Concord Air, Inc. v. Malarz , 2015 IL App (2d) 140639 ( 2015 )

2015 IL App (2d) 140639
No. 2-14-0639
Opinion filed June 30, 2015
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
CONCORD AIR, INC., ) Appeal from the Circuit Court
) of Lake County.
Plaintiff-Appellant, )
)
v. ) No. 13-CH-2931
)
MARCIN MALARZ, CHICAGO TITLE )
LAND TRUST COMPANY, as Trustee )
Under a Trust Agreement Dated May 8, 2012, )
Known as Trust Number 80023599443, )
UNKNOWN OWNERS, and )
NONRECORD CLAIMANTS, ) Honorable
) Mitchell L. Hoffman,
Defendants-Appellees. ) Judge, Presiding.
______________________________________________________________________________
JUSTICE BURKE delivered the judgment of the court, with opinion.
Justices Jorgensen and Hudson concurred in the judgment and opinion.
OPINION
¶1 Harris Bank filed a foreclosure action (Harris foreclosure) as to the property at issue and
named plaintiff, Concord-Air, Inc., as a junior lienholder. Affidavits in the record state that
personal service was unsuccessful, and service ultimately was made by publication. Plaintiff
defaulted, and Harris Bank was the successful bidder at the judicial sale of the property, which
was confirmed by the trial court. Title was then conveyed to LaSalle Holdings via a sheriff’s
deed. In preparing to buy the property, defendant Chicago Title Land Trust Company (Chicago
2015 IL App (2d) 140639
Title) obtained a title report showing that plaintiff’s interest had been extinguished by the Harris
foreclosure. Chicago Title purchased the property and resold it to defendant Marcin Malarz. 1
¶2 Upon learning of its default, plaintiff successfully moved to quash the service as
defective. The trial court vacated the judgment against plaintiff only; and in turn, plaintiff
initiated this action by filing a complaint for foreclosure and sale of the property.
¶3 The trial court dismissed the complaint under section 2-619(a)(9) of the Code of Civil
Procedure (Code) (735 ILCS 5/2-619(a)(9) (West 2012)), concluding that Chicago Title was a
bona fide purchaser for value and that a ruling for plaintiff would be against public policy.
Plaintiff appeals, arguing that the record in the Harris foreclosure gave Chicago Title inquiry
notice that plaintiff’s interest in the property had not been extinguished, because service by
publication was improper. We conclude that the service affidavits on file in the Harris
foreclosure gave Chicago Title inquiry notice; and therefore, the complaint may not be dismissed
on the ground that Chicago Title was a bona fide purchaser. We reverse the dismissal and
remand the cause for further proceedings.
¶4 I. BACKGROUND
¶5 On October 21, 2013, plaintiff filed a verified complaint to foreclose the mortgage on the
property at 1313 East Westleigh Road in Lake Forest. The complaint named Malarz as
mortgagor and Chicago Title as present owner of the property. Plaintiff alleged that the
mortgage was executed on March 5, 2009, and recorded in Lake County on July 30, 2009.
Plaintiff further alleged that the mortgage was in default because the property was transferred
without plaintiff’s prior written consent.
1
Malarz is an appellee in this action but has not filed a brief and apparently relies on
Chicago Title’s arguments.
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¶6 On February 14, 2014, Chicago Title filed a motion to dismiss the complaint under
section 2-619(a)(9) of the Code, alleging as affirmative matter that Chicago Title was a bona fide
purchaser for value. To the motion, Chicago Title attached relevant documents to support its
assertions. Chicago Title alleged that BMO Harris Bank, as successor in interest to Harris Bank,
previously pursued a foreclosure action as to the subject property, docketed in the circuit court of
Lake County under No. 10-CH-636 (Harris foreclosure). The Harris foreclosure pertained to a
mortgage-securing note of $2.66 million, which was recorded in the office of the recorder of
deeds in Lake County on July 19, 2007.
¶7 Harris Bank obtained a judgment of foreclosure and sale on December 6, 2011.
Thereafter, Harris Bank proceeded to a judicial sale in which the bank was the successful bidder.
