                                    2013 IL App (1st) 121964

                                                                                THIRD DIVISION
                                                                                  October 2, 2013

No. 1-12-1964

LAURA J. TURCZAK and ROBERT M. LEW,                           )   Appeal from
                                                              )   the Circuit Court
       Plaintiffs-Appellants,                                 )   of Cook County
                                                              )
                v.                                            )
                                                              )   No. 11 M 4001670
FIRST AMERICAN BANK and LEBOW, MALECKI &                      )
TASCH, LLC,                                                   )   The Honorable
                                                              )   James Gavin,
       Defendants-Appellees.                                  )   Judge Presiding.


       PRESIDING JUSTICE HYMAN delivered the judgment of the court, with opinion.
       Justices Pucinski and Mason concurred in the judgment and opinion.

                                          OPINION

¶1     For plaintiffs to close a short sale, defendants, the second mortgagee and the law firm that

represented the second mortgagee, conditioned the release of the second mortgage on plaintiffs

paying $6,000. This payment forms the basis for plaintiffs' claims.

¶2     Plaintiffs contend that once the second mortgagee had obtained a default judgment on its

promissary note, the doctrine of res judicata barred any action on the second mortgage, and

defendants' demand for $6,000 to execute the release, violated the Illinois Consumer Fraud and

Deceptive Business Practices Act (in the case of the second mortgagee) (815 ILCS 505/1 et seq.

(West 2008)), and the federal Fair Debt Collections Practices Act (in the case of the law firm)

(15 U.S.C. § 1692 et seq. (2006). The trial court dismissed the complaint for lack of legal

sufficiency. We affirm. Illinois law holds a lender may proceed in separate suits to enforce the

mortgage and the underlying promissory note, and the second mortgagee's rights in the property
1-12-1964


were not extinguished as a matter of law.

¶3                                      BACKGROUND

¶4     Wells Fargo Bank and First American Bank financed plaintiffs Laura Turczak's and

Robert Lew's purchase of a residence at 1300 Dodson Ave., Elburn, Illinois. Wells Fargo

secured its $391,250 loan with a promissory note and first mortgage on the property. First

American secured its $73,335 loan with a promissory note, in which plaintiffs were jointly and

severely liable for the repayment of the principle, and a second mortgage on the property. Both

the Wells Fargo and First America mortgages were dated August 9, 2007.

¶5     In 2010, plaintiffs stopped paying off the loans. In June 2010, Wells Fargo filed to

foreclose its mortgage against plaintiffs and First American. On September 3, 2010, Wells Fargo

obtained a "Variable Foreclosure Order" finding plaintiffs, First American, and other parties in

default. Judgment for foreclosure and sale was entered in the amount of $408,597.92.

¶6     Also in June 2010, during the pendency of Wells Fargo's action, First American, through

defendant law firm, sued plaintiffs on the promissory note that secured First American's second

mortgage. On December 21, 2010, First American obtained a default judgment against plaintiffs

in the amount of $80,986.93 and recorded a memorandum of the judgment in Kane County on

December 28 (the Wells Fargo and First American lawsuits were all filed in the circuit court of

Kane County as the property was located in Kane County). Under the judgment First American

could garnish each plaintiff's wages.

¶7     Plaintiffs tried to set up a short sale of the property between September 3, 2010, and

March 10, 2011, with a sale being subject to the approval of Wells Fargo and First American.

                                                2
1-12-1964


Plaintiffs allege that during this time, First American refused to consent to any short sale unless

the balance it was due on its promissory note or the default judgment was paid.

¶8      Plaintiffs received an offer of $277,000 for the property. Although not enough to satisfy

Wells Fargo's judgment, Wells Fargo agreed to approve the short sale if, among other things,

First American executed a release of its mortgage lien. First American required plaintiffs pay

$6,000 to sign the release. On March 7, 2011, plaintiffs secured First American's release of its

mortgage lien after paying $3,000 and Wells Fargo contributing the remaining $3,000.

¶9      Plaintiffs alleged that during the time plaintiffs tried to sell the property, defendant

Lebow, Malecki & Tasch, LLC, the law firm for First American, engaged in false or misleading

conduct by maintaining that First American had an enforceable second mortgage after obtaining

the judgment on First American's promissory note. Plaintiffs plead the law firm violated the

federal Fair Debt Collections Practices Act (15 U.S.C. § 1692 et seq. (2006)) (FDCPA).

