The Illinois Appellate Court for the Third District has added its voice to the issue of the “single-refiling” rule’s application in mortgage foreclosure proceedings. Creating further confusion in this area, it announced in Wells Fargo Bank, N.A. v. Rodriguez, 2024 IL App (3d) 230020, that the single-refiling rule barred a third foreclosure because it constituted “the same action” as the prior two foreclosures and because the lender never formally revoked its notice of acceleration.
After falling behind on their mortgage, the mortgagors’ lender modified the loan. They fell behind on that as well, so the lender sent the mortgagors a default notice stating the amount owed, that they had the right to reinstate the loan, and that if payment was not made “we will proceed with acceleration”. When they did not reinstate, the lender sent a notice of default and acceleration stating that the entire balance on the loan was now “due and payable.”
The lender then commenced foreclosure proceedings alleging a default date of May 2012, an unpaid principal balance of $364,828, and an amount due of $381,276.23. The mortgagors applied for and obtained a HAMP modification. They made the trial period payments but declined the modification offer. For reasons that are not in the record, the lender voluntarily dismissed the amended complaint on August 22, 2017.
In January 2018, the lender filed a second foreclosure alleging the same unpaid principal balance but modified the amount outstanding to account for the trial period payments bringing the total indebtedness to $377,530.71. The date of default was now alleged to be December 2012, not May 2012. On grounds that are not in the record, the mortgagors successfully moved to dismiss the second foreclosure on April 9, 2019.
On August 16, 2019, the lender filed a third foreclosure alleging the same original indebtedness of $364,828, but a default date of April 1, 2019 and a total balance of $330,085.81.
The mortgagors moved to dismiss the third foreclosure arguing that it violated the “single refiling rule” under section 13-217 of the Illinois Civil Practice Act. 735 ILCS 5/13-217. The trial court found that the lender had accelerated the loan in 2012 and the total amount due remained constant across all three actions. Relying on the First District case, Deutsche Bank Trust Co. Americas v. Sigler, 2020 IL App (1st) 191006, the court concluded that third foreclosure “arose from the same set of operative facts as the [previous] action” and therefore violated the single refiling rule”.
The appellate court affirmed. It agreed with the trial court that each of the three foreclosures arose from the same operative facts because they were brought by the same lender, alleged the same original indebtedness, and asserted a default of the same underlying note, mortgage, and modified loan agreement. It also held that dismissal of the prior foreclosures did not “de-accelerate” the loan. Thus, the single refiling rule applied to bar the foreclosure.
The court rejected the lender’s argument that the foreclosures were not the same under the “new-default” rule. This rule, discussed in the Second District’s opinion, Wilmington Savings Fund Society, FSB v. Barrera, 2020 IL App (2d) 190883, allows a party entitled to installment payments under a contract to bring a separate action on each installment as each one becomes due or wait until several installments are due. Id. ¶¶ 118-19. In Barrera, the default was the mortgagor’s failure to make the tax and insurance payments that came due after the complaints were filed, which cannot be accelerated. Id. ¶ 14. The Third Circuit found the “new-default” did not apply where the loan had been accelerated for the missed mortgage payments.
The court also distinguished Bank of New York Mellon v. Dubrovay, 2021 IL App (2d) 190540 where the Second District extended Barrera to conclude that the voluntary dismissal of three prior foreclosure complaints deaccelerated the loan, which effectively reinstated it. The Rodriguez court said “[t]here is a different rule, however, when a bank accelerates the note separate and apart from the foreclosure proceedings”. In that circumstance, the dismissals of the prior foreclosures do not operate to de-accelerate the note. It analogized the case to Sigler where the court held that the three foreclosures arose from the same operative facts because they were all filed by the same bank, they all sought the same principal amount, and they all alleged a default of the same underlying note and mortgage. When the lender both invoked the acceleration clause and filed a foreclosure action, the contract became indivisible, and the obligations to pay each installment merged into one obligation to pay the entire balance on the note. Thus, because the lender “did not expressly revoke the acceleration notice when it voluntarily dismissed the first foreclosure complaint, nor did it otherwise issue a letter or notice to the borrowers reinstating the loan” the loan was not de-accelerated.
Thus, for the Third District it makes all the difference how the loan was accelerated. If a pre-foreclosure notice was sent, then it can only be de-accelerated by a separate notice to the mortgagors. Rodriguez presumes that a pre-foreclosure notice of acceleration was not sent to the mortgagors in Dubrovay ignoring the fact that “[v]irtually every residential mortgage contains an “acceleration clause” requiring the lender to send the borrowers a notice (an ‘acceleration letter’) before suing them to foreclose the mortgage”. See, CitiMortgage, Inc. v. Hoeft, 2015 IL App (1st) 150459, ¶ 1, 39 N.E.3d 240, 242. There is nothing stated in the Dubrovay opinion to indicate whether the loan had been accelerated before the foreclosure.
The court also rejected the argument that the single-refiling rule did not apply because the dismissal of the second foreclosure was not voluntary. The case was dismissed on the mortgagors’ motion. According to the court, the reason the second foreclosure was dismissed was immaterial for purposes of section 13-217. That position appears contrary to the view of the Supreme Court which has interpreted the rule to apply only when the prior dismissal is the type stipulated in that section, and involuntary dismissals are not one of the types of dismissals which apply under section 13-217. See, Suslick v. Rothschild Sec. Corp., 128 Ill. 2d 314, 321 (1989) (“The plaintiff’s previously dismissed State court action is not the type of dismissal which gives rise to a right to refile under section 13–217”).
Author
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Jim is a founding partner of Noonan & Lieberman. Jim has more than 25 years of experience in civil litigation on behalf of creditors, servicers, business and real estate owners.
