The Illinois Appellate Court, First District, recently affirmed a trial court’s final order in a foreclosure, refusing to vacate summary judgment in favor of the mortgagee, even though the notice of the relevant motions was mailed directly to the borrowers and not their attorney of record, and was originally missing the time of the hearing and the date it was mailed, and even though the borrowers argued that the trial court used the wrong interest rate to calculate the amounts due at sale.

In so ruling, the Appellate Court held that the Illinois statutory rate of 9% interest is to be applied to the amounts due on a mortgage loan after judgment of foreclosure is entered and before the foreclosure sale is confirmed.

A copy of the opinion is available at: Link to Opinion.

The plaintiff mortgagee sued husband and wife borrowers to foreclose the mortgage. The borrowers appeared through counsel and filed an answer and affirmative defenses.

The mortgagee filed a motion for summary judgment, and later filed a motion for judgment of foreclosure and sale, along with a notice scheduling the motions for hearing.

The required notice for the motions was mailed to the borrowers at their home address, but not to their attorney of record. The notice was also missing the time of the hearing and the date it was mailed.

Shortly thereafter, the mortgagee filed a second notice of hearing, which provided the information missing from the first notice, but was also only mailed to the borrowers, not to their attorney of record. The trial court granted the servicer’s motions.

The husband mortgagor moved to vacate the summary judgment order, arguing that, although he received notice of the hearing on the mortgagee’s motion for summary judgment, the notice was not provided to his attorney of record. In addition, he argued that the envelope was too large for his mailbox and he did not receive word from the post office to pick it up until the day after the hearing.

The trial court denied the borrowers’ motion to vacate, the property was sold at foreclosure sale, and the mortgagee moved for entry of an order approving the report of sale and distribution and for possession.

The next day, the wife mortgagor filed a second motion to vacate the default judgment, which was denied.

The husband mortgagor then opposed the mortgagee’s motion for entry of an order approving the report of sale and distribution and for possession, arguing that the mortgagee included taxes it was not entitled to recover in the report of sale, and improperly calculated the post-judgment interest rate using the statutory rate of 9% per annum instead of the rate provided in the note, 6%.

On June 17, 2014, the trial court granted the mortgagee’s motion for entry of an order approving the report of sale and distribution and for possession, and the borrowers appealed.

The Appellate Court began by citing the applicable local procedural rule of court and Illinois Supreme Court rule governing service of notices of hearing.

Turning to the borrowers’ arguments, the Appellate Court pointed out that, although the first notice was missing the time of the hearing and the date on which it was mailed, the second notice remedied these deficiencies and was mailed at least five days before the hearing as required.

In addition, although the second notice should have been mailed to borrowers’ counsel, the record revealed that their attorney had been suspended for two years from the practice of law almost six months before the second notice was sent to the borrowers.

The Appellate Court also rejected the borrowers’ argument that they did not receive timely notice of the hearing, relying on the common law presumption that a document sent by regular mail directed to a correct address is presumed to have been received.

The Appellate Court concluded that because the mortgagee complied with the rules, the borrowers were properly served as a matter of law, and the fact that they may not have actually received the notice was not dispositive.

Next, the Appellate Court rejected the borrowers’ argument that they were deprived of procedural due process.  The Court noted that the borrowers failed to “provide reasoned argument or citation to pertinent authority in support of their arguments.” In addition, they did not explain how the few cases they cited supported their arguments, which the Appellate Court found distinguishable in any event.

The Appellate Court also rejected the borrowers’ argument that the trial court erred by confirming the sale because the wrong interest rate was used, reasoning that once a motion to confirm has been filed, it is not enough under section 15-1508(b) to “merely raise a meritorious defense to the complaint.” In addition, the Appellate Court noted that a trial court’s decision to grant a motion to confirm a judicial sale under the Illinois Mortgage Foreclosure Law will not be disturbed absent an abuse of discretion.

Because the borrowers failed to establish any of the four grounds set forth in section15-1508(b), were not even arguing the trial court abused its discretion in confirming the sale, and once again provided no citation to authority or reasoned argument in support of their position, the Appellate Court found that the borrowers had forfeited their incorrect interest rate argument.

The Court did, however, address the borrowers’ argument that mortgagee was not entitled to the higher statutory rate of interest until after the trial court confirmed the sale, rejecting the two cases relied on by the borrowers as inapplicable and factually distinguishable.

Instead, in order to determine whether the mortgagee was entitled to the statutory rate of interest once the foreclosure judgment was entered, the Court looked to the language of the statute, section 15-1220 of the Illinois Mortgage Foreclosure Law, which defines “statutory interest rate” as the “rate of interest on judgments specified in Section 2-1303” of the Illinois Code of Civil Procedure.

Section 2-1303 provides that “[j]udgments recovered in any court shall draw interest at the rate of 9% per annum from the date of judgment until satisfied.”

Section 15-1504(e) of the Illinois Mortgage Foreclosure Law, in turn, sets forth the form for a foreclosure complaint and what the allegations therein are “deemed and construed” to mean, and subsection 15-1504(e)(3) expressly provides the complaint is deemed to request “interest … at the statutory judgment rate from the date of the judgment.”

The Appellate Court noted that the legislature’s use of the word “judgment” in subsection 15-1504(e)(3) of the Illinois Mortgage Foreclosure Law “clearly refers to the foreclosure judgment, which includes the total amount due to a plaintiff from the defendant before the property has been sold, not the order confirming the sale, which has been interpreted as the final judgment for purposes of an appeal.”

Thus, the Court concluded, “the [Illinois Mortgage] Foreclosure Law clearly provides for the plaintiff’s recovery of interest at the statutory rate after the foreclosure judgment has been entered and before the confirmation of sale.”

The Appellate Court noted that its conclusion was supported by the common law “merger doctrine,” pursuant to which Illinois courts have long held that the mortgage contract merges into the judgment upon entry of the foreclosure judgment, meaning the judgment is controlled by statute at that point, not the contract.

Taking the merger doctrine and the language of the Illinois Mortgage Foreclosure Law together, the Appellate Court held that the correct interest rate of 9% was set forth in the report of sale and the trial court did not abuse its discretion in confirming the sale.