Lack of Standing and Mortgagor Protection

The Illinois Second District Appellate Court recently adopted a legal principle aimed at protecting borrowers and further curbing lender wrongs, such as improperly affixing lender’s signatures to foreclosure documents without reviewing them.

As early as 2008, Federal and State jurisdictions around the country began a trend of dismissing foreclosure suits due to a lack of mortgagee standing.  In December 2012, the Second District adopted this trend — which could have significant implications on Illinois mortgagors and mortgagees alike.

In practice, it is not unusual for a mortgagee foreclosing on an assigned note to produce documents evidencing such assignment took place after or even well after initiation of the foreclosure suit.  These late assignments could be a result of a mortgagee’s honest inadvertent act or, more likely, may represent a mortgagee’s standard business practice.  Mortgagees that engage in this behavior intentionally operate on the assumption that no one will notice or raise the timing discrepancy.  Usually, they are correct.

For whatever reason the assignment was late, the servicer will more than likely argue that it should be given retroactive effect because it merely memorialized an earlier assignment or dismissal and refiling would unnecessarily strain judicial resources.  Moreover, a servicer will also most likely attempt to argue that the statutory provision, 735 ILCS 5/2-616(c), allows for liberal amendment of pleadings to correct so that cases are decided on the their merits and not on procedural technicalities.

However, federal courts[1] and state courts in New York[2], Ohio[3] and elsewhere[4] recently began dismissing foreclosure suits in which servicers or mortgagees were assigned the note subsequent to initiating a foreclosure action.  For example, in Saxon Mortgage Servs., Inc v. Hillery, a foreclosure action was dismissed because a plaintiff failed to allege the note had been assigned to it before filing its complaint.  2008 WL 5170180.  Moreover, in Countrywide Home Loans, Inc. v. Gress, a foreclosure suit was dismissed because it was “undisputed that the subject mortgage was not assigned to the plaintiff until . . . more than five months after the commencement of [the] action” and “retroactive assignment cannot be used to confer standing upon the assignee in a foreclosure action.”  888 N.Y.S. 2d 914-15 (2009).  While the factual bases of the foregoing examples differ, the trend of courts scrutinizing plaintiff standing in foreclosure cases is clear.

Recently, in Deutsche Bank National Trust Co. v. Gilbert, the Illinois’ Second District appellate court followed this trend when it dismissed Deutsche Bank’s foreclosure claim on the basis that it lacked standing at the time of filing.  982 N.E. 2d 815, 824 (2012).  Lack of standing is an affirmative defense, and the burden of proving the defense is on the party asserting it.  Therefore, the mortgagor bears the burden to prove the mortgagee lacked standing at the time the foreclosure was initiated.  However, when a prima facie showing is made — such as an assignment executed subsequent to filing of the foreclosure complaint– the mortgagee must rebut that showing with admissible evidence to establish it had standing at the time the action was initiated.

In Gilbert, the mortgagor established a prima facie defense by drawing attention to the fact that Deutsche Bank’s assignment did not explicitly state when it was assigned the mortgage.  That showing established a prima facie defense and shifted the burden to Deutsche Bank National Trust Co. to rebut with admissible evidence.

Deutsche Bank attempted to rebut Gilbert’s prima facie showing by submitting an affidavit stating that the assignment merely memorialized an earlier assignment of the note, but did not attach any documentary evidence to support the assertion.  The appellate court was not persuaded by the affidavit but rather followed the trend of scrutinizing mortgagee standing in foreclosure cases.  Although not addressed in the Gilbert decision, it is important to note that other jurisdictions and courts have expanded on this trend to further securitize mortgagee standing by awarding attorneys’ fees for such deficiencies.[5]

The upshot of the recent Illinois appellate court decision in Gilbert is that counsel for mortgagees and mortgagors alike must diligently examine the dates of any assignments and be prepared to support a prima facie defense or rebuttal with documentary evidence.  A failure to do so could result in a dismissal, a failure to obtain a dismissal or even sanctions.

