Thursday, March 10, 2016

Void vs. Voidable: Illinois Lawsuit: Failure To Use State-Licensed Private Detective Agency To Serve Foreclosure Lawsuits Violates State Law, Leads To Slew Of Void (Not Merely Voidable) Foreclosure Judgments; Property Owner Seeks Return Of $3.5 Million In Proceeds From 22 Sales

In Chicago, Illinois, the Cook County Record reports:

  • Trying to take advantage of a “procedural windfall,” a Chicago-area investment firm is alleging West Suburban Bank owes it almost $3.5 million from the sales of foreclosed properties held as collateral for a $10 million loan the firm defaulted on, because the firm was not legally served with notice of the foreclosures, as the process servers did not work for a state-licensed private detective agency as required by law.

    Advantage Financial Partners lodged a one-count restitution complaint Feb. 16 in Cook County Circuit Court against West Suburban Bank, which is headquartered in Lombard and has 19 branches in the suburbs.

    The case originated in 2005, when Advantage took a $10 million loan from West Suburban Bank, putting up 23 mortgaged properties as collateral, 15 of which were in Cook County, with the rest in DuPage, Will and Kane counties. The bank, however, alleged Advantage defaulted in 2008, and initiated foreclosure proceedings in December that year. The bank used a private detective agency, MPSI, to serve summonses on Advantage for 22 of the cases, and used another process server in the 23rd case. Advantage purportedly never responded.

    In 2009, default judgments were ordered against Advantage. West Suburban next bought the properties at sheriff’s sales, then sold them to third parties for $3.5 million, according to Advantage.

    In April 2013, Advantage sued to have 22 of the foreclosure judgments vacated, saying MPSI was not licensed with the state at the time its agents served foreclosure notice on Advantage. Specifically, MPSI’s agency license had expired Aug. 31, 2008, and was never renewed. Given that MPSI was not licensed, Advantage argued it was never legally served with notice of the foreclosure actions.

    Advantage did not claim it never received the summonses.

    West Suburban Bank filed a motion to consolidate the cases, which was granted, with 22 of the cases combined in DuPage County Circuit Court; the 23rd case was from Cook County and remained there. The bank then moved for dismissal of the cases in DuPage County handled by MPSI, contending, although the agency was not licensed as a detective agency, the agency’s employees who served the summonses were licensed. As a consequence, the bank contended the summonses were lawfully served.

    DuPage County Judge Robert G. Gibson agreed with the bank and dismissed Advantage’s suit in September 2013. Advantage appealed to Second District Appellate Court in Elgin, which in November 2014 overturned Gibson’s ruling, voided the foreclosure judgments and reinstated Advantage’s case.(1)

    The appellate court found the detective agency was the entity authorized to serve process, not the agency’s employees, regardless of whether they were individually licensed. Justice Mary Seminara-Schostok, who authored the appellate opinion, noted the opinion was in keeping with judicial principles “embedded in Illinois law for over a century.”(2)

    However, the court reached this decision with reluctance, having concern about the unjust effect of its ruling.

    “I invite the reader to step back and set aside, for a moment, the procedural niceties in play here and consider this case with an intuitive sense of justice. I venture that few would find this result at all palatable. Advantage has received an undeserved procedural windfall,” said Justice Joseph E. Birkett, who concurred in the opinion with Justice Schostok, as well as with Justice Ann B. Jorgensen.

    The case was remanded to DuPage County Circuit Court, where more legal maneuvers were made before the case was closed in July 2015.

    Advantage lodged a new complaint Feb. 16 in Cook County Circuit Court, demanding West Suburban Bank return to Advantage the $3.5 million in proceeds from the sale of 21 of the foreclosed properties, plus pre- and post-judgment interest, as well as any damages the judge deems just.

    Advantage alleged the money the bank received by selling the properties was based upon “unlawful judicial proceedings,” as the appellate court laid out in its ruling.
Source: Foreclosed land investors exploit technicality to demand $3.5 million 'procedural windfall' from bank.
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(1) West Suburban Bank v. Advantage Financial, 23 NE 3d 370 (Ill. App. 2nd Dist. 2014).

