In the

United States Court of Appeals

For the Seventh Circuit

No. 08-2153

PATRICK L. COGSWELL and PATRICK M. O’FLAHERTY,

doing business as THE PATRICK GROUP,

Plaintiffs-Appellants,

v.

CITIFINANCIAL MORTGAGE COMPANY, INCORPORATED,

successor by merger to Associates Finance, Incorporated,

Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 1:05-cv-05008—Charles R. Norgle, Sr., Judge.

ARGUED APRIL 15, 2009—DECIDED OCTOBER 5, 2010 

Before FLAUM, RIPPLE, and SYKES, Circuit Judges.

SYKES, Circuit Judge. CitiFinancial Mortgage assigned

its interest in a mortgage to two investors—doing

business as “The Patrick Group”—but never delivered

the original or a copy of the underlying note. When The

Patrick Group tried to foreclose on the mortgage in
2 No. 08-2153

Illinois state court, its action was dismissed because it

could not produce the note. After an unsuccessful

appeal, The Patrick Group filed this breach-of-contract

lawsuit against CitiFinancial. The suit was removed to

federal court, and the district court granted summary

judgment in favor of CitiFinancial.

We reverse. The district court based its summaryjudgment decision primarily on a determination that

CitiFinancial never agreed to deliver the note as part of

the parties’ agreement to transfer the mortgage. But

whether they agreed on this term is a question of fact,

and The Patrick Group presented enough evidence

from which a reasonable fact finder could conclude that

it was a part of the parties’ agreement. The district

court’s alternative basis for summary judgment—that

CitiFinancial’s alleged breach did not cause The Patrick

Group’s damages—was also erroneous. Under the circumstances of this case, the causation question should

have been resolved in The Patrick Group’s favor as a

matter of law; the state trial and appellate courts

rejected The Patrick Group’s foreclosure action because

without a copy of the note, it could not prove it was the

holder of the debt the mortgage secured.

I. Background

In November 2000 CitiFinancial initiated proceedings

in state court to foreclose on a mortgage secured by
No. 08-2153 3

At the time of the mortgage transaction at issue in this 1

case, Associates Finance actually owned the mortgage. By the

time the complaint was filed in this action, however, Associates

Finance had merged with CitiFinancial Mortgage. For the

sake of simplicity, we refer to Associates Finance and

CitiFinancial Mortgage as “CitiFinancial.”

residential property in Illinois. Around the same time, 1

Patrick Cogswell and Patrick O’Flaherty, who at the

time were doing business as The Patrick Group, approached CitiFinancial and offered to purchase the mortgage and the underlying note. The parties settled on

a purchase price of $140,000, and in January 2001

CitiFinancial assigned its interest in the mortgage and

the note to The Patrick Group. The original note and

mortgage could not be located, however, and while

CitiFinancial was able to give The Patrick Group a copy

of the mortgage, it did not have a copy of the note.

After the assignment, The Patrick Group stepped into

CitiFinancial’s shoes in the foreclosure proceeding but

quickly ran into problems. The current owners of the

property had not discovered CitiFinancial’s mortgage

lien in their title search, and further inquiry revealed a

gap in the recorded ownership of the mortgage. The

original mortgagee, Equity Mortgage, assigned the mortgage to Fleet Finance, but the next recorded assignments were from Home Equity to CitiFinancial and from

CitiFinancial to The Patrick Group; nothing in the record

indicated how Home Equity acquired the mortgage

from Fleet Finance. Since The Patrick Group could not

produce either an original or a copy of the underlying
4 No. 08-2153

note, the property owners contended that The Patrick

Group was not a mortgagee entitled to foreclose upon

the property within the meaning of 735 ILL. COMP. STAT.

5/15-1208.

The Patrick Group introduced testimony and

CitiFinancial’s computer records at trial in an effort to

prove it was entitled to enforce the note, but the state

trial court sided with the property owners and entered

a directed verdict against The Patrick Group. The Illinois

Appellate Court affirmed. The appellate court observed

that under Illinois law only the holder of a note may

foreclose on property; transferring a mortgage is not

enough by itself to confer the right to foreclose upon

property. See, e.g., Moore v. Lewis, 366 N.E.2d 594, 599

(Ill. App. Ct. 1977). The court concluded that The

Patrick Group had not proved it was a noteholder

because it never received the note from CitiFinancial or

otherwise possessed it and therefore was not entitled to

foreclose upon the mortgage.

