First Mortg. Co. v. Dina

2017 IL App (2d) 170043

92 N.E.3d 448

FIRST MORTGAGE COMPANY, Plaintiff–Appellee,

v.Daniel DINA; Gratziela Dina; Unknown Heirs and Legatees of Daniel Dina, if any; Unknown Owners; and Nonrecord Claimants, Defendants

(Daniel Dina and Gratziela Dina, Defendants–Appellants).

No. 2–17–0043

Appellate Court of Illinois, Second District.

Opinion filed November 15, 2017

George H. Olsen, of The Rogers Law Group, of Deerfield, for appellants.

Susan M. Horner and Edward J. Lesniak, of Burke, Warren, MacKay & Serritella, P.C., of Chicago, for appellee

JUSTICE BURKE delivered the judgment of the court, with opinion.

¶ 1 In this appeal, a follow-on to our decision in First Mortgage Co. v. Dina , 2014 IL App (2d) 130567, 381 Ill.Dec. 712, 11 N.E.3d 343 ( Dina I ), defendants Daniel Dina and Gratziela Dina appeal from a new foreclosure judgment and a new order confirming a judicial sale in favor of plaintiff, First Mortgage Co. (First Mortgage). We now affirm.

¶ 2 In Dina I , we held, based on our interpretation of the Residential Mortgage License Act of 1987 (Act) ( 205 ILCS 635/1–1 et seq . (West 2006)), that, if the original mortgagee, First Mortgage Company of Idaho, LLC (FMCI), lacked a license required by the Act, the Dina's mortgage (which First Mortgage had acquired from FMCI) would be void. Based on uncertainty about FMCI's licensure status, we vacated a prior foreclosure judgment and sale and remanded the cause. In the period between the remand and the new foreclosure judgment, the General Assembly passed Public Act 99–113 (eff. July 23, 2015) (the amendment), which amended the Act so as to reject the holding in Dina I . On remand, the trial court granted judgment in favor of First Mortgage based not on the amendment but on its ruling that the Act was inapplicable to FMCI because FMCI did not engage in business in Illinois. We hold that the Act was applicable to FMCI, but we affirm on the basis that, as a result of the amendment, an exception to the law-of-the-case doctrine applies here.

¶ 3 I. BACKGROUND

¶ 4 On May 21, 2010, First Mortgage filed a complaint to foreclose a property in North Barrington. The named defendants were Daniel Dina, the property owner and borrower, and Gratziela Dina, who had cosigned the mortgage. The mortgage was dated November 16, 2007. The Dinas filed an answer with affirmative defenses, one of which was that First Mortgage lacked standing, as it was neither the original mortgagee, which was FMCI, nor FMCI's successor in interest. First Mortgage moved for summary judgment. It responded to the lack-of-standing defense by, among other things, filing a "Statement of Merger" filed with the Idaho Secretary of State. The statement showed that, effective April 30, 2011, FMCI, First Mortgage's wholly owned subsidiary, had merged into First Mortgage. The Dinas, having missed the deadline to respond to the motion for summary judgment, sought leave to file a late response in which they asserted, among other things, that neither First Mortgage nor FMCI was licensed under the Act. The court allowed the filing.

¶ 5 First Mortgage responded that, as a "registered domestic entity with the National Information Center under the laws of Oklahoma," it was a bank and thus was exempt from the licensing requirements of the Act. The exhibit attached in support states that First Mortgage "was established as a Domestic Entity Other" on or as of January 1, 2007.

¶ 6 The court granted the motion for summary judgment on August 14, 2012, and entered the judgment for foreclosure and sale the same day. The property was sold and the court confirmed the sale, over the Dinas' objection, on February 19, 2013. After the court denied the Dinas' motion for reconsideration, they appealed.

¶ 7 We addressed three questions on appeal: (1) whether the Dinas' lack-of-licensure defense was procedurally forfeited; (2) whether there was a question of material fact as to FMCI's licensure; and (3) whether the lack of a required license was a defense to foreclosure. Dina I , 2014 IL App (2d) 130567, 381 Ill.Dec. 712, 11 N.E.3d 343, passim . We vacated the summary judgment and ensuing orders, stating in summary that a question of material fact had existed as to FMCI's status under the Act ( Dina I , 2014 IL App (2d) 130567, ¶ 13, 381 Ill.Dec. 712, 11 N.E.3d 343 ), with the following being our main intermediate holdings:

(1) First Mortgage failed to demonstrate that the entity that made the mortgage was exempt from the Act. Dina I , 2014 IL App (2d) 130567, ¶ 14, 381 Ill.Dec. 712, 11 N.E.3d 343.

(2) "[A] mortgage made by an entity that lacked authorization under the * * * Act to conduct * * * business [requiring such authorization] is void as against public policy." Dina I , 2014 IL App (2d) 130567, ¶ 21, 381 Ill.Dec. 712, 11 N.E.3d 343.

