# Oral argument — Payne v. PNC Bank, National Ass'n > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/argument%3A92848 ## Record - **Collection:** Oral argument - **Document type:** Oral argument - **Published:** July 9, 2024 ## Text Bank, PNC Bank, PNC Bank, PNC Bank, National Ass'n Bank, PNC Bank, PNC Bank, PNC Bank, PNC Bank, PNC Bank, National Ass'n Bank, PNC Bank, PNC Bank, PNC Bank, PNC Bank, PNC Bank, PNC Bank, PNC Bank, National Ass'n Bank, PNC Bank, PNC Bank, PNC Bank, PNC Bank, Tina and William Payne. Okay, I'm sure that you've read everything that was submitted regarding the facts of this case, and I just want to go over a few points that we think are critical for you to consider. In 2004, the Paynes sought to renovate their home. They had two options at the time. One was to add a second floor, and the other one was just to add rooms to the first floor. Based on Defendant Lovell and Shriver's appraised value of the home being $1.8 million, with the renovations of adding the second floor, the Paynes had the second floor added, and the C&C approved the loan to them in the amount of $1.4 million to carry out the renovations. The Paynes had been getting a copy... Do you recall what was the collateral that was pledged for the loan? Was it simply a mortgage on the house, or was there other collateral? That was the only collateral. That was the home, and the issue is the value of the home was never $1.8 million. So they were always going to be underwater with this mortgage. Do we know what the value should have been in going back to that time period? What should the house have been appraised at? Like we're saying, with the second floor addition. This is the appraiser's opinion of what it would be when the second floor was done. When should it have been done? I think we can figure that out with forensic appraisers. We can go back and see what the appraised value was. That's just other opinions, right? No, we're not just an opinion. We don't think it's an opinion, and I think what's critical is the question is, are we willing to hold appraisers and banks liable when they don't follow established regulations and guidelines? That sounds like negligence, right? That sounds like professional negligence, appraisal malpractice, not fraud. Well, we think it's fraud, and we think we've... Okay, so is it your position, and if it is, where are the complaints? Is it alleged that the appraisers knew that the appraisals were false? We allege that they did not follow USPAP guidelines, and let me tell you what that is. So in this case, we allege that the appraisal failed to comply with USPAP guidelines. USPAP stands for Uniform Standards of Professionals. Let me just interrupt there. But to have fraud claim, you have to make a knowing mistake. There's an element of scientry, right? So the appraisers could be negligent. They could violate certain standards, and that could be, I suppose, circumstantial proof that they knew that the... But are you alleging that they knew that the appraisals were false at the time that they made them? They knew, or they should have known, because they didn't follow the guidelines. Okay. And I was not aware of USPAP guidelines, and I bought homes. But in this case, I just wanted to let you know what the USPAP is. It's a set of ethical and performance standards for the appraisal profession in the United States. It was developed and copyrighted by the Appraisal Foundation in 1987 and adopted by Congress in 1989. USPAP applies to all types of appraisal services, including real estate, personal property, business, and mass appraisals. And the purpose of the USPAP guidelines is to ensure the reliability and credibility of appraisals. Okay. So is that what you're saying, that they learned in 2017 was that the guidelines weren't followed in 2004 and 2005 when these appraisals were put together? That's what we're saying. So when they met with the new appraiser, whose name, I'm sorry, answers KP, in 2017, that's when they learned, oh, these appraisals did not follow the guidelines. Exactly. That's what we're saying. And we're saying that the guidelines are there to ensure the reliability and credibility. They're there to protect the public. They're there to protect the consumer. So in this case, we alleged that you don't even have, and you would agree that there's no negligence claim against the appraisers. They don't have a duty to you that gives rise to a negligence claim. I understand you have one against the bank, but you have no negligence claim against them. Correct? Correct. And you agree with that. Right. We all agree with that. Right. We do agree with that. We do have a negligence claim against P&C. So in this case, we allege that the appraisals violated USP guidelines, and that the comparator properties were farther away than they should have been, and that the sales that they used were older than they should have been. And this case is unusual because usually the appraisal falls short, and the homeowner does not get the loan. Usually the bank wants to ensure that there's adequate collateral. But that's not always the case. In Gowdy v. Countrywide home loans, the bank made that same argument that the plaintiff's claim of appraisal fraud made no sense because the bank had no incentive to inflate the appraised value of the plaintiff's property. However, the court in Gowdy stated, putting appraisals completely in the hands of lenders may sound like a good idea because it is supposed to be the lenders who are putting their money at risk in a home loan. I'd like to ask you about paragraph 69 of your complaint. Sure. You alleged defendants knew that the appraised value was inflated and false. What facts? That's a legal conclusion, right? That seems to comport with an element that's required to state a fraud claim. But what facts do you have as to scientific evidence? That they didn't follow the guidelines. They are making up comparative properties. We have guidelines that they're supposed to follow. They're not following the guidelines. And if they followed the guidelines, they would know that the house was never worth $1.8 million. And I do want to point out that sometimes a homeowner wants to make additions to the house in excess of the value, appraised value. For example, I worked for a firm where there were lottery winners in Roseland. They won the lottery. They wanted to do improvements of their home. But they knew and understood that even though they made millions of dollars worth of improvements, the value of their home wasn't going to change significantly. And they knew that, and the appraised value came in at what it was. It wasn't inflated. This is different. Okay. In paragraph 77, you allege defendants agreed upon a minimum value or range of value in advance of the appraisals being performed. So what fact? I guess that's a fact. But could you speak a little bit about that? Defendants agreed upon a minimum. Were they in a room together? So that's PMC and Cheryl. Right. Now, this goes to the conspiracy to commit fraud. Are we in a room with them? No. And I believe the courts do say that we can't plead on information and belief. But the thing is, we have two different appraisals coming in at $1.8 million. What are the odds that you're going to get two appraisals for the exact same amount of money? And so