Frustrated that it paid $140,000 to purchase an unenforceable mortgage, The Patrick Group filed this breachof-contract action in state court against CitiFinancial.

CitiFinancial removed the case to federal court based on

diversity jurisdiction. Both parties moved for summary

judgment, and the district court granted CitiFinancial’s

motion. The court first concluded that The Patrick Group

had not proven that the parties’ agreement required

CitiFinancial to transfer the original or a copy of the

note. The court also concluded that even if CitiFinancial

was obligated to turn over a copy of the note, its failure
No. 08-2153 5

to do so did not cause The Patrick Group’s damages.

This conclusion was based on the court’s view that

Illinois law permitted The Patrick Group to foreclose on

the mortgage even if it did not hold the note. The court

entered judgment for CitiFinancial, and this appeal followed.

II. Discussion

We review the district court’s decision to grant summary judgement de novo. When the district court decides

cross-motions for summary judgment, as it did here, “we

construe all facts and inferences therefrom in favor of

the party against whom the motion under consideration

is made,” which in this case is The Patrick Group.

First State Bank of Monticello v. Ohio Cas. Ins. Co., 555 F.3d

564, 567 (7th Cir. 2009) (internal quotation marks and

citation omitted). Summary judgment is appropriate

only if “there is no genuine issue as to any material fact

and . . . the movant is entitled to judgment as a matter

of law.” FED. R. CIV. P. 56(c).

The parties agree that Illinois law governs this action.

In Illinois, as elsewhere, a breach-of-contract claim requires: (1) an offer and acceptance; (2) consideration;

(3) definite and certain terms; (4) performance by the

plaintiff of all required conditions; (5) breach; and

(6) damages caused by the breach. E.g., Ass’n Benefit

Servs., Inc. v. Caremark RX, Inc., 493 F.3d 841, 849 (7th Cir.

2007) (citation omitted); Barille v. Sears Roebuck & Co., 682

N.E.2d 118, 121 (Ill. App. Ct. 1997). Only the third and

sixth elements are at issue in this appeal. More specif-
6 No. 08-2153

ically, the first question is whether the parties’ agreement required CitiFinancial to deliver the original or a

copy of the note secured by the mortgage when it sold

the mortgage to The Patrick Group. The second question

is whether CitiFinancial’s failure to deliver an original

or a copy of the note caused The Patrick Group’s foreclosure action to fail.

A. The Terms of the Contract

The Patrick Group maintains that the parties agreed

CitiFinancial would deliver the note when it transferred

the mortgage. The district court treated this issue as a

question of law, drawing on language from our cases

stating that “ ‘[t]he question of the existence of a contract

is a matter of law for determination by the court.’ ”

Caremark, 493 F.3d at 849 (quoting Arneson v. Bd. of Trs.,

McKendree Coll., 569 N.E.2d 252, 256 (Ill. App. Ct. 1991)).

But this refers to the determination of whether the

parties have created an enforceable contract, which turns

on whether they described their “essential obligations” in

definite and certain terms. Id. at 851; accord Acad. Chi.

Publishers v. Cheever, 578 N.E.2d 981, 983-84 (Ill. 1991). The

contract between CitiFinancial and The Patrick Group

meets this test; the essence of the parties’ agreement was

to transfer the mortgage in exchange for $140,000.

The real question here is whether the obligation to

transfer physical possession of the note—or at least a

copy—was part of the parties’ agreement. This is a question of fact. See Mulliken v. Lewis, 615 N.E.2d 25, 27 (Ill.

App. Ct. 1993) (“Whether a contract exists, its terms,
No. 08-2153 7

and the intent of the parties are questions of fact for the

trier of fact.” (citation omitted)); see also Otto v. Variable

Annuity Life Ins. Co., 134 F.3d 841, 848 (7th Cir. 1998); Estate

of Kern v. Handelsman, 491 N.E.2d 1275, 1280 (Ill. App. Ct.

