DeBlasio Law Group LLC partner, Antonio DeBlasio is pleased to announce the firm obtained a $250,000 settlement for a property owner against his Condominium Association and several of its board members.

The firm filed a lawsuit against the association and its board members for illegally enacting condominium rules and regulations without providing proper notice to the homeowners in advance, as required by the association’s declarations and Illinois law. As part of the lawsuit, the firm obtained summary judgment in favor of our client against the Condominium Association for failing to produce records of the Condominium Association in violation of the Illinois Condominium Property Act.  The lawsuit also alleged that the Association enacted and attempted to enforce illegal and unreasonable leasing rules, fabricated evidence against our client and assessed multiple, grossly excessive fines of $500 per month for alleged continuing violations of the leasing rules.  The lawsuit filed in Cook County Circuit Court asserted claims for failure to examine records, breach of contract (e.g., the Association’s Declarations), and breach of fiduciary duties. 

Attorney Antonio DeBlasio has been selected by Super Lawyers® in 2008 and in each year from 2014 through 2026.  No more than 5% of Illinois attorneys receive this distinction.  Mr. DeBlasio has over 31 years of experience as an Illinois attorney, representing businesses, individuals, and homeowners in contested litigation matters, including real estate and condominium disputes. For information on scheduling a consultation, call DeBlasio Law Group at (630) 560.1123, or you may reach us through our firm’s website at www.DGLLC.net/contact.

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In their motions for summary judgment, both Bank of America and the Stuarts claimed that the contractor’s mechanic‘s  lien fraudulently stated that the contractor completed all the work required under the construction agreement by September 12, 2009, when in fact, the contractor did not even begin construction on the Stuarts’ house until sometime in October or November of 2009.  The Stuarts further claimed that the contractor’s mechanic‘s lien falsely stated that they owed plaintiff $46,200 as of September 12, 2009, when the first payment under the parties’ retail installment contract was not due until November 1, 2009.  The contractor did not dispute these allegations, but instead, claimed that the false statements in its mechanic‘s lien amounted to nothing more than “erroneous overcharges and overstatements” and that the record does not support the circuit court’s finding that it recorded the mechanic‘s lien with the intent to defraud defendants. The Court disagreed.

Section 7 of the Illinois Mechanic’s Lien Act provides that: “No such lien shall be defeated to the proper amount thereof because of an error or overcharging on the part of any person claiming a lien therefor under this Act, unless it shall be shown that such error or overcharge is made with intent to defraud.” 770 ILCS 60/7.  Intent to defraud may be inferred from documents containing overstated lien amounts combined with additional evidence. The requirement that there be intent to defraud is designed to protect an honest lien claimant who makes a mistake rather than a dishonest claimant who knowingly makes a false statement. When there is evidence, however, that the lien claimant knowingly filed a lien claim containing false statements the claim will be defeated because the effect of such a lien claimant’s claim is to give the appearance of a greater encumbrance on the property than that to which he is entitled. Thus, not only will Illinois courts invalidate a mechanic‘s lien on the basis of actual fraud, but also on the basis of constructive fraud. The additional evidence required to establish constructive fraud may, however, come in the form of an affidavit, signed by an agent of a contractor’s company, which is attached to the mechanic‘s lien claim, and which falsely attests to the truth of overstatements and overcharges made by the contractor. 

In the Stuart case, the Court ruled that there was “no room for doubt over whether [the contractor], at the very least, committed constructive fraud. The allegations of fraud were not merely based on overstatements or overcharges, but rather on patently false statements that plaintiff used to establish its right to a mechanic‘s lien in the first place.   First, the plaintiff’ contractor’s mechanic‘s lien, recorded on September 17, 2009, falsely stated that all the work required under the construction agreement, including the construction of the garage, basement, and deck, was completed by September 12, 2009. This statement was proven false by plaintiff’s own admission that “it completed work at the subject property in or about June, 2010.” Plaintiff must have known that it had not completed all the work required under the construction agreement as the Department of Buildings only issued a building permit on September 10, 2009.  Likewise, the “completion certificates,” which plaintiff had the Stuarts sign as the project progressed, clearly indicate that plaintiff knew that as of September 17, 2009, it had not constructed any of the land improvements (the garage, deck, and basement) required under the construction agreement.

