                                2013 IL 115469

                             IN THE
                        SUPREME COURT
                               OF
                      THE STATE OF ILLINOIS


                       (Docket No. 115469)
     WELLS      FARGO BANK, N.A., Appellant,                   v.   KATIE
                      McCLUSKEY, Appellee.

                      Opinion filed November 21, 2013.

        JUSTICE THEIS delivered the judgment of the court, with
     opinion.
        Chief Justice Garman and Justices Freeman, Kilbride, Karmeier,
     and Burke concurred in the judgment and opinion.
        Justice Thomas took no part in the decision.



                                   OPINION

¶1       In this residential mortgage foreclosure action, we are asked to
     consider whether, after a judicial sale of property, a party may seek to
     vacate an underlying default judgment of foreclosure under section 2-
     1301(e) of the Code of Civil Procedure (the Code) (735 ILCS 5/2-
     1301(e) (West 2010)) or whether the Illinois Mortgage Foreclosure
     Law (the Foreclosure Law) (735 ILCS 5/15-1101 et seq. (West 2010))
     governs the mode of procedure. For the reasons that follow, we hold
     that after a motion to confirm the judicial sale has been filed, the
     Foreclosure Law governs.

¶2                          BACKGROUND
¶3       In 2009, Katie McCluskey executed a promissory note in the
     principal amount of $330,186 secured by a mortgage on her home.
     The mortgage was held by Wells Fargo Bank, N.A. McCluskey
     subsequently defaulted on the loan obligation. In July 2010, Wells
     Fargo initiated foreclosure proceedings pursuant to the Foreclosure
     Law. McCluskey was served with process on July 20, 2010, but did
     not answer or otherwise plead. Thereafter, on October 18, 2010, the
     circuit court entered an order of default and judgment of foreclosure.
     The judgment indicated that the statutory period of redemption would
     expire on February 20, 2011, after which time the property would be
     sold.
¶4       On February 24, 2011, seven months after the judgment of
     foreclosure was entered, and on the date set for judicial sale,
     McCluskey, through counsel, filed an emergency motion to stay the
     sale and to vacate the default judgment. Therein, she acknowledged
     service of process and that she was in default on the loan. She
     explained that she diligently sought a loan forbearance or loan
     modification agreement with the bank, but was unable to reach an
     agreement. She further explained that her husband had obtained new
     employment and was now able to make the monthly payments on
     their mortgage. At the hearing on the motion, the parties settled on an
     agreed order pursuant to which McCluskey withdrew her motion to
     vacate the default judgment, and Wells Fargo agreed to postpone the
     judicial sale for 75 days to allow McCluskey to negotiate a loan
     modification agreement with the bank.
¶5       Negotiations on the loan were unsuccessful and, on May 12,
     2011, the rescheduled date for the judicial sale, Wells Fargo was the
     successful bidder on the property at a purchase price of $235,985.69.
     On May 26, 2011, 10 months after the judgment of foreclosure,
     McCluskey, through new counsel, filed a new motion to vacate the
     default judgment and set aside the sale pursuant to section 2-1301(e)
     of the Code. Therein, McCluskey alleged for the first time that she
     had meritorious defenses to the complaint, including that (1) the
     affidavit in support of the judgment of foreclosure was not in
     compliance with the requirements of Supreme Court Rule 191
     because the loan officer did not have personal knowledge of the facts
     of the case; and (2) evidence existed that Wells Fargo was not the
     current holder of the note and, therefore, lacked standing to bring suit.
¶6       On August 30, 2011, following a hearing, the circuit court denied
     McCluskey’s motion to vacate, finding that she had waived her
     objections to the default and had voluntarily withdrawn her original
     motion in return for the postponement of the judicial sale. Since she
     had received the benefit of the parties’ agreement, and had agreed that


