## I L L I N O I S 

## O F F I C I A L 

## RE P O R T S Appellate Court

Turczak v. First A m erican Bank , 2013 IL App (1st) 121964

Appellate Court Caption LAURA J

. TURCZA K and ROBERT M. L EW, Plaintiffs-Appellants, v. FIRST AMERI CAN BA

NK and L EBO W, MAL ECKI & TASCH, L L C, Def endants-A

ppellees.

District & N o. First District, Third Division Docke t No. 1-12-1964

Filed October 2, 2013

Held (Note : This syl lab us

co n st it ute s no par t of the opi nio n of the cour t but has bee n pre

par ed by the Repo r t er of D e c i s i o n s f

o r t h e

c o n v e n i e n c e o

f t h e

rea der

. ) T h e defa ult judgme nt defe ndant bank obtained on the promissory n o t e

securing its second mortg ag e on plaintiffs’ residenc e did not bar defe ndant from enforcing its second mortg ag e on the residenc e, since I llinois law allows such a cre ditor to c onsecutively or conc urre ntly seek

rec overy on a mortg ag e and the note securing the mortg ag e; further more, the defa ult judgme nt obtained by the first mortg ag or’s fore closure action did not exti nguish the second mortg ag or’s second mortg ag e lien in the absenc e of a judicial sale of the proper ty and the confirmation of the sale, and, there fore
, plaintiffs’ ac ti o n a ll e g in g th a t d e f endant second mortg ag ee and its law firm violated the Consumer Fr aud and Dec ep t ive Business Practice s Act and the Fa ir Debt Collections Practice s Act by demanding $6,000 from plaintiffs for the execution of a rele ase to complete the short sal e plaintiffs arr ang ed was proper ly dismiss ed, since the second mortg ag ee’ s rig hts in the property had not bee n exti nguished.

Dec ision Under Review Appea l from the Circuit Court of Cook County
, No. 11-M-4001670; the Hon. J ames Ga

vin, J udg e, pre siding.

J udg ment Affir med.Counsel on

Appea l Brian M. For nek, of B rian M. F ornek & Associates, P C, of Batavia, for appellants.

Richard K. Heller

man and Mark D. Be longia
, both of Roetzel & Andre ss, L PA, of Chicag o, for a

ppellee F irst America

n Ba nk.

J ohn Duffy
, Kar en DeGr and, and Michae l Carney
, all of Donohue Br own Mathewson & Smy

th, L L C, of Chicag o, for appellee L ebow, Malec ki & Tasch, LL C.

Panel PRES IDI NG J USTI CE HYMAN delivere d the judgme nt of the co u rt , with opinion.
J ustices Pucinski and Mason conc urre d in the judgme nt and opinion.

OP INION

¶ 1 For plaintiffs to close a short sale, defe ndants, the second mortg ag ee and the law firm that
repr esente d the second mortg ag ee, conditioned the rele ase o f t h e s econd mortg ag e on plaintiffs paying $6,000. T his pay ment forms the ba sis for plaintiffs’ c laims. ¶ 2 Plaintiffs contend that once the second mortg ag ee had obtained a defa ult judgme nt on its promissary note, the doctrine of res judicata barr ed any action on the second mortg ag e and defe ndants’ demand for $6,000 to execute the rele ase violated the I llinois Consumer Fr aud and Dec eptive Business Practice s Act (in the case of the second mortg ag ee) (815 I L CS 505/1 et seq. (West 2008)) and the fede ral F air De bt Coll ections Prac tices Ac t (in the ca se of the law firm) (15 U.S.C. § 1692 et seq. (2006))

. The trial court dismiss ed the complaint for lack of leg al sufficie ncy

. We a ffirm. I llinois law holds a lender may proce ed in se parate suits to enfor ce the mortg ag e and the underly ing promissory note, and the second mortg ag ee’ s rights in the proper

ty wer e not extinguished as a matter of la

w.