— James D. Trail
The Bernstein Law Firm, LLC

[1] Saxon Mortgage Servs., Inc. v. Hillery, 2008 WL 5170180 (N.D. Cal. Dec. 9, 2008)

[2] Countrywide Home Loans, Inc. v. Gress, 888 N.Y.S.2d 914 (2009)

[3] Wells Fargo Bank, N.A. v. Jordan, 2009 WL 625560 (Ohio Ct. App. Mar. 12, 2009)

[4] Jeff-Ray Corp. v. Jacobson, 566 So. 2d 885 (Fla. Dist. Ct. App. Sept. 12, 1990)

[5] Bank of New York v. Williams, 979 So. 2d 347 (Fla. Dist. Ct. App. 2008); Countrywide Home Loans, Inc. v. Taylor, 843 N.Y.S.2d 495 (N.Y. Sup. Ct. 2007)


The Constitutionality of the Federal Defense of Marriage Act

On March 27, 2013, the Supreme Court heard arguments dealing with same sex marriage in the matter of United States v. Windsor, which questions whether it is constitutional for the federal government to refuse to recognize same sex marriages that have been recognized by other states.

The law, the Defense of Marriage Act (DOMA), defines marriage, at least for federal purposes, as between a man and a woman.  Section three of the Act, which is the section at issue in the case, states that, “the word ‘marriage’ means only a legal union between one man and one woman as husband and wife” for purposes of “any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States.”

The Plaintiff in the case, Edie Windsor, brought suit against the IRS because it denied her a federal tax refund following the 2009 death of Thea Spyer, her partner for over forty years.  The two were finally married in Canada in 2007, but resided in the State of New York.  Following Spyer’s death, Windsor would have been eligible for a federal tax exemption in excess of $363,000 on her inheritance of her wife’s estate.  Windsor sued, arguing that if Spyer had been a man – if federal law had accorded their marriage the same status as heterosexual marriages recognized by their state – she would have paid no taxes.

So, the issue before the Supreme Court is whether the federal government must recognize same sex marriages that occur in states where it is legal.  More practically: if DOMA is ruled unconstitutional, then same sex couples can get married in states that allow gay marriage while residing in states that do not and still retain federal (but not state) recognition of that marriage.

Legally, whether DOMA will be upheld or struck down depends on the type of scrutiny the Court uses in its judicial review of the issue involved.  The lowest level of scrutiny is called the rational basis test, which states that if a law discriminates against a group of people, it must be for some legitimate reason.  Thus far both the US District Court as well as the US Court of Appeals for the 2nd Circuit struck down DOMA using the rational basis test and will likely do so here.

There is, however, the possibility that the Court will not reach a decision in this case.  President Bill Clinton signed DOMA into law in 1996, with just 81 of the 535 members of Congress opposed to the Act.  In the past, President Obama has defended laws passed by Congress that were challenged in court.  But, in February of 2011, the Obama administration announced it would cease defending the law because it believed the law to be invalid under the Constitution.  Because the Justice Department would not defend the law as passed by Congress, Republican Congressmen hired Paul Clement, George W. Bush’s former solicitor general, to represent the federal government in this case.  The Court, therefore, may decide not to rule on the case, because Congress did not technically receive any actual harm in order to defend it and because the Obama administration is not a viable party because it agrees with the lower courts.

Surviving this argument, and given the remainder of the questions the Justices asked at oral argument, it appears the Court may be leaning to overturn DOMA, though.  Justice Kennedy, who is thought to be the Court’s swing vote on this issue, acknowledged that there were 1,100 references to marriage in the federal code, and that the definition of who is married is “intertwined with daily life.”  He questioned whether the federal government may impose its own view of marriage, which has “always thought to be” the domain of the state.  Justice Ginsburg said that if same sex couples don’t receive federal pension, Social Security, and family medical leave benefits, “what kind of marriage is it” she questioned.  She said the law basically created two classes: real marriage and “skim-milk marriage.”  And Justice Sotomayor asked: “What gives the federal government the right to define marriage?”

One final question asked by Kennedy, however, caused Court observers to speculate that he would join the four liberal-leaning justices to create a majority against the Act: when questioning the reach of DOMA into state’s rights, he said it “presents a real risk of running into traditional state police power to regulate marriage.”  Kennedy’s repeated questioning is significant because he has written the majority opinion in two of the court’s most important gay rights decisions.

A decision in the Windsor case is expected in June.

