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77 » VISIT US ONLINE @ DSNEWS.COM ILLINOIS CAUSE FOR CONCERN A new ruling from the federal bench means lenders should exercise caution when nonsuiting a foreclosure case. By Louis Manetti, Codilis & Associates, P.C. e United States Court of Appeals for the Seventh Circuit recently held that Illinois' "single refiling" rule could prevent foreclosure of a mortgage when a corresponding suit on the promissory note is barred. Although the ruling is not binding precedent in Illinois state courts, the decision highlights the caution that should be exercised when cases are nonsuited to prevent procedural bars on future actions to foreclose. Moreover, even if a party finds that it has inadvertently violated the "single refiling" rule as applied to mortgages, there are still viable argu- ments to salvage the foreclosure action. In United Central Bank v. KMWC 845, LLC1, United Central Bank filed an action in federal court to foreclose three mortgages. Although each mortgage secured property in Wisconsin, one of the mortgages was amended to include a choice of law provision mandating that Illinois law apply to that mortgage.2 United Central Bank unsuccessfully tried to argue that Wisconsin law should apply to the mortgage despite the choice of law amendment, and for the Seventh Circuit's analysis, Illinois law controlled the mortgage which is the focus of the opinion.3 e defendant brought a Motion for Sum- mary Judgment and argued that United Central Bank could not foreclose because of Illinois' "single refiling" rule.4 Section 13-217 of the Illinois Code of Civil Procedure governs under what conditions a plaintiff can bring a lawsuit, voluntarily nonsuit the action, and have the abil- ity to bring the action again.5 "[S]ection 13-217 expressly permits one, and only one, refiling of a claim even if the statute of limitations has not expired."6 e defendant argued that because United Central Bank had filed two prior actions to enforce the promissory notes underlying the mortgages, and those prior actions were nonsuited, United Central Bank had violated the single refiling rule and could not foreclose the mortgage securing the note.7 e trial court granted summary judgment in the defendant's favor, and United Central Bank appealed to the Seventh Circuit.8 On appeal, the Seventh Circuit affirmed the holding that the two prior dismissals of actions to sue on the promissory note barred any future action to foreclose the corresponding mortgage.9 United Central Bank argued that application of the "single refiling" rule was improper because a mortgage foreclosure action is not the same cause of action as an action on the promissory note.10 e Seventh Circuit rejected this argument, and held that a plaintiff is precluded from foreclosing on a mortgage when an action on the underlying promissory note is barred.11 e Court rea- soned that the action to foreclose the mortgage was barred because any action to collect on the underlying promissory note was prohibited under the "single refiling" rule.12 Fortunately, the decision is not binding on Illinois State courts. Decisions by the federal courts, other than the United States Supreme Court, as to the law of Illinois are not binding on state courts.13 However, state court judges could find the reasoning persuasive or opt to follow the holding of the case out of a desire to create uniformity in the interpretation of the "single refiling" rule. As a result of the United Central Bank case, lenders should exercise caution when nonsuit- ing a case, even if the action is a lawsuit on the promissory note and not a mortgage foreclosure action. Particular care should be taken when loans are obtained via assignment to confirm whether or not an action on the mortgage or note had been nonsuited by a prior lender. Every effort should be taken to not nonsuit twice to remain in compliance with the Seventh Circuit's broad reading of the "single refiling" rule. However, if for whatever reason a loan has run afoul of the broad "single refiling" approach expressed in United Central Bank, there are still viable arguments that an action to foreclose can proceed. e clearest route would be to ensure that the default date in the new lawsuit is for a date further in the future than the default date expressed in the dismissed actions. e Illinois Appellate Court recently noted—in a non-prec- edential Supreme Court Rule 23 order—that res judicata did not apply in a mortgage foreclosure lawsuit alleging a different default date than prior dismissed actions, because "[u]nder our caselaw, each of [the] missed payments constituted a new cause of action."14 e principle that each missed payment is a new cause of action with its own statute of limitations is not discussed in United Central Bank. e argument would remain that although a certain missed payment on the note could be barred under the "single refiling" rule (thus barring foreclosure based on that default date), each missed payment would provide an entirely new cause of action that would not be barred under the "single refiling" rule. Addition- ally, the Illinois Supreme Court has held that, in the context of the bar against claim-splitting, the prohibition against claim-split causes of action will not be applied when "the case involves a continuing or recurrent wrong[.]"15 An analogous argument could be made that the "single refil- ing" rule shouldn't bar a foreclosure action after previous dismissals because there is a continuing wrong—under most mortgage agreements, the borrower has promised to make payments for thirty years. With these arguments, the harsh result of the United Central Bank case can be avoided. Still, efforts should be made to avoid being subject to United Central Bank's broad interpretation of the "single refiling" rule in the first place.

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