Beyond providing a fabricated completion date, plaintiff’s mechanic‘s lien also stated falsely that the Stuarts owed plaintiff $46,200 as of September 12, 2009. This statement was proven false by the clear and unambiguous terms of the parties’ retail installment contract, under which the Stuarts were not required to make the first installment payment until November 1, 2009.

Finally, plaintiff attached to its mechanic‘s lien the signed and sworn affidavit of the president of plaintiff’s company, falsely attesting to the truth of the overstatements and overcharges made in its mechanic‘s lien claim.  On appeal, the Court ruled that the circuit court could reasonably infer that plaintiff knew that its mechanic‘s lien contained false statements.  As such, the Court ruled that it “had no choice but to conclude that plaintiff’s mechanic‘s lien, based on patently false statements, constituted constructive fraud.”

DeBlasio Law Group’s founding member, Attorney Antonio DeBlasio, has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys in Illinois receive this distinction.  Contact Mr. DeBlasio at (630) 560-1123 or via our website, www.DGLLC.net/contact.

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Background

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.  The note was executed on October 22, 2004, and it was secured by a second mortgage on the condominium, executed on the same day.   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.”

The note expressly referenced 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.”  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.”

Default in Payment

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 proceedings. After the condominium was sold, Olympus assigned the note to Ameriquest Mortgage Company, which assigned the note to AAM.

Demand Letters

Over the next several years, AAM sent four letters to Cruz demanding payment of the debt. None of the letters were sent by certified mail.

• The first letter, dated February 21, 2008, was sent from AAM’s counsel to Cruz and Calderon at the condominium address. The letter explained that AAM recently acquired the loan file and that “your account is seriously past due” with an unpaid balance of $69,587.60 (e., the entire outstanding principal). The letter also offered a “repayment plan,” under which Cruz and Calderon could pay $487.11 per month for six months to be reevaluated for another repayment or settlement plan, and a “settlement plan,” under which Cruz and Calderon could pay 60% of the principal balance to be forgiven of any remaining obligations. It provided that these offers were good for 60 days, after which AAM would “exercise all of its legal rights” under the loan.
• The second letter, dated May 5, 2008, was sent from an AAM loan counselor to Cruz at a California Avenue address in (Cruz claims he never resided there.) In the letter, the loan counselor recommended that Cruz call him to “work out a solution” with his debt. The letter did not state the overdue amount or provide a period for repayment.
• The third letter, dated January 21, 2010, was sent from AAM’s legal review department to Cruz and Calderon at the California Avenue address. It stated that AAM “has reviewed your account and is currently in the process of forwarding it to our legal ” Again, the letter did not state the overdue amount or provide a period for repayment.
• The fourth and final letter, dated April 23, 2013, was sent from AAM’s counsel to Cruz and Calderon at a Van Buren Street address in Chicago. It stated that Cruz and Calderon owed $69,587.60 in principal and $58,809.24 in accrued interest, for a total of $128,396.84. It further stated that Cruz and Calderon had 14 days in which to make payment in full if they wished to resolve the matter without a lawsuit.

The Lawsuit

In 2013, plaintiff, Associates Asset Management, LLC (AAM), brought a breach of contract action against Cruz, seeking payment on the 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 filed an answer in which he alleged, as an affirmative defense, that AAM failed to give him notice of its intent to declare a default and accelerate the note, which he claimed was a “condition precedent” (e.g., contingency) to filing a lawsuit against him. Cruz stated that under the plain language of the note, AAM was required to send him a pre-default notice, giving him a 10-day grace period in which he could cure the missing payments to avoid default.  He claimed that AAM could not sue him until this was done.

At trial, the court found that personal service of the complaint (lawsuit) on Cruz constituted sufficient notice of both default and acceleration, and  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 appealed that ruling and the Illinois Appellate Court agreed, holding that AAM’s suit was premature, that it failed to give proper notice of default and acceleration under the note, and that the mere filing of the lawsuit was not sufficient notice under the terms of the promissory note.  An absolutely devastating outcome for AAM, and a terrific win for the homeowner.

The Winning Arguments on Appeal

On appeal, Cruz argued that AAM’s suit was premature because AAM did not fulfill the contractual conditions precedent to declaring default and accelerating the note. He further argued that the trial court erred when it found that service of process was sufficient to satisfy those requirements.