we can draw inferences that how do, and this rarely happens, that an appraiser would come in at the exact same amount of the loan amount that is needed. So we can draw inferences, Your Honors, that this is what happened. Well, I'm sorry. Go ahead. This wasn't the loan amount originally. I mean, they went, they originally got a lower loan amount, and later they upped it. Based on the appraised value of the home being $1.8 million with the renovation. So two appraisers might come in at $1.8 million if they were collusive. Or two appraisals might actually come in at $1.8 million because that action would reflect the market at the time. Well, we're saying that that home was never appraised for anywhere near that. Even as late as spring of 2022, the appraised value of the home was $870,000. Well, it's 2022. We're in a different world. Let's say 07-08. Everyone's home is in a different value. How can we say what it's being appraised at in 22 reflects that in 04-05? As I said before, we can bring in forensic appraisals to show what were the comparators, what should the home have appraised for, and we've alleged that. We've alleged that. So Sheryl and LaValle give an opinion and say, this is what it's going to be worth when the second-floor renovations, there's renovations of different styles, but the second-floor renovations, if you do this second-story renovation, it'll be worth $1.8 million. That's what we believe it's going to be worth. But it's more than an opinion. And we believe that it's more than an opinion because courts have held that appraisals can be the basis of liability, and we say Sure, because appraisers are in the business of giving opinions, and if they give a knowingly false opinion, it's actual. And that's what we're saying because they didn't follow the guidelines. And at this point, we're just trying to establish a cause of action, right? Right. And we are asking to be able to do that. This purchase, and for any homeowner, represents the single most valuable thing that they will ever invest in. And for PNC to say, because the plaintiff is a doctor and is not really concerned about the actual value of the home, does a real disservice to them. And we know from discoveries taken from the earlier federal case that this was their consideration. They knew. PNC knew at the time that there was an issue with the home providing adequate collateral for the loan. But they went ahead and said, Oh, we'll approve it because he can make the payment. Well, is there some specific facts that you learned in the federal case that can you be more specific as to where it is in your complaint? We allege this. We allege that the plaintiffs have pled and that defendants took affirmative steps to hide the fraud. I mean, I guess there's three different possibilities. One is the home really was worth that. Two is it wasn't, but there was no knowing fraud in appraising it as that. And the third, and what your, I think, complaint lies and falls on, is they knowingly put out a number that they knew was wrong. And that's what we're alleging. We state that the defendants did not disclose that PNC did not believe that the home provided sufficient collateral. That is from the discovery. There's something in the discovery that's not specifically alleged in your complaint that said PNC knew, was concerned, had expressed concern this collateral might not be sufficient. Is that what you're saying? Yes, we do say that in the complaint. I'm positive that really gives rise to an inference of fraud. A lender, obviously, is going to scrutinize a transaction with someone like me, with a very modest income, versus some of what aren't, right? We know this was a Donald Trump case. It was a case that was registered with Len Trump, whatever he wanted to be, because he was a good business man. Well, we're saying that appraisal should have been accurate, like the Roseland case, like our case with the people in Roseland who won the lottery. Just being accurate is appraisal, so the homeowner knows what they're getting into. But they're accurate to the extent that they can say, well, you're proposing this second floor addition. If you do this second floor addition, this is what we estimate the value of the house would be. Not the value of the house as additions now, prior to the addition. It's post-addition. Right, and we're saying that even post-addition, that the value of that house was never $1.8 million. It's always been underwater. It's the risk that the homeowner takes. Like your Roseland case. If you want to over-improve your property, that's a risk that you take. The bank's not there to say, ah, I think you really shouldn't put in the high-end appliances. Well, with the Roseland example, the appraisals were always accurate, so the homeowners knew what the value of their home was. In this case, the appraisers and the bank said the value of the home was $1.8. It was never $1.8. And they didn't know this. Part of your complaint is that they didn't know this until 2017. When they meet with the- 2018. Well, I put in this January of 2018. So there's an open question, right? Is it 2017? Is it 2018? Or there's discussion about that they're trying to refinance as early as 2010. Right. Well, right, immediately after, or some time after, they're immediately trying to refinance. Which is to say that they know this value isn't there. Well, I think that's an issue of fact as to when you know that there's an issue. We're saying that they were never given any written indication, and we believe that this is similar to what the court held in Smith v. Cook County Hospital. So in June of 2022- Hold on. When you say no written indication, what does no written indication mean? They never put in writing that the home did not provide adequate collateral. But the paragraph 37 says plaintiffs were given a copy of the defendant's appraisal. The defendant would have the appraisal and believe the value of the home would be $1.8 million with improvement. Right. So they were given some writing. They were never given a writing that explained the reason why the bank declined to refinance the property. Right. They were never told that they were under water. They were never told that the appraisals didn't comply with U.S. PAT standards, that the comparative properties that the appraisals used were inadequate because of the time and the distance used. And in June of 2022, the plaintiffs had a conversation with PNC because they're constantly trying to refinance. The bank says, we're going to put in writing what happened. They never do that, but they do say your home doesn't provide sufficient collateral for the loan. That's why we can't refinance. And what we're saying is because they had never put that into writing, that the PNC bank would tell that information and they should have provided that information like they said they were going to provide it in June of 2022. And this is similar to what the court found in Smith v. Cook County Hospital, where the failure to provide information could be evidence of fraudulent concealment. So we're saying that the bank should have told them that your home doesn't provide sufficient collateral. They should have told them that in 2022 their home did not. No, they should have told them. Well, they never should have told them that their home value had $1.8 