                           ILLINOIS OFFICIAL REPORTS
                                         Appellate Court




                   Crown Mortgage Co. v. Young, 2013 IL App (1st) 122363




Appellate Court            CROWN MORTGAGE COMPANY, Plaintiff, v. JOSEPH YOUNG;
Caption                    MINNIE McCLINDEN, a/k/a MINNIE L. McLENDON; UNKNOWN
                           OWNERS AND, NON RECORD CLAIMANTS, Defendants-Appellees.
                           (Unclaimed Funds Unit, LLC, Petitioner-Appellant)



District & No.             First District, First Division
                           Docket No. 1-12-2363


Filed                      March 18, 2013


Held                       Appellant’s petition for the turnover of surplus foreclosure funds due
(Note: This syllabus       defendant mortgagor was properly denied on the ground that the terms of
constitutes no part of     the agreement under which defendant assigned her interest in the funds
the opinion of the court   to appellant in exchange for $50 plus half of the surplus was
but has been prepared      unconscionable, since defendant could barely read, she did not understand
by the Reporter of         that appellant was involved in the foreclosure business, and she could
Decisions for the          have used the trial court’s help desk to obtain the money without paying
convenience of the         any fees.
reader.)


Decision Under             Appeal from the Circuit Court of Cook County, No. 04-CH-04632; the
Review                     Hon. Moshe Jacobius, Judge, presiding.



Judgment                   Affirmed.
Counsel on                 Law Office of Jonathan D. Peterson, of Chicago (Jonathan D. Petersen
Appeal                     and Natasha A. Burkett, of counsel), for appellant.

                           James A. Brady and Miriam Hallbauer, of Chicago, for appellees.


Panel                      PRESIDING JUSTICE HOFFMAN delivered the judgment of the court
                           with opinion.
                           Justice Rochford concurred in the judgment and opinion.
                           Justice Delort specially concurred, with opinion.


                                             OPINION

¶1           The appellant, Unclaimed Funds Unit, LLC (Unclaimed), appeals the circuit court’s order
        denying its petition for turnover of surplus foreclosure funds owed to the defendant, Minnie
        McLenden. Unclaimed argues that the defendant validly assigned her interest in the surplus
        to it and that the court erred in finding the assignment unconscionable. For the reasons that
        follow, we affirm the circuit court’s judgment.
¶2           This matter arises out of the 2004 foreclosure of the defendant’s mortgage on her home,
        whose later judicial sale yielded a surplus of over $14,000. The defendant never claimed the
        funds on her own, but, in February 2012, Unclaimed filed a petition for turnover of the funds.
        The petition stated that the defendant had assigned her interest in the funds to Unclaimed,
        for “Fifty Dollars *** and for other good and valuable consideration.” On April 18, 2012,
        Unclaimed appeared in the circuit court to prosecute its petition, and it asserted that it had
        promised to give the defendant $50 plus half of the surplus in exchange for her assignment
        of the full $14,000 to Unclaimed. After the attorney for Unclaimed acknowledged that he had
        not given the defendant notice of the court hearing, the circuit court informed him that it
        would not proceed absent such notice. The court also warned that he saw “a serious issue of
        conscionability” of the assignment contract. The court explained as follows:
                 “We have rules here in terms of how much you can charge on a mortgage foreclosure,
             $1,500. To charge somebody $7,000 for something that is not at all difficult or
             complicated because of the fact that we have a help desk here–anybody can go here. We
             have people, pro ses, and basically they pay nothing.”
¶3           On May 1, 2012, the defendant appeared in court and testified regarding the assignment
        contract. The defendant recalled that she received a letter “stating that [she] had some money
        that [she] didn’t even know about.” The defendant stated that she could go about getting the
        money “through [Unclaimed].” She said that she contacted Unclaimed, which sent a notary
        to her home with papers for her signature. The defendant said that Unclaimed never told her
        that she could obtain the money without its help and that she agreed to split the money with
        Unclaimed in exchange for assistance. However, she agreed that the actual contract that she

