The Illinois Appellate Court Weighs in on the Intersection of Claims Under the Illinois Probate Act and the Illinois Mortgage Foreclosure Law

The Illinois Appellate Court Weighs in on the Intersection of Claims Under the Illinois Probate Act and the Illinois Mortgage Foreclosure Law


By: Blake A. Strautins, Managing Partner, and Susan Notarius, Associate

The Fourth District of the Illinois Appellate Court recently decided In Re Estate of Thomas F. Topal, 2022 IL App (4th) 210613, which is an important win for mortgagees attempting to foreclose on properties with deceased borrowers in Illinois. In the ruling, the appellate court clarified that mortgagees do not need to file a claim in probate proceedings for a deceased mortgagor in order to protect their secured interest unless they wish to pursue a deficiency judgment against the deceased mortgagor’s estate.  

The fact pattern at issue in Topal is a common one—the mortgagor died and the heirs did not open a probate estate. Topal died in 2017 and the mortgage was current at the time of his death and stayed current for more than 2 years. Topal’s heirs did not open a probate estate until October 2020, more than 2 years after his death. Because the mortgage payments continued to be made, the owner of the loan—Associated Bank—took no action to foreclose on the mortgage.

After opening the estate in 2020, the estate moved to bar all of Associated Bank’s claims and sought a release of the mortgage on the basis that Associated Bank’s claims were time barred under the statute of limitations in the Probate Act of 1975; 755 ILCS 5/18-12(b) provides that “all claims which could have been barred under this Section are, in any event, barred 2 years after decedent’s death, whether letters of office are issued upon the estate of the decedent.” Id. at §18-12(b). The estate took the position that because Illinois Supreme Court Rule 113(i), which is part of the Illinois Mortgage Foreclosure Law, requires an appointment of a special representative for a deceased borrower in a foreclosure action and because Associated Bank did not open the estate within the 2-year limitations period, the foreclosure claim was time barred. The lower court ruled in favor of the estate and ordered Associated Bank to release the mortgage.

The appellate court, however, reversed that ruling, holding that a mortgagee’s right to its secured interest in real property is different from the right to recover on a monetary claim from the estate. While the appellate court agreed with the lower courts’ decision that Associated Bank was time barred from seeking any personal deficiency judgment from the estate, it reversed the remainder of the ruling requiring Associated Bank to release its mortgage, holding that Associated Bank was not time barred from foreclosing its mortgage. In sum, the appellate court allowed Associated Bank’s mortgage to stand, meaning that it could foreclose on the mortgage in the event of a default.

Ultimately, the appellate court reversed what could have been a disastrous ruling for mortgagees in Illinois, which would have required them to actively pursue claims in probate proceedings for deceased borrowers, regardless of whether the mortgage is current or past due. Such a ruling would have caused chaos for mortgage lenders and note investors in Illinois. Thankfully, the Topal court got it right by holding that a secured mortgage can still be foreclosed outside of probate proceedings, regardless of whether a claim is timely made under the Probate Act. Nevertheless, this issue appears to be one of first impression in Illinois, and it will be interesting to see if other heirs attempt to argue that a foreclosure is time barred to another one of the appellate districts in an attempt to ultimately have the Illinois Supreme Court weigh in on the issue.