Bhutani v. Barrington Bank and Trust Company, N.A.

2015 IL App (2d) 140972, 42 N.E.3d 377

• Court: Appellate Court of Illinois
• Decided: August 13, 2015
• Docket: 2-14-0972
• Status: Unpublished

Opinion

2015 IL App (2d) 140972 No. 2-14-0972 Opinion filed August 13, 2015 ______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT ______________________________________________________________________________

BALDEV RAJ BHUTANI, ) Appeal from the Circuit Court ) of Lake County. Plaintiff-Appellant, ) ) v. ) No. 14-L-20 ) BARRINGTON BANK AND TRUST ) COMPANY, N.A., as Successor in Interest ) to Charter National Bank and Trust, ) Hoffman Estates, ) Honorable ) Michael B. Betar, Defendant-Appellee. ) Judge, Presiding. ______________________________________________________________________________

JUSTICE HUDSON delivered the judgment of the court, with opinion. Justices Birkett and Spence concurred in the judgment and opinion.

OPINION

¶1 Plaintiff, Baldev Raj Bhutani, appeals the dismissal of his complaint for conversion and

replevin, which rested on the alleged refusal by defendant, Barrington Bank & Trust Company,

N.A., as successor in interest to Charter National Bank & Trust, Hoffman Estates (the bank), to

allow Bhutani to take possession of certain pharmaceutical manufacturing equipment that

remained on a foreclosed property after the bank took possession of the property. The bank

successfully moved for the complaint’s dismissal on the basis that the claims were barred by the

foreclosure judgment. We hold that Bhutani’s claims here and the foreclosure claim are

essentially unrelated so that there can be no bar by prior judgment. We further hold that 2015 IL App (2d) 140972

nothing in the foreclosure judgment gave the bank a possessory interest in the equipment

superior to Bhutani’s interest. We therefore reverse the dismissal and remand for further

proceedings in Bhutani’s action.

¶2 I. BACKGROUND

¶3 The relevant history of this case begins with the foreclosure case, the source of the

judgment by which the bank obtained the dismissal here. On December 7, 2011, according to

copies of documents attached to Bhutani’s complaint as exhibits, the bank obtained a judgment of

foreclosure against Avtar, LLC, 1 and Bhutani. A copy of the mortgage shows that Avtar was the

mortgagor and that Bhutani was the guarantor of the note. The court entered the judgment after

finding Avtar and Bhutani in default. The judgment related to lots 1, 2, and 3 in Hawthorn

Industrial Center—Gurnee Unit Three (the property) and to all its “rents, issues and profits,

together with the tenements, hereditaments and appurtenances.” The judicial sale went forward,

and the report of sale showed that the amount then due the bank was $1,897,503.20. The bank

was the high bidder; the sale resulted in a deficiency of $17,530.20. The court confirmed the sale

on February 8, 2012, and approved an order of possession as of March 9, 2012.

¶4 A copy of a Lake County sheriff’s report—an exhibit to Bhutani’s complaint—shows that

four deputies attempted to carry out an eviction on June 26, 2012. On entering the building on the

property, they found chemical stocks and equipment related to pharmaceutical manufacturing.

Because they were uncertain of the safety of removing the chemical stocks, they simply secured

the building.

1 According to records of the Secretary of State, Avtar, LLC, was involuntarily dissolved

on January 11, 2013. Secretary of State, Business Services, Corporation/LLC Search, available at

http://www.ilsos.gov/corporatellc/ (last visited July 17, 2015) (name search on “Avtar”).

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¶5 Bhutani initiated the case at issue on January 14, 2014, when he filled a two-count

complaint for conversion and replevin against the bank. He asserted that he had made a series of

requests, orally and in writing, seeking access to the property so that he could remove what he

described as pharmaceutical equipment having a replacement value in excess of $4 million.

¶6 The bank moved to dismiss the action under section 2-619 of the Code of Civil Procedure

(Code) (735 ILCS 5/2-619 (West 2014)), asserting that both counts of the complaint were barred

by the foreclosure judgment. It asserted that the doctrines of res judicata and collateral estoppel

defeated Bhutani’s right to seek possession of the equipment and that Bhutani’s attempt to reclaim

the equipment amounted to an attempt to relitigate the foreclosure. It further claimed that, under

Illinois law, it assumed no duty to care for personal property on or within the foreclosed property.

¶7 More specifically, the bank asserted that Bhutani had failed to state a claim for conversion

in that, because it was in lawful possession of the property on which the equipment was located, it

was not in wrongful possession of the equipment. It asserted that he lost the right to enter the

property or to store personal property thereon and that this result was conclusive as to his right to

the equipment.