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     signed stated that she would receive only $50 and unspecified other consideration, without
     making mention of any split of the proceeds. When asked, the defendant said that she did not
     know that she could have obtained all of the money by consulting with the court’s help desk.
     She said that she agreed to the assignment because she believed that Unclaimed was working
     as her attorney, and because it informed her of her entitlement to the funds. On further
     examination, the defendant testified that she could read only “[a] little bit” and that her niece
     read the contract to her before she signed it.
¶4       After hearing the defendant’s testimony, the court declared the agreement to be
     unconscionable, denied Unclaimed’s petition, and informed the defendant that she could go
     to the help desk to claim the entire $14,000.
¶5       Unclaimed later filed a timely motion to reconsider, to which it attached a copy of the
     initial letter it had sent to the defendant, as well as a copy of a contract between it and the
     defendant. The contract stated that Unclaimed would give the defendant half of the surplus
     funds, plus $50. The initial solicitation letter stated that Unclaimed had “located monies that
     we believe belongs [sic] to you” and that, with her approval, it would “do further research
     and then determine the best method for retrieving the monies.” The letter invited the
     defendant to call Unclaimed for further information. The circuit court denied the motion to
     reconsider, and Unclaimed filed this timely appeal.
¶6       Unclaimed’s principal argument on appeal is that the circuit court erred in declaring its
     contract with the defendant to be unconscionable. The parties do not dispute the facts
     underlying the circuit court’s determination of unconscionability; they present us with only
     the question as to whether the court correctly found unconscionability based on those facts.
     “The determination of whether a contract or a portion of a contract is unconscionable is a
     question of law, which we review de novo.” Kinkel v. Cingular Wireless, LLC, 223 Ill. 2d
     1, 22 (2006).
¶7       “Unconscionability can be either ‘procedural’ or ‘substantive’ or a combination of both.”
     Razor v. Hyundai Motor America, 222 Ill. 2d 75, 99 (2006). “Procedural unconscionability
     refers to a situation where a term is so difficult to find, read, or understand that the [party]
     cannot fairly be said to have been aware [she] was agreeing to it, and also takes into account
     a lack of bargaining power.” Razor, 222 Ill. 2d at 100. “Substantive unconscionability refers
     to those terms which are inordinately one-sided in one party’s favor.” Razor, 222 Ill. 2d at
     100. We agree with the circuit court’s determination that both facets of unconscionability are
     present here.
¶8        Several aspects of this contract’s formation indicate its procedural unconscionability.
     First, there was an obvious inequality in the parties’ abilities to understand the transaction
     at hand. Unclaimed, a company that deals in this type of transaction, presented its contract
     to a defendant who did not fully understand Unclaimed’s relationship to her and, had very
     limited reading skills, and had no knowledge of the simple procedures required to obtain the
     surplus money at issue. Unclaimed preyed on this disparity by claiming in its solicitation
     letter that it needed to conduct research to determine how to obtain the money, when, as the
     circuit court noted, the matter required no research at all. Second, and relatedly, there existed
     a vast discrepancy in bargaining power between the defendant, a widowed woman with


