U.S. Bank National Ass'n v. Miller

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Appellate Court Date: 2020.11.17
12:04:26 -06'00'
U.S. Bank National Ass’n v. Miller, 2020 IL App (1st) 191029Appellate Court U.S. BANK NATIONAL ASSOCIATION, as Successor Trustee to
Caption Bank of America, N.A., as Successor by Merger to LaSalle Bank N.A.,
as Trustee for Merrill Lynch First Franklin Mortgage Loan Trust,
Mortgage Loan Asset-Backed Certificate, Series 2007-5, Plaintiff and
Counterdefendant-Appellee, v. JOHN MILLER, a/k/a John L. Miller,
a/k/a Jon L. Miller; ROOSJATI MILLER; NEWBERRY PLAZA
CONDOMINIUM ASSOCIATION; UNKNOWN OWNERS; and
NONRECORD CLAIMANTS, Defendants (John Miller and Roosjati
Miller, Defendants and Counterplaintiffs-Appellants).
District & No. First District, Sixth Division
No. 1-19-1029
Filed March 20, 2020
Rehearing denied June 8, 2020
Decision Under Appeal from the Circuit Court of Cook County, No. 09-CH-28413; the
Review Hon. Edward Robles and the Hon. Ann M. Loftus, Judges, presiding.
Judgment Affirmed.
Counsel on John L. Miller, of Naperville, appellant pro se.
Appeal
Harry N. Arger and Rosa M. Tumialán, of Dykema Gossett, PLLC, of
Chicago, for appellee.
Panel JUSTICE CUNNINGHAM delivered the judgment of the court, with
opinion.
Presiding Justice Mikva and Justice Harris concurred in the judgment
and opinion.
OPINION
¶1 The defendants-appellants, John and Roosjati Miller, appeal from the judgment of the
circuit court of Cook County in this mortgage foreclosure action dismissing their counterclaim
alleging that plaintiff-appellee U.S. Bank National Association (U.S. Bank) violated their right
of rescission under the Truth in Lending Act (TILA) (15 U.S.C. § 1601 et seq. (2006)), on the
ground that it was barred by the statute of limitations. The Millers also challenge the denial of
their motion for substitution of judge. For the following reasons, we affirm the judgment of
the circuit court of Cook County.
¶2 BACKGROUND
¶3 On July 2, 2007, the Millers refinanced their mortgage, which encumbered the property
located at 1030 North State Street, Unit 9D, in Chicago, and secured a note reflecting a
$210,000 loan.
¶4 Two years later, on August 14, 2009, U.S. Bank filed a complaint seeking to foreclose the
mortgage. After 19 unsuccessful attempts to serve the Millers, U.S. Bank finally served them
by publication in November 2009.
¶5 The parties proceeded to engage in extensive motion practice beginning in 2010 and
continuing through 2011. During that time, U.S. Bank filed an amended complaint attaching
the mortgage and note as exhibits (which it had failed to do in its initial complaint).
Additionally, in November 2011, the Millers answered the complaint after their motion to
dismiss was denied. The Millers’ answer included affirmative defenses and counterclaims, one
of which alleged that the initial lender violated TILA by materially changing the terms and
type of the loan on the date of closing and also failing to provide John with a Real Estate
Settlement Procedures Act of 1974 (12 U.S.C. § 2601 et seq.) statement at the closing. The
counterclaim further alleged that the Millers rescinded the loan, in writing, on June 28, 2010,
but U.S. Bank never responded to the rescission.
¶6 The record reflects that no action was taken on the case following the filing of the Millers’
answer and, on June 12, 2013, the circuit court entered an order striking the case from the
court’s docket.
¶7 Almost one year later, on May 5, 2014, U.S. Bank moved to dismiss the Millers’
affirmative defenses and counterclaims. With regard to the rescission claim, U.S. Bank argued
that it was time-barred. In response, the Millers filed a motion to dismiss U.S. Bank’s
foreclosure complaint for want of prosecution and to default U.S. Bank for its failure to answer
their counterclaims and affirmative defenses. No copy of either motion appears in the record
on appeal.