¶ 10    Plaintiffs further alleged First American violated either the Illinois Consumer Fraud and

Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2008)) or a valid interlocutory

order. Plaintiffs pled First American could not have sought to foreclose the second mortgage

when it tied the release of the second mortgage to the payment. Plaintiffs do not challenge the

enforceability of the $80,986.93 judgment in First American's promissory note action against

them.

¶ 11    Defendants moved to dismiss the complaint under section 2-615 of the Code of Civil

Procedure. 735 ILCS 5/2-615 (West 2008). They argued that First American's default judgment

on the promissory note securing the second mortgage did not bar First American from enforcing

                                                   3
1-12-1964


its second mortgage because Illinois law allows a creditor to consecutively as well as

concurrently pursue remedies on a mortgage and the note securing the mortgage. Defendants also

argued Illinois law recognizes that Wells Fargo's default judgment did not extinguish First

American's second mortgage lien in the absence of a judicial sale of the property and judicial

confirmation of the sale.

¶ 12   Without a written order explaining its reasoning, the trial court dismissed plaintiff's

complaint with prejudice.

¶ 13   Plaintiffs timely appeal.

¶ 14                                        ANALYSIS

¶ 15   A section 2-615 motion to dismiss attacks "the legal sufficiency of a complaint based on

defects apparent on its face." Pooh-Bah Enterprises, Inc. v. County of Cook, 232 Ill. 2d 463, 473

(2009); see 735 ILCS 5/2-615 (West 2008). In deciding a motion to dismiss under section 2-615,

the trial court considers only the "facts apparent from the face of the pleadings, matters of which

the court can take judicial notice, and judicial admissions in the record." Pooh-Bah Enterprises,

Inc., 232 Ill. 2d at 473. All well-pleaded facts and all reasonable inferences that may be drawn

from those facts must be accepted as true. Id. Mere conclusions of law or facts unsupported by

specific factual allegations in the complaint are disregarded. Id. The trial court should grant the

motion to dismiss if it is "clearly apparent that no set of facts can be proved that would entitle the

plaintiff to relief." Id. We review the trial court's granting of a section 2-615 motion to dismiss

de novo. Id.



                                                  4
1-12-1964


¶ 16                                 Completeness of Record

¶ 17    First American argues that without the trial court's "extensive reasoning and lengthy

questioning of counsel during the two-days of hearings" or a certified bystander's affidavit (Ill.

Ct. R. 323(c) (eff. Dec. 13, 2005)), plaintiffs failed to satisfy their burden of providing a

sufficiently complete record on the proceedings below.

¶ 18    With no recording and the trial court declining to issue a written opinion or, apparently,

explain his ruling in open court, we question what a bystander's report summarizing counsels'

arguments would add, particularly because the standard of review is de novo. As the court noted

in Maynard v. Parker, 54 Ill. App. 3d 141, 142-43 (1977), "Where the judgment appealed from

relates only to a question of law involving an order which was part of the common law record,

the record on appeal is adequate without a transcript of proceedings."

¶ 19    As our review is de novo, we will address plaintiffs' claims of error on the merits. Before

doing so, however, we take this opportunity to remind trial judges, that unlike umpires, they must

justify the substance of their decisions. Explaining a ruling, either orally or in writing, instills

confidence in the impartiality and fairness of the judge and enhances respect for the courts. While

who prevails matters, the "why" also matters, and not just to the losing party. The parties, the

legal profession, and the public are more likely to place greater confidence in our legal system

when judges give reasons for their decisions.

¶ 20                                         Res Judicata

¶ 21    Plaintiffs argue that First American should have adjudicated the promissory note and

mortgage together in a single action, both documents having been signed as part of the same

                                                   5
1-12-1964


original transaction. And, once First American successfully obtained the final judgment on the

promissory note, the principles of res judicata come into play to bar any other action to enforce

the second mortgage, thereby, establishing the fraudulent nature of the sine qua non for the

release. If plaintiffs are wrong, and the doctrine of res judicata does not extinguish the second

mortgage lien, their causes of action deserve dismissal.

