Cathay Bank v. Accetturo

• Decision Date: 30 September 2016
• Docket Number: No. 1–15–2783.,1–15–2783.
• Citation: Cathay Bank v. Accetturo, 66 N.E.3d 467, 408 Ill.Dec. 675 (Ill. App. 2016)
• Parties: CATHAY BANK, f/k/a NAB Bank, Plaintiff–Appellee, v. Helen R. ACCETTURO; United States of America, Department of Treasury; Unknown Owners; Unknown Tenants; and Nonrecord Claimants, Defendants (Helen R. Accetturo, Defendant–Appellant).
• Court: United States Appellate Court of Illinois

66 N.E.3d 467

408 Ill.Dec. 675

CATHAY BANK, f/k/a NAB Bank, Plaintiff–Appellee,

v.Helen R. ACCETTURO; United States of America, Department of Treasury; Unknown Owners; Unknown Tenants; and NonrecordClaimants, Defendants (Helen R. Accetturo, Defendant–Appellant).

No. 1–15–2783.

Appellate Court of Illinois, First District, Second Division.

Sept. 30, 2016.

Eryk Folmer, of Chicago, for appellant.

Ashen Faulkner, of Chicago (Alexander Wright, of counsel), for appellee.

OPINION

Justice NEVILLEdelivered the judgment of the court, with opinion.

¶ 1 On September 25, 2013, the plaintiff, Cathay Bank, formerly known as NAB Bank,¹ filed a mortgage foreclosure action against the defendants, Helen Accetturo; United States of America, Department of Treasury; unknown owners; unknown tenants; and nonrecord claimants, to obtain possession of the property located at 3624 South Paulina Street, Chicago, Illinois, because Accetturo failed to make payments on her note from December 1, 2011, to the present.On June 3, 2014, Accetturo filed an answer and affirmative defenses, which maintained that Cathay Bank failed to satisfy a contractual condition precedent by failing to submit a notice of acceleration prior to filing the foreclosure action.On March 5, 2015, the circuit court entered an order granting Cathay Bank's motion for summary judgment.On March 5, 2015, the circuit court also entered a judgment of foreclosure and sale against Accetturo.On April 3, 2015, Accetturo filed a motion to reconsider.On July 17, 2015, the circuit court entered an order denying the motion to reconsider.On August 27, 2015, the circuit court entered an order approving the report of sale and distribution, confirmed the sale, entered an order of possession, and entered a personal deficiency judgment in the amount of $11,964.86 against Accetturo.The deed was subsequently conveyed to the purchaser on September 9, 2015.²On September 25, 2015, Accetturo filed her notice of appeal.

¶ 2We find that a notice provision with an acceleration clause in a mortgage is a condition precedent and prescribes servicing requirements that a lender must comply with in order for the lender to have a right to file an action to recover possession of a secured property.Kingdomware Technologies, Inc. v. United States,579 U.S. ––––, ––––, 136 S.Ct. 1969, 1978, 195 L.Ed.2d 334(2016);People v. Pomykala,203 Ill.2d 198, 205–06, 271 Ill.Dec. 230, 784 N.E.2d 784(2003).We also find that Cathay Bank failed to comply with the condition precedent in paragraph 21 of the mortgage and that Cathay Bank's failure to give Accetturo the notice required by paragraph 21 divested the lender of its right to file this foreclosure action.Because we find that Cathay Bank had no right to file this foreclosure action, we hold that the circuit court erroneously granted Cathay Bank's motion for summary judgment and abused its discretion when it entered the August 27, 2015, order approving the report of sale and distribution.Accordingly, because Cathay Bank had no right to file this foreclosure action, we reverse the circuit court's March 5, 2015, order granting Cathay Bank's motion for summary judgment and vacate all subsequent orders because Cathay Bank must comply with the notice of acceleration clause in paragraph 21 of the mortgage before filing a foreclosure action.

¶ 3 BACKGROUND

¶ 4 On January 17, 2003, Accetturo executed a note and mortgage in the amount of $141,000 naming "NAB BANK, IT'S [sic ] SUCCESSORS AND/OR ASSIGNS," now Cathay Bank, as the lender.The mortgage contained a "Transfer of the Property or a Beneficial Interest in Borrower" provision in paragraph 17 which provided:

"If all or any part of the Property or any interest in it is sold or transferred (or if a beneficial interest in Borrower is sold or transferred and Borrower is not a natural person) without Lender's prior written consent, Lender may, at its option, require immediate payment in full of all sums secured by this Security Instrument.However, this option shall not be exercised by Lender if exercise is prohibited by federal law as of the date of this Security Instrument.

If Lender exercises this option, Lender shall give Borrower notice of acceleration.The notice shall provide a period of not less than 30 days from the date the notice is delivered or mailed within which Borrower must pay all sums secured by this Security Instrument.If Borrower fails to pay these sums prior to the expiration of this period, Lender may invoke any remedies permitted by this Security Instrument without further notice or demand on Borrower."

