Tag: DWP

No Claim-Splitting or Res Judicata Issue Where Bank Refiles Breach of Note Claim After Prior DWP – From the Illinois Archives

BankFinancial, FSB v. Tandon, 2013 IL App (1st) 113152 serves as fairly recent reminder of the possible pitfalls that await a plaintiff who chooses to voluntarily dismiss or non-suit certain complaint counts when other counts of the complaint are involuntarily dismissed – such as by a motion to dismiss filed by a defendant.

The strategic reasons for taking a voluntary dismissal are several.  A non-suit can be a time-buying device when you get to trial and you realize you need more time to secure witnesses and strengthen your case.  Having some chronological breathing room to further develop your case can pay psychological and financial dividends for both client and lawyer.  But as BankFinancial amply illustrates, the right to voluntarily dismiss a claim and later refile it has limits.

In this breach of contract and mortgage foreclosure case, Plaintiff filed a three-count complaint for mortgage foreclosure, breach of contract (the promissory note) and breach of guaranty in 2003.

In 2006, Plaintiff voluntarily dismissed the foreclosure count and in 2008 the remaining claims were dismissed for want of prosecution (“DWP”).  A few month later, in January 2009, the plaintiff filed a new lawsuit, repleading its breach of note and breach of guaranty claims.

The trial court dismissed the 2009 case based on res judicata and plaintiff appealed.

Held: reversed.

Q: Why?

A: Res judicata’s central purpose is to preclude parties from contesting matters they had a full and fair opportunity to litigate.  To further this purpose, a final judgment on the merits is required to trigger res judicata’s application.  A “final judgment” is one that terminates the litigation between the parties on the merits.

A voluntary dismissal of a case or a DWP is, by definition, NOT a final judgment since when a case is DWPd, the court doesn’t reach the merits of a case. 

After a DWP, Code Section 13-217 allows party one year to refile an action within one year and the DWP order doesn’t become final until the one year refilling period expires. (¶¶ 29-30).

Illinois also disallows the related doctrine of claim splitting. Claim splitting applies where a plaintiff tries to refile a claim that he previously voluntarily dismissed in an earlier proceeding AFTER another count of the complaint in that prior action was involuntarily dismissed.

So, if in Case No. 1, a plaintiff’s negligence claim is (involuntarily) dismissed on a defendant’s motion and then plaintiff voluntarily non-suits his remaining breach of contract claim, the plaintiff cannot later file the breach of contract claim in a new action.  This will be deemed impermissible claim splitting because it subverts the law’s desire for finality and efficiency.

Applying these rules, the court held that the plaintiff could properly refile its breach of note and guaranty claims. The voluntary dismissal of the foreclosure count wasn’t a final judgment nor was the DWP of the note and guaranty counts.  The DWP order didn’t become final until a year elapsed from the DWP order date.  Since the plaintiff refiled its note and guaranty counts within a year of the DWP, the refiled action was timely.  As a result, the plaintiff’s refiled suit wasn’t barred by res judicata or the claim splitting rule.

Afterwords:

This case crystallizes the proposition that if a plaintiff non-suits a complaint count or gets a claim(s) DWPd, he can refile the dismissed claims within one year and avoid any dismissal motion based on res judicata.

If a plaintiff non-suits one claim after a different complaint claim is involuntarily dismissed, he will likely be barred from refilling the non-suited claim in a second action under res judicata and claim-splitting rules.  In such a setting, the plaintiff should either litigate the remaining count(s) (the count(s) that isn’t (aren’t) dismissed) to judgment or ask the court for a finding that he can immediately appeal the order dismissing the involuntarily dismissed claim.

Other References:

Hudson v. City of Chicago, 228 Ill.2d 462 (2008)

Rein v. Noyes & Co., 172 Ill.2d 325 (1996)

 

Default “Orders”, Default “Judgments” And “DWPs” – Illinois Quick Hits

Jackson v. Hooker, 397 Ill.App.3d 614 (1st Dist. 2010) is dated but relevant for its interesting procedural history and nuanced discussion of appellate procedure, the difference between default orders and default (money) judgments and the appropriate time to vacate a dismissal for want of prosecution (“DWP”).

After obtaining an order of default against the defendant, the plaintiff didn’t show up for the prove-up hearing and the case was dismissed for want of prosecution (“DWP’d”). Four months later, the plaintiff moved to vacate the DWP.  The trial court denied the motion and granted the plaintiff leave to file a Section 2-1401 petition to vacate the DWP. Plaintiff did so and the court granted the motion and reinstated the default.

Plaintiff later obtained a $700,000 money judgment after a prove-up hearing. This time, the defendant moved to vacate the judgment. The trial court denied the motion for failure to comply with Section 2-1401. Defendant appealed.

Reversing the default judgment, the trial court first focused on the nature of DWPs and when and how to vacate them.  The guideposts:

– When a case is DWPd, a plaintiff has one year (or within the remaining limitations period) to file a new action under Code Section 13-217 (735 ILCS 5/13-217);

– A DWP order only becomes final and appealable when the one-year refiling period lapses.  Until that one-year time period expires, the DWP isn’t a final order and can’t be appealed;

– In addition, the one-year period doesn’t start running until after a court rules on a motion to vacate a DWP.  (For example: if a case is DWP’d on January 1, 2015, the plaintiff has through January 1, 2016 to refile the case.  If the DWP is vacated on June 1, 2015, the plaintiff has one year – through June 1, 2016 – to refile.);

– Code Section 2-1301 (735 ILCS 5/2-1301) allows a court to set aside any (non-final) default order at any time or to set aside a final judgment within 30 days of the judgment’s entry;

– After 30 days from the judgment date, the more stringent Section 2-1401 standards apply (735 ILCS 5/2-1401).  Section 2-1401 applies to judgments more than 30 days but less than 2 years old;

– A default order (an “order of default”) is simply a non-final order that prevents the defaulting party from making additional defenses but doesn’t determine any rights or remedies;

– A default judgment is the specific act that ends the litigation and finally decides the dispute;

– A default judgment has two elements: (1) a finding of the issues for the plaintiff; and (2) an assessment of damages.

(¶¶ 4-9)

Here, Since the one-year refiling period hadn’t expired when the plaintiff sought to vacate the DWP, the motion was timely.  As a result, Section 2-1401 didn’t apply and the plaintiff didn’t have to show due diligence or a meritorious defense.

The court also held that Section 2-1401 also didn’t apply to the defendant’s motion to vacate the default judgment in favor of the plaintiff. A default order entered in October 2007 but the default judgment didn’t enter until June 2008.  Since the defendant filed his motion to vacate the default judgment within 30 days of June 2008, the more relaxed standards of Section 2-1301 applied.  ¶ 9; also see (here)

Take-aways:

The case contains some good procedural reminders.  Specifically, an order of default differs qualitatively from a default judgment.  The latter assigns a dollar value to the plaintiff while a default order doesn’t award any monetary relief.

The case also stresses that a dismissal for want of prosecution isn’t a final (and therefore appealable) order until one-year elapses from (a) the date of the dismissal or (b) from the date a motion to vacate the DWP is denied.

Lastly, this case reaffirms the key differences between motions to vacate judgments before (Section 2-1301 motions) and after (Section 2-1401 motions) 30 days.