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       limited education and apparently limited means, and Unclaimed, a company with sufficient
       resources to send a notary to the plaintiff’s residence to obtain her signature on a contract it
       devised. Third, the defendant’s testimony regarding how the contract was presented to her
       demonstrates that she was offered no opportunity to change the contract that Unclaimed
       proposed or to meaningfully negotiate its terms.
¶9         Standing alone, this procedural unconscionability might be insufficient to invalidate
       Unclaimed’s contract. However, it more than suffices once combined with an even stronger
       showing of substantive unconscionability. As the circuit court noted, this agreement would
       have the defendant pay approximately $7,000 to Unclaimed for a service she could have
       obtained for free. These terms epitomize the “ ‘overall imbalance in the obligations and
       rights imposed by [a] bargain, and significant cost-price disparity’ ” (Kinkel, 223 Ill. 2d at
       28 (quoting Maxwell v. Fidelity Financial Services, Inc., 907 P.2d 51, 58 (Ariz. 1995) (en
       banc))) that defines substantive unconscionability. Indeed, although Unclaimed’s appellate
       brief contains a section purporting to challenge the circuit court’s substantive
       unconscionability finding, that section offers nothing to address the gaping cost-price
       disparity in this agreement; it instead diverts attention back to the procedural aspects of the
       contract. Accordingly, we see no reason to dispute the circuit court’s conclusion that
       Unclaimed’s contract with the defendant was substantively unconscionable. Based on this
       strong substantive unconscionability, paired with some level of procedural unconscionability,
       we share the circuit court’s view that Unclaimed’s contract was unconscionable and should
       not be enforced.
¶ 10       Unclaimed raises two additional arguments on appeal, but we may dispose of both in
       short order. First, Unclaimed argues that the court erred in declining to consider it a
       successor in interest or a substitute party, so that it could petition for the unclaimed
       foreclosure surplus. This argument is based on the premise that Unclaimed’s contract with
       the defendant was valid. Because we conclude that the contract is not valid, we agree with
       the circuit court’s refusal to consider Unclaimed a successor in interest or substitute party in
       this action.
¶ 11       Second, Unclaimed asserts that, by raising the issue of unconscionability sua sponte, and
       by indicating before a final ruling that he was inclined to find unconscionability, the circuit
       court betrayed a lack of impartiality. This argument is not well-taken. As the defendant
       observes in her brief, “ ‘judicial remarks during the course of a trial that are critical or
       disapproving of, or even hostile to, counsel, the parties, or their cases, ordinarily do not
       support a bias or partiality challenge,’ ” unless “ ‘they reveal such a high degree of favoritism
       or antagonism as to make fair judgment impossible.’ ” Eychaner v. Gross, 202 Ill. 2d 228,
       281 (2002) (quoting Liteky v. United States, 510 U.S. 540, 555 (1994)). The circuit court’s
       statements and actions here did nothing to reveal anything resembling such a high degree of
       antagonism, and we reject Unclaimed’s argument to the contrary.
¶ 12       For the foregoing reasons, we conclude that the circuit court did not err in denying
       Unclaimed’s petition for turnover of surplus foreclosure funds.

¶ 13       Affirmed.


