2015 IL App (2d) 140331 No. 2-14-0331 Opinion filed December 30, 2015 ______________________________________________________________________________

IN THE APPELLATE COURT OF ILLINOIS

SECOND DISTRICT ______________________________________________________________________________

BAYVIEW LOAN SERVICING, LLC, ) Appeal from the Circuit Court ) of Du Page County. Plaintiff and Counterdefendant- ) Appellee, ) ) v. ) No. 11-CH-3939 ) DOMINIK SZPARA and LIDIA SZAREK, ) ) Defendants and Counterplaintiffs- ) Appellants ) ) Honorable (Unknown Owners and Nonrecord Claimants, ) Robert G. Gibson, Defendants). ) Judge, Presiding. ______________________________________________________________________________

JUSTICE SPENCE delivered the judgment of the court, with opinion. Justices Zenoff and Burke concurred in the judgment and opinion.

OPINION

¶1 Plaintiff, JPMorgan Chase Bank, NA, 1 filed a complaint to foreclose the mortgage on the property of defendants, Dominik Szpara and Linda Szarek, at 122 East Lincoln Avenue, Glendale Heights, Illinois (the Property). Defendants answered the complaint and raised four

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2015 IL App (2d) 140331 also the appraiser, committed fraud in the inducement by inflating the appraisal price in order to

obtain a larger commission as well as by inflating defendants’ assets, thereby voiding the mortgage lien; and (4) alternatively, in light of the broker’s conduct, the action was barred by

equitable estoppel. Defendants also included a counterclaim to quiet title, alleging again that the broker inflated the appraisal for personal gain and inflated defendants’ assets. They further alleged that they were not fluent in English and therefore could not understand that the broker was acting dishonestly.

¶7 On August 31, 2012, plaintiff replied to defendants’ first affirmative defense, denying

that it failed to send an acceleration letter. It also filed a motion to strike defendants’ second, third, and fourth affirmative defenses and their counterclaim to quiet title. After the matter was briefed, the trial court entered a November 7, 2012, order striking defendants’ second affirmative defense and their counterclaim with prejudice and striking defendants’ third and fourth affirmative defenses without prejudice.

¶8 On December 6, 2012, defendants filed amended third and fourth affirmative defenses.

In defendants’ amended third affirmative defense, they alleged the following to support fraud in the inducement: the broker was also the appraiser of the Property, creating a conflict of interest; defendants never received a copy of the appraisal; the broker inflated defendants’ assets; defendants did not speak fluent English; and therefore plaintiff was estopped from enforcing their lien. The amended fourth affirmative defense, equitable estoppel, contained allegations identical to those in the amended third affirmative defense.

¶9 On December 26, 2012, plaintiff filed a motion to strike defendants’ amended affirmative defenses. Plaintiff argued that the amended affirmative defenses were not well pleaded, containing conclusory allegations insufficient to support fraud in the inducement or 140333

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equitable estoppel. Furthermore, plaintiff argued that, under the terms of the purchase and assumption agreement (PAA), which it entered into with the Federal Deposit Insurance

Corporation (FDIC), as receiver for Washington Mutual Bank, on September 25, 2008, plaintiff

explicitly disclaimed liability to defendants arising from Washington Mutual Bank’s prior conduct, even if defendants raised their claims affirmatively or defensively.

¶ 10 On January 8, 2013, the trial court entered an order stating that it took judicial notice of the PAA. The court therein also granted plaintiff’s motion to strike, striking the amended third and fourth affirmative defenses with prejudice.

¶ 11 On August 30, 2013, plaintiff filed its motion for summary judgment. Defendants responded, arguing primarily that plaintiff’s prove-up affidavit for the amounts due and owing on the mortgage loan was insufficient. They argued that the affidavit, of plaintiff’s vice president

Rosalva Cardenas, lacked a foundation as a business record because she lacked personal knowledge of the pertinent records and that the affidavit thus relied on inadmissible hearsay.

Plaintiff replied that there was a proper foundation for the affidavit and that defendants did not challenge anything else in the affidavit, such as the actual amounts owing.

¶ 12 On November 6, 2013, the trial court granted a summary judgment of foreclosure and sale in plaintiff’s favor.

¶ 13 The judicial sale of the property occurred on February 11, 2014. Plaintiff filed a motion

for confirmation of the sale on February 19, 2014. On March 11, 2014, the trial court granted the motion and confirmed the sale.

¶ 14 Defendants timely appealed. ^[2]

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¶ 15 II. ANALYSIS

¶ 16 1. Standard of Review

¶ 17 Defendants’ affirmative defenses and counterclaim were struck pursuant to sections 2-

615 and 2-619 of the Code (735 ILCS 5/2-615, 2-619 (West 2012)). We review de novo dismissals under these sections of the Code. Kean v. Wal-Mart Stores, Inc., 235 Ill. 2d 351, 361

(2009).

