First Mortgage Co. v. Dina
11 N.E.3d 343
Ill. App. Ct.2014Background
- First Mortgage Company, LLC (plaintiff) sued Daniel and Gratziela Dina to foreclose a mortgage showing lender as First Mortgage Company of Idaho, LLC (FMCI); borrowers defaulted on a balloon payment due March 15, 2008.
- Plaintiff moved for summary judgment and submitted a Statement of Merger indicating FMCI merged into plaintiff effective April 30, 2011; defendants missed the initial response deadline but were later allowed to file an opposition.
- Defendants argued in opposition that neither FMCI nor plaintiff was licensed under the Illinois Residential Mortgage License Act of 1987 (License Act) and therefore the mortgage was unenforceable; they also raised registration/LLC Act and loan-modification arguments.
- The trial court granted summary judgment for foreclosure and later confirmed the judicial sale; defendants moved for reconsideration and appealed after denial.
- On appeal the Second District held a genuine factual dispute existed about FMCI’s License Act status and that, if unlicensed, the mortgage would be void as against public policy; the panel vacated the summary judgment and sale confirmation and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a mortgage is enforceable if the lender lacked a License Act license | Mortgage enforceable; plaintiff (or its parent) is exempt as a bank or merger cured any defect | Mortgage void because FMCI was not licensed under the License Act, so contract violates public policy | Mortgage by an unlicensed mortgage lender is void as against public policy; material fact issue on FMCI’s license status precluded summary judgment |
| Whether plaintiff (or FMCI) is exempt from the License Act as a bank | Plaintiff claims NIC classification shows it is a bank and thus exempt; merger/registration excuses FMCI | Exemption irrelevant because the loan was made by FMCI, not plaintiff, and NIC classification does not prove bank status | Plaintiff’s NIC-based exemption argument was unsupported and irrelevant; FMCI’s exempt status was not established |
| Whether defendants forfeited the licensing defense by raising it in opposition rather than the answer | Forfeiture: licensing is an affirmative defense that must be pleaded | No forfeiture: public-policy illegality can be considered even if not pleaded properly | Defense not forfeited here because unenforceability on public-policy grounds may be considered and plaintiff had fair opportunity to respond |
| Whether confirmation of the sale was an abuse of discretion because modification would be mutually beneficial | Sale was procedurally proper after judgment of foreclosure | Confirmation unjust because parties could have modified loan to mutual benefit | Court did not decide on modification merits; remand required because underlying foreclosure judgment was vacated |
Key Cases Cited
- Carter-Shields v. Alton Health Institute, 201 Ill. 2d 441 (2002) (unlicensed professional practice renders agreements unenforceable under public policy)
- Chatham Foot Specialists, P.C. v. Health Care Service Corp., 216 Ill. 2d 366 (2005) (courts will not enforce contracts made in violation of licensing laws enacted to protect the public)
- Solomon v. Gilmore, 731 A.2d 280 (Conn. 1999) (majority view that mortgages made by unlicensed lenders are void as against public policy)
- Bennett v. Bourne, 5 S.W.3d 124 (Ky. 1999) (contrasting view that legislature must expressly make contracts unenforceable)
- Dixon v. Mercury Finance Co. of Wisconsin, 296 Ill. App. 3d 353 (1998) (distinguishable precedent holding financing contracts not void for licensing violation where statute balanced remedies)
- First Trust & Savings Bank of Kankakee v. Powers, 393 Ill. 97 (1946) (equity will refuse to enforce provisions contrary to public policy even if not raised)
- In re Marriage of Best, 387 Ill. App. 3d 948 (2009) (courts may consider public-policy violations sua sponte)