On April 13, 2012, the trial court entered an order confirming the sale. On April 19, 2012, the
property was conveyed to LaSalle Holdings via a sheriff’s deed, and the deed was recorded on
June 18, 2012.
¶8 On or around May 7, 2012, Chicago Title obtained a title commitment in preparation of
its purchase of the property from LaSalle Holdings. Chicago Title’s motion alleged that “[n]o
outstanding title issues with the property were found” in the title commitment. On May 21,
2012, LaSalle Holdings sold the property to Chicago Title for $1.15 million, and the special
warranty deed conveying the property was recorded on June 18, 2012.
¶9 In the trial court, Chicago Title argued that the complaint must be dismissed because
Chicago Title was a bona fide purchaser of the property for value. Referring to the title
commitment, issued by Chicago Title Insurance Company, Chicago Title asserted that it took
title “without notice of any outstanding right or interest of [plaintiff].” The title commitment
“did not identify [plaintiff’s] lien as creating a title issue or any exception of title that needed to
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be remedied prior to closing,” and in fact it “identifie[d] the Harris foreclosure action and
identifie[d] no issue therein regarding any possible lien claim by [plaintiff].”
¶ 10 Plaintiff responded that the trial court in the Harris foreclosure lacked personal
jurisdiction over plaintiff and that the jurisdictional defect was apparent from the record,
defeating Chicago Title’s claim that it was a bona fide purchaser. The record does not contain a
transcript or a written order with an explanation of the court’s basis for quashing service and
vacating the judgment as to plaintiff in the Harris foreclosure. However, the motion to quash
service alleged that plaintiff had never been served with a summons or complaint, plaintiff
neither resided in another state nor left this state, plaintiff could have been found upon due
inquiry, and plaintiff had not been concealed in this state.
¶ 11 To the motion, plaintiff attached the affidavit of Daniel Bachtold, Harris Bank’s special
process server, who stated that he was unsuccessful in attempting to serve plaintiff at 629
Pheasant Lane in Deerfield. The affidavit states:
“We tried to obtain service on Dzoko Stojanov at this address, we ran it several
times before actually catching anybody at this address, when we encountered a man who
fits our description of Dzoko, he answered the door intoxicated and he indicated he does
not feel like talking to anybody and just come back tomorrow, we tried to get him to be
cooperative and he was playing games by opening and closing the garage door, he had
company over and was trying to be funny, we left a copy of the documents behind, all
skip and service efforts have been exhausted, request for service by Notice of Publication
for [plaintiff] being difficult!”
The motion alleged that the property at the Pheasant Lane address is a residence and that the
Secretary of State’s website indicated that, when service was attempted, (1) plaintiff’s registered
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agent was Iljco Stojanov, not Dzoko Stojanov, (2) the address of plaintiff’s registered agent was
7915 North Linder Avenue in Morton Grove, not 629 Pheasant Lane in Deerfield, and (3)
plaintiff was dissolved as a corporation at the time of service by publication. The motion also
alleged that the Linder Avenue address was listed as plaintiff’s address on the mortgage.
Plaintiff argued that, because it had been dissolved within five years of the attempted service, the
registered agent and the registered office on record with the Secretary of State were an agent of
the corporation upon whom claims could be served and service of process could be had. See 805
ILCS 5/5.05 (West 2012). Plaintiff contended that, according to the affidavit of nonservice,
Bachtold did not attempt to serve process on Iljco Stojanov or anyone at the Linder Avenue
address. Plaintiff also argued that the affidavit of due diligence filed by Kelly Doherty
misidentified Mark Grena of Intelex Investigations as the process server, instead of Bachtold.
¶ 12 The record in the Harris foreclosure contains a document labeled “Corporation File Detail
Report” from the Secretary of State’s website, which identifies Iljco Stojanov as plaintiff’s agent,
shows the Linder Avenue address, and indicates that, in 2010, plaintiff was dissolved as a
corporation. Bachtold’s affidavit of nonservice, Doherty’s affidavit of due diligence, and the
Secretary of State’s corporation report were filed in the Harris foreclosure on October 8, 2010,
which was 3½ years before Chicago Title obtained its title commitment on May 7, 2012.
