LSREF2 Nova Investments III, LLC v. Coleman , 2014 IL App (1st) 140184 ( 2014 )

2014 IL App (1st) 140184
SIXTH DIVISION
December 19, 2014
No. 1-14-0184
________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
________________________________________________________________________
LSREF2 NOVA INVESTMENTS III, LLC, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. ) No. 12 L 5297
)
MICHELLE COLEMAN, ) The Honorable
) Brigid Mary McGrath,
Defendant-Appellee. ) Judge Presiding.
________________________________________________________________________
JUSTICE LAMPKIN delivered the judgment of the court, with opinion.
Justice Hall concurred in the judgment and opinion.
Justice Rochford dissented, with opinion.
OPINION
&1 Plaintiff, LSREF2 Nova Investments III, LLC, appeals the circuit court's order
granting a motion to reconsider in favor of defendant, Michelle Coleman, and dismissing
plaintiff's complaint seeking relief under a promissory note based on the doctrine of res
judicata. On appeal, plaintiff contends the circuit court erred in dismissing its complaint
where res judicata did not bar it from pursuing a distinct remedy other than the remedy
pursued in the prior mortgage foreclosure action. Based on the following, we reverse and
remand for further proceedings.
No. 1-14-0184
&2 FACTS
&3 On November 19, 2007, defendant executed a mortgage and a promissory note in
relation to a commercial property located at 6456 S. Honore, in Chicago, Illinois. The
promissory note was for $304,000 and was secured by the mortgage. Plaintiff is the
current holder of the promissory note, as the apparent successor in interest of Citibank,
N.A.
&4 On August 18, 2010, plaintiff's predecessor in interest filed a single-count
complaint to foreclose the mortgage seeking in its prayer for relief, inter alia, a judgment
to foreclose the mortgage and a personal judgment for a deficiency. The mortgage and
the promissory note were attached as exhibits to the complaint. On November 22, 2010,
the circuit court entered a judgment of foreclosure and sale in favor of plaintiff, finding
that a default had occurred in the payment of the principal and interest due pursuant to the
terms of said mortgage and note and that "plaintiff has the right and power to declare
immediately due and payable all indebtedness secured by the mortgage." The circuit
court further found that by virtue of the mortgage and note, plaintiff was due
$322,668.35. The judgment also provided that "[i]n case there is any deficiency in the
amount [due] the plaintiff, LSREF2 NOVA INVESTMENTS, LLC, the plaintiff shall be
entitled to a deficiency judgment against the defendant, MICHELLE L. COLEMAN,
jointly and severally, for such amount and for an execution thereon as provided by law."
In addition, the judgment provided that "[t]he Court expressly retains jurisdiction of the
property which is the subject of this foreclosure for so long as may be necessary for the
purpose of placing in possession of the premises the holder of the Certificate of Sale or
the grantees in the Intercounty Judicial Deed, or his or their legal representatives or
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No. 1-14-0184
assigns, and reserves the right to appoint a receiver to take possession of said premises in
order to prevent impairment of the value of the premises, manage and conserve the
premises, or satisfy any deficiency which may be found due to plaintiff."
&5 On January 11, 2011, a judicial sale was held and plaintiff purchased the subject
property for $100,000. On February 28, 2011, the circuit court entered an order
approving the report of the sale and distribution of the subject property, confirming the
sale, and ordering possession. The February 28, 2011, order stated that "[t]here shall be
an IN REM deficiency judgment entered in the sum of $227,416.32 with interest thereon
as by statute provided against the subject property."
&6 On May 15, 2012, plaintiff filed a complaint, seeking to enforce the promissory
note against defendant. On January 2, 2013, defendant filed an answer, but, on May 15,
2013, the circuit court granted defendant’s motion to withdraw that answer and to file a
motion to dismiss. In her motion to dismiss pursuant to section 2-619 of the Code of
Civil Procedure (Code) (735 ILCS 5/2-619 (West 2010)), defendant alleged plaintiff's
breach of contract action was barred by the doctrine of res judicata where the circuit
court already had ruled on defendant's liability pursuant to the promissory note. On
October 30, 2013, the circuit court denied defendant's motion to dismiss without
providing its reasoning. Then, on November 27, 2013, defendant filed a motion to
reconsider the circuit court's denial of her motion to dismiss, arguing that the circuit court
erred in its application of the law to the facts established by the pleadings. Following a
hearing, 1 the motion to reconsider was granted by the circuit court on December 19,
1
A transcript from the hearing, or an acceptable substitute, does not appear in the record on
appeal.
