(AUGUST 2000)


By Steven B. Bashaw

McBride Baker & Coles

10th Floor - One MidAmerica Plaza

Oakbrook Terrace, Illinois  60171-4710

Tel.: (630) 954-7588

Fax.: (630) 954-7590

e-mail:  SBashaw @MBC.COM

(Copyright 2000 - All Rights Reserved)



(EDITOR’S NOTE:  In addition to my firm’s support, that of the Illinois State Bar Association’s Real Estate Section Council,  and the Illinois Institute of Continuing Legal Education, it should be noted that Chicago Title Insurance Company helps underwrite the monthly production of these real estate law Keypoints. Chicago Title is committed to the role of attorneys in real estate transactions and their continuing education in this area. Its staff attorneys are pleased to offer their view points on various developments in the law as set forth below.)




Shaker and Associates, Inc. v. Medical Technologies Group, Inc., (1st Dist., June 30, 2000), is a classic constructive eviction case that the tenant should have won, but lost due to poor pleading in the trial court, and serves as a good lesson to us all to take care in amending our pleading to not lose the factual detail that will support the cause of action.


Medtech rented commercial office space from Shaker on a five-year lease from 1994 to 1999 to conduct its business of reviewing claims for medical benefits. Shaker built the space out for the tenant, and Medtech was consistently late in rent payment from the beginning. In September 1994, Medtech stopped paying rent altogether and was served with a five day notice. Shaker filed a forcible action in late September, and Medtech vacated the premises on December 20, 1994, shortly before the trial date. Medtech filed a counter complaint and affirmative defenses alleging Shaker failed to provide adequate air conditioning in the summer or heat in the winter, (causing one employee to quit and others to be ill), failed to fix plumbing, broken skylights, and didn’t provide cleaning services and light bulbs.  The trial court dismissed the counterclaims and struck the affirmative defenses with leave to replead. Medtech’s first amended counterclaim and affirmative defenses repeated the same allegations, but with significantly more detail; setting forth days when the temperature was 48-54 degrees in the winter and others when the summer heat rose to exceed 90 degrees, rendering the space unusable as an office.  The trial court again dismissed the counterclaims with leave to replead under sections 2-615 and 2-619, and Medtech filed its second amended counterclaim.  The only basis Medtech alleged in this third pleading to support its counterclaim and affirmative defenses, however, was failure to provide heat and air conditioning, and it did not provide the specific detail of  exactly how hot or cold it became or the damages caused as found in the prior pleadings.


The trial court interpreted the lease language as merely requiring the landlord to provide electricity to operative the HVAC system during certain hours, but not to repair, maintain and provide heating and air conditioning,  and therefore entered summary judgment in favor of the landlord.


On appeal, the Court agreed with Medtech that it would make no sense to express exceptions to the landlord’s duty to regulate temperature as set forth in the lease unless the landlord also had a duty to provide heating and air conditioning, but noted “in this case the error was harmless due to the deficiency of Medtech’s pleadings…we note that Medtech waived the issues not included in its second amended counterclaim and affirmative defenses. Where an amendment is complete in itself and does not refer to or adopt the prior pleading, the earlier withdrawn pleading ceases to be a part of the record for most purposes, being in effect abandoned and withdrawn.” In the absence of supporting facts, the general allegations of constructive eviction were mere conclusions and properly stricken.


Turning to the affirmative defenses of constructive eviction, the opinion also contains an excellent discussion of the necessary element of vacating the premises by the tenant.  Noting that Medtech did not vacate for almost ten months after the heating and air conditioning problems began, the Court noted that there could be no constructive eviction without vacating the premises, although attempts to repair the heating and air conditioning system do not necessarily preclude a claim of constructive eviction.  The landlord is allowed a reasonable time to repair, and the tenant is allowed a reasonable time to vacate; this being a question of fact allowing considerations of the time required to find a new location and reliance upon the promises by the landlord to repair.  Ten months, in this case however, was viewed as an unjustifiable delay by Medtech, and “Without the defenses and counterclaims of breach of contract and constructive eviction, Medtech had no basis to dispute that it was liable for at least some rent.”  Because its cause for constructive eviction failed, Medtech was obligated to pay rent that accrued until the landlord was able to relet the property rather than to the date of vacating the premises.





