LSREF2 Nova Investments III, LLC v. Coleman
33 N.E.3d 1030
Ill. App. Ct.2015Background
- Nova Investments holds a $304,000 promissory note secured by a mortgage on 6456 S. Honore, Chicago, with Coleman as the mortgagor; Nova is the current holder, successor in interest to Citibank, N.A.
- Coleman defaulted on payments in 2010, prompting a foreclosure action by Nova’s predecessor in interest, seeking foreclosure and a personal deficiency judgment.
- The foreclosure judgment entered November 22, 2010, allowed for a deficiency judgment against Coleman if a deficiency remained, totaling $322,668.35 due to Nova.
- A January 2011 judicial sale occurred; Nova purchased the property for $100,000 and the February 28, 2011 order approved the sale and stated an in rem deficiency of $227,416.32 with interest.
- In May 2012 Nova filed a separate action to enforce the promissory note; Coleman moved to dismiss on res judicata grounds, which the circuit court granted on December 19, 2013, dismissing with prejudice.
- Nova appeals, arguing its in personam deficiency claim under the note is distinct from the foreclosure action and not barred by res judicata.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does res judicata bar the deficiency claim? | Nova: claim is distinct from foreclosure and not barred. | Coleman: there is identity of causes of action; the note claim arises from the same facts as the foreclosure. | Yes; claim barred under res judicata. |
| Is there an identity of causes of action under the transactional test? | Nova: separate remedies on the note and mortgage exist; not same cause. | Coleman: foreclosure and note claim arise from same default and same facts. | Yes; single group of operative facts from the deficiency, barred. |
| Did the foreclosure judgment and 15-1508(e) foreclose in personam deficiency recovery in subsequent suit? | Nova: could pursue in personam deficiency separate from foreclosure. | Coleman: 15-1508(e) permits in foreclosure, thus defers to prior remedy. | Definitively barred by res judicata. |
Key Cases Cited
- River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290 (1998) (transactional test governs identity of causes of action)
- Skolnik v. Petrella, 375 Ill. 500 (1941) (definitive bar when second action on deficiency could have been brought in first action)
- Turczak v. First American Bank, 2013 IL App (1st) 121964 (2013) (confirms Skolnik principles and res judicata applicability to deficiency actions)
- Farmer City State Bank v. Champaign National Bank, 138 Ill. App. 3d 847 (1985) (mortgagee may pursue note and foreclosure remedies consecutively or concurrently)
- Goldstein v. Goldstein, 349 Ill. App. 3d 237 (2004) (foreclosure does not bar separate in personam guaranty action; distinguishes in rem vs. in personam)
- LP XXVI, LLC v. Goldstein, 349 Ill. App. 3d 237 (2004) (recognizes concurrency/consecutiveness of remedies on mortgage and note)
- In re Liquidation of Legion Indemnity Corp., 373 Ill. App. 3d 969 (2007) (res judicata extends to issues that could have been decided)