REAL ESTATE LAW PRACTICE “KEYPOINTS”

(December, 2002)

 

By Steven B. Bashaw

Steven B.  Bashaw, P.C.

Suite 1012

1301West 22nd Street

Oak Brook, Illinois  60523

Tel.: (630) 472-9990

Fax.: (630) 472-9993

e-mail:  sbashaw @bashawlaw.com

(Copyright 2002- All Rights Reserved)

 

In addition to encouragement from the Illinois Institute of Continuing Legal Education and the Illinois State Bar Association’s Real Estate Section Council,  it should be noted that Chicago Title Insurance Company helps underwrite the monthly production of these real estate law “Keypoints”. Chicago Title is committed to the role of attorneys in real estate transactions and their continuing education in this area.  Its staff attorneys are pleased to offer their view points on various developments in the law as set forth below from the perspective of a title company serving the public and the attorneys who represent their clients in real estate transactions.

 

1. CONDOMINIUMS; FORCIBLE ENTRY AND DETAINER AND HOMESTEAD:

In November of 2001, the first in three installments in the saga of the battle between condominium associations and members who fail to pay their assessments played out in the Second District decision of Knolls Condominium Association v. Harms, (2nd Dist., November 26, 2001), http://www.state.il.us/court/Opinions/AppellateCourt/2001/2ndDistrict/November/Html/2000485.htm. There the Court held that a condominium unit owner could assert her homestead as a defense to the association's forcible entry and detainer action. The reasoning was that since the legislature expressly made the claim of homestead inapplicable to the foreclosure of a lien by a condominium association, (735 ILCS 5/12-903), but failed to create the same exception in a forcible entry and detainer action, it must have intended that the homestead exemption remain in tact. Round two of the battle was the passage of House Bill 4014, (Public Act 92-540), which "clarifies" that property under the Condominium Property Act IS subject to an action for possession for nonpayment of condominium expenses, and is NOT subject to an exemption for homestead. The act amended the applicable statutory provisions in Code of Civil Procedure, 735 ILCS 5/9-111 and 12-903. This was a relatively rapid legislative response considering that less than seven month passed between the decision and the effective date of the "clarifying" act. The final installment is the recent decision by the Illinois Supreme Court in Knolls Condominium Association v. Harms, (November 21, 2002), http://www.state.il.us/court/Opinions/SupremeCourt/2002/November/Opinions/Html/92971.htm, which reversed the decision of the Second District. Justice Thomas, (who ascended to the Supreme Court from the Second District), writes that "the appellate court majority placed undue emphasis upon the rule of construction that the inclusion of one item in a statute is intended as the exclusion of other possible items that were not included."; (inclusio unis est exclusio alterius). "We instead emphasize that the overall intent of the legislature is of paramount importance, and statues must be construed in harmony if possible." Noting that Illinois is "unique in allowing a condominium association to evict a unit owner for failure to pay assessments. When such action occurs, the unit owner maintains title to the unit and the association has the right to possession of the unit until the judgment of possession is vacated after the amount owed is paid.", the decision concludes that the legislature could not have intended to first provide this remedy and then eliminate it by failing to list it in the exceptions to the applicability of the homestead estate. The "proof" is, (as always in three act plays), in the second "act". Justice Thomas states "Our analysis resolving the foregoing issue is supported by the General Assembly's recent amendments…made in the aftermath of the appellate court's decision and make it clear that the legislature had intended to give a condominium association the right to maintain an action for possession against a unit owner under the forcible entry and detainer statute without interference from the right of homestead….[and]…The legislature specifically included language to point out that the amendments were 'intended as clarification of existing law'…"

 

2. LANDLORD TENANT; LEASE CONSTRUCTION AND ALTERATIONS:

The lease in Chicago Transparent Products, Inc. v. American National Bank, (1st Dist. November 25, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/November/Html/1993745.htm, provided that the Lessee was not to make alterations, additions or improvements to the leased manufacturing and warehouse buildings at a cost of $50,000 or more without the prior written consent of the Landlord. The Landlord filed suit contending that CTP and its sublessee made alterations totaling $77,293.19 without its consent and thereby breached the lease. The Lessee responded that it had hired a electrical contractor to install an electrical service upgrade at a cost totaling $47,742, paid a separately billed cost of $1,350 for cleaning and tightening the existing switchgear, and paid a further sum of $26,900 to a different contractor for the cost of a concrete walkway, gate, and to repair damaged walls. The Lessee's position was that each of these was a separate project, each of which was completed for less than $50,000, and therefore did not require the Landlord's prior written consent. The trial court found that the Lessee was conducting multiple projects, none of which violated the lease provisions requiring the Landlord's consent.