¶ 13 On May 21, 2014, the trial court granted Chicago Title’s motion to dismiss under section
2-619(a)(9). Initially, the court remarked that public policy weighed in favor of protecting
Chicago Title as a bona fide purchaser. The court stated that denying the motion to dismiss
would “set a precedent for any party that ever purchased property following a foreclosure in
Illinois, would never be able to safely hold title based on the possibility that some party could
come in later and seek to void that judgment. It seems to me that the sheriff’s sale has to confer
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rights, and to say that the purchaser here needed to consider the possibility that the judgment was
void when there’s nothing on the record to suggest that [plaintiff’s] lien had not been properly
extinguished as a matter of public policy would undercut the entire purpose of the statute, the
[Illinois Mortgage Foreclosure Law], and lead to chaos with sheriff’s sales.”
¶ 14 The court determined that Chicago Title was a bona fide purchaser because Chicago Title
had no notice of plaintiff’s claim that it had not been properly served in the Harris foreclosure.
The court noted that, although the title commitment was dated May 7, 2012, and Chicago Title
purchased the property on May 21, 2012, plaintiff’s motion to quash service was not filed until
February 7, 2013, and was not granted until October 2013. The court ruled that, “despite the fact
that certainly [plaintiff] legitimately raised a motion to quash, it doesn’t change the fact that
Chicago Title is, in this instance, a bona fide purchaser for value; and on that basis, I’m going to
grant the 2-619 [motion] with prejudice.” This timely appeal followed.
¶ 15 II. ANALYSIS
¶ 16 On appeal, plaintiff argues that the trial court erred in determining that Chicago Title was
a bona fide purchaser. Specifically, plaintiff argues that Chicago Title had inquiry notice that the
court in the Harris foreclosure lacked personal jurisdiction over plaintiff, such that no foreclosure
judgment could be entered against plaintiff. Plaintiff concludes that, with such notice that
plaintiff’s interest was not properly extinguished, Chicago Title could not reasonably rely on the
judgment disclosed in the title commitment to take the property as a bona fide purchaser.
¶ 17 In support, plaintiff argues that the record in the Harris foreclosure provided Chicago
Title with notice of plaintiff’s interest. After Chicago Title purchased the property, the court in
the Harris foreclosure ruled that it lacked personal jurisdiction over plaintiff because the
publication notice was improper as to plaintiff. Citing the orders quashing service and vacating
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the judgment, plaintiff concludes that Chicago Title should have known of the jurisdictional
defect before purchasing the property, and therefore Chicago Title should not be afforded
protection as a bona fide purchaser.
¶ 18 Chicago Title responds that, (1) by raising the issue for the first time on appeal, plaintiff
has waived its claim that Chicago Title had inquiry notice of plaintiff’s interest in the property;
(2) plaintiff has forfeited any claim that Chicago Title purchased the property with actual notice
of plaintiff’s interest in the property; and (3) the trial court correctly concluded that Chicago
Title was a bona fide purchaser for value.
¶ 19 A. Standard of Review
¶ 20 Plaintiff appeals the dismissal of the complaint under section 2-619(a)(9) of the Code. A
motion to dismiss under section 2-619(a)(9) admits the legal sufficiency of the complaint and
asserts affirmative matter outside the pleading that avoids the legal effect of or defeats the claim.
Relf v. Shatayeva, 2013 IL 114925, ¶ 20. We review de novo the dismissal of a complaint
pursuant to section 2-619(a)(9). Glisson v. City of Marion, 188 Ill. 2d 211, 220 (1999).
¶ 21 Chicago Title argues that, in this case, the dismissal of the complaint is subject to the
abuse-of-discretion standard of review because the motion required the trial court to weigh
evidence. We disagree. Whether the trial court in the Harris foreclosure obtained personal
jurisdiction over plaintiff is an inquiry requiring findings of fact, but this case does not turn on
that issue. Instead, the relevant issue is whether Chicago Title was reasonable in concluding that
the judgment extinguished plaintiff’s interest in the property. This question is answered by
reviewing the record of the Harris foreclosure as it existed when Chicago Title purchased the
property. Reviewing the record does not require the weighing of evidence. In granting the
motion to dismiss the complaint, the trial court considered the record and heard argument
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without an evidentiary hearing. Contrary to Chicago Title’s assertion, whether the documents in
the record show that Chicago Title had inquiry notice of plaintiff’s claim is a legal question,
subject to de novo review. Chicago Title offers no compelling reason for departing from the
well-established rule of conducting de novo review of a section 2-619(a)(9) dismissal, and we
decline to do so.
