July 2010 Vol. 3, No. 6
 

Casenotes

Illinois

Foreclosures; In Rem Jurisdiction

ABN AMRO Mortgage Group, Inc v McGahan, 237 Ill 2d 526, 931 NE2d 1190, 342 Ill Dec 7 (Ill., 2010).

Facts: This decision combined two cases,ABN AMRO Mortgage Group, Inc v McGahanandCharter One Bank v Hunter. In the first case, Nona McGahan defaulted on a loan from ABN AMRO (ABN); on August 30, 2006, ABN sought to foreclose the mortgage that secured the loan. However, McGahan had died before ABN filed its complaint. At ABN's request, on October 11, 2006, the court granted ABN leave to name a personal representative on behalf of McGahan. On November 29, 2006, ABN informed the court it did not intend to name a personal representative.

The court subsequently dismissed ABN's complaint for foreclosure, citing a recent order dismissing a similar foreclosure proceeding where the mortgagor had predeceased the foreclosure complaint. Based on older Illinois cases, ABN argued that foreclosures arein remactions, or actions against an item of property, and therefore these actions do not require a human defendant. The trial court disagreed and categorized foreclosures asquasi in rem, meaning an action against a person in the context of that person's rights in a piece of property. The trial court's reasoning was based on the fact that mortgage foreclosures are adversarial and mortgagors have a right to defend these actions. Therefore, where a mortgagor is deceased and the mortgagee does not name a personal representative, the court in which the foreclosure complaint is filed does not have subject matter jurisdiction.

Charter One Bank v Hunterhad substantially similar facts - a mortgagee attempted to foreclose against a deceased mortgagor. In the absence of a personal representative, the court again dismissed the mortgagee's complaint for want of subject matter jurisdiction.

The banks appealed the decisions and the appellate court consolidated the cases. Neither appellee made an appearance, but the Chicago Volunteer Legal Service Foundation (Foundation) filed an amicus curiae brief in support of the underlying decisions. Finding that Illinois courts consistently categorized foreclosures asin remactions, the appellate court stated that foreclosures determine rights not against individuals but against the whole world. Therefore, becausein remactions do not require an actual defendant, the appellate court found that the trial court had subject matter jurisdiction despite the lack of personal representatives. The Foundation appealed.

Holding: Reversed. First, the court pointed out that the U.S. Supreme Court labeled foreclosures asquasi in remactions inFreeman v Alderson, 119 US 185 (1886). That case stated that a foreclosure isquasi in rembecause it is a claim against individuals, not the underlying property, and "the action is personal in nature."Freeman, 119 U.S. at 188. The court agreed, further stating that the property at issue in a foreclosure is not the defendant in the case, but rather the mortgagor is. In fact, the Illinois Mortgage Foreclosure Law makes a mortgagor a necessary party to a foreclosure claim. 735 ILCS 5/15-1501(a)(i).

Unlike anin remaction, foreclosure requires personal service on an individual, in this case the mortgagor. Also, the property in a foreclosure is not the instrumentality of the wrong as it is in anin remaction. The instrumentality of the wrong in a foreclosure is the mortgagor who defaulted on the terms of the loan. Finally, mortgage foreclosures do not bind the whole world, because foreclosure judgments are subject to interested nonparties whose claims were not barred by the judgment. For example, junior lienholders who were not made parties to a foreclosure would still have valid liens that could be extinguished in a separate strict foreclosure action.

Because the court found that foreclosures arequasi in rem, the court unanimously reversed the appellate decisions finding subject matter jurisdiction. In so concluding, the court evaluated a recent case,Financial Freedom v Kirgis, 377 Ill App 3d 107 (2007), where a circuit court retained jurisdiction in a foreclosure filed against a deceased person, concluding that the foreclosure was anin remaction. The court rejected the reasoning in Financial Freedom and overruled it to the extent it conflicted with the instant decision.

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