1986). Accordingly, the pertinent inquiry is whether

The Patrick Group has produced enough evidence to

convince a reasonable fact finder that the parties agreed

CitiFinancial would transfer the original or a copy of

the note.

The Patrick Group has met its burden of production.

In the district court, it relied on three pieces of evidence.

The first was its letter to CitiFinancial offering to purchase “the note secured by” the mortgage; this offer

was subject to certain conditions, one of which was

“[v]erification of all back-up documents including but

not limited to the Note.” The second piece of evidence

was the assignment executed by the parties, which provided that CitiFinancial “grants, assigns and transfers . . .

all beneficial Interest under [the mortgage] . . . TOGETHER

with the notes therein described or referred to, the

money due and to become due thereon with Interest, and

all rights accrued or to accrue under [the mortgage].”

Finally, Patrick Cogswell submitted an uncontested

affidavit in which he testified that the parties agreed

CitiFinancial was required to transfer both the original

note and the mortgage to The Patrick Group.

As even CitiFinancial agrees, this evidence is open to

different interpretations. But the district court’s analysis

shows it mistakenly believed it could resolve the issue

on the cross-motions for summary judgment, when a
8 No. 08-2153

reasonable fact finder could accept either party’s

proffered interpretation. For example, the district court

discounted The Patrick Group’s offer letter because it

said only that The Patrick Group would have an opportunity to “verify” the note and was silent as to whether

CitiFinancial would have to “transfer” the note. This

does not conclusively resolve the issue. To the contrary,

that the note was mentioned in the offer letter demonstrates that The Patrick Group believed that the transfer

of the note was part of the transaction.

Next, the district court discounted the language of

the assignment by interpreting that document to mean

only that CitiFinancial “transfer[red] . . . all beneficial

interest under . . . the notes” and had no bearing on

whether CitiFinancial was required to transfer physical

possession of the note. The court’s interpretation is one

plausible reading of this evidence but is hardly conclusive; a reasonable fact finder could reject it in favor

of The Patrick Group’s interpretation.

Finally, the district court rejected the Cogswell affidavit

because Cogswell also testified that he requested the

original note and the mortgage on several occasions after

the parties came to an agreement. In the district court’s

view, this course of conduct indicated that any obligation to turn over the note did not arise as part of the

parties’ original agreement. Again, this is one possible

interpretation of Cogswell’s testimony, but it is not the

only reasonable one; Cogswell might simply have

been reminding CitiFinancial of its promise. The Patrick

Group is entitled to have reasonable inferences drawn in
No. 08-2153 9

CitiFinancial also argues that The Patrick Group waived its 2

breach-of-contract claim by attempting to foreclose on the

mortgage, claiming that this conduct is inconsistent with an

intent to enforce any contractual right to receive the note.

See Wikoff v. Vanderveld, 897 F.2d 232, 241 (7th Cir. 1990); Wald

v. Chi. Shippers Ass’n, 529 N.E.2d 1138, 1147 (Ill. App. Ct. 1988).

We see no inconsistency.

its favor, Akande v. Grounds, 555 F.3d 586, 589 (7th Cir.

2009), but the district court’s analysis shows that it essentially resolved the factual dispute itself.

CitiFinancial takes issue with The Patrick Group’s

argument on appeal that it was entitled to the original

note or a copy, noting that the Cogswell affidavit and the

complaint claim entitlement to the original. Cf. Caremark,

493 F.3d at 851 (finding relevant for purposes of determining whether a contract existed as a matter of law

the fact that a party adopted inconsistent positions).

This hardly makes a difference. For reasons we will explain in a moment, either one would have changed the

outcome in the foreclosure proceeding. In addition,

CitiFinancial argues that The Patrick Group’s course of

conduct suggests that transfer of the note was not a term

of the parties’ agreement. On this point CitiFinancial

notes that The Patrick Group executed the purchase

agreement and attempted to foreclose on the property

without ever seeing the note. The apparent argument is

that if The Patrick Group really thought copies of both the

note and the mortgage were required to foreclose, it would

have waited until it had physical possession of both of

these documents. On summary judgment this argument

2

is unconvincing. Evaluating the weight of the evidence
10 No. 08-2153

is a task for a jury, not a judge, and the evidence here

is not so one-sided that no reasonable fact finder could

agree with The Patrick Group’s interpretation. See, e.g.,

Wheeler v. Lawson, 539 F.3d 629, 633-34 (7th Cir. 2008).