                                       -2-
     the sale could go forward on the postponed date absent an agreement
     on the loan negotiations, the court determined that she could not now
     seek to rescind her agreement. Additionally, the court entered an
     order, over McCluskey’s objection, confirming the judicial sale and
     finding that: (1) all notices required by the Foreclosure Law were
     given; (2) the sale was fairly and properly made; (3) the sale
     proceeded in accordance with the terms of the court’s judgment; and
     (4) justice was done. McCluskey filed her notice of appeal,
     challenging the court’s ruling on the motion to vacate the default
     judgment. She did not challenge the order confirming the sale of the
     property. Thereafter, her motions to stay the execution of the
     judgment were denied in both the circuit court and appellate court.
¶7        On appeal, McCluskey argued that the circuit court abused its
     discretion in denying her motion to vacate the judgment of
     foreclosure. Wells Fargo maintained that the motion to vacate the
     default pursuant to section 2-1301(e) of the Code conflicted with
     section 15-1508(b) of the Foreclosure Law, which governs the mode
     of procedure for confirming a judicial sale. In support, Wells Fargo
     relied upon Mortgage Electronic Registration Systems, Inc. v. Barnes,
     406 Ill. App. 3d 1 (2010). Barnes held that the Foreclosure Law takes
     precedence over any inconsistent statutory provisions, and that a
     borrower could not utilize section 2-1301(e) to circumvent section
     15-1508(b) of the Foreclosure Law after the motion to approve the
     sale had been filed because section 15-1508(b) limits the court’s
     discretion to refuse confirmation of the sale to four specified grounds
     and is therefore more restrictive than section 2-1301(e). Id. at 4-5.
¶8        The appellate court reversed, rejecting Barnes, and, instead,
     relying upon Merchants Bank v. Roberts, 292 Ill. App. 3d 925 (1997),
     holding that the Foreclosure Law does not preclude the circuit court
     from granting relief under section 2-1301(e) following a judicial sale
     if the movant can present a compelling excuse for lack of diligence,
     as well as a meritorious defense to the underlying judgment. 2012 IL
     App (2d) 110961, ¶ 13. The court remanded the matter to the circuit
     court to exercise its discretion and consider McCluskey’s motion
     under the standards applicable to section 2-1301(e) of the Code. 2012
     IL App (2d) 110961, ¶ 18. We allowed Wells Fargo’s petition for
     leave to appeal. Ill. S. Ct. R. 315 (eff. Feb. 26, 2010).




                                      -3-
¶9                                  ANALYSIS
¶ 10       Wells Fargo contends that the appellate court erred in holding,
       contrary to Barnes, that a borrower may seek to vacate a default
       judgment of foreclosure, after the judicial sale, under the standards of
       section 2-1301(e) of the Code. The resolution of this conflict involves
       the relationship between section 2-1301(e) of the Code (735 ILCS
       5/2-1301(e) (West 2010)) and section 15-1508(b) of the Foreclosure
       Law (735 ILCS 5/15-1508(b) (West 2010)). The issue is one of
       statutory construction, a question of law, which we review de novo.
       LaSalle Bank National Ass’n v. Cypress Creek 1, LP, 242 Ill. 2d 231,
       237 (2011).
¶ 11       Section 2-1301(e) of the Code sets forth the terms under which
       the court may exercise its discretion to set aside any default, and the
       terms under which it may entertain that motion:
               “The court may in its discretion, before final order or
               judgment, set aside any default, and may on motion filed
               within 30 days after entry thereof set aside any final order or
               judgment upon any terms and conditions that shall be
               reasonable.” 735 ILCS 5/2-1301(e) (West 2010).
¶ 12       Section 2-1301(e) is generally available “to seek relief from any
       nonfinal order of default or default judgment or from a final default
       judgment within 30 days of its entry.” 4 Richard A. Michael, Illinois
       Practice § 42:5, at 516 (2d ed. 2011). In the context of a mortgage
       foreclosure proceeding, it is well settled that in the absence of a
       Supreme Court Rule 304(a) finding in the judgment of foreclosure,
       “it is the order confirming the sale, rather than the judgment of
       foreclosure, that operates as the final and appealable order in a
       foreclosure case.” EMC Mortgage Corp. v. Kemp, 2012 IL 113419,
       ¶ 11. Accordingly, a motion to vacate a default judgment of
       foreclosure brought before the order confirming the sale or within 30
       days thereafter would be timely.
¶ 13       Wells Fargo initially maintains that to allow a motion to vacate a
       default judgment of foreclosure after the judicial sale has taken place,
       even if the motion is timely, would be inconsistent with the
       procedures set forth in section 15-1508(b) of the Foreclosure Law,
       which govern the confirmation of judicial sales.
¶ 14       Section 15-1508(b) of the Foreclosure Law provides:
               “Upon motion and notice in accordance with court rules
               applicable to motions generally, which motion shall not be


