ILLINOIS OFFICIAL REPORTS
Appellate Court
Turczak v. First American Bank, 2013 IL App (1st) 121964
Appellate Court LAURA J. TURCZAK and ROBERT M. LEW, Plaintiffs-Appellants, v.
Caption FIRST AMERICAN BANK and LEBOW, MALECKI & TASCH, LLC,
Defendants-Appellees.
District & No. First District, Third Division
Docket No. 1-12-1964
Filed October 2, 2013
Held The default judgment defendant bank obtained on the promissory note
(Note: This syllabus securing its second mortgage on plaintiffs’ residence did not bar
constitutes no part of defendant from enforcing its second mortgage on the residence, since
the opinion of the court Illinois law allows such a creditor to consecutively or concurrently seek
but has been prepared recovery on a mortgage and the note securing the mortgage; furthermore,
by the Reporter of the default judgment obtained by the first mortgagor’s foreclosure action
Decisions for the did not extinguish the second mortgagor’s second mortgage lien in the
convenience of the absence of a judicial sale of the property and the confirmation of the sale,
reader.)
and, therefore, plaintiffs’ action alleging that defendant second mortgagee
and its law firm violated the Consumer Fraud and Deceptive Business
Practices Act and the Fair Debt Collections Practices Act by demanding
$6,000 from plaintiffs for the execution of a release to complete the short
sale plaintiffs arranged was properly dismissed, since the second
mortgagee’s rights in the property had not been extinguished.
Decision Under Appeal from the Circuit Court of Cook County, No. 11-M-4001670; the
Review Hon. James Gavin, Judge, presiding.
Judgment Affirmed.
Counsel on Brian M. Fornek, of Brian M. Fornek & Associates, PC, of Batavia, for
Appeal appellants.
John Duffy, Karen DeGrand, and Michael Carney, all of Donohue Brown
Mathewson & Smyth, LLC, of Chicago, for appellees.
Panel PRESIDING JUSTICE HYMAN delivered the judgment of the court,
with opinion.
Justices Pucinski and Mason concurred in the judgment and opinion.
OPINION
¶1 For plaintiffs to close a short sale, defendants, the second mortgagee and the law firm that
represented the second mortgagee, conditioned the release of the second mortgage on
plaintiffs paying $6,000. This payment forms the basis for plaintiffs’ claims.
¶2 Plaintiffs contend that once the second mortgagee had obtained a default judgment on its
promissary note, the doctrine of res judicata barred any action on the second mortgage and
defendants’ demand for $6,000 to execute the release violated the Illinois Consumer Fraud
and Deceptive Business Practices Act (in the case of the second mortgagee) (815 ILCS 505/1
et seq. (West 2008)) and the federal Fair Debt Collections Practices Act (in the case of the
law firm) (15 U.S.C. § 1692 et seq. (2006)). The trial court dismissed the complaint for lack
of legal sufficiency. We affirm. Illinois law holds a lender may proceed in separate suits to
enforce the mortgage and the underlying promissory note, and the second mortgagee’s rights
in the property were not extinguished as a matter of law.
¶3 BACKGROUND
¶4 Wells Fargo Bank and First American Bank financed plaintiffs Laura Turczak’s and
Robert Lew’s purchase of a residence at 1300 Dodson Ave., Elburn, Illinois. Wells Fargo
secured its $391,250 loan with a promissory note and first mortgage on the property. First
American secured its $73,335 loan with a promissory note, in which plaintiffs were jointly
and severely liable for the repayment of the principle, and a second mortgage on the property.
Both the Wells Fargo and First American mortgages were dated August 9, 2007.
¶5 In 2010, plaintiffs stopped paying off the loans. In June 2010, Wells Fargo filed to
foreclose its mortgage against plaintiffs and First American. On September 3, 2010, Wells
Fargo obtained a “Variable Foreclosure Order” finding plaintiffs, First American, and other
parties in default. Judgment for foreclosure and sale was entered in the amount of
$408,597.92.
¶6 Also in June 2010, during the pendency of Wells Fargo’s action, First American, through
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defendant law firm, sued plaintiffs on the promissory note that secured First American’s
second mortgage. On December 21, 2010, First American obtained a default judgment
against plaintiffs in the amount of $80,986.93 and recorded a memorandum of the judgment
in Kane County on December 28 (the Wells Fargo and First American lawsuits were all filed
in the circuit court of Kane County as the property was located in Kane County). Under the
judgment First American could garnish each plaintiff’s wages.
