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Turczak v. First American Bank

Court of Appeals of Illinois, First District, Third Division

October 2, 2013

LAURA J. TURCZAK and ROBERT M. LEW, Plaintiffs-Appellants,
v.
FIRST AMERICAN BANK and LEBOW, MALECKI & TASCH, LLC, Defendants-Appellees.

Held [*]

The default judgment defendant bank obtained on the promissory note securing its second mortgage on plaintiffs’ residence did not bar defendant from enforcing its second mortgage on the residence, since Illinois law allows such a creditor to consecutively or concurrently seek recovery on a mortgage and the note securing the mortgage; furthermore, the default judgment obtained by the first mortgagor’s foreclosure action did not extinguish the second mortgagor’s second mortgage lien in the absence of a judicial sale of the property and the confirmation of the sale, and, therefore, plaintiffs’ action alleging that defendant second mortgagee and its law firm violated the Consumer Fraud and Deceptive Business Practices Act and the Fair Debt Collections Practices Act by demanding $6, 000 from plaintiffs for the execution of a release to complete the short sale plaintiffs arranged was properly dismissed, since the second mortgagee’s rights in the property had not been extinguished.

Appeal from the Circuit Court of Cook County, No. 11-M-4001670; the Hon. James Gavin, Judge, presiding.

Brian M. Fornek, of Brian M. Fornek & Associates, PC, of Batavia, for appellants.

John Duffy, Karen DeGrand, and Michael Carney, all of Donohue Brown Mathewson & Smyth, LLC, of Chicago, for appellees.

Justices Pucinski and Mason concurred in the judgment and opinion.

OPINION

HYMAN, PRESIDING JUSTICE

¶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 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 American 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.

ΒΆ7 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. Plaintiffs allege that during this time, First American refused to consent to any short sale unless the ...


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