“[T]he district court was not presented with a situation

where it could simply interpret the contract as a matter

of law,” and as such, it is the jury’s responsibility to, “in

light of all the documentary and testimonial evidence,

[glean] the intent of the parties and [determine] the

terms of the contract.” Otto, 134 F.3d at 848.

There remains one final loose end on this issue. On

remand the district court might conclude that the obligation to transfer physical possession of the note (or a

copy) is a “missing term” in the contract that should be

supplied by a court as a matter of law. See, e.g., Cheever,

578 N.E.2d at 984 (“It is not uncommon for a court to

supply a missing material term, as the reasonable conclusion often is that the parties intended that the term

be supplied by implication.”). Courts are generally reluctant to imply missing contract terms; this reluctance

flows from a concern about mistakenly binding contracting parties to terms outside their agreement. E.g.,

Architectural Metal Sys., Inc. v. Consol. Sys., Inc., 58 F.3d

1227, 1229 (7th Cir. 1995) (“The more willing the courts

are to interpolate missing terms, the more difficult it is

for the recipient of a vague offer to interpret the intentions behind the offer.”). Even so, the conduct of the

parties or customary practice may suggest that the purchaser of a mortgage must receive the note, a copy, or

other documentary evidence establishing ownership of

the debt as an implicit term of the parties’ contractual
No. 08-2153 11

understanding, especially since a party may not transfer

its interest in the mortgage without transferring its interest in the debt. See Moore, 366 N.E.2d at 599. We express

no opinion on this question. Because The Patrick Group

never raised this argument in this court, we leave

the matter for the district court to consider in the first

instance.

B. Damages Caused by the Alleged Breach

The district court’s alternative basis for entering summary judgment for CitiFinancial was that CitiFinancial’s

failure to turn over the original or a copy of the note

was not the cause of The Patrick Group’s damages. The

Patrick Group argues that causation is established as a

matter of law because the state-court decisions would

have been different if it could have produced an original

or a copy of the note. CitiFinancial maintains that because

there were alternative ways of proving ownership of

the note, the dismissal of the foreclosure action was not

caused by its failure to deliver the note.

We begin with the observation that the particular

causation question here is a legal, not a factual one.

Although the general rule is that the determination of

causation is for the fact finder, Illinois courts apply a

special rule in breach-of-contract claims where the

asserted damage is caused by an adverse outcome of a

judicial proceeding. See, e.g., O’Neil v. Cont’l Bank, N.A., 662

N.E.2d 489, 496 (Ill. App. Ct. 1996). In O’Neil the

plaintiff submitted a bid to purchase real estate in a

bankruptcy proceeding; the plaintiff claimed the defen-
12 No. 08-2153

dant agreed to support confirmation of the bid in the

bankruptcy court. When the time came for the defendant to so, however, the defendant remained silent and

the bankruptcy judge accepted a competitor’s bid. In the

ensuing breach-of-contract action, the Illinois Appellate

Court held that as a matter of law, the defendant’s breach

caused the plaintiff’s bid to fail. Id. at 497. The causation

inquiry, the O’Neil court said, was a legal question for

the court if the bankruptcy judge acted “in his role as

‘judge,’ not as ‘fact finder.’ ” Id. at 496.

Under O’Neil, as we have noted, the causation inquiry

in this context is a legal question; the state courts that

rejected The Patrick Group’s foreclosure action were

acting in their capacity as judges and not as fact finders.

The trial court in the foreclosure action took the issue out

of the jury’s hands by entering a directed verdict against

The Patrick Group—a decision the appellate court affirmed. These courts concluded that The Patrick Group

failed to make out a prima facie case because it had not

shown it was a “noteholder,” and in Illinois the question

of whether a plaintiff has presented a prima facie case is

a question of law. E.g., People ex rel. Sherman v. Cryns,

786 N.E.2d 139, 148 (Ill. 2003). Since the Illinois courts

acted in their capacity as judges, not as fact finders, this

particular causation question is a legal one.

