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Illinois App. Court (2nd Dist) Holds Successive Foreclosures Not Necessarily Barred by Dismissal of Prior Actions

foreclosureThe Appellate Court of Illinois, Second District, recently reversed a trial court’s grant of a borrower’s motion to dismiss a mortgagee’s foreclosure complaint and the trial court’s denial of the mortgagee’s motion to reconsider. 

In so ruling, the Second District held that the “single refiling” rule found in section 13-217 of the Illinois Code of Civil Procedure did not bar the mortgagee from filing a fourth foreclosure complaint against the same borrower even after voluntarily dismissing the prior three complaints without prejudice. 

Specifically, the Appellate Court held that the fourth foreclosure complaint arose from a different set of operative facts than the prior foreclosure complaints, and that the mortgagee’s voluntary dismissals of the prior actions each constituted affirmative acts revoking the prior accelerations of the debt.

A copy of the opinion in Bank of New York Mellon v. Dubrovay is available at:  Link to Opinion.

A mortgagee filed three separate foreclosure complaints against a borrower before deciding to voluntarily dismiss each action without prejudice. When the mortgagee filed a fourth foreclosure complaint against the same borrower, the borrower filed a motion to dismiss the complaint pursuant to section 2-619 of the Code of Civil Procedure. The borrower’s motion argued that the fourth foreclosure complaint was barred by section 13-217’s single refiling rule and the principles of res judicata.

The mortgagee responded by arguing that the default date alleged in the fourth foreclosure complaint was not the same as claimed in the prior three foreclosure complaints and, therefore, was not in violation of the single refiling rule.

The trial court granted the borrower’s motion to dismiss and denied the mortgagee’s subsequent motion to reconsider. The mortgagee timely appealed both rulings of the trial court and the Second District consolidated the appeals.

Initially, the Second Judicial District noted that the issue in this case was whether the Illinois “single refiling” rule barred the current action.

The Illinois Code of Civil Procedure at 735 ILCS 5/13-217 states in relevant part that, when an action “is voluntarily dismissed by the plaintiff, or… is dismissed for want of prosecution, … the plaintiff…  may commence a new action within one year or within the remaining period of limitation, whichever is greater, after… the action is voluntarily dismissed by the plaintiff.”  Additionally, the Illinois Supreme Court has interpreted section 13-217 as “expressly permit[ting] one, and only one, refiling of a claim even if the statute of limitations has not expired.” Flesner v. Youngs Development Co., 145 Ill. 2d 252, 254 (1991).

To determine whether the single refiling rule barred the filing of the fourth foreclosure complaint, the Second District used the “transactional test” derived from res judicata cases. Wilmington Savings Fund Society, FSB v. Barrera, 2020 IL App (2d) 190883, ¶ 17. The transactional test treats separate claims as the same cause of action “if they arise from a single group of operative facts.” Id. ¶ 19 (quoting River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 311 (1998)).

Here, the mortgagee argued that its fourth foreclosure complaint arose from a different set of facts than its prior foreclosure complaints because the fourth complaint alleged a different default date than the earlier filed complaints. The borrower, in turn, contended that all four cases arose from the same set of operative facts because the bank accelerated the note upon the first default. According to the borrower, when the mortgagee first accelerated the note, all installment obligations merged into one single obligation to pay the entire balance due under the note and the mortgage.

“Generally, … where a money obligation is payable in installments, a separate cause of action arises on each installment.” McHenry Savings Bank v. Moy, 2021 IL App (2d) 200099, ¶ 30 (quoting Brown v. Charlestowne Group, Ltd., 221 Ill. App. 3d 44, 46 (1991)). Thus, the Second Judicial District reasoned that a plaintiff may bring a separate action on each installment as it becomes due and owing or wait until several installments are due and owing and then sue for all such installments in one cause of action. Barrera, 2020 IL App (2d) 190883, ¶ 19.

Therefore, the Second District held that the fourth foreclosure complaint did not arise from the same set of operative facts as the prior complaints.

The Second District also determined that the effect of a dismissal without prejudice is to render the proceedings a nullity and to leave the parties in the same position as if the case had never been filed. Palm v. 2800 Lake Shore Drive Condominium Ass’n, 2014 IL App (1st) 111290, ¶ 42. Therefore, because the mortgagee’s alleged accelerations occurred by the filing of foreclosure actions, the Court concluded that the mortgagee’s voluntary dismissals of those actions constituted affirmative acts of revocation of those accelerations. 

Consequently, in the Second District’s view, the parties returned to their pre-acceleration rights and obligations upon revocation, and the borrower was obligated to make monthly installments; thus, the borrower’s new payment default gave rise to a separate action.

Accordingly, the Second District held that the present action and the prior actions were predicated on different operative facts, the single refiling rule did not bar the mortgagee’s fourth foreclosure complaint, and the trial court erred by dismissing the mortgagee’s fourth complaint. The Court thus reversed the judgment of the trial court and remanded the case for further proceedings.

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The attorneys of Maurice Wutscher are seasoned business lawyers with substantial experience in business law, financial services litigation and regulatory compliance. They represent consumer and commercial financial services companies, including depository and non-depository mortgage lenders and servicers, as well as mortgage loan investors, financial asset buyers and sellers, loss mitigation companies, third-party debt collectors, and other financial services providers. They have defended scores of putative class actions, have substantial experience in federal appellate court litigation and bring substantial trial and complex bankruptcy experience. They are leaders and influencers in their highly specialized area of law. They serve in leadership positions in industry associations and regularly publish and speak before national audiences.

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