GMAC Mortgage, LLC v. Arrigo (IL)

Summary: Under 735 ILCS 5/12–901, the spouse of a titleholder, who is not on title to the property but maintains the property as her primary place of residence, cannot claim a homestead exemption.

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GMAC Mortgage, LLC v. Arrigo, 2014 IL App (2d) 130938, rehearing denied.


Facts: In 2003, Nicholas Arrigo, defendant, purchased property with a purchase-money mortgage from First Home Mortgage. He refinanced in 2004 and again in 2009 with Guaranteed Rate Inc., which later assigned the note to GMAC. Nicholas eventually defaulted on his loan obligations, and GMAC subsequently filed a mortgage foreclosure complaint against Nicholas and his wife Lina Arrigo, as defendants. In their amended complaint, GMAC alleged that Nicholas waived his homestead exemption. The Arrigos answered, arguing in part that Lina was not present at the closing and never received or signed a waiver of homestead rights.


The Arrigos then filed a counterclaim for partition, and further alleged that the property was Lina’s primary residence and that she possessed homestead rights. GMAC moved to strike and dismiss the Arrigos’ affirmative defenses and counterclaims, arguing that a spouse could not claim the statutory homestead exemption under 735 ILCS 5/12–901 when the spouse had no interest in or formalized possession of the home.


The trial court denied GMAC's motion, relying on Brod v. Brod, 390 Ill. 312, 61 N.E.2d 675 (1945), and interpreting its holding as dictating that a spouse's interest need not be formalized. However, the trial court also acknowledged that recent federal cases interpreting Illinois law supported GMAC's position. The trial court decided to certify the question of, “Whether a spouse may claim her homestead exemption when that spouse is not on title to the property but is the spouse of the title holder and maintains the property as her primary place of residence" under 735 ILCS 5/12–901, the homestead exemption statute at issue. The appellate court granted GMAC's application for leave to appeal and to answer the trial court's certified question.


Holding: Certified Question Answered – Negative. On appeal, GMAC argued that Lina held no ownership interest in the property and so did not have a homestead exemption. GMAC also argued that Brod, the Illinois Supreme Court case upon which the trial court centered its holding, was factually and legally distinguishable and based on antiquated law.


The appellate court began by stating that "[e]states of homestead are statutory creations" and are liberally construed. The burden of proving the existence of homestead is on the individual asserting it. Based on the statutory language, to qualify for the exemption, “an 'individual' must (1) occupy the property 'as a residence'; and (2) have some right in the property ('owned or rightly possessed by lease or otherwise').” It was undisputed that Lina was an individual who occupied the property in question as a residence. It was also undisputed that she neither leased nor owned it. Therefore, the issue was whether Lina “otherwise” rightly possessed the property, because the phrase in the statute "or otherwise" could encompass a range of similar or dissimilar possessory interests.


The appellate court could not reconcile the inconsistencies in the statutory language and turned to case law. First, In re Belcher, 551 F.3d 688 (7th Cir. 2008), a bankruptcy case, the court held that the husband could not claim the homestead exemption "where his name was not on the title and he did not have any other formalized interest in the property." Next, the court concluded that Brod was distinguishable because the couple in that case owned the property as joint tenants. Further, the case involved a dispute between a husband and a wife and not a couple against a creditor, and the case did not center on 735 ILCS 5/12–901. The court further held that section 16 of the Rights of Married Persons Act did not create a right in a particular property, and section 27 of the Conveyances Act presumed a right of homestead and did not create one. Additionally, the court’s conclusions, “[did] not run afoul of [reading the statute harmoniously so that no provisions were rendered inoperative],” nor did they fail to liberally construe the statute as required. The court found that the sections the defendants relied upon addressed different rights and procedures and did not touch upon the exemption that was addressed in section 12-901 of the Code.


Therefore, because there was appellate court authority for the proposition that possession alone was insufficient to allow a nontitled spouse to claim a homestead exemption in 735 ILCS 5/12–901 and because of recent persuasive federal case law, the court reasoned that each person seeking to claim an exemption must have a sufficient interest in the property. This sufficient interest had to be more than mere possession.


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By: ATG Underwriting Department | Posted on: Fri, 11/21/2014 - 12:58pm