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¶8 The circuit court denied the Millers’ motions on September 9, 2014. Following that denial,
on October 7, 2014, the Millers responded to U.S. Bank’s motion to dismiss. At the same time,
the Millers moved to reconsider the denial of their motion to dismiss and their motion for
default.
¶9 On October 23, 2014, more than five years after U.S. Bank filed its initial foreclosure
complaint, the Millers moved to substitute judge as of right, arguing that the current judge had
yet to make a substantive ruling.
¶ 10 On November 13, 2014, the court entered an order that, in relevant part, (1) denied the
Millers’ motion to substitute judge; (2) denied their motion to reconsider; and (3) dismissed,
without prejudice, their counterclaim and affirmative defense regarding the violation of their
right to rescind the loan.
¶ 11 Several rounds of amendments of the Millers’ counterclaim followed, and the Millers filed
their third amended counterclaim—the operative pleading in this case—on October 27, 2016.
In that counterclaim, the Millers alleged that despite executing six copies of a “Notice of Right
to Cancel” at the closing, John did not receive a copy to keep, which was a material violation
of TILA. According to the Millers, this violation enabled them to exercise their right of
rescission pursuant to section 1635(f) of TILA (15 U.S.C. § 1635(f) (2006)) within three years
from the date the loan was executed. On June 30, 2010, the Millers, through counsel, mailed a
notice of rescission to the original lender, First Franklin Corporation (First Franklin), as well
as U.S. Bank. But neither First Franklin nor U.S. Bank responded to the rescission or
terminated their security interest in the property, as required by section 1635(b) of TILA (id.
§ 1635(b)). The Millers’ counterclaim therefore sought rescission of the transaction,
termination of the security interest, return of money given by them in connection with the
transaction, and reasonable attorney fees.
¶ 12 U.S. Bank initially answered the Millers’ counterclaim but then sought and was granted
leave to withdraw its answer and file a motion to dismiss. U.S. Bank’s motion to dismiss, filed
on March 28, 2017, argued that the TILA rescission claim was time-barred. Following briefing
and a hearing, the circuit court agreed with U.S. Bank and dismissed the counterclaim with
prejudice as untimely. The court went on to deny the Millers’ motion to reconsider and later
denied the Millers’ motion to amend their answer to include the TILA rescission claim as an
affirmative defense.
¶ 13 On March 13, 2018, U.S. Bank moved for summary judgment on its foreclosure complaint.
While there is no order in the record granting the motion, a judgment of foreclosure and sale
of the property was entered on July 10, 2018. A judicial sale of the property was held, and the
court subsequently entered an order confirming that sale on April 17, 2019. The Millers timely
appealed.
¶ 14 ANALYSIS
¶ 15 We note that we have jurisdiction to review this matter, as the Millers filed a timely notice
of appeal following the order confirming the sale of the property. Ill. S. Ct. R. 301 (eff. Feb. 1,
1994); R. 303 (eff. July 1, 2017).
¶ 16 We turn first to the Millers’ challenge to the circuit court’s denial of their motion for
substitution of judge as of right. A party is entitled to a single substitution of judge, without
cause, as of right if the court has not held a hearing and the judge hearing the motion has not
yet ruled on a “substantial issue.” 735 ILCS 5/2-1001(a)(2)(ii) (West 2016). The purpose of
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these limitations on the right to request a substitution of judge is to preclude judge shopping.
See Bowman v. Ottney, 2015 IL 119000, ¶¶ 18, 25. A “substantial issue” is one that relates to
the merits of the case. In re Marriage of Crecos, 2015 IL App (1st) 132756, ¶ 25. But even in
the absence of a substantial ruling, a court may deny a motion to substitute if the movant had
an opportunity to form an opinion on the judge’s reaction to his claims. In re D.M., 395 Ill.
App. 3d 972, 976-77 (2009). We review a trial court’s ruling on a motion to substitute judge
as of right de novo. Id. at 977.