                                         -4-
                made prior to sale, the court shall conduct a hearing to
                confirm the sale. Unless the court finds that (i) a notice [of the
                sale] *** was not given, (ii) the terms of sale were
                unconscionable, (iii) the sale was conducted fraudulently or
                (iv) that justice was otherwise not done, the court shall then
                enter an order confirming the sale.” 735 ILCS 5/15-1508(b)
                (West 2010).
¶ 15        In considering the laws governing the interplay between these two
       procedural statutes, article II, section 1-108(a), of the Code provides
       in pertinent part that “[t]he provisions of Article II *** apply to all
       proceedings covered by Articles III through XIX of this Act except as
       otherwise provided in each of the Articles III through XIX,
       respectively.” 735 ILCS 5/1-108(a) (West 2010). Article XV, which
       governs the Foreclosure Law, provides that generally article II
       governs the mode of procedure, but if inconsistent with the provisions
       of the Foreclosure Law, then the Foreclosure Law controls. 735 ILCS
       5/15-1107(a) (West 2010); Teerling Landscaping, Inc. v. Chicago
       Title & Trust Co., 271 Ill. App. 3d 858, 866 (1995). Thus, we must
       determine whether the standards applicable to a motion to vacate a
       default judgment under section 2-1301(e) are inconsistent with the
       sale confirmation procedures set forth in section 15-1508(b) of the
       Foreclosure Law.
¶ 16        Generally, a liberal policy exists with respect to vacating defaults
       under section 2-1301(e). In re Haley D., 2011 IL 110886, ¶ 69; 4
       Richard A. Michael, Illinois Practice § 42:5, at 515 (2d ed. 2011) (the
       motion is “marked by a liberal policy toward the vacation of default
       judgments, and imposes few requirements to sustain a determination
       in the defendant’s favor”). A default has been described as an action
       taken to punish for disobeying the court’s command and “should only
       be condoned when, as a last resort, it is necessary to give the plaintiff
       his just demand.” Widicus v. Southwestern Electric Cooperative, Inc.,
       26 Ill. App. 2d 102, 109 (1960). As this court has observed, when a
       court is presented with a request to set aside a default, the overriding
       question is “whether or not substantial justice is being done between
       the litigants and whether it is reasonable, under the circumstances, to
       compel the other party to go to trial on the merits.” Haley D., 2011 IL
       110886, ¶ 69. Although relevant, the party need not necessarily show
       a meritorious defense and a reasonable excuse for failing to timely
       assert such defense. Id. ¶ 57. “What is just and proper must be
       determined by the facts of each case, not by a hard and fast rule


                                          -5-
       applicable to all situations regardless of the outcome.” Widicus, 26 Ill.
       App. 2d at 109.
¶ 17        In the context of a typical motion to vacate a default, the plaintiff
       files a cause of action, the defendant fails to appear or otherwise
       plead, and the court ultimately enters a default judgment. Within 30
       days of its issuance, the defendant moves to vacate it. In exercising
       its discretion, the court balances the severity of the penalty and the
       attendant hardship on the plaintiff if required to proceed to a trial on
       the merits. See, e.g., Venzor v. Carmen’s Pizza Corp., 235 Ill. App.
       3d 1053, 1057-58 (1992).
¶ 18        Nevertheless, a party seeking to vacate a default judgment of
       foreclosure after the judicial sale of the mortgaged property
       necessarily must also seek to set aside the judicial sale. Under the
       Foreclosure Law, after a judicial sale and a motion to confirm the sale
       has been filed, the court’s discretion to vacate the sale is governed by
       the mandatory provisions of section 15-1508(b). See Household
       Bank, FSB v. Lewis, 229 Ill. 2d 173, 179 (2008) (holding that the
       court’s exercise of discretion under the mandatory terms of section
       15-1508(b) is triggered when invoked by a motion to confirm the
       sale). Pursuant to section 15-1508(b), upon motion and notice, the
       court shall confirm the sale unless the court finds that: (i) proper
       notice of the sale was not given; (ii) the terms of the sale were
       unconscionable; (iii) the sale was conducted fraudulently; or (iv)
       justice was otherwise not done. 735 ILCS 5/15-1508(b) (West 2010).
       Thus, a party seeking to set aside the sale at that point is limited to the
       three specified grounds related to defects in the sale proceedings, or
       to the fourth ground, that “justice was otherwise not done.” 735 ILCS
       5/15-1508(b) (West 2010).
¶ 19        What constitutes an injustice under section 15-1508(b)(iv) is not
       expressly defined in the statute. 735 ILCS 5/15-1508(b)(iv) (West
       2010). This court has not had occasion to construe the extent of the
       trial court’s discretion under the justice provision or the standards by
       which the court assesses whether justice was done in this context.
       Nevertheless, it appears to merely codify the long-standing discretion
       of the courts of equity to refuse to confirm a judicial sale. See Levy v.
       Broadway-Carmen Building Corp., 366 Ill. 279, 288 (1937). Long
       before the codification of the Foreclosure Law, courts have retained
       the power to vacate a sale where unfairness is shown that is
       prejudicial to an interested party. Evans v. Hunold, 393 Ill. 195, 199
       (1946) (“Where fraud or unfairness is shown from any source which