In distinguishing a prior case that appeared to state the relevant law, (perhaps too favorably for the insured), the Second District opinion in Whitt v. State Farm Fire and Casualty Co., (2nd Dist., July 7, 2000), sets some limitations for finding coverage for flooding based upon a brochure drawing supplied by the company.   Stuart and Rebecca Whitt purchased homeowners insurance from State Farm for their home. While they were covered under the policy, 17 inches of rain fell in Aurora, where their home was located, and water entered the house around the basement window casing, through a hole in the furnace room wall, under doors, and through the roof and skylight sufficiently to fill the entire basement and the first floor to a dept of over four feet.  The Whitts left their home in a boat and canoe. They then filed a claim with State Farm under the policy, which had a specific exclusion for water damage caused by flooding.  Despite this exclusion, the Whitts argued for coverage due to a brochure given to them that described the policy coverage and included drawings of different perils covered; including one drawing which depicted rain falling through an open window and puddling on the floor.  The trial court found that the word “flood” contained in the brochure was “at best ambiguous..” and ruled in favor of the Whitts.


The Appellate Court found no such ambiguity and noted that the brochure contained a statement in bold black print, larger than the print used in the drawing captions, that stated, “This brochure contains only a general description of coverages and is not a statement of contract. All coverages are subject to the exclusions and conditions in the policy itself.” The policy, of course, specifically excluded coverage for flood damage.  The case distinguished in the opinion was Dobosz v. State Farm Fire and Casualty Co., (1983), 120 Ill.App.3d 674, in which coverage was declared where water leaked through the walls of the policyholder’s basement causing damage while there was a policy in effect with wording almost exactly the same as the policy in this case and a brochure very similar to that given to the Whitts. The Court in Dobosz declared an ambiguity in favor of the insured and  held that the brochure was part of the policy thereby estopping State Farm from relying on the exclusionary clause.  The brochure in Dobroz did not contain the same bold type disclaimer, and the policy there did not specifically state that flooding was an exception to coverage.  In the Whitt’s case, “Even treating the brochure as part of the homeowners’ policy…The single drawing in the brochure of rain water entered an open window and accumulating on the floor, captioned “Water Damage”, does not make ambiguous the clear exclusions of ‘flood’ and ‘surface water’.


Real estate practitioners confront issues relating to homeowners insurance coverage from time to time, and a reading of BOTH of these cases is necessary before you counsel your clients…and then you still may not be able to predict the outcome.





An interesting question appeared on the ISBA Real Estate Section discussion site this last month. (For those who are wondering what this “discussion site” is, the Illinois State Bar Association’s website, [], provides a bulletin board type of e-mail discussion area for most of the Sections. In addition to postings about Section business, many members post questions or issues for comment by other members.)  On July 26, 2000, Therese O’Brien queried:  “Must a grantor / trustee waive homestead rights in deed when transferring personal residence into living trust? Why, Why not?”  My initial reaction was that without the waiver in the deed, the conveyance may be subject to the homestead rights, regardless of the conveyance. (This is why all mortgages include a waiver of homestead, right?)  My friend, Dick Bales of Chicago Title seems to agree with me, and includes a statute in addition to his intuitive reaction in his response to Therese:




The issue of homestead arises when a "titleholding spouse" is married to one who is the "nontitleholding spouse."  That is, a couple is married, but only one of the two owns the land.  The two live in the home in question.  I have always felt that when property is conveyed into a living trust, and the couple lives in the home, the non-title holding spouse must join in the conveyance into the trust.  There are no exceptions in the law that exempt such a conveyance as you describe.  See 735 ILCS 5/12-901 et seq.  Otherwise, the title holding spouse could convey the property into the trust, and later convey the property to a third party, free and clear of the homestead rights of the non-title holding spouse.