¶ 22 B. Forfeiture
¶ 23 Chicago Title next argues that plaintiff has waived its argument that Chicago Title had
inquiry notice of plaintiff’s interest. Chicago Title asserts that plaintiff has made this claim for
the first time on appeal. We note that the action Chicago Title describes is more accurately
called “forfeiture” instead of “waiver.” See People v. Phipps, 238 Ill. 2d 54, 62 (2010) (“Waiver
is distinct from forfeiture ***. While forfeiture applies to issues that could have been raised but
were not, waiver is the voluntary relinquishment of a known right.”).
¶ 24 Issues not raised in the trial court generally are forfeited and may not be raised for the
first time on appeal. Village of Lake Villa v. Stokovich, 211 Ill. 2d 106, 121 (2004). However,
the forfeiture rule is an admonition to the parties and not a limitation on the jurisdiction of this
court. Dillon v. Evanston Hospital, 199 Ill. 2d 483, 504-05 (2002). In this case, plaintiff
responded to Chicago Title’s motion to dismiss by arguing that (1) the order confirming the sale
in the Harris foreclosure was void based on improper service and (2) Chicago Title was not a
bona fide purchaser, because it had actual notice of plaintiff’s interest in the property when
Chicago Title took title. On appeal, plaintiff raises the related issue of whether Chicago Title
had inquiry notice.
¶ 25 Plaintiff did not raise the inquiry-notice issue in the trial court, but Chicago Title did. At
the May 21, 2014, hearing, counsel for Chicago Title argued that the title commitment “made
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clear that there were no outstanding title issues with respect to the property. It had specifically
mentioned the [Harris] foreclosure, but there would have been nothing of record either in the
foreclosure case, any recorded document, any court document, that would have alerted [Chicago
Title] to any outstanding interest that any other party, including [plaintiff], could have had in the
property.” At the hearing, plaintiff’s counsel responded that “there was a $900,000 junior lien
that [Chicago Title] should have at least done more due diligence upon *** in looking into the
record.”
¶ 26 Thus, Chicago Title argued that there was nothing in the Harris foreclosure record that
would have put Chicago Title on notice of plaintiff’s interest, and plaintiff responded that
Chicago Title should have been more diligent in looking into the record of the Harris foreclosure
before purchasing the property. Plaintiff’s appellate argument regarding Chicago Title’s inquiry
notice was argued to and considered by the trial court. The issue is not forfeited.
¶ 27 In a related argument, Chicago Title contends that plaintiff has forfeited any claim that
Chicago Title purchased the property with actual notice of plaintiff’s interest in the property.
Plaintiff made that contention in the trial court, in its response to the motion to dismiss, but
plaintiff does not renew the argument on appeal. Thus, we need not consider whether Chicago
Title had actual notice.
¶ 28 C. Bona Fide Purchaser
¶ 29 Plaintiff argues that the service by publication in the Harris foreclosure was a
jurisdictional defect that was apparent on the face of the record, and therefore Chicago Title had
inquiry notice of plaintiff’s interest. Plaintiff concludes that Chicago Title was not diligent in
investigating plaintiff’s interest and may not invoke the defense of being a bona fide purchaser
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for value. Chicago Title responds that the record did not provide such inquiry notice of
plaintiff’s interest.
¶ 30 A bona fide purchaser, one who takes title “in good faith for value,” takes “free of any
interests of third persons, except such interests of which he has notice.” Daniels v. Anderson,
162 Ill. 2d 47, 57 (1994). If bona fide purchasers were not so protected, “our laws requiring the
registration of deeds would be useless if not worse.” Petta v. Host, 1 Ill. 2d 293, 304 (1953).