The First District affirmed this portion of the trial court's judgment, noting that "Under Illinois Law, a lease is an agreement subject to the law of contracts", which must be construed as a whole to determined the parties' intent, and strictly enforced as written, absent some ambiguity. Here there was no ambiguity in the language, and the trial court's finding that the intent of the parties was to prohibit only any single project costing $50,000 or more was not against the manifest weight of evidence because "it would not be reasonable to require the lessee to add together all addition, alteration or improvement projects over the life of the lease to determined whether the total exceeded $50,000." (This decision also contains an extensive and worthwhile discussion and ruling on the issue of motions for substitution of judge as a matter of right on the eve of trial.)

 

3. MORTGAGE FORECLSOURE; DISMISSAL FOR WANT OF PROSECUTION AND CONFIRMATION OF SALE.

Plaza Bank v. Kappel, (1st Dist., October 28, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/October/Html/1012854.htm, is a mortgage foreclosure case in which a third party bidder sought to have the confirmation of sale denied. The case had been dismissed for want of prosecution at the time of the sale, and therefore the bidder argued the sale was void. The Judgment of Foreclosure was entered on May 3, 2000, specifically provided for the sale of the premises to satisfy the judgment and that the trial court would retain jurisdiction for the purpose of enforcement. The case was then dismissed for want of prosecution on the court's annual calendar call. This was unknown to the plaintiff's attorneys, and they nonetheless proceeded to sale at the subsequent expiration of the redemption period. David Azran was out of town at the time of the sale, but was nonetheless the successful bidder at sale through one of his agents. Upon his return, Mr. Azran determined that he did not want to complete the purchase of the property, and accordingly objected to confirmation of the sale based on the argument that the sale was void inasmuch as the case had been dismissed for want of prosecution. The Plaintiff's attorney argued that there was no basis under the Illinois Mortgage Foreclosure Law not to confirm the sale and Azran establish any of the statutory elements upon which the sale should not be confirmed. The trial court confirmed the sale.

On appeal of this as an issue of first impression, the First District affirmed, holding that IMFL provides the exclusive procedure for foreclosure of mortgages in Illinois, and once the judgment is entered the rights of the parties shall be solely as provided in the judgment of foreclosure and IMFL. "(T)he authority of the trial court continues during the entire pendency of the foreclosure and until disposition of all matters arising out of the foreclosure." Noting that the judgment contained language providing that it was final and appealable, the decision holds that the judgment was "unaffected" by the entry of the dismissal for want of prosecution. The sale was held not by the trial court, but by the sale officer pursuant to the judgment and order of appointment, and therefore was not a "further proceeding" within the meaning of case law holding there could be no "further proceedings" following the dismissal order. While the trial court was without jurisdiction to confirm the sale until the dismissal was vacated, upon the entry of the order vacating the dismissal, the trial court's jurisdiction was revived and confirmation of the sale could proceed. Azran did not challenge the trial court's authority to vacate the dismissal for want of prosecution under Section 1401 of the Code of Civil Procedure, and presented no basis upon which the sale should not be confirmed according to the mandate of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1508).

 

4. DEEDS; VALIDITY AND BURDENS OF PROOF:

The case of In re Estate of Ann L. Cuneo, (2nd Dist., October 30, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/2ndDistrict/October/Html/2011268.htm, does not set forth any new or groundbreaking law on the issue of the validity of deeds, but the facts in this case are worthwhile for anyone who has a case relating to a fabricated deed as a checklist of what to investigate to turn-up such a deed.