¶7 Plaintiffs tried to set up a short sale of the property between September 3, 2010, and
March 10, 2011, with a sale being subject to the approval of Wells Fargo and First American.
Plaintiffs allege that during this time, First American refused to consent to any short sale
unless the balance it was due on its promissory note or the default judgment was paid.
¶8 Plaintiffs received an offer of $277,000 for the property. Although not enough to satisfy
Wells Fargo’s judgment, Wells Fargo agreed to approve the short sale if, among other things,
First American executed a release of its mortgage lien. First American required plaintiffs pay
$6,000 to sign the release. On March 7, 2011, plaintiffs secured First American’s release of
its mortgage lien after paying $3,000 and Wells Fargo contributing the remaining $3,000.
¶9 Plaintiffs alleged that during the time plaintiffs tried to sell the property, defendant
Lebow, Malecki & Tasch, LLC, the law firm for First American, engaged in false or
misleading conduct by maintaining that First American had an enforceable second mortgage
after obtaining the judgment on First American’s promissory note. Plaintiffs plead the law
firm violated the federal Fair Debt Collections Practices Act (15 U.S.C. § 1692 et seq.
(2006)) (FDCPA).
¶ 10 Plaintiffs further alleged First American violated either the Illinois Consumer Fraud and
Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2008)) or a valid
interlocutory order. Plaintiffs pled First American could not have sought to foreclose the
second mortgage when it tied the release of the second mortgage to the payment. Plaintiffs
do not challenge the enforceability of the $80,986.93 judgment in First American’s
promissory note action against them.
¶ 11 Defendants moved to dismiss the complaint under section 2-615 of the Code of Civil
Procedure. 735 ILCS 5/2-615 (West 2008). They argued that First American’s default
judgment on the promissory note securing the second mortgage did not bar First American
from enforcing its second mortgage because Illinois law allows a creditor to consecutively
as well as concurrently pursue remedies on a mortgage and the note securing the mortgage.
Defendants also argued Illinois law recognizes that Wells Fargo’s default judgment did not
extinguish First American’s second mortgage lien in the absence of a judicial sale of the
property and judicial confirmation of the sale.
¶ 12 Without a written order explaining its reasoning, the trial court dismissed plaintiffs’
complaint with prejudice.
¶ 13 Plaintiffs timely appeal.
¶ 14 ANALYSIS
¶ 15 A section 2-615 motion to dismiss attacks “the legal sufficiency of a complaint based on
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defects apparent on its face.” Pooh-Bah Enterprises, Inc. v. County of Cook, 232 Ill. 2d 463,
473 (2009); see 735 ILCS 5/2-615 (West 2008). In deciding a motion to dismiss under
section 2-615, the trial court considers only the “facts apparent from the face of the
pleadings, matters of which the court can take judicial notice, and judicial admissions in the
record.” Pooh-Bah Enterprises, Inc., 232 Ill. 2d at 473. All well-pleaded facts and all
reasonable inferences that may be drawn from those facts must be accepted as true. Id. Mere
conclusions of law or facts unsupported by specific factual allegations in the complaint are
disregarded. Id. The trial court should grant the motion to dismiss if it is “clearly apparent
that no set of facts can be proved that would entitle the plaintiff to relief.” Id. We review the
trial court’s granting of a section 2-615 motion to dismiss de novo. Id.
¶ 16 Completeness of Record
¶ 17 First American argues that without the trial court’s “extensive reasoning and lengthy
questioning of counsel during the two-days of hearings” or a certified bystander’s affidavit
(Ill. S. Ct. R. 323(c) (eff. Dec. 13, 2005)), plaintiffs failed to satisfy their burden of providing
a sufficiently complete record on the proceedings below.
¶ 18 With no recording and the trial court declining to issue a written opinion or, apparently,
explain its ruling in open court, we question what a bystander’s report summarizing
counsel’s arguments would add, particularly because the standard of review is de novo. As
the court noted in Maynard v. Parker, 54 Ill. App. 3d 141, 142-43 (1977), “Where the
judgment appealed from relates only to a question of law involving an order which was part
of the common law record, the record on appeal is adequate without a transcript of
proceedings.”
¶ 19 As our review is de novo, we will address plaintiffs’ claims of error on the merits. Before
doing so, however, we take this opportunity to remind trial judges that, unlike umpires, they
must justify the substance of their decisions. Explaining a ruling, either orally or in writing,
instills confidence in the impartiality and fairness of the judge and enhances respect for the
courts. While who prevails matters, the “why” also matters, and not just to the losing party.
