Bank of N.Y. v. Kogut

1

2023 IL App (1st) 210886-U

BANK OF NEW YORK AS TRUSTEE FOR THE CERTIFICATE HOLDERS CWALT, INC, ALTERNATIVE LOAN TRUST 2005-76 MORTGAGE PASS-THROUGH CERTIFICATES, SERIES 2005-76, Plaintiff, v. WIESLAWA KOGUT, STEPHAN KOGUT a/k/a STEFAN KOGUT, MARTA KULESZA, JPMORGAN CHASE BANK, N.A., UNKNOWN OWNERS AND NON-RECORD CLAIMANTS, Defendants.

MARTA KULESZA, Petitioner-Appellant, v. THE BANK OF NEW YORK MELLON, f/k/a Bank of New York as Trustee on behalf of the Holders of the Alternative Loan Trust 2005-76 Mortgage Pass-Through Certificates, Series 2005-76, Respondent-Appellee.

No. 1-21-0886

Court of Appeals of Illinois, First District, Second Division

August 8, 2023

This order was filed under Supreme Court Rule 23 and is not precedent except in the limited circumstances allowed under Rule 23(e)(1).

Appeal from the Circuit Court of Cook County, Illinois No. 2008 CH 3118 Hon. Edward J. King, Judge Presiding

JUSTICE ELLIS delivered the judgment of the court. Presiding Justice Fitzgerald Smith and Justice Cobbs concurred in the judgment.

ORDER

ELLIS JUSTICE

¶ 1 Held: Affirmed. Section 2-1401 petition was properly dismissed for lack of standing.

¶ 2 This case began as a mortgage-foreclosure action filed by plaintiff Bank of New York, now Bank of New York Mellon (BoNYM), on a residential property in which Marta Kulesza (Petitioner) held an interest. That action resulted in foreclosure and a judicial sale of the property that was confirmed in 2016. Presently before us is a petition under section 2-1401 of the Code of Civil Procedure to vacate all judgments in the foreclosure proceeding as void for lack of personal jurisdiction over Petitioner. See 735 ILCS 5/2-1401 (West 2016).

¶ 3 Petitioner's argument is that she was never properly served with notice of the foreclosure action because service took place at the resident property, and she did not live there at that time or ever. BoNYM argued, among other things that Petitioner lacks standing to assert this argument in light of a bankruptcy action she filed. We agree with BoNYM and affirm the judgment on that basis.

¶ 4 BACKGROUND

¶ 5 I. Petitioner's Interest in the Prospect Heights Property (2005-06)

¶ 6 In 2005, Petitioner's relatives, Wieslawa and Stephan Kogut, obtained a mortgage from BoNYM to purchase residential property in Prospect Heights (the Prospect Heights property). (It appears that Petitioner is the Koguts' niece, but elsewhere in the record there is a suggestion that she is a cousin-they are relatives, in any event.) By all accounts the Koguts resided at the Prospect Heights property.

¶ 7 Petitioner's interest in the Prospect Heights property began in August 2006, when the Koguts executed a quitclaim deed to her and themselves. The Koguts executed the deed in connection with a $300,000 home equity line of credit (HELOC) that the Koguts and Petitioner obtained from JPMorgan Chase Bank, N.A. (Chase Bank).

¶ 8 In applying for that HELOC, Petitioner told Chase Bank that the Prospect Heights property was her "primary residence." She listed the Prospect Heights property under the listing of "current address." She stated that the purpose of the HELOC was "home improvement." And when identifying "real estate owned," she listed another residential property in Wheeling, Illinois (the Wheeling property) as "rental property."

¶ 9 II. BoNYM's Foreclosure Action (2008)

¶ 10 In January 2008, BoNYM filed a complaint to foreclose the mortgage on the Prospect Heights property. The suit named both the Koguts and Petitioner as defendants. On January 27, 2008, BoNYM purported to serve the summons and complaint on Petitioner via substitute service on Weislawa Kogut at that Prospect Heights property. (The issue of service, as noted, is a contested issue in the section 2-1401 petition under review, as Petitioner claims she never lived at the Prospect Heights property, making substitute service improper.)

¶ 11 In any event, Petitioner did not answer or appear in the foreclosure action. In June 2008, the circuit court found her in default, entered summary judgment against her and in favor of BoNYM, and issued a judgment for foreclosure and sale. (As Petitioner was not the only defendant, the litigation did not terminate at that time.)

¶ 12 III. Petitioner files for personal bankruptcy (2010)

¶ 13 About two years after that June 2008 judgment against her, Petitioner and her then-husband filed for personal bankruptcy. Specifically, she and her husband filed a "no-asset" case on August 25, 2010. Petitioner did not list the Prospect Heights property, or the HELOC with Chase Bank, on her schedule of assets and liabilities. The bankruptcy court discharged Petitioner in December 2010.