AAM argued that, because the note provided that “the Note Holder may send … a written notice”, it is permissive rather than mandatory and, therefore, sending such a notice was not required.  The Appellate Court held that while AAM was “technically” correct, concomitantly, the note holder is not required to try and collect any outstanding debt either. The note holder may forbear pursuing its rights in case of nonpayment. But considering the note as a whole, the court ruled that if the note holder wishes to declare default (as AAM clearly did), the only contractual mechanism for doing so was by following the procedure set forth in sections 4(B) and (C). Thus, the Appellate Court agreed with Cruz that, under the plain language of the note, notice is a contractual condition precedent to default.  The Court also ruled that the note required AAM to give a preacceleration notice as described in the “Acceleration; Remedies” clause of the mortgage.

Condition Precedent

The Court next turned to the central issue of this case, namely, whether the trial court erred in concluding that AAM satisfied the note’s predefault and preacceleration notice requirements. Cruz argued that AAM’s notices were inadequate and AAM’s suit was therefore premature. AAM did not dispute that it failed to strictly comply with the note’s notice requirements, but it argues that it gave Cruz the “essential information” to advise him that payment under the note was long overdue.

Under Illinois law, a “condition precedent” is an act that must be performed or an event that must occur before a contract becomes effective or before a party is required to perform.  Accetturo, 2016 IL App (1st) 152783, ¶ 32.  As discussed, the note in this case sets forth conditions precedent to both default and acceleration. Cf. Credit Union 1 v. Carrasco, 2018 IL App (1st) 172535, ¶ 15, 424 Ill. Dec. 302, 107 N.E.3d 1021 (satisfaction of mortgage’s preacceleration notice requirement was a condition precedent to suit); Accetturo, 2016 IL App (1st) 152783, ¶ 33 (same). Where a contract contains express conditions precedent, strict compliance with those conditions is required, and “[c]ourts will enforce express conditions precedent despite the potential for harsh results for the noncomplying party.” Midwest Builder Distributing, Inc. v. Lord & Essex, Inc., 383 Ill. App. 3d 645, 668, 891 N.E.2d 1, 322 Ill. Dec. 371 (2007) (citing Dodson v. Nink, 72 Ill. App. 3d 59, 64, 390 N.E.2d 546, 28 Ill. Dec. 379 (1979) (“It is well established that where a contract contains a condition precedent, the contract does not become enforceable or effective until the condition is performed or the contingency occurs.”)).

On this issue, the Appellate Court ruled that all four of AAM’s demand letters were severely deficient in substance. The first letter did not state the overdue amount, much less give Cruz a 10-day period to pay that amount to avoid default. Rather, it stated that Cruz owed the entire outstanding principal, as if the note had already been accelerated. The second and third letters were even more deficient: they referred generically to “this debt” and “your account” but made no reference to the amount of the debt and did not provide any grace period for repayment. The fourth letter, like the first, described the note as already having been accelerated since it asserted that the entire outstanding principal was “due and owing” and demanded that Cruz pay the entire sum (not just the overdue payments) within 14 days to avoid litigation. These are not mere technical deficiencies; rather, AAM failed to provide most of the information required under the contract. Thus, it ruled that AAM’s letters, whether viewed separately or together, were insufficient to meet the contractual conditions precedent to default and acceleration.

Similarly, it ruled that AAM’s complaint was deficient as a notice of default and acceleration since it neither advised Cruz of the overdue payment amount nor gave a grace period to pay that amount, but sought the full accelerated balance from him.  Thus, it held that the trial court’s finding that the complaint complied with the conditions precedent in the note was against the manifest weight of the evidence. Moreover, it held that AAM’s failure to provide Cruz with the contractually required notices prior to default and acceleration divested AAM of the right to file this breach of contract action, citing Midwest Builder Distributing, 383 Ill. App. 3d at 668 (“[c]ourts will enforce express conditions precedent despite the potential for harsh results for the noncomplying party”).

All in all, this was a tremendous victory for the homeowner who stuck to the plain language of the contract which required notice of default and notice of acceleration before he would be found in default.

DeBlasio Law Group’s founding member, Attorney Antonio DeBlasio, has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys in Illinois receive this distinction.  Contact Mr. DeBlasio at (630) 560-1123 or via our website, www.DGLLC.net/contact.