¶ 3 BA CKGROUND ¶ 4 Wells Fa

rg o Ba nk and First Am er i ca n Bank financ ed plaintiffs L aura Turczak’ s and Robert L ew’ s purcha se of a residenc e at 13 0 0 Dods on Ave., Elburn, I llinois

. Wells Fa rg o

secur ed it s $391,250 loan wit h a promiss ory note an d first mortg ag e on the property

. First Americ an secur ed its $73,335 loan with a promissory note, in which plaintiffs wer e jointly and sever ely liable for the repa y ment of the principle, and a second mortg ag e on the proper ty

. Both the Wells Fa

rg o and F irst America

n mortg ag es we re dated August 9, 2007. ¶ 5 In 2010, plaintiffs stopped paying off the loans. In J une 2010, W el l s Fa rgo fi l ed t o fore close its mortg ag e ag ainst plaintiffs and First Americ an. On September 3, 2010, Wells

-2-Fa

rg o obtained a “Va

riable For eclosure Orde r” finding plaintiffs, First Americ an, and other parties in defa

ult. J udg ment for fore closure and sale was enter ed in the am o u n t of $408,597.92. ¶ 6 Also in J une 2010, during the pendenc y of Wells Fa rg o’s action, First Americ an, through defe ndant law firm, sued plaintiffs on the promissory note that sec u re d First Americ an’s second mortg ag e. On De ce mb er 21, 2010, First Americ an obtained a defa ult judgme nt ag ainst plaintiffs in the amount of $80,986.93 and rec orded a memorandum of the judgme nt in Kane County on Dec ember 28 (the Wells Fa rg o and First Americ an lawsuits wer e all filed in the circ uit court of Kane County as the proper ty was located in Kane County). Under the judgme nt First Amer ican c ould ga rnish eac h plaintiff’s wa g es. ¶ 7 P l ai n t i ffs tried to set up a short sale of the proper ty betwee n September 3, 2010, and Marc h 10, 2011, with a sale being subject to the approva l of Wells Fa rg o and First Americ an. Plaintiffs alleg e that duri ng this time, First Americ an ref used to consent to any short sale unless the balanc e it was due on its promissory note or the de fault judg ment was pa id. ¶ 8 Plaintiffs rec eived an offe r of $277,000 for the proper ty

. Although not enough to satisfy Wells Fa rg o’s judgme nt, Wells Fa

rg o agree d to approve the short sale if, among other things, First Americ an executed a rele ase of its mortg ag e lien. First Americ an require d plaintiffs pay $6,000 to sign the rele ase. On Marc h 7, 2011, plaintiffs secur ed First Americ an’s rele ase of its mortgag e lien af

ter pa ying $3,000 a

nd Wells Farg o contributingthe re maining $3,000. ¶ 9 Plaintiffs alleg ed that during the time plaintiffs tried to sell the p ro p er t y , d ef en d an t L ebow, Malec ki & Tasch, L L C, the law firm for First Americ an, eng ag ed in false o r misleading conduct by maintaining that First Americ an had an enfor cea ble second mortg ag e afte r obt ainingthe judg ment on First American’ s promissory note. Plaintiffs plead the la w firm violated the fede ral Fa ir Debt Collections Practi ce s Act (15 U.S.C. § 1692 et seq. (2006)) (F DCPA). ¶ 10 Plaintiffs further alleg ed First Americ an violated either the I llinois Consumer Fr aud and Dec eptive Business Practice s Act (815 I L CS 505/1 et seq. (We st 2008)) or a valid interlocutory order

. Plaintiffs pled Fi rs t Am eric an could not have soug ht to fore close the second mortg ag e whe n it tied the rele ase of the second mortg ag e to the pay ment. Plaintiffs do not challeng e the enfor cea bility of the $80,986

. 9 3 j u d gm ent in First Americ an’s promissory

note ac tion ag ainst them. ¶ 11 Def

endants moved to dismiss th e co mp laint under section 2-615 of the Code of Civil Procedur e. 735 I L C S 5/2-615 (West 2008). They argued that First Americ an’s defa ult judgme nt on the promissory note securing the second mortg ag e did not bar First Americ an from enfor cingits second mortg ag e bec ause I llinois law allows a cre ditor to c onsecutively

as well as concur

rently pursue reme dies on a mortg ag e and the note securing the mortg ag e. Def endants also arg

ued I llinois law rec og nizes that Wells Fa rg o’s defa ult judgme nt did not exti nguish First Americ an’s second mortg ag e lien i n t h e ab s ence of a judicial sale of the
proper ty and judicial conf

irmation of the sale

. ¶ 12 W ithout a written order explaining its rea soning, the trial court dismiss ed p l ai n t i ff s ’ complaint with prejudice

. ¶ 13 Plaintiffs tim ely appea l.