¶ 31 A judgment is not valid unless the trial court has both jurisdiction of the subject matter of
the litigation and jurisdiction over the parties. State Bank of Lake Zurich v. Thill, 113 Ill. 2d 294,
308 (1986). “Absent a general appearance, personal jurisdiction can be acquired only by service
of process in the manner directed by statute,” and the Code authorizes service of process either
by summons (735 ILCS 5/2-203, 2-204, 2-205 (West 2012)) or by publication and mailing (735
ILCS 5/2-206 (West 2012)). Thill, 113 Ill. 2d at 308. “A judgment rendered without service of
process, either by summons or by publication and mailing, where there has been neither a waiver
of process nor a general appearance by the defendant, is void regardless of whether the defendant
had actual knowledge of the proceedings.” Thill, 113 Ill. 2d at 308.
¶ 32 Moreover, a party attacking a judgment for lack of personal jurisdiction due to defective
service of process is not restricted by either the time limitations or the “due diligence”
requirements of section 2-1401 of the Code. Thill, 113 Ill. 2d at 308; see 735 ILCS 5/2-1401(f)
(West 2012). Accordingly, a judgment rendered by a court that fails to acquire jurisdiction of
either the parties or the subject matter of the litigation may be attacked at any time or in any
court, either directly or collaterally. Thill, 113 Ill. 2d at 309.
¶ 33 Where the rights of innocent third-party purchasers have attached, a judgment can be
collaterally attacked for an alleged jurisdictional defect that affirmatively appears in the record.
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Thill, 113 Ill. 2d at 312-13 (citing Ill. Rev. Stat. 1981, ch. 110, ¶ 2-1401(e) (now 735 ILCS 5/2-
1401(e) (West 2012))). In determining whether a lack of jurisdiction is apparent from the record,
we must look to the whole record, which includes the pleadings, the return on the process, the
verdict of the jury, and the judgment of the court. Thill, 113 Ill. 2d at 313.
¶ 34 In the Harris foreclosure, the trial court allowed Harris Bank to serve plaintiff under
section 2-206(a) of the Code, which provides for service by publication in cases involving
property within the jurisdiction of the court. Section 2-206(a) requires the filing of an affidavit
showing that the defendant “on due inquiry cannot be found, or is concealed within this State, so
that process cannot be served upon him or her, and stating the place of residence of the
defendant, if known, or that upon diligent inquiry his or her place of residence cannot be
ascertained.” 735 ILCS 5/2-206(a) (West 2012). Within 10 days of the first publication, the
clerk of the court is required to send a copy of the published notice “by mail, addressed to each
defendant whose place of residence is stated in such affidavit.” 735 ILCS 5/2-206(a) (West
2012). Although the Code contemplates service by publication, the appellate court long ago
recognized that such service is “an extraordinary means of serving notice—one unknown to the
common law” and that, from the perspective of the person to be notified, it is the “least
satisfactory method” of giving notice and “often it is no notice at all.” Public Taxi Service, Inc.
v. Ayrton, 15 Ill. App. 3d 706, 713 (1973). A party defending notice by publication “must show
a strict compliance with every requirement of the statute.” Illinois Valley Bank v. Newman, 351
Ill. 380, 383 (1933). With these principles in mind, we examine the claimed deficiencies in the
service in the Harris foreclosure and the extent to which Chicago Title should have recognized
the deficiencies before acquiring the property.
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¶ 35 Plaintiff argues that, in support of its motion to quash service, it presented evidence that
Harris did not effectuate service as required by statute. Specifically, plaintiff argues that Harris
did not comply with section 5.05 of the Business Corporation Act of 1983 (the Act) (805 ILCS
5/5.05 (West 2012)), and sections 2-206 and 2-202 of the Code (735 ILCS 5/2-206, 2-202 (West
2012)).
