 39 In its petition for rehearing, plaintiff argues that the "Assignment of Mortgage from HUD to Plaintiff pre-dates the filing of the complaint and thereby illustrates the removal of HUD requirements from the loan—i.e., a non-HUD insured loan cannot logically be said to have HUD-mandated requirements." Plaintiff did not raise this argument in the trial court or in its original response brief filed in this appeal, and we find that it is forfeited. See IPF Recovery Co. v. Illinois Insurance Guaranty Fund, 356 Ill. App. 3d 658, 666 (2005). We express no opinion as to the merits of this claim. ¶ 40 Accordingly, we conclude that granting plaintiff's motion to strike was improper because plaintiff did not establish as a matter of law that it complied with section 203.604.

¶ 42 For the preceding reasons, we affirm the order granting plaintiff's motion to strike defendants' affirmative defenses relating to standing and Rule 113(b). We vacate the order granting plaintiff's motion to strike defendant's affirmative defense concerning plaintiff's compliance with Title 24, section 203.604, of the Code. Further, we vacate the judgment of foreclosure and sale, and we remand the cause for further proceedings. ¶ 43 Affirmed in part and vacated in part. ¶ 44 Cause remanded.