¶8 The court granted the bank’s motion to dismiss. It agreed that Bhutani’s claims were

barred by res judicata and collateral estoppel. It also ruled that the termination of Bhutani’s

“possessory interest in the premises” was a sufficient basis to dismiss.

¶9 Bhutani filed a timely motion to reconsider, in which he asserted that the court had

misinterpreted the law. The court denied the motion, and Bhutani filed a timely notice of appeal.

¶ 10 II. ANALYSIS

¶ 11 On appeal, Bhutani argues that the bank failed to demonstrate that either form of bar by

prior judgment applied or that it had a relevant possessory interest in the equipment. The bank

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responds with several arguments, at the core of which is the premise that its possessory interest

was resolved by the order giving it possession of the property. The bank also raises a series of

specific arguments against reversal that we will address after we address the applicability of the

bank’s defenses. We will conclude that the bank had no possessory interest sufficient to defeat

Bhutani’s claims and that, as a consequence, the bank failed to adequately set out its defenses of

res judicata and collateral estoppel. Further, we will conclude that none of the other matters

raised by the bank negates the success of Bhutani’s arguments.

¶ 12 Preliminarily, we note that the propriety of a dismissal under section 2-619 of the Code is

an issue of law and so subject to de novo review. Lutkauskas v. Ricker, 2015 IL 117090, ¶ 43.

Further, a defendant who seeks a dismissal by means of a section 2-619 motion bears the burden of

setting out its defense—that is, of stating an affirmative matter sufficient to defeat the complaint.

Badette v. Rodriguez, 2014 IL App (1st) 133004, ¶ 16.

¶ 13 We start our analysis by considering the underlying premise of the bank’s arguments,

namely, that its possessory right to the equipment was resolved by the order giving it possession of

the property. We will conclude that, although the order gave the bank a kind of incidental and

conditional right to possess the equipment, this right was not sufficient to defeat Bhutani’s claims.

The order can be taken to have adjudicated the bank’s possessory right to the equipment incidental

to its possession of the property, but it did not adjudicate the relative possessory rights to the

equipment, between Bhutani and the bank. In explaining why this is so, we will address the

bank’s res judicata and collateral estoppel defenses. We will consider whether those defenses are

rooted in the same incorrect idea that the bank’s limited possessory right necessarily defeated

Bhutani’s ownership interests.

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¶ 14 Initially, we will, for the purposes of further discussion, take it as a given that the order

giving the bank possession of the property, in combination with the equipment’s presence on the

property, established for the bank a limited possessory right to the equipment. We note that

nothing in Illinois law suggests that the equipment’s presence on the property was a barrier to the

bank’s taking possession of the property or that the bank, by taking possession of the property,

acquired a duty to immediately deliver the equipment to its owner.

¶ 15 Whatever right the bank had to possess the equipment arose incidentally from its right to

take possession of the property and, because of that source, was limited to what was necessary to

take possession of the property. A description of an analogous situation should make that

statement more concrete. Suppose that an individual who has lent a vehicle to another finds the

borrower’s dropped wallet in the returned vehicle. One might fairly conclude that the presence of

the dropped wallet does not preclude the lender from using the vehicle even though that implies

taking possession of the wallet. However, that conclusion does not require one to accept the

further conclusion that the lender has a right to retain the wallet in the face of the borrower’s

reasonable attempts to recover it. This example suggests that a person can acquire a right to take

possession of someone else’s personal property but that the right is strictly limited to what is

necessary for the first person to take possession of his or her own property.

¶ 16 Case law supports the conclusion that, when a person who has been lawfully evicted from

real property leaves behind personal property, that person generally retains a right to recover the

personal property. Direct litigation of the issue has been sparse, but the New York courts have

twice addressed essentially the question at issue here.

¶ 17 The relatively recent case of Miller v. Marchuska, 819 N.Y.S.2d 591 (N.Y. App. Div.

2006), is closely on point. In Miller, one of the defendants, a tax buyer, obtained an order

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resulting in the eviction of the plaintiff, an auto mechanic, from the property from which he

operated his business. The plaintiff’s tools and equipment and some vehicles remained on the

premises at the time of the eviction, but the tax buyer hired two other defendants to remove them to

storage facilities. Miller, 819 N.Y.S.2d at 592. The plaintiff made a demand for his property’s

return that the defendants refused to meet. He filed suit, asserting conversion of his property, but

the trial court granted summary judgment in favor of the defendants on the conversion claim.

Miller, 819 N.Y.S.2d at 592. The appellate court noted that the plaintiff conceded that the

eviction was proper, but it held that, in the absence of any evidence that any defendant had a lien

on the plaintiff’s property, the retention of the plaintiff’s property after he demanded its return was

unlawful and the basis for a conversion claim. Miller, 819 N.Y.S.2d at 592. The court further

held that the law authorized a counterclaim for storage fees and similar expenses for the period

before the plaintiff’s demand for his property.

