PATRICK L. COGSWELL and PATRICK M. O’FLAHERTY, doing business as THE PATRICK GROUP v. CITIFINANCIAL MORTGAGE COMPANY, INCORPORATED, successor by merger to Associates…

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-2153
PATRICK L. COGSWELL and PATRICK M. O’FLAHERTY,
doing business as THE PATRICK GROUP,
Plaintiffs-Appellants,
v.
CITIFINANCIAL MORTGAGE COMPANY, INCORPORATED,
successor by merger to Associates Finance, Incorporated,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:05-cv-05008—Charles R. Norgle, Sr., Judge.
ARGUED APRIL 15, 2009—DECIDED OCTOBER 5, 2010
Before FLAUM, RIPPLE, and SYKES, Circuit Judges.
SYKES, Circuit Judge. CitiFinancial Mortgage assigned
its interest in a mortgage to two investors—doing
business as “The Patrick Group”—but never delivered
the original or a copy of the underlying note. When The
Patrick Group tried to foreclose on the mortgage in

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2 No. 08-2153
Illinois state court, its action was dismissed because it
could not produce the note. After an unsuccessful
appeal, The Patrick Group filed this breach-of-contract
lawsuit against CitiFinancial. The suit was removed to
federal court, and the district court granted summary
judgment in favor of CitiFinancial.
We reverse. The district court based its summary-
judgment decision primarily on a determination that
CitiFinancial never agreed to deliver the note as part of
the parties’ agreement to transfer the mortgage. But
whether they agreed on this term is a question of fact,
and The Patrick Group presented enough evidence
from which a reasonable fact finder could conclude that
it was a part of the parties’ agreement. The district
court’s alternative basis for summary judgment—that
CitiFinancial’s alleged breach did not cause The Patrick
Group’s damages—was also erroneous. Under the cir-
cumstances of this case, the causation question should
have been resolved in The Patrick Group’s favor as a
matter of law; the state trial and appellate courts
rejected The Patrick Group’s foreclosure action because
without a copy of the note, it could not prove it was the
holder of the debt the mortgage secured.
I. Background
In November 2000 CitiFinancial initiated proceedings
in state court to foreclose on a mortgage secured by

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No. 08-2153 3
At the time of the mortgage transaction at issue in this 1
case, Associates Finance actually owned the mortgage. By the
time the complaint was filed in this action, however, Associates
Finance had merged with CitiFinancial Mortgage. For the
sake of simplicity, we refer to Associates Finance and
CitiFinancial Mortgage as “CitiFinancial.”
residential property in Illinois. Around the same time,1
Patrick Cogswell and Patrick O’Flaherty, who at the
time were doing business as The Patrick Group, ap-
proached CitiFinancial and offered to purchase the mort-
gage and the underlying note. The parties settled on
a purchase price of $140,000, and in January 2001
CitiFinancial assigned its interest in the mortgage and
the note to The Patrick Group. The original note and
mortgage could not be located, however, and while
CitiFinancial was able to give The Patrick Group a copy
of the mortgage, it did not have a copy of the note.
After the assignment, The Patrick Group stepped into
CitiFinancial’s shoes in the foreclosure proceeding but
quickly ran into problems. The current owners of the
property had not discovered CitiFinancial’s mortgage
lien in their title search, and further inquiry revealed a
gap in the recorded ownership of the mortgage. The
original mortgagee, Equity Mortgage, assigned the mort-
gage to Fleet Finance, but the next recorded assign-
ments were from Home Equity to CitiFinancial and from
CitiFinancial to The Patrick Group; nothing in the record
indicated how Home Equity acquired the mortgage
from Fleet Finance. Since The Patrick Group could not
produce either an original or a copy of the underlying