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By way of example, the monthly payment for one such rental property was $605.58, including $490.13 for principal and interest and $115.45 for the escrow deposit.  When Homeward took over the servicing of the loans in October 2009, it sent McGinnis a welcome letter that said McGinnis’s payment on that one loan for November 2009 was $843.58, without explaining the basis for the increase.  In December 2009, Homeward sent McGinnis an escrow analysis showing a present payment of $843.58, including $490.13 for principal and interest and $353.45 for the escrow deposit. No explanation was given for the high percentage increase in the escrow deposit portion of the payment. The statement described McGinnis’s new monthly payment beginning February 1, 2010 as $680.08. McGinnis disputed the accuracy of these communications.

On January 15, 2010, Homeward sent McGinnis a letter explaining that the escrow analysis on her loan could have reflected an escrow error and directing her to disregard the December analysis and continue making payments at the previous amount. On February 20, 2010, Homeward sent a second escrow statement that described McGinnis’s present payment as $843.59 through March 2010 and her new payment, effective April 1, 2010, as $638.32. Homeward treated the past payments of $605.58 as partial, and held the funds in a suspense account until there were enough funds to pay off the oldest past-due monthly payment. The interest and late fees continued to mount and Homeward frequently contacted McGinnis and her son by phone and mail demanding payment.

On May 19, 2010, McGinnis sent Homeward a fax explaining that the correct payment for November 2009 through March 2010 should have been $605.58 and providing her own escrow analysis, which was identical to Homeward’s analysis with respect to payments after April 2010. The only difference was the $843.58 that McGinnis refused to pay for November 2009 through March 2010 and associated late fees. Homeward failed to explain or retract the $843.48 amount and the issues persisted throughout 2010. McGinnis continued to pay $605.58 until January 2011 when she began paying the $638.32. From February through May 2011, Homeward returned McGinnis’s payments. On March 22, 2011, Homeward sent a formal notice of foreclosure on and finally foreclosed on July 7, 2011.

At trial McGinnis testified that the experience traumatized her. Her clinical psychologist testified that the events leading up to the foreclosure were a major cause of depression for McGinnis as well as of physical symptoms that included projectile vomiting.  McGinnis, who was retired and relied on her rental properties for income, described the effect of the foreclosure at trial: “I am too old to start over. They have taken my life away from me.” McGinnis also presented at trial a letter that her son had sent to Homeward on December 17, 2009 describing the undue stress Homeward’s constant demands had caused him and his mother. At trial, McGinnis also presented recordings of phone conversations with Homeward in which her son mentioned his and his mother’s frustration with Homeward’s repeated demands for payment and refusal to explain the increase. Homeward’s only witness, a default case manager at Homeward, insisted that McGinnis was obligated to pay any amount Homeward demanded whether reasonable or in error.

In this case, the court agreed that Homeward’s conduct caused McGinnis physical and emotional harm in addition to economic harm; demonstrated an indifference to McGinnis’s health; knew that McGinnis was financially vulnerable; involved repeated actions of misconduct; and found Homeward’s use of the suspense account also involved intentional malice, trickery, or deceit.

The court also agreed that the jury was free to conclude that Homeward knew its conduct was substantially certain to cause McGinnis emotional harm because of four pieces of evidence:  (1) Homeward’s knew its escrow analysis was incorrect yet proceeded to demand payment repeatedly without explanation and proceeded to foreclose; (2) Homeward’s use of the suspense account in which it held her monthly payments in suspense, failed to apply any of those payments to her balance, charged late fees and interest that were not due all the while increasing her monthly escrow by over 300 percent (making the late fees and interest not due); (3) the jury could infer that Homeward knew its conduct was almost certain to cause McGinnis emotional harm from the sheer volume of adversarial communications and threats of foreclosure, the fact that her son told Homeward of the undue stress the errors were causing his mom; and (4) Homeward’s offer to allow McGinnis to avoid foreclosure by giving in to all of its demands, including paying all unexplained monthly payment increases and all late fees and penalties, showed a specific intent to harm.

The court found also observed that Homeward’s conduct as a servicer were “not typical” and went well beyond ordinary threats of foreclosure because Homeward never retracted or justified its demands for payment despite repeated attempts by McGinnis to correct the errors.  Homeward continued to send demands for payment that literally stacked 5 feet high, even though it knew those demands were unreasonable and that its demands were causing McGinnis harm.

Antonio DeBlasio is the founding member of the DeBlasio Law Group.  He has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys receive this distinction. 