¶ 36 First, section 5.05 of the Act provides that “[i]n the event of dissolution of a corporation,
either voluntary, administrative, or judicial, the registered agent and the registered office of the
corporation on record with the Secretary of State on the date of the issuance of the certificate or
judgment of dissolution shall be an agent of the corporation upon whom claims can be served or
service of process can be had during the 5-year, post-dissolution period provided in Section
12.80 of this Act, unless such agent resigns or the corporation properly reports a change of
registered office or registered agent.” Plaintiff contends that Harris Bank knew that plaintiff was
dissolved and no longer a corporation, and therefore these statutes required Harris Bank to
attempt service on Iljco Stojanov at the Linder Avenue address rather than on Dzoko Stojanov at
the Pheasant Lane address. We agree.
¶ 37 The Secretary of State’s corporation report shows that, in 2010, plaintiff was dissolved as
a corporation. It also identifies Iljco Stojanov as plaintiff’s agent and lists the Linder Avenue
address in Morton Grove as the agent’s address. Harris Bank filed the corporation report on
October 8, 2010, in support of its motion for service by publication. Section 5.05 of the Act
required Harris Bank to attempt service on Iljco Stojanov at the Linder Avenue address rather
than on Dzoko Stojanov at either the Linder Avenue address or the Pheasant Lane address.
¶ 38 Second, plaintiff contends that Harris Bank did not comply with the requirements for
service by publication under section 2-206. That statute requires, inter alia, an affidavit
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“showing that the defendant resides or has gone out of this State, or on due inquiry cannot be
found, or is concealed within this State, so that process cannot be served upon him or her, and
stating the place of residence of the defendant, if known, or that upon diligent inquiry his or her
place of residence cannot be ascertained.” 735 ILCS 5/2-206(a) (West 2012). Plaintiff argues
that “there was one sworn affidavit by an individual who attempted service in the record at the
time [Chicago Title] gained an interest in the property” and that the affidavit “included only one
address where the individual attempted service.” Plaintiff concludes that the affidavit gave
Chicago Title inquiry notice that Harris Bank had not undertaken a diligent inquiry into
plaintiff’s location, including at the Linder Avenue address. We agree with this proposition as
well. The Secretary of State’s corporation report identifies Dzoko Stojanov as the president of
plaintiff, and his address is shown to be the Linder Avenue address, but in Niles. The Pheasant
Lane address is not mentioned in the corporation report. Bachtold’s affidavit of nonservice,
Doherty’s affidavit of due diligence, and the Secretary of State’s corporation report identifying
Iljco Stojanov as plaintiff’s agent and showing the Linder Avenue address were filed at the same
time in the Harris foreclosure on October 8, 2010, which was 3½ years before Chicago Title
obtained its title commitment on May 7, 2012. Chicago Title was not required to “comb the
record” in this case, but due diligence required further inquiry into these patently apparent
discrepancies, which were shown in consecutive pages in the record.
¶ 39 Third, plaintiff argues that Bachtold was not authorized to act as a special process server.
When Bachtold attempted service on September 12, 2010, sections 2-202(a) and 2-202(b)
provided that “[a] sheriff of a county with a population of less than 2,000,000 may employ
civilian personnel to serve process” and that “[s]ummons may be served upon the defendant
wherever they may be found in the State, by any person authorized to serve process.” 735 ILCS
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5/2-202(a), (b) (West 2010). Under section 2-202, a licensed or registered private detective may
serve process without court appointment only in counties with populations of less than 2 million.
See Schorsch v. Fireside Chrysler-Plymouth, Mazda, Inc., 172 Ill. App. 3d 993, 998 (1988).
Plaintiff argues that Harris Bank did not obtain a special appointment of the court for Bachtold to
serve plaintiff at the Linder Avenue address in Cook County, which had a population of more
than 2 million. We need not delve into plaintiff’s assertion regarding the need for a special
appointment, as Harris Bank’s noncompliance with other service requirements was apparent on
the face of the record.