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4 No. 08-2153
note, the property owners contended that The Patrick
Group was not a mortgagee entitled to foreclose upon
the property within the meaning of 735 ILL. COMP. STAT.
5/15-1208.
The Patrick Group introduced testimony and
CitiFinancial’s computer records at trial in an effort to
prove it was entitled to enforce the note, but the state
trial court sided with the property owners and entered
a directed verdict against The Patrick Group. The Illinois
Appellate Court affirmed. The appellate court observed
that under Illinois law only the holder of a note may
foreclose on property; transferring a mortgage is not
enough by itself to confer the right to foreclose upon
property. See, e.g., Moore v. Lewis, 366 N.E.2d 594, 599
(Ill. App. Ct. 1977). The court concluded that The
Patrick Group had not proved it was a noteholder
because it never received the note from CitiFinancial or
otherwise possessed it and therefore was not entitled to
foreclose upon the mortgage.
Frustrated that it paid $140,000 to purchase an unen-
forceable mortgage, The Patrick Group filed this breach-
of-contract action in state court against CitiFinancial.
CitiFinancial removed the case to federal court based on
diversity jurisdiction. Both parties moved for summary
judgment, and the district court granted CitiFinancial’s
motion. The court first concluded that The Patrick Group
had not proven that the parties’ agreement required
CitiFinancial to transfer the original or a copy of the
note. The court also concluded that even if CitiFinancial
was obligated to turn over a copy of the note, its failure

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No. 08-2153 5
to do so did not cause The Patrick Group’s damages.
This conclusion was based on the court’s view that
Illinois law permitted The Patrick Group to foreclose on
the mortgage even if it did not hold the note. The court
entered judgment for CitiFinancial, and this appeal fol-
lowed.
II. Discussion
We review the district court’s decision to grant sum-
mary judgement de novo. When the district court decides
cross-motions for summary judgment, as it did here, “we
construe all facts and inferences therefrom in favor of
the party against whom the motion under consideration
is made,” which in this case is The Patrick Group.
First State Bank of Monticello v. Ohio Cas. Ins. Co., 555 F.3d
564, 567 (7th Cir. 2009) (internal quotation marks and
citation omitted). Summary judgment is appropriate
only if “there is no genuine issue as to any material fact
and . . . the movant is entitled to judgment as a matter
of law.” FED. R. CIV. P. 56(c).
The parties agree that Illinois law governs this action.
In Illinois, as elsewhere, a breach-of-contract claim re-
quires: (1) an offer and acceptance; (2) consideration;
(3) definite and certain terms; (4) performance by the
plaintiff of all required conditions; (5) breach; and
(6) damages caused by the breach. E.g., Ass’n Benefit
Servs., Inc. v. Caremark RX, Inc., 493 F.3d 841, 849 (7th Cir.
2007) (citation omitted); Barille v. Sears Roebuck & Co., 682
N.E.2d 118, 121 (Ill. App. Ct. 1997). Only the third and
sixth elements are at issue in this appeal. More specif-

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6 No. 08-2153
ically, the first question is whether the parties’ agree-
ment required CitiFinancial to deliver the original or a
copy of the note secured by the mortgage when it sold
the mortgage to The Patrick Group. The second question
is whether CitiFinancial’s failure to deliver an original
or a copy of the note caused The Patrick Group’s fore-
closure action to fail.
A. The Terms of the Contract
The Patrick Group maintains that the parties agreed
CitiFinancial would deliver the note when it transferred
the mortgage. The district court treated this issue as a
question of law, drawing on language from our cases
stating that “ ‘[t]he question of the existence of a contract
is a matter of law for determination by the court.’ ”
Caremark, 493 F.3d at 849 (quoting Arneson v. Bd. of Trs.,
McKendree Coll., 569 N.E.2d 252, 256 (Ill. App. Ct. 1991)).
But this refers to the determination of whether the
parties have created an enforceable contract, which turns
on whether they described their “essential obligations” in
definite and certain terms. Id. at 851; accord Acad. Chi.
Publishers v. Cheever, 578 N.E.2d 981, 983-84 (Ill. 1991). The
contract between CitiFinancial and The Patrick Group
meets this test; the essence of the parties’ agreement was
to transfer the mortgage in exchange for $140,000.
The real question here is whether the obligation to
transfer physical possession of the note—or at least a
copy—was part of the parties’ agreement. This is a ques-
tion of fact. See Mulliken v. Lewis, 615 N.E.2d 25, 27 (Ill.
App. Ct. 1993) (“Whether a contract exists, its terms,