¶ 18 We also review de novo an order granting summary judgment. Chatham Foot

Specialists, P.C. v. Health Care Service Corp., 216 Ill. 2d 366, 376 (2005). Plaintiff argues, however, that because the trial court’s determination of whether the prove-up affidavit was based on admissible evidence was within its sound discretion, we should review the grant of summary

judgment for an abuse of discretion. We reject this argument because, although “[i]n general, this court reviews a circuit court’s decision on a motion to strike an affidavit for an abuse of discretion, *** when the motion ‘was made in conjunction with the court’s ruling on a motion for summary judgment,’ we employ a de novo standard of review with respect to the motion to

strike.” US Bank, National Ass’n v. Avdic, 2014 IL App (1st) 121759, ¶ 18 (quoting Jackson v. Graham, 323 Ill. App. 3d 766, 773 (2001)). Here, there was no specific motion to strike the affidavit, but in substance the argument was that the affidavit could not support summary judgment because it failed to comply with Illinois Supreme Court Rule 191 (eff. Jan. ^[4], 2013) and thus should not be considered. Accordingly, we review de novo the grant of summary judgment in conjunction with the consideration of the prove-up affidavit. See Jackson, 323 Ill.

App. 3d at 774 (“[W]hen the trial court rules on a motion to strike a Rule 191 affidavit in 140335

2015 IL App (2d) 140331 conjunction with a summary judgment motion, we review de novo the trial court’s ruling on the motion to strike.”).

¶ 19 2. Motions to Strike

¶ 20 Defendants argue that the trial court erred in striking their second affirmative defense, their amended third and fourth affirmative defenses, and their counterclaim to quiet title. We address the affirmative defenses and the counterclaim in turn.

¶ 21 a. Second Affirmative Defense

¶ 22 Defendants first argue that the trial court improperly struck their second affirmative defense, that plaintiff violated section 15-1502.5 of the Code by failing to send a grace-period notice to them prior to filing its complaint.

¶ 23 Section 15-1502.5 requires a mortgagee to send notice via United States mail advising the mortgagor to seek approved housing counseling if the mortgage becomes more than 30 days delinquent, “[e]xcept for mortgages secured by residential real estate in which any mortgagor has filed for relief under the United States Bankruptcy Code.” 735 ILCS 5/15-1502.5(c) (West

2010).

¶ 24 Here, defendants claim that they filed for bankruptcy on March 29, 2011, after plaintiff

initiated its foreclosure action on March 23, 2011. Therefore, they claim, the exception in section 15-1502.5(c) quoted above did not apply, and plaintiff was required to send them the notice.

¶ 25 Plaintiff responds as follows. First, this court does not have jurisdiction to entertain an

appeal of the striking of defendants’ second affirmative defense (and, for the same reasons, the striking of their counterclaim). Defendants’ notice of appeal lists three specific orders from which they appeal: the January 8, 2013, order, in which the court struck their amended third and 140336

2015 IL App (2d) 140331 fourth affirmative defenses with prejudice; the November 6, 2013, order granting summary judgment 3; and the March 11, 2014, order confirming the sale of the Property. Under Illinois

Supreme Court Rule 303(b)(2) (eff. May 30, 2008), we lack jurisdiction to review judgments or parts of judgments not specified in or inferred from the notice of appeal. See Fitch v. McDermott, Will & Emery, LLP, 401 Ill. App. 3d 1006, 1014 (2010). Moreover, the striking of the second affirmative defense and the counterclaim was not a step in the procedural progression

leading to the judgments specified in the notice of appeal. See Illinois Central Gulf R.R. Co. v. Sankey Brothers, Inc., 78 Ill. 2d 56, 61 (1979) (holding that appellate court properly ruled that dismissal of defendant’s counterclaim in December 1977 was not before it when defendant’s notice of appeal sought review only of summary judgment in April 1978 and did not mention the earlier dismissal order).

¶ 26 We agree with plaintiff that defendants’ second affirmative defense is not properly

before us on appeal. The order striking defendants’ second affirmative defense (and counterclaim) with prejudice was entered on November 7, 2012. That order is not specified in defendants’ notice of appeal. While an unspecified judgment is reviewable if it is a step in the procedural progression leading to the judgment specified in the notice of appeal (Village of Lisle v. Village of Woodridge, 192 Ill. App. 3d 568, 572 (1989)), the striking of the second affirmative

defense was not part of the procedural progression here (see Edward E. Gillen Co. v. City of Lake Forest, 221 Ill. App. 3d 5, 11 (1991) (dismissal of earlier counts of a complaint is not a step

in “procedural progression” (internal quotation marks omitted)); see also Dalen v. Ozite Corp., 230 Ill. App. 3d 18, 24 (1992) (matters outside the scope of the cause at issue are not part of the 140337

2015 IL App (2d) 140331 procedural progression)). The second affirmative defense alleged that plaintiff violated section

15-1502.5 of the Code by failing to send a grace-period notice. This was an isolated issue outside of the procedural progression to any judgment specified in the notice of appeal.