¶ 17 Here, the Millers moved for substitution of judge in October 2014, over five years after
U.S. Bank filed its complaint seeking foreclosure of the property and almost three years after
the Millers filed their counterclaims and affirmative defenses. Significantly, at the time the
Millers filed their motion for substitution, the court had already denied their motion to dismiss
U.S. Bank’s complaint for want of prosecution as well as their motion to default U.S. Bank for
failure to answer their counterclaims and affirmative defenses. Contrary to the Millers’
contention, these were substantive rulings. See Antkiewicz v. Pax/Indianapolis, Inc., 254 Ill.
App. 3d 723, 727 (1993) (holding that denial of motion for default judgment constitutes a
resolution of a “substantial issue” for purposes of motion to change venue); City of Quincy v.
Weinberg, 363 Ill. App. 3d 654, 662 (2006) (finding that grant of motion for default judgment
directly related to merits of case such that defendant’s motion to substitute judge as of right,
filed after the circuit court’s ruling on the motion for default, was not timely filed).
Accordingly, we conclude that the trial court did not err in denying the Millers’ belated motion
for substitution of judge as of right.
¶ 18 Next, we turn to the Millers’ challenge to the court’s dismissal of their third amended
counterclaim pursuant to section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-
619 (West 2016)). A section 2-619 motion to dismiss admits the legal sufficiency of the
complaint but asserts that an affirmative matter bars the plaintiff’s claim. Id.; see also Lake
Point Tower Condominium Ass’n v. Waller, 2017 IL App (1st) 162072, ¶ 11. Here, U.S. Bank
brought its motion pursuant to section 2-619(a)(5) of the Code, which provides that an action
may be dismissed if it was not “commenced within the time limited by law.” 735 ILCS 5/2-
619(a)(5) (West 2016); see also Johnson v. The Augustinians, 396 Ill. App. 3d 437, 439 (2009).
We review de novo the circuit court’s decision on a motion to dismiss on this basis. Ferguson
v. City of Chicago, 213 Ill. 2d 94, 99 (2004).
¶ 19 In order to determine the applicable statute of limitations, we must first consider the
allegations in the Millers’ counterclaim. The counterclaim generally alleges that U.S. Bank
failed to respond or take action after receiving the Millers’ timely notice of rescission of the
loan. The counterclaim then asks the court for rescission of the loan, termination of U.S. Bank’s
security interest in the property, and a return of all money the Millers paid in connection with
the transaction. These are all forms of relief available under section 1635 of TILA. 15 U.S.C.
§ 1635(b) (2006). Finally, the counterclaim seeks an award of costs and attorney fees “as
provided under section 1640(a) [of TILA].”
¶ 20 We next explore the relationship between sections 1635 and 1640 of TILA. Section 1635
provides for the equitable remedy of rescission under certain circumstances including where,
as alleged here, the lender failed to deliver certain notices or disclosures. See Hoang v. Bank
of America, 910 F.3d 1096, 1102 (9th Cir. 2018). Section 1640, on the other hand, provides
for legal damages where the lender has failed to comply with the requirements of section 1635.
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¶ 21 Specifically, pursuant to section 1635, once a borrower has timely notified the lender that
it is exercising its right to rescind, a lender has 20 days to return any earnest money to the
borrower and to “take any action necessary or appropriate to reflect the termination of any
security interest created under the transaction.” 15 U.S.C. § 1635(b) (2006). If the lender fails
to do this, it is liable for, inter alia, the costs of suit to enforce the rescission rights and attorney
fees. Id. § 1640(a). Section 1640 explicitly states that an action brought under it must be
commenced within one year from the date of the occurrence of the violation. Id. § 1640(e).
¶ 22 To the extent that the Millers’ counterclaim seeks damages pursuant to section 1640, it is
indeed untimely: the Millers filed their counterclaim on November 16, 2011, one year and four
months after U.S. Bank allegedly let the 20-day period following the Millers’ notice of
rescission (sent on June 30, 2010) lapse without taking any action.