million based on these appraisals. They never should have done that. So what we're saying is that we know that they could have put it in writing because they offered to do that in June of 2022. They didn't do that, but they did tell them your home doesn't provide sufficient collateral. That's the issue. So that was the first time we knew that the bank admitted that there was insufficient collateral for the home loan, and that's why they couldn't refinance the home. So we believe that we have sufficiently pled a cause of action for common law fraud, deception under the Illinois Commercial Deceptive Practice Act, and conspiracy. Conspiracy. And negligence. I'm not sure where I am. Well, before you go next time, let me ask you about two other things. First, you did not ask to re-plead. I think it's a little unclear. Ms. Tromko seems to have thought that she dismissed it with prejudice, I think. And, you know, do you have any objection to that, or do you believe that you should have been allowed to re-plead? Well, we knew that our due process rights were violated when Judge Katherine Schneider abruptly dismissed Plaintiff's complaint with prejudice without Plaintiff's knowledge that she had been reassigned to the case. But getting past the fact that it's Judge Schneider that was assigned to it, the question is you didn't ask to file a nomenic complaint. Well, by that time, it had already been dismissed with prejudice. Okay. And by operation of the rule for substitution of judge, we couldn't... I think I got to send a question just like this. Okay. Substitution question. Okay. You're not complaining on appeal, oh, the complaint shouldn't have been dismissed. You're defending the adequacy of the complaint that you filed. You're not saying, oh, you should have been given a chance to cure these supposed defects. Well, we would have taken an opportunity to cure the alleged defects had we been given an opportunity to. But as you stand here now, there are no more facts. You're not aware of any more facts you could possibly have. But you spread everything you could, right, in the complaint that you filed. I believe so. I believe so, but we do believe that our due process rights were violated, and... Well, with regard to that, when a judge is assigned to a new calendar, there's an order that's published. It's published typically in the law that's assigning a judge to a particular calendar. And there would be a docket entry. You don't suggest that there was never a docket entry indicating that Judge Schneider took over. Fair. I have reviewed the record on appeal. I am not aware of it. I'm not aware to you that in general publication, either in the law bulletin or, you know, if you go to... Sure. That's right. The website has all of them. It's put in the law bulletin. It's blocked by a new judge's assignment calendar. They wouldn't assign any Judge Schneider from you. You just never got... Your argument is that you didn't get a specific notice saying, hey, pardon me, in this case, there's a new judge assigned to this calendar. And you should know it wasn't Schneider that was trying to do it. Right. No, we did not get notification. And the first time that we got notification was the dismissal. She gets that dismissal. Did you then fill out a motion saying, hey, wait a minute, we never knew. We were never given notice that we had a new judge. Had we been given notice, we would have exercised our right to change. By operation of the rule. And the rule is, if the judge has made a substantive ruling, then you can't file your motion for SOJ. So by operation of that rule, we were prevented from doing so. That was our interpretation of what the rule is. So at that point, we filed our appeal, basically. But we believe that that is a substantial right, the right to SOJ. Okay. What would the remedy be at this point for us to do if we agreed with you? We believe it should be remanded. Assigned to a different judge? Assigned to a different judge. Well, we should be given a right to exercise our SOJ right. And we should have a right to have a judge hear the case. But it's not through ruling and philosophy of a substantive ruling. I mean, you correctly say the rule says you have to bring a motion before there's a substantive ruling. And that's why you didn't bring a motion to reconsider. Okay. Well, then that ship has sailed, right? We can't unbring the bow. Well, she still made a substantive ruling before you interposed that motion for substitution. Okay. Well, I think the remedy is to remand and allow us to exercise our right to SOJ. It is a substantive right, and we were prevented from doing so in this case. And allow you to amend the complaint or proceed on the complaint as filed? Well, we would ask to amend, but I don't know if we would amend the complaint, but it certainly is an issue that we were not allowed to exercise our right to SOJ. And I think we should be allowed to remand. We can't, obviously, do it with Judge Katherine H. Schneider because she has already made a substantive ruling. So, we remand back to the courts, not all the time, but we remand back to the courts and direct the judge to reconsider their earlier ruling? That's not to say that if we remand it back, it can't go back to that judge, right? I guess that's possible. But in this case, we're saying that our substantive right for SOJ was violated. Well, doesn't that necessarily mean that we must agree with you on a personal basis and say that you stated a viable cause of action? Doesn't it? Well, that's correct, and we believe we have stated a viable cause of action. Well, okay. So, if you're right on that, then you're going to remand anyway. So, there's really no prejudice on the failure to exercise the SOJ. Well, I'm not sure how we're going to rule, but we would say that we have established a cause of action for fraud. We feel that we have alleged that the defendants have concealed, took affirmative acts to conceal what the fraud was. We've alleged that defendants did not give the Shiloh appraisal to plaintiffs. We've alleged that defendants did not tell the plaintiffs that the appraisals were incorrect. We've alleged that defendants did not tell the plaintiffs that the appraisals were not done in accordance with U.S. TAP guidelines and standards. We've alleged that defendants did not disclose that PNC did not believe that the home provided sufficient collateral back when the loan was given. We've alleged that in approximately June of 2022, the plaintiffs had a conversation with PNC in which PNC said it would send a letter explaining why it was rejecting their latest request to refinance the loan. And so, somehow, that the value of the house in 22 is not $1.8 million, that translates back to that the value of the house wasn't $1.8 in 05? For us, this all goes back to them violating the U.S. TAP guidelines. And we can show... But an appraisal in 22 has nothing to do with an appraisal in however many years. Right. 