In Nationstar Mortgage, LLC v. Canale, 2014 IL App (2d) 130676 (Apr. 9, 2014), the Illinois Appellate Court rejected the borrower’s argument that the plaintiff’s foreclosure is void for lack of subject matter jurisdiction in a foreclosure action in which the Appellate Court characterized the “plaintiff’s standing [as] much in doubt.”  Canale clarifies that standing to foreclose and subject matter jurisdiction are separate concepts under Illinois law, and serves as a reminder that costly post-judgment litigation in foreclosure actions can be avoided by careful attention to the details of an Illinois foreclosure complaint. 

In recent years, borrowers have challenged the validity of foreclosures by asserting that the foreclosing plaintiff lacked standing or failed to properly invoke a court’s subject matter jurisdiction.  In Canale, the borrower moved to vacate the foreclosure by asserting a novel combination of these arguments. 

The four corners of the Canale plaintiff’s complaint called plaintiff’s standing to foreclose into question.  Although the plaintiff alleged in its complaint that it was the holder of the note and mortgagee of the mortgage sought to be foreclosed, the note and mortgage attached to the complaint identified a different entity as holder and mortgagee.  Under Illinois law, the exhibits to a complaint govern over contrary allegations in the complaint.  Lack of standing is, however, an affirmative defense under Illinois law that is waived if not timely raised. The borrower failed to timely raise lack of standing as an affirmative defense, and thus waived the ability to challenge the plaintiff’s standing to foreclose. 

In an effort to avoid the waiver and challenge the validity of the foreclosure, the borrower argued that the Illinois Mortgage Foreclosure Law (IMFL) required the plaintiff to plead its standing in order to invoke the court’s subject matter jurisdiction.  The borrower argued that because the complaint and its exhibits did not establish the plaintiff’s standing, the resulting foreclosure was void for lack of subject matter jurisdiction which is a defect that cannot be waived.

In rejecting the borrower’s argument, the Appellate Court held that it did not have to address the issue of whether IMFL placed the burden of pleading standing on the plaintiff because the court’s subject matter jurisdiction is conferred by the Illinois Constitution.  Under the Illinois Constitution, a court’s subject matter jurisdiction extends to all justiciable matters.  The analysis of whether a particular case is justiciable focuses on whether the claim asserted falls within the class of cases that a court is authorized to determine and not on the legal sufficiency of the pleadings.  The Canale court held that even though the plaintiff’s complaint cast doubt on its standing, the court did have subject matter jurisdiction because “[t]here is no doubt that courts have the inherent power to hear and determine foreclosure cases.”  In light of this holding and the borrower’s waiver of the challenge to plaintiff’s standing, the Canale Court affirmed the trial court’s denial of the borrower’s motion to vacate the foreclosure.