¶ 40 We conclude that the service defect appears on the face of the record to the extent that
Chicago Title had inquiry notice of a lack of personal jurisdiction over plaintiff. Plaintiff
identifies potential noncompliance with at least two statutes governing service by publication,
and the parties agree that plaintiff’s motion to quash service was granted and resulted in the
foreclosure judgment being vacated as to plaintiff. The court in the Harris foreclosure found the
jurisdictional defect after hearing the testimony of six witnesses and arguments by plaintiff and
Harris Bank. The court did not rely solely upon the record in quashing service; but the record
alone gave Chicago Title inquiry notice of a potential problem. At the time of the purchase,
Chicago Title did not have the benefit of the court’s factual finding of a lack of jurisdiction or the
witnesses’ testimony in support of that claim, but it had constructive notice of the documents
submitted in support of the service by publication. Those documents, containing inconsistent
information, were filed at the same time and appear in sequential pages in the record, which did
not require Chicago Title to “comb the record” for the potential jurisdictional error.
¶ 41 Our decision is supported by Thill, which holds that innocent third-party purchasers are
not protected from setting aside a judicial sale where a lack of personal jurisdiction affirmatively
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appears on the face of the record. In Thill, the intervenors, including third-party purchasers,
could not rely on the facial validity of the foreclosure proceedings where the record showed a
lack of personal jurisdiction over one of the property owners. The foreclosure judgment
specifically recited that “ ‘each of the defendants in this cause has been duly and properly
brought before the court, either through service of process of summons, by appearance, or by
service by publication, all in the manner as provided by law; and this court now has jurisdiction
over all the parties to this cause and the subject matter hereof.’ ” Thill, 113 Ill. 2d at 313-14.
¶ 42 However, personal jurisdiction was based upon substituted service of summons, and the
affidavit of service did not show strict compliance with the requirements of the statute
authorizing substituted service of summons. Thill, 113 Ill. 2d at 314. First, the affidavit of
service did not show that any summons was served, noting only service of a complaint. Second,
the affidavit failed to show that an additional copy of the summons for the defendant was left
with the defendant’s wife. Third, the affidavit was defective because it did not affirmatively
recite that a copy of the summons was subsequently mailed, in a sealed envelope with postage
fully prepaid, to the defendant at the address of the subject property. Accordingly, the supreme
court determined that the defects appearing on the face of the affidavit of service rendered the
return defective. Thill, 113 Ill. 2d at 311. The supreme court held:
“[T]he alleged jurisdictional defect in this case does not require inquiry beyond the face
of the record. Because the record affirmatively shows that service on the defendant was
not had in the manner provided by statute, the intervenors, notwithstanding their
purported status as innocent third-party purchasers, cannot rely on the jurisdictional
recital in the foreclosure judgment to prevent a collateral attack on that judgment.” Thill,
113 Ill. 2d at 314.
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¶ 43 In Thill, the jurisdictional defect was readily apparent in that several lines on the affidavit
of substitute service were left entirely blank. The affidavit omitted information for the mailing
of the summons, including the location of the post office and the date of the mailing. Thill, 113
Ill. 2d at 300. The supreme court observed that the affidavit was defective on its face, which
gave the third-party purchasers inquiry notice.
¶ 44 Here, Bachtold’s affidavit of nonservice does not omit information, but rather contains
allegedly erroneous information. This is a distinction without a difference, as the jurisdictional
defect is readily apparent on the face of the Harris foreclosure record. The affidavit of
nonservice and the corporation report, which were filed at the same time, show that service was
attempted on the wrong person at the wrong address. Discovering these potential errors did not
require Chicago Title to comb the record for other documents showing contrary information,
including the mortgage and the corporation record on file with the Secretary of State. The
mortgage, the corporation report, the due-diligence affidavit, and the affidavit of nonservice were
filed at the same time. Simply reviewing the documents that supported Harris Bank’s motion for
service by publication would have revealed a potential jurisdictional defect worthy of further
inquiry. Consistent with Thill, we conclude that the inconsistencies in the documents gave
Chicago Title inquiry notice of the jurisdictional defect that plaintiff ultimately proved.
