2015 IL App (1st) 133017
FIRST DIVISION
AUGUST 10, 2015
No. 1-13-3017
HARRIS BANK, N.A., ) Appeal from the
) Circuit Court of
Plaintiff ) Cook County.
)
(EDC Fund 2, LLC, )
Plaintiff-Appellee), )
) No. 09 CH 12471
v. )
)
EMMA HARRIS, Not Personally, But as Trustee On Behalf of )
the Emma L. Harris TRUST Dated October 21, 2003; )
EMMA L. HARRIS, ) Honorable
) Michael J. Otto,
Defendants-Appellants. ) Judge Presiding.
______________________________________________________________________________
JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion.
Presiding Justice Delort and Justice Harris concurred in the judgment and opinion.
OPINION
¶1 Emma L. Harris (Emma), individually and as trustee on behalf of the Emma L. Harris
Revocable Trust Dated October 21, 2003, appeals from an order of the circuit court of Cook
County denying her amended petition pursuant to section 2-1401 of the Illinois Code of Civil
Procedure (735 ILCS 5/2-1401 (West 2012)), seeking relief from a September 2011 order
confirming the foreclosure sale of her former property.
¶2 BACKGROUND
¶3 Emma, through her revocable living trust, was the owner of real property at 6609-11 and
6605-07 South Greenwood Avenue in Chicago (the property), which consists of two adjoining
residential apartment buildings containing twelve apartment units. According to Emma, a senior
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citizen who is at least in her late eighties, 1 she and her late husband purchased one of the
buildings in 1980 and the second in 1989. Emma lived within one of the apartments at the
property, and rented out other apartment units as a source of income.
¶4 According to Emma, after her husband passed away in 1995, she managed the property
independently until approximately 2003, when she hired a property manager. Emma alleges that
the manager failed to collect rents due from tenants and otherwise mismanaged the property,
"such that rents collected did not cover the mortgage payments, utilities and maintenance on the
buildings, leaving [Emma] in increasing debt." By late 2006, due to the negligence of the
property manager, the property was "fal[ing] into disrepair," and suffered from outstanding
building code violations, lapsed insurance coverage, and overdue utility bills. As a result, the
apartments at the property could not be rented for full market value, and there were only three
regularly paying tenants at the property besides Emma.
¶5 In November 2006, Emma sought a refinance loan on the property from Harris Bank,
N.A. (the bank), who was the original plaintiff in this litigation. According to Emma, she sought
the 2006 loan to pay off "two existing mortgages and other outstanding property-related bills."
Emma met with a bank employee, Allison Regina Bell, in connection with the loan. Emma
claims that she informed Bell that she was on a limited income from Social Security and a
pension, and disclosed that there were only a few paying tenants at the property. However,
according to Emma, Bell filled out her loan application with false information regarding the
1
Emma's filings in the trial court are inconsistent regarding her precise age. Her original
section 2-1401 petition, filed in December 2012, states she is "in her eighties." Other
submissions to the trial court state that she was either 84 or 86 years old at the time the mortgage
in question was executed in 2006, which suggest that Emma is currently in her nineties.
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financial health of the property – stating that the apartment buildings "were fully occupied" with
paying tenants—in order to ensure that the bank would approve a loan to Emma. Emma claims
that she never saw and was later denied access to the loan application that was prepared by Bell.
¶6 On November 29, 2006, Emma entered into a promissory note with the bank under which
she borrowed the principal amount of $350,000 to be repaid at an annual interest rate of 7.070%.
The note called for repayment over three years, specifying that Emma "will pay this loan in 35
regular payments of $2,369.15 each and one irregular last payment estimated at $341,465.74,"
with the last payment due on December 1, 2009. Emma's indebtedness under the promissory
note was secured by a mortgage on the property as well as an assignment of rents, both of which
were also dated November 29, 2006. Notably, the promissory note executed by the bank and
Emma stated that the address of the "borrower" was at 7337 Shore Drive in Chicago, a different
address than the mortgaged property on Greenwood Avenue. Emma's submissions to the trial
court indicated this was the address of Emma's daughter, yet the record is unclear why that
address was listed on the loan document.
¶7 Emma does not dispute that she executed the promissory note and mortgage. However,
she claims that the bank did not explain to her, and that she did not understand, the repayment
terms of the loan and the corresponding risk of default and foreclosure. In fact, Emma claims
that the bank knew and intended that Emma, as an elderly person with limited income, would not
be able to fulfill the loan's repayment terms.
¶8 It is undisputed that Emma did not repay under the terms of the loan. On March 19,
2009, the bank filed a complaint seeking foreclosure of the mortgage on the property based on
Emma's payment default, claiming an unpaid principal balance of $343,253.90.
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¶9 On April 6, and April 9, 2009, the Cook County sheriff attempted without success to
serve Emma with the summons and complaint at 7337 South Shore Drive in Chicago, the address
stated on the promissory note. Emma maintains that she did not reside at that address, but lived
at an apartment at the mortgaged property.
¶ 10 In April 2009, the bank moved for immediate possession and appointment of a receiver
of the property to collect rents and to show vacant units to potential renters. On April 17, 2009,
the trial court granted the motion and appointed a receiver to manage the property and directed
the receiver to file bimonthly reports. Beginning in August 2009, the receiver submitted periodic
reports to the court, including information on rents collected from the property's tenants.
¶ 11 In light of the previous unsuccessful attempts to serve Emma, on August 26 2009, the
court granted the bank's motion to appoint a special process server, LaSalle Process Servers.
According to an affidavit executed by LaSalle Process Servers, Emma was served personally on
September 30, 2009 at 7337 South Shore Drive. Emma disputes that she was served on that date.