¶ 22   Res judicata, an equitable doctrine, prevents the multiplicity of lawsuits between the

same parties involving the same facts and issues. Murneigh v. Gainer, 177 Ill. 2d 287, 299

(1997). After a court of competent jurisdiction enters a final judgment on the merits, res judicata

bars the same parties or their privies from re-litigating causes of action that were or could have

been raised in the earlier lawsuit. Lane v. Kalcheim, 394 Ill. App. 3d 324, 329 (2009); Hudson

v. City of Chicago, 228 Ill. 2d 462, 467 (2008) (res judicata also applies to causes of action that

could have been decided).

¶ 23   For res judicata to apply, the party must show each of the following elements: (1) a final

judgment on the merits rendered by a court of competent jurisdiction; (2) an identity of causes of

action; and (3) an identity of the parties or their privies. Kalcheim, 394 Ill. App. 3d at 329-30.

Here, the decisive element is the identity of the causes of action.

¶ 24   Illinois follows the so-called transactional test to determine the identity of the causes of

action. River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 310 (1998). The transactional

test considers separate claims as part of the same cause of action, even without substantial

overlap in the evidence, as long as the claims "arise from a single group of operative facts,

regardless of whether they assert different theories of relief." River Park, 184 Ill. 2d at 311.

                                                  6
1-12-1964


¶ 25   Plaintiffs maintain that (i) from September 3, 2010 (date of entry of default judgment

against First American in Wells Fargo's foreclosure suit), until at least March 10, 2011, First

American did not possess an enforceable mortgage lien; and (ii) from December 29, 2010 (day

after First American recorded its default judgment against plaintiffs in First American's suit to

enforce promissory note) until at least March 10, 2011, First American's only enforceable lien

was its judgment lien. Consequently, plaintiffs contend, res judicata precludes First American

from asserting its mortgage lien in exchange for consenting to the short sale.

¶ 26   Plaintiffs rely on Skolnik v. Petella, 376 Ill. 500, 507 (1941), for the proposition that

under the doctrine of res judicata, a lawsuit to foreclose a mortgage and a lawsuit to enforce

personal liability on the underlying note, must be pursued in a single action. Plaintiffs submit that

no decision of the Illinois Supreme Court or any appellate decision has allowed a mortgage

lender to split its note and mortgage enforcement actions.

¶ 27   Not only does the Skolnik case not help plaintiffs, but well-settled Illinois case law

permits lenders to bring separate enforcement actions on the mortgage and the note.

¶ 28   In Skolnik, the bank tried to maintain a second action for a deficiency against an assignee

after having already sued and obtained a judgment on the deficiency claims against the original

debtors. These facts markedly differ from the facts presented here. And, the holding in Skolnik is

consistent with res judicata principles because the second action on the deficiency was nothing

more than a do-over of the first action on the deficiency.

¶ 29   Case law discredits plaintiffs' argument as well. Defendants cite a number of cases

holding a note accompanying a mortgage need not be enforced in a single case. Farmer City

                                                  7
1-12-1964


State Bank v. Champaign National Bank, 138 Ill. App. 3d 847, 852 (1985) (mortgagee may

consecutively pursue collection on note and mortgage foreclosure); see also Treadway v. Nations

Credit Financial Services Corp., 383 Ill. App. 3d 1124, 1131 (2008) (same).

¶ 30   In another case, LP XXVI, LLC v. Goldstein, 349 Ill. App. 3d 237, 242 (2004), which is

discussed in depth by the parties, defendant executed a promissory note, secured by a mortgage

to the plaintiff's predecessor in interest, as well as a personal "Commercial Guaranty." Goldstein,

349 Ill. App. 3d at 238. The obligors on the note defaulted and the plaintiff's predecessor filed

suit to foreclose the mortgage. Goldstein, 349 Ill. App. 3d at 239. The property was sold at a

Sheriff's sale leaving a deficiency, which the plaintiff's predecessor obtained in an in rem

deficiency judgment. Id. The plaintiff was assigned all interests in the note, the guaranty, and the

deficiency judgment and sued based on the "Commercial Guaranty" of the note. The defendant

moved to dismiss, claiming the action was barred under the doctrine of res judicata. Id. The trial

court granted the defendant's motion to dismiss.

