Without Proof of Delivery, a Demand Letter Sent via Certified Mail Fails to Constitute Sufficient Notice under Most Mortgages

Without Proof of Delivery, a Demand Letter Sent via Certified Mail Fails to Constitute Sufficient Notice under Most Mortgages

By: Blake A. Strautins and Michael R. Schumann, Kluever & Platt, LLC

A recent Illinois appellate court decision reiterates that when accelerating the amounts owed on a past-due debt, the method for sending the demand letter sent must strictly comply with the terms of the loan documents. Following its holding in Cathay Bank v. Accetturo, 2016 IL App (1st) 152783, the appellate court in Deutsche Bank National Trust Company v. Roongseang, 2019 IL App (1st) 180948 held that the mortgagee failed to send a demand letter to the borrowers in accordance with the terms of the mortgage.

In Roongseang, the borrowers filed an affirmative defense to a foreclosure alleging Deutsche Bank failed to provide them with an acceleration notice in accordance with sections 20 and 22 of the mortgage. Section 15 of the mortgage at issue provided that: “Any notice to Borrower in connection with this Security Instrument shall be deemed to have been given to Borrower when mailed by first class mail or when actually delivered to Borrower’s notice address if sent by other means.”

Deutsche Bank moved for summary judgment arguing it had complied with the notice requirements when it mailed the acceleration letter by certified mail. The trial court granted summary judgment in favor of Deutsche Bank, and the borrowers appealed. The borrowers argued that summary judgment was improper because Deutsche Bank failed to provide proof of delivery of the acceleration notice, and the mortgage does not presume delivery of an acceleration notice sent by certified mail. The borrowers alleged that Deutsche Bank was required to provide proof of actual delivery in order to establish compliance with the notice provision of the mortgage.

The appellate court agreed with the borrowers, holding that the express purpose of sections 15, 20, and 22 of the mortgage, when read together, were to provide the borrowers with a notice of default by one of two methods. First, notice could be deemed given when mailed to the borrower by first class mail. Second, if the notice is sent by “other means”—such as via certified mail—notice is deemed given when actually delivered to the borrower’s notice address. Because the terms “first class mail” and “other means” are not defined in the mortgage, the court needed to construe these terms with in the context of the mortgage document as a whole.

The US Postal Service defines “certified mail” as an “extra service” used to provide “the sender with a mailing receipt and, upon request, electronic verification that an article was delivered or that a delivery attempt was made.” The court, consistent with the findings of other courts across the country, declined to extend the “mailbox” presumption of delivery to certified mail. By undertaking more than the rule required in sending the notice via certified mail, the party sending the certified mail triggered an obligation “to follow through on that method by submitting the return receipt as proof of service.”

Given the difference between the methods of delivery for first class and certified mail, when Deutsche Bank chose to send the acceleration notice via certified mail, it was sent by “other means” and proof of actual delivery of the notice was required to establish compliance with the notice provisions in the mortgage. Here, the borrowers’ denial that they received notice, and Deutsche Bank’s failure to produce a return receipt of the certified mail or other proof that the acceleration notice was delivered, created an issue of fact that precluded entry of summary judgment.

In practice, investors and mortgage servicers must be mindful of the terms of loan documents and the importance of complying with those terms. When a mortgage dictates how notice to a borrower must be given, strict compliance with such provisions is required. The alternative—starting over with a new demand—is an expensive price to pay for non-compliance.