(2) From the 2014 appeals court ruling:
  • ¶ 20 WSB argues that MPSI's expired certification is a technical defect that should not result in a lack of personal jurisdiction. However, the weight of Illinois law is clearly to the contrary: defects in the service of process are neither "technical" nor insubstantial.
    ***
    Further, strict compliance with the statutes governing the service of process is required before a court will acquire personal jurisdiction over the person servedSarkissian v. Chicago Board of Education, 201 Ill.2d 95, 109, 267 Ill.Dec. 58, 776 N.E.2d 195 (2002); C.T.A.S.S. & U. Federal Credit Union v. Johnson, 383 Ill.App.3d 909, 912, 322 Ill.Dec. 543, 891 N.E.2d 558 (2008).
    ***
    ¶ 24 WSB contends that the defect in service of process merely rendered the judgments voidable, not void, [...].
    ***
    As we have said, the proposition is well established that invalid service results in a judgment that is void for lack of personal jurisdictionSarkissian, 201 Ill.2d at 109, 267 Ill.Dec. 58, 776 N.E.2d 195; Thill, 113 Ill.2d at 308-09, 100 Ill.Dec. 794, 497 N.E.2d 1156; see also Pennoyer v. Neff, 95 U.S. 714, 732, 24 L.Ed. 565 (1877) ("if the court has no jurisdiction over the person * * * and, consequently, no authority to pass [judgment] upon his personal rights and obligations[,] * * * the whole proceeding * * * is coram non judice and void").

    There is no similar support for the idea that lack of personal jurisdiction merely renders a judgment voidable.

Monday, March 7, 2016

Florida Appeals Court Invokes 'Two Strikes & You're Out!' Rule To Permanently Sink Foreclosure Action; Unanimous Panel Says Banksters Allowed Only One Refiling Per Mortgage Note (Not Per Plaintiff), Then Get The Boot After The 2nd

In West Palm Beach, Florida, the Daily Business Review reports:

  • One voluntary dismissal too many sank a foreclosure case for a lender who acquired a debt that had been sold at least twice before.

    The Fourth District Court of Appeal considered the procedural history and the number of voluntary dismissals tied to the note rather than the dismissals per plaintiff to reverse the foreclosure Wednesday and leave homeowner attorneys celebrating.

    "This has always been the rule … but it's interesting in the context of foreclosure where there's this constant shifting of plaintiffs," said foreclosure defense attorney Thomas Ice of Ice Legal in Royal Palm Beach, who was not involved in the litigation. "Often the parties are different on paper, but they're related somehow, so it really is the same lawsuit."

    The appellate court invoked the so-called two-dismissal rule under Florida Rule of Civil Procedure 1.420(a)(1)which allows one voluntarily dismissal but not two.(1)

    The appeal pitted Loxahatchee property owner Charles Nolan against MIA Real Holdings LLC, a successor lender that sought to foreclose on the same default as its predecessor, Flagstar Bank. It was the third foreclosure attempt against Nolan following two voluntary dismissals.

    The first suit came from Flagstar, which filed for foreclosure in 2011 after Nolan reportedly defaulted on the loan.

    Flagstar dismissed that case and later assigned the note and mortgage to DKR Mortgage, which started its own foreclosure before selling the debt as a trouble mortgage to MIA Real Holdings.

    MIA sought to be substituted as the real party in interest to take over the case but then voluntarily dismissed the suit before filing a third complaint alleging the same breach.

    Nolan's lawyers, Brian Korte and Scott Wortman of Korte & Wortman in West Palm Beach, argued the suit — "based on the same mortgage, same note, same default and same damages as the prior two actions" — was barred under the two-dismissal rule.

    "It's just unfair," Korte told the Daily Business Review. "The court wants some finality. You get two bites of the apple."

    MIA attorney Jerome Tepps of Sunrise did not respond to requests for comment by deadline. His client triumphed at trial when Palm Beach Circuit Judge Catherine Brunson counted MIA's voluntary dismissal as the only one applied to the current parties in the litigation.

    But Nolan successfully challenged that decision.

    "We hold that the two noteholders — the original plaintiff and the subsequent assignee of the note — were the same 'plaintiff' under the rule, so that the second voluntary dismissal triggered an 'adjudication on the merits,' " Fourth DCA Judge Robert Gross wrote in a unanimous decision with Judges Martha Warner and Spencer Levine concurring.
Source: Appeals Court: Two Strikes and You're Out on Foreclosure Dismissals (may require subscription; if no subscription, TRY HERE, then click appropriate link for the story).

For the court ruling, see Nolan v. MIA Real Holdings, LLC, No. 4D15-666 (Fla. App. 4th DCA, February 24, 2016).
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(1) "[A] notice of dismissal operates as an adjudication on the merits when served by a plaintiff who has once dismissed in any court an action based on or including the same claim." Florida Rule of Civil Procedure 1.420(a)(1). (Page 124)