ILLINOIS’ FIRST DISTRICT REVERSES JUDGMENT WHICH WOULD HAVE NULLIFIED $500K MORTGAGE

Last month the Second Division of Illinois’ First District reversed a summary judgment entered in favor of the borrower in Bank of New York Mellon’s (“BONY”) mortgage foreclosure action. Bank of N.Y. Mellon v. Bartelstein, 2026 IL App (1st) 242136, ¶ 3, 4. Had the Court affirmed the judgment for the borrower, BONY’s $512,800 note and mortgage would have been rendered unenforceable by operation of law.i

In October 2006 Bartelstein executed a 30-year note and mortgage in favor of Guaranteed Rate, Incorporated, (“Guaranteed” or “Lender”) secured by property located in Glencoe, Illinois.ii Bartelstein stopped making payments less than a year later and the loan servicer sent a demand letter on September 17, 2007, requiring Bartelstein to pay $10,623.82 within 30 days to avoid foreclosure.iii Bartelstein failed to cure the default.

Sometime prior to 2008, Guaranteed assigned the loan to BONY and on December 24, 2007, BONY initiated foreclosure proceedings against Bartelstein.iv The foreclosure complaint included a demand for a deficiency judgment.v Bartelstein answered the complaint “denying the substance of the allegations” and asserted as affirmative defenses that BONY lacked standing and failed to comply with the face-to-face meeting requirement.vi After significant delays, caused in part by COVID-19, Bartelstein moved for summary judgment in December 2019 and BONY filed its cross-motion for summary judgment in August 2022.vii

In support of summary judgment, Bartelstein argued that the 10-year statute of limitations for enforcement of a note had now expired since the limitations period started on September 17, 2007, when BONY mailed the demand letter.viii Consequently, Bartelstein argued, because BONY could no longer enforce the note “the mortgage lien was extinguished by operation of law.”ix Bartelstein also argued that BONY failed to satisfy conditions precedent because BONY’s demand notice failed to strictly comply with paragraph 22 of the mortgage.x

In response to Bartelstein’s motion, BONY asserted that Bartelstein waived statute of limitations and failure of conditions precedent by raising them for the first time in a summary judgment motion rather than pleading them as affirmative defenses.xi Although the court agreed with BONY and struck Bartelstein’s defenses, the court denied both parties’ summary judgment motions finding there to be a genuine dispute on whether BONY was the note holder.xii Both parties sought reconsideration.xiii

On reconsideration, Bartelstein argued that BONY failed to allege any surprise or prejudice based on the unpled defenses and further argued that BONY had “ample time to respond” to Bartelstein’s summary judgment motion.xiv The trial court agreed, reinstated the defenses and granted reconsideration to Bartelstein while denying BONY’s motion for reconsideration.xv The court set a hearing for August 15, 2023, to reconsider Bartelstein’s motion for summary judgment.xvi

The hearing took over two hours, after which the court took the matter under advisement.xvii The following month the court entered a “48-page written opinion” granting Bartelstein’s motion for summary judgment. The court found BONY failed to strictly comply with conditions precedent because the demand notice only advised Bartelstein of her right to cure the default, not of her right to reinstate the mortgage after acceleration.

Additionally, the court rejected BONY’s argument that the foreclosure complaint seeking a deficiency judgment eliminated the need for a separate action on the note. The court held that the 10-year statute of limitations for bringing an action on the note had run rendering the note and mortgage unenforceable by operation of law.xviii The court denied BONY’s subsequent motion for reconsideration and BONY appealed the trial court’s adverse orders.xix For purposes of this article, our focus will be the order which granted Bartelstein’s summary judgment.

BONY raised two primary arguments on appeal. Firstly, BONY argued that its demand notice strictly complied with the mortgage requirements and any perceived deficiency was technical and did not prejudice Bartelstein.xx The First District agreed and explained that BONY was not required to “repeat verbatim the language of the mortgage” to satisfy conditions precedent.xxi The Court elaborated that as long as the notice “accurately describes the substance of the mortgage and the only discrepancies are technical” conditions precedent are satisfied absent a showing of prejudice. The Court concluded summary judgment should not have been granted in favor of Bartelstein on this issue.

Secondly, BONY argued that the foreclosure action which included a demand for a deficiency judgment was the equivalent of bringing an action under the note, so the statute of limitations had not run because the foreclosure action was brought within ten years of acceleration. xxii The First District agreed, finding there was no need for a separate action on the note and agreeing that BONY’s foreclosure complaint was filed within the limitations xxiii period.” The Court reversed the summary judgment, vacated the order granting Bartelstein’s attorneys’ fees and remanded the matter for further proceedings.xxiv

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1. Last month the Second Division of Illinois’ First District reversed a summary judgment entered in favor of the borrower in Bank of New York Mellon’s (“BONY”) mortgage foreclosure action. Bank of N.Y. Mellon v. Bartelstein, 2026 IL App (1st) 242136, ¶ 3, 4. Had the Court affirmed the judgment for the borrower, BONY’s $512,800 note and mortgage would have been rendered unenforceable by operation of law.

2. At the trial level Bartelstein successfully argued on summary judgment that BONY failed to strictly comply with conditions precedent by failing to use the exact language of the mortgage in its demand letter. The trial court also agreed with Bartelstein’s argument that BONY was required to file both a foreclosure action and an action on the note and BONY’s failure to file the latter within the 10-year statute of limitations rendered the note and mortgage unenforceable by operation of law. The trial court entered summary judgment in Bartelstein’s favor and dismissed the foreclosure action. BONY appealed.

3. On appeal the First District agreed with BONY that the demand notice was not required to “repeat verbatim the language of the mortgage” to satisfy conditions precedent. Rather, as long as the notice “accurately describes the substance of the mortgage and the only discrepancies are technical” conditions precedent are satisfied absent a showing of prejudice.

4. Likewise, the Court held BONY timely filed its foreclosure action within the limitations period and BONY was not required to file a separate action on the note because the foreclosure complaint included a demand for a deficiency judgment. The Court reversed the summary judgment, vacated the order granting Bartelstein’s attorneys’ fees and remanded the matter for further proceedings.

I Bartelstein, at ¶ 20.

ii Bartelstein, at ¶ 3, 4.

iii Bartelstein, at ¶ 7.

iv Bartelstein, at ¶ 4, 8.

v Bartelstein, at ¶ 8.

vi Bartelstein, at ¶ 9.

vii Bartelstein, at ¶ 12, 13.

viii Bartelstein, at ¶ 12, 14.

ix Bartelstein, at ¶ 14, 16.

x Bartelstein, at ¶ 12.

xi Bartelstein, at ¶ 12.

xii Bartelstein, at ¶ 13, 15.

xiii Bartelstein, at ¶16-17.

xiv Bartelstein, at ¶ 16.

xv Bartelstein, at ¶ 18.

xvi Bartelstein, at ¶ 18-19.

xvii Bartelstein, at ¶ 19. Future references are to this citation until indicated otherwise.

xviii Bartelstein, at ¶ 20.

xix Bartelstein, at ¶ 21.

xx Bartelstein, at ¶ 30. Future references are to this citation until indicated otherwise.

xxi Bartelstein, at ¶ 42. Future references are to this citation until indicated otherwise.

xxii Bartelstein, at ¶ 47.

xxiii Bartelstein, at ¶ 58-59. The Court relied heavily on the Illinois Supreme Court’s holding in First Midwest Bank v. Cobo, 2018 IL 123038, ¶ 20, 429 Ill. Dec. 416, 421, 124 N.E.3d 926, 931.

xxiv Bartelstein, at ¶ 64.

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