Cathay Bank v. Accetturo
2016 IL App (1st) 152783
| Ill. App. Ct. | 2017Background
- In 2003 Accetturo executed a note and mortgage naming NAB Bank (now Cathay Bank). She defaulted on payments beginning December 1, 2011.
- The mortgage’s paragraph 21 required the lender to "give notice to Borrower prior to acceleration" and to include specific information (default, cure action, at least 30 days to cure, warning that failure may result in acceleration/foreclosure, right to reinstatement and defenses).
- Cathay Bank sent five letters (Nov 2011, Jan 2012, Mar 13 2012, Mar 19 2012 "Notice of Intent to Foreclose", and Aug 6 2013 "Notice of Default and Acceleration"). The August 2013 letter stated the loan was already accelerated.
- Cathay Bank filed a foreclosure complaint Sept 25, 2013. Accetturo asserted an affirmative defense that Cathay failed to provide the paragraph 21 acceleration notice as a condition precedent.
- The circuit court granted summary judgment to Cathay Bank (Mar 5, 2015), entered foreclosure, sale occurred June 2015, and court later approved the sale and deficiency. Accetturo appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether paragraph 21 creates a mandatory condition precedent to acceleration and to the bank's right to foreclose | Paragraph 21 is satisfied by the notices sent; the bank complied and may proceed | Paragraph 21 uses "shall" and imposes mandatory pre‑acceleration notice; bank did not give required pre‑acceleration notice | Paragraph 21 is a mandatory condition precedent; lender must give the specified pre‑acceleration notice before accelerating and suing (bank lacked right to foreclose) |
| Whether the five letters complied with paragraph 21’s required content and timing | The multiple letters (particularly the last) satisfied the mortgage’s notice requirements | The first four letters lacked required specifics; the Aug 6, 2013 letter came after acceleration and thus failed to provide notice prior to acceleration | The letters did not strictly comply: required cure information, 30‑day cure period, warning of acceleration/foreclosure, and reinstatement/defense language were missing or untimely; noncompliance was more than technical |
| Whether Accetturo’s notice defense was forfeited or improper as an affirmative defense | The defense was procedurally defective or waived and cannot bar summary judgment | The servicing/notice requirement is a contractual condition precedent and may be raised as an affirmative defense; bank drafted the mortgage | The court rejected waiver/forfeiture; the defense was properly raised and should not have been struck |
| Whether the circuit court’s summary judgment and sale‑approval orders should stand given the notice failure | The sale and orders should be upheld; judicial sale standards prevent disturbance absent shocking unconscionability | Because the bank had no right to file, summary judgment and subsequent orders lack a lawful basis | The summary judgment and sale‑approval orders are reversed/vacated because the bank failed to satisfy the pre‑acceleration notice condition precedent |
Key Cases Cited
- People v. Pomykala, 203 Ill. 2d 198 (Ill. 2003) ("shall" in contract/statute connotes mandatory duty)
- Williams v. Manchester, 228 Ill. 2d 404 (Ill. 2008) (summary judgment standard is de novo)
- Corral v. Mervis Industries, Inc., 217 Ill. 2d 144 (Ill. 2005) (reviewing factual findings: manifest weight standard)
- Household Bank, FSB v. Lewis, 229 Ill. 2d 173 (Ill. 2008) (appellate review of court's approval of judicial sale is abuse of discretion)
- Phoenix Insurance Co. v. Rosen, 242 Ill. 2d 48 (Ill. 2011) (contract interpretation is reviewed de novo)
- Abdul-Karim v. First Federal Savings & Loan Ass’n of Champaign, 101 Ill. 2d 400 (Ill. 1984) (acceleration clause affects right to foreclose; mortgage and note are separate contracts)
- Kingdomware Technologies, Inc. v. United States, 579 U.S. _ (U.S. 2016) (distinction between "shall" and "may": "shall" generally imposes a mandatory duty)