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Supreme Court States “If Sought” is Seeking

Illinois’ single refiling rule permits only one refiling of a claim. In other words, if a plaintiff voluntarily dismisses their action, they are only permitted to bring that same cause of action one more time. However, what constitutes a “same” cause of action, especially when multiple contracts are at play? This question was at the heart of an Illinois Supreme Court ruling in First Midwest Bank v. Cobo.  

In Cobo, the lender brought a Foreclosure Complaint in 2011 (the 2011 Foreclosure,) alleging a 7/1/2011 default and an owed principal balance of $214,079.06. The complaint followed the Illinois statutory complaint model by requesting a personal deficiency “if sought,” and attaching a copy of the mortgage and note. This action was dismissed by the lender in 2013.

Weeks after the dismissal, the lender filed a Breach of Promissory Note action (the 2013 Note Breach,) alleging a 7/1/2011 default and an owed principal balance of $214,079.06. Two years later, the plaintiff voluntarily dismissed this action as well. In July of 2015, the lender filed a Breach of Contract claim (the 2015 Contract Breach,) alleging a 7/1/2011 default and an owed principal balance of $214,079.06, which ultimately became the basis of the Supreme Court’s decision.

The mortgagor argued that the same cause of action existed for all three filings, which consequently barred the lender’s 2015 Contract Breach under Illinois’s single re-filing rule as an impermissible third attempt. Specifically, the mortgagor pointed out that all three actions involved the same default and the same principal balance owed.

In contrast, the lender argued that the 2011 Foreclosure and the 2013 Note Breach sought different remedies under different contracts and were, therefore, separate actions, arguing that the 2011 Foreclosure’s request for a personal deficiency “if sought” wasn’t enough to constitute an action upon the note since the lender never specifically requested this amount.

As background, a standard mortgage loan is made up of both a mortgage and a note.  A defaulted mortgage permits a lender to sell the subject property to recover their losses (which may or may not make them whole, depending on the value of the property,) whereas a note permits a lender to obtain the full amount owed directly from a mortgagor. In foreclosure parlance, seeking an amount owed directly from a mortgagor (i.e., utilizing the note) is referred to as seeking a “personal deficiency” in order to obtain amounts that weren’t recovered via the foreclosure sale.  

The Illinois Supreme Court found that the 2011 Foreclosure’s request for a personal deficiency “if sought” did, in fact, constitute a claim under the note, emphasizing that the Illinois model statute listed this remedy as an option, not as a requirement.  The Court further noted that the Illinois single refiling rule did not require prior suits to be adjudicated prior to qualification, as well as indicated that an action based upon a defaulted loan modification (with an ostensibly different default date and principal balance) would constitute a different claim.

In light of this decision, savvy mortgagees may wish to forgo any references to personal deficiencies in their initial foreclosure complaints. Even when successfully obtained, personal deficiency judgments are rarely collected upon. Therefore, eliminating this potential remedy at the outset may help preserve additional later bites at the apple that may otherwise be lost.