Thomas and Candida Cuneo Mowinski appealed the trial court finding that a Palm Desert, California condominium was an asset of the estate of Candida's mother, Ann. They asserted that two quitclaim deeds purportedly executed by Ann approximately one year before her death and recorded in California conveyed title to the condominium to them. Ronald and Breda Stout, however, contended that the deeds were fabrications, invalid, and therefore the condominium was an asset of the estate and passed to them under a specific bequest in Ann's will rather than by the quit claim deeds. (Ronald and Breda were the children of Ann's sister, Golda Stout.) The Second District opinion first clarifies the fact that while California law governs the substantive issues of the case relating to the real estate which is located in California, the law relating to the procedural elements of the litigation is governed by Illinois law as the situs of the probate action. The two quitclaim deeds were purportedly executed on consecutive days; Friday, April 19, 1996 and April 20, 1996. Ann's signature on the Friday deed was witnessed by the Mowinskis' neighbors, Diane Shroyer and John Somers, and notarized by another neighbor, Vivian Somers, on a form prepared by Thomas Mowinski. It conveyed title jointly to Ann and her daughter, Candida. The Saturday deed was supposedly based on Ann's dissatisfaction with the Friday deed and appeared to be a conveyance that quitclaimed the title to Candida and Thomas jointly. The signature on this deed was purportedly witnessed by Diane Shroyer and Thomas Mowinski and again notarized by Vivian Somers; (although the notary seal on this deed was distinctly different from the seal she used to notarize earlier the Friday deed.) Both deeds were given to Thomas for "safekeeping". Candida recorded the Friday deed in California on May 7, 1996. Thomas recorded the Saturday deed on August 29, 1996.

From here, some excellent detective-work appears to unravel the Mowinskis' story. The Saturday deed was dated August 29, 1996 on its face, and Thomas testified that this was because the deed was not dated when it was executed by Ann, and, at the instruction of the California Recorder, he inserted the date of recording rather than the April 20, 1996 date. Then, evidence was offered that the notary seal the Vivian Somers used on the deeds did not exist on April 20, 1996. Vivian's notary commission expired in July 1996, and she filed her renewal application in June 1996. The manager and record keeper of the company that manufactured Vivian's notary seal (purportedly used on the April 20, 1996 deed), however, testified that the seal that was imprinted on that instrument was identifiable due to a unique feature in the software used in its manufacture as one of those not made until sometime in late June or July 1996. Vivian Somers nevertheless maintained that she notarized both of the deeds on consecutive days in April 1996. Next, testimony from a "questioned documents examiner" concluded that the signatures on the deeds could not be confirmed to be those of Ann Cuneo. Evidence was also offered that on Thursday, April 18, 1996, Ann left California and traveled to Illinois to attend the funeral of her Brother-in-Law, Hugh Stout. Ronald and Breda testified that rather than spending the evening of Friday and Saturday, April 19, 1996 and April 20, 1996, with the Mowinskis at their Sandwich, Illinois home as the Mowinskis contended, Ann stayed at their home in Elgin, Illinois. Testimony from the funeral director in Addison, Illinois where Hugh Stout's arrangements were made indicated that if Ann Cuneo had gone to the Mowinski's home, she could not have arrvived until been well after midnight on the evening that she supposedly executed the quitclaim deeds; well after the time the Mowinskis and their witnesses testified that the first deed was signed. There were additional instances of "confusion" in the testimony of Mowinski and their witnesses relating to whether and when Ann visited the Mowinski's home between Thursday and Saturday. The original deeds, which were to have been returned to Mowinski in Sandwich, Illinois, according to the documents recorded in California, were never produced at trial. All of which significantly impeached the Mowinski's account of the creation, execution and recording of the deeds.

The law in Illinois is that a recorded deed raises a presumption that it is a valid conveyance, and in order to rebut the presumption of validity, the party challenging the deed must present clear and convincing evidence. Once the challenge is mounted, however, the finding of the trial court as the trier of fact will not be disturbed unless against the manifest weight of evidence. Based on the foregoing, the Second District notes that the trial court's finding that the deeds were shown invalid by clear and convincing evidence was not against the manifest weight of evidence. After recounting all of the instances of impeachment, Justice O'Malley notes, "In effect, petitioners ask this court to reweigh the evidence in order to reach a decision in petitioner's favor. This we cannot do. Our review is deferential to the trial court's factual determinations, as it was in the better position to view the witnesses during their testimony and make the necessary creditability determination. A reversal of the trial court's judgment in this case would amount only to a substitution of our judgment for that of the trial court and this is not our proper function." (Certainly quotable language!) The arguments that the notarization of the deeds was irrelevant under California law "missed the point" that the notarization issue was not relating to the form of the deed, but to the fact that Vivian Somer's testimony was incredible and untruthful. Likewise, the attack on the "document examiner" was not leveled against the admissibility of her opinion, but went to the weight given the opinions; which was within the providence of the trial court. Finally, the argument relating to the presumed validity of a deed of conveyance from a parent to a child "missed the point" that the deeds were invalid because they were fabricated, not because the parent's signature was wrongfully obtained by fraud or undue influence. In the end, the appellants were "merely ask(ing) this court to find that their version is preferable to respondents',…asking us to substitute our judgment for that of the trial court on a factual matter. We decline to do so."