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No. 08-2153 7
and the intent of the parties are questions of fact for the
trier of fact.” (citation omitted)); see also Otto v. Variable
Annuity Life Ins. Co., 134 F.3d 841, 848 (7th Cir. 1998); Estate
of Kern v. Handelsman, 491 N.E.2d 1275, 1280 (Ill. App. Ct.
1986). Accordingly, the pertinent inquiry is whether
The Patrick Group has produced enough evidence to
convince a reasonable fact finder that the parties agreed
CitiFinancial would transfer the original or a copy of
the note.
The Patrick Group has met its burden of production.
In the district court, it relied on three pieces of evidence.
The first was its letter to CitiFinancial offering to pur-
chase “the note secured by” the mortgage; this offer
was subject to certain conditions, one of which was
“[v]erification of all back-up documents including but
not limited to the Note.” The second piece of evidence
was the assignment executed by the parties, which pro-
vided that CitiFinancial “grants, assigns and transfers . . .
all beneficial Interest under [the mortgage] . . . TOGETHER
with the notes therein described or referred to, the
money due and to become due thereon with Interest, and
all rights accrued or to accrue under [the mortgage].”
Finally, Patrick Cogswell submitted an uncontested
affidavit in which he testified that the parties agreed
CitiFinancial was required to transfer both the original
note and the mortgage to The Patrick Group.
As even CitiFinancial agrees, this evidence is open to
different interpretations. But the district court’s analysis
shows it mistakenly believed it could resolve the issue
on the cross-motions for summary judgment, when a

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8 No. 08-2153
reasonable fact finder could accept either party’s
proffered interpretation. For example, the district court
discounted The Patrick Group’s offer letter because it
said only that The Patrick Group would have an opportu-
nity to “verify” the note and was silent as to whether
CitiFinancial would have to “transfer” the note. This
does not conclusively resolve the issue. To the contrary,
that the note was mentioned in the offer letter demon-
strates that The Patrick Group believed that the transfer
of the note was part of the transaction.
Next, the district court discounted the language of
the assignment by interpreting that document to mean
only that CitiFinancial “transfer[red] . . . all beneficial
interest under . . . the notes” and had no bearing on
whether CitiFinancial was required to transfer physical
possession of the note. The court’s interpretation is one
plausible reading of this evidence but is hardly con-
clusive; a reasonable fact finder could reject it in favor
of The Patrick Group’s interpretation.
Finally, the district court rejected the Cogswell affidavit
because Cogswell also testified that he requested the
original note and the mortgage on several occasions after
the parties came to an agreement. In the district court’s
view, this course of conduct indicated that any obliga-
tion to turn over the note did not arise as part of the
parties’ original agreement. Again, this is one possible
interpretation of Cogswell’s testimony, but it is not the
only reasonable one; Cogswell might simply have
been reminding CitiFinancial of its promise. The Patrick
Group is entitled to have reasonable inferences drawn in

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No. 08-2153 9
CitiFinancial also argues that The Patrick Group waived its 2
breach-of-contract claim by attempting to foreclose on the
mortgage, claiming that this conduct is inconsistent with an
intent to enforce any contractual right to receive the note.
See Wikoff v. Vanderveld, 897 F.2d 232, 241 (7th Cir. 1990); Wald
v. Chi. Shippers Ass’n, 529 N.E.2d 1138, 1147 (Ill. App. Ct. 1988).
We see no inconsistency.
its favor, Akande v. Grounds, 555 F.3d 586, 589 (7th Cir.
2009), but the district court’s analysis shows that it essen-
tially resolved the factual dispute itself.
CitiFinancial takes issue with The Patrick Group’s
argument on appeal that it was entitled to the original
note or a copy, noting that the Cogswell affidavit and the
complaint claim entitlement to the original. Cf. Caremark,
493 F.3d at 851 (finding relevant for purposes of deter-
mining whether a contract existed as a matter of law
the fact that a party adopted inconsistent positions).
This hardly makes a difference. For reasons we will ex-
plain in a moment, either one would have changed the
outcome in the foreclosure proceeding. In addition,
CitiFinancial argues that The Patrick Group’s course of
conduct suggests that transfer of the note was not a term
of the parties’ agreement. On this point CitiFinancial
notes that The Patrick Group executed the purchase
agreement and attempted to foreclose on the property
without ever seeing the note. The apparent argument is
that if The Patrick Group really thought copies of both the
note and the mortgage were required to foreclose, it would
have waited until it had physical possession of both of
these documents. On summary judgment this argument2
is unconvincing. Evaluating the weight of the evidence