¶ 23 U.S. Bank argues that the same one-year limitations period should apply to the Millers’
claim for relief pursuant to section 1635. Initially, U.S. Bank maintains that the Millers,
through counsel, conceded the applicability of the one-year statute of limitation to their TILA
counterclaim in the circuit court and instead argued that the savings clause of section 13-207
of the Code operated to render their claim timely. See 735 ILCS 5/13-207 (West 2016).
Accordingly, U.S. Bank contends, they cannot take a contrary position on appeal. See
Sakellariadis v. Campbell, 391 Ill. App. 3d 795, 800 (2009) (doctrines of invited error, waiver,
and judicial estoppel prevent party from taking one position at trial and different position on
appeal).
¶ 24 To be sure, at oral argument before the circuit court on U.S. Bank’s motion to dismiss the
Millers’ third amended counterclaim, the court asked the Millers’ counsel if they were
“admitting there is a one-year statute of limitations, but the savings clause saves your
counterclaim,” to which counsel responded affirmatively. But later, counsel said “it’s our
position that the counterclaim is not barred by the statute of limitations in this matter.” Further,
the Millers’ written submissions responding to U.S. Bank’s motion to dismiss argued that their
counterclaim was not barred by the statute of limitations. Viewed in context, counsel denied
the applicability of the one-year statute of limitations to the counterclaim, with the exception
of his equivocal verbal statement when asked by the judge in the throes of oral argument.
Accordingly, counsel’s isolated statement does not rise to the level of a binding concession.
¶ 25 Turning then to the merits of the dispute, we begin with an examination of Fendon v. Bank
of America, N.A., 877 F.3d 714 (7th Cir. 2017), on which U.S. Bank heavily relies. There, the
plaintiff filed a lawsuit in federal court seeking rescission and other relief after the Illinois state
court entered a final judgment confirming the foreclosure sale of his home. Id. at 716. The
plaintiff alleged that he notified the defendant of his intent to rescind in 2008, 2009, and 2010.
Id. The defendant ignored his 2008 and 2009 notices, rejected the third, and, in 2011, filed a
foreclosure action in state court. Id. The Seventh Circuit held that because the property had
already been sold, the Rooker-Feldman doctrine (see Rooker v. Fidelity Trust Co., 263 U.S.
413 (1923); District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983))
prohibited it from unwinding that transaction. Fendon, 877 F.3d at 716. Nevertheless, the court
considered whether it could grant the plaintiff relief “that takes as a given” the state court
judgment—namely, damages under section 1640 of TILA. Id. The defendant, however, argued
that the statute of limitations barred suit under this section, and the court agreed. The court
implicitly accepted the plaintiff’s claim that there was no statute of limitations on claims for
rescission under section 1635 but held that because the only possible relief it could offer the
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plaintiff was damages under section 1640, the one year statute of limitations in section 1640(e)
applied to bar his claim. Id. at 717.
¶ 26 Here, in contrast to the plaintiff in Fendon, the Millers are seeking relief under section
1635, and because their counterclaim is pending in state court, as opposed to federal court, the
Rooker-Feldman doctrine does not prevent them from obtaining that relief notwithstanding the
fact that the property has already been sold. Thus, Fendon and other cases from this court
applying a one-year statute of limitations to claims under section 1640 are of limited
applicability here. See, e.g., Beneficial Illinois Inc. v. Parker, 2016 IL App (1st) 160186, ¶ 17;
Financial Freedom Acquisition, LLC v. Standard Bank & Trust Co., 2015 IL 117950, ¶ 44.
¶ 27 Instead, we must consider the statute of limitations, if any, that is applicable to section 1635
claims, given that the section itself does not provide a limitations period. Prior to the United
States Supreme Court’s decision in Jesinoski v. Countrywide Home Loans, Inc., 574 U.S. 259,
135 S. Ct. 790 (2015), a number of lower courts had assumed that the statute of limitations for
rescission claims under section 1635 of TILA was three years from the date of the mortgage,
such that a borrower had to both give notice of rescission and sue to enforce the right to rescind
within the three years allowed by section 1635. See Keiran v. Home Capital, Inc., 720 F.3d
721, 726-28 (8th Cir. 2013) (discussing split in the circuits prior to Jesinoski), cert. granted,
judgment vacated, 135 S. Ct. 1152 (2015), abrogated by Jesinoski, 574 U.S. 259, 135 S. Ct.