 

5. DEMOLITION; UNCONSTITUTIONALITY CONSIDERED FROM THE TITLE COMPANY'S POINT OF VIEW: FROM THE TITLE INSURANCE PERSPECTIVE

In last month's "Flashpoints," both Steve and I were critical of THE VILLAGE OF LAKE VILLA v. DOROTHY STOKOVICH, ET AL., No. 2-00-0943. Regular readers will remember that in this case, the second district determined that Section 11-31-1 of the Illinois Municipal Code (65 ILCS 5/11-31-1), which pertains to the demolition of a building by a municipality, was unconstitutional.

But in the last month I was reminded that the fifth district had also issued an opinion concerning section 11-31-1. This gem of a case is THE CITY OF GRANITE CITY v. HOUSE OF PRAYERS, INC, ET AL., No. 5-01-0212. In this decision the court was given a very similar fact situation but came up with a completely different result.

The facts of this case are as follows: In 1997 the defendant bought a vacant building for $14,000. Although the defendant hoped to eventually use it as a church, it remained vacant for the next two years. In April of 1999 the Building and Zoning Department of Granite City, responding to numerous complaints about the property, inspected the building. The department determined that the building was in such a state of disrepair that the cost of repair was greater than the value of the building. In March of 1999 the city council passed a resolution finding that the building was dangerous and unsafe and that it should be demolished.

In June of 1999 the plaintiff filed a complaint pursuant to section 11-31-1,seeking to demolish or repair the building. In August of 1999 counsel for defendant filed an appearance. At a pretrial conference in April 2000, the circuit court ordered the defendant to, among other things, obtain a construction estimate. By March 2001, defendant still had not complied with the judge's order, and the petition for repair or demolition was tried. The court authorized the demolition of the property, and the defendant appealed, contending, inter alia, that the court's failure to state specific defects denied the defendant the opportunity to repair said defects and avoid demolition.

Ironically, both appellate courts cited CITY OF AURORA v. MEYER, 38 Ill. 2d 131, 230 N.E.2d 200 (1967) as standing for the proposition that demolition should not be ordered without giving the owners of a structure a reasonable opportunity to make the repairs. But in GRANITE CITY the court found in favor of the municipality, stating that "we are unable to understand what more the court could have reasonably done to enable defendant to repair the building. From the time plaintiff filed its complaint defendant had nearly two years to comply with procedures that would have enabled it to repair the building and avoid demolition. We believe that the circuit court exhibited great patience responding to defendant's many motions to continue and unwillingness to comply with the court's orders. We hold that the circuit court committed no error."

The LAKE VILLA decision indicates that the Illinois Supreme Court asked its second district brethren to consider the constitutionality of section 11-31-1. This appellate court determined that the statute was in fact unconstitutional. The court stated in LAKE VILLA that ordinarily courts will employ a relaxed scrutiny of statutes, looking only to see whether the statute in question bears a reasonable relationship to a legitimate state interest. However, where the right infringed upon is considered to be a "fundamental" constitutional right, courts subject the statute to "strict scrutiny." Under the strict scrutiny standard, the means employed by the legislature must be "necessary" to a "compelling state interest," and the legislature must use the least restrictive means in order to attain its goal. The court determined that in enacting section 11-31-1, the legislature failed to use the least restrictive means to protect the public from dangerous and unsafe buildings.

I will be the first one to admit that I remember very little about constitutional law from law school. Nonetheless, it seems to me that the court incorrectly analyzed section 11-31-1 in the LAKE VILLA case. That is, it appears that by referring to the "strict scrutiny" of a "fundamental right," the court looked at this case as if it arose out of the 14th Amendment Equal Protection Clause: "No State shall . . . deny to any person within its jurisdiction the equal protection of the laws." But this is not an equal protection case. Rather, the issue seems to be one of 14th Amendment procedural due process: "Nor shall any State deprive any person of life, liberty, or property, without due process of law. . . ." Procedural due process traditionally involves notice and an opportunity to be heard before an unbiased tribunal. The defendant in the Lake Villa case clearly had all three. It will be interesting to see if this decision is appealed.