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10 No. 08-2153
is a task for a jury, not a judge, and the evidence here
is not so one-sided that no reasonable fact finder could
agree with The Patrick Group’s interpretation. See, e.g.,
Wheeler v. Lawson, 539 F.3d 629, 633-34 (7th Cir. 2008).
“[T]he district court was not presented with a situation
where it could simply interpret the contract as a matter
of law,” and as such, it is the jury’s responsibility to, “in
light of all the documentary and testimonial evidence,
[glean] the intent of the parties and [determine] the
terms of the contract.” Otto, 134 F.3d at 848.
There remains one final loose end on this issue. On
remand the district court might conclude that the ob-
ligation to transfer physical possession of the note (or a
copy) is a “missing term” in the contract that should be
supplied by a court as a matter of law. See, e.g., Cheever,
578 N.E.2d at 984 (“It is not uncommon for a court to
supply a missing material term, as the reasonable con-
clusion often is that the parties intended that the term
be supplied by implication.”). Courts are generally reluc-
tant to imply missing contract terms; this reluctance
flows from a concern about mistakenly binding con-
tracting parties to terms outside their agreement. E.g.,
Architectural Metal Sys., Inc. v. Consol. Sys., Inc., 58 F.3d
1227, 1229 (7th Cir. 1995) (“The more willing the courts
are to interpolate missing terms, the more difficult it is
for the recipient of a vague offer to interpret the inten-
tions behind the offer.”). Even so, the conduct of the
parties or customary practice may suggest that the pur-
chaser of a mortgage must receive the note, a copy, or
other documentary evidence establishing ownership of
the debt as an implicit term of the parties’ contractual

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No. 08-2153 11
understanding, especially since a party may not transfer
its interest in the mortgage without transferring its inter-
est in the debt. See Moore, 366 N.E.2d at 599. We express
no opinion on this question. Because The Patrick Group
never raised this argument in this court, we leave
the matter for the district court to consider in the first
instance.
B. Damages Caused by the Alleged Breach
The district court’s alternative basis for entering sum-
mary judgment for CitiFinancial was that CitiFinancial’s
failure to turn over the original or a copy of the note
was not the cause of The Patrick Group’s damages. The
Patrick Group argues that causation is established as a
matter of law because the state-court decisions would
have been different if it could have produced an original
or a copy of the note. CitiFinancial maintains that because
there were alternative ways of proving ownership of
the note, the dismissal of the foreclosure action was not
caused by its failure to deliver the note.
We begin with the observation that the particular
causation question here is a legal, not a factual one.
Although the general rule is that the determination of
causation is for the fact finder, Illinois courts apply a
special rule in breach-of-contract claims where the
asserted damage is caused by an adverse outcome of a
judicial proceeding. See, e.g., O’Neil v. Cont’l Bank, N.A., 662
N.E.2d 489, 496 (Ill. App. Ct. 1996). In O’Neil the
plaintiff submitted a bid to purchase real estate in a
bankruptcy proceeding; the plaintiff claimed the defen-

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12 No. 08-2153
dant agreed to support confirmation of the bid in the
bankruptcy court. When the time came for the defen-
dant to so, however, the defendant remained silent and
the bankruptcy judge accepted a competitor’s bid. In the
ensuing breach-of-contract action, the Illinois Appellate
Court held that as a matter of law, the defendant’s breach
caused the plaintiff’s bid to fail. Id. at 497. The causation
inquiry, the O’Neil court said, was a legal question for
the court if the bankruptcy judge acted “in his role as
‘judge,’ not as ‘fact finder.’ ” Id. at 496.
Under O’Neil, as we have noted, the causation inquiry
in this context is a legal question; the state courts that
rejected The Patrick Group’s foreclosure action were
acting in their capacity as judges and not as fact finders.
The trial court in the foreclosure action took the issue out
of the jury’s hands by entering a directed verdict against
The Patrick Group—a decision the appellate court af-
firmed. These courts concluded that The Patrick Group
failed to make out a prima facie case because it had not
shown it was a “noteholder,” and in Illinois the question
of whether a plaintiff has presented a prima facie case is
a question of law. E.g., People ex rel. Sherman v. Cryns,
786 N.E.2d 139, 148 (Ill. 2003). Since the Illinois courts
acted in their capacity as judges, not as fact finders, this
particular causation question is a legal one.
O’Neil is also instructive because it emphasizes that in
a breach-of-contract action like this one, which turns on
how the defendant’s conduct affected the outcome of a
judicial proceeding, the proper question to ask at the
causation stage is what a reasonable court “should have

