By Blair Gisi, Esq.
SouthLaw, PC *
USFN Member (IA, KS, MO, NE)

In Wilmington Sav. Fund Soc'y v. Campbell, 2021 Kan. App. Unpub. LEXIS 330, the Kansas Court of Appeals issued a ruling that provides a bright line rule under K.S.A. §60-241. 

60-241. Dismissal of actions. (a) Voluntary dismissal.

(1) By the plaintiff. 

(A) Without a court order. Subject to subsection (e) of K.S.A. §60-223, K.S.A. §60-223a and K.S.A. §60-223b, the plaintiff may dismiss an action without a court order by filing:

(i) A notice of dismissal before the opposing party serves either an answer or a motion for summary judgment; or

(ii) a stipulation of dismissal signed by all parties who have appeared. When the dismissal is by stipulation, the clerk of the court must enter an order of dismissal as a matter of course.

(B) Effect. Unless the notice or stipulation states otherwise, the dismissal is without prejudice. But if the plaintiff previously dismissed any federal- or state-court action based on or including the same claim, a notice of dismissal operates as an adjudication on the merits.

That bright line or “two-dismissal” rule is: “[I]f a plaintiff has once dismissed an action, a dismissal by notice of a second action based on or including the same claim, amounts to an adjudication on the merits.  As such, the second dismissal effectively creates a res judicata bar to a third action.”  Campbell at 6.

In this case, the Appellate Court stated that the district court relied upon “judicial magic” in concluding the second foreclosure case, which was dismissed by a Court Order, was legally equivalent to a notice of dismissal. Given this false equivalency relied upon by the district court and given the procedural disposition of the case at dismissal which would prevent dismissal by notice, “the dismissal of that [second] action must have been by court order, obviating the application of the two-dismissal rule.”  Campbell at 11.

While it may be arguable that certain circumstances leading to the dismissal of a pending foreclosure action, e.g., reinstatement or a loan modification, may create a new cause of action with new or distinguishable grounds for foreclosure, the mere act of filing a second Notice of Dismissal on the same loan against the same borrowers may create grounds for those borrowers to argue that any subsequent foreclosure is precluded under the statute cited above.

To avoid the risk of protracted litigation associated with this issue, the best practice for dismissing subsequent foreclosure cases against the same loan and borrower(s) is to seek leave to dismiss via a Motion and Order to Dismiss, ultimately reviewed and approved by the presiding judge. Obtaining an Order of Dismissal significantly reduces the risk of a res judicata bar to foreclosing, as the Campbell case makes clear, “. . . the [dismissal by notice] rule comes into play only if the second dismissal is by notice.”  At 8 (emphasis in original). Seeking an Order of Dismissal may include additional filing and attorney fees; however, those fees will be significantly less than litigating this issue and potentially losing the right to foreclose.

Copyright © 2024 USFN
USFNews - May 15, 2024

* Denotes firm is a 2023 USFN Award of Excellence recipient