(Thanks to Douglas M. Karlen, Regional Counsel, Chicago Title Insurance Company, Chicago, for his insight into these two cases.)

Dick Bales

Chicago Title Insurance Company

Wheaton

 

6. EMINENT DOMAIN; INVERSE CONDEMNATION, RESTRICTIVE COVENANTS, AND PUBLIC TAKING:

The case of Daniels v. The Area Plan Commission of Allen County, (7th Cir., September 11, 2002), http://caselaw.lp.findlaw.com/data2/circs/7th/011158p.pdf is a lengthy opinion, (42 pages on the internet), that may be very limited to specific law, (Indiana, constitutional and eminent domain), and facts which are concededly rarely combined, but it may also spark some creativity and understanding in those of you who do work in this area.

The Daniels owned a residence within the subdivision commonly known as Broadmoor in Ft. Wayne, Indiana. The subdivision has a restrictive covenant that only single-family residential dwellings and private garages could be built on any lot. The Area Plan Commission of Allen County determined that three lots on the edge of the subdivision abutting Lima Road, (a main thoroughfare over which 30,000 cars passed daily), should be rezoned at the request of HNS Enterprises for the purpose of commercial development along the roadway. In order to accomplish the commercial development, the restrictive covenants had to be vacated in addition to granting the rezoning petition granted. At the public hearing on the Petition, Daniels argued that the Plan Commission did not have authority to remove the restrictive covenant and alter the residential nature of the lots, and that the result would be an unconstitutional taking of their private property rights, (the protection of the restrictive covenant which runs with the land), for a private rather than public purpose. The Plan Commission countered and found that the commercial development would serve as a buffer between Lima Road and the residential lots on the interior of the subdivision, not diminish the value of the Daniels lot, and would serve the public interest because (1) the traffic increase on Lima Road made the lots less desirable for residential purposes, (2) the result would be the removal of currently vacant homes on the lots along Lima Road, (3) the commercial development would preserve the property values in the remainder of the subdivision, and (4) the resulting commercial area would be an asset to the surrounding neighborhood.

Before HNS began development of the lots following the Plan Commission's approval, Daniels filed suit in Federal District Court, alleging that the Commission's actions constituted "inverse condemnation" in violation of 42 U.S.C. 1983 and requesting declaratory judgment and a permanent injunction against the taking of their property rights in violation of the Fifth and Fourteenth Amendments. The District Court granted summary judgment in favor of Daniels finding that "a restrictive covenant in a plat is a covenant running with the land, and that a state that takes a restrictive covenant for a private purpose violates both the Federal and Indiana Constitutions."

On appeal, the Plan Commission raised issues relating to (1) whether the Daniels' claim was 'ripe' and the Federal District Court had subject matter jurisdiction without a prior exhaustion of state remedies, and (2) whether the taking was actually for a public rather than private purpose. Turning first to the subject matter jurisdiction, the Court of Appeals noted that inverse condemnation occurs when property which is not actually the subject of the taking is affected or diminished by the condemnation of an adjoining parcel of land or when no formal exercise of the power has been attempted. Here, noting that the Daniels had a definite property right relating to the protection of their restrictive covenant rights under Indiana law, the Court found that exhausting their rights in state court to receive 'just compensation' would have been fruitless given the fact that there was not actual diminution in the value of their land. Accordingly, a state court inverse condemnation proceeding was not necessary: "where compensation for diminished value is not an issue, resorting to that remedy would futile". The Court thereby stated this as an exception to the exhaustion requirement.

Moving to the issue of 'takings for a public purpose', the Court noted the Fifth Amendment provides "nor shall private property be taken for public use, without just compensation", and that this prohibition is imposed on state governments by the application of the Fourteenth Amendment. While the United States Supreme Court has held that "one person's property may not be taken for the benefit of another private person without a justifying public purpose…", the Court has also imposed a "remarkably light" burden on the state. Where the taking is "rationally related to a conceivable public purpose, the court has never held a compensated taking to be proscribed by the Public Use Clause". The actions of the state in its determinations of what is a public use will not be disturbed unless they are "palpably without reasonable foundation", OR the result of "a situation where a local plan commission is making legislatively unrestrained decisions as to what constitutes a public use." Here, the Circuit Court of Appeals determined that the Area Planning Commission's determination of the "public use" resulting in the taking along Lima Road "falls outside Indiana's legislative definitions of 'public use'…[and therefore] they will not be given the almost compete deference [that past takings have enjoyed]." The Indiana legislature had limited these types of takings to remedy conditions of 'blight' in the exercise of eminent domain, and since the Plan Commission did not follow any of the statutory requirements for determining "blight" to justify the taking, they were acting outside of their legislative enablement. Accordingly, removing vacant houses and creating a commercial zone that may be an asset to the community is not, by definition, substantially related to the public health, safety, and welfare without the legislature's express imprimatur, and the taking was beyond the legislative empowerment.