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No. 1-14-0184
2013, and plaintiff's complaint was "dismissed with prejudice based upon res judicata."
This appeal followed.
&7 ANALYSIS
&8 Plaintiff contends the circuit court erred in granting defendant's motion to
reconsider and in dismissing its complaint based on res judicata where plaintiff was
entitled to pursue an action separate from the prior foreclosure proceeding in order to
adjudicate defendant's liability under the promissory note. In response, defendant
contends plaintiff is barred from pursuing an in personam claim under the note against
her where its previously adjudged complaint requested "[a] personal judgment for any
deficiency," where the foreclosure judgment explicitly provided that plaintiff was
"entitled to a deficiency judgment" against defendant in the event there was a remaining
deficiency, and where the order approving the sale and distribution of the subject
property stated that "[t]here shall be an IN REM deficiency judgment entered in the sum
of $227,416.32 with interest thereon as by statute provided against the subject property."
&9 The parties dispute the proper standard of review. While we recognize that the
circuit court did grant defendant's motion to reconsider, the ultimate ruling was the
dismissal of plaintiff's complaint on the basis of res judicata. A section 2-619 motion to
dismiss admits the legal sufficiency of a plaintiff's allegations but asserts the existence of
an affirmative matter that avoids or defeats the plaintiff's claim, in this case res judicata.
See Barber v. American Airlines, Inc., 241 Ill. 2d 450, 455 (2011). This court reviews de
novo a dismissal pursuant to section 2-619 based upon the doctrine of res judicata.
Morris B. Chapman & Associates, Ltd. v. Kitzman, 193 Ill. 2d 560, 565 (2000).
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No. 1-14-0184
&10 The doctrine of res judicata prevents the multiplicity of lawsuits between the
same parties involving the same facts and issues. Turczak v. First American Bank, 2013
IL App (1st) 121964, ¶ 22. In order for res judicata to bar the same parties or their
privies from litigating causes of action that were or could have been raised in an earlier
lawsuit, the moving party must demonstrate (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. Id. ¶ 22-23. There is no dispute that the circuit
court rendered a final judgment by granting relief in the foreclosure action or that there is
an identity of the parties or privies. The parties dispute the second element, namely, the
existence of an identity of causes of action. Plaintiff contends there was no identity to the
causes of action where it sought separate, consecutive proceedings for the adjudication of
the mortgage and note. In contrast, defendant argues there was an identity of the causes
of action where the pleadings demonstrate plaintiff chose to adjudicate its rights under
the note in the mortgage foreclosure action.
&11 With regard to the second element of res judicata, Illinois applies the
"transactional test" to determine the identity of causes of action. River Park, Inc. v. City
of Highland Park, 184 Ill. 2d 290, 310 (1998). Pursuant to the transactional test, separate
claims are considered 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." Id. at 311.
&12 It is well settled that "[u]pon default, a mortgagee may sue upon the [promissory]
note itself or bring an action to foreclose the mortgage. [Citation.] These remedies may
be pursued consecutively or concurrently." Farmer City State Bank v. Champaign
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No. 1-14-0184
National Bank, 138 Ill. App. 3d 847, 852 (1985). In LP XXVI, LLC v. Goldstein, 349 Ill.
App. 3d 237 (2004), the Second District applied the transactional test to determine
whether res judicata barred the subsequent filing of a claim under a guaranty after
already having received a judgment on a foreclosure complaint. This court advised:
"At first blush, a transactional analysis may appear to lead to the
conclusion that the action on the guaranty is the same cause of action as
the mortgage foreclosure, because the note, mortgage, and guaranty were
all executed concurrently and, apparently, as components of a related deal.
Such a result, however, overlooks the practical aspects of the interrelated
transactions comprising the execution of the note, mortgage, and guaranty,
as well as long-settled precedent, and reduces the transactional analysis to
the most cursory and formalistic level. The note was executed to provide
capital, the mortgage to secure the note. *** While the *** transactions
are 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 240-41.
