U.S. Bank Trust National Association v. Lopez

2017 IL App (2d) 160967 No. 2-16-0967
Opinion filed November 14, 2017
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
U.S. BANK TRUST NATIONAL ) Appeal from the Circuit Court
ASSOCIATION, Not in Its Individual ) of Du Page County.
Capacity but Solely as Owner Trustee for
)
Queen’s Park Oval Asset Holding Trust, )
)
Plaintiff-Appellee, )
)
v. ) No. 14-CH-473
)
MARIO A. LOPEZ, a/k/a Mario Augusto )
Lopez-Franco; MARTHA D. LOPEZ; )
UNKNOWN OWNERS; and NONRECORD )
CLAIMANTS, ) Honorable
) Robert G. Gibson,
Defendants-Appellants. ) Judge, Presiding.
______________________________________________________________________________
JUSTICE BURKE delivered the judgment of the court, with opinion.
Justices McLaren and Schostok concurred in the judgment and opinion.
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 defense
that plaintiff violated Illinois Supreme Court Rule 113 (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
2017 IL App (2d) 160967
(2014)). The trial court struck defendants’ affirmative defenses, granted plaintiff summary
judgment, and entered a judgment for foreclosure and sale. On appeal, defendants challenge the
trial court’s orders striking their affirmative defenses and granting plaintiff summary judgment.
For the following reasons, we reverse the judgment of foreclosure, vacate the order approving
the sale, and dismiss the foreclosure action.
¶2 I. BACKGROUND
¶3 A. Initial Foreclosure Proceedings and Amended Complaint
¶4 On March 11, 2014, plaintiff filed a complaint to foreclose the mortgage on property
owned by defendants. The complaint contained a copy of 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 Defendants filed an answer with affirmative defenses on May 12, 2014, 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 because the note did not show an
indorsement to plaintiff, and that plaintiff failed to comply with Title 21, 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 at 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 to the pleading a copy of the note that bore the same two indorsements, one
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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 named trustee.
¶7 B. Defendants’ Motion to Dismiss the Amended Complaint
¶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 that the foreclosure action was barred under Rule 113. Defendants
claimed that the defect could not be cured by amendment. Following argument, the court denied
defendants’ motion to dismiss, without prejudice.
¶9 C. Defendants’ Affirmative Defenses to the Amended Complaint
¶ 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 original complaint was indorsed to HUD and
no assignment to plaintiffs 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 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 for the required face-to­
face meeting with defendants or offer defendants “an opportunity to conduct one.”
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¶ 11 D. Striking the Affirmative Defenses, Summary Judgment, and Judicial Sale
¶ 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 without the note, various
affidavits, and a Federal Express 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 trial court’s orders granting plaintiff’s motion to
strike their affirmative defenses pursuant to section 2-619.1 and granting it summary judgment.
¶ 15 II. ANALYSIS
¶ 16 Defendants raise a number of arguments on appeal regarding plaintiff’s legal standing to
bring the foreclosure action, plaintiff’s violation of Rule 113, and plaintiff’s failure to strictly
adhere to the mandated servicing guidelines of Title 24, section 203.604, of the Code. We
initially examine the trial court’s entry of the foreclosure judgment in plaintiff’s favor, the
validity of which rests on whether plaintiff had the ability to bring this suit against defendants.
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¶ 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 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 question on appeal is 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
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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.
¶ 20 To support their argument that plaintiff had no standing to sue them on the date the
foreclosure action was filed, defendants point to the note attached to the original complaint. The
original complaint alleged that plaintiff was the legal holder of the indebtedness of the attached
note. However, the note establishes that it was indorsed to a nonparty to the case. When
plaintiff filed the complaint, the note was indorsed to HUD, not to plaintiff. Indeed, plaintiff
conceded that the note was not indorsed to plaintiff at that time.
¶ 21 In Gilbert, the defendant raised standing as an affirmative defense. In support, the
defendant showed that the note and the mortgage attached to the original complaint identified not
the plaintiff but another mortgagee. Also, the assignment attached to the amended complaint
showed that the interest in the mortgage was not assigned to the plaintiff until several months
after the foreclosure action was filed. Gilbert, 2012 IL App (2d) 120164, ¶ 17. We held that this
evidence met the defendant’s burden to show that the plaintiff lacked standing when the suit was
filed, because the plaintiff was not identified on either the note or the mortgage. The documents
attached to the complaint contradicted the plaintiff’s allegation that it was “the mortgagee” and
they supported the defendant’s argument that the plaintiff did not have an interest in the
mortgage that would confer standing. Because the defendant made 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. Id. ¶ 21.