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¶ 14       JUSTICE DELORT, specially concurring.
¶ 15       I concur completely with Justice Hoffman’s opinion. As a judge who heard tens of
       thousands of foreclosure cases at the trial court level over the course of five years, I write
       separately to provide some additional background about the issues presented. Because of the
       depressed real estate market, the number of current foreclosure cases resulting in a surplus
       is infinitesimal. Therefore, cases regarding distribution of surplus funds arise quite
       infrequently. Nonetheless, the issues presented herein are quite important, and they may gain
       greater relevance once the real estate market improves.
¶ 16       The chancery division of the circuit court of Cook County, in which this case was
       originally heard, is one of the busiest mortgage foreclosure courts in the nation. To ensure
       that the large number of these sensitive cases is heard efficiently and adjudicated correctly,
       the court established a dedicated foreclosure section staffed by judges knowledgeable in
       foreclosure law. Cook Co. Cir. Ct. G.O. 1.2, § 2.1(b)(2) (Mar. 1, 2005). The presentation of
       foreclosure cases in Cook County is governed by a detailed set of rules and standing orders.
       See, e.g., Cook Co. Cir. Ct. Mortgage Foreclosure Courtroom Procedures (rev. July 31,
       2012), http://www.cookcountycourt.org/Portals/0/Chancery Division/Forms/Courtroom
       Procedures 7-31-2012.1pdf (last visited Mar. 6, 2013). These rules ensure that judges have
       sufficient information before them when entering foreclosure judgments, and help protect
       the interests of disadvantaged homeowners, who usually represent themselves. In particular,
       some of the rules address scams perpetrated by individuals seeking to take advantage of
       unwitting mortgagors.
¶ 17       On July 21, 2003, the presiding judge of the chancery division adopted General
       Administrative Order 2003-03 (hereinafter Order 2003-03) to address problems stemming
       from judicial sales of foreclosed property which generated surplus funds unclaimed by the
       mortgagors. Cook Co. Cir. Ct. G.A.O. 2003-03, http://www.cookcountycourt.org/Portals/0/
       Chancery Division/ General Administrative Orders/ GO 03-03.pdf (last visited Mar. 6, 2013).
       One concern was that persons were combing court files to find surplus cases, impersonating
       mortgagors, and then trying to claim the surplus. Order 2003-03 requires that mortgagors,
       with a few exceptions not relevant here, present their surplus motion before the presiding
       judge with photographic identification in hand. Another motivation for Order 2003-03 was
       the practice of certain companies which would also identify surplus cases, track down the
       mortgagor, and then enter into a contingency fee contract to return the mortgagor’s own
       money to him or her. If someone else claims the mortgagor’s surplus under an “assignment”
       (the original order sets off the word in quotation marks), the mortgagor still must appear so
       that the judge can question her about “the circumstances leading to the ‘assignment.’ ” That
       is exactly what Presiding Judge Jacobius did here.
¶ 18       The foreclosure courtroom procedures also require orders confirming surplus sales to
       specifically command the lender’s attorney to send a simple notice to the mortgagors,
       advising them of their right to claim the surplus and enclosing a fill-in-the-blank motion for
       them to claim their money. Cook Co. Cir. Ct. Mortgage Foreclosure Courtroom Procedures
       (rev. July 31, 2012), http://www.cookcountycourt.org/Portals/0/Chancery/Division/Forms/


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       Courtroom Procedures 7-31-2012.1pdf (last visited Mar. 6, 2013). Our supreme court on
       February 22, 2013, adopted very similar rules, applicable statewide, facilitating the ability
       of mortgagors to claim surplus funds. Ill. S. Ct. R. 113(f)-(h) (eff. May 1, 2013).
¶ 19       Order 2003-03 prohibits rank-and-file foreclosure judges from hearing surplus
       distribution motions. They are instead reserved to be heard only before the presiding judge
       himself. Because the presiding judge’s docket is much less crowded than that of the
       foreclosure judges, and his courtroom is staffed with a court reporter, he can devote the
       necessary time to carefully review surplus motions and ensure the general integrity of the
       process. Additionally, there is a “help desk” at the courthouse staffed by attorneys who
       prepare surplus claim motions for mortgagors free of charge.
¶ 20       The herculean efforts of the judges, court staff, and county agencies to inform mortgagors
       of their ability to claim surplus funds somehow evaded defendant McLenden. She did,
       however, respond to a letter from Radosvet Krastev of Unclaimed Funds Unit LLC, stating
       that the company would “do further research and then determine the best method for
       retrieving the monies.” The company’s letter specifically states “we do not charge a fee.” An
       unsophisticated reader might be lured into signing up in the hope of receiving “free” money,
       not noticing that the letter is unprofessionally prepared and contains numerous typographical
       and capitalization errors. McLenden responded, and within a few days, the company sent its
       “mobile notary” out to ensure that she signed on the proverbial dotted line and gave up half
       of her own money for a service she could have received for free.
¶ 21       Unclaimed Funds argues strenuously for the enforcement of its written contract with
       McLenden and complains about the presiding judge’s administration of a salutary process
       established for almost a decade. While contract law is structured to ensure that parties receive
       the benefit of their bargain, our opinion finds that the law can only stretch so far.
       McLenden’s contract falls within the narrow exception under which an otherwise valid
       contract is void because of unconscionability. The circuit court’s ruling to invalidate
       McLenden’s contract is well-supported by the testimonial and documentary evidence in the
       record, and the result below is exactly what the foreclosure section’s rules were adopted to
       achieve.




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