&13 Generally, Illinois courts held that a mortgage foreclosure action was an in rem
proceeding that adjudicated only the interests in the property subject to the mortgage,
while an action to enforce a promissory note or guarantee was an in personam action
against the person or entity. Id. However, in ABN AMRO Mortgage Group, Inc. v.
McGahan, 237 Ill. 2d 526, 538 (2010), the supreme court clarified that a mortgage
foreclosure suit is a quasi in rem action because it involves both an action against real
property as well as a monetary claim for personal liability. Nevertheless, this court, in
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Turczak v. First American Bank, 2013 IL App (1st) 121964, ¶ 33, instructed that "ABN
AMRO does not alter the ability to bring a separate suit on the promissory note, which
remains a purely in personam proceeding." That said, while the holder of a note secured
by a mortgage may pursue remedies on both the mortgage and the note cumulatively, he
"is limited to one satisfaction." Skach v. Lydon, 16 Ill. App. 3d 610, 614 (1973). In other
words, the mortgagor and note holder may not obtain double recovery.
&14 Based on the record before us, we conclude that the circuit court erred in
dismissing plaintiff's complaint based on res judicata. Plaintiff chose to pursue separate,
consecutive actions to foreclose on the mortgage and to collect on the delinquent
promissory note, as was its right. Turczak, 2013 IL App (1st) 121964, ¶ 33; Farmer City
State Bank, 138 Ill. App. 3d at 852. Plaintiff's predecessor in interest filed a single-count
complaint for a foreclosure action. After the conclusion of that case wherein the circuit
court entered judgment approving the sale of the subject property and found that a
deficiency remained despite the proceeds from the sale, plaintiff proceeded to enforce the
terms of the promissory note vis-a-vis a separate complaint and recover under the note an
amount not satisfied by the foreclosure case. Based on the law as provided, there was not
an identity to the causes of action between the quasi in rem foreclosure action and the in
personam action seeking to adjudicate plaintiff's rights under the promissory note.
Therefore, the elements of res judicata were not established.
&15 We recognize that plaintiff's predecessor in interest did request a personal
judgment for any deficiency in its prayer for relief in the foreclosure complaint; however,
in the order approving and confirming the sale of the subject property, the circuit court
entered only an in rem deficiency in the sum of $227,416.32. The in rem action
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No. 1-14-0184
adjudicated only the rights and interests in the property that was the subject of the
mortgage. See LP XXVI, LLC, 349 Ill. App. 3d at 241. No personal deficiency judgment
was entered. There was no decision on the merits of the promissory note. We are not
convinced that the circuit court's foreclosure judgment stated anything to the contrary.
Rather, in the November 22, 2010, judgment for foreclosure and sale of the subject
property, the circuit court provided that "[i]n case there is any deficiency in the amount"
due to plaintiff, it was entitled to a deficiency judgment against the defendant. As stated,
after learning the terms of the judicial sale, the circuit court did find that a deficiency
remained in the amount of $227,416.32. Although the foreclosure judgment stated that
plaintiff would be entitled to a deficiency judgment under the circumstances, in the final
judgment in which the circuit court approved the judicial sale there was no finding of
personal liability. Therefore, plaintiff maintained its rights to seek an in personam
judgment under the default provision of the promissory note. There was no risk of
plaintiff obtaining double recovery.
&16 Section 15-1508(b)(2) of the Illinois Mortgage Foreclosure Law provides that an
order confirming a sale may "provide for a personal judgment against any party for a
deficiency." 735 ILCS 5/15-1508(b)(2) (West 2010). More specifically, pursuant to
section 15-1508(e) of the Foreclosure Law (735 ILCS 5/15-1508(e) (West 2010)):
"In any order confirming a sale pursuant to the judgment of foreclosure,
the court shall also enter a personal judgment for deficiency against any
party (i) if otherwise authorized and (ii) to the extent requested in the
complaint and proven upon presentation of the report of sale in accordance
with Section 15-1508."
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No. 1-14-0184
There is no evidence that a personal judgment was pursued in the foreclosure case
beyond the mere cursory mention in the prayer for relief. Rather, as stated, the initial
complaint contained a single count for a foreclosure action and did not plead a cause of
action pursuant to the promissory note.
