Illinois Appellate Court holds that “single refiling rule” is not a complete bar to subsequent action

The trial court in Wilmington Savings Fund v. Barrera, 2020 IL App (2d) 190883 (September 21, 2020) dismissed a foreclosure suit as being barred by the single refiling rule.  The appellate court reversed, holding that the borrower’s subsequent failure to make property tax and insurance payments were new defaults and the single refiling rule does not bar a complaint based on new defaults.

The foreclosure complaint alleged four defaults: (1) failure to reimburse the mortgagee for payments it made for insurance on the property, (2) failure to reimburse the mortgagee for property taxes it paid on the property, (3) failure to pay for insurance on the property directly, and (4) failure to pay the property taxes on the property directly. The borrowers filed a motion to dismiss claiming the suit was filed in violation of Illinois’ proscription on multiple refilings of the same action, i.e., the “single refiling rule”. The borrower argued that the mortgagee’s predecessor had filed two earlier foreclosure cases relating to the mortgage at issue and the mortgagee itself had also earlier filed an action on the note. In response, the mortgagee contended that the fourth complaint alleged a separate, subsequent default which occurred after the third complaint’s dismissal makes it a different action which does not violate the single refiling rule.

The appellate court held that the single refiling rule was not a complete defense to the fourth complaint. The single refiling rule cannot bar a complaint based on a later default. Existing case law makes clear that even when a prior judgment bars a claim based on a particular default, a claim based on a later default of the same kind is not barred. The alleged failures to pay property taxes and insurance after the prior suits were filed are new defaults. No equivalent of acceleration of a note exists for property tax and insurance payments. To be sure, the property tax and insurance defaults existing when the first two foreclosure complaints were part of the core of operative facts that formed the bases for those two complaints and the single refiling rule would apply to those defaults. However, the borrower allegedly continued to default on obligations to make property tax and insurance payments after those complaints were dismissed.

The court disagreed with the borrower’s characterization that the rule barred a mortgage foreclosure based on the same mortgage instrument. It is illogical that a lender who sues and wins based on an earlier default would be barred from suing on the same note based on a different subsequent default.  A default that has not occurred cannot be litigated.

The court therefore reversed holding that the portions of the alleged tax and insurance defaults postdating the dismissal of the first complaint but predating the filing of the second complaint are barred. Those portions of the defaults either were raised in the second foreclosure complaint or, as existing mortgage-based claims, were part of that complaint’s core of operative facts. However, they were not part of the core of operative facts of the third complaint: that complaint was based on the note alone, and the tax and insurance requirements were part of the mortgage, not the note. Thus, the current complaint is the first refiling to include portions of the alleged defaults postdating the dismissal of the first complaint but predating the filing of the second complaint. In addition, the portions of the alleged defaults occurring after the filing of the second complaint are new and thus also are not barred.

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