                                           2014 IL App (1st) 131387

                                                                                       THIRD DIVISION
                                                                                       September 10, 2014

                                                No. 1-13-1387


                                             IN THE
                                  APPELLATE COURT OF ILLINOIS
                                    FIRST JUDICIAL DISTRICT


DEUTSCHE BANK NATIONAL TRUST,                                         )       Appeal from the
                                                                      )       Circuit Court of
                          Plaintiff-Appellee,                         )       Cook County.
                                                                      )
                 v.                                                   )       09 CH 11323
                                                                      )
ANNA CICHOSZ AND MACIEJ RENG, UNKNOWN                                 )       The Honorable
OWNERS AND NONRECORD CLAIMANTS,                                       )       Daniel P. Brennan,
                                                                      )       Judge Presiding
                          Defendants-Appellants.                      )

        JUSTICE LAVIN delivered the judgment of the court, with opinion.
        Presiding Justice Howse and Justice Fitzgerald Smith concurred in the judgment and
        opinion.


                                                  OPINION

¶1      The plaintiff, Deutsche Bank National Trust (Deutsche Bank), succeeded to this action

under the Illinois Mortgage Foreclosure Law (Foreclosure Law) (735 ILCS 5/15-1101 et seq.

(West 2012)), seeking foreclosure on property owned by defendants' Anna Cichosz and Maciej

Reng (defendants). 1 The trial court granted Deutsche Bank summary judgment, and subsequently

confirmed the sale and distribution of defendants' property. Defendants' timely appeal argues

that all orders relating to the judgment of foreclosure are void because the original plaintiff and

mortgagee, Mortgage Electronic Registration Systems, Inc. (MERS), operated as an unregistered

1
 The foreclosure action filed against unknown owners and nonrecord claimants was later dismissed as to those
parties.
No. 1-13-1387


"debt collection agency" under the Collection Agency Act (Act) (225 ILCS 425/1 et seq. (West

2012)), thereby nullifying the original complaint. We affirm.

¶2                                    BACKGROUND

¶3      The limited common law record reveals the following facts which animate our

disposition. On March 12, 2009, MERS filed the present action against defendants seeking

foreclosure of the residential property located at 104 S. Maple Lane in Prospect Heights, Illinois.

According to the complaint and attached mortgage documents, defendants obtained a mortgage

for the subject property on September 29, 2006, for $287,000. The mortgage listed MERS, a

Delaware corporation, as the mortgagee and stated MERS was acting as "nominee" for the

"Lender and Lender's successors and assigns." MERS is well known in the foreclosure setting as

a membership organization that typically records, trades, and forecloses loans on behalf of many

lenders, acting for lender accounts rather than their own. Mortgage Electronic Registration

Systems, Inc. v. Estrella, 390 F.3d 522, 524-25 (7th Cir. 2004). Here, the mortgage identified the

"Lender" as WMC Mortgage Corp., a California corporation. The accompanying note identified

WMC Mortgage Corp. as having the beneficial interest in the subject property. However, by the

time MERS filed the foreclosure action, MERS asserted it was holder of both the note and the

mortgage. Defendant Reng filed a pro se answer admitting that fact and also admitting the

assertions of default.

¶4     On October 28, 2009, apparently in response to MERS's motion, the court ordered

substitution of plaintiffs, replacing MERS with Deutsche Bank, "as trustee under pooling and

servicing agreement dated as of January 1, 2007 securitized asset backed receivables LLC trust

2007-HE1 mortgage pass-through certificates, series 2007-HE1."




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No. 1-13-1387


¶5     On February 4, 2010, Deutsche Bank filed motions for summary judgment, judgment of

foreclosure, and an order for sale against defendants. Deutsche Bank alleged there were no

issues of material fact or law contradicting the money due by defendants. Deutsche Bank

attached an affidavit from the keeper of records stating Deutsche Bank was the current holder

and owner of the note and mortgage and was thus entitled to foreclose on the property.

¶6     On February 16, 2010, counsel filed an appearance on behalf of defendants, and

meanwhile, Deutsche Bank retained new counsel. Some two years later, counsel for defendants

apparently filed an amended answer to the complaint denying the default and any liability for

deficiencies. Defendants neither admitted nor denied that Deutsche Bank was holder of both the

note and mortgage. In a scheduling order, the court held that defendant Reng's pro se answer

should stand and the amended answer was on behalf of only defendant Cichosz.

¶7     On June 8, 2012, Deutsche Bank filed another motion for summary judgment arguing, as

before, that there was no genuine issue of material fact or law precluding the foreclosure

judgment in its favor.

¶8     On June 14, 2012, the circuit court granted Deutsche Bank's motion for summary

judgment and entered a judgment of foreclosure and sale against defendants for a total debt of

$407,690.66. Although both Deutsche Bank in its final summary judgment motion and the court

in its order referenced defendants' affirmative defenses, these defenses do not appear in the

record on appeal.