                                          -6-
       operates to the prejudice of an interested party, a court of chancery is
       abundantly justified in refusing to approve a sale.”). However, the
       contours of that discretion have been described as “not a mere
       arbitrary discretion but must be exercised in accordance with
       established principles of law.” Shultz v. Milburn, 366 Ill. 400, 403
       (1937). It was explained that in the absence of fraud or irregularity,
       courts would not refuse to confirm a judicial sale merely to protect an
       interested party “against the result of his own negligence.” Id. at 405.
¶ 20       In the appellate court cases that have considered the justice
       provision under 15-1508(b)(iv), the court has balanced the interests
       of the parties and exercised its equitable authority to vacate a sale,
       applying traditional equitable principles. For example, in Fleet
       Mortgage Corp. v. Deale, 287 Ill. App. 3d 385 (1997), the court
       found that where the lender mistakenly proceeded with a foreclosure
       sale after the borrowers had exercised their right to redeem and sold
       the property to another party for the full judgment amount, the
       borrowers’ right to redeem was impacted. After balancing the
       conflicting interests involved, the court held that the trial court did
       not err in finding that justice was not otherwise done where the
       lender’s error prevented the borrowers from pursuing their
       redemption rights. Id. at 386-87. The court recognized the import of
       requiring stability in judicial sales, but found that interest could not
       be given ascendancy over protecting the redemption rights of the
       mortgagors. Id. at 389.
¶ 21       In Commercial Credit Loans, Inc. v. Espinoza, 293 Ill. App. 3d
       923 (1997), the appellate court affirmed the trial court’s finding that
       justice was not otherwise done where, coupled with a sales price that
       represented one-sixth of the property’s proven, fair market value, the
       lender’s conduct in repeatedly ignoring the borrower’s requests about
       what steps she should take to redeem the property prevented her from
       pursuing her right to redeem. Id. at 927.
¶ 22       In both Deale and Espinoza, it was the lender’s conduct that
       prevented the borrowers from protecting their interest in the property
       and affected their right to redeem the property, which underpinned the
       court’s finding of injustice under section 15-1508(b). In contrast, the
       court in Bayview Loan Servicing, LLC v. 2010 Real Estate
       Foreclosure, LLC, 2013 IL App (1st) 120711, held that an intervenor
       did not meet its burden to show that justice was not done under
       section 15-1508(b) where its complained of error was the result of the
       intervenor’s own negligence. Id. ¶ 40.


