Lenders, Beware! The Return of the Decade Old Foreclosure

What is a bank to do when a former owner challenges a foreclosure proceeding based on the Court’s lack of personal jurisdiction nearly a decade after a judgment of foreclosure was entered and a foreclosed property sold at sheriff’s sale? In Deutsche Bank National Trust Co. v. Sedys, the Second District Appellate Court of Illinois addressed this particular issue.

In Sedys, Deutsche Bank began foreclosure proceedings on a residential property owned by Sedys.  Deutsche Bank was unable to personally serve Sedys.  Instead, Deutsche Bank was allowed to serve Sedys via publication. After publication, Deutsche Bank provided notice of the publication to the Circuit Clerk of DuPage County. According to Illinois law, the Circuit Clerk is required to send notice of publication by mail to each defendant (including Sedys). The failure to abide by this law’s requirements can void a subsequently entered judgment. The trial court entered an order finding that it had personal jurisdiction over Sedys. A judgment of foreclosure and sale was entered in favor of Deutsch Bank because Sedys failed to file an appearance. After judgment was entered, the property was sold at a sheriff’s sale.

Almost a decade later, Sedys filed a petition to void the judgment of foreclosure and sale, essentially seeking to unwind the entire foreclosure action. Arguably, this would require the subsequent purchasers of the property to transfer their rights back to Sedys if the foreclosure was unwound.

Sedys argued that the court never obtained personal jurisdiction over her because the Circuit Clerk did not mail notice of publication to her. Specifically, Sedys pointed to the fact that the Court file did not contain a certificate of service of the Clerk that the notice was mailed to her. Under Illinois law, if a judgment is entered against a party that was not subject to the personal jurisdiction of the Court, the judgment is void. Deutsche Bank filed a motion to dismiss the petition, which was granted, giving rise to the appeal.

In affirming the dismissal, the appellate court relied on the plain language of the law which states that “the certificate of the clerk that he or she has sent a copy in pursuance of this Section is evidence that he or she has done so.”  The appellate court found that while the certificate of the clerk is evidence of mailing of the required notice, it was not the only acceptable proof that the notice was mailed. Accordingly, absence of a certificate of service alone does not show a failure to comply with the law. The appellate court therefor deferred to the trial court’s determination that it had personal jurisdiction over Sedys when the judgment of foreclosure and sale was entered.  Moreover, it was Sedys burden to supplement the record to show that the trial court’s determination was incorrect.

The Second District Appellate Court’s holding was based solely upon its interpretation of the law; it did not address the equitable ramifications of overturning a nearly decade old foreclosure of a property that had changed ownership.

For more information regarding foreclosure proceedings and real estate litigation, please contact:  Roenan Patt at (312) 368-0100, or any of our litigation attorneys at Levin Ginsburg.