 

7. MECHANIC'S LIENS; PUBLIC FUNDS AND LIENABLE WORK:

The law in Illinois is well settled that since mechanic's liens exist only by virtue of the statute creating them, the Mechanics Lien Act must be strictly complied with in order to create a lien. The Courts will not extend the coverage "to cases not provided for by the language of the Act even though they may fall within its reason." There are three sections which provide for the type of work, labor, and materials for which a lien can be claimed; Section 1, Section 21, and Section 23 relating to publicly funded projects. The case of Luise v. Village of Skokie, (1st Dist., September 6, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/September/Html/1004213.htm, deals with Section 23 liens, and whether two trucking companies hauling dirt and debris from the sit of a storm sewer replacement project have a right to a lien upon the public funds. In the process, Justice Campbell's decision offers not only some good historical instruction in the development of the legislative definition of lienable work under Section 1 and 21, but also and reverses a contrary holding on this issue in two, different consolidated cases from Cook County.

Both trucking companies, (Luise, Inc. and Berkeley Trucking Inc), were subcontractors of the bankrupt general contractor, Szabo Contracting, Inc. They provided $126,771.79 and $254,107.28, respectively, of trucking and hauling during a storm sewer replacement project on village streets. In the Luise case, Judge Meacham determined that hauling is a separate activity from excavation, and while the excavation work may have been lienable, the hauling was not. It did not meet the test of becoming a "constituent part of the improvement nor was [it] directly consumed in the process of construction." Judge Quinn came to a similar conclusion in the Berkeley case.

Finding that "There appears to be a tension between a strict and liberal construction of the Act.", the First District held that both Judge Meacham and Quinn erred and that Section 23 is broad enough to include "the hauling of debris from the jobsite and the delivery of raw materials to the job site necessary to complete the construction of a new sewer." Opining first in the Luise case, and then turning to the Berkley claim, the court also found: "Consistent with our review of the order in the Luise matter, we find that the trial court erred in finding that the activities of Berkely are not lienable…despite the fact that such labor and services do not meet the trial court's standard definition of 'used and consumed'. Ample case law demonstrates a broader interpretation of 'consumption' and 'use' as they apply to labor on a public works project than the trial court determined."

 

8. FORCIBLE ENTRY AND DETAINER; SANCTIONS:

Recent continuing education seminars have visited the issues of removing "unknown occupants" from possession of real estate in forcible entry and detainer cases and the growing incidence of the imposition of sanctions against attorneys. The case of Robertson v. Calcagno, (1st Dis., September 18, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/September/Html/1004209.htm, deals with both. Robertson filed a forcible action against Calcagno as a result of a breached contract for the purchaser of real estate. Calcagno had agreed to purchase Robertson's townhome in Hoffman Estates for $234,900. Robertson agreed to Calcagno's request for possession prior to closing. Calcagno then failed to close and failed to vacate the townhouse. The trial court granted Robertson's prayer for an order of possession against Calcagno. When the Sheriff arrived to evict her, however, it was James Jakubosky who was occupying the property. The Sheriff refused to evict Jakubosky because he was not named in the eviction order. Robertson then amended his complaint to name Jakubosky. At this point in the proceedings, Attorney Daniel Starr filed an appearance and jury demand on behalf of Jakubosky, followed by two motions to dismiss. The motions were denied, and after a two-day jury trial, an order for possession was also entered against Jakubosky and any unknown occupants. Robertson then brought a motion for sanctions pursuant to Supreme Court Rule 137 against Starr and his firm alleging that he had presented Jakubosky's claim of an interest in the real estate without a reasonable basis in fact or law, in order to harass, delay the eviction, and needlessly increase the cost of litigation. At the hearing on the motion for sanctions, Robertson's attorney called Jakubosky as his first witness over Starr's objection. Jakubosky testified that he had never met Starr, had never hired him or his firm, did not authorize them to file pleadings on his behalf or conduct a trial for him, and did not know he was a defendant in the case until after the trial.