Dick Bales, Chicago Title Insurance Company, Wheaton, Illinois


If any of this really intrigues you, (or, of course, if you have a case behind your desk that needs some research on the question), I recommend an article to you that appeared in the January 26, 2000 Chicago Daily Law Bulletin, Section Two,  by Vickie Bresnahan entitled “Homestead Considerations in Illinois” The article begins with a section on “What is Homestead and how was it created” setting forth the statutory genesis of the right, then proceeds to consider qualifications, waiver, personal property and divorce issues and exceptions.


(Vickie also agrees with Dick and I: “Deeds into trust must properly convey homestead rights.”)





Another interesting development in the arena of real estate practice for you to ponder and consider was brought up by the following e-mail I received from Beth Brush, (an attorney with Chicago Title and member of the Real Estate Section Council), relating to the potential impact of the Electronic Signatures Act.  While I am “interested” in electronic signatures as a consumer and transactional attorney, it did not occur to me that the October, 2000 effective date of the Act might impact day-to-day recordings and perfection of interests in real estate:




Intro by Bert Rush:


Pat Randolph is a professor of law at the University of Missouri at Kansas City, and moderator of the e-mail listserv known as “DIRT”.  Yesterday, 7/10, DIRT carried some very interesting comments (and replies) about possible effects of the new Electronic Signatures in Global and National Commerce Act upon county recording offices. Her is Pat’s original posting, and selected replies.


Recently, Congress has adopted the Electronic Signatures Act, which is really, for purposes of land recorders, also an Electronic Documents Recording Act.  The Act does not appear aimed at land recorders, but at a vast array of other electronic instruments.  Nevertheless, most of us who have read the Act feel that there is at least a very strong argument that it does require that county recorders will be required, as a matter of preemptive federal law, to accept electronic instruments as validly recorded documents of title as of October 1 of this year.


Although in some states, such as California, Virginia, Delaware, and probably others, many county recorders in fact do accept electronic instruments now, it appears that this is not a national practice at present, and for every recorder in the nation to gear up to accept such records by October 1 is likely to result in some undesirable results.


Probably the most undesirable result from the standpoint of the practice community is that local recorders will attempt to comply by moving to “quick and dirty” recording methods for electronic instruments without making any attempt to adopt a system that can “talk” to other systems and provide a national information network, (which could be a good thing).  Another problem is that these “quick and dirty” solutions themselves would not prove adequate, leading to the loss of electronic filing information, possibly forever.


 This issue has emerged only in the last few days. I’m interested in knowing what groups are focusing on the problem and what thinking is going on...


Can others contribute some information to DIRT?


Reply by Jay Weiser (Zicklin School of Business, Baruch College):


My very quick and dirty review of the statute suggests that there may be a temporary out, although not a completely reliable one. Sec. 101(e) says that notwithstanding Sec. 101(a)’s general requirement that electronic signatures must be accepted as of October 1, “if a…record relating to a transaction…{must} be in writing, the …enforceability of an electronic record of such…other record may be denied if…not in a form that is capable of being retained and accurately reproduced for later reference by all parties or persons who are entitled to retain the contract or other record.”


So there’s an argument that if somebody sends an electronic record to a county recording system on October 1, and the county, having made good faith efforts to comply, isn’t set up yet for retention and accurate reproduction, they can reject the electronic record. Of course, it all depends on what the statute means by “capable”.  Is a document that could be retained and accurately reproduced in SOME electronic medium, even if not the one the county is using or planning to us, a “capable” document? That doesn’t make sense, but we’ll leave it to the courts (and the title companies) to sort out.


Comment by Bert Rush:  (I LOVE THIS ONE!)