¶ 12 Emma failed to respond to the complaint or otherwise appear in the action. On
November 20, 2009, the bank moved for a default judgment and judgment of foreclosure and
sale, supported by LaSalle Process Servers' affidavit of service. On December 14, 2009, the trial
court entered a default judgment of foreclosure and authorized a sale of the property.
¶ 13 On February 23, 2010, Emma's first counsel in this action, attorney Glenda Gray, filed a
general appearance in the trial court on behalf of Emma. However, attorney Gray filed no
answer to the foreclosure complaint or any other filing on behalf of Emma.
¶ 14 On March 2, 2010, the bank filed a notice of sheriff's sale, specifying that the Cook
County sheriff would sell the property by public auction on March 31, 2010. The record reflects
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that on the day before the scheduled sale date, March 30, 2010, Emma (through attorney Gray)
filed a Chapter 13 bankruptcy petition, postponing the sheriff's sale. The bankruptcy
proceedings are not in the record on appeal. However, the parties' trial court filings acknowledge
that Emma's first bankruptcy petition was dismissed, and that a second bankruptcy petition was
also filed and dismissed prior to the eventual sheriff's sale of the property.
¶ 15 On August 13, 2010, the bank filed another notice of sheriff's sale, stating that the
property would be sold at public auction on September 16, 2010. On September 3, 2010,
attorney Gray filed a motion to withdraw which stated that Emma had elected to proceed with
different counsel. The motion to withdraw was granted on October 4, 2010.
¶ 16 Emma's second counsel, Al Hofeld Jr., filed an appearance on behalf of Emma on
September 13, 2010, three days before the scheduled sheriff’s sale. On the same date, Emma
filed an "emergency motion to stay sale" as well as an "emergency § 5/2-1301(e) petition to
vacate the default judgment." 735 ILCS 5/2-1301(e) (West 2012).
¶ 17 In those September 2010 filings, Emma claimed she was never served personally with the
foreclosure complaint and, for the first time, also alleged fraud and other misconduct by the bank
in connection with originating the November 2006 loan. The emergency motion to stay the
foreclosure sale claimed "this is an egregious case of predatory lending in which the bank
knowingly exploited a vulnerable, 84-year-old woman by making her a loan that –— it knew at
the time–—she could not afford to repay and did so by inflating her income to get the loan
through underwriting."
¶ 18 The emergency petition to vacate the default judgment sought leave to file an answer
with affirmative defenses and counterclaims for: "improvident lending (i.e, making [Emma] a
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loan the bank knew, at the time or origination, that she could not afford to repay), fraud (i.e.,
inflating her income to get the loan through underwriting) and discrimination based on age, sex
and race (i.e., singling out and exploiting [Emma] because of her perceived vulnerabilities as a
lone, elderly, African-American female in the marketplace)." As an exhibit to the petition to
vacate the default judgment, Emma also included a proposed answer and counterclaims to the
bank's foreclosure complaint which claimed that the promissory note was "void" because it
resulted from the bank’s fraudulent conduct. The proposed pleading alleged that the bank
"originated the loan through fraud" as it "made her a loan that – it knew at the time – she could
never afford to repay."
¶ 19 According to the proposed pleading submitted with the September 2010 petition to vacate
the default judgment, Emma had been "referred by the trustee of her church to [the bank] for a
refinance loan for her property." The bank's employee, Bell, allegedly filled out Emma's loan
application and "falsified and misrepresented [Emma's] income during the underwriting process
in order to get the loan approved." The proposed pleading claimed that Bell and the bank knew
that "the loan terms were totally unsustainable on [Emma's] income" but that Bell "drew the loan
in such a way as it would be approved by [the bank’s] underwriting department." Emma sought
to plead affirmative defenses including "fraud in the inducement" as well as violations of the
federal Truth in Lending Act and Illinois Fairness in Lending Act, the Illinois Consumer Fraud
Act, Equal Credit Opportunity Act, Civil Rights Act, Fair Housing Act, and unclean hands.
¶ 20 The trial court granted the emergency motion to stay the sheriff's sale and set a briefing
schedule on the petition to vacate the default judgment. On October 5, 2010, the bank responded
to the petition to vacate, claiming that Emma "ha[d] no meritorious defenses" and that denial was
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independently warranted because Emma "ha[d] not been diligent in her defense of this matter or
in bringing" the petition to vacate the default. The bank clamed that Emma's first counsel, who
appeared in February 2010, had been aware of the default judgment, and that Emma offered no
reason why it was not until September 2010 that she (through her second attorney) sought to
vacate the default judgment or to assert any affirmative defenses. The bank also urged that
Emma had been served, relying on the affidavit of service from the special process server.
¶ 21 On October 12, 2010, Emma submitted a reply which reiterated that the bank
"intentionally defrauded" her "by originating a loan *** that it knew then would inevitably result
in default and foreclosure" due to her inability to repay it. Emma argued that a judgment of
default could be vacated even without a showing of diligence. Emma further argued that she was
in fact diligent, again claiming that she was not personally served. Emma acknowledged that
she had "filed two separate bankruptcies in an attempt to save her property and workout a
payment she could afford," and argued this was "evidence not of a lack of diligence *** but of an
abundance of diligence." As a "financially unsophisticated elder," she claimed that she "did not
understand *** the events of fraud that occurred at origination until September 8, 2010, when
she first met with [her second attorney]" and that her "inadvertence is excusable in the face of a
much graver injustice committed by the bank."
¶ 22 On October 27, 2010, the trial court denied Emma's petition to vacate the December 2009
default judgment in an order stating that the basis of the denial was a "lack of due diligence."
