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Cathay Bank v. Accetturo

Court of Appeals of Illinois, First District, Second Division

September 30, 2016

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.

         Appeal from the Circuit Court Of Cook County. No. 13 CH 21936 The Honorable Daniel Patrick Brennan, Judge Presiding.

          JUSTICE NEVILLE delivered the judgment of the court, with opinion. Presiding Justice Hyman and Justice Pierce concurred in the judgment and opinion.

          OPINION

          NEVILLE JUSTICE

         ¶ 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.[2] On September 25, 2015, Accetturo filed her notice of appeal.

         ¶ 2 We 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 (2016); People v. Pomykala, 203 Ill.2d 198, 205-06 (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."

         ¶ 6 Cathay 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 3624 S. 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 foreclosure and sale against the defendants. Cathay Bank also filed the loss mitigation affidavit of its employee, Janie Yang, on February 13, 2014.

         ¶ 10 On May 8, 2014, the circuit court entered an order giving Accetturo until June 5, 2014, to file an appearance or to answer or otherwise plead to the complaint. That same day, Accetturo's attorney, Thomas L. Burdelik, filed an appearance on her behalf. On June 3, 2014, Accetturo filed a verified answer and an affirmative defense. In her affirmative defense, Accetturo alleged that Cathay Bank failed to satisfy a contractual condition precedent by failing to submit a notice of acceleration prior to filing the foreclosure action. Specifically, in paragraphs 6 through 9 of her affirmative defense, Accetturo alleged the following:

"6. NAB Bank [Cathay Bank], its successors or assigns and plaintiff failed to provide ACCETTURO any notice that a failure to cure the alleged defaults may result in 'foreclosure by judicial proceeding and sale of the Property.'
7. NAB Bank [Cathay Bank] and plaintiff have failed to meet a condition precedent of the mortgage when it failed to mail or deliver an adequate notice of acceleration to ACCETTURO as required by Section 21 of the alleged mortgage.
8. ACCETTURO was denied a good faith opportunity, pursuant to the alleged mortgage and the obligations of BAC to avoid acceleration and foreclosure.
9. The failure to provide a proper acceleration notice prior to filing this foreclosure action would require dismissal of this action."

         On July 16, 2014, Cathay Bank filed its response to Accetturo's affirmative defense denying the allegations.

         ¶ 11 On September 22, 2014, Cathay Bank filed a motion for entry of an order of default against unknown owners, unknown tenants, and nonrecord claimants; for summary judgment against Accetturo and the United States of America, Department of Treasury; and for a judgment of foreclosure and sale against the defendants. In its motion, Cathay Bank maintained that (i) defendants unknown owners, unknown tenants and nonrecord claimants are in default pursuant to section 5/15-1506(2)(c) of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1506(2)(c) (West 2012)) and a judgment of foreclosure should be entered against them; (ii) Accetturo is in default on the note and mortgage and has failed to establish that she made payment from December 1, 2011, to the present, thereby failing to raise an issue of fact that would prevent summary judgment; and (iii) Accetturo's affirmative defense is void and does not raise a fact issue that would prevent summary judgment as Cathay Bank has provided evidence to establish that all proper notices were mailed to Accetturo.

         ¶ 12 On January 8, 2015, the circuit court entered an order allowing Accetturo's previous counsel, the Burdelik Law Group, to withdraw its appearance and granted the Law Office of Mark A. Laws leave to file its appearance on behalf of Accetturo, instanter. That same day, Mark Laws filed an appearance on behalf of Accetturo. On January 8, 2015, Accetturo filed a motion to dismiss pursuant to section 2-619. 735 ILCS 5/2-619 (West 2012). In her motion to dismiss, Accetturo maintained that Cathay Bank's failure to comply with section 15-1503(b) of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1503(b) (West 2012) and issue a copy of the notice of foreclosure to the alderman for the 11th ward or file an affidavit of compliance with this rule within 10 days of filing the complaint, should result in dismissal of the complaint without prejudice.

         ¶ 13 On February 5, 2015, Accetturo filed a response to Cathay Bank's motion for summary judgment. In this response, Accetturo maintained that (i) Cathay Bank's failure to comply with section 15-1503(b) of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1503(b) (West 2012) and issue a copy of the notice of foreclosure to the alderman for the 11th ward or file an affidavit of compliance with this rule within 10 days of filing the complaint, precludes summary judgment and (ii) Cathay Bank failed to properly follow the notice guidelines provided in paragraph 21 of the mortgage.

         ¶ 14 On February 19, 2015, Cathay Bank filed its reply and maintained that (i) Accetturo's answer to the complaint failed to raise an issue of fact, specifically it failed to offer proof that payment was made on the note after December 1, 2011; (ii) section 15-1503 of the Illinois Mortgage Foreclosure Law (735 ILCS 5/15-1503 (West 2012)) does not apply because the real property at issue in this case is not "residential real estate" as defined in the statute; (iii) Accetturo cannot raise a new affirmative defense in her response brief that was not pled in her answer and her section 15-1503 defense was not pled in her answer; and (iv) Accetturo admits to receiving several notices from Cathay Bank which is contrary to her position in her answer and fails to raise a fact issue to prevent summary judgment.

         ¶ 15 On March 5, 2015, the circuit court entered an order denying Accetturo's section 2-619 motion to dismiss pursuant to section 15-1503(b) of the Illinois Mortgage Foreclosure Law. 735 ILCS 5/15-1503(b) (West 2012). In its order, the court found that "at the time of the filing of the complaint, the property was not residential real estate as defined in 735 ILCS 5/15-1219 [of the ...


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