                                         -7-
¶ 23       Although in both a proceeding to vacate a default judgment under
       section 2-1301(e) and a section 15-1508(b) hearing, justice is the
       driving force; it is the nature, procedural posture, and the facts and
       circumstances of the case that inform the court’s equitable discretion
       and understanding of whether justice is being done. Therefore, our
       consideration of whether a section 2-1301(e) proceeding is
       inconsistent with a section 15-1508(b) proceeding is informed by the
       statutory framework of the Foreclosure Law, looking at the statute as
       a whole. Wisnasky-Bettorf v. Pierce, 2012 IL 111253, ¶ 16 (a statute
       should be evaluated as a whole and each provision should be
       construed in connection with every other section).
¶ 24        The General Assembly has set out a carefully crafted procedural
       process to balance the competing interests of the lender in enforcing
       its security interest as efficiently as possible, and the competing
       interests of the borrower in attempting to protect her equity in the
       property. Where a judgment of foreclosure is entered, the procedural
       framework culminates in the confirmation of sale and possession of
       the property. Each step in the foreclosure action seeks to “terminate
       legal and equitable interests in real estate” (735 ILCS 5/15-1203
       (West 2010)), while additionally providing specific built-in
       protections to the borrower’s equity in the property. These protections
       include time allotted for the right to reinstatement of the mortgage
       (735 ILCS 5/15-1602 (West 2010)), the equitable and statutory rights
       of redemption (735 ILCS 5/15-1603(b), 15-1605 (West 2010)), and
       notice of the judicial sale (735 ILCS 5/15-1507(c) (West 2010)).
       Once a judgment of foreclosure has been entered and the borrower’s
       reinstatement and redemption rights have expired, the property shall
       be sold at a foreclosure sale unless the lender agrees to accept other
       terms. 735 ILCS 5/15-1603(h), 15-1507(a) (West 2010).
¶ 25       As this statutory framework reveals, once a motion to confirm the
       sale under section 15-1508(b) has been filed, the court has discretion
       to see that justice has been done, but the balance of interests has
       shifted between the parties. At this stage of the proceedings,
       objections to the confirmation under section 15-1508(b)(iv) cannot be
       based simply on a meritorious pleading defense to the underlying
       foreclosure complaint. To allow the borrower to utilize the standards
       of a section 2-1301(e) motion to both set aside the judicial sale and
       also unravel the underlying foreclosure judgment—after being given
       ample statutory opportunity to respond to the allegations of the
       complaint, and after being fully informed of the court


                                        -8-
       process—would indeed be inconsistent with the need to establish
       stability in the judicial sale process. See Household Bank, 229 Ill. 2d
       at 181-82 (recognizing the need to promote stability in the conduct of
       judicial sales). Furthermore, it would allow the borrower to
       circumvent the time limitations for redemption and reinstatement and
       essentially allow for a revival of those provisions that is otherwise
       explicitly precluded by the Foreclosure Law. 735 ILCS 5/15-
       1603(c)(1) (West 2010) (“Once expired, the right of redemption ***
       shall not be revived.”).1 Rather, the justice provision under section
       15-1508(b)(iv) acts as a safety valve to allow the court to vacate the
       judicial sale and, in rare cases, the underlying judgment, based on
       traditional equitable principles. Consequently, we find that the more
       liberal standards applicable to a motion to vacate a default judgment
       under section 2-1301(e) are inconsistent with the more restrictive sale
       confirmation procedures set forth in section 15-1508(b) of the
       Foreclosure Law.
¶ 26       To vacate both the sale and the underlying default judgment of
       foreclosure, the borrower must not only have a meritorious defense
       to the underlying judgment, but must establish under section 15-
       1508(b)(iv) that justice was not otherwise done because either the
       lender, through fraud or misrepresentation, prevented the borrower
       from raising his meritorious defenses to the complaint at an earlier
       time in the proceedings, or the borrower has equitable defenses that
       reveal he was otherwise prevented from protecting his property
       interests. After a motion to confirm the sale has been filed, it is not
       sufficient under section 15-1508(b)(iv) to merely raise a meritorious
       defense to the complaint. See, e.g., Barnes, 406 Ill. App. 3d at 4-5;
       Nationwide Advantage Mortgage Co. v. Ortiz, 2012 IL App (1st)
       112755, ¶ 26; Deutsche Bank National Trust Co. v. Snick, 2011 IL
       App (3d) 100436, ¶ 9 (court held it was far too late to assert the
       defense of standing where the plaintiff had already moved for


           1
            Additionally, we note that the new supreme court rules on mortgage
       foreclosure aim to alleviate many of the problems arising with regard to
       potential pleading defects in the underlying foreclosure proceeding, thereby
       resolving these issues at the earliest possible time. See, e.g., Ill. S. Ct. R.
       113(b) (eff. May 1, 2013) (requiring “a copy of the note, as it currently
       exists, including all indorsements and allonges,” to be attached to the
       complaint at the time of filing); Ill. S. Ct. R. 113(c) (eff. May 1, 2013)
       (adopting new rules governing the form and content of the affidavit of
       indebtedness and providing a model prove-up affidavit).