15 years earlier. But we can show that back when the loan was given, they didn't follow the guidelines because we can look at the comparator properties. We know that what was done wrong. So, we can say without a shadow of a doubt that the comparator properties used to justify that $1.8 million, those properties were taken a lot farther away than they should have been. One property was in Frankfort, which is a much different location than Flossmoor. And we know that they used sales that were older than they should have used. So, we can tell that they were just basically trying to come up with this number and it didn't adequately reflect what was going on in that community and how much that property was worth. And I believe that we have alleged that. And I'm saying that we have alleged that they withheld information and they should have provided this information much like my example in Roseland where the people are told your property isn't going to be worth more even though you put millions of dollars into it. If that was what they wanted to do, they could have just said your property isn't going to be worth $1.8 million and they would have gone with a different renovation of just adding rooms to the first floor. And that's why we know that there should be liability. We should be allowed at least to attempt to move forward with this litigation and get justice for these people who have been in a state of being underwater on a mortgage and they can't refinance and they really have no other option. Okay. With that, we'll hear from your friends on the other side and we'll hear from your rebuttal. Good morning and thanks for coming to court. My name is Toby Shisler with Densmore & Scholl, Counsel for P&T Bank. As we mentioned at the beginning, our plan is to divide roughly equally the time for myself and my colleagues. Ms. Bartolucci is primarily going to focus on the due process, substitution of judge issue, and just for efficiency purposes, I'm going to primarily focus on the merits and the subject issues of the case being sufficiently fled. That said, we're both certainly happy to answer questions as they relate to our clients involving any of the issues. Again, we respectfully contend that the trial court properly granted the motions to dismiss and issued a thorough well-reasoned decision finding that the current... Oh, no, no, no, no, no, no, no. ...of analysis, 11 and a half pages of summaries, book report summary, found a correct decision, a correct conclusion after thoroughly summarizing the briefing from the parties in the department issues that were raised in the case. The trial court correctly recognized that even though the appellants had been given multiple opportunities to amend their complaint, that they had still failed to step forward to act. They don't have that in court. Correct. They did it in state court once. They had also previously filed a largely identical action in federal court that the federal claims were dismissed on the merits. The federal court declined to exercise jurisdiction over their merits. You're kind of touting that federal court one as the first. Oh, sure, that's correct. They had multiple opportunities. The trial court never did it. As one commercial calendar judge was praised for doing it by the appellate court. That's me. Did you praise yourself? No. Yeah. In regards to caution, we're going to give you one final opportunity to re-complete. We have a warning to the plaintiff that this is it, right? That there is no explicit warning. To my knowledge, it was not communicated as either or as a warning in writing that there would be no further opportunities to amend. Let me ask you about a troubling allegation. Defendants agreed to find a minimum value or range of value in advance of the appraisals being performed. And P&C approved the loan knowing that the probable actual value of the loan was well below $1.8 million. That's a factual allegation. And I actually, as you, disagree with that fact. But how do you not have to accept that fact for purposes of a motion to dismiss? Yes, Your Honor, if we take that as a factual allegation as opposed to a legal conclusion. As opposed to what? As opposed to a conclusion or a legal conclusion. If we treat it as a factual allegation. That fact still has to be read in the context of the appraisals or opinions subject to future building for P&C's own internal benefit. But all that said, P&C, as the lender, has the right to look at an appraised value and say, we have questions about whether or not the value is going to be sufficient. But that doesn't make it actionable for fraud if it exercised its discretion. That sounds a lot like summary judgment, not a motion to dismiss. If a plaintiff alleges a cause of action, legal claim, and makes the factual assertion that the moon is made of green cheese, you don't get a dismissal by arguing that the moon is not made of green cheese. That isn't right. You have to accept the fact. And doesn't this rise to the level of a fact? Even if we set that as a factor, Your Honor, for the appellant to meet all the elements of their claims, they have to prove that they relied, to their judgment, on a fact that was presented to them. No, they have to acknowledge that they relied. They have to prove it. They have to indicate that they built the addition in their life. They built a second floor in their life. And now they have a house that's severely under water on their mortgage. That sounds like reliance, to me. Reliance upon opinion. But they relied on it. Whether or not it was initially for the bank's benefit, the pain of relying on that, like Justice Lincoln just said, to get it and do the addition. But their intention is that they relied on their opinion. But they did. We're not saying that they didn't do a second floor addition, right? They did the addition. That's correct. And they allege that they relied upon appraisals that explicitly indicated they were for the lender's use only and relied upon that to proceed with the work that they had done. But, again, those are opinions of future value. And the first element of their fraud claim is they have to rely upon a fact. They can't rely upon opinion. Opinions are statements as to future conduct. Certainly our actual one is part of a scheme to do fraud in Illinois, right? That's the Steinberg Medical School. Understood. And when you're in the business of giving opinions, and if it's alleged that you gave a false opinion, you knowingly gave a false opinion, your position is that's not actionable. It could never be actionable as a matter of law. I wouldn't say it could never happen. I wouldn't say the broad statement would never happen. Well, it would have to be a broad statement if it's as a matter of law, right? Tender to the fact alleged in this complaint, I don't think there are facts that take these allegations to an actionable claim that are set forth in the amended complaint that's the appellant filed in this particular case. There isn't sufficient factual information to tie it all together. Well, yes, because when a civil complaint, if you're sitting down to draft a civil complaint for fraud, they don't have the benefit of a grand jury. They don't even have the benefit of priests who've discovered it. They had it at the meeting. That's correct. They did have some priests who discovered it in a vote. Correct. So isn't it illusory? Because by definition, in a fraud case, there's a discurrent of knowledge between the plaintiff and the alleged fraud case, right? Absolutely. Correct. And I'm certainly not suggesting that a plaintiff has to allege every conceivable fact in the complaint in order to be actionable. But it is a fact-clearing state, and