+
September 2015
21
Community Bankers Association of Illinois
Bank
notes
D
o
you recall the height of the Great Recession
when banks obtained judgments against debtors
daily? What did you do when judgment was
entered against your borrower/guarantor? Did
you proceed to supplementary proceedings? Were citations
to discover assets issued either directly to the debtor or a
third party? Was a memorandum of judgment recorded? Was
a credit report run and asset search performed? Have you
searched the bankruptcy docket? If you are a banker or an
attorney representing banks, now is an excellent time to
revisit your drawer or spreadsheet of judgments to see if they
are worth more than the paper they are printed on.
Imagine it is May 1, 2008 and ABC Bank has just obtained
a $250,000.00 judgment against Gary Guarantor. ABC
Bank diligently records a memorandum of judgment against
Guarantor on May 2, 2008 in the local recorder of deed’s office.
Unfortunately, the prospect of recovery looks bleak. A citation
to discover assets is issued to Guarantor, but Guarantor is
never served. ABC Bank hears from a friend who hears it from
another friend that Guarantor has left the country, possibly for
good. At the time the memorandum of judgment was recorded,
Guarantor’s real property consists of two parcels: 1) an income
producing three-flat valued at $475,000 encumbered with a
first mortgage in the amount of $480,000 and ABC Bank’s
$250,000 memorandum of judgment; and 2) a vacant lot
located in the Fulton Meat Packing District valued at $750,000
with a first mortgage in the amount of $650,000 and a second
lien in the amount of $125,000. With both properties lacking
any apparent equity, ABC Bank chooses to take no action to
enforce the judgment and it is filed away and forgotten.
Fast forward seven years to present-day May 2015. Guarantor
has resurfaced and his three-flat is now worth $550,000 with
the first mortgage having been paid down to $470,000.00
followed by ABC Bank’s $250,000 memorandum of judgment.
To Guarantor’s surprise his vacant lot is now the subject of a
bidding war between developers in the Fulton Meat Packing
District. Guarantor currently is under contract to sell his lot for
$950,000, which would pay-off the first mortgage and second
mortgagee in full and leave roughly $175,000 for Guarantor.
Unfortunately, ABC Bank is unaware of any of these
developments, continues to take no action and relies upon
their memorandum of judgment recorded in 2008. Guarantor
closes on the sale of his lot on May 31, 2015 with proceeds
paying off the first and second liens in full and Guarantor
walking away with the remaining proceeds. ABC Bank receives
nothing. What happened?
Illinois’s Revival of Judgment statute sets forth the procedure
to revive judgments and enforce them after the age of seven
years. 735 ILCS5/2-1602(a) states a judgment may be revived
Michael J. Gilmartin, Howard & Howard Attorneys PLLC, Chicago, IL
Reviving Dormant Judgments in Illinois
