Seventh Circuit holds that under Illinois law mortgagee’s prior dismissals of actions on the note bars it from later foreclosing

The mortgagee in United Cent. Bank v. KMWC 845, LLC, No. 14-1491 (7th Cir. Aug. 28, 2015) brought a mortgage foreclosure action in Wisconsin federal court to foreclose three mortgages on various Wisconsin properties. The first mortgage, encumbering four properties, originally had a choice of law provision selecting Wisconsin law, but it was later amended to change the choice of law to Illinois. The mortgagors moved for summary judgment on the counts relating to the first mortgage contending that under Illinois’ single refiling rule, 735 ILCS 5/13-217, the mortgagee was barred from enforcing the promissory notes underlying the mortgage since it had twice formerly sued the mortgagors to recover on the notes and voluntarily dismissed each of those prior actions. The district court agreed and was affirmed on appeal. There, the mortgagee argued that – despite the amendment to the mortgage – the trial court should have applied Wisconsin law which does not include the single refiling rule. The reviewing court said that the argument was waived because it was not raised below; in fact, it was conceded below that Illinois law applied. The district court’s ruling on the application of the single refiling rule was not erroneous either. The rule provides that a plaintiff who dismisses a lawsuit may commence a new action within one year or within the remaining period of limitation, whichever is greater. This has been construed to mean that a plaintiff who voluntarily dismisses a lawsuit may commence only one new action within the statutorily imposed time limit. The opinion does not say why the two actions in Illinois against the mortgagors were dismissed; for example, because of a workout or cure. But because the mortgagee had twice sued the mortgagors for a breach of the note and dismissed the actions, the mortgagee was statutorily barred from enforcing the note underlying that mortgage. The court also rejected the mortgagee’s final argument which was that the Illinois single refiling rule does not bar it from foreclosing on the first mortgage because a mortgage foreclosure action is not the same cause of action as an action on the underlying note. The court observed that long-standing Illinois law precludes a mortgagee from foreclosing on a mortgage when an action on the underlying note is barred by the statute of limitations or another procedural rule – i.e., the single refiling rule.

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