THE BANK OF NEW YORK MELLON, f/k/a The Bank of New York, as Trustee for the Certificate Holders of the CWABS, Inc., Asset-Backed Certificates, Series 2005-4, Plaintiff-Appellee, v. FRANCESCA T. RODRIGUEZ, JESSE RODRIGUEZ, and THE VILLAGE OF CAROL STREAM, UNKNOWN OWNERS-TENANTS, and NONRECORD CLAIMANTS, Defendants (Francesca T. Rodriguez and Jesse Rodriguez, Appellants; Carl Duber, Garry Duber, Janet Duber, Rosa DeLaRosa, Erica DeLaRosa, and Community Savings Bank, Respondents-Appellees).
No. 2-19-0143
Appellate Court of Illinois, Second District
March 30, 2020
2020 IL App (2d) 190143
JUSTICE JORGENSEN delivered the judgment of the court, with opinion. Justices Schostok and Brennan concurred in the judgment and opinion.
Appeal from the Circuit Court of Du Page County, No. 12-CH-1998; the Hon. James D. Orel, Judge, presiding. Judgment Affirmed.
Giovanni Raimondi, of RAI Law, LLC, of Schaumburg, for appellants.
Punit Kumar Marwaha, of Troutman Sanders LLP, of Chicago, for appellee Bank of New York Mellon.
Nathan B. Grzegorek and James A. Larson, of Plunkett Cooney, P.C., of Chicago, for appellees Carl Duber, Garry Duber, and Janet Duber.
¶ 1 In April 2012, plaintiff, the Bank of New York Mellon, formerly known as the Bank of New York, as trustee for the certificate holders of CWABS, Inc., Asset-Backed Certificates, Series 2005-4 (Bank), filed a foreclosure complaint against defendants, Francesca T. and Jesse Rodriguez, concerning a home in Hanover Park. Ultimately, in May 2014, the trial court entered a default judgment against defendants, and the property was sold through a judicial sale.
¶ 2 In July 2018, defendants filed a petition for relief from a void judgment, pursuant to
I. BACKGROUND
¶ 4 As mentioned, the Bank filed the foreclosure complaint in April 2012. In May 2012, defendants filed a Chapter 7 bankruptcy petition, in which they identified the property as one of their assets that they intended to “surrender.” On September 18, 2012, the bankruptcy closed, and defendants’ debts, including those pertaining to the property, were discharged.
¶ 6 Approximately two weeks later, on December 17, 2012, defendants’ attorney from the bankruptcy proceeding filed in the foreclosure action a “suggestion of bankruptcy.” The document notified “interested parties” оf the existence of the bankruptcy case and attached various documents pertaining to that case. Again, this document was filed in the foreclosure action almost three months after the bankruptcy case closed.
¶ 7 The record reflects, without explanation or detail, that the foreclosure action was then continued for approximately two years. It is apparently undisputed that defendants did not seek to redeem or reaffirm the property. Eventually, in April 2014, the Bank moved for a default judgment against defendants and a judgment of foreclosure and sale. On May 16, 2014, the court entered an order of default against defendants and a judgment of foreclosure. The property was sold at a judicial sale, with the Bank being the successful bidder. On October 7, 2014, the foreclosure court entered an order confirming the judicial sale.
¶ 8 In January 2015, the Dubers purchased the residence from the Bank for $130,000. They attested that they had remitted sums for real estate taxes and property insurance and invested approximately $61,500 in home improvements. In September 2015, the DeLaRosas (and their mortgage lender, CSB) purchased the residence from the Dubers for $260,000.
¶ 9 On July 17, 2018, approximately six years after they received their bankruptcy discharge, defendants filed a section 2-1401 petition seeking relief from a void judgment. They argued that, where there was no order in the record appointing a special process server, they were improperly served in Cook County, in violation of
—quash the service;
—vacate all orders and judgments in the case as void ab initio;
—find that the lack of jurisdiction is apparent on the face of the record;
—find that defendants are the owners of the property;
—restore possession of the property to them and order that the Bank, the
Dubers, and the DeLaRosas pay defendants, “as restitution, reasonable use and occupancy of [the property] from October 7, 2014, through and including the date [defendants] are restored to possession.” Alternatively, “in the event that possession is not restored” to defendants, the Bank, the Dubers, and the DeLaRosas pay defendants “as restitution” the value of the property on the date that the petition is granted, plus reasonable use and occupancy of the property from October 7, 2014, through and including the date that restitution is paid in full; —order the Bank and the purchasers to pay defendants and CSB, “as restitution,” all profits that they derived from the property; and
—stay further proceedings until all restitution is made to defendants.