¶ 45 In arguing that it was a bona fide purchaser, Chicago Title proposes three bases on which
to distinguish Thill from this case. Chicago Title argues that Thill applies to (1) collateral attacks
on a foreclosure judgment but not to a new foreclosure action, like this case; (2) property owners
but not junior lienholders, like plaintiff; and (3) foreclosure-judgment recitals but not a title
commitment, like the one relied upon by Chicago Title. See Thill, 113 Ill. 2d at 314. These too
are distinctions without a difference. Chicago Title overemphasizes peripheral matters and the
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procedural posture of Thill to avoid its central holding: when an alleged jurisdictional defect
does not require inquiry beyond the face of the record, and the record affirmatively shows that
service on the foreclosure defendant was not had in the manner provided by statute, a subsequent
purchaser may not rely on the foreclosure judgment to establish his status as a bona fide
purchaser. Perhaps the matters raised by Chicago Title might be relevant to tailoring equitable
remedies among the parties on remand, but they do not negate our holding that the jurisdictional
defect was apparent on the face of the Harris foreclosure record and, therefore, Chicago Title
was not a bona fide purchaser.
¶ 46 Like in Thill, the subsequent purchasers of property in Bank of New York v. Unknown
Heirs & Legatees, 369 Ill. App. 3d 472 (2006) (BONY), were not bona fide purchasers where the
record showed insufficient service on an heir of the deceased property owner. The affidavit of
publication service did not affirmatively establish due inquiry and diligence. Unlike in this case
and in Thill, the heir in BONY had filed a motion to dismiss, which was pending when the
judgment of foreclosure was entered. BONY, 369 Ill. App. 3d at 474, 476-77. However, the
legal proceedings in BONY were not necessary to give the subsequent purchasers notice of a
possible outstanding interest in the property. The defective affidavit provided inquiry notice, and
the pending proceedings simply drew more attention to a potential defect in personal jurisdiction.
Contrary to Chicago Title’s assertion, the absence of pending proceedings regarding jurisdiction
in the Harris foreclosure did not negate Chicago Title’s inquiry notice of the potential
jurisdictional defect.
¶ 47 D. Public Policy
¶ 48 Plaintiff argues that, because the defect in personal jurisdiction was apparent on the
record of the Harris foreclosure, the trial court erred in considering whether public policy weighs
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in favor of protecting Chicago Title as a bona fide purchaser. The trial court cited the public
policy of finality and stability of judicial sales as a basis for dismissing the complaint. In Thill,
the supreme court addressed the public policy favoring the permanency and stability of judicial
sales but ultimately held that such interests give way when the record of the judicial proceedings
shows a lack of personal jurisdiction. The same balancing of the equities supports affirming the
trial court’s ruling in favor of the bona fide purchaser over a junior lienholder in this case, but
public policy considerations are subordinate because the jurisdictional defect was apparent on the
record of the Harris foreclosure.
¶ 49 That said, our analysis does not end with our determination that Chicago Title had
inquiry notice of the jurisdictional defect in the Harris foreclosure. Chicago Title argues that the
equities favor granting plaintiff relief different from the foreclosure judgment it seeks. Chicago
Title distinguishes Thill, where the foreclosure was challenged by the property owner, from this
case, where the challenge is brought by a junior lienholder. When service is challenged
following a judicial sale, the relief sought by a property owner and a junior lienholder is
different. A prevailing property owner is allowed to retain ownership and possession of the
property, while a prevailing junior lienholder would recover repayment of a debt secured by the
property.
¶ 50 In this case, the judicial sale did not result in a surplus, so plaintiff was not entitled to any
of the sale proceeds. In challenging the judicial sale in the Harris foreclosure, plaintiff argued
that vacating the judgment and reselling the property would result in a higher price, which would
entitle plaintiff to a share of the surplus. Here, Chicago Title argues that, if plaintiff’s alleged
damages are measured by the amount of a potential surplus, plaintiff could prove those damages
and recover from Harris Bank as the foreclosure proceeds, without dispossessing an innocent
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2015 IL App (2d) 140639
third-party purchaser. The value of the property and the status of the Harris foreclosure inform a
balancing of the equities, but we express no opinion as to where the equities lie. On remand, the
parties may present their arguments on this point for the trial court to consider.
¶ 51 III. CONCLUSION
¶ 52 We conclude that Chicago Title had inquiry notice of plaintiff’s interest in the property,
because the defect in personal jurisdiction over plaintiff was apparent on the face of the Harris
foreclosure record. Thus, we reverse the dismissal of the complaint.
¶ 53 Reversed and remanded.
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