The parties, the legal profession, and the public are more likely to place greater confidence
in our legal system when judges give reasons for their decisions.
¶ 20 Res Judicata
¶ 21 Plaintiffs argue that First American should have adjudicated the promissory note and
mortgage together in a single action, both documents having been signed as part of the same
original transaction. And, once First American successfully obtained the final judgment on
the promissory note, the principles of res judicata come into play to bar any other action to
enforce the second mortgage, thereby establishing the fraudulent nature of the sine qua non
for the release. If plaintiffs are wrong, and the doctrine of res judicata does not extinguish
the second mortgage lien, their causes of action deserve dismissal.
¶ 22 Res judicata, an equitable doctrine, prevents the multiplicity of lawsuits between the
same parties involving the same facts and issues. Murneigh v. Gainer, 177 Ill. 2d 287, 299
(1997). After a court of competent jurisdiction enters a final judgment on the merits, res
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judicata bars the same parties or their privies from relitigating causes of action that were or
could have been raised in the earlier lawsuit. Lane v. Kalcheim, 394 Ill. App. 3d 324, 329
(2009); Hudson v. City of Chicago, 228 Ill. 2d 462, 467 (2008) (res judicata also applies to
causes of action that could have been decided).
¶ 23 For res judicata to apply, the party must show each of the following elements: (1) a final
judgment on the merits rendered by a court of competent jurisdiction; (2) an identity of
causes of action; and (3) an identity of the parties or their privies. Kalcheim, 394 Ill. App. 3d
at 329-30. Here, the decisive element is the identity of the causes of action.
¶ 24 Illinois follows the so-called transactional test to determine the identity of the causes of
action. River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 310 (1998). The
transactional test considers separate claims as part of the same cause of action, even without
substantial overlap in the evidence, as long as the claims “arise from a single group of
operative facts, regardless of whether they assert different theories of relief.” River Park, 184
Ill. 2d at 311.
¶ 25 Plaintiffs maintain that (i) from September 3, 2010 (date of entry of default judgment
against First American in Wells Fargo’s foreclosure suit), until at least March 10, 2011, First
American did not possess an enforceable mortgage lien; and (ii) from December 29, 2010
(day after First American recorded its default judgment against plaintiffs in First American’s
suit to enforce the promissory note) until at least March 10, 2011, First American’s only
enforceable lien was its judgment lien. Consequently, plaintiffs contend, res judicata
precludes First American from asserting its mortgage lien in exchange for consenting to the
short sale.
¶ 26 Plaintiffs rely on Skolnik v. Petella, 376 Ill. 500, 507 (1941), for the proposition that
under the doctrine of res judicata, a lawsuit to foreclose a mortgage and a lawsuit to enforce
personal liability on the underlying note must be pursued in a single action. Plaintiffs submit
that no decision of the Illinois Supreme Court or any appellate decision has allowed a
mortgage lender to split its note and mortgage enforcement actions.
¶ 27 Not only does the Skolnik case not help plaintiffs, but well-settled Illinois case law
permits lenders to bring separate enforcement actions on the mortgage and the note.
¶ 28 In Skolnik, the bank tried to maintain a second action for a deficiency against an assignee
after having already sued and obtained a judgment on the deficiency claims against the
original debtors. These facts markedly differ from the facts presented here. And, the holding
in Skolnik is consistent with res judicata principles because the second action on the
deficiency was nothing more than a do-over of the first action on the deficiency.
¶ 29 Case law discredits plaintiffs’ argument as well. Defendants cite a number of cases
holding a note accompanying a mortgage need not be enforced in a single case. Farmer City
State Bank v. Champaign National Bank, 138 Ill. App. 3d 847, 852 (1985) (mortgagee may
consecutively pursue collection on note and mortgage foreclosure); see also Treadway v.
Nations Credit Financial Services Corp., 383 Ill. App. 3d 1124, 1131 (2008) (same).
¶ 30 In another case, LP XXVI, LLC v. Goldstein, 349 Ill. App. 3d 237, 242 (2004), which is
discussed in depth by the parties, defendant executed a promissory note, secured by a
mortgage to the plaintiff’s predecessor in interest, as well as a personal “Commercial
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Guaranty.” Goldstein, 349 Ill. App. 3d at 238. The obligors on the note defaulted and the
plaintiff’s predecessor filed suit to foreclose the mortgage. Goldstein, 349 Ill. App. 3d at 239.