¶9     The sale took place at public auction on November 9, 2012. Deutsche Bank subsequently

filed a motion to approve the report of sale and distribution of the subject property, as a judicial

foreclosure sale is not complete until it has been approved by the trial court. See Commercial

Credit Loans, Inc. v. Espinoza, 293 Ill. App. 3d 923, 927 (1997). On March 5, 2013, defendants



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No. 1-13-1387


filed a response to the motion and for the first time argued that MERS was an unlicensed debt

collector in violation of the Act, and because MERS filed the original action, this rendered the

judgment void. Defendants attached an affidavit from the records keeper for the Illinois

Department of Financial and Professional Regulation, stating that MERS was not licensed under

the Act. Deutsche Bank responded, asserting defendants forfeited their argument by failing to

raise it previously and, regardless, defendants failed to allege specific facts in support of their

claim. Deutsche Bank asserted the Act was inapplicable because, per section 2.03, MERS

operated a business other than a collection agency, making it exempt. See 225 ILCS 425/2.03

(West 2012).

¶ 10   Finding defendants' arguments unpersuasive, on April 2, 2013, the court confirmed the

sale and distribution of the subject property. This appeal followed.

¶ 11                                           ANALYSIS

¶ 12   Defendants argue now, as they did below, that the original complaint filed by MERS is a

nullity, voiding all subsequent orders relating to the judgment of foreclosure, because MERS

allegedly operated as an unregistered "debt collection agency" under the Act (225 ILCS 425/1 et

seq. (West 2012)). Although defendants failed below to cite a statutory source for this challenge

of the judicial sale, they now point to section 15-1508(b)(iv) of the Foreclosure Law (735 ILCS

5/15-1508(b)(iv) (West 2012)), which governs confirmation of judicial sales. Defendants assert

that since MERS operated as an unregistered debt collection agency, this essentially was a

violation of public policy, "justice was not otherwise done" in this case, and thus the trial court

was required to decline the confirmation of sale.

¶ 13   Indeed, a motion requesting confirmation of a judicial sale invokes section 15-1508(b),

which mandates that a circuit court hold a hearing and then confirm the judicial sale unless one



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No. 1-13-1387


of four stated exceptions applies, including that "justice was otherwise not done." 735 ILCS

5/15-1508(b)(iv) (West 2012); Bayview Loan Servicing, LLC v. 2010 Real Estate Foreclosure,

LLC, 2013 IL App (1st) 120711, ¶ 32. 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. Wells Fargo Bank, N.A., v. McCluskey, 2013

IL 115469, ¶ 25. An interested party seeking to oppose the judicial sale bears the burden of

proving that sufficient grounds exist to disapprove a judicial sale. Bayview Loan Servicing, 2013

IL App (1st) 120711, ¶ 32. This standard requires both a meritorious defense to the underlying

judgment and proof that justice was not otherwise done because 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. McCluskey, 2013 IL 115469, ¶ 26.

The provisions of section 15-1508 confer on circuit courts broad discretion in approving or

disapproving judicial sales, and as a result, a court's decision to confirm or reject a judicial sale

under the statute will not be disturbed absent an abuse of that discretion. Household Bank, FSB

v. Lewis, 229 Ill. 2d 173, 178 (2008).

¶ 14   In response to defendants' assertions relating to MERS's status under the Act, Deutsche

Bank initially argues that defendants forfeited review of their contentions because the matter

constitutes an affirmative defense similar to standing which defendants failed to raise in a timely

manner. See Lebron v. Gottlieb Memorial Hospital, 237 Ill. 2d 217, 252-53 (2010). Defendants

counter, a claim that a foreclosure proceeding is premised on a void judgment may be raised at

any time. In support, defendants cite cases wherein the issue of voidness related to a question of

the court's jurisdiction. See People v. Vasquez, 2013 IL App (2d) 120344, ¶ 21 (a lack of



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No. 1-13-1387


standing does not divest the trial court of subject matter jurisdiction and thus the reviewing court

can consider the issue of voidness). We would clarify that this case addresses whether the

original complaint is a nullity and the resulting judgment is void for public policy reasons. See

First Mortgage Co. v. Dina, 2014 IL App (2d) 130567, ¶ 25 (noting, in reference to the

enforceability of mortgages made by allegedly unlicensed mortgage lenders, that a court may,

and indeed should, consider sua sponte whether a contract provision violates public policy).

While such a challenge may be raised for the first time on appeal, we conclude the pleadings

together with the total record must be sufficient to establish the claim of nullity or voidness

under the law. Here, defendants have demonstrably failed to set forth sufficient facts to establish

that MERS is subject to the Act, let alone that this inquiry is even relevant since MERS is no

longer the plaintiff on record.