¶ 18 Also instructive is the New York Court of Appeals decision on which the Miller court

relied, Congregation Anshe Sefard of Keap Street, Inc. v. Title Guarantee & Trust Co., 50 N.E.2d

534 (N.Y. 1943). In Congregation Anshe Sefard, the plaintiff had been evicted from its

synagogue building by its landlord and sought to recover “personal property *** of a religious

character” that had remained in the synagogue after the eviction. Congregation Anshe Sefard, 50

N.E.2d at 534. The court held that an order that grants possession of real property relates only to

the real property and therefore gives no right to “ ‘exercise dominion’ ” over the personal property

of the dispossessed former occupant. Congregation Anshe Sefard, 50 N.E.2d at 535 (quoting

Reich v. Cochran, 99 N.Y.S. 755, 756 (N.Y. App. Div. 1906)). The court thus held that, although

the plaintiff could not use the conversion action to mount a collateral challenge to the eviction

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judgment, the plaintiff could go forward with its conversion action. Congregation Anshe Sefard,

50 N.E.2d at 534.

¶ 19 These cases provide three logical results. First, a judgment that gives possession of real

property does not create a permanent right to possess any personal property on the premises.

Second, and consequently, a suit to recover that property is not barred by the judgment for

possession. Third, a party who has incurred expenses as a result of personal property being left

behind may recover those expenses in conjunction with the other party’s recovery of the property.

We explicitly adopt the first two results and leave open the possibility that the third result is proper

as well. Further, we reject all of the bank’s arguments that suggest that its right to the property is

inseparable from its right to the equipment.

¶ 20 We now address the specific issues of res judicata and collateral estoppel. We consider

those doctrines in order.

¶ 21 Because no identity exists between the claim in the foreclosure action and Bhutani’s

claims, Bhutani’s claims were not barred by res judicata. Three requirements must be satisfied

for res judicata to apply: “(1) the rendition of a final judgment on the merits by a court of

competent jurisdiction; (2) the existence of an identity of cause of action; and (3) identity of the

parties or their privies.” Lutkauskas, 2015 IL 117090, ¶ 44. When we decide whether claims

have a common identity such that res judicata bars the later ones, we apply what is known as the

“transactional test.” Lutkauskas, 2015 IL 117090, ¶ 47. Under the transactional test, “separate

claims will be considered the same cause of action for purposes of res judicata if they arise from a

single group of operative facts, regardless of whether they assert different theories of relief.”

River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 311 (1998); accord Lutkauskas, 2015 IL

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117090, ¶ 47. The issue is one of law and thus subject to de novo review. Lutkauskas, 2015 IL

117090, ¶ 43.

¶ 22 Applying the transactional test to the question of whether the foreclosure claim shares an

identity with Bhutani’s conversion and replevin claims, we conclude that it does not. The bank’s

primary argument for an identity is that which we have already addressed and rejected, that the

foreclosure judgment specifically adjudicated the same right to possession as is at issue in

Bhutani’s complaint. Furthermore, the foreclosure judgment decided the parties’ rights as to a

specific piece of real property and all its “rents, issues and profits, together with the tenements,

hereditaments and appurtenances.” That judgment had its basis in a particular mortgage,

apparently an ordinary mortgage on real property that was used for industrial purposes. Because

a mortgage “is an interest in land, created by a written instrument providing security in real estate

to secure the payment of a debt” (emphases added) (Schilling v. Stahl, 395 Ill. App. 3d 882, 888

(2009), a mortgage foreclosure action does not ordinarily decide the plaintiff’s interest in personal

property in or on the real property. Given that the bank does not in any way tie its claimed right to

the equipment to the mortgage or a related transaction, it has not shown any common core of

operative facts that could create an identity of the claims.

¶ 23 Collateral estoppel also does not bar either of Bhutani’s claims; this is because neither

claim has an issue that was litigated in the foreclosure suit.

“The minimum threshold requirements for the application of collateral estoppel

are: (1) the issue decided in the prior adjudication is identical with the one presented in the

suit in question, (2) there was a final judgment on the merits in the prior adjudication, and

(3) the party against whom estoppel is asserted was a party or in privity with a party to the

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prior adjudication.” (Emphasis in original.) Nowak v. St. Rita High School, 197 Ill. 2d

381, 390 (2001).

“For collateral estoppel to apply, a decision on the issue must have been necessary for the

judgment in the first litigation, and the person to be bound must have actually litigated the issue in

the first suit.” Talarico v. Dunlap, 177 Ill. 2d 185, 191 (1997). As we have stated, a possessory

right to the equipment was not litigated in the foreclosure action.