Here’s a scenario: After October 1, 2000, Big Bank makes a loan to Jones and takes a mortgage against the Jones residence.  The mortgage is in electronic form, and an optical image thereof is submitted to the appropriate county recorder, via the recorder’s Internet website or e-mail address, for recording.  Let’s suppose the bank also tenders the appropriate recording fee, perhaps by wire transfer. The recorder responds that they will need the original mortgage to complete the recording. Big Bank and the recorder’s office get into a beef, during which yet another mortgage is recorded against the Jones residence.  Big Bank sues the other mortgage holder to determine priority and, alternatively, sues the recorder for damages. Who wins?


This scenario brings to mind the historic problems we’ve had with county recording offices that are slow to process documents after they’re submitted for recording—the “gap” problem—and with misindexed docs.  When a document is properly submitted for recording, but later can’t be discovered by a search of public records, who stands to lose? Should it be the one who is first to “record”, but whose interest can’t be discovered, or should it be the one later to record, who lacks actual and constructive notice of the earlier “recording”?”



Makes you want to go “hmmmmmm”, doesn’t it??




Our “Landlord/Tenant” case last month, Ikari v. Mason Properties, (2nd Dist., June 14, 2000), provided an opportunity to review the Illinois Security Deposit Return Act, (765 ILCS 710/1), relating to lessor’s withholding of security deposits at the termination of a residential lease. There, the Appellate Court rejected the landlord’s technical argument the trial court erred in assessing the penalty inasmuch as the “failing” was relating to providing an exit inspection.  This month, a would-be-tenant’s equally technical argument was rejected in Antler v. Classic Residence Mgt. LP, (1st Dist., June 30, 2000), when a senior citizen attempted to bring a class action lawsuit against an extended care facility under the Chicago Residential Landlord Tenant Ordinance (RLTO, Chicago Municipal Code Section 5-12-080, 5-12-170) and the Illinois Consumer Fraud and Deceptive Business Practices Act, (815 ILCS 501/1 et seq.) for failing to pay interest on her “building entrance fee” as a “security deposit in disguise”, and for failing to attach summaries of the Ordinance  to her residency agreement.  The Court rejected Antler’s argument that she was a “tenant” entitled to interest on her entrance fee as a “disguised security deposit”. Her argument that the defendants deliberately concealed her rights under the RLTO in violation of  the Consumer Fraud Act was also rejected.


The Chicago RLTO specifically excludes “extended care facilities” from the requirements relating to payment of interest on security deposits and disclosure summaries.  While the ordinance does not defined “extended care facilities”, the Court noted the distinction between traditional landlords who provide rarely more than shelter, and utilities and care facilities that provide services such as transportation, laundry and meals. The defendant was found be more than a mere “landlord” with extended obligations to its residents. The premises are more than simply a “luxury high-rise for senior citizens. The Court distinguished the Wisconsin decision in M&I First National Bank v. Episcopal Homes Management, Inc., (1995) 195 Wis.2d 485, 536 N.W.2d 175, (in which the Wisconsin Court held certain “residency agreements” signed by residents of a facility for the elderly were, in essence, rental agreements and the ‘entrance fees’ were therefore properly categorized as ‘security deposits’), on the basis of  “a sound application of Wisconsin law to the facts of that case, (although) we find it inapposite to the case sub judice.


This is an interesting case to review from the point of view of statutory interpretation, defined exemptions (or perhaps delineated but undefined exceptions…), and distinction of a decision that appears to be factually on all fours, but is rejected as applying differing laws under differing circumstances.