O’Neil is also instructive because it emphasizes that in

a breach-of-contract action like this one, which turns on

how the defendant’s conduct affected the outcome of a

judicial proceeding, the proper question to ask at the

causation stage is what a reasonable court “should have
No. 08-2153 13

The parties briefly dispute who bears the burden of proving 3

causation. O’Neil contains language suggesting that the burden

of proof on causation shifts from the plaintiffs to the

defendants if the plaintiffs show that the defendant’s breach

“materially contributed” to the outcome of the judicial proceeding. O’Neil v. Cont’l Bank, N.A., 662 N.E.2d 489, 496-97 (Ill.

App. Ct. 1996). But this language is drawn from RESTATEMENT (SECOND) OF CONTRACTS § 245 (1981), and that section

addresses causation in the context of determining when a

party’s failure to perform a condition means the party has

breached its contract. Accord Cummings v. Beaton & Assocs., Inc.,

618 N.E.2d 292, 306 (Ill. App. Ct. 1992). In this case, by contrast,

we are confronted with the ultimate question of whether a

defendant’s breach caused the plaintiff’s damages.

We need not resolve the matter here. Plaintiffs normally bear

the burden of proving the elements of their claims, see TAS

Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 633 (7th Cir.

2007); Midland Hotel Corp. v. Reuben H. Donnelley Corp.,

515 N.E.2d 61, 66 (Ill. 1987); Dyduch v. Crystal Green Corp., 582

N.E.2d 302, 305 (Ill. App. Ct. 1991), and for reasons we

will explain, The Patrick Group has established causation as

a matter of law.

done” had the defendants followed through on their

agreement. 662 N.E.2d at 496. The inquiry therefore

focuses on what a reasonable court should have done in

the foreclosure action had CitiFinancial given The Patrick

Group the original or a copy of the note secured by the

mortgage.3

This question turns on principles of Illinois mortgageforeclosure law. Generally speaking, only a mortgagee

can foreclose on property, and a mortgagee must (at a

minimum) be “the holder of an indebtedness . . . secured
14 No. 08-2153

by a mortgage.” 735 ILL. COMP. STAT. 5/15-1208. Under

the Uniform Commercial Code, which Illinois has adopted,

810 ILL. COMP. STAT. 5/1-101 et seq., a key requirement

to being a holder is physical possession of the note

secured by the mortgage. See id. 5/1-201(b)(21)(A) (defining a holder as “the person in possession of a

negotiable instrument that is payable either to bearer or

to an identified person that is the person in possession”).

Had CitiFinancial delivered the original or a copy of the

note, The Patrick Group would in turn have been able

to produce it in the foreclosure proceeding and thus fill

the evidentiary void on which the Illinois trial and appellate courts rested their adverse decisions. A reasonable court under these circumstances would have

allowed The Patrick Group to proceed with the foreclosure. It follows, then, that CitiFinancial’s failure to

deliver the note or a copy to The Patrick Group caused

the foreclosure action to fail.

CitiFinancial raises two arguments in response,

which do not address causation so much as they address

whether The Patrick Group “use[d] all reasonable means

to mitigate [its] damages.” Pokora v. Warehouse Direct,

Inc., 751 N.E.2d 1204, 1213 (Ill. App. Ct. 2001). First,

CitiFinancial contends that The Patrick Group could

have asked it to provide a lost-note affidavit, which could

then have been used to establish ownership of the debt

secured by the mortgage and thus foreclose on the property. Second, CitiFinancial claims that The Patrick

Group could have filed a personal-judgment action

against the property owners based on its ownership

interest in the note. Neither of these arguments carries

the day.
No. 08-2153 15

In Illinois a party may foreclose on a mortgage without suing 4

to enforce the underlying promissory note. See Hickey v. Union

Nat’l Bank & Trust Co. of Joliet, 547 N.E.2d 4, 7 (Ill. App. Ct.

1989). Only mortgagees may foreclose upon property, and a

mortgagee is defined as “the holder of an indebtedness . . .

secured by a mortgage,” “any person designated or authorized

to act on behalf of such holder,” or “any person claiming

through a mortgagee as successor.” 735 ILL. COMP. STAT. 5/15-

(continued...)

