## Facts

- The Bank of Lyons sued Mary Schultz and her husband, Alvin Schultz, as alleged debtors and sought to reach Alvin’s life-insurance proceeds payable to Mary as beneficiary (about $61,533.27).
- In June 1963, the bank filed an equity action for an accounting and obtained a preliminary injunction requiring insurers to deposit the proceeds with the court clerk.
- On July 2, 1963, the trial court dissolved the first injunction and dismissed the equity complaint; Mary recovered limited damages under the Illinois Injunction Act (interest lost on sequestered funds, attorneys’ fees, and costs).
- Seventeen days later, the bank amended its pending creditor’s suit to add a second count again seeking an accounting and injunctive relief against distribution of the proceeds; a second preliminary injunction issued on July 19, 1963.
- On September 24, 1965, the court dismissed the second count, dissolved the injunction, and stated the injunction had been wrongfully issued; proceeds in excess of $30,000 were ordered released to Mary.
- In 1975, Mary sued the bank for malicious prosecution based on the prior civil proceedings, alleging that the prolonged restraint of the proceeds caused serious financial harm, including foreclosure and loss of her home.
- The trial court dismissed the malicious-prosecution complaint on res judicata and failure to plead “special injury”; the appellate court reversed.

## Issues

1. Whether Mary Schultz’s malicious-prosecution action was barred by res judicata due to her earlier recovery of damages under the Illinois Injunction Act for a wrongful injunction.
2. Whether allegations of prolonged deprivation of substantial funds resulting in foreclosure and loss of a home constitute the “special injury” required for malicious prosecution based on civil proceedings in Illinois.

## Decision

- The Illinois Supreme Court affirmed the appellate court and remanded for further proceedings.
- Res judicata did not bar the malicious-prosecution claim because the Injunction Act damages proceeding did not adjudicate the distinct elements of malicious prosecution.
- Mary’s allegations of substantial interference with property and consequential loss (including foreclosure) adequately pleaded “special injury” beyond ordinary litigation burdens.

## Legal Principles

- An award of damages for wrongful issuance of an injunction under the Illinois Injunction Act does not necessarily preclude a subsequent malicious-prosecution action arising from related civil litigation.
- Res judicata requires identity of causes of action and a final merits determination of the claim later asserted; limited Injunction Act proceedings compensate for specific injunction-related harm and do not resolve malice, lack of probable cause, or favorable termination as elements of malicious prosecution.
- In Illinois civil malicious-prosecution cases, “special injury” must exceed ordinary consequences of being sued (such as typical expense and inconvenience) and may be satisfied by substantial, prolonged interference with property rights causing serious consequential harm, including foreclosure.

## Conclusion

The court allowed Mary Schultz to proceed with a malicious-prosecution claim, holding that prior Injunction Act damages did not bar the tort action and that alleged prolonged restraint of significant funds leading to foreclosure constituted sufficient special injury.


Bank of Lyons v. Schultz, 78 Ill. 2d 235 (Ill. 1980)