In its memoranda opinion, the trial court noted that "Ms. Calcagno had an extensive history of being a defendant in a [sic] forcible cases involving dilatory tactics. Mr. Starr had acted as an attorney in many of those cases. This case, like those prior cases, resulted in extensive legal proceedings before Mr. Robertson finally regained possession." Based upon this history, the court found that Starr had failed to conduct a reasonable inquiry prior filing an appearance, jury demand, and motions to dismiss on behalf of Jakubosky, and violated Supreme Court Rule 137 by filing "an unauthorized appearance on behalf of a non-existing occupant for the purpose of delaying an eviction as part of a fraudulent scheme to retain possession of the leasehold." Starr attempted to 'defend' the sanctions motion by moving to strike based on the fact that Robertson's attorney himself had not signed the motion for sanctions as also required under Rule 137. The irony was not lost on the Court which stated "We reject Starr's attempted perversion of Rule 137 into a hyper technical shield against the prosecution of his egregious conduct. Starr's interpretation manipulates Rule 137 against itself to harass and delay appropriate sanctions proceedings…The holding urged by Starr would transmogrify a de minimus signature flaw into a quasi-jurisdictional defect…" Ending with a recitation of the case law relating to the award and determination of reasonable attorney fees, (and noting that the recovery may include recovery of the fees incurred in prosecuting the motion for sanctions), the Court modified the award of the trial court by deducting the $105.00 filing fee for the initial complaint as a cost incurred before Starr had appeared in the case, but affirmed the reduced award of sanctions in the sum of $23,799.25.

 

9. FAIR DEBT COLLECTION PRACTICES ACT; VALIDATION NOTICES IN PLEADINGS AND 'RECONCILATION' LANGUAGE:

Just when we may have thought it was "safe" to understand the Fair Debt Collection Practices Act as it applies to mortgage foreclosure litigation, a recent case from the Circuit Court of Appeals for the 11th Circuit, In Re: Pablo Martinez, (11th Cir., November 5, 2002), 2002 WL 31455510, 271 BR 696, http://caselaw.lp.findlaw.com/cgi-bin/getcase.pl?court=11th&navby=case&no=0211485OPN, has caused some stirring and concern among litigators in this area. Most plaintiff's attorney filing residential mortgage foreclosures employ the statutory "short form" mortgage foreclosure complaint found in the Illinois Mortgage Foreclosure Act. (735 ILCS 5/515-1504) Beginning in 1996, following the United States Supreme Court decision in Heintz v. Jenkins, (1995) 514 U.S. 291, 115 S.Ct. 1489, 131 L.Ed.2d 395, establishing that attorneys who regularly engage in consumer-debt collection fall within the scope of the Fair Debt Collection Practices Act, most of these same attorneys began adding Fair Debt Collection Practices Act verbiage to their complaints, summons and publication notices; (i.e., the 'Miranda-like' warnings that this is an attempt to collect a debt and all information obtained will be used for that purpose, the debts validity will be assumed unless it is disputed by the debtor within 30 days of receipt of the notice, and an offer by the debt collector to provide information regarding the details and verification of the debt upon request.)

