Turczak v. First American Bank
2013 IL App (1st) 121964
Ill. App. Ct.2013Background
- Plaintiffs (Turczak and Lew) defaulted on two loans: Wells Fargo (first mortgage) and First American (second mortgage secured by a promissory note).
- Wells Fargo obtained a foreclosure judgment in Sept. 2010; First American obtained a default judgment on its promissory note in Dec. 2010 and recorded it.
- Plaintiffs pursued a short sale; Wells Fargo conditioned approval on First American releasing its second-mortgage lien.
- First American (through its law firm) required $6,000 to execute the release; plaintiffs paid $3,000 and Wells Fargo paid $3,000 to obtain the release.
- Plaintiffs sued, alleging (1) res judicata extinguished First American’s mortgage rights after its note-judgment and Wells Fargo’s foreclosure judgment, and (2) defendants violated the Illinois Consumer Fraud Act and the FDCPA by demanding payment to release the mortgage.
- The trial court dismissed the complaint under section 2-615; the appellate court affirmed, holding separate suits on a note and mortgage are permitted and no foreclosure sale had extinguished First American’s lien.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether res judicata barred enforcement of the second mortgage after First American’s judgment on the note | First Am. should have enforced note and mortgage together; final judgment on note extinguished mortgage rights | Lender may pursue note and mortgage consecutively or concurrently; judgments did not extinguish mortgage lien absent sale/confirmation | Res judicata did not bar enforcement; lender may bring separate actions; mortgage lien survived |
| Whether Wells Fargo’s foreclosure judgment extinguished First American’s second mortgage lien | Wells Fargo’s judgment foreclosing first mortgage eliminated junior mortgage | Foreclosure judgment does not terminate third-party rights unless followed by judicial sale and confirmation | Wells Fargo’s judgment did not extinguish First American’s lien because no judicial sale/confirmation occurred |
| Whether conditioning release on payment violated Illinois Consumer Fraud Act | Demanding payment for release was deceptive because mortgage rights were purportedly extinguished | Demand lawful because mortgage rights remained and release is valuable consideration | CFA claim fails because underlying premise (mortgage extinguished) is wrong |
| Whether law firm violated FDCPA by representing that mortgage was enforceable | Law firm misrepresented debt status in demanding payment for release | Law firm accurately represented First American’s rights; collection was lawful | FDCPA claim fails because debt-collection representations were legally supportable |
Key Cases Cited
- Pooh-Bah Enters., Inc. v. County of Cook, 232 Ill. 2d 463 (2009) (standard for 2-615 motion and de novo review)
- River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290 (1998) (transactional test for res judicata)
- Farmer City State Bank v. Champaign Nat’l Bank, 138 Ill. App. 3d 847 (1985) (mortgagee may pursue note and mortgage consecutively or concurrently)
- LP XXVI, LLC v. Goldstein, 349 Ill. App. 3d 237 (2004) (distinguishing remedies and permitting separate suits on note/foreclosure)
- ABN Amro Mortgage Grp., Inc. v. McGahan, 237 Ill. 2d 526 (2010) (foreclosure is quasi in rem but does not eliminate in personam remedies)
- Hanson v. Denckla, 357 U.S. 235 (1958) (explains distinctions among in personam, in rem, and quasi in rem judgments)