This blog post was co-authored by Casey Delury; Pre-law student at Elmhurst College

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Monette Saccameno originally filed for Chapter 13 bankruptcy after her home loan went into foreclosure.  Chapter 13 bankruptcy is a promise to a debtor: if you comply with the bankruptcy plan, then you can get a fresh start.  As Judge St. Eve noted, for Monette Saccameno that promise went unfulfilled.  She had done everything that was required of her, including making 42 monthly mortgage payments under the bankruptcy court’s watchful eye.  Near the end of her bankruptcy, Saccameno even obtained statements from her mortgage servicer, Ocwen, stating that she was paid up and even that she had paid too much.  The bankruptcy court granted her a discharge.

After receiving a bankruptcy discharge, Ocwen immediately began trying to collect money from Saccameno that it was not owed and threatening foreclosure again.  Saccameno thought it was a simple mistake.  She sent Ocwen all the paperwork it could have needed to fix its records.  When that did not work, she sent it again. Then she sent it a third and fourth time, with a request from an acquaintance, a lawyer, for an explanation why Ocwen thought she owed money. As noted by Judge St. Eve, Ocwen did not truly grasp how wrong its records were until almost four years later, two days into Saccameno’s jury trial when its witness was testifying and admitted that Saccameno had made all 42 payments.

At trial, the jury awarded Saccameno substantial damages for the pain, frustration, and emotional torment Ocwen put her through.  The jury ordered Ocwen to pay $500,000 in compensatory damages based on three claims that did not allow an award of punitive damages (breach of contract, the Fair Debt Collection Practices Act, and a claim under RESPA).  However, Saccameno’s claim under the Illinois Consumer Fraud and Deceptive Business Practices Act (ICFA), 815 ILCS 505/1, did allow for punitive damages.  For the Consumer Fraud claim, the federal jury awarded Saccameno $3,000,000 in punitive damages, plus compensatory damages of an additional $82,000.  An interesting note that was not part of the appeal is the parties stipulated to an award of $750,000 in attorneys’ fees to the plaintiff’s lawyers after the trial concluded.  (15-cv-1164, Dkt. 344)

Sufficiency of the Punitive Damages Evidence

Ocwen appealed the punitive damage award.  It first argued that there was insufficient evidence for the jury to award punitive damages at all.  Under Illinois law, punitive damages may be awarded only if the defendantʹs tortious conduct evinces a high degree of moral culpability, that is, when the tort is committed with fraud, actual malice, deliberate violence or oppression, or when the defendant acts willfully, or with such gross negligence as to indicate a wanton disregard of the rights of others.  Slovinski v. Elliot, 927 N.E.2d 1221, 1225 (Ill. 2010) (quoting Kelsay v. Motorola, Inc., 384 N.E.2d 353, 359 Ill. 1978)). When the defendant is a corporation, like Ocwen, the plaintiff must demonstrate also that the corporation itself was complicit in its employees’ tortious acts. Kemner v. Monsanto Co., 576 N.E.2d 1146, 1156 (Ill. App. Ct. 1991).

On appeal, Judge St. Eve concluded that the evidence at trial was sufficient to award punitive damages (although not $3 million), noting among other evidence that:

• “Ocwen’s servicing of Saccameno’s loan was chaos from the moment Ocwen began working on the loan in 2011 to the day of the jury’s verdict seven years later”;
• Ocwen offered no real explanation for any of the errors its employees made or how it could be avoided in the future;
• Ocwen never acted to correct its mistakes, and was unwilling to take steps to determine what occurred;
• The utter lack of explanation supported a finding of corporate complicity by ratifying Ocwen employees’ conduct, citing Mattyasovszky v. W. Towns Bus Co., 330 N.E.2d 509, 512 (Ill. 1975) (listing four ways this complicity can be demonstrated);
• Ocwen’s representative at trial knew nothing about the employee (Marla) that miscoded Saccameno’s bankruptcy payments;
• Ocwen’s representative at trial testified that she did not speak with Marla, did not know where Marla’s office was, did not know how long Marla had been an Ocwen employee, and did not know if she remained one to this day.
• No one at Ocwen took any steps, whatsoever, to investigate how Marla’s mistake was made or how Ocwen would prevent it from happening again.
• Ocwen offered no evidence of any “attempt to alter its procedures.”
• The jury’s ratification finding was supported further by Ocwen’s complete lack of insight into its other, unnamed employees’ errors on this file;
• Ocwen had made false oral and written statements regarding Saccameno’s default and engaged in unfair practices in violation of consent decrees that Ocwen previously had entered with various regulatory bodies, addressing, among other things, its inadequate recordkeeping, misapplication of payments, and poor customer service.