¶ 10 The Bank filed the section 2-615 motion, arguing that defendants’ petition lacked a required affidavit and that service was proper. The Dubers, joined by the DeLaRosas and CSB, filed the section 2-619.1 motion, arguing that they were entitled to bona-fide-purchaser protections under
¶ 11 On January 24, 2019, after hearing oral argument, the trial court denied the Bank‘s section 2-615 motion but granted with prejudice the purchasers’ motion, pursuant to the section 2-619 judicial-estoppel arguments. At a hearing, the court and defendants’ counsel had the following exchange:
“THE COURT: How can you even bring this action when the trustee on the Chapter 7 is the party that was of interest, number one. Number two, your clients gave up their interest. And number three, they are taking a contrary stance now, as you stand here in front of the Court.
* * *
THE COURT: They have surrendered to the trustee the property.
MR. RAIMONDI: For administration. At the point where the trustee did not administer that asset, it returns back to the debtor upon the discharge.
THE COURT: And did they get the property back on discharge?
MR. RAIMONDI: I don‘t know.
THE COURT: So, how can you bring this action then? If you don‘t even know—
MR. RAIMONDI: Because—
THE COURT: You just made an admission in open court that you don‘t know if they even have this property at this point.
MR. RAIMONDI: Obviously, they don‘t have the property, your Honor.”
¶ 12 The court emphasized that defendants filed their bankruptcy petition, vacated and surrendered the property, and received the bankruptcy discharge before they received service in the foreclosure action. It found defendants’ position in the bankruptcy—surrendering the property—contrаry to their section 2-1401 argument that they had an interest in the property, and it dismissed the petition. On February 22, 2019, defendants filed their notice of appeal.
II. ANALYSIS
¶ 14 Preliminarily, we note that, similar to their postures below, the Bank on appeal filed a response brief, and the
¶ 15 Turning to defеndants’ appellate arguments, they contend initially that the trial court erred in dismissing their section 2-1401 petition, pursuant to
¶ 16 First, defendants contend that estoppel does not apply to a motion to vacate a void judgment, as voidness may be raised at any time. Second, they argue that the purchasers failed to establish judicial estoppel, because there are no allegations that defendants acted in a manner calculated to make a mockery of the judicial system and, citing Seymour, they contend that courts are reluctant to apply judicial estoppel in the context of bankruptcy. Moreover, defendants contend that a statement of intention to surrender property pursuant to
¶ 17 We begin with the trial court‘s basis for dismissal, which addressеs defendants’ contention that surrendering the property did not act to waive their rights to challenge
¶ 18 While we have no quarrel with defendants’ assertion that void judgments may, generally, be attacked at any time, this position presumes that the judgment is being attacked by one with a valid interest in doing so. The question here is whether the bankruptcy proceeding, in which defendants surrendered the property and received a discharge of their debts—before they received the alleged defective service of the foreclosure complaint—affected their ability to seek relief from the foreclosure judgment. Defendants’ arguments, in total, suggest that their positions and the relief they were afforded in bankruptcy were of no legal import with respect to the foreclosure. For the following reasons, we disagree.
¶ 19 Two cases from other jurisdictions, although not precedential, are instructive with respect to the unique facts of this case. First, in In re Failla, 838 F.3d 1170 (11th Cir. 2016), the court explained the effect that “surrendering” property has in the context of bankruptcy. There, the court framed the question as “whether a person who agrees to ‘surrender’ his [(or her)] house in bankruptcy may oppose a foreclosure action in state court.” Id. at 1173. The court concluded that the word “surrender,” although not defined in the Bankruptcy Code, requires that debtors relinquish their rights to possess property such that they may not oppose state foreclosure actions. Id. at 1177-78; see also In re Pratt, 462 F.3d 14, 18-19 (1st Cir. 2006) (“the most sensible connotation of ‘surrender’ *** is that the debtor agreed to make the collateral available to the secured creditor—viz., to cede his possessory rights in the collateral” (emphases in original and added)). Specifically, the court determined that
“Because ‘surrender’ means ‘giving up of a right or claim,’ debtors who surrender their property can no longer contest a foreclosure action. When the debtors act to preserve their rights to the property ‘by way of adversarial litigation’ they have not ‘relinquish[ed] *** all of their legal rights to the property, including the rights to possess and use it.’ [Citation.] *** Ordinarily, when debtors surrender proрerty to a creditor, the creditor obtains it immediately and is free to sell it. [Citation.] Granted, a
creditor must take some legal action to recover real property—namely, a foreclosure action. [Citation.] Foreclosure proceedings ensure that debtors do not have to determine unilaterally issues of priority if there are multiple creditors or surplus if the value of the property exceeds the liability. [Citation.] Debtors who surrender property must get out of the creditor‘s way. ‘[I]n order for surrender to mean anything in the context of § 521(a)(2) , it has to mean that *** debtor[s] *** must not contest the efforts of the lienholder to foreclose on the property.’ [Citation]. Otherwise, debtors could obtain a discharge in bankruptcy based, in part, on their sworn statement to surrender and ‘enjoy possession of the collateral indefinitely while hindering and prolonging the state court process.’ [Citations.]” (Emphases omitted.) Id. at 1177.
