Potential Hazards Of A Lender Taking A Voluntary Nonsuit

By David A. Eide

A plaintiff suing in Illinois state court is permitted to refile a lawsuit only once after taking a voluntary dismissal. See Flesner v. Youngs Dev. Co., 145 Ill. 2d 252 (1991) (interpreting 735 ILCS 5/13-217 as permitting a single refiling even where statute of limitation has not yet run).

This rule can have harsh consequences for the unwary lender. In First Midwest Bank v. Cobo, 2018 IL 123038, the plaintiff bank had previously filed a foreclosure complaint that included a request for a deficiency judgment. The bank voluntarily dismissed the foreclosure lawsuit and subsequently brought a suit for recovery on the promissory note against the same defendants. That suit was voluntarily dismissed as well. The bank then filed another lawsuit against the same defendants, again seeking recovery on the same promissory note. The third lawsuit was deemed an impermissible second refiling and ordered dismissed, a dismissal that the Illinois Supreme Court affirmed.

Although the foreclosure complaint (which followed the statutorily-prescribed form) was in the form of a single count, it included in its prayer for relief a request for a personal judgment of deficiency. This was deemed sufficient to constitute "for practical purposes" a claim independent of the claim for foreclosure. Id. at ¶ 20. Because all three lawsuits sought remedies for the same default under the same note they were held to be suits on the same claim, and the third lawsuit therefore was an impermissible second refiling. Had one or both of the subsequent filings pled a different default, then the plaintiff bank would have been in a position to argue that the subsequent lawsuits involved different claims and, therefore, that the third lawsuit was not an impermissible second refiling.

Being able to successfully argue that successive lawsuits did not involve identical claims is what saved the plaintiff bank in Wells Fargo Bank, N.A. v. Norris, 2017 IL App (3d) 150764, a case involving three successive foreclosure filings. It was held that the third lawsuit was not an impermissible second refiling because the "operative facts" of the first lawsuit were "substantially different" from those of the second lawsuit. Id. at ¶ 22. The suits therefore "did not involve the same cause of action." Id. The complaint in the first lawsuit alleged a violation of the original mortgage. The complaint in the second lawsuit alleged violations of both the original mortgage and a loan modification agreement and alleged a date of breach different from that alleged in the first lawsuit. Id.

The lesson to be learned from these cases is that, where a second refiling of a suit on a mortgage or note is necessary, it is essential that the three lawsuits not all be predicated on the same breach or default. [Where the original foreclosure or suit on a note is being dismissed pursuant to an agreement with the borrower, it is essential that the agreement be memorialized in writing, either as a forbearance agreement or a loan modification agreement. If this is done, then a subsequent breach is arguably a new cause of action under a different instrument or set of circumstances, thereby preserving the lender's right to sue.