Due Process Considerations

The Seventh Circuit next addressed the amount of punitive damages awarded by the jury – $3,000,000. Ocwen argued that the amount exceeded constitutional limits.  But the court noted that the Constitution is not the most relevant limit to a federal court when assessing punitive damages, as it comes into play “only after the assessment has been tested against statutory and common-law principles.” A federal court can (and should) reduce a punitive damages award before it reaches the outermost limits of due process. 

On this issue, the court addressed three guideposts: (1) the degree of reprehensibility, (2) the disparity between the harm suffered and the damages awarded, and (3) the difference between the award and comparable civil penalties. Reviewing these guideposts, the court concluded that the $3,000,000 punitive damage award exceeded constitutional limits should be reduced to $582,000.

Reprehensibility

The first and most important guidepost is the reprehensibility of the defendant’s conduct, which is judged based on five factors including whether:

1. The harm caused was physical as opposed to economic;
2. The tortious conduct evinced an indifference to or a reckless disregard of the health or safety of others;
3. The target of the conduct had financial vulnerability;
4. The conduct involved repeated actions or was an isolated incident; and
5. The harm was the result of intentional malice, trickery, or deceit, or mere accident.

The Seventh Circuit held that the first two factors were not present in this case.  On the third factor, the court held that the close connection between Saccameno’s bankruptcy and the conduct in this case supported some award of punitive damages.  As for the fourth factor, the court noted that recidivism is not required and that it has consistently found this factor to be met in cases involving repeated acts against the same person.  In any event, the court held that the record contained evidence that Ocwen was a recidivist. The consent decrees described how it had treated other customers as it did Saccameno, and that it had continued its ways despite repeated warnings from regulators. The number of opportunities Ocwen had to fix its mistakes is the core fact that justified punitive damages in this case.  For the last factor – whether the harm was “the result of intentional malice, trickery, or deceit, or mere accident” the court agreed that Ocwen’s actions were not “mere accident” and that the evidence shows instead “reckless indifference” to Saccameno which was sufficient to sustain this factor even though Ocwen had not preyed on Saccameno intentionally.

Ultimately, the court held that Ocwen’s conduct was reprehensible, but not to an extreme degree. It caused no physical injuries and did not reflect any indifference to Saccameno’s health or safety.  Ocwen was, however, indifferent to her rights, including those rights that originated from her bankruptcy. No evidence supported that Ocwen was acting maliciously, though the number of squandered chances it had to correct its mistakes came close.  Judge St. Eve ruled that these factors pointed toward a substantial punitive damages award, but not one even approaching the $3,000,000 awarded here.  Judge St. Eve specifically mentioned McGinnis v. American Home Mortgage Servicing, Inc., 901 F.3d 1282, a factually similar case, but there the jury found a specific intent to harm, and the Eleventh Circuit considered evidence supporting all five factors.  Ocwen’s conduct was less reprehensible than that in McGinnis and thus warranted a smaller punishment.

Ratio of Punitive Damages to Actual Damages

Ocwen’s primary concern on appeal was with the second guidepost, the disparity between the harm to the plaintiff and the punitive damages awarded.  Judge St. Eve agreed with Ocwen’s argument that the district court wrongly inflated this ratio by looking to the entire compensatory award ($582,000) instead of just the $82,000 awarded under the Consumer Fraud Act.  Furthermore, Judge St. Eve noted that the $3,000,000 punitive award was not a modest award, and the $82,000 in compensatory damages for the Consumer Fraud claim was substantial enough that a huge multiplier was not needed to reflect harm that was “slight and at the same time difficult to quantify” and concluded that a single-digit punitive damages ratio relative to the $82,000 reflects an appropriate punishment on these facts.  Accordingly, Judge St. Eve concluded that $582,000 is a considerable compensatory award for the indifferent, not malicious, mistreatment of a single $135,000 mortgage and that nearly all of this compensatory judgment award reflected emotional distress damages that “already contain [a] punitive element” and that a ratio of compensatory to punitive damages should not exceed 1:1.