they have an obligation to set forth facts that rise to the legal elements necessary to pursue viable claims. Well, to help us out here, going back to Justice Mitchell's question, there is this allegation that they agreed upon minimum value in advance of the appraisals, and PNC knew the House was well below that appraisal. That's our green-teeth scenario. Yes. And I agree with you that the specific factual allegations don't seem to support that. So what do we do with that allegation? What do you do with that? Again, in my opinion, I still believe that is a conclusion. The conclusion is to be actionable. But even if we take that as an alleged fact, I would respectfully contend that it is still a bridge too far to extrapolate that into knowing fraud allegations. The mere fact that the bank may have had concerns? No. It says knowing that the probable actual value was well below. No. Not concerned. It says PNC approved the loan knowing that the value was much lower. That's correct. But I would respectfully contend that that ties in with the whole reason the appraisals were performed in the first place, for PNC's benefit. PNC doesn't want to make a loan that is significantly under water. They have no interest in doing that. So even if we take the plaintiff's allegation, the fact that the bank may have looked at this and said, we're making a risky loan here does not mean that we can draw the inference that they were intentionally trying to defraud their loan. They have summary judgment territory. That's not a motion to dismiss. They are getting into reasons as to why the bank did this and what the plaintiffs really did and what they can actually prove. If that were the only elements for them to satisfactorily prove their claim, then I would potentially agree. But there are multiple elements in each one of their claims. They have to be able to prove that it was knowingly false, don't believe that we have that here, that it was intended to cause them to rely to their detriment, don't believe that that is insufficiently pled, properly resulting in ultimate damages, which is maybe the conclusively pled misinterpretation. So just the fact that they've alleged that the bank had information that told them it was insufficient, we respectfully submit that the trial court correctly recognized it is still too much of an inferential leap to take that one fact and equate that to fraud. In addition, even if we assume the argument states that that was sufficient, the claim is still time-bound. I know, and when you're reaching a complaint, a motion to dismiss, it has to be read as a light illustration of the non-movement. Understood. And that means they get the benefit of the inference, not the bank. Understood. So, however, I guess that's one of the problems I have with the trial court's ruling, is it seemed to me as if there were inferences being drawn against the plaintiff. I believe the trial court looked at all the facts alleged in their totality, not singling out any one, making any one more important than the other, recognized that all the facts, unless you dismiss the facts, Another fact, defendants knew that the appraised value was inflated and false. So, we might see what we do with it. Again, I think that the contention, let me ask this, a hypothetical question. If two appraisals, a fan or an officer, went along and said, we really want to make this, we want to make this, so you need to come in at this amount, and we know the House won't support that, but we want to make this loan, we're in the business of making loans, you don't make money, we don't make money, unless we make loans. That's told you. Could that be for us to claim a fraud? Those facts potentially could, but it wouldn't be the appraisals that would be giving rise to that. It would be different overt acts and different communications that were made to the lenders. The fact that the bank obtained appraisals for its internal purposes, that the lenders claim they rely upon, isn't a sufficient factual basis to form actionable fraud. In addition to that, again, as I said, even if we assume for argument's sake that it would be, the claims are time barred on their face. Is there a requirement that a bank may pay a full mortgage loan debt in appraisals? I honestly don't know, Your Honor. I don't know if there's a requirement. I know that there are certain standards when they obtain one in terms of what they need. I don't know if a bank is required by any legal standard. Now, there may be, if any may, if any investors, I'm sure, have regulations that require appraisal before, they will underwrite a loan, certainly. And I'm certain that, I speak for my client and most other lenders, that they have their own internal policies and procedures, that those internal policies and procedures require an appraisal from an underwriting standpoint. You started to talk about the time bar. Tom, the statute of limitations, let's just talk about one of the claims. Negligence is two years. Two years. Correct. And so, would you say that they're time barred after negligence claims? Absolutely. Negligence is probably easiest. Out of all the ones, even if we want to accept the common contention of discovery rule or fraudulent concealment, by their own contention, they became aware of the circumstances that they claim they lacked the knowledge of in 2017. Or early 2018. Or early 2018. This lawsuit was filed in November of 2021. So, even utilizing the discovery rule or fraudulent concealment, which is addressed in our briefs, those are important. Or even if you take it as a final court action. Even a final court action, the negligence claims time bar, under any mechanism, What about the conspiracy claims? The fraud claims that you're filing? We all hear the idea. Fraudulent conspiracy claims. There's no meaningful disagreement from the appellants that we're talking about events that happened in 2004, 2005. So, on the face of the complaint, the fraud claim, the conspiracy claim, time barred, absent some type of exception to the statute of limitations that would allow those claims to proceed. They've advocated for a discovery rule or fraudulent concealment contention. Both of which, respectfully, they have essentially failed to step forward with anything to support those claims. But as Justice Mitchell has pointed out, other than whatever limited discovery went on in federal court, they still don't have the animal right now, the sport that they're saying, that was concealed from them. The structure of these appraisals was concealed from them back in 2004, 2005. So, they just didn't know. But as it relates to the discovery rule, they could easily allege what facts they undertook to try to determine that the appraisals were in place. In fact, the allegations are contradictory in their face. They state in their complaint and have reiterated today that the home consistently was appraised for less than the $1.4, $1.8 million. They consistently received tax appraisals in the $600,000 range. Going all the way back to 2004, 2005 when the work was being done. In order for them to effectively plead a discovery rule, they would need to step forward with something more than a conclusive allegation of they made good faith efforts or they made conservative efforts to try to get the additional facts. All of this information