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It's settled--mortgage foreclosure actions are quasi in rem proceedings.

ABN AMRO Mortgage Group, Inc v McGahan, No. 107954, 2010 WL 2222126 (Ill Sup Ct 2010)

The Illinois Supreme Court in June upheld decisions of the Circuit Court of Cook County, finding that mortgage foreclosure actions are quasi in rem proceedings. The court held that "a mortgagee must name a personal representative for a deceased mortgagor in a mortgage foreclosure proceeding in order for the circuit court to acquire subject matter jurisdiction."

The case involves two cases, ABN AMRO Mortgage Group, Inc v McGahan and Charter One Bank v Hunter, which were consolidated on appeal. (For more, see LawPulse on page 394). The pertinent facts of each case are essentially the same. The mortgagees filed complaints for foreclosure in the Circuit Court of Cook County pursuant to the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq), only to later learn that the named mortgagors, McGahan and Hunter, died prior to filing the complaints. Since the mortgagees failed to name personal representatives for the deceased mortgagors, the circuit court dismissed the complaints for lack of subject-matter jurisdiction.

The appellate court reversed and remanded the circuit court's decision, finding that foreclosure actions "determine rights as against the whole world, not merely against certain individuals, and, therefore, logically are in rem actions." The appellate court held that "plaintiffs' failure to name a personal representative in the foreclosure action did not divest the circuit court of jurisdiction" over the matter.

Leave to appeal was granted by the Illinois Supreme Court. The supreme court reversed the appellate court decision and affirmed the circuit court opinion. The Illinois Supreme Court noted that the mortgagor is a "necessary party" in foreclosure proceedings. 735 ILCS 5/15-1501(a)(i). However, the Illinois Mortgage Foreclosure Law does not specify which procedure a mortgagee must follow or who must be named when the mortgagor is deceased. Normally, courts would look to the general rules of civil procedure to determine this question, but the question in this instance is dependent upon whether a foreclosure proceeding is characterized as in rem or quasi in rem.

To answer this question, the court distinguished in rem and quasi in rem proceedings. An in rem proceeding is one which is taken directly against property and, therefore, treats the property itself as defendant. While the owner may receive personal service, it is not necessary to name the owner in the complaint. A quasi in rem proceeding is "brought against the defendant personally, with jurisdiction based upon an interest in property, the objective being to deal with the particular property or to subject the property to the discharge of the claims asserted." Black's Law Dictionary 30 (7th ed 1999). Thus, the main difference between these proceedings is whether the defendant is the property or a named person. While prior decisions have classified foreclosure proceedings as both in rem and quasi in rem, the court in this case finally settled the law: foreclosure actions are quasi in rem proceedings.

The basis for its conclusion is that in a foreclosure action the proper defendant is the mortgagor, since it is his or her interest in the real estate that is the subject of a foreclosure action. Since a foreclosure action must be brought against a named defendant, it is best characterized as a quasi in rem proceeding. Furthermore, in foreclosure actions, the property is not the instrumentality of the wrong, nor is it independently responsible for the plaintiff's injury. Rather, it is the mortgagor's breach of contract that the mortgagee seeks to enforce in a foreclosure action. Thus, the complaint must name the mortgagor, or a personal representative, for a circuit court to have subject-matter jurisdiction. Any decision or statements in prior cases contrary to this holding are overruled.
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Title Annotation:cases: ILLINOIS SUPREME COURT
Author:Kaatz, Jeff
Publication:Illinois Bar Journal
Date:Aug 1, 2010
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