¶ 14 IV. The foreclosure action ends (May-August 2016)

¶ 15 Though Petitioner was defaulted and had judgment entered against her in 2008, the foreclosure litigation on the Prospect Heights property continued with the other defendants, including the Koguts. Ultimately, BoNYM prevailed, and the Prospect Heights property was sold on May 19, 2016. The court approved the sale on August 15, 2016.

¶ 16 V. Petitioner reopens her bankruptcy case (November-December 2016)

¶ 17 On November 1, 2016, Petitioner moved the bankruptcy court to reopen her case. She formally disclosed to the bankruptcy court on an amended "schedule" that, at the time she filed her bankruptcy action in August 2010, she "had an interest in some real estate, located at [address in Prospect Heights], improved with a single family home" that "she held in common with relatives, Stefan and Wieslawa Kogut."

¶ 18 She further explained that, as of the date she originally filed for bankruptcy in August 2010, the Prospect Heights property "was subject to a foreclosure proceeding in the Circuit Court of Cook County" in which Petitioner "was named as a defendant." She told the bankruptcy court that "Judgment of foreclosure was entered in May, 2015, on June 1, 2016, the Property was sold, and on August 15, 2016, the foreclosure court entered an order for possession."

¶ 19 She further noted that "[t]he foreclosure has not been concluded. Notwithstanding the order for possession, Stefan and Wieslawa Kogut are still living in the Property, and as of the date of this motion there has been no attempt to evict them."

¶ 20 Petitioner conceded in that bankruptcy filing that the Prospect Heights property "should have been listed on Schedule A, Real Property; [BoNYM] should have been listed on Schedule D, Secured Claims; the Koguts should have been listed in Schedule H, Co-Debtors; and the foreclosure suit should have been included on the Statement of Financial Affairs."

¶ 21 The trustee then issued a written report of "no distribution" in which he stated that

"I have neither received any property nor paid any money on account of this estate; that I have made a diligent inquiry into the financial affairs of the debtor(s) and the location of the property belonging to the estate; and that there is no property available for distribution from the estate over and above that exempted by law. *** I hereby certify that the estate of [Petitioner] has been fully administered. I request that I be discharged from any further duties as trustee."

¶ 22 On January 9, 2017, the bankruptcy court closed the case and discharged the trustee once more.

¶ 23 VI. Petitioner files her section 2-1401 petition

¶ 24 Two and a half months after her bankruptcy case was closed for the second time, on March 20, 2017, Petitioner filed her section 2-1401 petition in the foreclosure action, alleging that all judgment orders entered in the foreclosure action were void for lack of personal jurisdiction, as she was never properly served with the complaint. Petitioner attached four affidavits, each of which stated that Petitioner did not live (and indeed had never lived) at the Prospect Heights property. Thus, when the process server placed the summons and complaint with her relative, that service was not effective as "substitute service" as to Petitioner.

¶ 25 As noted, BoNYM objected on several grounds. It alleged that Petitioner lacked standing to bring this claim, as her section 2-1401 claim belonged to her bankruptcy estate and was never properly discharged. Second, BoNYM claimed that her petition was barred by the doctrine of judicial estoppel. And third, said BoNYM, the petition was barred by laches.

¶ 26 Petitioner moved for judgment on the pleadings. An oral argument was held, but we lack a transcript of those proceedings. The circuit court denied the motion for judgment on the pleadings and dismissed the petition with prejudice. This appeal followed.

¶ 27 ANALYSIS

¶ 28 Our review here is de novo, as the court decided the section 2-1401 petition on documentary evidence and legal argument alone, without hearing any live witness testimony we thus sit in the same position as the trial court and owe its judgment no deference. See Cleeton v. SIU Healthcare, Inc., 2023 IL 128651, ¶ 26; Addison Insurance Co. v. Fay, 232 Ill.2d 446, 453 (2009); Dowling v. Chicago Options Associates, Inc., 226 Ill.2d 277, 285 (2007). We lack a transcript of the oral argument, and the court's written judgment order does not specify the basis for dismissing the section 2-1401 petition. But because our review is de novo, our review is not hampered. Fields v. Schaumburg Firefighters' Pension Bd., 383 Ill.App.3d 209, 223 (2008). And in any event, we may affirm the dismissal of a section 2-1401 petition on any basis in the record, regardless of the trial court's reasoning. In re Marriage of Buck, 318 Ill.App.3d 489, 497 (2000).

¶ 29 BoNYM's standing argument, as well as its argument regarding judicial estoppel and to some extent its laches argument, revolve around the same...