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Commercial National Bank v. Mehta





Appeal from the Circuit Court of Cook County; the Hon. David J. Shields, Judge, presiding.


Defendants appeal from an order of the circuit court of Cook County denying their motion to vacate a previous order granting plaintiff relief pursuant to section 2-1401 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1401). In this appeal, defendants contend that the trial court erred when it suggested to plaintiff that it amend its petition to vacate so that it would be brought pursuant to section 2-1401 of the Code of Civil Procedure; that plaintiff's section 2-1401 petition was deficient in law; that the trial court's exercise of equitable powers pursuant to section 2-1401 defeats the provisions of other laws and makes the same redundant; and that in allowing plaintiff's section 2-1401 petition the trial court failed to consider the resultant prejudice to defendants.

The underlying action in this matter was plaintiff's complaint to foreclose a trust deed on several parcels of real estate given to plaintiff as security for the payment of a note made by defendants to plaintiff. Allegedly, plaintiff had received no payments on the note since 1978. On March 25, 1983, the trial court entered summary judgment in plaintiff's favor.


In 1976 plaintiff agreed to provide financing for defendants' acquisition of a grocery store, which was located in Norridge. Because of this, plaintiff made a loan of $100,000 to Three Stars, Inc., a proposed Illinois corporation. Defendants, in their capacity as officers of the proposed corporation, signed a demand note that granted plaintiff the right to resort to certain specified collateral for payment of the loan in case of default.

That loan was secured by a Uniform Commercial Code (UCC) security agreement, which covered the furniture, fixtures, chattels, and accounts receivable connected with the store. It was also secured by a trust deed covering the three parcels of real estate owned by defendants individually. The trust deed designated defendants as grantors and provided that the grantors agreed to pay the indebtedness evidenced by the note, preserve the real estate that was collateral for the loan, and satisfy all costs if foreclosure by plaintiff became necessary. In addition, defendants, individually, signed a personal guarantee agreement specifying that their liability would not be affected by any change in the indebtedness, security, or collateral and that the plaintiff had express authorization to make such changes without notice. In addition, defendants, individually, signed an owner's consent by which plaintiff, without notice to defendants, could resort to the collateral real estate for payment of the indebtedness evidenced by the note.

In 1977 plaintiff made a second loan to defendants' corporation, which at that time was called Dobson, Inc., because of the unavailability of the name Three Stars, Inc. This $35,000 loan was also evidenced by a demand note containing terms identical to those in the original note and bearing the signatures of defendants as officers of the corporation. Defendants also signed, individually, a limited guarantee containing essentially the same terms as those in the personal guarantee that had accompanied the original loan.

In 1978 defendants renewed the aforesaid loans under the terms of a demand note that was signed by defendants both individually and as officers of Dobson, Inc. The renewed loan in the amount of $84,000 stated that it was secured by the same security agreement and trust deed that had secured the original notes, and the new note contained language identical to that in the two prior notes. Moreover, in exchange for paying a 2% higher interest rate, defendants were given an extra three years to make the payments and were required to make monthly payments in an amount nearly equal to half of what they had been paying on the two original notes. The notes evidencing the two original loans were then stamped by plaintiff "paid by renewal."

On August 9, 1978, Dobson, Inc., was forcibly evicted from the supermarket. Plaintiff then filed a notice of enforcement of security interest under sections 9-504 and 9-505 of the UCC (Ill. Rev. Stat. 1983, ch. 26, pars. 9-504, 9-505), and began to make arrangements for a UCC sale of the property covered by the security agreement. In response, defendants obtained an injunction enjoining the sale, arguing that plaintiff would not be damaged by the injunction and did not need to enforce the security agreement because the bank had adequate security for its loan under the trust deed. Defendants asserted that without the furniture, fixtures inventory, and accounts they would be prevented from operating the store, and consequently, could not make payments on the loans. However, on March 20, 1979, plaintiff instituted foreclosure proceedings because no payments due under the renewed note had been made on or after November 15, 1978, by defendants.

On November 3, 1981, plaintiff filed an amended complaint to foreclose a mortgage on two of the parcels of real estate named in the trust deed. Defendants filed an answer, an affirmative defense and a counterclaim for damages allegedly attributable to plaintiff's alleged impairment of the collateral. Two days later, defendants sued plaintiff (No. 82 L 700), making allegations identical to those in their counterclaim to plaintiff's amended foreclosure complaint (No. 79 CH 1629). On August 24, 1982, the two cases were consolidated.

When plaintiff filed a motion for summary judgment in its foreclosure action, defendants requested an indefinite extension of the briefing schedule to enable them to conduct unspecified documentary discovery and take the depositions of four persons who had participated in the eviction from the store or in plans to conduct the UCC sale. On February 14, 1983, the trial court entered an order that, inter alia, denied the motion for an extension and stayed discovery pending its ruling on plaintiff's motion for summary judgment. Defendants then argued that they had a due process right to conduct discovery before the trial court considered plaintiff's summary judgment motion, and they filed a motion to vacate the order staying discovery and to continue the hearing on plaintiff's motion. The trial court heard arguments on both motions on March 25, 1983, but deferred entry of an order pending the submission of proposed drafts by the parties. Despite the lack of a final order, defendants filed a notice of appeal "against the order of 3-25-83" denying their motions to vacate the stay order and to continue the hearing. On March 28, 1983, the trial court entered an order nunc pro tunc to March 25, denying defendants' motions, granting plaintiff's motion for summary judgment, and granting defendants leave to conduct discovery with respect to their counterclaim in cause No. 79 CH 1629 and complaint in cause No. 82 L 700, both of which dealt with the alleged impairment of the collateral.

On April 4, 1983, following the entry of further interlocutory orders, defendants filed a second notice of appeal, this one from the trial court's denial of their petition for permission to file an appeal from the court's order denying their March 25 motion for an extension of time under Supreme Court Rule 191(b) (87 Ill.2d R. 191(b)) to obtain affidavits from hostile or otherwise unavailable witnesses. On April 22, 1983, defendants filed a third notice of appeal, claiming error in the trial court's order which denied their motions for a continuance and for the vacation of the stay order and which granted plaintiff's motion for summary judgment.

On September 27, 1984, by a Rule 23 order this court affirmed the trial court's order granting plaintiff summary judgment. (Commercial National Bank v. Mehta (1984), 127 Ill. App.3d 1156.) The Illinois Supreme Court denied defendants' petition for leave to appeal (Commercial National Bank v. Mehta (1985), 101 Ill.2d 588) and issued its mandate to this court. On March 14, 1985, this court issued its mandate to the trial court.

On March 19, 1985, the trial court dismissed the present matter for want of prosecution when neither party appeared at the trial court's chancery calendar call. On April 25, 1985, plaintiff filed a motion to vacate the dismissal. On May 2, 1985, plaintiff filed a section 2-1401 motion to vacate. That motion stated that the instant action was a mortgage foreclosure that involved several lengthy appeals to the appellate court and the supreme court from the court's order granting plaintiff's motion for summary judgment and denying several other of defendants' motions which divested the circuit court of jurisdiction; that the appellate court upheld the trial court's order and the supreme court denied defendants' petition for leave to appeal; that the supreme court issued its mandate to the appellate court on February 26, 1985; that the appellate court issued its mandate to the circuit court on March 14, 1985; that plaintiff was not informed that the appellate court mandate would issue to the court, thereby revesting jurisdiction in the circuit court; that on March 19, 1985, the circuit court dismissed the instant mortgage foreclosure action for want of prosecution; and that plaintiff first obtained ...

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