was readily available to them. This is the value of their own home. There was nothing that precluded them from obtaining information that would have allowed them to discover the allegedly fraudulent appraisals, if they were, again, putting aside that these were appraisals in 2004 and that the basis for them being inflated is what the values would be now, and those are apples and oranges. But even if we assume that they were inflated, there was nothing that precluded the appellants from obtaining that, and therefore they can't rely on the discovery rule. Same with all the fraudulent concealments. You're saying that the discovery rule, they had an obligation beginning when to find out, beginning when, according to you? When the loans were made. I mean, when the loans were made going forward, they had no reasons. Well, they took the whole point of the discovery rule. Right? It's just, I didn't know, and I had no reason to know, until some such event. But we had noticed. I would respectfully contend, Your Honor, that even based on their own allegations, they had reason to know. Their own allegations were that, for years, they had received tax appraisals of $600,000 that they had consistently been provided with information indicating that the house was worth nowhere near what the loan was. So, respectfully, the law does not allow them to sit on their right and say, well, we think it might be too high, but we're not going to look into this. And then 15 years later say, now we think they were way too high and it was fraudulent. They don't allege in their complaint that they alleged the tax. I haven't seen anything like that. So, we're talking about something outside the complaint now that defeats their right to release? I can't. I'm talking about the record citation of where the tax appraisals are. So, again, it sounds like summary judgment, not a motion to dismiss. I do believe the person in the complaint makes reference to the fact that the home had consistently, for years, been appraised as less than $600,000. That complaint is analogy and it's not the operative complaint. It wasn't a verified complaint. So, the other way, their claim simply is implausible in terms of being an actual claim. On the one hand, they say, it should have been so readily apparent to P&C and the appraisers that these were inflated that they committed fraud by not disclosing it. But at the same time, it was completely undiscoverable to the appellants as they entered into the loan transaction. Respectfully, there's a little bit of a tension between those two different points and they can't have it both ways. We would also contend that fraudulent concealment arguments fail for similar reasons. Fraudulent concealment requires affirmative acts. Affirmative undertakings by the defendants to prevent them from learning information necessary to file a lawsuit. Everything that the plaintiffs have identified in their complaint, in their briefing, in their arguments, everything is omissions, not affirmative acts that they rely upon to evoke the fraudulent concealment doctrine. Because neither of those doctrines will apply and we're talking about events which occurred in 2004 and 2005, we would respectfully contend that the claims are time-barred in addition to being sufficiently fled. And no law amendment would have changed these deficiencies. Even had, I think this is the question I meant to get back to earlier, had there been a warning, and we're going to dismiss this if you don't address these, the deficiencies that exist here could not have been cured. The complaint could have been amended ten times and we still would have the same legal deficiencies that the trial court recognized supported dismissing the case with prejudice. This might be a question better directed to your friend on the other side. I guess I'm struggling with what the damages would be. If I was defrauded into borrowing a million dollars, you gave me a million dollars on the terms that I agreed to to pay it back, and now, I mean, I got a million dollars, or I got whatever the sum was. What? Yes, I'm... Yeah. Your Honor, the complaint insufficiently pleads actual damages. And you hit on a very correct point, which is, trying to determine if the population is an actual damage. That's correct. This is a renovation that occurred prior to the global recession and everything else that occurred. I'm not sure if anyone could ever actually calculate what the actual damages would be from folks that have derived the benefit of being in this home for the past 15 years. That is correct. They received the loan. The loan was used for its intended purposes of making the renovations. The fact that it is now underwater, while unfortunate, does not make it actionable against any of the appellees in this case. I want to be mindful of being my colleagues in time to address the other issues. So, if there are any other questions, I respectfully request to support, affirm the trial court's decision, and I'll yield to Ms. Bartolucci. Good afternoon. My name is Elizabeth Bartolucci. I'm with O'Hagan-Meyer, representing defendant Shiro, but arguing on behalf of all defendants on a substitution due process issue. May it please the court, counsel. Even if Plaintiff's argument regarding the error complained of here had not been forfeited and were deemed to implicate Plaintiff's due process rights, it cannot be equated with the narrow class of automatically reversible errors articulated by the Illinois Supreme Court or the U.S. Supreme Court. Let me ask you a question about the state of the record. Was there a docket entry in the trial court indicating that a new judge before the new judge ruled on that? No, Your Honor. But I do know, as you did, that there was ample public record of Judge Schneider's retirement. He retired January of 2023, and Judge Schneider issued her decision March 30th of 2023. Not only that, Judge Schneider struck the hearing date in November, early November of 2022, so five months elapsed, and began to review a written ruling for its coming, striking the hearing. Five months elapsed with no written ruling coming. One could say it's incumbent upon the parties to see what's happening with their motion, but even aside from that, there were public notices, the ISDA newsletter, and the Daily Law Bulletin published. Is that in the record? I don't believe that the articles themselves were put in the record, but they're capable of judicial notice. I would ask the court to take judicial notice of the fact that Judge Schneider's retirement was made public, and it was effective January 2023. So there was certainly notice. It's a little disingenuous for plaintiffs to say they were blindsided when they got a decision from Judge Schneider. I mean, we've all been litigants. We've all worked at the trial level and know that litigants can contact the court at any time to find out what's happening with the ruling on their motion, but aside from that, there was public record. I understand the answer to this is no, or the plaintiff would have mentioned it, but there's no local rule that requires notification or anything of a new judge being assigned to... Not that I've discovered, Your Honor. But even aside from the peculiarities of Cook County, we still have to acknowledge that this is an administrative issue because the