Last month the case of Federal National Mortgage Association v. Kuipers, (2nd Dist., June 28, 2000), dealing with the issue of relative lien priority where the assignee of a priority mortgage failed to record the assignment until after the perfection of a judgment lien by another creditor was our “lead” Keypoints.  The case held that by the assignment of mortgage, FNMA  “stood in the shoes” of Medallion Mortgage as its assignee, and it was not necessary to record the assignment to retain the priority position of Medallion’s mortgage lien. Noting that a recorded mortgage remains a lien on real estate until such time as the mortgage release is recorded under 765 ILCS 905/2, the decision in this case finds that the assignment of a mortgage note carries with it an equitable assignment of the mortgage by which it is secured.  My friend, Dick Bales, once again sees the case a little “differently” from a title company viewpoint, and I think his reflections on the case are worthy of a “revisit”:




After I read the KUIPERS case, my first reaction was, "so what else is new?"  And really, the court's decision should come as no surprise to most real estate practitioners. But as I thought about it, I was reminded of title policy "date down endorsements," and how there have been times when customers have modified their loans and then requested that date down endorsements be issued.  But are there times when these endorsements are not necessary?


The key to mortgage modifications is: will junior lien holders or claimants be prejudiced by the modification?  If the answer to this question is "yes," then a date down endorsement should be issued, so that the lender is certain that there are no intervening mortgages or claims.


For example: if a lender merely wants to extend the maturity date of the mortgage, then, assuming that the mortgage provides for the securing of any and all renewals and extensions, the priority of the original mortgage is not affected, and a date down endorsement is not necessary.  A junior lien holder or claimant is not prejudiced by the extension, since the original mortgage indicated that the loan secured any future extensions.


But if the modification involves the disbursement of  "new money"-either an increase in the interest rate or an increase in the indebtedness-then that new money will be subordinate to any intervening matters.  A date down endorsement should be requested.  An increase in the mortgage amount or interest rate could prejudice a subsequent lien holder, as the increased debt might make it more difficult for the borrower to pay off his loans.


Anyone wishing to read more information about this subject should consult Gina Giannelli's fine article that appeared in the March/April, 1997 issue of TITLE ISSUES, which is a real estate newsletter that features articles written by Chicago Title's underwriters.  All past and present issues are available online.  Just go to   Click on "Title Issues," in the left hand column, third line from the bottom. 


(Editor’s Comment {Steve Bashaw}:  If you want to know more background about the law of easements, covenants, conditions, and restrictions, you will find that there is a lot on these subjects that can be found on Dick’s recommended website.)


Dick Bales, Chicago Title, Wheaton, Illinois





(Ed. Note: At least one regular reader of these Keypoints, (my daughter, Jenny, who says she reads them every month from Rota, Spain), will probably suggest that the following case is included solely because of its “prurient value” and that this is further “evidence” of the fact that I am a ‘dirty old man’ –at least professionally, that is.  I protest, of course, and would note that the following case has a very academic discussion of land measurements and boundary lines that are clearly serious and instructive regardless of the fact that they relate to an “adult entertainment facility”.)


In People of the State of Illinois v. Studio 20, (2nd Dist., July 20, 2000), the Second District was called upon to review the ruling of the Boone County Circuit Court interpreting Section 5-1097.5 of the Counties Code which provides that an “adult entertainment facility” may not be located within 1,000 feet of the property boundaries of any school, day care center, cemetery, (cemetery??), public park, forest preserve, public housing and place of religious worship. (55 ILCS 5/5-1097.5)  In the trial court, the issue was whether the adult entertainment “facility” was within 1,000 feet of a church boundary when measured from property line to property line or if the distance should be measured from the boundary line of the church parcel to the edge of the building (“facility”) which housed the adult entertainment activities and was set back from the parcel lot line. The building was located on a five-acre parcel.  The distance from property line to property line was 955.13 feet, whereas the distance from the boundary line of the leased portion of the property on which the adult entertainment facility was located to the boundary line of the church parcel was 1130 feet and therefore non-violative if so measured.


