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Associates Asset Management, LLC v. Cruz

Court of Appeals of Illinois, First District, Second Division

November 5, 2019

ASSOCIATES ASSET MANAGEMENT, LLC, Successor in Interest to Olympus Mortgage Company, Plaintiff-Appellee,
v.
ROBERT L. CRUZ, Defendant-Appellant.

          Appeal from the Circuit Court of Cook County, No. 2013-L005579; the Hon. Brigid Mary McGrath, Judge, presiding.

          Attorneys for Appellant: Arthur C. Czaja, of Niles, for appellant.

          Attorneys for Appellee: Richard J. Sorman, of Sorman & Frankel, Ltd., of Chicago, for appellee.

          JUSTICE COGHLAN delivered the judgment of the court, with opinion. Justices Lavin and Pucinski concurred in the judgment and opinion.

          OPINION

          COGHLAN, JUSTICE

         ¶ 1 In 2013, plaintiff, Associates Asset Management, LLC (AAM), brought a breach of contract action against defendant Robert Cruz, seeking payment on a promissory note with a maturity date of November 1, 2034. The complaint sought the full amount due plus interest, as if the note had been accelerated. Cruz alleged, as an affirmative defense, that AAM's suit was premature because the note required AAM to give him notice and an opportunity to cure before it could declare default and accelerate the note, which AAM failed to do.

         ¶ 2 The trial court found that personal service of the complaint on Cruz constituted sufficient notice of both default and acceleration. Following a bench trial, the court entered judgment for AAM in the amount of $120, 402.86, representing the entire principal amount, interest accrued from the date of service until the date of judgment, and attorney fees. Cruz now appeals. We agree with Cruz that AAM's suit was premature and reverse.

         ¶ 3 BACKGROUND

         ¶ 4 In 2004, Cruz and Juan Calderon purchased a condominium in Chicago. The purchase was financed by a promissory note for $69, 800 that Cruz and Calderon executed in favor of Olympus Mortgage Company (Olympus), AAM's predecessor in interest. (Calderon was later discharged in a Chapter 7 bankruptcy proceeding and is not a party to this appeal.) The note was executed on October 22, 2004, and it was secured by a second mortgage on the condominium, executed on the same day.

         ¶ 5 Although the note's maturity date is November 1, 2034, section 4 of the note provides for acceleration in the case of default, as follows:

"(B) Notice from Note Holder
If I do not pay the full amount of each monthly payment on time, the Note Holder may send me a written notice telling me that if I do not pay the overdue amount by a certain date, I will be in default. That date must be at least 10 days after the date on which the notice is mailed to me or, if it is not mailed, 10 days after the date on which it is delivered me.
(C) Default
If I do not pay the overdue amount stated in the notice described in Section 4(B) below [sic], I will be in default. If I am in default, the Note Holder may require me to immediately pay the full amount of principal which has not been paid and all the interest that I owe on that amount."

         Under the heading "Giving of Notices," the note states:

"Any notice that must be given to me under this Note will be given by delivering it or mailing it by certified mail addressed to me at the Property Address above [i.e., the condominium]. A notice will be delivered to me at a different address if I give the Note Holder a written notice of my different address."

         Finally, the note expressly references the acceleration provision in Olympus's mortgage on the condominium, as follows:

"In addition to the protections given to the Note Holder under this Note, a Mortgage, dated October 22, 2004, protects the Note Holder from possible losses which might result if I do not keep the promises which I make in this Note. That Mortgage describes how and under what conditions I may be required to make immediate payment in full of all amounts that I owe under this Note."

         ¶ 6 The referenced text in the mortgage is a standard acceleration clause titled "Acceleration; Remedies" stating in bold print:

"[U]pon Borrower's breach of any covenant or agreement of Borrower in this Mortgage, including the covenants to pay when due any sums secured by this Mortgage, Lender prior to acceleration shall give notice to Borrower *** specifying: (1) the breach; (2) the action required to cure such breach; (3) a date, not less than 10 days from the date the notice is mailed to Borrower, by which such breach must be cured; and (4) that failure to cure such breach may result in acceleration of the sums secured by this Mortgage, foreclosure by judicial proceeding, and sale of the Property."

         ¶ 7 Cruz and Calderon ceased making payments on the note after July 5, 2005. In November 2005, the senior lender filed an action to foreclose on the condominium. Long Beach Mortgage Co. v. Ortiz, No. 05-CH-20399 (Cir. Ct. Cook County). A judgment of foreclosure and sale was entered, and the condominium was sold at a judicial sale in 2006. Olympus, as the junior lender, was named as a defendant in the foreclosure case but did not participate in the ...


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