¶ 27 Regardless, the dispute over the striking of the second affirmative defense comes down to a disagreement over when plaintiff instituted its action for foreclosure. Defendants argue that plaintiff filed its action on March 23, 2011, before they filed for bankruptcy on March 29, 2011.

As plaintiff argues, and as the record supports, it filed its action on August 17, 2011, almost five months after defendants filed for bankruptcy. Accordingly, even if the issue were properly

before us, plaintiff had no obligation to send defendants notice under section 15-1502.5 of the Code (735 ILCS 5/15-1502.5 (West 2010)).

¶ 28 b. Amended Third and Fourth Affirmative Defenses

¶ 29 Defendants argue that they pled their amended third and fourth affirmative defenses—

fraud in the inducement and equitable estoppel, respectively—with sufficient specificity and particularity. Regarding fraud in the inducement, defendants argue that they properly pled the defense by stating: they were led to believe that the appraiser of the Property was an independent contractor, not an employee of the mortgage broker’s office; plaintiff knew of this misrepresentation; plaintiff failed to disclose this conflict of interest; defendants trusted plaintiff despite not receiving a copy of the appraisal; and defendants were injured when they found out

that the Property was worth less than its appraised value. Regarding equitable estoppel, defendants reiterate the aforementioned allegations and additionally cite First Mortgage Co. v. Dina, 2014 IL App (2d) 130567, ¶ 25, to say that, where a public-policy reason supports voiding a mortgage, a technical flaw in the way a defendant raised a defense does not result in forfeiture of the defense.

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¶ 30 Plaintiff responds that defendants’ amended third and fourth affirmative defenses, as well as their counterclaim, were barred by the PAA. Moreover, plaintiff argues that the amended defenses were properly stricken for failure to meet the appropriate pleading standard.

¶ 31 We agree with plaintiff with respect to both the PAA and the sufficiency of defendants’ pleadings. The trial court took judicial notice of the PAA, which is a public document, and we

do so as well. See Country Cos. v. Universal Underwriters Insurance Co., 343 Ill. App. 3d 224, 229 (2003) (the appellate court may take judicial notice of public records regardless of whether the records were before the trial court). Article II, section 2.5, of the PAA reads:

“Borrower Claims. Notwithstanding anything to the contrary in this Agreement, any

liability associated with borrower claims for payment of or liability to any borrower for monetary relief, or that provide for any other form of relief to any borrower *** whether asserted affirmatively or defensively, related in any way to any loan or commitment to lend made by the Failed Bank prior to failure *** or otherwise arising in connection with the Failed Bank’s lending or loan purchase activities are specifically not assumed by the Assuming Bank.”

The “Failed Bank” here was Washington Mutual Bank, and the “Assuming Bank” was plaintiff.

¶ 32 The plain language of the PAA states that plaintiff did not assume any liability to defendants arising from their original loan with Washington Mutual Bank, including claims asserted defensively or affirmatively, and other courts have found that such language in a purchase and assumption agreement bars borrower claims against the purchasing bank. See

Baginski v. JP Morgan Chase Bank N.A., No. 11 C 6999, 2012 WL 5989295, at *5 (N.D. Ill.

Nov. 29, 2012) (section 2.5 of the purchase and assumption agreement between Chase and the FDIC broadly excluded borrower claims from the liabilities assumed by Chase, and thus

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borrower could not pursue a fraud claim against Chase that arose before Chase assumed the loan); see also Yeomalakis v. Federal Deposit Insurance Corp., 562 F.3d 56, 60 (1st Cir. 2009)

(plaintiff-borrower’s motion to substitute Chase as a party failed because the agreement Chase

signed with the FDIC when it acquired the relevant assets excluded assumption of liability for borrower claims). Defendants acquired their mortgage loan in June 2006, and plaintiff

purchased Washington Mutual Bank’s assets in September 2008. Defendants’ original third and fourth affirmative defenses were based on allegations of wrongdoing at the origination of the mortgage loan, and the amended affirmative defenses did not specify a time but instead referenced an unspecified “refinancing.” Given defendants’ sparse allegations, the record does not support that their claim for fraud or equitable estoppel arose, if at all, after the PAA.

Accordingly, the PAA bars defendants’ amended affirmative defenses from being asserted against plaintiff.

¶ 33 Moreover, we agree with plaintiff that the amended third and fourth affirmative defenses

were properly stricken because their allegations were conclusory. The amended third defense, fraud in the inducement, alleged:

“1. Defendants were current on their previous loan.