The majority opinion interpreted the statute as requiring the measurement be taken from property line to property line based upon its determination of the legislative intent: “The evil sought to be remedied here is the purveyance of adult entertainment close by places children or families frequent…By measuring the distance from the property lines of both the protected entity and the adult entertainment facility, this protection can be maximized.”  The Court also noted that the alternative interpretation of measuring from the boundary line to the facility raises more questions than it answers and provides plenty of opportunity for manipulation.  (Can you visualize the neon signs set back three acres into the woods??)  The Court justified its decision with “Our interpretation, on the other hand, promotes both stability and certainty.”


Justice Hutchinson disagreed and dissented based upon the clear meaning of the language used by the legislature.  Noting that the statute did not use words which indicated the “concept of property boundaries” at all, but referred to the “facility”, the dissent argues that the “language here is clear and unambiguous, and it does not say that the distance between the protected entities and an adult entertainment facility is to be measured property line to property line.”





In a case which reviews whether a tenant can be strictly liable for a third party’s criminal activity in her leased apartment, the Second District ruled that a tenant must have “some minimum connection with the criminal activity” before she can be evicted for ‘good cause’ under the terms of the lease. Kimball Hill Mgt. Co. v. Roper, (2nd Dist., July 20, 2000), Kimball Hill operated the Foxview Apartments in which Terri Roper was a Section 8 tenant. (Under Section 8 of the Housing Act of 1937, 42 USC Section 1437, people with low incomes, disabilities and the elderly can qualify for federal rent subsidies whereby the tenant pays 30% of their adjusted income and the balance of rent is paid by HUD to the landlord.)  Paragraph 13(c)(1) of the lease provided that the tenant agrees to not engage in or permit unlawful activities on the property and that neither the lessee nor any members of the lessee’s household or guests shall engage in or facilitate criminal activity with or without the actual knowledge of the lessee. While Terri Roper was away undergoing dialysis treatment, her brother Edward was babysitting her children.  Shortly after she returned and went to her room to sleep, the Carpentersville police department’s narcotics task force broke into the apartment under a search warrant specifying “a black male and various electronic equipment.”  Edward was downstairs in the living room and Terri and her children were upstairs. The police found cannabis, a semiautomatic handgun and ammunition, and a stolen WHS recorder and speakers. At the trial on her eviction, Terri argued that she could not be held responsible for her brother’s illegal activities of which she had no knowledge. She also asserted that the lease was ambiguous in that it both required some involvement (‘engage or permit”) while providing for strict liability (“with or without actual knowledge”) in the criminal activity.  The Court ruled that the conflicting provisions were ambiguous, and the resulting ambiguity must be construed against the landlord. Citing the prior decision in Diversified Realty Group, Inc. v. Davis, (1993) 257 Ill.App.3d 417, the Court stated “We agree with the Diversified court that the language…should be read to require that the tenant have some minimum connection with the criminal activity before she can be evicted for ‘good cause’”.





More and more, administrative law and hearings are determining the rights of parties relating to real estate. Accordingly, it is increasingly important that practitioners be not only familiar with administrative procedures (and opportunities!), but also know when the findings of an administrative tribunal are res judicata.  In Schofield, Inc. v. Nikkel, (5th Dist., June 12, 2000), the determination of the Illinois Department of Mines and Minerals (the what?) to unitize mineral leases pursuant to statute (225 ILCS 725/23.1 et seq.) was binding upon Schofield in this case brought for damages based on an alleged oral agreement by Nikkel to convey an interest in oil and gas leases acquired in exchange for geological services rendered. In order to “unitize” mineral leases, (“Unitization is a method of combining separate leases to allow for the operation of the field as a single unit.”), the Department hearing must allocate the costs of production to each separately owned tract and determine the owners. It did this at the administrative hearing, and during that process found that Schofield had no interest in the oil and gas lease held by Nikkel. Accordingly, Nikkel argued that Schofield could not collaterally attack the finding of the Department of Mines and Minerals by relitigating the issue in the trial court.  Both the trial court and the Fifth District agreed.  The opinion has an excellent discussion of oral agreements relating to interests in land, the statute of frauds, and specific performance of a contract to convey land in exchange for services. (The Statute of Frauds (740 ILCS 80/2) applies, and in order to apply the exception for partial performance, the court must find that the contract terms are clear, definite and unequivocal enough to support specific performance.)  This case sets forth a cogent discussion of the “same-evidence test” and “same transaction” approach to res judicata, and a quotable cite that: “In Illinois, administrative decisions have res judicata and collateral estoppel effect where a department’s determination is made in proceedings that are adjudicatory, judicial, or quasi-judicial in nature.”