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No. 08-2153 13
The parties briefly dispute who bears the burden of proving 3
causation. O’Neil contains language suggesting that the burden
of proof on causation shifts from the plaintiffs to the
defendants if the plaintiffs show that the defendant’s breach
“materially contributed” to the outcome of the judicial pro-
ceeding. O’Neil v. Cont’l Bank, N.A., 662 N.E.2d 489, 496-97 (Ill.
App. Ct. 1996). But this language is drawn from RESTATE-
MENT (SECOND) OF CONTRACTS § 245 (1981), and that section
addresses causation in the context of determining when a
party’s failure to perform a condition means the party has
breached its contract. Accord Cummings v. Beaton & Assocs., Inc.,
618 N.E.2d 292, 306 (Ill. App. Ct. 1992). In this case, by contrast,
we are confronted with the ultimate question of whether a
defendant’s breach caused the plaintiff’s damages.
We need not resolve the matter here. Plaintiffs normally bear
the burden of proving the elements of their claims, see TAS
Distrib. Co. v. Cummins Engine Co., 491 F.3d 625, 633 (7th Cir.
2007); Midland Hotel Corp. v. Reuben H. Donnelley Corp.,
515 N.E.2d 61, 66 (Ill. 1987); Dyduch v. Crystal Green Corp., 582
N.E.2d 302, 305 (Ill. App. Ct. 1991), and for reasons we
will explain, The Patrick Group has established causation as
a matter of law.
done” had the defendants followed through on their
agreement. 662 N.E.2d at 496. The inquiry therefore
focuses on what a reasonable court should have done in
the foreclosure action had CitiFinancial given The Patrick
Group the original or a copy of the note secured by the
mortgage.3
This question turns on principles of Illinois mortgage-
foreclosure law. Generally speaking, only a mortgagee
can foreclose on property, and a mortgagee must (at a
minimum) be “the holder of an indebtedness . . . secured

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14 No. 08-2153
by a mortgage.” 735 ILL. COMP. STAT. 5/15-1208. Under
the Uniform Commercial Code, which Illinois has adopted,
810 ILL. COMP. STAT. 5/1-101 et seq., a key requirement
to being a holder is physical possession of the note
secured by the mortgage. See id. 5/1-201(b)(21)(A) (de-
fining a holder as “the person in possession of a
negotiable instrument that is payable either to bearer or
to an identified person that is the person in possession”).
Had CitiFinancial delivered the original or a copy of the
note, The Patrick Group would in turn have been able
to produce it in the foreclosure proceeding and thus fill
the evidentiary void on which the Illinois trial and ap-
pellate courts rested their adverse decisions. A rea-
sonable court under these circumstances would have
allowed The Patrick Group to proceed with the fore-
closure. It follows, then, that CitiFinancial’s failure to
deliver the note or a copy to The Patrick Group caused
the foreclosure action to fail.
CitiFinancial raises two arguments in response,
which do not address causation so much as they address
whether The Patrick Group “use[d] all reasonable means
to mitigate [its] damages.” Pokora v. Warehouse Direct,
Inc., 751 N.E.2d 1204, 1213 (Ill. App. Ct. 2001). First,
CitiFinancial contends that The Patrick Group could
have asked it to provide a lost-note affidavit, which could
then have been used to establish ownership of the debt
secured by the mortgage and thus foreclose on the prop-
erty. Second, CitiFinancial claims that The Patrick
Group could have filed a personal-judgment action
against the property owners based on its ownership
interest in the note. Neither of these arguments carries
the day.

