HSBC Bank USA, NA v. Thomas et al
Filing
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ORDER denying 12 Motion to Dismiss. Entered by Judge Joe Billy McDade on 8/1/2011. (RK, ilcd)
E-FILED
Tuesday, 02 August, 2011 08:42:07 AM
Clerk, U.S. District Court, ILCD
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF ILLINOIS
PEORIA DIVISION
HSBC BANK USA, N.A., as Successor )
Trustee for the Registered Holders of Ace)
)
Securities Corp. Home Equity Loan
Trust, Series 2005 - HE2, Asset Backed )
)
Pass-Through Certificates,
)
)
Plaintiff,
)
)
v.
)
)
MACK THOMAS, MARY M. THOMAS, )
)
BENEFICIAL ILLINOIS, INC. D/B/A
)
BENEFICIAL MORTGAGE CO.,
)
McLEAN COUNTY TREASURER,
SECURITY FINANCE CORPORATION )
)
OF ILLINOIS,
)
)
Defendants.
)
)
)
Case No. 11-CV-1170
OPINION & ORDER
Before the Court is Defendants Mack Thomas and Mary M. Thomas’
(“Defendants”) Motion to Dismiss Plaintiff’s Complaint (Doc. 12) and Plaintiff’s
Response to Defendants’ Motion to Dismiss (Doc. 13). For the following reasons,
Defendants’ Motion to Dismiss (Doc. 12) is DENIED.
BACKGROUND1
Plaintiff initiated this lawsuit by filing its Complaint (Doc. 1) on April 29,
2011, to foreclose on Defendants’ mortgage. (Doc. 1 at 1). The mortgage is in default
due to the failure of Defendants to pay the monthly installments of principal,
interest, and taxes, from 10/01/2010 through the present. (Doc. 1 at 3). There
remains an outstanding principal balance of $98,127.66 with interest accruing on
the unpaid principal balance at $15.48 per day, plus attorneys fees, foreclosure
costs, late charges, advances, and expenses incurred by the Plaintiff as a result of
the default. (Doc. 1 at 3).
Beneficial Illinois, Inc., d/b/a Beneficial Mortgage Co., is a party to this action
by virtue of a Junior Mortgage between Defendants and Beneficial Illinois, Inc.,
d/b/a Beneficial Mortgage Co. dated March 23, 1999 in the amount of $19,054.89.
(Doc. 1 at 3). McLean County Treasurer is a party to this action by virtue of a
county lien entered against Mary Thomas in the amount of $183.16. (Doc. 1 at 3).
Security Finance Corporation of Illinois is a party to this action by virtue of a
judgment entered against Defendants on March 1, 2001 in the amount of $808.47.
(Doc. 1 at 3).
On July 5, 2011, Defendants filed their Motion to Dismiss alleging that
Plaintiff failed to comply with 735 ILCS 5/2-606 and the terms of the Promissory
For purposes of this Order, the Court accepts as true all facts and allegations
alleged in the Complaint. See Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir.
2008).
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Note (“Note”) and Mortgage by failing to serve, and attach to the Complaint, a
written notice of acceleration and default as conditions precedent to filing a
foreclosure suit. (Doc. 12 at 1-4). Defendants further claim that Plaintiff failed to
comply with 735 ILCS 5/2 - 606 regarding the notice required by 735 ILCS 5/15 1502.5 by failing to provide, and attach to the Complaint, the “Grace Period Notice”
to the borrowers prior to filing its Complaint for foreclosure. (Doc. 12 at 4-5).
LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 12(b)(6), a motion to dismiss does
not test whether the plaintiff will prevail on the merits, but instead whether the
claimant has properly stated a claim upon which relief can be granted. Limestone
Dev. Corp. v. Village of Lemont Ill., 520 F.3d 797, 797 (7th Cir. 2008). To state a
proper claim, the plaintiff must make a plausible, rather than a merely speculative
claim for relief. Id. The plaintiff must describe the claim in sufficient detail to give
the defendant fair notice of the claim and the grounds upon which it rests. EEOC v.
Concentra Health Serv., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Bell Atlantic v.
Twombley, 127 U.S 1955, 1964 (2007)).
The court accepts facts and reasonable inferences in the plaintiff’s complaint
as true. Tamayo, 526 F.3d at 1081. However, the court is not bound to accept a legal
conclusion couched in the plaintiff’s complaint as a fact. Ashcroft v. Iqbal, 129 U.S.
1937, 1957 (2009). Furthermore, when the plaintiff’s well-pleaded facts do not
permit the court to infer more than the mere possibility of misconduct, the
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complaint does not sufficiently show that the pleader is entitled to relief “above a
speculative level.” Concentra, 496 F.3d at 776 (citing Bell Atlantic, 127 U.S at 1965,
1973).
Moreover, while the court should construe the complaint in the light most
favorable to the plaintiff, the court should not ignore facts set forth in the complaint
that either undermine the plaintiff's claim or give weight to unsupported
conclusions of law. Buchanan-Moore v. Cnty. of Milwaukee, 570 F.3d 824, 827 (7th
Cir. 2009). Therefore, if a court finds that the plaintiff’s complaint does not
establish a set of facts that support the relief sought, the court must dismiss the
complaint. McCormik v. City of Chi., 230 F.3d 319, 325 (7th Cir. 2000).