¶ 5 The mortgage also contained an "Acceleration; Remedies" clause in paragraph 21 which provided:

"Lender shall give notice to Borrower prior to acceleration following Borrower's breach of any covenant or agreement in this Security Instrument (but not prior to acceleration under paragraph 17 unless applicable law provides otherwise).The notice shall specify: (a) the default; (b) the action required to cure the default; (c) a date, not less than 30 days from the date the notice is given to Borrower, by which the default must be cured; and (d) that failure to cure the default on or before the date specified in the notice may result in acceleration of the sums secured by this Security Instrument, foreclosure by judicial proceeding and sale of the Property.The notice shall further inform Borrower of the right to reinstate after acceleration and the right to assert in the foreclosure proceeding the non-existence of a default or any other defense of Borrower to acceleration and foreclosure.If the default is not cured on or before the date specified in the notice, Lender at its option may require immediate payment in full of all sums secured by this Security Instrument without further demand and may foreclose this Security Instrument by judicial proceeding.Lender shall be entitled to collect all expenses incurred in pursuing the remedies provided in this paragraph 21, including, but not limited to, reasonable attorneys' fees and costs of title evidence."

¶ 6Cathay Bank sent several letters to Accetturo:

i. On November 22, 2011, Cathay Bank mailed a letter informing Accetturo that her loan with Cathay Bank was "seriously delinquent," that "$8,4205.29"[sic ] was past due, and that Accetturo should call Cathay Bank to resolve the matter;

ii.On January 24, 2012, Cathay Bank mailed a second letter to Accetturo stating that the loan was "seriously delinquent," stating that amount past due on the loan was $8700.83, and urging Accetturo to call Cathay Bank to resolve the matter;

iii.On March 13, 2012, Cathay Bank mailed a third letter, informing Accetturo that the loan was "seriously delinquent," and stating that the amount past due on the loan was $12,183.48, which included the actual loan payments plus late fees, and an estimate of collection fees and costs.This notice also urged Accetturo to call Cathay Bank to resolve the matter;

iv.On March 19, 2012, Cathay Bank mailed a fourth letter to Accetturo entitled "Notice of Intent to Foreclose."This letter informed Accetturo that "Events of Default * * * as defined in the Loan Documents, have occurred and are continuing as a result of [Accetturo's] failure to pay to make [sic ] required monthly payments to [Cathay Bank] that were due on the 1st of the month for the months of December 2011 through March 2012.In addition, the next payment due of April, 2012."The letter further stated "[u]nless Cathay Bank is in receipt of a cashiers [sic ] check or certified funds for the full amount of the balance due [$11,912.99] on or before April 10, 2012, Cathay Bank may exercise its rights and remedies as provided for in the Guaranty and other related loan documents;" and

v. On August 6, 2013, Cathay Bank mailed a fifth letter to Accetturo, through counsel, entitled "Notice of Default and Acceleration."This letter informed Accetturo that "pursuant to paragraph 21 and 17 of the Mortgage, the Loan is now accelerated and the entire loan is due."Accetturo was instructed to pay $78,193.65 no later than September 6, 2013.In the event the loan amount was not paid by the deadline, the notice informed Accetturo that Cathay Bank"may pursue all its rights and remedies to enforce the loan documents, including foreclosure without additional notice or demand."

¶ 7 On September 25, 2013, Cathay Bank filed a mortgage foreclosure action against the defendants, involving the property located at 3624 South Paulina Street, Chicago, Illinois, because Accetturo failed to make payments on her note and mortgage from December 1, 2011, to the present.On October 2, 2013, "unknown occupants" were served personally through "abode service" by leaving a copy of the summons and complaint with Zayra Garcia, a member of the household, at 3624S. Paulina Street, Chicago, Illinois.On October 3, 2013, Accetturo was personally served with summons and a copy of the complaint at 2543 S. Lowe Avenue # 1, Chicago, Illinois.On October 7, 2013, the United States of America, Department of Treasury was served with corporate service on Joann Contreras, a receptionist, at 219 S. Dearborn Street, Chicago, Illinois.

¶ 8 On September 25, 2013, Cathay Bank filed an affidavit of service by publication on the defendants, unknown owners, unknown tenants, and nonrecord claimants.735 ILCS 5/2–206(West 2012);735 ILCS 5/15–1502(c)(West 2012).The notice was published in the Chicago Daily Law Bulletin on September 30, 2013; October 7, 2013; and October 14, 2013.On November 13, 2013, United States Attorney Zachary Fardon filed an appearance for the United States of America, Department of Treasury, and filed an answer to the complaint.

¶ 9 On February 13, 2014, Cathay Bank filed a motion for entry of an order of default against Accetturo and unknown owners, unknown tenants, and nonrecord claimants; requested summary judgment against the United States of America, Department of Treasury; and requested a judgment of...