A lost-note affidavit from CitiFinancial would not

have conclusively established The Patrick Group’s ability

to foreclose on the mortgage. The Illinois rules of civil

procedure provide that if a claim rests upon a written

instrument, as foreclosure actions do, the plaintiff must

attach a copy of the written instrument to the pleading.

735 ILL. COMP. STAT. 5/2-606. It is true that if the instrument is not available, a party may proceed with the

action by relying on an affidavit explaining why the

instrument is not available and describing its terms,

id.; this is commonly called a “lost note affidavit.” The

Uniform Commercial Code contains a similar concept,

allowing a party to enforce a lost, stolen, or destroyed

instrument if it can prove the terms of the instrument

and its right to enforce the instrument. See 810 ILL. COMP.

STAT. 5/3-309(b).

CitiFinancial’s argument assumes that a party may

succeed in a foreclosure action under 735 ILL. COMP. STAT.

5/15-1208 so long as it can produce a lost-note affidavit.

Even if we assume that Illinois law permits a party to

use a lost-note affidavit as part of its proof, a lost-note 4
16 No. 08-2153

(...continued) 4

1208. But no published Illinois decisions address whether a

party may foreclose upon a mortgage if it owns the interest in

the note (as CitiFinancial argues) or whether the party must

show that it holds the note in order to foreclose upon the

mortgage.

The inquiry is made more complicated by the fact that by

concluding that The Patrick Group could not enforce the

mortgage, the Illinois Appellate Court treated these concepts

as interchangeable. The appellate court observed that the trial

court had entered a directed verdict because the “plaintiffs

lacked any interest in the debt, or, put another way, were not

holders of the note and, therefore, not entitled to foreclose

the mortgage,” and concluded that The Patrick Group was not

the noteholder because CitiFinancial “did not transfer the note

to plaintiffs and . . . the plaintiffs never had possession of it.” 

O’Neil instructs that we consider how a reasonable court

should have acted if The Patrick Group had presented a lostnote affidavit. As we have noted, there are no precedential

Illinois decisions to guide us, but other courts have in some

circumstances concluded that a party may foreclose so long

as it shows it owns the underlying debt. See Ocwen Fed. Bank,

FSB v. Harris, No. 99-C-658, 2000 WL 1644377, at *4 (N.D. Ill.

Oct. 24, 2000) (interpreting Illinois law to allow a foreclosure

to proceed even though note was missing because there was

no dispute that plaintiff had title to the mortgage and the

underlying debt); accord Atl. Nat’l Trust, LLC v. McNamee, 984 So.

2d 375, 378-79 (Ala. 2007); New England Sav. Bank v. Bedford

Realty Corp., 680 A.2d 301, 309-10 (Conn. 1996). We will

assume for the sake of argument that Illinois law would allow

The Patrick Group to proceed with foreclosure if a lost-

(continued...)
No. 08-2153 17

(...continued) 4

note affidavit could have convinced a reasonable court that

it owned the note.

affidavit would not have helped The Patrick Group

under the circumstances of this case. Lost-note affidavits are most commonly used to prove the terms of the

underlying debt; they are rarely enough by themselves

to prove ownership of a debt. Although a few courts

have allowed foreclosure to proceed based on a lostnote affidavit, the affidavits in these cases also attached

a copy of the underlying original note. E.g., First Fed. Sav.

& Loan Ass’n of Chi. v. Chi. Title & Trust Co., 508 N.E.2d

287 (Ill. App. Ct. 1987) (finding that an affidavit and

copies of note and mortgage were sufficient to support

foreclosure action). We are not aware of any case in

Illinois in which a lost-note affidavit by itself was

enough to prove ownership of the underlying debt, and

CitiFinancial has not identified other documentary or

testimonial evidence that, in combination with a lostnote affidavit, would have filled the evidentiary vacuum

identified by the Illinois trial and appellate courts in

The Patrick Group’s foreclosure action.