Although the appellate record does not contain a transcript of proceedings, Emma's subsequent
motion to reconsider reflects that the trial court, in denying the petition, referenced: the affidavit
of service on September 30, 2009, the fact that Emma's first attorney appeared in February 2010
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and had repeatedly appeared before the court without challenging the December 2009 default
judgment, and that Emma had filed for bankruptcy twice, shortly before the scheduled date of the
sheriff's sale of the property.
¶ 23 On November 24, 2010, Emma filed a motion for reconsideration of the denial of the
petition to vacate, arguing that the trial court erred by making "due diligence the sole or
determining factor in its ruling" and had failed to adequately consider the equities of the
situation. The motion to reconsider included an affidavit from Emma in which she stated that
she "did not become aware that there was a foreclosure case until sometime in January 2010"
after which time she was referred to her first attorney. Emma's affidavit acknowledged that her
first attorney had "filed the two bankruptcy cases" but stated: "I do not know or understand why
[her first attorney] did not do anything about the default judgment. I was not aware of the
default judgment until I met [Emma's second attorney]."
¶ 24 The affidavit further stated that Emma "was never personally served with a summons or
complaint." According to the affidavit, the address stated in the process server's affidavit, 7337
South Shore Drive in Chicago, (which was the address in the promissory note) was the address
where Emma's daughter lived. However, Emma stated that she lived at the foreclosed property,
at 6607 S. Greenwood Avenue.
¶ 25 Pending decision on the motion for reconsideration, the court permitted the sheriff's sale
to proceed. The sale was finally held on February 23, 2011, at which time the bank purchased
the property for $160,560. After accounting for that sale amount, a deficiency in the amount of
$312,085.58 remained on Emma's indebtedness under the terms of the promissory note.
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¶ 26 On March 22, 2011, while the motion for reconsideration of the denial of her motion to
vacate remained pending, Emma's second attorney filed a motion to withdraw, citing
"irreconcilable differences" with respect to "matters of attorney-client communication." On
April 12, 2011, the court denied the motion to reconsider the denial of the petition to vacate the
default judgment. On April 19, 2011, the court granted the motion to withdraw by Emma's
second attorney.
¶ 27 On May 17, 2011, the bank filed a motion to confirm the February 23, 2011 sheriff's sale
of the property in the amount of $160,560, and additionally sought a deficiency judgment against
Emma in the amount of $312,085.58. In August 2011, Emma—through her third legal counsel,
Kaplan Silverman LLC—filed a motion to vacate the February 23, 2011 sale. That motion
claimed that, after the sale was postponed from the previously scheduled date, the bank had
failed to give notice by publication of the rescheduled sale date. The bank filed a response
arguing that republication of notice of the sale was not required because individual notice was
provided to the parties, and that Emma's prior counsel had agreed to waive republication of
notice. On September 12, 2011, the court entered an order reflecting that Emma had withdrawn
her motion to vacate the February 23, 2011 sale.
¶ 28 Also on September 12, 2011, the court entered an "order approving report of sale and
distribution, confirming sale for deficiency judgment and for order of possession." The order
approved the February 23, 2011 sale as fair and proper and directed the sheriff to deliver a deed
to convey title to the bank's assignee, Dearborn Street Holdings, LLC–Series 6
Harris/Greenwood (Dearborn), and specified that Dearborn would be entitled to possession of
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the property after 70 days. The September 12, 2011 order also entered an in personam
deficiency judgment in the amount of $312,085.58 against Emma.
¶ 29 On June 6, 2012, the property was sold by Dearborn to a third party, EDC Fund 2, LLC
(EDC), which is the current plaintiff-appellee in this appeal. EDC, as the new owner of the
property, filed a motion on July 23, 2012 to substitute itself as the plaintiff in this action. EDC's
motion also stated that the sheriff had refused to evict Emma because the order failed to state her
specific unit at the property, and thus requested modification of that order. On October 10, 2012,
the court ordered Emma to file a response to EDC's motion. On December 10, 2012, Emma's
fourth attorney, James Glass (Emma's counsel in this appeal), entered an appearance. Emma
filed an opposition to EDC's motion on or about December 17, 2012.
¶ 30 Shortly thereafter, on December 20, 2012, Emma filed a petition pursuant to section 2-
1401 of the Code of Civil Procedure seeking relief from the September 12, 2011 order
confirming the sheriff's sale, as well as leave to file an answer with affirmative defenses and
counterclaims. The section 2-1401 petition—much like the September 2010 motion to vacate
default judgment filed by Emma's second attorney—was largely premised on allegations of
fraudulent conduct by the bank and Bell, its employee. The section 2-1401 petition alleged that
the bank "knew or should have known that the subject [bank] loan was unfair" and that Emma
"did not understand or appreciate the high risk of early default on the [bank] loan as written" or
the risk of foreclosure. The petition claimed that in order to qualify Emma for the loan, Bell
"falsely notated on [Emma's] loan application *** that the building[s] were fully occupied with
tenants paying $800 per month for rent, when this was not the case." The petition claimed that
the bank made "an unfair predatory loan that had a high risk of early default as evidenced *** by
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the fact that several months after the [bank] loan closed *** [Emma] was left with only a few
thousand dollars from the principal loan proceeds, with no demonstrated ability to repay."
¶ 31 Under the heading "Due Diligence," the section 2-1401 petition acknowledged that
Emma had previously been represented by other counsel in the foreclosure suit but alleged that
"unbeknownst to [Emma] none of her attorney(s) ever filed an Answer and Affirmative Defense
or Counterclaim" to the foreclosure complaint. According to the section 2-1401, petition, she
"first discovered that no formal legal defense had been mounted in her behalf in the foreclosure
suit in October 2012."