forfeiture here is significant because there's not even a court order that you are being asked to review. Judge Schneider certainly can't be found to have erred in ruling on a pending motion that was transferred to her. She certainly can't be found to have erred in just ruling on the motion. So there's no... So what is the plaintiff to do? File a motion to vacate the judgment. They have 30 days after the dismissal order was entered to move to vacate the judgment, saying, wait, we weren't going to file it... First we said, sorry, too late. Why don't we discuss the ruling? No, you're reading the motion after I've made a substantive ruling. Well, the first step would be to file a motion to vacate, not the substitution motion. The first step is a motion to vacate. Then, if that's denied, you have an order you can appeal. Hearing... I think the motion to vacate allows, you could say, that we had not been unnoticed. That Judge Schneider had been appointed... Exactly. And we were deprived of our alleged due process right to exercise a 1-5-3 substitution. So here, the first step would be to move to vacate, and the court could vacate on any reasonable terms and conditions. They don't have to meet even the standard of a motion to reconsider under 12.03. It's just a motion to vacate based on an alleged due process violation. If that had been denied, then Plans could have appealed the denial of that motion. They didn't do that. They just came straight to the appellate court. So now you are being asked to basically find an administrative clerk, error, or Judge Schneider wrong for ruling a motion that was assigned to her, neither of which are recognized in Illinois. And even if you consider the substitution of Judge as a matter of right to be a due process right, which no court has actually held, plaintiffs cite the U.S. Supreme Court in Nader multiple times implying that the court held that. That case didn't involve substitution. It doesn't at all. It just suggests when substantial rights are affected, the due process analysis and the harmless error analysis that you follow. Well, we do know that when the substitution right is violated, it is the subject of harmless error analysis. It's treated as an automatic reversal. Well, but in this context, we've had trial judges who impartially denied motions to substitute that seized the record with a reversal. Well, the jurisprudence that exists focuses on whether the litigant was deprived of a meaningful opportunity to be heard at a meaningful time, and whether the process itself was fair. So, here, and granted, there are several cases that say a litigant is entitled to an unbiased judge. Here, that's not the issue. They do not have substitutions. Right. If you bring a title motion to substitute judge as a matter of right, and the trial judge improperly denies it, every ruling entered after that is going to be void because it's going to get reversed on appeal. It's not subject to a harmless error analysis. Right, and that's where the entire due process analysis becomes apparently not relevant here because this is not a due process right. But what you stated was the very current requirement is that the party move to a substitution of judge. That didn't occur here. That is the first threshold step that has to be taken by the litigant, and that didn't happen here. I agree. If a party moves with substitution as a matter of right that's improperly denied, any substitute is going to be vacated, and it goes back. But that's not what happened here. So, we're now looking at an amorphous hypothetical situation, and this didn't occur. And the plaintiffs are asking us to make the leap that well, if we've known the judgment changed, we would have just filed a substitution motion regardless of who the judge was, which kind of negates any concept of prejudice, right, or bias. You did a show on the bias. You've done this, right? Agreed. So, as I said, we're going to file a motion because they felt like it. Okay, they get a new judge. But even if they had, the courts talk about the ameliorative effect or the remedy that results when there are other safeguards, other procedural safeguards. So, here, now the plaintiffs are getting the normal review of their complaint, and the plaintiffs, by failing to file a substitution motion, they're now saying, well, we were deprived of an important right and that can't be remedied other than by reversing the judgment. But I just don't see a basis for reversing a judgment when a party didn't even seek the relief that would give them the right to that judgment. And my right to summarize your argument is two-part. First of all, they forfeited this because they never found a way to present it to the trial court, and the way to have presented it would have been a motion to vacate. Look, Judge Schneider, you should not have done this. We didn't... So, vacate your ruling. That's what you're saying they should have done, correct? Yes. And then they say, even if they had done that, they don't have any due process right to be notified that the calendar has changed. Is that also your argument? Yes. I don't see any right. I don't see... I mean, you were not waiting to follow your case. You should follow... That's your due process right. The courts were not hiding the fact that the calendar has changed. There's no due process. Exactly. The entire due process here is loosely tied to the 14th Amendment due process concerns, but a substitution of judge is never going to help to be a constitutional right under the federal or local constitution. It's a legislatively created, I would say, privilege given to the litigants that has been actually challenged so much. Well, I'm not sure I hear you. Well, I'm not sure I hear you. Well, you can agree that it's not... There definitely is a due process part that have an unbiased judge. Yeah, yeah. That's a different section of the statute, though. And that is definitely a right, and that is the subject of some constitutional case law from the U.S. Supreme Court and the Illinois Supreme Court. But the right to a substitution of judge as a matter of right has never been deemed a constitutional or a fundamental right. It's never been held to implicate due process concerns. Some courts do analyze parties' arguments if they were denied due process in connection with substitution motions, but I've not found one case that says it's a due process right that a party has. So, you have a right to know who your judge is. That is probably due process. Well, but then you also have an obligation to investigate that to get a list of public records. So, the error here, if any, was administrative. It didn't implicate a fundamental right or a constitutionally protected right. And the fact that the client didn't move for a substitution of judge means you don't have a basis for vacating every subsequent order. You just don't. So, how do you justify vacating the order here when there was no motion made? And I know forfeiture is often a doctrine the court doesn't like to apply. They want to go to the merits and they say it doesn't apply to us. It only applies to the litigants, which is true. I didn't want forfeiture for the other time. Well, good. It's good. Hopefully we don't have to have the majority in this case. So, but it's significant here because it actually implicates the