Civil Penalties

The final guidepost discussed by the court is the disparity between the award and “civil penalties authorized or imposed in comparable cases.”  The court first looked at the $50,000 monetary penalty authorized by the  Consumer Fraud Act, which can be calculated per offense if there is intent to defraud. 815 ILCS 505/7(b).  Looking at this factor, the court held that Ocwen’s actions were not so reprehensible that they might justify an award equal to the maximum penalty for 60 intentional violations. There was no evidence that Ocwen’s actions in this case were either intentional or fraudulent, only indifferent, and therefore, this aspect of the third guidepost pointed toward a lower punitive damage award.

The second civil penalty was the possibility that Ocwen could have its license to service mortgages suspended or revoked under the Illinois Residential Mortgage License Act (RMLA), 205 ILCS 635/4-5.  Judge St. Eve ruled that the district court did not err in considering the possibility that Ocwen could lose its license.

Remedy

Ultimately, Judge St. Eve ruled that considering all the factors together, he maximum permissible punitive damages award was $582,000, holding that an award of this size “punishes Ocwen’s atrocious recordkeeping and service of Saccameno’s loan without equating its indifference to intentional malice.”  As noted by the court, a $582,000 punitive damage award:

• Reflects a 1:1 ratio relative to the large total compensatory award;
• Reflects a roughly 7:1 ratio relative to the $82,000 awarded on the Consumer Fraud Act claim alone
• It is equivalent to the maximum punishment for less than 12, not 60, intentional violations of the Consumer Fraud Act
• It is “miniscule” compared to the value of Ocwen’s business license.

Antonio DeBlasio is the founding member of the DeBlasio Law Group.  He has been selected by Super Lawyers® for Business Litigation in 2008 and in each year from 2014 through 2025. Only 5% of attorneys receive this distinction.  

This blog post was co-authored by Casey Delury; Pre-law student at Elmhurst College

The post Jury’s $3 Million Punitive Damage Award Against Mortgage Loan Servicer Ocwen Reduced on Appeal to $582,000. appeared first on DeBlasio Law Group, LLC.

For example, if you are obtain a judgment against a former employer (e.g., company) for past due wages or commissions and you serve a citation on the company, the company generally cannot pay anyone before the company pays you first.

So in this example, the company cannot use any of its money to pay for its rent, or the wages of its current employees, before the company pays you.

The attorneys at our firm used the citation tool against a company that owed our client over $3 million.  That company could not pay its employees payroll without satisfying our judgment first.

Citation can also be used by commercial landlords and residential landlords in eviction cases.  Often times, when the landlord gets an eviction order, the court will give the tenant time to move out.   And most tenants know how to “play the game” to buy as much time as possible before they have to vacate the premises.

But a savvy landlord that obtains an eviction order and a money judgment against a tenant can perhaps force the clock to move more quickly by serving the tenant with a citation to discover assets.  Once the citation is served, it acts as a lien on the tenant’s assets and likely will force the tenant to cut a deal on the past due rent along with an agreement to voluntarily move out of the property long before he or she is required to.  The reason?  The tenant wants that lien released as soon as possible and the shrewd landlord will be glad to do so after the tenant vacates the property and pays some or all of the past due rent.

Our law firm used this strategy for a commercial landlord who obtained an eviction order and money judgment against a dry cleaning business tenant that was still operating its business.  As soon as we served the citation to discover assets on the dry cleaner, he vacated the premises many days before he was required to under the eviction order.

The lawyers at DeBlasio Law Group have the experience you need to face the most difficult challenges in court, including the DuPage County Courthouse located in Wheaton, Illinois, the federal and state courts in Chicago and other collar counties.  Strategically located in Oakbrook Terrace, Illinois, our office is minutes from all courts in the Chicagoland area and surrounding collar counties.  Call us for a consultation on any business related litigation matter at 630.560.1123.  www.DGLLC.net.

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According to the plaintiff in Gagnon v. Schickel, two parties agreed to buy real property together and share in its costs and profits.  But, the defendant never recorded a deed transferring half of the property even though the plaintiff had paid for half of the purchase price, utilities, taxes and improvements. 

The plaintiff attached a copy of a letter to the complaint, which plaintiff alleged was evidence of a conditional gift – the condition being that defendant must make plaintiff co-owner of the property.  But, the letter referred to the plaintiff’s payment of half the purchase price as “a bona fide gift with no obligation expected or implied[.]”  Therefore, the trial court refused to enforce the alleged “oral agreement” and the appellate court affirmed, leaving the Plaintiff high and dry and the defendant with everything.

