Illinois Circuit Court Dismisses Foreclosure Complaint Finding Failure Of Conditions Precedent Amp Statute Of Limitations Barred Action On The Note Amp Prevented Foreclosure


Last month in Cook County, Illinois, Judge Sullivan entered a lengthy memorandum opinion and order dismissing The Bank of New York’s (“BONY”) foreclosure complaint against mortgagor, Debbie Bartelstein, based on two findings: (1) BONY failed to strictly comply with conditions precedent and (2) the statute of limitations indirectly barred the foreclosure of Bartelstein’s mortgage. The Bank of New York, as Trustee, etc., v. Bartelstein, Case No. 2007 CH 38051 (Ill. Cir. Ct. Sept. 27, 2023).

In October 2006 Bartelstein signed a promissory note for $512,800 and a purchase money mortgage which was secured by property located in Glencoe, Illinois (“the Property”).[i] Less than a year later she “allegedly” defaulted by failing to make her monthly payment. BONY sent a presuit demand and acceleration letter on September 17, 2007, advising Bartelstein that she must cure the default by October 17, 2007, or BONY would accelerate the loan and initiate foreclosure proceedings. After expiration of the demand letter, BONY filed a single-count complaint for foreclosure in December 2007. BONY later amended the complaint (to attach a copy of the note) and in June 2009 Bartelstein answered the complaint and asserted three affirmative defenses (which the court did not identify).[ii]

It is an understatement to say the foreclosure proceedings were delayed. Judge Sullivan even noted at the start of his opinion that this case, spanning nearly 16 years, was the oldest on his docket by two years.[iii] Finally, in December 2019 both BONY and Bartelstein moved for summary judgment. Notably, Bartelstein raised two new affirmative defenses in her summary judgment motion which she had not previously pled, namely, that: (1) BONY failed to strictly comply with conditions precedent; and (2) The statute of limitations barred an action on the note which prevented an action to foreclose the mortgage.[iv]

Due to various delays, Judge Sullivan did not hear both summary judgment motions until February 7, 2023.[v] The court struck Bartelstein’s new defenses but denied BONY’s summary judgment based on a factual dispute as to BONY’s standing. Both parties moved for reconsideration. Based on an exception[vi] to the general pleading requirements, Judge Sullivan granted Bartelstein’s rehearing motion and held that her affirmative defenses based on failure of conditions precedent and the statute of limitations would stand. Bartelstein then moved for summary judgment on those defenses and BONY cross-motioned for summary judgment.[vii]

As a preliminary matter, the court explained that Bartelstein was permitted to raise the unpled affirmative defenses for the first time in her summary judgment motion because BONY had more than three years to prepare its arguments in response to the summary judgment motion, providing “ample time and opportunity to answer them.”[viii] The court proceeded to evaluate each defense and concluded that there was merit to both.[ix] Because BONY’s demand letter provided only that Bartelstein could “cure the default” rather than “reinstate the mortgage” after acceleration, the court found the notice to be substantively defective and a bar to foreclosure.[x] The court elaborated that under Illinois’ strict compliance requirements, the court was required to enforce the unambiguous provisions of the mortgage which explicitly differentiated between the right to cure and the right to reinstate. Because the demand letter did not inform Bartelstein that she could reinstate the loan after acceleration, the letter failed to provide the notice required by the mortgage.

The court also found merit in Bartelstein’s statute of limitations[xi] defense. Bartelstein argued that the demand letter which indicated the mortgage would be accelerated if the default was not cured by October 17, 2007, triggered the statute of limitations and barred an action on the note if not filed before October 17, 2017.[xii]  The court concluded that since BONY failed to file an action on the note within that time the Note was “deemed unenforceable by operation of law…” Connecting the dots based on several very old Illinois cases dating back to 1866, the court then explained that Illinois law precluded a plaintiff from foreclosing a mortgage if an action on the underlying debt was procedurally prohibited.[xiii] The court reasoned, quoting a case from 1878, that “the existence of the debt…is essential to the life of the mortgage” and “when the debt is paid, discharged, released, or barred by the statute of limitations (***) the mortgage is gone and has effect no longer.”[xiv]

The court granted Bartelstein’s summary judgment motion and dismissed BONY’s amended foreclosure complaint with prejudice. The court also declared the $512,800 note extinguished and unenforceable and ordered BONY to record a release of the mortgage within 30 days. The take-away from this case is to beware of pertinent statutes of limitation and when in doubt, include a count to enforce the note. Obviously, for cases that have already been delayed due to extensive litigation or COVID-19 related delays, counsel will need to think outside the box for a solution.

[i] Bartelstein, at 2-3. Future references and citations to this case are to this citation until indicated otherwise.

[ii] Bartelstein, at 3-4.

[iii] Bartelstein, at 2.

[iv] Bartelstein, at 4-5.

[v] Bartelstein, at 5. Future references and citations to this case are to this citation until indicated otherwise.

[vi] The court relied on Hawkins v. Chicago Comm’n on Hum. Rels., 2020 IL App (1st) 191301, ¶ 29, 171 N.E.3d 21, 23 and Falcon Funding, LLC v. City of Elgin, 399 Ill. App. 3d 142, 156 (2d Dist. 2010). In both cases the court concluded that defenses raised for the first time in a summary judgment motion could be considered if the plaintiff had ample time to respond to the defenses.

[vii] Bartelstein, at 8. Future references and citations to this case are to this citation until indicated otherwise.

[viii] Bartelstein, at 9-10.

[ix] Bartelstein, at 8.

[x] Bartelstein, at 30-32. Future references and citations to this case are to this citation until indicated otherwise.

[xi] Bartelstein relied on 735 ILCS5/13-206 which “imposed a ten-year statue of limitations period for a suit to be brought after a cause of action on a promissory note…” Bartelstein, at 33.

[xii] Bartelstein, at 34. Future references and citations to this case are to this citation until indicated otherwise.

[xiii] Bartelstein, at 35-36.

[xiv] Bartelstein, at 36 (quoting Emory v. Keighan, 88 Ill. 482, 485 (1878)).