-3-¶ 14 ANALYSI S

¶ 15 A section 2-615 motion to dismiss attacks “the leg al sufficie ncy of a complaint based on defe cts appar ent on its fac e.” Pooh-Bah Enterprises, Inc. v. County of Cook
, 232 I ll. 2d 463, 473 (2009); see 735 I L CS 5/2-615 (West 2 0 0 8 ). In deciding a motion to dismiss under

s ection 2-615, the trial court considers only the “fa cts appar ent from the fac e of t h e pleading s, matters of which the court can take judicial notice, and judicial admissions in the

rec ord.” Pooh-Bah Enterprises, In c. , 232 I ll. 2d at 473. All well-plea ded fac ts and all

rea sonable infere nces that may be drawn from those fac ts must be acc epted as true. Id. Mere conclusions of law or fac ts unsupported by specific fac tual alleg ations in the complaint are disreg arde d. Id. The trial court should g rant the motion to dismiss if it is “clea rly appar ent that no set of fac ts can be proved that would entitle the plaintiff to relief .” Id. We revie w the trial court’ s g rantingof a se ction 2-615 motion to dism iss de novo

. Id.

¶ 16 Completeness of Rec ord ¶ 17 Fi rs t Am er i ca n argues that without the trial court’s “extensive rea soning and lengthy questioning of counsel during the two-day s of hearings” or a cer tified by stander’ s aff

idavit (I ll. S. Ct. R. 323(c) (ef

f. Dec

. 13, 2005)), plaintiffs failed to satisfy their burden of providing a suff iciently complete r ecor d on the proc eeding s below. ¶ 18 Wit h no rec ording and the trial court declining to issue a written opinion or, appar ently
, explain its ruling in open cou rt , we question what a by stander’ s repor t summarizing counsel’s arguments would add, particula rly beca use the standard of revie w is de novo

. As the court noted in Maynard v. Parker
, 54 I ll. App

. 3 d 141, 142-43 (1977), “Where the judgme nt appea led from relates only to a question of law involving an order which was part of the common law rec ord, the rec ord on appea l is adequate wi t h o u t a transcript of
proce eding s.” ¶ 19 As our revie w is de novo , we will addre ss plaintiffs’ claims of err or on the merits. Be fore doing so, howeve r, we take this opportunity to remind trial judge s that, unlike umpires, they
must justify the substance of their decisions. Ex plaining a ruling
, either orally or in writing
, instil ls confide nce in the impartiality and fairne ss of the judge and enhanc es respe ct for the
courts. Whil e who preva ils matters, the “why ” also matters, and not just to the losing party

. The parties, the leg al profe ssion, a nd the public are more likely to pla ce g reater confide nce in our leg al sy stem when judg es g ive re asons for the ir dec isions.

¶ 20 Res Judic ata ¶ 21 Plaintiffs argue that First Americ an should have ad j u d i ca t ed the promissory note and mortg ag e toge ther in a single action, both documents having been signe d as part of the same orig inal transac tion. And, once First Americ an succe ssfully obtained the final judgme nt on the promissory note, the principles of res judicata come into play to bar any other action to enfor ce the second mortg ag e, there by establishing the fra udulent nature of the sine qua non for the relea se. I f plaintiffs ar e wr ong , and the doc trine of res j udicata does not exti nguish

-4-the sec ond mortg ag e lien, their c auses of action dese rve dismissal. ¶ 22 Res judicata
, an equitable doctrine, preve n t s t h e m u l t i p l i city of lawsuits betwee n the

same parties involving the same f acts a nd issues. Murneigh v. Gainer
, 177 I ll. 2d 287, 299 (1997). After a court of competent jurisdiction enter s a final judgme nt on the merits, res judicata bars the same parties or their privies from relitig ating cause s of action that wer e or could have been raised in the earlier lawsuit. L a n e v. Kalcheim
, 394 I ll. App. 3d 324, 329 (2009); Hudson v. City of Chicago
, 228 I ll. 2d 462, 467 (2008) ( res judicata also applies to

cause s of ac tion that could have be en dec ided). ¶ 23 For res judicata to apply
, the party must show eac h of the following elements: (1) a final judgme nt on the merits rende red by a court of competent jurisdic t ion; (2) an identity of

cause s of action; and (3) an identity of the parties or their privies. Kalcheim
, 394 I ll. App. 3d at 329-30. He re, the decisive e lement is the identity of the c auses of