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¶ 22 Similarly here, the note attached to the original complaint showed on its face that it was
not indorsed to plaintiff. At the hearing on defendants’ motion to dismiss plaintiff’s amended
complaint, plaintiff conceded that the note was not indorsed to plaintiff on the date the original
complaint was filed. Plaintiff alleged that the copy of the note attached to its original complaint
was a “copy of the note as it currently exists.” Thus, the allonge, which has no date of execution,
must have been executed after the filing of the original complaint. As defendants observe,
plaintiff’s admission that the note attached to its complaint was in its current form leaves no
other possible interpretation. As in Gilbert, defendants have made a prima facie showing of a
lack of standing, and plaintiff has failed to rebut it.
¶ 23 Defendants further contend that “equally inaccurate” is plaintiff’s position that it was a
“non-holder with rights of a holder” when the action was filed. Plaintiff’s argument rests on the
January 16, 2014, assignment of the mortgage, from HUD to plaintiff. However, “ ‘[a]n
assignment of the mortgage without an assignment of the debt creates no right in the assignee.’ ”
Bristol v. Wells Fargo Bank, National Ass’n, 137 So. 3d 1130, 1133 (Fla. Dist. Ct. App. 2014)
(quoting Vance v. Fields, 172 So. 2d 613, 614 (Fla. Dist. Ct. App. 1965); see also Elvin v.
Wuchetich, 326 Ill. 285, 288-89 (1927) (assignment of mortgage on truck without transferring
note transferred no interest in truck authorizing replevin). Without the assignment of the debt to
plaintiff, which must have occurred after the foreclosure complaint was filed, when the allonge
was executed, the assignment of the mortgage did not give plaintiff the rights of a holder.
¶ 24 Plaintiff also attempts to rebut defendants’ argument by stating that “it proved it
possessed the original note before it filed the lawsuit.” Plaintiff points to its counsel’s affidavit
that established that he possessed the note on plaintiff’s behalf before it filed the foreclosure suit.
A similar contention was raised by the plaintiff in Gilbert. The plaintiff endeavored to challenge
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the standing argument by noting that, in an affidavit of an employee of a company that serviced
loans for the plaintiff, he averred that, based on his review of “ ‘the documents contained in the
Gilbert loan file,’ ” the interest was assigned to the plaintiff before the filing of the initial
complaint. Gilbert, 2012 IL App (2d) 120164, ¶ 7. The plaintiff argued that this statement must
be taken as true in the absence of contrary evidence. Id. ¶ 19. Noting that this principle applies
only to admissible evidence, we held that the statement about the date of the assignment was
inadmissible because it was unsupported by any foundation. Id. (citing Complete Conference
Coordinators, Inc. v. Kumon North America, Inc., 394 Ill. App. 3d 105, 108 (2009)).
¶ 25 In this case, plaintiff points to the affidavit of Robert H. Rappe, Jr., managing attorney of
the law firm representing plaintiff. He attached three exhibits to his affidavit. Exhibit 1 is an
image of a computer screen reflecting that the original indorsed note was scanned and imaged
into the firm’s case management system on March 10, 2014, the day before the original
complaint was filed. Exhibit 2 is a copy of the original note, which was also imaged and
electronically stored. Exhibit 3 is the allonge to the note. However, because plaintiff’s name
does not appear on the original note and because the assignment of the note occurred after the
original complaint was filed, these items do not rebut defendants’ standing argument.
¶ 26 Plaintiff cites Cornejo, 2015 IL App (3d) 140412, in support of its argument that
attaching a copy of the note to the foreclosure complaint was prima facie evidence that it owned
the note. In Cornejo, the note attached to the foreclosure complaint was held to be prima facie
evidence that the plaintiff owned the note, even though it lacked an indorsement in blank. Id.
¶ 13. The Third District Appellate Court held that the defendants failed to present any evidence
that the transfer did not occur before the complaint was filed and that the defendants thus failed
to meet their burden of showing that the plaintiff lacked standing. Id. ¶ 14. Here, as in Gilbert,
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defendants presented evidence that showed that the assignment of the debt actually took place
after the original complaint was filed and that plaintiff thus lacked standing when the complaint
was filed.
¶ 27 Based on our determination that plaintiff lacked standing, we need not address the other
issues defendants raise.
¶ 28 III. CONCLUSION
¶ 29 For the preceding reasons, we reverse the judgment of foreclosure, vacate the order
approving the sale, and dismiss the foreclosure action.
¶ 30 Judgment reversed; order vacated; action dismissed.
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