¶ 24 We now turn to the other arguments that the bank raises in its response to Bhutani. After

addressing those, we dispose of the bank’s motion to dismiss the appeal as moot as to the replevin

claim.

¶ 25 The bank argues that, because Bhutani could have established his right to possess the

equipment in the foreclosure action, by, for instance, seeking an order specifically granting him

possession of the equipment, the judgment in the foreclosure action bars this action. The bank’s

argument misunderstands such bars. The argument implies that every possible claim a party

could raise against the other party in an action must be raised or be barred. This is not the case.

It is true that Illinois courts use words that suggest a rule akin to that implied by the bank. For

instance, in Lutkauskas, 2015 IL 117090, ¶ 44, the supreme court stated that, “[i]n addition to the

matters that were actually decided in [a] first action, the bar [of res judicata] also applies to those

matters that could have been decided in the prior suit.” While this statement accurately

summarizes the doctrine, its application requires courts to consider three specific elements. The

supreme court subsequently set forth those elements in Lutkauskas, 2015 IL 117090, ¶ 44, as

follows: “(1) the rendition of a final judgment on the merits by a court of competent jurisdiction;

(2) the existence of an identity of cause of action; and (3) identity of the parties or their privies.”

Here, the doctrine does not apply, because the second element is not satisfied. Quite simply, a

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claim for the possession of the equipment is not the same for res judicata purposes as the

foreclosure claim.

¶ 26 The bank makes several arguments equating Bhutani’s attempts to regain possession of the

equipment to an attempt to challenge his loss of possession of the property. Possession of the

equipment does not require possession of the property. Indeed, as we will later discuss, the bank

has filed an affidavit in this court averring that the equipment is no longer on the property.

Further, an attempt to seek entry onto property does not equate to an attempt to seek possession of

that property. Property law includes entire classes of persons other than possessors who may

lawfully enter onto real property—notably licensees and invitees. See Black’s Law Dictionary

846, 939 (8th ed. 2004) (invitee, licensee). Seeking possession of the equipment—or for that

matter, seeking entry onto the property—is in no way equivalent to seeking possession of the

property.

¶ 27 The bank argues that, because Bhutani’s filings in the trial court used the wrong standard

for the identity of claims, Bhutani forfeited his argument on appeal that res judicata did not bar his

claims. Bhutani asked the court to apply the “same-evidence test,” which the supreme court

discarded in favor of the transactional test. River Park, Inc., 184 Ill. 2d at 307. On these facts,

we decline to find forfeiture. If the difference between the same-evidence test and the

transactional test had been a genuine issue in this case, then an argument could be made that

Bhutani had forfeited the issue. Typically, however, the choice of tests makes no difference.

See River Park, Inc., 184 Ill. 2d at 307 (“In almost all cases in which Illinois courts have discussed

these two tests, the courts have found that the result of the analysis was the same, regardless of

which test was applied.”). Here, the complete lack of identity of the claims makes clear that the

choice of test would have no effect on the outcome.

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¶ 28 The bank argues that Bhutani’s appeal is moot as to the replevin action because the

equipment has been removed from the property. It has further filed a motion seeking partial

dismissal of the appeal on the same basis. Included with the motion is an affidavit of the bank’s

vice president, Alexander Durek, in which Durek avers that the bank’s agent for the property

informed him before September 30, 2013—before Bhutani filed his complaint—that a “third

party” removed the equipment from the property.

¶ 29 Initially, we fail to understand how the removal of the equipment makes moot Bhutani’s

attempt to regain possession of it. The argument could make sense if one assumes again that

some unbreakable tie joins Bhutani’s right to the equipment with his right to the property. We

reject such a link for the reasons we have stated. Alternatively, the argument could make sense if

the bank expects us to infer that it no longer has any control over the equipment. We do not draw

that inference from the affidavit, which does not explain why the equipment was removed or who

arranged for the removal.

¶ 30 We further note that, although the bank purports to seek dismissal for mootness, its

argument in fact goes to the merits of Bhutani’s replevin claim. Generally, a matter is moot when

the course of events has removed any actual controversy. See, e.g., Baker v. Forest Preserve

District of Cook County, 2015 IL App (1st) 141157, ¶ 35. The bank’s motion relates to a likely

controversy between the parties: its control of the equipment. We will not wade into what

appears to be a factual controversy between the parties, even if it is presented in the guise of a

mootness claim. We thus deny the bank’s motion.

¶ 31 III. CONCLUSION

¶ 32 For the reasons stated, we reverse the dismissal of Bhutani’s complaint and remand the

cause.

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¶ 33 Reversed and remanded.

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