¶ 15   The purpose of the Act is to "protect consumers against debt collection abuse." 225 ILCS

425/1a (West 2012). It broadly bars any "collection agency" from operating in this state,

engaging in the business of debt collection, or exercising its right to collect without first

registering under the Act. 225 ILCS 425/4 (West 2012). The Act defines a "collection agency"

or "debt collector" as "any person who, in the ordinary course of business, regularly, on behalf of

himself or herself or others, engages in debt collection." 225 ILCS 425/2 (West 2012). A

"consumer credit transaction" under the Act is defined as a "transaction between a natural person

and another person in which property, service, or money is acquired on credit by that natural

person from such other person primarily for personal, family, or household purposes." Id.

Similarly, a debt is money, property, or the equivalent that is due and owing. Id. The Act,

however, does not apply "to persons whose collection activities are confined to and are directly

related to the operation of a business other than that of a collection agency," including but not



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No. 1-13-1387


limited to, "[b]anks, including trust departments, affiliates, and subsidiaries thereof, fiduciaries,

and financing and lending institutions (except those who own or operate collection agencies);

[and] *** [l]oan and finance companies." 225 ILCS 425/2.03 (West 2012).

¶ 16    Defendants argue that MERS was acting as a collection agency for the lender when

foreclosing on defendants and therefore MERS fits within the purview of the Act. See 225 ILCS

425/3 (West 2012). Although defendants presented evidence demonstrating that MERS was not

licensed in Illinois as a debt collection agency, they failed to present any evidence that the Act in

fact applied to MERS or that the type of loan servicing MERS conducts is equivalent to debt

collection. See Bayview Loan Servicing, 2013 IL App (1st) 120711, ¶ 35. Likewise, there is no

evidence demonstrating that MERS is not exempt from the registration requirements. See id.

Bare allegations are insufficient to unravel a judicial sale, especially in light of this court's past

suggestion that mortgage foreclosure is not the collection of a debt. See Aurora Loan Services,

LLC v. Kmiecik, 2013 IL App (1st) 121700, ¶¶ 30, 32, 35. It was defendants' burden to establish

grounds for disapproving the judicial sale, and they fell manifestly short of fulfilling it. See

Bayview Loan Servicing, 2013 IL App (1st) 120711, ¶ 35.

¶ 17    In reaching this conclusion, we find defendants' reliance on LVNV Funding, LLC v. Trice,

2011 IL App (1st) 092773, to be misplaced. LVNV Funding held that a complaint filed by an

unregistered collection agency is a nullity upon which no later judgment can survive. LVNV

Funding, 2011 IL App (1st) 092773, ¶ 19. In LVNV Funding, unlike in this case, the appellate

court, while conducting de novo review, found the pleadings set forth in the motion filed under

section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401 (West 2008)) were sufficient.

LVNV Funding, 2011 IL App (1st) 092773, ¶ 16 (noting that given the procedural posture, the

court had to assume the allegations were true). This case reaches us at a different procedural



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No. 1-13-1387


stage and without adequate evidence submitted. Distinguishing factors aside, we question the

continued viability of LVNV Funding, which is now pending before the Illinois Supreme Court

(appeal allowed, No. 116129 (oral argument held May 14, 2014)). To support its holding that

the complaint was a nullity, the LVNV Funding court analogized unregistered debt collection to

the unauthorized practice of law, but in Downtown Disposal Services, Inc. v. City of Chicago,

2012 IL 112040, ¶ 30, our supreme court recently held that a per se nullity rule is unreasonable

in the context of complaints filed by nonlawyers and judgments rendered thereon; rather, the

nullity rule should be invoked only where it fulfills the purposes of protecting both the public

and the integrity of the judicial system from the actions of the unlicensed, and only where no

alternative remedy is possible. The court stated the matter was subject to equitable

considerations by the circuit court and, in that sense, abrogated the principal holding of LVNV

Funding. Id. ¶ 31. Thus, applying Downtown Disposal to the present case, if defendants had set

forth adequate allegations in their section 15-1508(b)(iv) motion demonstrating MERS was not a

registered collection agency, this would not have automatically rendered the complaint and

judgments entered thereon a nullity.

¶ 18   Lastly, even assuming MERS were acting as an unregistered debt collection agency,

MERS is no longer the mortgagee or complainant. Rather, the record indicates the mortgage and

underlying note were assigned to the current plaintiff, Deutsche Bank. Defendants raise no

explanation as to why MERS's alleged activities as an unlicensed debt collector would render all

subsequent pleadings, even those relating to a new plaintiff licensed under the Act, a nullity. For

all intents and purposes, it seems a new plaintiff would have cured the alleged defect.

¶ 19                                   CONCLUSION

¶ 20   For the foregoing reasons, we affirm the judgment of the circuit court.



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No. 1-13-1387


¶ 21   Affirmed.




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