Illinois court holds that suit on note is barred as an impermissible second refiling of previously dismissed foreclosure

The First District Appellate Court held in First Midwest Bank v. Andres Cobo et al., 2017 IL App (1st) 170872 (Nov. 6, 2017) that a breach of contract complaint filed after the mortgagee’s voluntary dismissal of both a prior foreclosure action and a prior breach of note suit was barred under principals of res judicata because it was a second-refiling of the same claim that is not allowed under state law.

In 2011 the mortgagors stopped making payments and defaulted on their note and mortgage. The mortgagee’s predecessor filed a foreclosure alleging a July 1, 2011 default and an unpaid principal balance of $214,079.06. The foreclosure was voluntarily dismissed. Two weeks later, a breach of note action was commenced alleging the same default date and unpaid principal balance. That suit was voluntarily dismissed as well. The reasons for the dismissals were not given.

A few months later, the mortgagee filed a complaint for breach of contract – based upon a breach of the note – and unjust enrichment again alleging the same default date and unpaid principal balance. The mortgagors moved to dismiss contending that the suit was an impermissible second refiling prohibited by Section 13-217 of the Illinois Code of Civil Procedure.

The trial court denied the motion finding that while the transactions were “closely related”, the claims in each case were based on “separate contracts executed for distinct purposes and [gave] rise to separate remedies.” After the mortgagee was awarded summary judgment the mortgagor’s appealed.

The Appellate Court reversed. It noted that the issue of whether the suits are the same for purposes of Section 13-217 is decided on res judicata grounds. The three cases, it found, were all based on the same set of operative facts gave rise to the causes of action. It did not matter if the three suits asserted different theories of recovery, as long as they arose from a single group of operative facts. The court distinguished two cases cited by the mortgagee on the grounds that one involved a suit on a guaranty, which was a different transaction than the note, and the other where there was a loan modification agreement entered after the dismissal of the first action. The second action in that case was therefore based on a breach of the loan modification agreement, not the note and mortgage.

The Court also found that unjust enrichment cannot be raised where there is an express contract between the parties concerning the same subject matter. Because the note and mortgage were express contracts, the mortgagee could not make out a claim for unjust enrichment. The judgment was vacated and the complaint dismissed.

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