Thus, CitiFinancial’s ability to provide a lost-note

affidavit if The Patrick Group had asked is simply a red

herring. This is especially so considering the gap in the

chain of title in this case. The decisions of the state trial

and appellate courts reflect an understandable concern

that CitiFinancial might not have been the true owner

of the debt. Because neither The Patrick Group nor
18 No. 08-2153

CitiFinancial could produce an original or even a copy

of the note, there remained the possibility that the note

was actually held by another who would be entitled to

enforce it against the property owners. This concern

was reasonable in light of the questions raised by the

ambiguous state of the title record. Illinois law is clear

that a mortgage may not be transferred unless the underlying debt is also transferred. In re BNT Terminals,

Inc., 125 B.R. 963, 969 (Bankr. N.D. Ill. 1990) (applying

Illinois law); Moore, 366 N.E.2d at 599. It might have

been theoretically possible to establish ownership of the

underlying debt by tracing it through a title search back

to the original mortgagee. See Fin. Freedom v. Kirgis, 877

N.E.2d 24, 45 (Ill. App. Ct. 2007) (allowing a foreclosure

action to proceed when the plaintiff produced testimonial evidence, a copy of the mortgage, and evidence

that the mortgage was recorded). But that possibility

would not have helped The Patrick Group here given the

unexplained gap in the title record. Accordingly, the fact

that The Patrick Group might have obtained a lost-note

affidavit from CitiFinancial does not alter the conclusion

that CitiFinancial’s failure to deliver an original or a

copy of the note caused the Illinois state courts to

reject The Patrick Group’s foreclosure action.

Finally, CitiFinancial argues that The Patrick Group

could have filed a personal-judgment action against the

property owners based on its interest in the note. A

personal-judgment action amounts to an effort to enforce

the note, and the normal rule under the Uniform Commercial Code is that a party may not enforce a negotiable

instrument unless it has physical possession of the note.
No. 08-2153 19

810 ILL. COMP. STAT. 5/3-301 (class of parties entitled to

enforce negotiable instruments under Illinois law is

limited to “the holder of the instrument” or “a nonholder

in possession of the instrument”); Locks v. N. Towne Nat’l

Bank of Rockford, 451 N.E.2d 19, 20-21 (Ill. App. Ct. 1983).

Obviously, The Patrick Group could not meet this requirement because it never had possession of the note. As

we have discussed, Illinois allows a party to enforce a

lost, stolen, or destroyed instrument under certain circumstances, 810 ILL. COMP. STAT. 5/3-301, 5/3-309, and

here, The Patrick Group was entitled to acquire whatever

rights CitiFinancial had in the note, see FREDERICK M.

HART & WILLIAM F. WILLIER, NEGOTIABLE INSTRUMENTS

UNDER THE UNIFORM COMMERCIAL CODE § 12.03(1) (2009)

(“[T]he owner of an instrument may not be in possession

of it. Such non-holder transferees are protected by the

property principle that a transferee of property, be it real

property, tangible personal property or intangible property, obtains all of the rights of his or her transferor as

a result of the transfer.”).

Put another way, The Patrick Group might have been

able to proceed with a personal-judgment action if it

could establish that CitiFinancial “was in possession of

the instrument and entitled to enforce it when loss of

possession occurred,” that “the loss of possession was not

the result of a transfer . . . or a lawful seizure,” and that

CitiFinancial “cannot reasonably obtain possession of

the instrument because the instrument was destroyed,

its whereabouts cannot be determined, or it is in the

wrongful possession of an unknown person or a person

that cannot be found or is not amenable to service of
20 No. 08-2153

We do not address the separate question of the amount of 5

The Patrick Group’s damages.

10-5-10

process.” 810 ILL. COMP. STAT. 5/3-309(a). But this is just

a different way of requiring The Patrick Group to prove

that CitiFinancial owned and transferred the debt, and

we have already explained why a reasonable court would

conclude that The Patrick Group could not make this

showing. Accordingly, a personal-judgment action to

recover the amount of the past-due debt would have failed.

In short, as a matter of law, The Patrick Group’s

damages were caused by CitiFinancial’s failure to deliver

an original or a copy of the note secured by the mortgage.5

The open factual question is whether the parties’ agreement required CitiFinancial to do so, and on this the

evidence is disputed. We therefore REVERSE the judgment of the district court and REMAND for further proceedings consistent with this opinion.