The opinion of the court was delivered by: MARVIN E. ASPEN
MARVIN E. ASPEN, District Judge:
Plaintiff Bank of Chicago/Lakeshore ("BOC") brings this action to collect the balance due on a promissory note made by defendants Arthur E. Menaldi ("Menaldi") and Spyridon Diognenes ("Diogenes") in favor of BOC. Diogenes has moved for summary judgment and Menaldi seeks to dismiss the action.
Both defendants claim that this action is barred by res judicata because judgment has already been entered against defendants in favor of BOC. BOC moves for a default judgment against the defendants and for sanctions. For the reasons set forth below, we deny defendants' motions, deny plaintiff's motion for default judgment, and impose sanctions on both defendants.
I. Summary Judgment Standard
Under Federal Rule of Civil Procedure 56(c), summary judgment is appropriate where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Moreover, we must view the record and all possible inferences in the light most favorable to the non-moving party. See United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S. Ct. 993, 994, 8 L. Ed. 2d 176 (1962); Williams v. Williams Electronics, Inc., 856 F.2d 920, 922 (7th Cir. 1988). Summary judgment should be denied "where there is reason to believe that the better course would be to proceed to a full trial." Anderson v. Liberty Lobby, 477 U.S. 242, 255, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986).
On May 13, 1982, Menaldi and Diogenes, as individuals and as President and Secretary, respectively, of Ektafax Corporation, executed a term note ("Note") in the amount of $ 1,118,925.74 in favor of BOC. The Note became due on November 1, 1982. As collateral for the Note, defendants pledged numerous assets including several junior mortgages evidenced by various trust deeds.
Defendants defaulted on the Note, as well as on their obligations to other lenders. As a result of their defaults, foreclosure actions were brought against defendants in at least four separate lawsuits. Several mechanics liens were also filed against properties used to collateralize defendants' Note to BOC. The cases include Lakeview Trust and Savings Bank v. Menaldi, et al., Case No. 82 CH 1118 ("Lakeview"), Branigar v. Menaldi, et al., Case No. 82 CH 72 ("Branigar"), Banks v. Menaldi, 82 CH 3534 ("Banks"), and Marina Bank v. Menaldi, et al., 82 CH 670 ("Marina Bank").
One of the junior mortgages used to secure the Note was on Unit 3, 929 West Ainslie Road in Chicago, Illinois, a condominium owned by Menaldi. Due to its interest in the condominium, BOC was named as a defendant in the Lakeview foreclosure action. At issue in Lakeview was property held in trust by LaSalle National Bank for the benefit of Menaldi and Diogenes. In the course of the case, BOC filed a counterclaim against Menaldi and Diogenes seeking, among other things, a personal deficiency judgment against Ektafax, Menaldi, and Diogenes separately and jointly. On March 1, 1983, Judge Reginald J. Holzer entered an order in which he denied a motion to dismiss BOC's counterclaim. Subsequently, on May 21, 1983, Judge Holzer entered a judgment of foreclosure and sale of the property held in trust by LaSalle National Bank for the benefit of Menaldi and Diogenes in favor of Lakeview.
Neither the March 1, 1983 order, or the foreclosure order mentioned BOC's counterclaim. Instead, the docket for 82 CH 1118 reveals that motions continued to be heard in the case, and that as late as October, 1984, BOC was granted leave to substitute attorneys in the action. The record, although not the docket,
also reflects that in January, 1984, BOC moved to consolidate the Lakeview case with the Banks case. In this motion, BOC stated that "the only remaining portion of [Lakeview] which is pending and undetermined is the claim for deficiency judgment of [BOC] against [Menaldi] and [Diogenes]." Diogenes' Reply at Exh. 8. BOC went on to observe that "all other relevant and meaningful matters in this cause have been adjudicated, the first mortgage of [Lake View Trust] has been foreclosed, and the property foreclosed and sold pursuant to Sheriff's Sale," and contended that "there remains nothing further for disposition by this Court except the prove-up of the deficiency claim of [BOC] against [Menaldi] and [Diogenes]." Id. BOC explained that the Banks case "is also between the same parties, involves the same issues, and is based upon the same transaction," and then asks the court to "transfer the remaining portion of [the Lakeview case], which consists of the Complaint of [BOC] against [Menaldi] and [Diogenes] for deficiency judgment to the Chief Justice for consolidation and reassignment to the Honorable Judge Francis X. Golniewicz of the Land Title Division for prove-up." Id. It is not clear whether the motion to consolidate was granted.
In the Banks case, it appears that BOC filed a counterclaim against Menaldi and Diogenes.
Its claim against the defendants in the Banks case was the same as its claim in the Lakeview case.
BOC's claim against Menaldi in the Banks case was set for prove up on January 24, 1984. Diogenes' Reply at Exh. 9. However, there is nothing in the record to indicate whether judgment had been entered against the defendants prior to the prove up, whether the prove up took place as scheduled, and, if so, what transpired. The only remaining information on the Banks case is that ...