¶ 32 The petition alleged several "meritorious defenses and counterclaims to the foreclosure
suit." Among these, Emma alleged "fraud in the inducement" as she "did not understand or
appreciate the high risk of early default on the [bank] loan as written." The section 2-1401
petition also alleged that the bank failed to act in good faith, violated the Illinois High Risk
Home Loan Act and the Illinois Consumer Fraud Act, engaged in "equity stripping" in violation
of the Illinois Fairness in Lending Act and had violated "the Cook County predatory lending
ordinance."
¶ 33 On January 16, 2013, the bank filed a motion to strike the section 2-1401 petition,
arguing that Emma failed to set forth a meritorious claim, failed to demonstrate due diligence in
presenting her claims in the underlying litigation, and failed to show due diligence in filing her
petition. The bank pointed out that the claim of a "predatory" loan that the bank knew Emma
would be unable to pay "was previously asserted by [Emma] in her September 13, 2010 Petition
to Vacate Default Judgment" which had been denied in October 2010. The bank argued that the
section 2-1401 petition "contains only unsupported, meritless claims that were already known to
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[Emma] that could have been previously asserted throughout the underlying litigation." The
bank further argued that Emma failed to act with due diligence in filing her petition, as it was
"filed almost two years after the sheriff's sale was held and more than a year after" the sheriff's
sale was confirmed in September 2011.
¶ 34 On March 13, 2013, the case was reassigned to a new trial judge following the recusal of
the prior judge overseeing the matter.
¶ 35 On April 26, 2013, the trial court granted Emma leave to file an amended section 2-1401
petition. Also on that date, the court granted EDC's motion to be substituted as the plaintiff in
place of the bank.
¶ 36 On April 29, 2013, Emma filed her amended section 2-1401 petition. The amended
petition maintained the original petition's allegations of fraudulent conduct, including the
allegations that Bell inserted false information on Emma's loan application that the apartments at
the property "were fully or almost fully occupied with tenants paying approximately $800 per
month for rent." The amended section 2-1401 petition further alleged that information derived
from the court-appointed receiver's first report on the property further supported her allegations
of Bell's fraudulent conduct, as "Bell's description [in the 2006 loan application] of the number
of tenants and the amount of rent they were actually paying was at odds with that reported" by
the court-appointed receiver. The amended section 2-1401 petition noted that the first report by
the receiver, dated August 21, 2009, included a rent roll showing that there were only three
tenants at the property besides Emma, and that those three tenants were paying monthly rents of
only $400 and $550 for the months of June, July, and August 2009.
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¶ 37 The amended section 2-1401 petition asserted the very same "meritorious defenses" set
forth in the original section 2-1401 petition, including "fraud in the inducement," violation of the
lender's duty to act in good faith, "equity stripping," and "violation of Cook County Predatory
Lending Ordinance." However, on the topic of due diligence, the amended petition added details
regarding the alleged failures of Emma's prior attorneys, urging that "[t]o the extent that failure
to file affirmative defenses or counterclaims in a foreclosure case constitutes legal negligence,
the Court should find that mitigating circumstances preserve [Emma's] due diligence in the form
of lack of cooperation between" her first two attorneys. The amended section 2-1401 petition
acknowledged that her second attorney (Hofeld) had filed a motion to vacate the default
judgment in October 2010 which asserted affirmative defenses and counterclaims, but claimed
"these were not specifically pleaded *** due to the lack of cooperation" between her first two
attorneys, Gray and Hofeld. The amended section 2-1401 petition alleged that "[e]ither attorneys
Gray and Hofeld failed to communicate" or that their communication "was meaningless and
ineffective as attorney Gray, for whatever reason, never worked up [Emma's] mortgage
foreclosure affirmative defenses and counterclaims into a duly constituted defensive pleading
that attorney Hofeld could have attached to his emergency motion to vacate" the default
judgment. Emma also submitted an affidavit in support of the amended section 2-1401 petition
in which she stated that she had not learned until October 2012 that her prior attorneys had not
filed an answer in the mortgage foreclosure case, repeating the allegations regarding the "lack of
cooperation" between her first and second attorneys.
¶ 38 On May 10, 2013, EDC filed a response to the amended section 2-1401 petition that
adopted the arguments that had been asserted in the bank's prior January 2013 motion to strike
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the original section 2-1401 petition. In addition, EDC's response made the argument that, as a
subsequent purchaser of the property for value, the section 2-1401 petition could not deprive
EDC of its interest in the property even if the petition was otherwise meritorious and asserted
with due diligence. On May 14, 2013, Emma filed a memorandum of law in support of her
amended section 2-1401 petition, arguing, inter alia, that the "noncooperation of her first and
second foreclosure defense attorneys thereby preserve[s] her due diligence."
¶ 39 On June 28, 2013, the trial court dismissed Emma's amended 2-1401 petition with
prejudice "for lack of diligence." On July 18, 2013, Emma filed a "motion for rehearing, retrial
or modification of the June 28, 2013 judgment" pursuant to section 2-1203 of the Code of Civil
Procedure. 735 ILCS 5/2-1203 (West 2012). Emma argued that the trial court had not properly
considered the "non-cooperation of Emma's first two foreclosure defense attorneys," which she
claimed was "newly discovered evidence" as she claimed that she did not discover until October
2012 that her first two attorneys had failed to answer the complaint. The motion for rehearing
also claimed that the trial court did not properly consider the "newly discovered evidence"
alleging that Bell falsely stated on Emma's November 2006 loan application that the rental units
were "fully occupied with tenants paying approximately $800 per month for rent"; the motion for
rehearing urged that these allegations were "corroborated by the receiver's rent roll showing the
receiver's receipt of $3850 in total rents *** during the months of June, July, and August 2009."