&17 We disagree with defendant's insistence that the foreclosure judgment adjudged
plaintiff's rights under the promissory note as evidence by the following language:
"The Court expressly retains jurisdiction of the property which is
the subject of this foreclosure for so long as may be necessary for the
purpose of placing in possession of the premises the holder of the
Certificate of Sale or the grantees in the Intercounty Judicial Deed, or his
or their legal representatives or assigns, and reserves the right to appoint a
receiver to take possession of said premises in order to prevent impairment
of the value of the premises, manage and conserve the premises, or satisfy
any deficiency which may be found due to plaintiff."
Defendant argues that the circuit court retained jurisdiction to satisfy any deficiency to
which plaintiff was due. A careful reading of the quoted language included in the circuit
court's November 22, 2010, foreclosure judgment, however, reveals that the circuit court
reserved the right to appoint a receiver to take possession of the subject property to
satisfy plaintiff's deficiency. There are no issues regarding a receiver presented in this
case. Simply put, the foreclosure judgment does not support defendant's argument.
&18 We recognize the factual differences between this case and the facts at issue in
Goldstein and Turczak; however, we further note that the well-established legal principles
cited above remain applicable to the fact specific inquiry presented here.
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No. 1-14-0184
&19 CONCLUSION
&20 Because we have found that res judicata did not bar plaintiff's complaint for relief
under the promissory note, we reverse the circuit court's December 19, 2013, order
dismissing the complaint with prejudice and remand this cause for further proceedings.
&21 Reversed and remanded.
&22 JUSTICE ROCHFORD, dissenting:
&23 I respectfully dissent. I believe the circuit court properly dismissed this suit as
barred by res judicata as it raises a claim for a personal deficiency judgment against
defendant which was raised in the prior foreclosure action against defendant.
&24 Defendant, on November 19, 2007, executed a note and mortgage in return for a
loan of $304,006 made by plaintiff's predecessor in interest (plaintiff). Defendant
defaulted on her payments.
&25 As a result of defendant's default, plaintiff brought a complaint against defendant
seeking to foreclose the mortgage on defendant's property pursuant to section 15-1504 of
the Foreclosure Law. 735 ILCS 5/15-1504 (West 2010). The unpaid principle balance at
the time of the filing of the foreclosure complaint was $291,813.89. According to the
foreclosure complaint, plaintiff brought the suit as holder of both the mortgage and the
note. The mortgage and the note were attached to the complaint. Plaintiff, also,
specifically alleged defendant was the person who was personally liable for any
deficiency. The foreclosure complaint prayed for a judgment of foreclosure, the sale of
the property, and a personal judgment against defendant for any deficiency balance found
due after the sale.
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No. 1-14-0184
&26 Section 15-1508(e) of the Foreclosure Law authorizes a court hearing a
foreclosure case to grant a personal deficiency judgment "only in cases where personal
service has been had upon the persons personally liable for the mortgage indebtedness,
unless they have entered their appearance in the foreclosure action." 735 ILCS 5/15-
1508(e) (West 2010). That section provides that a court entering an order confirming a
sale pursuant to the judgment of foreclosure "shall also enter a personal judgment for
deficiency against any party (i) if otherwise authorized and (ii) to the extent requested in
the complaint and proven upon presentation of the report of sale in accordance with
Section 15-1508." Id. The personal deficiency judgment may be entered for any money
that may be due to the plaintiff, over and above the proceeds of the foreclosure. Id. The
personal deficiency judgment may be enforced and collected as if the judgment in the
foreclosure action was solely for purposes of money. Id.
&27 The circuit court in the foreclosure action specifically found that defendant was
personally served with the foreclosure complaint and, thus, the provisions of section 15-
1508(e) of the Foreclosure Law were fully applicable and authorized the circuit court to
enter a personal deficiency judgment.
&28 Defendant failed to answer the foreclosure complaint and was found in default.
The circuit court entered a default judgment against defendant in the amount of
$322,668.35, and ordered the sale of the property. In the judgment order, the court found
the mortgage and note were "valid obligations of defendant." The order allowed for the
entry of a deficiency judgment after the sale as follows:
"In case there is a deficiency in the amount owed the plaintiffs, *** the plaintiff
shall be entitled to a deficiency judgment against the defendant, Michelle L.
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No. 1-14-0184
Coleman, jointly and severally, for such amount and for an execution thereon as
provided by law."