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No. 08-2153 15
In Illinois a party may foreclose on a mortgage without suing 4
to enforce the underlying promissory note. See Hickey v. Union
Nat’l Bank & Trust Co. of Joliet, 547 N.E.2d 4, 7 (Ill. App. Ct.
1989). Only mortgagees may foreclose upon property, and a
mortgagee is defined as “the holder of an indebtedness . . .
secured by a mortgage,” “any person designated or authorized
to act on behalf of such holder,” or “any person claiming
through a mortgagee as successor.” 735 ILL. COMP. STAT. 5/15-
(continued...)
A lost-note affidavit from CitiFinancial would not
have conclusively established The Patrick Group’s ability
to foreclose on the mortgage. The Illinois rules of civil
procedure provide that if a claim rests upon a written
instrument, as foreclosure actions do, the plaintiff must
attach a copy of the written instrument to the pleading.
735 ILL. COMP. STAT. 5/2-606. It is true that if the instru-
ment is not available, a party may proceed with the
action by relying on an affidavit explaining why the
instrument is not available and describing its terms,
id.; this is commonly called a “lost note affidavit.” The
Uniform Commercial Code contains a similar concept,
allowing a party to enforce a lost, stolen, or destroyed
instrument if it can prove the terms of the instrument
and its right to enforce the instrument. See 810 ILL. COMP.
STAT. 5/3-309(b).
CitiFinancial’s argument assumes that a party may
succeed in a foreclosure action under 735 ILL. COMP. STAT.
5/15-1208 so long as it can produce a lost-note affidavit.
Even if we assume that Illinois law permits a party to
use a lost-note affidavit as part of its proof, a lost-note4

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16 No. 08-2153
(...continued) 4
1208. But no published Illinois decisions address whether a
party may foreclose upon a mortgage if it owns the interest in
the note (as CitiFinancial argues) or whether the party must
show that it holds the note in order to foreclose upon the
mortgage.
The inquiry is made more complicated by the fact that by
concluding that The Patrick Group could not enforce the
mortgage, the Illinois Appellate Court treated these concepts
as interchangeable. The appellate court observed that the trial
court had entered a directed verdict because the “plaintiffs
lacked any interest in the debt, or, put another way, were not
holders of the note and, therefore, not entitled to foreclose
the mortgage,” and concluded that The Patrick Group was not
the noteholder because CitiFinancial “did not transfer the note
to plaintiffs and . . . the plaintiffs never had possession of it.”
O’Neil instructs that we consider how a reasonable court
should have acted if The Patrick Group had presented a lost-
note affidavit. As we have noted, there are no precedential
Illinois decisions to guide us, but other courts have in some
circumstances concluded that a party may foreclose so long
as it shows it owns the underlying debt. See Ocwen Fed. Bank,
FSB v. Harris, No. 99-C-658, 2000 WL 1644377, at *4 (N.D. Ill.
Oct. 24, 2000) (interpreting Illinois law to allow a foreclosure
to proceed even though note was missing because there was
no dispute that plaintiff had title to the mortgage and the
underlying debt); accord Atl. Nat’l Trust, LLC v. McNamee, 984 So.
2d 375, 378-79 (Ala. 2007); New England Sav. Bank v. Bedford
Realty Corp., 680 A.2d 301, 309-10 (Conn. 1996). We will
assume for the sake of argument that Illinois law would allow
The Patrick Group to proceed with foreclosure if a lost-
(continued...)

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No. 08-2153 17
(...continued) 4
note affidavit could have convinced a reasonable court that
it owned the note.
affidavit would not have helped The Patrick Group
under the circumstances of this case. Lost-note affi-
davits are most commonly used to prove the terms of the
underlying debt; they are rarely enough by themselves
to prove ownership of a debt. Although a few courts
have allowed foreclosure to proceed based on a lost-
note affidavit, the affidavits in these cases also attached
a copy of the underlying original note. E.g., First Fed. Sav.
& Loan Ass’n of Chi. v. Chi. Title & Trust Co., 508 N.E.2d
287 (Ill. App. Ct. 1987) (finding that an affidavit and
copies of note and mortgage were sufficient to support
foreclosure action). We are not aware of any case in
Illinois in which a lost-note affidavit by itself was
enough to prove ownership of the underlying debt, and
CitiFinancial has not identified other documentary or
testimonial evidence that, in combination with a lost-
note affidavit, would have filled the evidentiary vacuum
identified by the Illinois trial and appellate courts in
The Patrick Group’s foreclosure action.
Thus, CitiFinancial’s ability to provide a lost-note
affidavit if The Patrick Group had asked is simply a red
herring. This is especially so considering the gap in the
chain of title in this case. The decisions of the state trial
and appellate courts reflect an understandable concern
that CitiFinancial might not have been the true owner
of the debt. Because neither The Patrick Group nor