790. But in Jesinoski, the Court held that a rescission is effected once a borrower notifies the
lender of his intent to rescind: the borrower does not need to also file suit to enforce the
rescission within three years of consummation of the loan. Jesinoski, 574 U.S. at ___, 135 S.
Ct. at 792. Following Jesinoski, courts have struggled to agree on the appropriate statute of
limitations for a claim by a borrower to enforce the right to rescind a loan.
¶ 28 The Ninth Circuit, in Hoang, borrowed the relevant state court limitations period for breach
of contract actions. There, the plaintiffs brought an action to enforce their timely rescission
notice after the defendant began foreclosure proceedings. Hoang, 910 F.3d at 1099. In
considering when a suit to enforce a rescission must be brought after a lender fails to respond
to the rescission notice, the court explained:
“When there is no statute of limitations expressly applicable to a federal statute,
‘we do not ordinarily assume that Congress intended that there be no time limit on
actions at all.’ DelCostello [v. International Brotherhood of Teamsters, 462 U.S. 151,
158 (1983)]. Rather, ‘the general rule is that a state limitations period for an analogous
cause of action is borrowed and applied to the federal claim.’ [County of Oneida v.
Oneida Indian Nation of New York State, 470 U.S. 226, 240 (1985)].” Id. at 1100-01.
The court applied this principle and borrowed Washington’s statute of limitations for contract
actions to apply to the plaintiff’s rescission claim. Id. Significantly, the court explicitly rejected
application of section 1640(e)’s one-year statute of limitations, noting:
“TILA provides for both legal damages and equitable relief but only includes a statute
of limitations for legal damages relief. The statute does not suggest that the statute of
limitations for legal damages relief is also applicable to claims for equitable remedies.
If Congress intended that statute to apply, Congress surely knew how to draft the statute
accordingly. *** Only when a state statute of limitations would ‘frustrate or
significantly interfere with federal policies’ do we turn instead to federal law to supply
the limitation period. [Reed v. United Transportation Union, 488 U.S. 319, 327
(1989)].” Id. at 1102.
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¶ 29 In a line of district court cases, however, the courts borrowed the one-year statute of
limitations from section 1640(e) of TILA. See U.S. Bank National Ass’n v. Gerber, 380 F.
Supp. 3d 429, 438 (M.D. Pa. 2018); Jacques v. Chase Bank USA, N.A., No. 15-548-RGA, 2016
WL 423770 (D. Del. Feb. 3, 2016); Fam v. Bank of America, N.A., No. 1:17-cv-319, 2017 WL
5139262, at *3 (E.D. Va. Oct. 6, 2017); In re Hunter, 400 B.R. 651, 662 (Bankr. N.D. Ill.
2009); Stewart v. BAC Home Loans Servicing, LP, No. 10 C 2033, 2011 WL 862938, at *6
(N.D. Ill. Mar. 10, 2011).
¶ 30 This split in federal authority begs our supreme court to take up the question of the
appropriate statute of limitations for claims arising under section 1635 of TILA. In the interim,
we find the line of cases leading to the district courts’ conclusion to be a more reasonable path
to resolution of this case. As the court noted in Gerber, borrowing a lengthy (state) statute of
limitations, rather than using the one-year statute provided for in TILA itself, allows a borrower
to sit on a claim to enforce rescission of the mortgage while keeping both the property and the
loan proceeds. Gerber, 380 F. Supp. 3d at 438. If the rescission is proper and enforced, the
lender will be entitled to no interest for this period. This seems far more generous to borrowers
than is necessary to enforce the important disclosure obligations of TILA. It also seems far
afield from the underlying intent of the statute.