The motion for rehearing also argued that the trial court had been "unduly persuaded" that the
much earlier October 2010 ruling (by a different judge) finding a lack of diligence with respect
to Emma's petition to vacate the default judgment governed the issue of diligence with respect to
her section 2-1401 petition.
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¶ 40 On September 4, 2013, the trial court denied Emma's motion for rehearing. On
September 19, 2013, Emma filed a notice of appeal.
¶ 41 ANALYSIS
¶ 42 Before we address the merits, we first address EDC's claim that we lack jurisdiction
because Emma's notice of appeal was untimely. In particular, EDC claims that Emma's failure to
file her notice of appeal within 30 days following the trial court's dismissal of her amended
section 2-1401 petition on June 28, 2013 deprives us of jurisdiction. EDC acknowledges that
within 30 days of the denial of the amended section 2-1401 petition, Emma filed a motion for
rehearing of that decision. EDC also does not dispute that after the September 4, 2013 denial of
the motion for rehearing, Emma filed a notice of appeal within 30 days, on September 19, 2013.
Nonetheless, EDC urges that the motion for rehearing did not toll the 30-day time to appeal from
the June 28, 2013 dismissal. Thus, EDC urges that Emma's failure to file a notice of appeal
within 30 days of the June 28, 2013 dismissal order precludes appellate jurisdiction.
¶ 43 This question is determined by Illinois Supreme Court Rule 303 (eff. May 30, 2008) and
Rule 304 (eff. Feb. 26, 2010). Rule 303(a)(1), governing appeals from final judgments of the
circuit court in civil cases, provides that "[t]he notice of appeal must be filed with the clerk of the
circuit court within 30 days after the entry of the final judgment appealed from, or, if a timely
posttrial motion directed against the judgment is filed, *** within 30 days after the entry of the
order disposing of the last pending postjudgment motion directed against that judgment or
order." Ill. S. Ct. R. 303(a)(1) (eff. May 30, 2008). At the same time, Rule 304(b)(3) provides
that "[a] judgment or order granting or denying any of the relief prayed in a petition under
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section 2-1401" is appealable without a special finding. Ill. S. Ct. R. 304(b)(3) (eff. Feb. 26,
2010).
¶ 44 The supreme court rules do not explicitly state whether a motion for reconsideration of a
dismissal of a section 2-1401 petition is construed as a "timely posttrial motion directed against
the judgment" that tolls the time to file a notice of appeal pursuant to Rule 303(a). In other
words, it is not immediately apparent from the rules whether the filing of a motion to reconsider
the denial of a section 2-1401 petition permits the appellant to file a notice of appeal up to 30
days following the denial of the motion to reconsider. EDC notes that, in a 1980 case concerning
a petition brought under section 72 (section 2-1401's statutory predecessor), this court held that
"[m]otions to reconsider the court's ruling on a section 72 petition should not be used to toll the
time for appeal." Dempster Plaza State Bank v. American National Bank & Trust Co. of
Chicago, 83 Ill. App. 3d 870, 873 (1980).
¶ 45 However, our supreme court has since decided this question in favor of allowing
appellate jurisdiction, holding that "it is fairly inferable that the timing of a Rule 304(b)(3)
appeal is to be governed by Rule 303(a)(1), including its provision for a toll following a post-
trial motion." (Emphasis added.) Elg v. Whittington, 119 Ill. 2d 344, 355 (1987) (noting that
"section 2-1401 actions are not simply continuations of previous actions but new causes of
action, and therefore parties against whom section 2-1401 judgments have been rendered should
enjoy the same appellate rights as all other appellants" (id. at 355-56)); see also Burnicka v.
Marquette National Bank, 88 Ill. 2d 527, 530-31 (1982) (holding that a motion to reconsider an
order granting a petition under section 72 tolled the time for filing a notice of appeal).
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¶ 46 Under our supreme court's interpretation of Rules 303(a)(1) and 304(b)(3), Emma's
notice of appeal was timely. That is, although Emma did not file a notice of appeal within 30
days of the June 2013 denial of her section 2-1401 petition, she filed a motion for rehearing of
the trial court's ruling within 30 days. Because she did so, pursuant to Rule 303(a)(1) her time to
file a notice of appeal was extended to "30 days after the entry of the order disposing of" that
motion for rehearing. Emma filed her notice of appeal on September 19, 2013, within 30 days
after the September 4, 2013 denial of her motion for rehearing. Accordingly, we have
jurisdiction.
¶ 47 We thus turn to the merits of Emma's appeal. Although the trial court dismissed Emma's
amended section 2-1401 petition on the basis of "lack of diligence," we conclude that dismissal
was independently warranted on other grounds. First, our court has held that, due to the
provisions of the Illinois Mortgage Foreclosure Law (Foreclosure Law), a section 2-1401
petition cannot be asserted in an effort to vacate the circuit court's confirmation of a foreclosure
sale. See U.S. Bank National Ass'n v. Prabhakaran, 2013 IL App (1st) 111224.
¶ 48 In Prabhakaran, as in this case, the prior owner filed a section 2-1401 petition seeking to
vacate a foreclosure judgment and the circuit court's order confirming the judicial sale of the
foreclosed property to a bank (U.S. Bank). Id. ¶ 1. However, U.S. Bank asserted that "section
15-509(c) of the Foreclosure Law barred the defendant's section 2-1401 petition as a matter of
law because the selling officer had already delivered a deed to U.S Bank following the circuit
court's order confirming sale of the property." Prabhakaran, 2013 IL App (1st) 111224, ¶ 26.
