Cathay Bank v. Accetturo
2016 IL App (1st) 152783
| Ill. App. Ct. | 2016Background
- In 2003 Accetturo executed a note and mortgage (loan $141,000) to NAB Bank (now Cathay Bank); mortgage paragraph 21 required lender to "give notice to Borrower prior to acceleration" containing specific cure information and at least 30 days to cure.
- Cathay Bank sent five letters (2011–2013): early letters warned of delinquency but did not include paragraph 21’s detailed acceleration/cure contents; an August 6, 2013 letter stated the loan was "accelerated" (but informed after acceleration).
- Cathay Bank filed a foreclosure complaint Sept. 25, 2013; Accetturo raised an affirmative defense that the bank failed to comply with the mortgage’s condition precedent (paragraph 21) by not providing a proper pre-acceleration notice.
- Circuit court granted summary judgment and entered foreclosure and sale orders (March–Aug. 2015); sale confirmed and deed conveyed; Accetturo appealed.
- The appellate court evaluated whether paragraph 21’s pre-acceleration notice is a mandatory condition precedent, whether Cathay complied, and whether failure deprived the bank of the right to foreclose.
Issues
| Issue | Plaintiff's Argument (Cathay) | Defendant's Argument (Accetturo) | Held |
|---|---|---|---|
| Whether paragraph 21 imposes a mandatory pre-acceleration notice (condition precedent) | Paragraph 21 is not a bar to foreclosing; bank satisfied notice requirements | Paragraph 21 uses "shall" and thus creates a mandatory condition precedent; bank must give specified pre-acceleration notice | Paragraph 21 is a contractual condition precedent; "shall" imposes mandatory duty and requires strict compliance |
| Whether the bank actually provided the required pre-acceleration notice | Bank sent multiple notices and the August 6, 2013 letter sufficed | Early letters lacked required specifics; the August 6 letter notified after acceleration, not before | Bank’s letters did not include the mandatory pre-acceleration content; August 6 letter was post-acceleration and insufficient |
| Whether Accetturo could raise failure-to-notice as an affirmative defense | Bank argued the defense was procedurally improper/forfeited and did not raise a new matter defeating the claim | Defense properly pleaded that bank failed a contractual condition precedent and thus lacked right to foreclose | The defense was properly raised; failure to comply with paragraph 21 is a valid affirmative defense that defeats the bank’s right to foreclose |
| Whether the sale and sale-confirmation should be sustained given defective notice | Sale was regular; confirmation and deficiency judgment were proper | Sale stems from a foreclosure filed without required notice; confirmation must be vacated | Because bank lacked the right to file foreclosure (no pre-acceleration notice), the summary judgment and all subsequent sale-confirmation orders are reversed/vacated |
Key Cases Cited
- Kingdomware Technologies, Inc. v. United States, 136 S. Ct. 1969 (2016) (distinguishing between "shall" and "may"; "shall" imposes mandatory duty)
- Pomykala v. People, 203 Ill. 2d 198 (2003) (Illinois uses mandatory connotation for "shall" absent contrary intent)
- Abdul-Karim v. First Federal Savings & Loan Ass'n of Champaign, 101 Ill. 2d 400 (1984) (acceleration clause affects the lender’s right to foreclose; mortgage and note are separate contracts)
- Household Bank, FSB v. Lewis, 229 Ill. 2d 173 (2008) (abuse of discretion standard for approval of judicial sales)
- Corral v. Mervis Industries, Inc., 217 Ill. 2d 144 (2005) (standard for reversing fact-findings: manifest weight of evidence)