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18 No. 08-2153
CitiFinancial could produce an original or even a copy
of the note, there remained the possibility that the note
was actually held by another who would be entitled to
enforce it against the property owners. This concern
was reasonable in light of the questions raised by the
ambiguous state of the title record. Illinois law is clear
that a mortgage may not be transferred unless the under-
lying debt is also transferred. In re BNT Terminals,
Inc., 125 B.R. 963, 969 (Bankr. N.D. Ill. 1990) (applying
Illinois law); Moore, 366 N.E.2d at 599. It might have
been theoretically possible to establish ownership of the
underlying debt by tracing it through a title search back
to the original mortgagee. See Fin. Freedom v. Kirgis, 877
N.E.2d 24, 45 (Ill. App. Ct. 2007) (allowing a foreclosure
action to proceed when the plaintiff produced testi-
monial evidence, a copy of the mortgage, and evidence
that the mortgage was recorded). But that possibility
would not have helped The Patrick Group here given the
unexplained gap in the title record. Accordingly, the fact
that The Patrick Group might have obtained a lost-note
affidavit from CitiFinancial does not alter the conclusion
that CitiFinancial’s failure to deliver an original or a
copy of the note caused the Illinois state courts to
reject The Patrick Group’s foreclosure action.
Finally, CitiFinancial argues that The Patrick Group
could have filed a personal-judgment action against the
property owners based on its interest in the note. A
personal-judgment action amounts to an effort to enforce
the note, and the normal rule under the Uniform Com-
mercial Code is that a party may not enforce a negotiable
instrument unless it has physical possession of the note.

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No. 08-2153 19
810 ILL. COMP. STAT. 5/3-301 (class of parties entitled to
enforce negotiable instruments under Illinois law is
limited to “the holder of the instrument” or “a nonholder
in possession of the instrument”); Locks v. N. Towne Nat’l
Bank of Rockford, 451 N.E.2d 19, 20-21 (Ill. App. Ct. 1983).
Obviously, The Patrick Group could not meet this re-
quirement because it never had possession of the note. As
we have discussed, Illinois allows a party to enforce a
lost, stolen, or destroyed instrument under certain cir-
cumstances, 810 ILL. COMP. STAT. 5/3-301, 5/3-309, and
here, The Patrick Group was entitled to acquire whatever
rights CitiFinancial had in the note, see FREDERICK M.
HART & WILLIAM F. WILLIER, NEGOTIABLE INSTRUMENTS
UNDER THE UNIFORM COMMERCIAL CODE § 12.03(1) (2009)
(“[T]he owner of an instrument may not be in possession
of it. Such non-holder transferees are protected by the
property principle that a transferee of property, be it real
property, tangible personal property or intangible prop-
erty, obtains all of the rights of his or her transferor as
a result of the transfer.”).
Put another way, The Patrick Group might have been
able to proceed with a personal-judgment action if it
could establish that CitiFinancial “was in possession of
the instrument and entitled to enforce it when loss of
possession occurred,” that “the loss of possession was not
the result of a transfer . . . or a lawful seizure,” and that
CitiFinancial “cannot reasonably obtain possession of
the instrument because the instrument was destroyed,
its whereabouts cannot be determined, or it is in the
wrongful possession of an unknown person or a person
that cannot be found or is not amenable to service of

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20 No. 08-2153
We do not address the separate question of the amount of 5
The Patrick Group’s damages.
10-5-10
process.” 810 ILL. COMP. STAT. 5/3-309(a). But this is just
a different way of requiring The Patrick Group to prove
that CitiFinancial owned and transferred the debt, and
we have already explained why a reasonable court would
conclude that The Patrick Group could not make this
showing. Accordingly, a personal-judgment action to
recover the amount of the past-due debt would have failed.
In short, as a matter of law, The Patrick Group’s
damages were caused by CitiFinancial’s failure to deliver
an original or a copy of the note secured by the mortgage.5
The open factual question is whether the parties’ agree-
ment required CitiFinancial to do so, and on this the
evidence is disputed. We therefore REVERSE the judg-
ment of the district court and REMAND for further pro-
ceedings consistent with this opinion.

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