Finally, the order declared:
"All matters in controversy by the parties hereto as reflected by the [pleadings] on
file are adjudged and determined by this Judgment ***."
&29 At the judicial sale, plaintiff purchased the property for $100,000. Thereafter, the
circuit court entered an order approving the report of the sale and the distribution of
proceeds which included an "INREM deficiency judgment" in the amount of $227,416.32
against defendant.
&30 Subsequently, after completion of the foreclosure proceeding, plaintiff filed this
action. In the instant complaint, plaintiff set forth that on November 19, 2007, defendant
had executed a mortgage and a note and had defaulted on the note and, as a result, a
foreclosure suit was filed. Plaintiff alleged that the order confirming the sale in the prior
foreclosure action "adjudicated the deficiency balance" owed by defendant and that this
amount of $227, 416.32 was now "due and owing" by defendant.
&31 There is no dispute that two of the elements of res judicata are present here. In
the foreclosure action, there was a final judgment on the merits rendered by a court of
competent jurisdiction and there is an identity of parties in both suits. The issue here is
whether the third element, an identity of causes of action, is present. Under the
applicable transactional test, "separate claims will be considered the same cause of action
for purposes of res judicata if they arise from a single group of operative facts, regardless
of whether they assert different theories of relief." River Park, Inc. v. City of Highland
Park, 184 Ill. 2d 290, 311 (1998).
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No. 1-14-0184
&32 In the foreclosure action, plaintiff sought to foreclose on defendant's property, but
also explicitly sought a personal deficiency judgment against defendant. Plaintiff sought
the personal deficiency judgment based on defendant's obligations under both the note
and the mortgage. Section 15-1508(e) of the Foreclosure Law allowed such a personal
money judgment to be entered against defendant in the foreclosure action and allowed
plaintiff to enforce and collect it to the same extent and manner applicable to any money
judgment. 735 ILCS 5/15-1508(e) (West 2010). Furthermore, the default judgment
order entered against defendant stated that plaintiff would be entitled to a deficiency
judgment after the sale of the property and be allowed to execute upon such judgment.
The order confirming the sale did not provide for an in personam deficiency judgment
but for an in rem one. However, the fact that plaintiff did not achieve an in personam
deficiency judgment as it requested in its foreclosure complaint does not preclude the
application of res judicata principles to the suit here. See In re Liquidation of Legion
Indemnity Corp., 373 Ill. App. 3d 969, 974 (2007) (Res judicata bars not only what was
actually decided in the first action but, also, whatever could have been decided.).
&33 In this action, plaintiff seeks to recover the amount of the deficiency as
adjudicated in the foreclosure action from defendant. Although plaintiff contends the
current action is brought strictly on the note, the complaint at hand seeks to recover from
defendant the deficiency which resulted from the foreclosure of the mortgage in the
amount determined by the foreclosure court in the order confirming the sale.
&34 The pivotal question for res judicata purposes is whether the claim raised in this
lawsuit could have been resolved in the prior lawsuit; and the answer is yes. In the
foreclosure action, plaintiff sought to recover any amount not covered by the foreclosure
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No. 1-14-0184
sale against defendant as provided by section 15-1508(e) based on plaintiff's default on
the mortgage and the note. Recovery sought in this case is based on the same default by
defendant on the note and seeks the recovery of the amount of the deficiency as
determined by the order confirming the sale in the foreclosure action. As alleged in the
complaint at issue, plaintiff's claim here, and its claim for a personal deficiency judgment
in the foreclosure suit arise from a single group of operative facts—the deficiency which
resulted from after the foreclosure sale based on plaintiff's default—albeit on different
causes of action against defendant.
&35 A conclusion that res judicata applies to bar plaintiff's suit on the note is not
contrary to the holding in Farmer City State Bank v. Champaign National Bank, 138 Ill.
App. 3d 847 (1985). In that case Farmer City State Bank made a loan of $60,000 to John
and Evelyn Henry in return for a promissory note. Champaign National Bank executed a
mortgage to secure the loan made by Farmer City State Bank and a second mortgage
secured by another promissory note for a loan of $345,000. When a default occurred,
Farmer City State Bank obtained a default by confession against the Henrys on the
$60,000 note. Farmer City State Bank then filed an action seeking to foreclose on both
mortgages which resulted in deficiency judgments against the Henrys.