—  Mike Herbst


A Change in Direction

“A change in direction was required.  The story you finished was perhaps never the one you began.”  –Salmon Rushdie

So many of us begin our careers knowing little of our direction — our goal — and find that as our careers evolve, we know less and less about our direction and path, even though we are becoming, at least outwardly, more successful.

Upon first entering the law profession, I worked at a small general practice firm in New York.  My responsibilities ranged from drafting motions, attending court in all five boroughs to picking up White Castle for the office.  I enjoyed the camaraderie of the small office, but I also yearned for “the bright lights” of a larger, more prestigious firm with all of the trappings of success.

Soon, I moved to Chicago and joined a larger and very well-established firm.  My responsibilities grew with more challenging assignments, including a promotion to Burger King delivery.  As my career grew, so did my aspirations.  I wanted all the “big firm trappings” – big money, corner office, election to the most prestigious, impressive committees.  Ego drove my progress and while I obtained much of what I thought was important, I grew increasingly disenchanted with the prestigious law firm experience… and my career.  Much of what I thought was important was ultimately unimportant.  In fact, it was personally and professionally unsatisfying.

Finally, I decided to create a different environment for myself and others with whom I would work.  In the fall of 2009, I opened Bernstein Law Firm – although much consternation ensued in selecting the firm’s name.

I was determined to create a boutique litigation firm, representing well-established corporations and entrepreneurs.  We would provide one-on-one contact with our clients and better lawyering in a dynamic and youthful firm and an environment where everyone who worked together also enjoyed one another’s company; where they were friends, not just co-workers; where everyone works together and supports one another.

To that end, everyone who works at Bernstein Law Firm was recommended by someone who works at the firm.  We started with our office manager, Sharon Meyers, and me.  We found great offices just across the Chicago River from the Daley Center.  We have grown organically to five attorneys, a paralegal and law clerks

The firm invests in its atmosphere and culture – we spend a good amount of time outside of work in social situations – further underscoring the cohesiveness of the group when we are in the workplace.  We consider each other friends first, and when we work into the night or over a weekend, I at least, am working with people for whom I care a great deal.

Obviously, our small firm does not have the expensive trappings of the bigger, more prestigious firms.  We pass those savings on to our clients.  Better yet, we each know all of our clients personally, and we are all motivated daily to do the best work possible for each of them.  We have largely avoided big firm politics because we all work together to pull the oar of the boat.  How do I know that?  I am once again relegated to delivering from White Castle.

All in all, for me, the trade-offs I have made have been worthwhile.  It shows that the story I “finished was perhaps never the one [I] began.”

– Lou Bernstein

A Personal Perspective on the Bernstein Law Firm Difference

Practicing at Bernstein Law Firm has made an enormous difference in my life, and in the service I give my clients.

I have worked at large law firms. I have been a part of the corporate machines that incessantly push associates to bill more hours, no matter what the cost. I have been there. I have been exposed to unhappy clients, unhappy fellow associates, and partners who treat associates as poorly as they were treated.

According to an often cited Johns Hopkins University study of more than 100 occupations, researchers found that lawyers lead the nation with the highest incidence of depression.[1]

Seven in ten lawyers responding to a California Lawyers magazine poll said they would change careers if the opportunity arose.[2]  Surprising?  Not in the least.

For me, the opportunity to change careers did not just arise for me – but I sought it out.  After becoming so dissatisfied both personally and professionally while working at a larger law firm, I quit – hopeful that the bad dream I had been living would disappear.  At that point, I thought my legal career was over and I returned to school to pursue another career path.  Then, I came across Lou Bernstein and the Bernstein Law Firm.

Today, I enjoy practicing law.  I advocate zealously for our clients and feel supported while I do so.  I feel as though I am part of a team that is improving our client’s lives.  I know I am part of a team that has the best interests of the client and of other team members in mind.

The Bernstein Law Firm is like a family and the family composition does not end with its staff.  Clients join us for dinner and celebrations marking the anniversary of the firm.  My own friends constantly ask when the next Bernstein event will take place because they want to join!  It is truly unbelievable to me.  I could never have imagined, while working at previous larger firms, that I could become so lucky.  I could not imagine finding such true happiness while working at a law firm.  But I did.  And others can too.

