Page 26 - John Hundley 2010

In Napcor, seller’s agent represented that the building had a new roof and implied that the old roof
had been torn off. In fact, tearing off of the old roof had been recommended but the new roof was applied
over it, leaving the building subject to wind damage.
MERS’ Standing in Foreclosure Suit Is Approved

The Mortgage Electronic Registration System (MERS) has standing to foreclose on mortgages
assigned to it, a panel in the Appellate Court’s First District held December 3.
Rejecting arguments that MERS is not a proper plaintiff generally and that it had fatally misdescribed
its capacity in the complaint at issue, the court in Mortgage Electronic Registration Systems, Inc. v.
Barnes, __ Ill.App.3d __, 2010 WL 4967826 (1st Dist. 2010), said a foreclosure judgment and sale
secured by MERS could not be properly challenged.
In Barnes, MERS’ short-form foreclosure complaint pled that it was the mortgagee and legal holder of
the debt and did not expressly proceed as assignee or nominee. However, the court said that such
standing issues are affirmative defenses which must be timely raised by the defendant and Barnes had
not done so. Moreover, the court said, MERS met the legal definition of a mortgagee under § 15-1208 of
the Mortgage Foreclosure Law (735 ILCS 5/15-1208) – i.e., it was a “person designated or authorized to
act on behalf of [the] holder” of the mortgage.

Specific Performance Claim May Limit Damage Remedies

A prospective purchaser’s claim for specific performance of a real estate contract can limit his ability
to recover money damages for breach of that contract, the Appellate Court in Chicago held September 23.

In Mandel v. Hernandez, __ Ill.App.3d __, 936 N.E.2d 1079 (1st Dist. 2010), the plaintiff was a real
estate agent who sought both an order of specific performance and money compensation for alleged
profits lost due to the delay in his ability to resell the property. The court said that while money damages
incidental to a delay in performance may be awarded along with specific performance in some instances,
such an award was inappropriate where the alleged lost profits were not within the contemplation of the
defaulting party when the contract was made.
Mortgage’s Increased Interest Rate After Default Is Justified, Court Rules

A mortgage’s provision that the interest rate rises when the mortgage goes into default is enforceable,
another panel in the First District has ruled.
In Inland Bank & Trust v. Knight, 399 Ill.App.3d 378, 927 N.E.2d 777 (1st Dist. 2010), defendant had
pledged an apartment complex to the mortgagee in an agreement which provided that upon default the
interest rate would increase by 5 percentage points. When the lender foreclosed, the mortgagor sought to
defend by arguing that the clause was unenforceable as imposing a second delinquency charge under the
Illinois Interest Act (815 ILCS 205/4.1a(f)) and as a penalty under general Illinois law.
The court rejected both challenges. “In our view, default interest serves to balance the risk of lending
to a defaulted borrower” and hence the clause providing for same was not a penalty but in the nature of a
permissible liquidated-damages remedy, it said.

-- John T. Hundley, Jhundley@lotsharp.com, 618-242-0246
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