Section 15-1509(c) of the Foreclosure Law states that the "vesting of title" to property by
delivery of a deed following a foreclosure sale, "unless otherwise specified in the judgment of
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foreclosure, shall be an entire bar of *** all claims of parties to the foreclosure." (Emphasis
added.) 735 ILCS 5/15-1509(c) (West 2012). Our court agreed with U.S. Bank's argument in
Prabhakaran, finding "[t]here is simply no Illinois authority to support the defendant's argument
that she can utilize section 2-1401 to circumvent *** section 15-1509(c) of the Foreclosure Law
after the circuit court confirmed the sale of the property." Prabhakaran, 2013 IL App (1st)
111224, ¶ 30. We concluded that "[t]he clear and unambiguous language of section 15-509(c)
of the Foreclosure Law bars the defendant's claims in her section 2-1401 petition and is
dispositive." Id. As in Prabhakaran, we hold that section 15-1509(c) of the Foreclosure Law
applies in this case to bar Emma's section 2-1401 petition.
¶ 49 Moreover, just as section 15-1509(c) of the Foreclosure Law limits the claims that may
be asserted after the judicial sale of foreclosed property, section 2-1401(e) of the Code of Civil
Procedure similarly precludes a section 2-1401 petition from affecting the disposition of property
transferred to a third party after the entry of the challenged judgment. See 735 ILCS 5/2-1401(e)
(West 2012). Section 2-1401(e) provides that "the vacation or modification of an order or
judgment pursuant to [section 2-1401] does not affect the right, title or interest in or to any real
or personal property of any person, not a party to the original action, acquired for value after the
entry of the order or judgment but before the filing of the petition." Id. In this case, Emma's
property was transferred for value to EDC—which was not a party to the original action—in
June 2012, after the September 2011 confirmation of the foreclosure sale and before Emma filed
her first section 2-1401 petition. Thus, section 2-1401(e) similarly barred Emma from asserting
a section 2-1401 petition attacking EDC's interest in the property.
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¶ 50 Even if our holding in Prabhakaran and the express language of section 2-1401(e) did
not otherwise bar Emma's section 2-1401 petition , we would nevertheless affirm the trial court's
dismissal due to her lack of diligence. Contrary to her arguments on appeal, Emma's petition
was subject to due diligence requirements, and the trial court did not abuse its discretion in
finding that she failed to show due diligence. As Emma's arguments implicate recent precedent
by our supreme court discussing the types of section 2-1401 petitions and the requisite showing
of due diligence, we proceed to address those contentions.
¶ 51 Emma argues that she did not need to show diligence, and in the alternative, claims that
any lack of diligence by her should have been excused by her prior attorneys' conduct. First,
Emma argues that her petition was in the nature of a "bill of review for errors or law apparent on
the face or the record," and that "[t]his type of [section] 2-1401 petition need not show
diligence." Emma relies heavily on our Second District's decision in Aurora Loan Services, LLC
v. Pajor, 2012 IL App (2d) 110899, which explained: "Current law recognizes at least three
primary types of section 2-1401 petitions. The most familiar is the 'new facts' type ***. Also
familiar is the petition to vacate a void judgment ***. A third type, based on errors of law
apparent on the face of the record is now rare, but remains viable." Id. ¶ 15. The Second District
stated that our supreme court's 1958 decision in Collins v. Collins, 14 Ill. 2d 178 (1958) contains
"the best description of this [third] kind of petition." Aurora, 2012 IL App (2d) 110899, ¶ 15.
¶ 52 "In Collins, the supreme court noted that section 2-1401 (then section 72 of the Civil
Practice Act (Ill. Rev. Stat. 1955, ch. 110, ¶ 72)) incorporated the power, formerly available
under bills of review, to vacate final judgments based on legal errors." Id. ¶ 17 (citing Collins,
14 Ill. 2d at 182-83). Collins explained that: "Bills of review were formerly available for the
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purpose of obtaining relief from decrees for errors apparent upon the face of the record" and
were "applicable where the decree was contrary to a rule of law or statutory provision." Collins,
14 Ill. 2d at 183. Our Second District in Aurora stated that "[u]nlike the usual test applied to ***
section 2-1401 petitions, in a Collins-type petition the petitioner need not show diligence."
Aurora, 2012 IL App (2d) 110899, ¶ 19.
¶ 53 Emma urges that her amended section 2-1401 petition was in the nature of a "bill of
review" seeking to correct an error of law apparent on the face of the record, as described in
Collins. Thus, she argues that her section 2-1401 petition was not subject to any due diligence
requirement and could not be dismissed on that basis. As explained below, we disagree with
Emma's characterization of her section 2-1401 petition as asserting an error of law. Rather, her
section 2-1401 petition was heavily fact-dependent.
¶ 54 Notably, our supreme court has recently examined the types of section 2-1401 petitions.
See Warren County Soil & Water Conservation District v. Walters, 2015 IL 117783. Warren
County explained that "a section 2-1401 petition can present either a factual or legal challenge to
a final judgment or order," and "the nature of the challenge presented in a section 2-1401 petition
is critical because it dictates the proper standard of review on appeal." Id. ¶ 31.
¶ 55 Warren County noted that the "seminal decision on section 2-1401 practice is Smith v.