2. Defendants were approached by a mortgage broker to re-finance their home loan.

3. Another lender agreed to use said mortgage broker to lend money to

Defendants pursuant to a refinancing of their home.

4. Before closing, it became apparent to lender that the broker was also the appraiser of the new home loan.

5. Therefore there was a conflict of interest with this loan.

- 10 - 2015 IL App (2d) 140331 6. Defendants were never given a copy of their appraisal. 7. Broker also inflated Defendants’ assets. 8. Defendants are not fluent in English. 9. Due to said broker’s actions in creating this bogus lien, Plaintiff is estopped from enforcing their bogus lien. 10. Defendants specifically deny the deemed allegations of 735 ILCS 5/15- 1504(c)(1) and 735 ILCS 5/15-1504(c)(7).” ¶ 34 Fraud in the inducement is a form of common-law fraud. Lagen v. Balcor Co., 274 Ill. App. 3d 11, 17 (1995). The elements of fraud are: (1) a false statement of material fact; (2) knowledge or belief of the statement’s falsity; (3) intent to induce the plaintiff to act or refrain from action on the falsity of the statement; (4) the plaintiff reasonably relied on the false statement; and (5) damage from such reliance. Id. Moreover, there is “a high standard of specificity for pleading claims of fraud.” Janowiak v. Tiesi, 402 Ill. App. 3d 997, 1006 (2010). “A complaint for common-law fraud ‘must allege, with specificity and particularity, facts from which fraud is the necessary or probable inference, including what misrepresentations were made, when they were made, who made the misrepresentations and to whom they were made.’ ” Aasonn, LLC v. Delaney, 2011 IL App (2d) 101125, ¶ 28 (quoting Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 496-97 (1996)). “Conclusory allegations are insufficient.” Id. ¶ 35 Here, the allegations in the amended third affirmative defense were conclusory and thus properly stricken. Defendants did not specify what misrepresentations plaintiff made but stated only that the broker “inflated Defendants’ assets.” They did not specify what the appraised value of the Property or their assets was or what it should have been. They failed to name the broker and failed to state when the alleged misrepresentations took place. They hinted that they relied - 11 - 2015 IL App (2d) 140331 on the broker’s representations because they were not fluent in English, but such intimations do not comport with fraud’s heightened pleading standards. They finally failed to allege that the broker knew or believed that the alleged misrepresentations were false when she made them. ¶ 36 Turning to the amended fourth affirmative defense, equitable estoppel, its allegations were identical to those in the fraud-in-the-inducement defense. Equitable estoppel is an equitable doctrine “invoked to prevent fraud and injustice” (Carey v. City of Rockford, 134 Ill. App. 3d 217, 218 (1985)) “by precluding a party from benefiting from its own wrongdoing” (Tegeler v. Industrial Comm’n, 173 Ill. 2d 498, 505 (1996)). The elements of equitable estoppel are: “(1) the other person misrepresented or concealed material facts; (2) the other person knew at the time he or she made the representations that they were untrue; (3) the party claiming estoppel did not know that the representations were untrue when they were made and when they were acted upon; (4) the other person intended or reasonably expected that the party claiming estoppel would act upon the representations; (5) the party claiming estoppel reasonably relied upon the representations in good faith to his or her detriment; and (6) the party claiming estoppel would be prejudiced by his or her reliance on the representations if the other person is permitted to deny the truth thereof.” Geddes v. Mill Creek Country Club, Inc., 196 Ill. 2d 302, 313-14 (2001). For the same reasons that defendants failed to properly plead fraud, defendants failed to plead sufficient facts to demonstrate all the elements of equitable estoppel, including facts to demonstrate that the broker knew that the representations were untrue when they were made and that defendants did not. Moreover, defendants argue that, where a public-policy reason exists to void a mortgage, technical flaws in raising a defense should not forfeit the defense, but - 12 - 2015 IL App (2d) 140331 defendants have not identified any public-policy reason for voiding the mortgage, and we do not further consider this argument. ¶ 37 c. Counterclaim ¶ 38 We have already decided that defendants’ second affirmative defense is not properly before us because the notice of appeal did not specify the order striking it and the order was not a step in the procedural progression leading to a specified order. Likewise, defendants’ counterclaim is not properly before us. The trial court disposed of the counterclaim with prejudice in the same order that struck the second affirmative defense. The counterclaim also raised an isolated issue outside of the procedural progression to any specified order. The counterclaim, while based on allegations similar to those in the amended third and fourth affirmative defenses (primarily, the allegation that the broker was also the appraiser), was likewise unrelated to the ruling striking the amended affirmative defenses or to either of the other specified orders. ^[4] ¶ 39 Because the counterclaim is not properly before us, we need not consider whether defendants had standing to bring their counterclaim after filing for bankruptcy. ¶ 40 3. Motion for Summary Judgment