¶ 31 Also, within 20 days of sending a notice of rescission, the borrower knows whether the
bank will respect that notice. It is difficult to conceive of a justification for a lengthy statute of
limitations, where the accrual of a claim is so straight forward. In addition, the rescission
enforcement action is inextricably intertwined with the TILA damages claim that is expressly
covered by the one-year statute of limitations. It would be surprising if Congress intended a
borrower to still be able to sue to enforce their rescission rights under section 1635, when the
statute of limitations had already run on that borrower’s right under section 1640 to recover
the costs of bringing suit and their attorney fees. While the Millers have agreed to give up those
fees and costs, clearly what Congress intended was that if a borrower had to sue to enforce
their right to rescission, the bank should be on the hook for the cost of doing so.
¶ 32 Finally, we are not persuaded by the Hoang court’s conclusion that this is not one of the
rare circumstances in which “ ‘a rule from elsewhere in federal law clearly provides a closer
analogy than available state statutes.’ ” Hoang, 910 F.3d at 1101 (quoting Reed v. United
Transportation Union, 488 U.S. 319, 324 (1989)). The TILA statutory remedy of rescission
has little to do with common law contract rights. The general equitable remedy of rescission is
available to undo a contract where, for example, there has been some fraud or misconduct in
the contract formation. See, e.g., Peddinghaus v. Peddinghaus, 314 Ill. App. 3d 900, 908
(2000). Under TILA, however, the borrower does not need to show any fraud or misconduct
by the bank. Rather, there is an absolute right to rescind under TILA, provided that there is
timely notice. 15 U.S.C. § 1635 (2006). While a mortgage is undoubtedly a contract, rescission
is a statutory remedy having little to do with contract law. Therefore, section 1640(e) provides
a closer analogy for a statute of limitations for actions to enforce a rescission than the 10-year
statute for written contracts in Illinois. See Gerber, 380 F. Supp. 3d at 438 n.6. And application
of the one-year statute renders the Millers’ section 1635 claim—just as its section 1640
claim—untimely. See supra ¶ 22.
¶ 33 Finally, we address the Millers’ challenge to the court’s decision denying them leave to
file an amended answer raising rescission as an affirmative defense. Amendments should
generally be freely allowed (Sheffler v. Commonwealth Edison Co., 399 Ill. App. 3d 51, 59
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(2010)), but the right to amend a complaint is not absolute, and whether to allow amendment
of a complaint is within the trial court’s sound discretion (Romito v. City of Chicago, 2019 IL
App (1st) 181152, ¶ 21). A trial court abuses its discretion where no reasonable person would
take the view adopted by the court. Board of Education of the City of Chicago v. Board of
Trustees of the Public Schools Teachers’ Pension & Retirement Fund, 395 Ill. App. 3d 735,
741 (2009).
¶ 34 In reviewing a trial court’s decision for an abuse of discretion, we consider the following
four factors: (1) whether the amendment would cure the defective pleading, (2) whether the
opposing party would sustain prejudice or surprise by the amendment, (3) whether the
amendment is timely, and (4) whether the plaintiff had previous opportunities to amend the
complaint. Tomm’s Redemption, Inc. v. Hamer, 2014 IL App (1st) 131005, ¶ 13; see also
Loyola Academy v. S&S Roof Maintenance, Inc., 146 Ill. 2d 263, 273 (1992).
¶ 35 In this case, the basis for the trial court’s decision to deny leave to amend does not appear
in the record. Instead, there is only a one-page order reflecting that the trial court denied the
Millers’ motion “for reasons stated on record.” It was the Millers’ burden, as the appellants, to
provide a complete record on appeal. Foutch v. O’Bryant, 99 Ill. 2d 389, 391-92 (1984). In the
absence of a record reflecting the reasons for the trial court’s decision to deny amendment of
the Millers’ counterclaim, we must presume that the court’s order conformed with the law and
had a sufficient factual basis. See Taliani v. Resurreccion, 2018 IL App (3d) 160327, ¶ 20.
Therefore, we affirm the trial court’s order denying the Millers leave to amend their complaint.
¶ 36 CONCLUSION
¶ 37 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 38 Affirmed.
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