Financial Freedom v Kirgis (IL)

Mortgage Foreclosure

Financial Freedom v Kirgis, 377 Ill App 3d 107, 877 NE2d 24, 315 Ill Dec 537 (1st D 2007).

Summary: The two-year statute of limitations period did not preclude or time bar mortgagee's independent in rem mortgage foreclosure claim.

Facts: On September 16, 2002, Financial Freedom Senior Funding Corp. (Financial Freedom) filed a complaint to foreclose a reverse mortgage against Mabel Kirgis and her son, Raymond. Mabel executed a reverse mortgage instrument with Financial Freedom on May 9, 1997, securing a maximum of $184,500 in principal indebtedness with a pledge of the property as collateral. The mortgage instrument was signed by Mabel and Raymond. Upon Mabel's death, Financial Freedom alleged that, pursuant to the mortgage instrument, all sums owed, the principal balance of $84,385.19 plus interest, costs, advances, and fees, were immediately due and payable. Additionally, among other things, Financial Freedom requested a judgment of foreclosure and sale and a personal judgment for deficiency in the event that the amount obtained through the foreclosure sale was insufficient to satisfy the debt.

On October 21, 2002, Raymond filed a motion to dismiss the complaint pursuant to Section 2-619 of the Code of Civil Procedure, contending that the circuit court lacked subject matter jurisdiction over the cause, because the suit was filed against a deceased person. Additionally, Raymond argued that the action was time barred, because it was filed three years after Mabel's death, in contravention of the two-year statute of limitations prescribed under Section 18-12 of the Probate Act. On January 7, 2003, Financial Freedom filed a response contending that it was unaware of Mabel's death when the complaint was filed and only became aware after the process server was unable to serve process on her. Additionally, Financial Freedom argued that the Probate Act's statute of limitations applies only to the filing of claims seeking entry of a personal judgment, and not foreclosure claims. On March 4, 2003, the circuit court denied Raymond's motion to dismiss and ruled that Financial Freedom was barred from any deficiency. The appellate court denied Raymond leave to file an appeal based upon the statute of limitations issue.

On July 17, 2003, Raymond filed an answer, raising three affirmative defenses to Financial Freedom's complaint: (1) the court lacked subject matter jurisdiction where a party files suit against a deceased person; (2) Financial Freedom's claim was time-barred by the two-year statute of limitations articulated in section 18-12 of the Probate Act; and (3) the mortgage was procured by fraud, alleging that the mortgage was part of a scheme brought by Senior Citizen's Remodeling, Inc. (SCR) to defraud the elderly. On October 27, 2004, Raymond filed an additional Section 2-619 motion to dismiss, based upon a purported settlement agreement reached by the parties. On December 22, 2004, Financial Freedom filed an amended complaint in order to name Mary Scholze and Patricia Bishop as additional defendant, believing that they were also Mabel's heirs, and alleged that the mortgage had been executed by Raymond. On February 18, 2005, Raymond filed an answer, admitting he had executed the mortgage, and raised the same three affirmative defenses as in the prior answer. Raymond then also filed a counterclaim against Financial Freedom, contending that the plaintiff had breached its settlement agreement. On March 21, 2005, Financial Freedom filed a motion for summary judgment, contending that it had proved that its mortgage lien against Mabel's property was valid, subsisting, and unsatisfied and that Raymond's first two affirmative defenses failed as a matter of law. As to Raymond's fraud defense, Financial Freedom asserted that: (1) the fraud alleged against SCR was too vaguely and incompletely pleaded; (2) there was no allegation of fraudulent misrepresentation by Financial Freedom or anyone else associated with the plaintiff; and (3) that even if SCR had acted fraudulently, Financial Freedom was a bona fide purchaser for value that took its interest without notice of any fraud tainting SCR's dealing with Mabel. On July 5, 2005, Raymond filed his response to the motion for summary judgment, contending that the motion should be denied for the reasons set forth in his previous motion to dismiss and because there was a genuine issue of material fact as to whether Mabel and Raymond were fraudulently induced to enter into the reverse mortgage agreement.

On October 13, 2005, a judgment for foreclosure and sale was entered. The court ruled that it did not lack subject matter jurisdiction, because this was a foreclosure proceeding and no precedent exists as to Raymond's position. The court also found that Financial Freedom's foreclosure was not time barred, because: (1) the action was in rem; (2) no probate estate had been opened; and (3) Section 18-12(d) is not a general statute of limitations, but a probate claims bar provision. Regarding Raymond's fraud defense, the court found that Raymond submitted no admissible evidence establishing or tending to support his claim and that there was a connection between Financial Freedom and SCR. Raymond then appealed.

Holding: Affirmed. On appeal, Raymond contended that the trial court erred when it denied his Section 2-619 motion to dismiss Financial Freedom's initial foreclosure action for two reasons: (1) the trial court lacked subject matter jurisdiction; and (2) the foreclosure action was time barred. Both were argued for the same reasons stated above. However, the court disagreed, following precedent set by the Illinois Supreme Court and holding that the two-year limitations period set forth in Section 18-12 of the Probate Act incorporated through Section 13-209 of the Code of Civil Procedure did not in any way preclude or time bar Financial Freedom's independent in rem mortgage foreclosure claim and that the trial court was not thereby deprived of subject matter jurisdiction.

Additionally, on appeal, Raymond contended that the trial court erred when it granted Financial Freedom's motion for summary judgment because there was a genuine issue of material fact as to whether the mortgage was produced by fraud. Again, the court disagreed, finding that Financial Freedom presented a sufficient factual basis to establish its cause of action and to negate any possibility of the existence of a genuine issue of material fact as to fraud. Finally, Raymond contended that the trial court erred in granting the motion for summary judgment because it did not permit him more discovery on his counterclaim for breach of the settlement agreement. However, the court held that Raymond never asked for more discovery on the settlement issue and that no such request was denied.

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By: ATG Underwriting Department | Posted on: Fri, 05/30/2008 - 5:16pm