¶ 31   Applying the transactional analysis, the Goldstein court held that while the transactions

were related, "we do not believe that their mere proximity in time and the overlap of some of the

parties render them a single transaction, especially in light of the purpose of each of the

transactions." Id. at 241. The court observed, "It is *** settled that, upon default, the mortgagee

is allowed to choose whether to proceed on the note or guaranty or to foreclose upon the

mortgage. 'These remedies may be pursued consecutively or concurrently.' " Goldstein, 349 Ill.

App. 3d at 241 (quoting Farmer City State Bank v. Champaign National Bank, 138 Ill. App. 3d

847, 852 (1985)).

                                                   8
1-12-1964


¶ 32     A case cited by Goldstein, Citicorp Savings of Illinois v. Ascher, 196 Ill. App. 3d 570,

574 (1990), specifically held that a judgment of foreclosure will not bar a later suit on a guaranty

because the foreclosure judgment does not adjudicate the defendant's rights and liabilities under a

guaranty contract, and, thus, the doctrine of res judicata is not implicated. See also Du Quoin

State Bank v. Daulby, 115 Ill. App. 3d 183, 186 (1983) (previous foreclosure did not resolve

defendant's liability under personal guaranty).

¶ 33   Plaintiffs also assert ABN Amro Mortgage Group, Inc. v. McGahan, 237 Ill. 2d 526

(2010), requires a contrary result. There, the Illinois Supreme Court held that a mortgage

foreclosure suit is a quasi in rem, as opposed to an in rem, because it involves both an action

against real property as well as a monetary claim for personal liability. Nevertheless, ABN Amro

does not alter the ability to bring a separate suit on the promissory note, which remains a purely

in personam proceeding. In an oft-quoted footnote, the United States Supreme Court summarized

the distinction of the three classes of legal proceedings:

               "A judgment in personam imposes a personal liability or obligation on one person

       in favor of another. A judgment in rem affects the interests of all persons in designated

       property. A judgment quasi in rem affects the interests of particular persons in designated

       property. The latter is of two types. In one the plaintiff is seeking to secure a pre-existing

       claim in the subject property and to extinguish or establish the nonexistence of similar

       interests of particular persons. In the other the plaintiff seeks to apply what he [or she]

       concedes to be the property of the defendant to the satisfaction of a claim against him [or

       her]." Hanson v. Denckla, 357 U.S. 235, 246 n.12 (1958).

                                                  9
1-12-1964


Thus, while in rem differs from quasi in rem, both are alternatives to in personam jurisdiction.

Foreclosure suits on property, a quasi in rem proceeding, applies a legally distinct remedy from

an in personam proceeding on a promissory note.

¶ 34   No compelling reasons exist to abandon this settled law.

¶ 35   Next, plaintiffs read the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq.

(West 2008)) as requiring enforcement of the note and mortgage together in a single case. Yet,

the language pertains only to actions to foreclose mortgages, and says nothing that would make it

applicable to other types of lawsuit, including actions at law for judgment on a promissory note.

Moreover, section 15-1504 states that a "[foreclosure] complaint *** may be joined with other

counts or may include in the same count additonal matters or a request for any additional relief."

(Emphasis added.) 735 ILCS 5/15-1504(b) (West 2008). It hardly needs to be said that "may" is a

permissive, not a mandatory, term.

¶ 36   As for plaintiffs argument that Wells Fargo's default judgment against First American

extinguished First American's second mortgage, the statute specifically provides otherwise. After

a judgment of foreclosure, only a judicial sale of the property followed by judicial confirmation

of the sale will terminate "with finality" the rights of third parties. 735 ILCS 5/15-1404 (West

2008). Wells Fargo never held a judicial sale of the property. Therefore, as a matter of law, First

American was under no legal restraint in seeking a payment in exchange for signing the release

of its second mortgage.

¶ 37   The Illinois Consumer Fraud and Deceptive Business Practices Act and the Federal Fair

Debt Collection Practices Act claims hinge on First American and its law firm misleading

                                                10
1-12-1964


plaintiffs on the viability of First American's second mortgage. Having decided against plaintiffs

on the premise underlying the claims, neither claim survives the motion to dismiss. The motion

to dismiss is affirmed.

¶ 38   Affirmed.




                                                11