&36 The relevant issue on appeal was the Henrys' contention that the foreclosure court
impermissibly increased the amount of the judgment entered in the initial suit on the
promissory note because the deficiency decree allocated the attorneys fees and costs
associated with collecting the debts to the $60,000 note. The court in Farmer City State
Bank found the foreclosure court did not impermissibly increase the prior judgment and
said:
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No. 1-14-0184
"Upon default, a mortgagee may sue upon the note itself or bring an action
to foreclose the mortgage. [Citation] These remedies may be pursued
consecutively or concurrently. [Citation] Where the mortgagee takes a judgment
upon the note, the mortgage stands as security for the judgment. [Citation] If the
mortgagee then forecloses the mortgage and obtains a deficiency judgment
against the mortgagor, the judgment on the note is merged into the second
judgment." Id. at 852.
&37 Thus, Farmer City State Bank provides that a mortgagee may pursue foreclosure
and sue on the note consecutively or concurrently. I find that Farmer City State Bank
does not control the outcome here. First and foremost, the Farmer City State Bank court
did not conduct a res judicata analysis. Furthermore, plaintiff here did not initially file
suit on the note as the mortgagee did in Farmer City State Bank. Under the facts here,
plaintiff's claim for a personal deficiency judgment was raised concurrently with its
request for foreclosure on the property in the foreclosure action and a final judgment was
entered against defendant. Plaintiff, having pursued its remedy for a personal deficiency
judgment in the mortgage foreclosure case, is precluded from now seeking a personal
deficiency judgment solely on the note in this consecutive action.
&38 Although the court in Farmer City State Bank did not address res judicata
principles, courts have relied on the decision in Farmer City State Bank in finding that
res judicata did not apply when there was a foreclosure action and a purely in personam
action at issue. The parties and the majority cite LP XXVI, LLC v. Goldstein, 349 Ill.
App. 3d 237 (2004), and Turczak v. First American Bank, 2013 IL App (1st) 121964, as
examples of such cases.
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No. 1-14-0184
&39 In Goldstein, the defendant and others had executed a note and a mortgage, but
defendant had also executed a personal commercial guaranty. Upon default, a mortgage
foreclosure suit was filed which the Goldstein court described as strictly an "in rem"
proceeding. Goldstein, 349 Ill. App. 3d at 241. After obtaining relief in the foreclosure
action, including an in rem deficiency judgment, the plaintiff, who had been assigned all
interests in the note, brought suit against the defendant on the personal guaranty. The
guaranty provided that the defendant had waived any defenses to suit on the guaranty
which may be brought before or after completion of any foreclosure action. Id. at 238-
39. The court found that the in rem deficiency judgment in the foreclosure action did not
bar the subsequent suit on the personal guaranty, stating:
"The [foreclosure] action did not encompass the guaranty. Further, defendant's
rights under the guaranty were not placed in issue or adjudicated. This action, by
contrast, is an in personam action against defendant to adjudicate his liability
under the 'Commercial Guaranty'; nothing in this action touches upon the subject
matter of the [foreclosure] action, namely, the property that was the subject of the
mortgage foreclosure. As such, this action is separate and distinct from the
[foreclosure] action, and the principle of res judicata is inapplicable to the facts of
this case." Id. at 241.
The Goldstein court found that its conclusion was supported by Farmer City State Bank,
which established the precedent that the mortgagee may proceed on the note or guaranty
or foreclose on the mortgage consecutively or concurrently. Id. at 241-42.
&40 The facts here are different. The instant suit is not based on a personal guaranty,
but on the note that secured the mortgage. The note does not include a waiver of any
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No. 1-14-0184
defenses to a suit on the note. There is no indication in Goldstein that the plaintiff had
sought a personal deficiency judgment in the foreclosure action, nor that the foreclosure
court had personal jurisdiction over the guarantor. In fact, the appellate court described
the mortgage foreclosure suit as strictly "in rem" or on the property and as not
encompassing the guaranty. Thus, the Goldstein court did not discuss or consider the
significance of section 15-1508(e) of the Foreclosure Law.