10. UPDATING THE BUSINESS OF THE PRACTICE OF LAW; Another Fair Debt Collection Safe Harbor, Partition suit to be reviewed, and Intercounty Title Company:


As many of you may know, on June 23, 2000, the Illinois Department of Financial Institutions ordered Intercounty National Title Company to cease selling title insurance in Illinois due to accounting and investing irregularities. As a result of the Department’s investigation, Intercounty Title Company’s reinsurance provider, Fidelity National, terminated its agreement to be financially responsible.  As a result, I have received at least one assurance from a competing title company (Ticor Title) that they are prepared to close any transactions pending with Intercounty.  Additionally, although there was some initial confusion on the part of some Judges in foreclosure cases, Intercounty Judicial Sales Corporation, (one of the two highest volume selling officers appointed to handle mortgage foreclosure sales), has assured the bench and the bar alike that it is not a subsidiary of Intercounty Title, it’s funds are segregated and escrowed separately from Intercounty Title, and that it has a separate, unrelated bond provider.


Steinbrecher v. Steinbrecher, is a case we featured in the March, 2000 Keypoints on the topic of partition suits, and is bound for review by the Illinois Supreme Court.  The Second District reversed the trial court’s decision to list for sale in a partition suit property consisting of 3 parcels stating that wherever possible property should be divided rather than sold and held that the court did not have discretion to direct a listing of the property for sale rather than a public sale at auction.  On July 5, 2000, the Illinois Supreme Court granted a petition for leave to appeal filed by the purchaser of the properties. The purchaser argues that under the Code of Civil Procedure, (735 ILCS 5/12-149; which provides that the interest of a third party bona fide purchaser for value at a sale can not affected by the vacating or modification of a judgment), the appellate court could not void the sale of this property where the trial court had approved the sale and where the appellants had failed to seek a stay of the trial court judgment pending appeal.  This should be interesting reading…..


And, while there is no end in sight of Fair Debt Collection Practices Act cases, another “safe harbor” is constructed for your use if you are an attorney engaging in debt collection. The Seventh Circuit in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols and Clark, LLC, (7th Cir.-Il., June 5, 2000),  has ruled that law firms engaged in the collection of a mortgage debt violated their duty under the FDCPA to state the amount of the debt where the firm’s collection letter indicated the amount of the principal balance and then noted that this sum did not include interest, late charges, escrow advances, or other charges and invited the mortgagor to call to obtain complete figures. The Act requires a statement of the debt, which is not satisfied by providing a telephone number for contact. (Perhaps the Court tried to contact the firm and got voicemail??) The Court ruled that the letter could have complied with the Act’s requirements by noting the amount due as a specific date and indicate that additional charges would accrue.  Judge Posner, (as he did previously in Bartlett v. Heibl, (7th Cir. 1997) 128 F.3d 497, 501-02, sets forth the following language as a “safe harbor” which, if used by one who “does not add other words that confuse the message”, will serve to satisfy the debt collector’s duty to state the amount of the debt”:

“As of the date of this letter, you owe $________[the exact amount due]. Because of interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay be greater.  Hence, if you pay the amount shown above, an adjustment may be necessary after we receive your check, in which event we will inform you before depositing the check for collection.  For further information, write the undersigned or call 1-800[phone number].”


Does this mean we have to get an 800 Number to collect a debt???