¶ 20 The Failla court rejected the argument that defendants raise here, i.e., that
¶ 21 Similarly, in Ibanez v. United States National Ass‘n, 856 F. Supp. 2d 273 (D. Mass. 2012), the court considered the equitable effect of a party purporting to surrender a property in bankruptcy later seeking to claim injury upon an invalid foreclosure of the property. There, a court declared void in 2011 a fоreclosure judgment that was entered in 2007 against the homeowner. The homeowner filed a complaint, claiming, in part, that he had been deprived of the use, possession, and value of the mortgaged property. The bank moved for judgment on the pleadings, noting that the homeowner had also, in 2007, filed for Chapter 7 bankruptcy, indicated his intent to surrender the subject property, and received a discharge of that debt. The court granted the motion. Citing cases relating to concеpts of judicial estoppel, it noted that the homeowner was “seeking to capitalize in this court on the holding [that the foreclosure was void] by invoking the wrongful foreclosure of the same property that he surrendered in the Bankruptcy Court in exchange for the discharge of his debts. This, equity will not permit.” Id. at 275. The court found “fatal to his claims in this court” the homeowner‘s surrender of the property in bankruptcy; “thus, even were there a claim, it does not belong to [the homeowner].” Id. at 276. In addition, the сourt noted that the homeowner was allegedly unlawfully deprived of the property 10 months after he had surrendered his interest: “To argue that he was injured by the invalid foreclosure of a property in which he no longer held any legal or equitable interest defies logic.” Id.
¶ 22 Here, like in Ibanez, the allegedly unlawful deprivation occurred after defendants surrendered their interest in the property, and therefore, their assertion of injury with respect to the allegedly invalid foreclosure defies logic. We acknowledge that, as defendants point out,
¶ 23 Defendants’ cited cases do not convince us otherwise. Although defendants argue that stating an intent to surrender property under
“to obtain possession by available legal means [(i.e., foreclosure actions)] without interference. The debtor is not required to take any affirmative action to physically deliver the property. But the debtor cannot impede the creditor‘s efforts to take possession of its collateral by available legal means. If the debtor fails to comply with his intention, courts have employed a variety of remedies, such as *** dismissal of the case ***.” (Emphasis added.) Id. at 143-44.
Similarly, the court in In re Theobald, 218 B.R. 133, 136 (B.A.P. 10th Cir. 1998), noted that “Section 521 was not designed to provide a mechanism by which creditors may avoid obligations imposed by state law,” but the court there was considering whether a debtor‘s “surrender” required that the debtor sign a special warranty deed conveying title to the property to the creditor. The court rejected that interpretation of “surrender,” noting that it would create “a host of рroblems and additional duties not required by the Bankruptcy Code,” including putting the debtor in a position to determine to whom the property should be deeded, if more than one lienholder held an interest, and that the creditor would not be required to hold a foreclosure sale. Theobald, 218 B.R. at 136. As such, we do
¶ 24 Again, the facts of this case are unique. They reflect that the Bank filed its foreclosure action and, one month later, defendants filed for bankruptcy, having apparently already physically abandoned the property. They declared an intent to surrender the property in their bankruptcy petition, they did in fact surrender the property without reaffirming or redeeming it, and they received discharge in bankruptcy. After the discharge, they received service of process (even if defective) of the foreclosure action, and their bankruptcy attorney shortly thereafter filed in the foreclosure action the suggestion of bankruptcy. Defendants did not take any other action, in the foreclosure case or otherwise, until six years had passed and two subsequent purchases of the property were completed. We agree with the trial court that, given the foregoing authority and the unique circumstances of this case, defendants cannot now seek rеlief from judgment. Therefore, the court properly dismissed the section 2-1401 petition.
III. CONCLUSION
¶ 26 For the foregoing reasons, the judgment of the circuit court of Du Page County is affirmed.
¶ 27 Affirmed.