The 11th Circuit has held in In Re Pablo Martinez that the inclusion of the Fair Debt Collections Practices Act verbiage in a complaint package which also contains a summons presents confusion and uncertainty arising from the conflict between the summons and the FDCPA Notice and thereby violates the FDCPA when judged by the 'least sophisticated consumer' standard approved by the Courts. In Martinez, the violation was raised in the context of an adversary complaint filed in a Chapter 13 Bankruptcy proceeding following the filing of the foreclosure. The foreclosure complaint package served upon Martinez consisted of 16 pages of documents. Included in the package were the summons (the first two pages), which set forth the admonishment that a failure to appear and/or plead within 30 days would result in a default judgment of foreclosure. The complaint, (consisting of three pages) set for the allegations of default, and attached copies of the mortgage and note. It was not until the eighth page of the package that the FDCPA "Validation Notice" appears, presenting the contradictory admonishment that the defendant had the right to dispute the debt and request verification of the debt within the same 30 day period. The Court ruled that "Even though the summons and the FDCPA Notice both had 30 day return dates, the conflicting statements rendered the FDCPA Notice ineffective." Reviewing decisions in cases where pre-litigation communications had been found to be invalid based on the potential to create confusion in the consumer, the Martinez court found the instance before it "more compelling…Here, we have not the threat of a lawsuit, but the actual commencement of a legal action." The summons contained the "ominous sentence" "IF YOU DO NOT FILE YOUR RESPONSE ON TIME, YOU MAY LOSE THE CASE, AND YOUR WAGES, MONEY AND PROPERTY MAY THEREAFTER BE TAKEN WITHOUT FURTHER WARNING FROM THE COURT". This language, Martinez holds would cause the least sophisticated consume to heed the warning on the summons and choose to answer the complaint rather than assert their rights under FDCPA, and therefore effective notice was not accomplished. The fact that this language was approved by the Florida Supreme Court for use in a summons was also to no avail; "Set alone, this Court finds no problem with the language approved by the Florida Supreme Court for use in a summons. The problem arose in the instant case because the summons was included n a single enclosure which also contained a validation notice…" Moreover, the opinion focused on the trial court's question to the Defendant's counsel during oral argument of what effect the request for validation of the debt within the time to appear or answer would have had on the default time frame; (a question which was not satisfactorily answered by simply stating that the debtor would have to both answer and request validation within the time period). The 11th Circuit decision finds that "Upon acting upon a Validation Notice by disputing the debt, a consumer is under no obligation to respond to the complaint until, at earliest, the debt collector responds with the requested information. See 15 U.S.C. 1692g(b)….when , as a matter of law, that time is statutorily extended if there is a request for the validation of the debt." The Court also rejected Defendant's theory that FDCPA does not specifically extend the Debtor's time to answer, but only precludes the debt collector from seeking a default. Noting that Judge Posner took a similar position in Bartlett v. Heibl, (7th Cir., 1997), 128 F.3d 497, 500, and then "affirmatively approving" the language of the Posner 'safe harbor' letter, ("The law does not require me [the debt collector] to wait until the end of the thirty-day period before suing you [the consumer] to collect this debt. If, however, you request proof of the debt or the name and address of the original creditor within the thirty-day period which begins with your receipt of the letter, the law requires me to suspend my effort (through litigation or otherwise) to collect the debt until I mail the requested information to you."), the per curiam opinion in Martinez offers directions toward a 'safe harbor' if not the 'safe harbor' itself: "For guidance, the Court offers the following simple suggestion for satisfying the statute where inclusion of a Validation Notice with the other documents might lead a consumer to be uncertain or indefinite as to his rights: to prevent confusion, a debtor collector should provide clarity. Specifically, if two or more messages would deliver mixed guidance to a least sophisticated consumer as to his rights under the FDCPA, the reconciling language out to be utilized to provide effective notice." Quoting the United States Supreme Court, "It does not seem unfair to require that one who deliberately goes perilously close to an area of proscribed conduct shall take the risk that he may cross the line", the decision notes that "The Defendant [law firm] took the risk, crossed the line and violated federal law", and found that the FDCPA mandates an award of attorneys fees as a means of fulfilling Congress's intent where one 'crosses the line"; the sum of $29,037.50, as compared with a fine of $1,000 plus costs, in this case.

(ed. Note: Thanks to Vince Robertelli for bringing this case to our attention.)

 

10. ELECTRONIC ACCESS AND ELECTRONIC FILING OF COURT RECORDS:

On September 19, 2002, the Clerk of the Supreme Court of Illinois filed a general administrative and supervisory Order to "oversee the orderly development of practices and procedures for electronic receipt, maintenance, and dissemination of every manner of information regarding cases and other court business by all courts within this state. By this Order the "Electronic Access Policy for Circuit Court Records of the Illinois Courts" and the "Policy for Implementation of an Electronic Filing Pilot Project in Illinois' Courts" become effective on January 1, 2003. The Policy for Implementation is quite comprehensive, including requiring the establishment of a system to authenticate digital signatures, determine the source of the documents filed, confirm the accuracy of transmission and means of ascertaining the date and time of filing, and register attorneys and assign id's and passwords. Most interestingly, the Policy ends with the statement that "This policy does not authorize electronic filing in the Supreme and Appellate Courts." (hmmmm….) The Order and Policy can be found at http://www.state.il.us/court/SupremeCourt/Announce/2002/pdf/Ann0919.pdf. It should be an interesting new year in what is finally and unequivocally the year after the new millennium.