                                            -9-
       confirmation of the judicial sale). This interpretation is consistent
       with the legislative policy of balancing the competing objectives of
       efficiency and stability in the sale process and fairness in protecting
       the borrower’s equity in the property and preserving the integrity of
       the sale. Household Bank, 229 Ill. 2d at 181-82.
¶ 27       Accordingly, we hold that up until a motion to confirm the
       judicial sale is filed, a borrower may seek to vacate a default
       judgment of foreclosure under the standards set forth in section 2-
       1301(e). Traditional considerations of due diligence and whether
       there is a meritorious defense will remain relevant in the court’s
       consideration of whether substantial justice has been done between
       the parties and whether it is reasonable to vacate the default.
       However, after a motion to confirm the judicial sale has been filed, a
       borrower seeking to set aside a default judgment of foreclosure may
       only do so by filing objections to the confirmation of the sale under
       the provisions of section 15-1508(b).
¶ 28        In reaching our holding, we find the appellate court misconstrued
       both Barnes and Roberts. In rejecting Barnes, the appellate court
       misread section 15-1107(a) of the Foreclosure Law, which provides
       that any inconsistent provisions of the Code shall not apply to the
       Foreclosure Law, as applying only to nonmortgage liens and
       encumbrances. 2012 IL App (2d) 110961, ¶ 12. Although the
       appellate court purported to follow Roberts, the court in Roberts was
       not asked to set aside the underlying judgment of foreclosure, or to
       consider the inconsistencies between a section 2-1301(e) proceeding
       and a section 15-1508(b) hearing. The court in Roberts ultimately
       remanded for a hearing under section 15-1508(b), which is consistent
       with our analysis today. Roberts, 292 Ill. App. 3d at 931-32.
¶ 29       After resolving the interplay between these two procedural
       statutes, we next apply the principles to the facts in this case. Here,
       the record reveals that McCluskey filed her motion to vacate the
       judgment of foreclosure on May 26, 2011, two weeks after the
       judicial sale. However, at the time she filed her motion, Wells Fargo
       had not yet sought to confirm the sale. Wells Fargo maintains that this
       fact should not change our analysis because it argues that the sale
       marks the point where the borrower is divested of her property rights
       and that once divested of those rights, it would be inconsistent with
       the Foreclosure Law to allow the borrower to vacate the underlying
       judgment of foreclosure. We disagree.



                                        -10-
¶ 30       Section 15-1404 of the Foreclosure Law provides that the
       interests of the borrower are terminated by the judicial sale, “provided
       the sale is confirmed.” 735 ILCS 5/15-1404 (West 2010). Thus, it is
       the confirmation of the sale that ultimately divests the borrower of her
       property rights. Where the mandatory provisions of section 15-
       1508(b) had not yet been triggered under the statute, it was not
       inconsistent with the Foreclosure Law for the court to entertain a
       motion to vacate the judgment of foreclosure under the standards of
       section 2-1301(e). See 735 ILCS 5/15-1107(a) (West 2010).
¶ 31       Nevertheless, even under the standards for vacating a default
       under section 2-1301(e), we find the circuit court did not err in
       denying McCluskey’s motion. The record reveals that despite being
       properly served, as well as having notice of the default, notice of the
       judgment of foreclosure, and notice of the sale, McCluskey waited 10
       months after the default judgment and after the sale to raise her
       pleading defenses for the first time. Moreover, she actively
       participated in the proceedings, admitting that she defaulted on the
       loan and seeking, through counsel, to stay the sale to negotiate a loan
       modification. Where she had ample opportunity to raise the alleged
       pleading defects, chose not to pursue them, actively participated in
       the proceedings, and admitted the default, the circuit court did not err
       in denying her motion to vacate the default judgment of foreclosure.

¶ 32                             CONCLUSION
¶ 33      For all of the foregoing reasons, we reverse the judgment of the
       appellate court and affirm the judgment of the circuit court.

¶ 34      Appellate court judgment reversed.
¶ 35      Circuit court judgment affirmed.




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