action. ¶ 24 I llinois follows the so-ca lled transac tional test to deter mine the identity of the cause s of action. River Park, Inc. v. City of Highland P a rk
, 1 8 4 I ll. 2d 290, 310 (1998). The
transac tional test considers separ ate claims as part of the same cause of action, even without sub s t an tial overla

p in the evidenc e, as long as the claims “arise from a single g roup of
operative fac ts, reg ardle ss of whether they asser t differ ent theories of relief .” River Park
, 184 I ll. 2d at 311. ¶ 25 Plaintiffs maintain that (i) from S ep t em b er 3, 2010 (date of entry of defa ult judgment
ag ainst First Americ an in Wells Fa rg o’s fore closure suit), until at least Marc h 10, 2011, First Americ an d i d n ot possess an enforce able mortga g e li en; and (ii) from Dec ember 29, 2010 (day afte r First Americ an rec orded its defa ult judgme nt ag ainst plaintiffs in First Americ an’s suit to enforce th e p ro m i ssory note) until at least Marc h 10, 2011, First Americ an’s only enfor cea ble lien was its judgme nt lien. Consequently
, plaintiffs contend, res judicata
prec ludes First Americ an from asser ting its mortg ag e lien in exchang e for consenting to the short sale. ¶ 26 Plaintiffs rely on Skolnik v. Petella
, 376 I ll. 500, 507 (1941), for t h e p ro p o sition t hat under the doctrine of res judicata
, a lawsuit to fore close a mortg ag e and a lawsuit to enfor ce persona l liability on the underly ing note must be pursued in a single action. Plaintiffs submit that no decision of the I llinois Supreme Court or any appella t e decision has allowed a mortg ag e lende r to split it s note and mortg ag e enf orce ment actions. ¶ 27 Not only does the Skolnik case not help plainti ff s , b u t we l l -s et t l ed I llinois case law permits lender s to bring se parate enf orce ment actions on the mortg ag e and the note. ¶ 28 In Skolnik
, the bank tried to maintain a second action for a defic iency ag ainst an assig nee afte r havi n g al re ad y sued and obtained a judgme nt on the defic iency claims ag ainst the orig inal debtors. These fac ts marke dly differ from the fac ts prese nted here

. And, the holding in Skolnik is consistent with res judicata principles beca use the second action on the defic iency

was nothingmore than a do-over of the fir st action on the def iciency

. ¶ 29 Ca s e l aw d i s cr ed i t s plaintiffs’ argument as well. Def endants cite a number of ca ses holding a note acc ompanying a mortg ag e need not be enfor ced in a single case

. Farmer City State Bank v. Champaign National Bank
, 138 I ll. App. 3d 847, 852 (1985) (mortg ag ee may

consec uti v el y p ursue collection on note and mortg ag e fore closure) ; see also Treadway v.

-5-Nations C redit Financial Service

s Corp. , 383 I ll. App. 3d 1124, 1131 (2008) (same). ¶ 30 In another case , LP XXVI, LLC v. Goldstein
, 349 I ll. App. 3d 237, 242 (2004), which is discussed in depth by the parties, defe ndant executed a promissory no t e, s ecur ed by a mortg ag e to the plaintiff’s prede cessor in interest, as well as a persona l “Comm ercial Guar anty .” Goldstein
, 349 I ll. App. 3d at 2 3 8

. T h e o bligor s on the note defa ulted and the plaintiff’s prede cessor filed suit to fore close the mortg ag e. Goldstein
, 349 I ll. App. 3d at 239. The proper

ty was sold at a sheriff’s sale leaving a defic iency
, which the plaintiff’s prede cessor obtained in an in rem defic ien cy j u dg ment. Id. The plaintiff was assigned all interests in the note, the guara nty , and the defic iency judgme nt and sued based on the “Commercia l Guara

nty” of the note. The defe ndant m oved to dismiss
, claiming the action

was barred u n d er the doctrine of res judicata

. Id. The trial court g rante d the defe ndant’s motion to di smiss. ¶ 31 Applying the transac tional analy sis, the Goldstein court held that while the transa ctions

wer e re lated, “w e do not believe that their mere proxi mity in time and the ove rlap of some of t he par ties rende r them a sing le transa ction, espec ially in light of the pur

pose of eac h of the transac tions.” Id. at 241. The court observe d, “It is *** set tled that, upon defa ult, the mortg ag ee is a llowed to choose whether to proce ed on the not e or g uara nty or to fore close

up o n the mortg ag e. ‘These reme dies may be pursued consec utively or concur rently

