Turczak v. First American Bank
997 N.E.2d 996
Ill. App. Ct.2013Background
- Plaintiffs Laura Turczak and Robert Lew executed a first mortgage to Wells Fargo and a second mortgage and promissory note to First American on the same residence; both mortgages dated August 9, 2007.
- Wells Fargo initiated foreclosure in June 2010 and obtained a foreclosure judgment; no judicial sale of the property occurred.
- First American separately sued on its promissory note in June 2010 and obtained a default money judgment against plaintiffs in December 2010; First American recorded the judgment.
- Plaintiffs negotiated a short sale for less than total indebtedness; Wells Fargo required First American to release its second mortgage for the sale to close.
- First American conditioned a release of its second-mortgage lien on payment of $6,000; plaintiffs paid $3,000 and Wells Fargo paid $3,000 to obtain the release.
- Plaintiffs sued alleging res judicata/that the judgment on the note extinguished the mortgage and that First American and its counsel committed consumer/debt-collection violations by demanding payment for the release; the trial court dismissed the complaint under section 2-615.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether First American’s judgment on the promissory note extinguished its second-mortgage lien or was barred from enforcing the mortgage by res judicata | The note and mortgage arose from the same transaction and should have been adjudicated together; the default judgment on the note precludes subsequent enforcement of the mortgage | Illinois law permits separate or consecutive suits on a mortgage and its underlying note; the foreclosure judgment did not extinguish junior liens absent a judicial sale and confirmation | Court held res judicata did not bar enforcement of the mortgage; the note-judgment did not extinguish First American’s second-mortgage lien because no judicial sale/confirmation occurred |
| Whether plaintiffs’ consumer-protection and FDCPA claims survive given the legal status of the mortgage lien | First American and its counsel misrepresented that the second mortgage was enforceable and unlawfully demanded payment to release it | If the mortgage remained enforceable, demanding payment for a release was lawful and no misrepresentation occurred | Court dismissed statutory claims because the underlying premise (that the mortgage was unenforceable) was incorrect—mortgage rights remained viable |
Key Cases Cited
- River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290 (1998) (adopts the transactional test for identity of causes of action for res judicata)
- Farmer City State Bank v. Champaign National Bank, 138 Ill. App. 3d 847 (1985) (mortgagee may pursue remedies on note and mortgage consecutively or concurrently)
- LP XXVI, LLC v. Goldstein, 349 Ill. App. 3d 237 (2004) (related transactions may be separate for res judicata purposes where remedies and purposes differ)
- ABN Amro Mortgage Group, Inc. v. McGahan, 237 Ill. 2d 526 (2010) (foreclosure is quasi in rem and distinct from in personam actions on promissory notes)
- Hanson v. Denckla, 357 U.S. 235 (1958) (distinction among in personam, in rem, and quasi in rem jurisdictions)
- Skolnik v. Petella, 376 Ill. 500 (1941) (discussed by parties but distinguished; addresses when related deficiency claims must be resolved)