Most mortgage servicers and foreclosure practitioners are familiar with Illinois’ single refiling rule, which has been interpreted as permitting only one refiling of a claim, even if the statute of limitations has not expired. See 735 ILCS 5/13-217 and Flesner v. Youngs Development Co. 145 Ill. 2d 252, 252-54 (1991). In other words, once an action is filed and voluntarily dismissed, plaintiffs are only permitted one more suit on any specific default on the debt.
Previous attempts to avoid this rule by separating actions on the note from actions on the mortgage have been unsuccessful. In United Central Bank v. KMWC 845 LLC, 800 F.3d 307 (7th Cir. 2015), a mortgagee had formerly filed and voluntarily dismissed two actions for breach of a promissory note. The mortgagee then filed a mortgage foreclosure action, arguing that Illinois’ single refiling rule was not a bar because the prior actions were actions on the note, whereas the instant suit was on the mortgage. Id. at pg. 11. The Court, although agreeing that mortgage foreclosure actions are separate from actions on the underlying note, nevertheless held that the single refiling rule was a bar to the mortgage foreclosure, stating that an action on a mortgage is precluded when an action to the underlying note is barred. Id. In other words, since the single refiling rule barred any further actions on the note, any actions on the mortgage were similarly untenable.
However, more recently, a mortgagee was successful in avoiding the rule when its actions involved different default dates. In Wells Fargo Bank, N.A. v. Norris, 2017 IL App 3d 150764, a series of three separate foreclosure actions were filed over a period of four years, due to a dispute as to whether a loan modification agreement was in existence. The first action had a default date of January 2008 and an outstanding principal balance of $159,061.43. Id., ¶4. The second action, evidencing a loan modification agreement, had a default date of June 2009 and an outstanding principal balance of $189.604.15. Id., ¶5. The third action removed the loan modification agreement completely and reverted to the original default date of January 2008 and $159,061.43 owed. Id., ¶8.
The Defendant, citing to the single refiling rule, argued that the third action was barred. Id., ¶11. The Defendant argued that the Plaintiff had filed a mortgage foreclosure complaint, voluntarily dismissed it, and then filed a second mortgage foreclosure complaint—and the voluntary dismissal of that second action terminated any ability at any further suits.
The Third District Appellate Court, however, disagreed, finding that the second action did not involve the same claim as the first and the third. Specifically, the Court held that the second foreclosure alleged a violation of the original mortgage and of a loan modification agreement, with a different default date and principal balance owed than the other actions. Id., ¶22. Consequently, the third action was “the first and only refiling of the 2008 case, and the single refiling rule [had] not been violated.” Id.
Therefore, it appears that every new mortgage default date and corresponding changing balance owed forms a separate potential claim, with each separate claim permitted two filings. Given the plethora of circumstances that could alter a mortgage’s default date over time, this ruling may provide a defense against the single refiling rule. However, the decision to voluntarily dismiss and re-file a foreclosure action should always be approached cautiously, as there are many factors that must be carefully considered, and incorrect decisions could lead to the loss of litigation options.