Recent Decision Reinforces the Importance of Proper Notice and Pleading Standards in Foreclosure Actions
November 13, 2009
Maureen Bickley
Financing institutions have long known the importance of following the notice requirements of a promissory note prior to filing a foreclosure action. This message was dramatically reinforced by an Ohio Court of Appeals’ decision in
National City Mortgage Company v. Richards.
1 In that case, National City sent a notice of default and acceleration via certified mail to the mortgagor, Richards. The certified mail receipt was returned to National City as “unclaimed” and Richards claimed she never received the notice. After National City refused Richards’ attempts to become current on her monthly payments it filed a foreclosure action. In
Richards, the court considered two issues: (1) whether the mortgagor waived a claimed lack of notice of acceleration by failing to raise it in her answer; and (2) whether National City complied with the notice requirements in the promissory note.
Pleading Standards
National City argued that Richards waived her affirmative defense of lack of notice because she failed to raise it in her answer. The Court disagreed because National City failed to properly plead that it complied with the notice requirements of the note. The Courts decision turned on whether the notice requirement was a condition precedent to a claim under the note. Where notice of default or acceleration is required by a provision of the note, then it is a condition precedent. Since the notice provision was a condition precedent, National City was required to specifically allege it satisfied the notice requirements in its complaint. As a result, Richards was not required to raise the defense in her answer and did not waive her ability to challenge the acceleration of her mortgage due to failure of notice.
Notice Requirements
Even though National City provided what many would believe to be
more notice than required under the terms of the note, the court found that National City’s notice was insufficient. The note required notice to be delivered by
first class mail. The Court held that National City’s delivery of notice by certified mail failed to satisfy the express language of the note. In addition, National City’s delivery by certified mail did not create a rebuttable presumption of actual delivery. Generally, under the “mailbox rule”, a rebuttable presumption arises that a letter mailed is received in due course. Since National City failed to send the notice via ordinary mail, no rebuttable presumption existed.
Future Implications When filing a foreclosure action, financing institutions should specifically plead that they satisfied all requirements under both the note and mortgage. In addition, it is necessary for the financing institution to provide notice in accordance with the precise terms of the note and mortgage. If the language calls for delivery by ordinary mail then delivery by certified mail will not suffice. If unsure, a financing institution may send notice by both ordinary and certified mail to ensure proper delivery.
1 10th Dist. (June 2, 2009), 182 Ohio App.3d 534, 2009-Ohio-2556.