(3) The Dinas raised their lack-of-licensure defense by the wrong means, but, because the issue implicated public policy, and because First Mortgage had a full opportunity to respond, they did not forfeit the defense. Dina I , 2014 IL App (2d) 130567, ¶ 25, 381 Ill.Dec. 712, 11 N.E.3d 343.

On the first point, some explanation is necessary. On appeal, First Mortgage argued that the Dinas' argument failed because public records showed that it was a bank and thus exempt from the Act. Whether First Mortgage was a bank was of course not relevant to whether FMCI was a bank. Thus, First Mortgage had failed to show that the entity that made the mortgage was exempt from the Act. Therefore (on March 31, 2014), we vacated the order for summary judgment, the foreclosure judgment, and the order approving the sale, and we remanded the matter for further proceedings. (We made modifications not relevant here when we denied rehearing on May 22, 2014.) First Mortgage petitioned for leave to appeal to our supreme court, but the court denied leave on September 24, 2014. First Mortgage Co. v. Dina , No. 117903, 386 Ill.Dec. 475, 20 N.E.3d 1253 (Ill. Sept. 24, 2014).

¶ 8 On May 13, 2015, First Mortgage moved in the trial court for additional time to file a new motion for summary judgment. It gave the following reason:

"Subsequent to the entry of [a scheduling order] Plaintiff learned that there is presently pending in the Illinois legislature HB2814, a bill that, if passed, will be dispositive of the primary legal issue in this case. The bill will have the effect of reversing the Illinois Appellate Court's decision in this case , by establishing that a loan contract is not rendered void by virtue of the fact that the originator was not licensed under the [Act]." (Emphasis added.)

The court gave First Mortgage until July 8, 2015, to file a new motion for summary judgment.

¶ 9 On July 8, 2015, First Mortgage filed a new motion for summary judgment, despite the continued pendency of the amendment to the Act in the General Assembly. It asserted two bases for the mortgage's validity. One, it anticipated that the General Assembly would pass the amendment, which would " ‘reveal the legislature's intent in enacting [the] statute’ " (quoting Daley v. Zebra Zone, Lounge, Inc. , 236 Ill. App. 3d 511, 515, 177 Ill.Dec. 715, 603 N.E.2d 785 (1992) ). Alternatively, it argued that, by the terms of sections 1–3(a) and 1–3(h) of the Act ( 205 ILCS 635/1–3(a), (h) (West 2006)), the Act "only applies to entities engaged in the business of residential mortgage lending in Illinois." Further, as an affidavit established, "the only loan FMCI ever made in the State of Illinois was the loan at issue in this case."

¶ 10 On July 23, 2015, the General Assembly approved Public Act 99–113, which amended section 1–3(e) of the Act to provide:

"A mortgage loan brokered, funded, originated, serviced, or purchased by a party who is not licensed under this Section shall not be held to be invalid solely on the basis of a violation under this Section. The changes made to this Section by this amendatory Act of the 99th General Assembly are declarative of existing law." Pub. Act 99–113, § 5 (eff. July 23, 2015) (amending 205 ILCS 635/1–3(e) ).

¶ 11 On September 10, 2015, the Dinas filed their response. They argued that the lack-of-licensure defense remained viable for two reasons:

(1) Our holdings in Dina I created law of the case that barred First Mortgage from asserting that the Act was inapplicable to FMCI.

(2) The amendment was constitutionally defective to the extent that it was to apply retroactively here.

¶ 12 The court granted First Mortgage's motion on February 11, 2016. It identified five issues as raised in the parties' briefing:

(1) Whether Dina I created law of the case that barred First Mortgage from attempting to show that the Dinas' mortgage is not void.

(2) Whether—given unrebutted evidence that FMCI had originated only one transaction in Illinois—the Act required FMCI to be licensed.

(3) "Whether retroactive application of the amendment * * * violates the Illinois Constitution's prohibition against retroactively applying amendments to existing statutes."

(4) Whether the amendment violated Illinois separation-of-powers principles by "attempting to directly reverse" Dina I .

(5) Whether the amendment violated the Illinois Constitution's special-legislation clause by "attempting to create a separate class of brokers for special treatment."

The court reasoned that it should address the Dinas' constitutional challenges to the amendment only if it could not resolve the issues on nonconstitutional grounds: "Since the * * * Act does not apply to this case, the Court does not have to resolve the Dinas' constitutional challenges to the * * * Act's amendment." The court then addressed the first two issues, answering "no" to both.

¶ 13 In ruling that the Act did not apply to FMCI, it concerned itself with only section 1–3(a), which, in relevant part, states:

"No person, partnership, association, corporation or other entity shall engage in the business of brokering, funding, originating, servicing or purchasing of residential mortgage loans without first obtaining a license from the

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