According to the appellate court, the letter contradicted an essential term of the alleged oral contract, and where a complaint’s allegations and an exhibit conflict, the exhibit controls.  Thus, because of the way the plaintiff pled his case which conflicted with the exhibit attached to his complaint, the court held that the plaintiff had gifted his interest in the property to defendant.

Before you sign a contract or file a lawsuit on your own, you should contact an experienced attorney.  Or else you could be left with nothing, like the plaintiff in the Gagnon case.

The trial lawyers at DeBlasio Law group are experienced litigation attorneys committed to securing the rights of their clients.  To speak with one of our attorneys, callus at (630) 560-1123 or visit our website at www.DGLLC.net/contact.  We are here to help.

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The plaintiff filed a class action complaint against both insurance companies alleging breach of contract and deceptive conduct in violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (“Consumer Fraud Act”). The trial court dismissed the plaintiff’s complaint, finding that the Consumer Fraud Act claim was preempted (e.g., trumped) by section 155 of the Illinois Insurance Code (“Insurance Code”), which provides that policyholders may seek recovery of not only compensatory damages, but attorneys’ fees also, where an insurance company’s refusal or delay in paying a claim is “vexatious and unreasonable.”

The Appellate Court reversed the trial court, finding that because well-established torts require proof of different elements and address insurer misconduct that is not merely vexatious and unreasonable, section 155 was not intended to insulate insurers from such tort actions.  The court recognized, however, that mere allegations of bad faith or unreasonable and vexatious conduct, without more, do not constitute a separate and independent tort and such allegations are preempted by section 155.  In this case, the court ruled that plaintiff’s complaint properly stated a Consumer Fraud Act claim that was separate and independent of her breach of contract claim and therefore was not preempted by section 155 of the Insurance Code.  To read the appellate court’s opinion, click here.

The attorneys at DeBlasio Law Group are knowledgeable in consumer fraud and insurance litigation matters.  To contact our law firm, call us at (630) 560-1123 or visit our website at www.DGLLC.net/contact.

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Structural design deficiencies led the local Building Department to order the demolition of the hotel before it ever opened, resulting in a $4.2 million loss to the hotel developer.

The district court held that Environs breached its professional standard of care by not employing a registered structural engineer and by failing to make timely inspections during the construction.  However, the district court applied the economic loss rule to bar SAMS’ negligence claim against Environs.  The economic loss rule generally states that a party to a contract cannot be liable under a tort theory (e.g., negligence) for a purely economic loss caused by a breach of the contract unless there was a personal injury or damage to property.  The district court also held that the limitation clause of the contract limited SAMS’ recovery from Environs under its breach of contract claim to $70,000.

On May 31, 2013, the 7th Circuit Court of Appeals had to decide whether the clause in the contract limiting Environs’ liability was enforceable.  The court ruled that the parties were sophisticated commercial entities that knew the risks and freely bargained for the terms of the contract, including the limitation of liability clause.  Thus, Environs’ total liability for the $4.2 million in damages was limited to $70,000.  You can read the full decision of the 7th Circuit here.

The trial lawyers at DeBlasio Law Group are experienced in business litigation and construction litigation cases.  Contact our firm at (630) 560-1123 or visit our website at www.DGLLC.net/contact.

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The unit owner filed suit and the trial court ordered the Condo Association to turn over its records because the ordinance is a valid exercise of the City’s home rule powers.  The trial court also ordered the Condo Association to pay the plaintiff’s attorneys’ fees as the “prevailing party” under the ordinance dispute.

The Association appealed all the way to the Illinois Supreme Court, which also ruled in favor of the plaintiff.  The Supreme Court found that the conflict between the City ordinance and the state statute did not render the ordinance invalid.  The Supreme Court stated: “The legislature has not specifically denied the City’s exercise of home rule power or required its exercise of that power to be consistent with statutory provisions.  If the General Assembly wishes to deny or restrict a City’s home rule authority, it may enact a statute expressly providing for that action at its next session.”

Condo owners and Condo associations in Chicago should be familiar with both local ordinances and state statutes, and our attorneys can help.  To speak with one of our attorneys, call us at (630) 560-1123 or visit our website at www.DGLLC.net/contact.  We are here to help.   

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