Concord Air, Inc. v. Marcin Malarz, et. al.

Jun 30, 2015

OUTCOME: Favorable, reversed and remanded

The case further solidified the importance of proper service of process on a party defendant to a lawsuit. Service of process is a fundamental right afforded to both individuals and companies, and nec ... essitates that all defendants be provided proper notice of a suit in order for a court to properly have jurisdiction over the parties. Under certain circumstances, however, Section 2-206 of the Illinois Code of Civil Procedure allows for notice to be effectuated through a newspaper publication where the action is pending. In order for a court to allow service to be performed by publication, a plaintiff, or his or her attorney, must file an affidavit with the court showing that on due inquiry the defendant cannot be found. Publication service is the least suggested method for effectuating service of process in Illinois and is reviewed under a standard of strict scrutiny. In the case, a junior mortgage lender and had a nearly $1 million second mortgage on a piece of property. The borrower defaulted on his obligations, and the primary mortgage lender filed foreclosure proceedings against the property and named the appellant in order to wipe out its substantial interest on the property. In order to effectuate service upon the appellant , the primary mortgage lender utilized publication service and the property was eventually sold to a subsequent Purchaser after a foreclosure auction. Thereafter, Concord Air learned of the proceeding and immediately moved to vacate the judgment and vacate the sale of the property in order to assert its nearly $1 million interest. Remarkably, the trial court judge vacated the judgment, but refused to vacate the sale. This decision resulted in the peculiar circumstance where the Purchaser remained the owner of the property and its nearly $1 million mortgage reverted. At that time, Concord Air filed its own foreclosure action against the property and the Purchaser asserted the defense of Bona Fide Purchaser (“BFP”) status. Under Illinois Law, a subsequent purchaser can assert a BFP argument if it took a piece of property: (1) for value, and (2) without notice of the outstanding interest of the asserting party. The trial court agreed with the Purchaser’s BFP argument and the trial court’s decision was appealed. On Appeal, it was argued that the Purchaser could not have successfully asserted a BFP argument, because the Purchaser had inquiry notice that service of process on his Client may have been improper. Generally, in order for a Purchaser to have inquiry notice, there must have been something in the original foreclosure record that would have pointed the Purchaser to the fact that service on a defendant was improper. The case makes clear that procedural due process is a fundamental right that must be afforded to all defendants in a lawsuit, and the failure of which can have drastic consequences for both the original litigating parties and a subsequent purchaser who fails to conduct adequate due diligence. http://www.illinoiscourts.gov/Opinions/AppellateCourt/2015/2ndDistrict/2140639.pdf