&41 Unlike Goldstein, defendant's obligations under the note were contained in the
foreclosure complaint and considered in the default judgment. Plaintiff specifically
sought a personal deficiency judgment and was entitled to obtain such a judgment under
section 15-1508(e) and the terms of the default judgment. Goldstein does not support a
conclusion that res judicata is inapplicable in this case.
&42 In Turczak, Wells Fargo Bank and First American Bank financed the plaintiffs'
purchase of their home. Each loan was secured by a note and a mortgage, with Wells
Fargo having the first mortgage. The plaintiffs defaulted on both loans. In June 2010,
Wells Fargo filed a foreclosure action against the plaintiffs and First American Bank.
Judgment for a foreclosure and sale was entered in the amount of $408,597.92.
&43 In June 2010, during the pendency of Wells Fargo's foreclosure suit, First
American obtained a default judgment against the plaintiffs on its note for $80,986.93,
and recorded a memorandum of judgment on December 28, 2010.
&44 Before the foreclosure action was finally resolved, the plaintiffs attempted to sell
the property as a short sale, but First American Bank, through the law firm representing
it, would not agree to the release of its mortgage until it received $6,000. The law firm
informed plaintiffs that First American Bank continued to have an enforceable mortgage.
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No. 1-14-0184
The plaintiffs later filed a separate suit against the law firm for damages alleging it had
engaged in false and misleading conduct. The law firm moved to dismiss the suit arguing
that it properly asserted that First American Bank had an enforceable mortgage after the
judgment on the note because "Illinois law allows a creditor to consecutively as well as
concurrently pursue remedies on a mortgage and the note securing the mortgage."
Turczak, 2014 IL App (1st) 121964, ¶ 11. The circuit court dismissed the suit.
&45 On appeal, this court, citing Goldstein and Farmer City State Bank, upheld the
dismissal. We found that the settled law allows a mortgagee to enforce the note in
consecutive suits and stated that "[f]oreclosure suits on property, quasi in rem
proceedings, apply a legally distinct remedy from an in personam proceeding on a
promissory note." Id. ¶ 33.
&46 Turczak is factually distinguishable. In this case, as previously discussed,
plaintiff did not file its initial lawsuit on the note. Plaintiff, instead, filed a foreclosure
action after defendant defaulted on the mortgage and the note and that foreclosure action
concurrently sought a personal deficiency judgment against defendant.
&47 I note that, in Turczak, this court found the facts in Skolnik v. Petella, 376 Ill. 500
(1941), were "markedly" different. Turczak, 2013 IL App (1st) 121964, ¶¶ 25-28.
Skolnik, however, has significant, relevant, factual similarities to the case at hand. In
Skolnik, a foreclosure action was brought against the original debtors and their assignees.
The foreclosure court had personal jurisdiction over all parties but the foreclosure
complaint sought a personal deficiency decree against only the original debtors. The
foreclosure judgment included a personal deficiency decree against the original debtors
but not the assignees. Thereafter, an action was brought against the assignees for the
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No. 1-14-0184
amount of the remaining deficiency. On review, our supreme court found the second
action was barred by res judicata, where the foreclosure court had personal jurisdiction
over the assignees and had express statutory authority to enter a personal deficiency
judgment against them in the foreclosure action. Ill. Rev. Stat. 1939, ch. 95, ¶ 17
(preceded section 15-1508). The supreme court found res judicata applied even where
the pleadings had not raised a claim for a personal deficiency decree against the assignees
because the claim could have been brought in that action. Skolnik, 375 Ill. at 507
("Piecemeal litigation is not to be permitted and neither the parties nor the courts may be
twice vexed with the same cause of action."). As this court stated in Turczak, "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."
Turczak, 2014 IL App (1st) 121964, ¶ 28. I believe that Skolnik is controlling and bars
this as a "do-over of the first action on the deficiency." Id.
&48 In summary, the foreclosure court had personal jurisdiction over defendant and
the statutory authorization to enter a personal deficiency judgment against defendant.
Moreover, plaintiff explicitly sought a personal deficiency judgment in its foreclosure
complaint pursuant to section 5/15-1508(e). I would conclude that this suit for a personal
judgment against defendant for the amount of the deficiency as determined in the
foreclosure suit as a result of the sale of the property is barred in accordance with the
relevant transactional test of River Park and the holding in Skolnik. For these reasons, I
would affirm the dismissal.
19