The property was sold at a sheriff’s sale leaving a deficiency, which the plaintiff’s
predecessor obtained in an in rem deficiency judgment. Id. The plaintiff was assigned all
interests in the note, the guaranty, and the deficiency judgment and sued based on the
“Commercial Guaranty” of the note. The defendant moved to dismiss, claiming the action
was barred under the doctrine of res judicata. Id. The trial court granted the defendant’s
motion to dismiss.
¶ 31 Applying the transactional analysis, the Goldstein court held that while the transactions
were related, “we do not believe that their mere proximity in time and the overlap of some
of the parties render them a single transaction, especially in light of the purpose of each of
the transactions.” Id. at 241. The court observed, “It is *** settled that, upon default, the
mortgagee is allowed to choose whether to proceed on the note or guaranty or to foreclose
upon the mortgage. ‘These remedies may be pursued consecutively or concurrently.’ ”
Goldstein, 349 Ill. App. 3d at 241 (quoting Farmer City State Bank v. Champaign National
Bank, 138 Ill. App. 3d 847, 852 (1985)).
¶ 32 A case cited by Goldstein, Citicorp Savings of Illinois v. Ascher, 196 Ill. App. 3d 570,
574 (1990), specifically held that a judgment of foreclosure will not bar a later suit on a
guaranty because the foreclosure judgment does not adjudicate the defendant’s rights and
liabilities under a guaranty contract and, thus, the doctrine of res judicata is not implicated.
See also Du Quoin State Bank v. Daulby, 115 Ill. App. 3d 183, 186 (1983) (previous
foreclosure did not resolve defendant’s liability under personal guaranty).
¶ 33 Plaintiffs also assert ABN Amro Mortgage Group, Inc. v. McGahan, 237 Ill. 2d 526
(2010), requires a contrary result. There, the Illinois Supreme Court held that a mortgage
foreclosure suit is quasi in rem, as opposed to in rem, because it involves both an action
against real property as well as a monetary claim for personal liability. Nevertheless, ABN
Amro does not alter the ability to bring a separate suit on the promissory note, which remains
a purely in personam proceeding. In an oft-quoted footnote, the United States Supreme Court
summarized the distinction of the three classes of legal proceedings:
“A judgment in personam imposes a personal liability or obligation on one person
in favor of another. A judgment in rem affects the interests of all persons in designated
property. A judgment quasi in rem affects the interests of particular persons in designated
property. The latter is of two types. In one the plaintiff is seeking to secure a pre-existing
claim in the subject property and to extinguish or establish the nonexistence of similar
interests of particular persons. In the other the plaintiff seeks to apply what he [or she]
concedes to be the property of the defendant to the satisfaction of a claim against him [or
her].” Hanson v. Denckla, 357 U.S. 235, 246 n.12 (1958).
Thus, while in rem differs from quasi in rem, both are alternatives to in personam
jurisdiction. Foreclosure suits on property, quasi in rem proceedings, apply a legally distinct
remedy from an in personam proceeding on a promissory note.
¶ 34 No compelling reasons exist to abandon this settled law.
¶ 35 Next, plaintiffs read the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq.
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(West 2008)) as requiring enforcement of the note and mortgage together in a single case.
Yet, the language pertains only to actions to foreclose mortgages and says nothing that would
make it applicable to other types of lawsuits, including actions at law for judgment on a
promissory note. Moreover, section 15-1504 states that a “[foreclosure] complaint *** may
be joined with other counts or may include in the same count additional matters or a request
for any additional relief.” (Emphases added.) 735 ILCS 5/15-1504(b) (West 2008). It hardly
needs to be said that “may” is a permissive, not a mandatory, term.
¶ 36 As for plaintiffs’ argument that Wells Fargo’s default judgment against First American
extinguished First American’s second mortgage, the statute specifically provides otherwise.
After a judgment of foreclosure, only a judicial sale of the property followed by judicial
confirmation of the sale will terminate “with finality” the rights of third parties. 735 ILCS
5/15-1404 (West 2008). Wells Fargo never held a judicial sale of the property. Therefore, as
a matter of law, First American was under no legal restraint in seeking a payment in
exchange for signing the release of its second mortgage.
¶ 37 The Illinois Consumer Fraud and Deceptive Business Practices Act and the federal Fair
Debt Collection Practices Act claims hinge on First American and its law firm misleading
plaintiffs on the viability of First American’s second mortgage. Having decided against
plaintiffs on the premise underlying the claims, neither claim survives the motion to dismiss.
The motion to dismiss is affirmed.
¶ 38 Affirmed.
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