Airoom, Inc., 114 Ill. 2d 209 (1986)." Id. ¶ 36. As explained by Warren County: "Airoom
established that to be entitled to relief from a final judgment or order under section 2-1401, the
petition must set forth specific factual allegations supporting each of the following elements: (1)
the existence of a meritorious defense; (2) due diligence in presenting this defense or claim to the
circuit court in the original action; and (3) due diligence in filing the section 2-1401 petition for
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relief." Id. ¶ 37 (citing Smith v. Airoom, Inc., 114 Ill. 2d 209, 220-21 (1986)). Under
Airoom,"[t]he question of whether relief should be granted lies within the sound discretion of the
circuit court, depending on the facts and equities presented. [Citation.] Accordingly *** a
reviewing court will reverse the circuit court's ruling on the petition only if it constitutes an
abuse of discretion." Id. (citing Airoom, 114 Ill. 2d at 221).
¶ 56 Warren County explained that Airoom was a "fact-dependent challenge to a final
judgment under section 2-1401. The primary issue in Airoom depended largely on the specific
facts of that case, determining whether the defendant's actions and conduct constituted due
diligence." Id. ¶ 40. However, Warren County also recognized that "a section 2-1401 petition is
not limited to the type of factual challenge involved in Airoom" but that "the petition may also
raise a legal challenge to a final judgment or order." Id. ¶ 41.
¶ 57 Our supreme court in Warren County explained that, "[i]n contrast to the fact-dependent
judgment under section 2-1401 in Airoom," our supreme court's decision in People v. Vincent,
226 Ill. 2d 1 (2007), was "representative of a case involving a purely legal challenge to a final
judgment under section 2-1401." Warren County, 2015 IL 117783, ¶ 42. In Vincent, in which a
criminal defendant's section 2-1401 petition alleged that his sentence of five consecutive 20-year
prison terms was void, our supreme court held that the applicable standard of review was de
novo. Vincent, 226 Ill. 2d at 15-18. Moreover, Vincent did not require an analysis of the
petitioner's due diligence as part of the applicable standard of review. See id.
¶ 58 In Warren County, however, our supreme court clarified that "Vincent must be viewed in
its narrow context of a section 2-1401 petition that raises a purely legal challenge to a judgment
by alleging that it is void under subsection (f) of section 2-1401. [Citation.] When viewed in
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this context, our decision to apply de novo review is consistent with established principles of
appellate review for cases involving purely legal questions. [Citation.] Accordingly, to the
extent that Vincent prohibits equitable considerations in section 2-1401 proceeding, that part of
our holding must be limited to a petition raising solely a legal issue." Warren County, 2015 IL
117783, ¶ 47.
¶ 59 Warren County thus recognized that "a section 2-1401 petition seeking to vacate a void
judgment, a purely legal issue, does not need to establish a meritorious defense or satisfy due
diligence requirements." Id. ¶ 48. However, Warren County reiterated the due diligence
requirements for a fact-dependent petition:
"[W]e hold that when a section 2-1401 petition presents a fact-
dependent challenge to a final judgment or order the standards
from Airoom govern that proceeding. Thus, the petitioner must set
forth specific factual allegations supporting each of the following
elements: (1) the existence of a meritorious defense; (2) due
diligence in presenting this defense; and (3) due diligence in filing
the section 2-1401 petition for relief. [Citation.] The quantum of
proof necessary to sustain a section 2-1401 petition is a
preponderance of the evidence, and the circuit court's ultimate
decision on the petition is reviewed for an abuse of discretion."
(Emphasis in original.) Id. ¶ 51.
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Warren County thus makes clear that although a section 2-1401 petition raising a purely legal
issue does not need to satisfy due diligence requirements, a fact-dependent challenge to a final
judgment or order must be supported by specific factual allegations of due diligence.
¶ 60 In this case, we do not agree with Emma's argument that her amended section 2-1401
petition raises a purely legal error, and thus excuses her from due diligence requirements.
Rather, it is apparent that her challenge to the underlying judgment confirming the foreclosure
sale is fact-dependent. Specifically, her section 2-1401 petition asserts numerous factual
allegations of "predatory lending," "fraud in the inducement," and other misconduct by the bank
to support her claim that she did not understand the November 2006 loan transaction. As her
petition presents fact-dependent challenges, it was required to set forth allegations supporting the
existence of a meritorious defense, due diligence in presenting the defense, and due diligence in
filing the section 2-1401 petition. Id. Further, the abuse of discretion standard applies to the
circuit court's determination as to whether these elements were satisfied. Id.
¶ 61 As an alternative argument, Emma contends that, even if her section 2-1401 petition is of
the type that requires due diligence, the lack of cooperation between her first and second defense
attorneys should be deemed to "toll[] the due diligence period" and excuse her delay. Emma
urges that, as a section 2-1401 petition "invokes the equitable powers of the trial court" to
"prevent enforcement of a judgment when it would be unfair, unjust or inequitable," courts may
"relax the due diligence standard where necessary to effect substantial justice." Although Emma
recognizes that a party is "generally bound by the negligence of her legal counsel," she urges that
in her case the lack of cooperation by her prior attorneys constitutes "mitigating circumstances"
that permit relaxation of the due diligence requirement. While we empathize with Emma's
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situation as an elderly person, who relied upon others to direct, inform and act in her behalf
regarding the refinancing of her property and the subsequent legal issues and representation
which arose, she still must meet the requirements which would give the trial court the basis to
grant her the relief she sought.
¶ 62 Emma is correct to the extent that equitable considerations are taken into account in
deciding a section 2-1401 petition. Id. ¶ 50 ("[A] section 2-1401 petition that raises a fact-
dependent challenge to a final judgment or order must be resolved by considering the particular
facts, circumstances, and equities of the underlying case.") "The trial court may also consider
equitable considerations to relax the applicable due diligence standards under the appropriate
limited circumstances." Id. ¶ 51. Emma is also correct in recognizing that "[a]lthough a party is
generally bound by the negligence of his legal counsel, a court may refuse to impute such
negligence to the client who seeks to vacate a default judgment when mitigating circumstances
are present." (Emphasis added.) West Bend Mutual Insurance Co. v. 3RC Mechanical &
Contracting Services, LLC, 2014 IL App (1st) 123213, ¶ 14.