Lou’s leadership and the firm’s culture he has created lead to an atmosphere that allows both personal growth and career growth for all involved.  Here, I am encouraged to be a well-rounded person with a happy and healthy lifestyle.  Because, as we all know – and as Lou demonstrates – to serve at your best, you must be at your best.

Now, I plan to maintain my legal career indefinitely.  Lou and the culture of this firm gave me that gift.  It makes my client service better – and I believe it makes Bernstein Law Firm very effective for all of our clients.

— Tracey Guerin

[1] Eaton, W.W. (1990). Occupations and the prevalence of major depressive disorder. Journal of Occupational Medicine, 32 (11), 1079-1087.

[2] Dolan, M. (June 28, 1995). “Disenchantment growing pervasive among barristers,” Houston Chronicle, 5A.

Supplementary Proceedings in Cook County Circuit Court

The following contains the basic procedures for issuing a Citation to Discover Assets on a judgment debtor in Cook County Circuit Court.  It is intended to provide a basic outline of the steps involved in the Citation proceeding and also provides citations to the Rules for reference.

Pursuant to Illinois Supreme Court Rule 277(a), supplementary proceedings are initiated following the entry of a final and enforceable judgment.  The clerk’s issuance of a Citation to Discover Assets pursuant to Rule 277(b) begins these supplementary proceedings against a judgment debtor. A Citation need only be presented to the clerk who, upon payment of an $80.00 fee, will then issue the Citation.  The Citation should be filed and then made returnable in the court where the judgment was entered or in any county in which the judgment debtor resides.  In the event the Citation must be served on a third party, the supplementary proceedings must be conducted in the county in which the third-party Citation respondent resides.  Il. Sup. Ct. R. 277(d).

The Citation must then be “served and returned in the manner provided by rule for service” pursuant to 735 ILCS 5/2-203 for individuals or Section 2-204 for business entities.  Service of the Citation can be effectuated upon the judgment debtor or upon “any third party the judgment creditor believes has property of or is indebted to the judgment debtor.”  Il. Sup. Ct. R. 277(a).  The Citation requires that the judgment debtor or the third-party respondent appear for an examination at a time not less than five days from the date of service of the Citation.  Il. Sup. Ct. R. 277(c).  It may also require the production at the examination of any books, papers, or records in his or its possession or control which have or may contain information concerning the property or income of the debtor.  Id.

Service of a Citation to Discover Assets prohibits the judgment debtor from transferring, disposing of or interfering with any property not exempt from execution or garnishment.  The judgment debtor, however, is not required to withhold the payment of any money beyond double the amount of the judgment.

Rule 277 requires that the examination pursuant to a Citation summons may take place outside of the courtroom if the court so orders. In Cook County, the presiding judge usually requires that at least the initial examination be commenced in the courtroom. Several Cook County judges also insist that the judgment creditor’s attorney conduct a search on the Court’s computers before the Citation examination commences to determine whether any other citation or other liens exist, so that the Citation creditor will not be paid ahead of other valid liens.

Supplementary proceedings under judgments from the Law Division of the Cook County Circuit Court are not heard by the court that ordered the underlying judgment. In this situation, a Motion for Substitution of Judge as of Right may be made.  By custom, if the judgment was obtained in the Cook County Circuit Court’s Chancery Division, the supplementary proceedings may be held in front of the same judge, at that judge’s discretion.  One case, currently pending before the Appellate Court, First District, captioned Bank of America, N.A. v. Laurance H. Freed, et al., Docket No. 1-11-0749, has taken this issue up on appeal.  A decision on this issue is expected early in 2013.

A supplementary proceeding under this rule continues until terminated by motion of the judgment creditor, order of the court, or satisfaction of the judgment.  A supplementary proceeding, however, must terminate automatically six months from the date of (1) the respondent’s first personal appearance pursuant to the citation or (2) the respondent’s first personal appearance pursuant to subsequent process issued to enforce the citation, whichever is sooner. The court may, however, grant extensions beyond six months, as justice may require.  Il. Sup. Ct. R. 277(F).

Posted in Uncategorized

Consolidating an appeal; filing record for consolidated appeal

In order to consolidate appeals in Illinois there must be two separate appeals filed in the appellate court, which is distinct from a single appeal with multiple issues being appealed. 

