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Illinois: New Supreme Court Case Affirms Limits on Refiled Cases

Posted By USFN, Tuesday, December 4, 2018
Updated: Friday, November 30, 2018

December 4, 2018

by Robert J. Deisinger
Anselmo Lindberg & Associates – USFN Member (Illinois)

Illinois law allows for only one refiling of a lawsuit if the plaintiff voluntarily dismisses its case. In practice, this means the plaintiff gets no more than two bites at the apple. In a unanimous opinion issued in the case of First Midwest Bank v. Cobo, 2018 IL 123038 (Nov. 29, 2018), the Illinois Supreme Court ruled that foreclosure plaintiffs cannot avoid the application of this rule by spinning one of its suits as a different kind of apple.

In Cobo the plaintiff brought a 2011 foreclosure action, alleging that the mortgagors had defaulted by failing to make the monthly payments as of July 2011 due under the note secured by the mortgage. The Illinois Mortgage Foreclosure law permits creditors to seek a personal deficiency if a deficiency exists after the property is sold at the foreclosure sale, and the foreclosure complaint requested that a deficiency judgment be awarded if sought after the foreclosure sale.

The plaintiff voluntarily dismissed this foreclosure case and filed a new action less than two weeks later. This second action did not seek to foreclose the mortgage, but rather only sought a judgment for breach of the borrower’s promise to repay the money owed under the note. This case, too, was eventually voluntarily dismissed by the plaintiff. The plaintiff then filed a third action, which like the first, but unlike the second, sought foreclosure of the mortgage and a deficiency judgment. Ultimately, the trial court found that the case could proceed, but the Illinois Appellate Court overruled that decision and ordered that the case be dismissed as a barred refiling. At the lender’s request, the Illinois Supreme Court agreed to hear the case.

Supreme Court’s Review
Unfortunately for the lender, the Supreme Court sided with the defendants. Technically speaking, Illinois follows a transactional test to determine whether a lawsuit is the same or nearly the same as a prior suit. When each case arises from an identical set of facts, they are considered to be the same case, even if they seek different types of judgment. In this instance, the basis of each case was the defendants’ alleged July 2011 failure to make payments due under the note.

Notably relevant to lenders, the Supreme Court stated that if a case is voluntarily dismissed by the plaintiff because the parties entered into a loan modification while a foreclosure case was pending, the single refiling rule would not apply because the modification changes the operative facts of any later suit (i.e., the date of default). Though not explicitly stated by the court, it seems that the same reasoning should apply to reinstatements as well. However, whether a lender could avoid the application of the rule by voluntarily advancing the due-date absent a modification or a reinstatement remains an open question, but that seeming loophole might be too small of a needle to thread.

In most foreclosure circumstances, the single refiling rule will not apply. Still, if a case was previously filed twice without a change of circumstances (such as application of payments, modification, or reinstatement), lenders must be aware that the single refiling rule might bar any future case. It is therefore important that lenders consult with their attorneys regarding the application of this rule prior to voluntarily dismissing any foreclosure lawsuit that they intend to later refile.

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November/December e-Update

Note for consideration of the USFN Award of Excellence: This article is not a "Feature."


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