¶ 63 Nonetheless, even if the trial court was permitted to relax the due diligence requirements,
we cannot say that the trial court abused its discretion in declining to do so in this case. "A
circuit court abuses its discretion when its ruling is arbitrary, fanciful, unreasonable, or where no
reasonable person would take the view adopted by the trial court." (Internal quotation marks
omitted.) Bank of America, N.A. v. Adeyiga, 2014 IL App (1st) 131252, ¶ 116.
¶ 64 In this case, the trial court could reasonably conclude that, notwithstanding Emma's
allegations of the failures of her first and second defense counsel, she nonetheless failed to
establish due diligence. Notably, a section 2-1401 petition must satisfy due diligence in two
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respects, both "in presenting the defense or claim to the trial court in the original action," as well
as "due diligence in filing the section 2-1401 petition." Charles Austin Ltd. v. A-1 Food
Services, Inc., 2014 IL App (1st) 132384, ¶ 25.
¶ 65 The trial court could reasonably have concluded that due diligence was lacking in either
respect. First, the trial court could conclude that Emma was not diligent in initially presenting
her defenses to enforcement of the loan, premised on her allegations of the bank's fraudulent
conduct and predatory lending. The default judgment was entered in December 2009. Although
the parties dispute when Emma was first served with the foreclosure complaint, it is not disputed
that her first attorney appeared in the action in February 2010. However, it was not until
September 2010 that Emma (through her second attorney) filed a petition to vacate the December
2009 default judgment, in which she first alleged that the bank engaged in predatory lending and
fraud. Moreover, section 2-1401 additionally requires "due diligence in filing the section 2-1401
petition for relief." Warren County, 2015 IL 117783, ¶ 51. In this regard, Emma did not file her
first section 2-1401 petition until December 2012, over a year after the September 2011 order
confirming the February 2011 foreclosure sale of the property. Furthermore, the section 2-1401
petition's allegations of predatory lending and fraud by the bank are largely duplicative of the
allegations set forth over two years earlier in Emma's September 2010 motion to vacate the
default judgment. 2
2
Emma emphasizes that her amended section 2-1401 petition, unlike her previous filings,
relied upon the court-appointed receiver’s report from August 2009—which reflected that only
$3850 in rent had been paid by the property's tenants from June to August 2009— as factual
support for her allegation that the bank’s employee falsely stated on her 2006 loan application
that the property's apartments were fully occupied by tenants paying $800 in monthly rent.
However, we can hardly say that the trial court abused its discretion in declining to attach
significance to that fact. The suggestion that the rents collected from the property in 2009 is
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¶ 66 Moreover, although Emma's appellate argument cites the lack of cooperation between her
first two defense counsel as justifying relaxation of the due diligence requirements, the record
reflects that her second counsel withdrew from the case in April 2011, and that Emma obtained
subsequent counsel by August 2011. Importantly, her first and second counsel were no longer
involved in the case after April 2011. Therefore, their lack of cooperation with each other offers
no explanation for why Emma waited until December 2012, over a year after the September
2011 order confirming the sheriff’s sale of the property, to file her original section 2-1401
petition. Given this record, we cannot say that the trial court abused its discretion in determining
that Emma did not satisfy the due diligence requirements of section 2-1401.
¶ 67 Apart from her arguments challenging the dismissal of her amended section 2-1401
petition on the basis of "lack of diligence," Emma's appeal separately argues that the court erred
in subsequently denying her motion for rehearing, retrial or modification pursuant to section 2-
1203 of the Code of Civil Procedure. That section provides that in non-jury cases, a party may
"within 30 days after the entry of the judgment *** file a motion for a rehearing, or a retrial, or
modification of the judgment or to vacate the judgment or for other relief." 735 ILCS 5/2-1203
(West 2012). The purpose of such a motion "is to bring to the court's attention newly discovered
evidence, changes in the law, or errors in the court's previous application of existing law."
(Internal quotation marks omitted.) Cable America, Inc. v. Pace Electronics, Inc., 396 Ill. App.
3d 15, 24 (2009). The applicable standard of review on such a motion is the deferential abuse of
probative of the rents paid by tenants prior to the loan origination in 2006, over three years prior
to the receiver's report, is tenuous at best. Moreover, Emma does not offer any particular reason
why, despite being represented by counsel since early 2010, she did not reference the August
2009 receiver’s report until her amended section 2-1401 petition in April 2013.
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discretion standard. Id. ("The decision to grant or deny a section 2-1203 motion is within the
sound discretion of the circuit court.").
¶ 68 Notably, Emma does not contend that her section 2-1203 motion raised any "newly
discovered evidence" or factual allegations that were not already contained in her amended
section 2-1401 petition or its supporting affidavit, and she does not claim that the section 2-1203
motion was premised upon a change in applicable law. Rather, her section 2-1203 motion
simply urged the trial court to reconsider its determination that she had failed to demonstrate due
diligence. However, as we have explained above, we cannot say that the trial court abused its
discretion in concluding that she failed to show due diligence. Moreover, as we have also found
that Emma's section 2-1401 petition was independently barred by our holding in Prabhakaran,
2013 IL App (1st) 111224, and by the terms of section 2-1401(e), we cannot conclude that the
trial court erred in denying her motion to reconsider.
¶ 69 For the foregoing reasons, we affirm the judgment of the circuit court of Cook County.
¶ 70 Affirmed.
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