. ’ ” Goldstein
, 349 I ll. App. 3d at 241 (quoting Farmer City State Bank v. Champaign National Bank, 138 I ll. App. 3d 847, 852 (1985)). ¶ 32 A case cited by Goldstein
, Citi corp Savings of Illinois v. Ascher
, 196 I ll. App. 3d 570, 574 (1990), specific ally held that a judgme nt of fo re cl o s ure will not bar a later suit on a guara nty beca use the fore closure judgm en t does not adjudicate the defe ndant’s rights and liabiliti es under a guara

nty contra ct and, thus, the doctrine of res judicata is not implicated. See also Du Quoin State Bank v. Daulby
, 115 I ll. App. 3d 183, 186 (198 3 ) (pre vious fore closure did not re solve defe ndant’s liability under pe rsonal guara

nty). ¶ 33 P l ai n t i ff

s al s o asser

t ABN Amro Mortgage Group, Inc. v. McGahan
, 237 I ll. 2d 526 (2010), requires a contrary result. There
, the I llinois Supreme Court held that a mortg ag e fore closure suit is quasi in rem , as opposed t o i n rem , beca use it involves both an action
ag ainst rea l property as well as a monetary claim for persona l liability

. Neve rtheless, ABN Amro does not alter the ability to bring a separ ate suit on the promissory note, which rema ins

a purely in personam proce eding

. In an oft-quoted footnote, the United States Supreme Court summarized the distinction of the three c lasses of leg al proc eeding s: “A judgment in personam imposes a personal l iability or obl iga tion on one p er s o n in f avor of another

. A judgme nt in re m aff ects the interests of all persons in de signated
proper ty

. A judgme nt quasi in rem aff ects the interests of particula r persons in designated
proper ty

. The latter is of two ty

pes. In one the plaintiff is seeking to secur e a pre- exis ting claim i n the s ubject property and to exti nguish or establish the none x istence of simil ar interests of particula

r persons. In the ot her the plaintiff s eeks to apply what he [or she]

conce des to be the proper

ty of the defe ndant to the satisfac tion of a claim ag ainst him [or her].” Hanson v. De nckla , 357 U.S. 235, 246 n.12 (1958). Thus, while in rem differ s from quasi in r em , b o t h are alternatives to in personam

-6-jurisdiction. For eclosure suits on proper ty , quasi in rem proce eding s, apply a leg ally distinct

reme dy from an in personam proce edingon a promissory note. ¶ 34 No compellingrea sons exi st to abandon this settled law. ¶ 35 Next, plaintiffs rea d the I llinois Mortg ag e For eclosure L aw (735 I L CS 5/15-1101 et seq. (West 2008)) as requiring enfor ceme nt of the note and mortgag e toget h er i n a si ng le case. Yet, the languag e perta ins only to actions to fore close mortg ag es and say s nothing that would make it applicable to other ty pes of l aw s u i t s , i ncluding actions at law for judgme nt on a promissory note. Moreove r, section 15-1504 states that a “[forec losure] complaint *** may be joined with other counts or may include in the same count additional matters or a reque st for any additional relief

.” (Emphase s added.) 735 I L CS 5/15-1504(b) (West 2008). It hardly needs to be said that “may” is a pe rmissive, not a mandatory , term. ¶ 36 As for plaintiffs’ arg ument that Wells Fa

rg o’s defa ult judgme nt ag ainst First American exti nguished First Americ an’s second mortg ag e, the statute specific ally provides otherwise. After a judgme nt of fore closure, only a judicial s al e o f t h e proper ty followed by judicial confirmation of t he sale will terminate “with finality” the rights of t hird parties. 735 I L CS 5/15-1404 (West 2008). Wells Fa rg o never held a judicial sale of the proper ty

. There fore
, as

a matter of law, First Am er i ca n wa s under no leg al restra int in seeking a pay ment in exchang e for

signingthe re lease of its second mortg ag e. ¶ 37 The I llinois Consumer Fr aud and Dec eptive Business Practice s Act and the fede ral F air Debt Collection Practice s Act cla ims hinge on First American and its law firm misleading plaintiffs on the viability of First Americ an’s s ec o n d mortg ag e. Having decide d ag ainst plaintiffs on the premise underlying the claims, neither claim survives the motion to dismiss

. The motion to dismi ss is affirmed.

¶ 38 Affir

med.

-7-