This means that two separate notices of appeal and two separate docketing statements must be filedTo consolidate two separate appeals effectively, one must bring a motion to consolidate and state the reasons for consolidation.  In most cases the reasons for consolidating an appeal arise from one party appealing two separate interlocutory orders before the underlying proceedings have ended (See: Illinois Supreme Court Rule 307), one party appealing two separate final judgments that do not dispose of the entire proceeding (See: Illinois Supreme Court Rule 304), or some combination of those two. 

No matter what types of appeals one attempts to consolidate, the procedure is consistent and relatively simple.  One brings a motion to consolidate or an agreed motion to consolidate, depending upon the position of opposing counsel.  Of course, opposing counsel may oppose the motion and file a response.  In any instance, attempting to consolidate two separate appeals is straightforward and similar to a motion to consolidate in a trial court.  However, filing the record for a consolidated appeal is where the process gets complicated.  

            From the outset, it is important to understand that if a court grants a motion to consolidate, even if the court consolidates two, three or even eight appeals, the appeal is docketed under the number assigned to the initially filed appeal or the lowest docket number of the appeals being consolidated.  Further, no matter how many appeals are filed or how many appeals are consolidated, there is only one record

The easiest way to think about this is to imagine that the trial court is a library and all of the documents filed and associated with the case at the trial level are compiled in a library book, the “Trial Level Book.” 

When an appeal is filed, the Trial Level Book is – essentially – checked out. 

To illustrate this, imagine two separate, unconsolidated appeals.  There is only one Trial Level Book, or record.  If it is filed (checked out) for appeal #1, then appeal #2 cannot – and will not — be heard.  Only when appeal #1 concludes, and the Trial Level Book returns to the trial court, can it again be checked out, this time for appeal #2. 

This is true regardless of whether the appeals are filed in the same appellate court. 

Obviously, eliminating this otherwise unavoidable delay is itself an incentive to consolidate appeals.  But understanding that there is just one record once an appeal has been consolidated gets us only halfway to the finish line. 

One reaches the homestretch by understanding that the entire time the record is checked out of the trial court, and is in the possession of the appellate court, it is not updated with critical filings and other documents. 

 So, according to the rules, if the original notice of appeal is filed on January 1, then, the record on appeal must be filed within 63 days.  (See: Illinois Supreme Court Rule 326).  Once the notice of appeal is filed, a form requesting preparation of the record must be submitted (this form is available on the Cook County Clerk of the Circuit Court’s website). 

 It is best to assume that from the day the preparation of the record form is filed, no subsequent filings or documents will not be included in that prepared record. 

 Additionally, the civil appeals division of the Cook County Circuit Court Clerk is relatively small and frequently backlogged.  Therefore, it is not unusual to file one or two extensions from the 63-day requirement.

 Returning to the example of filing a notice of appeal on January 1st, assume the record on appeal is filed on May 1.  The four months from January 1 to May 1 are lengthy, especially in a highly contested case.  Something may have occurred in the case during that time that should itself be appealed.  But, as we have seen, no documents coming into existence since the January 1 request will be part of the record, making citation to them impossible.    To alleviate this problem one must supplement the record on appeal.   

Two means exist to supplement the record on appeal, (1) a court order from the trial level or (2) a stipulation with opposing counsel.  The court order or stipulation should include the name, description and date of each document to be added to the record. 

 In either instance the procedure is straightforward.  One  completes a form to supplement the record on appeal in the civil appeals division of the Cook County Clerk of the Circuit Court. 

 To file the request to supplement the record an original and signed copy of the court order or stipulation must be attached.  The actual signature of the judge – if by court order, or at least one party – if by stipulation is mandatory,  along with a single copy of all of the documents to be added to the record. 

 The Clerk cross-checks each submitted document with the court order or stipulation, and then accept the documents and begin the certification process. 

 Certification takes between 10 and 60 days, perhaps more, depending on how busy the Clerk is and how many documents are being added to the record.  Upon completion, the Clerk will notify the submitting party to take possession of the record.  The supplemental record should be copied for one’s own use and for opposing counsel before submission to the appellate court. 

 Once the supplemental record has been submitted to the appellate court, briefing can begin.  Citations to either the original record or the supplemental record are in order, but they must be clear: for example, (C234) for the original record and (Suppl. R. C234) for the supplemental record.                      Image