Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Doherty v. Federal Deposit Insurance Corp.

United States Court of Appeals, Seventh Circuit

August 6, 2019

Patrick J. Doherty, Plaintiff-Appellant,
v.
Federal Deposit Insurance Corporation, as receiver for Washington Federal Bank for Savings, et al., Defendants-Appellees.

          Argued May 14, 2019

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 18 CV 703 - Joan B. Gottschall, Judge.

          Before Flaum, Kanne, and Scudder, Circuit Judges.

          KANNE, CIRCUIT JUDGE.

         Washington Federal Bank brought a default action against Patrick Doherty, John Farano, Jr., and Worth Conversion, LLC, for notes related to various real estate ventures. Doherty raised affirmative defenses on behalf of himself and Worth, but the bank dismissed Doherty and Worth from the action, without prejudice, after obtaining a default judgment against Farano. Doherty then attempted to bring this suit against the bank with claims founded on similar grounds as his previously-raised affirmative defenses. But the Cook County Circuit Court determined that Doherty's claims were barred by res judicata thanks to the default judgment entered against Farano. Doherty appealed to the Illinois Appellate Court, but before his appeal was heard, Washington Federal was placed into the Federal Deposit Insurance Corporation's receivership. The FDIC removed this action to the district court, which adopted the Illinois Circuit Court's decision. Because res judicata does not bar Doherty's claims, we vacate and remand for further proceedings.

         I. Background

         Patrick Doherty and John Farano, Jr., formed Worth Conversion, LLC. In April 2006, Washington Federal Bank ("the bank") loaned Worth $400, 000 in exchange for Worth's promissory note and Doherty and Farano's personal guaranties of the loan. Washington Federal extended the maturity date of the loan multiple times, but Worth eventually defaulted. The bank subsequently sued Worth, Farano, and Doherty in Cook County Circuit Court in March 2014 (the guaranty action). The twenty-seven count complaint also included counts related to other loans made to another entity affiliated with Farano and Doherty, F & D Services, Inc. But the bank eventually dismissed those counts and F & D Services from the suit.

         Doherty is an attorney and he filed an appearance in the guaranty action on behalf of himself and Worth. In his answer to the bank's complaint, Doherty raised affirmative defenses, including that the bank extended the maturity date of the loan without authorization, that the bank charged fees and an interest rate not agreed upon, and that the bank charged excessive fees.

         Farano never appeared, however, and the trial court entered a default judgment for the loan balance against Farano for Count XXVI, which sought judgment on his personal guaranty of the loan, on August 27, 2014. The default judgment ordered:

1. [Washington Federal's] Motion for Default and Judgment is granted; 2. [The bank] has proven the damages it incurred and reasonable attorney's fees and costs; 3. Judgment is entered in favor of [the bank] and against Defendant John Farano Jr., in the TOTAL AMOUNT of $228, 739.81 due under the Note; $2, 804.50 due in attorney fees and $485.33 in legal costs; 4. There is no just reason to delay the enforcement of the judgment, appeal, or both.

         On April 27, 2015, Doherty received a report from a forensic document examiner opining that his signature had been forged on loan extension paperwork in 2010. Doherty sent a copy of the report to the bank's counsel, advising them that he intended to file a suit for fraud and other claims. Around that time, the bank moved the trial court to dismiss its claims against Worth and Doherty from the action without prejudice. The trial court dismissed the bank's remaining counts (XXV-seeking judgment against Worth on default; and XXVII-seeking judgment against Doherty on his guaranty of the Worth loan) on June 15, 2015. Doherty did not object to this order.

         Over a year later, on June 28, 2016, Doherty filed suit against the bank, its president, its corporate secretary, and its attorneys, alleging breach of contract, forgery, excessive fees, fraud, and legal malpractice against the bank's law firm. He claimed that during the first trial (the guaranty action), he did not learn of the bank's alleged forgery early enough to take action before being dismissed. His suit sought to recover damages for the fees he incurred defending the guaranty action. The trial court dismissed Doherty's complaint, and he filed an amended complaint alleging the same facts and counts, but he alleged malicious prosecution instead of malpractice against the bank's legal counsel.

         The bank and its attorneys moved to dismiss Doherty's amended complaint on the grounds of res judicata, lack of standing, and (on the malicious prosecution count) failure to state a claim. The trial court dismissed Doherty's suit, holding that most of Doherty's claims were barred by res judicata because he should have brought them in the guaranty action. The trial court also determined that he failed to state a claim for malicious prosecution. Doherty appealed to the Illinois Appellate Court. Before the court heard Doherty's appeal, however, Washington ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.