solvency process rights. They never got to address this issue in the trial court. You wouldn't have a role in it, right? No, but if they failed to file a substitution motion or didn't file a substitution motion and just filed a motion to reconsider or to vacate, then yes, we would have said fine. And maybe we would have watched that there be arguments we could make and we'd be prepared to address a due process issue that we knew of for the first time reading their opening brief. So, I don't think it makes sense that you all feel like all the U.S. Supreme Court case laws necessarily implicated here, but just to go over some of that quickly. If you do believe it's a due process right to have notice of your new judge and to file your substitution as a matter of right, even though the Illinois Supreme Court does not recognize that, the court should still analyze this under a Hummel's error analysis because of the procedural posture in which it reaches the court. I understand your point, Judge Mitchell, that knowing that to do that when it's a, you know, the court agrees that the child does incorrectly deny the substitution as a matter of right, but that's not our posture here. So, plaintiffs have put us in the posture we are in which does require a Hummel's error analysis. In this case, if the court would agree with plaintiffs and presume prejudice to them, we'd be creating an entirely new category of structural error that the U.S. Supreme Court and the Illinois Supreme Court have not recognized. The structural errors in those cases, repeatedly, the courts say, relate to the framework of the litigation, not the errors in the process itself. So, the framework here usually involves the representation of criminal defendants by counsel and an impartial judge. We don't have either of those issues here. This is not a structural issue, so the Hummel's error doctrine applies. And here, because the plaintiffs are getting de novo review, any harm that was caused by the child court's order can be remedied on review. And because the plaintiffs have not sufficiently alleged fraud, I just want to comment on that quickly that although there is the troubling allegation of meeting and agreeing to a minimum value, there's no who, what, when, why, or none of the facts that are needed for fraud. And the delay in bringing the suit is problematic in that regard and why the limitation period should be enforced because now, we're talking about alleged conversations that occurred in 2004, 20 years ago. And the parties are implying, well, now we can do discovery. We're going to do discovery on a conversation or what, emails or some agreement that was made 20 years ago. That's why we said such limitations exist because this is going to be impossible to disprove based on this very conclusory allegation of some agreement among all the defendants without making any specific contention factually of what defendants did what, who agreed to what, what date, no specifics. Well, those are all things that can be treated and repleted. Plaintiffs were very critical of whether they would even amend. They've had multiple opportunities to amend and they haven't found the facts and they haven't indicated truly a basis for the one allegation that troubles the court. Unless you have any further questions, I'll rest there. Okay, thank you. Thank you. So you had asked earlier if we would amend, what would we do and what's most troubling is that we have already alleged that the bank knew at the time it gave the loan that the house didn't support 1.8 million dollars. But if we could allege, I'm sorry, but if we could allege, I would amend the complaint we would attach those documents to show that the bank knew that at the time that there was insufficient credit. I have my damage questions. Okay, how have your clients been harmed? Because assuming everything you say is correct and the complaint is true, but what's the damage here? That is to say they got along for the agreed upon amount upon the amount didn't qualify for. But that's to their benefit not their detriment. It's actually to their detriment because right now the house, they're underwater and I would ask to what they would do, how could we correct that? We could So how does that mean the becomes the owner of the home then? I can't There was a case that we cited, your honors, that talked about what should happen when there is a misrepresentation and that case is James versus Lifeline Mobile Medics and in there the court stated where a misrepresentation relates to a specific extrinsic fact materially affecting the value of matters at issue and where that fact is one of particularity within the knowledge of the speaker and the is made with knowledge of its falsity or what the law regards as the equivalent of knowledge and is acted upon to the injury of another party such misrepresentation amounts to fraud warranting a court to set aside the contract induced in whole or in thereby. We're asking for the court asking for the court to set aside the contract induced in thereby. And that was an issue with PNC and the appraisers. asking for one remedy would be reformation. They want to pay and how they've been damaged, you've been asking this, is because they have been in this contract. underwater. They don't want to walk away. Other people in this situation will walk away from the loan and just leave the house and let the bank take over. They don't want to do that because it damages their credit and their reputation. Dr. Payne refuses to do that although that's what other people in this situation have done. We're going to violated guidelines and standards. We can prove that. But they performed additions or remodeling and invested such an References say they invested that amount but they should not be paying that amount back. They have been paying it back. But what you're asking us to do is... It's like the court in James says that it was based on fraudulent misrepresentations about the value of the property with the addition. They're entitled to some relief. And what is that relief? We have to work that out. But right now we're just trying to plead a cause of So we would ask that you allow us to do that. We can work out maybe the bank will agree to something. But at this point we're saying they have been hurt. They've been lied to. We can show that they didn't comply with these standards. The standards weren't placed at the time. They tried to address the situation. The bank, they didn't know. And there's an issue of fact that we would argue about when they were put on notice. We cited case law as to that issue. So we believe that is an issue that Okay. You're down to your final minutes. Okay. I think that's all we have. I know there was an issue about why didn't we file a motion to reconsider. As we stated before, when we got the order dismissing the case with prejudice from a new judge, by operation of that rule, we couldn't go back to that judge because the substantive ruling had already been made. And we believe that is a fundamental right under our state that we should have a right to SOJ and we were deprived of that. Thank you. Thank you. Thank you to all of our panelists. I'm appreciate Thank you. Thank you. I have a . --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/argument%3A92848. Public record. Not legal advice.