DISCUSSION
Defendants argue that Plaintiff’s claims are founded on one or more written
instruments, including the Mortgage and Note, making Plaintiff’s Complaint
subject to the requirements of Section 2-606, which states in pertinent part:
“[i]f a claim or defense is founded upon a written instrument, a copy
thereof, or of so much of the same as is relevant, must be attached to
the pleading as an exhibit or recited therein, unless the pleader
attaches to his or her pleading an affidavit stating facts showing that
the instrument is not accessible to him or her.”
735 ILCS 5/2 - 606.
Pursuant to Sections 15, 20, and 22 of the mortgage and Section 7(C) of the
Note, the service of written notice of acceleration and a written notice of default are
conditions precedent to Plaintiff’s right to file a foreclosure suit or a suit to collect
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on the Note, and as a matter of contract law, said notices are both instruments upon
which Plaintiff’s claims are founded. (Doc. 12 at 3). As such, Defendants argue that
Plaintiff has failed to comply with this requirement in that it has failed to attach to
its Complaint a copy of the notice of acceleration required by Sections 15, 20, and 22
of the Mortgage as well as a copy of the notice of default required by Section 7(C) of
the Note. (Doc. 12 at 3). Defendants argue that by failing to attach to the Complaint
a copy of the notice of acceleration required by the Mortgage and the notice of
default required by the Note, as required by Section 2-606, Plaintiff has failed to
state a cause of action upon which relief can be granted, and its Complaint is
substantially insufficient in law.
Additionally, Section 15 - 1502.5(c) of the Illinois Mortgage Foreclosure Law
provides: “...if a mortgage secured by residential real estate becomes delinquent
more than 30 days the mortgagee shall send via U.S. mail a notice advising the
mortgagor that he or she may wish to seek approved housing counseling,” and
further provides, “[n]o foreclosure action under Part 15 of Article XV of the Code of
Civil Procedure shall be instituted on a mortgage secured by residential real estate
before mailing the notice described in this subsection (c).” Defendants argue that
pursuant to the provisions of 735 ILCS 5/2-606 and 735 ILCS 5/15-1502.5, the
notice required to be sent to Defendants by Section 15-1502.5 of the Act is a written
instrument upon which Plaintiff’s claims are founded, and therefore must be
attached to Plaintiff’s Complaint. (Doc. 12 at 5). Defendants argue that by failing to
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attach to the Complaint a copy of the notice required by Section 15-1502.5 of the
Act, as required by Section 2-606 of the Code of Civil Procedure, Plaintiff has failed
to state a cause of action upon which relief can be granted, and its Complaint is
substantially insufficient in law. (Doc. 12 at 5).
Plaintiff disagrees, and argues that it satisfied both conditions precedent by
mailing the required notices to the borrower in advance of filing its Complaint, and
that it is not required by law to attach these notices as exhibits to its Complaint.
(Doc. 13 at 2). Plaintiff acknowledges that pursuant to Illinois foreclosure law and
the terms of the Note and Mortgage, Plaintiff was required to send a notice of
default and acceleration to Defendants prior to foreclosing on the mortgage. (Doc. 13
at 3). However, it points out that Ocwen Loan Servicing, as servicer for Plaintiff,
sent a notice of default to Defendants at the mailing address that Defendants had
provided. (Doc. 13 at 3). Plaintiff argues that 735 ILCS 5/2-606 does not require that
the notice of default be attached to the Complaint and the only requirement is that
the written instrument on which the complaint is based be attached, which in this
case was met when Plaintiff attached the Mortgage and Note to its Complaint (Doc.
13 at 3).
Plaintiff also acknowledges that Illinois foreclosure law requires that
Plaintiff send via U.S. mail a notice advising Defendants that they may wish to seek
approved housing counseling. See 735 ILCS 5/15 - 1502.5. In this case, Ocwen Loan
Servicing, as servicer for Plaintiff, sent a “Grace Period Notice” to Defendants at the
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mailing address that Defendants had provided. (Doc. 13 at 3). Plaintiff argues that
735 ILCS 5/2 - 606 does not require that the notice advising Defendants that they
may wish to seek approved housing counseling be attached to the Complaint and
the only requirement is that the written instrument on which the Complaint is
based be attached, which in this case is met when Plaintiff attached the Mortgage
and Note to its Complaint. (Doc. 13 at 3).
In resolving this dispute, the Court finds Farm Credit Bank of St. Louis v.
Biethman, 634 N.E.2d 1312, 1318 (5th Dist. 1994) to be relevant. In that case, the
counterdefendants appealed from a judgment of foreclosure entered on September
15, 1992, in favor of counterplaintiff. Id. at 1314. On appeal, defendants raised the
following issues: (1) whether the trial court erred in admitting into evidence a
written agreement (agreement), dated September 13, 1990, between the parties, in
addition to a promissory note and deed of trust executed by defendant, since
plaintiff did not attach a copy of the agreement to its complaint; and (2) whether the
trial court erred in denying defendant’s motion for judgment at the close of
plaintiff’s case because (a) the evidence established that defendant had paid the
mortgage, and (b) no security interest existed above the face amount of the note. Id.
Plaintiff argued, and the court agreed, that it was not required to attach a
written copy of the agreement to their countercomplaint because their claim was
not founded upon the agreement, but rather, upon the promissory note and deed of
trust. Id. at 1318. The court found that defendant’s argument that plaintiff’s claim
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was founded upon the agreement rather than the promissory note and deed of trust
was conclusory and not supported by the facts. Id. Additionally, the court found that
plaintiff had complied with the pleading requirements of the Illinois Mortgage
Foreclosure Law 735 ILCS 5/15-1101 et seq., which requires only that a complaint in
foreclosure attach copies of the mortgage and note secured thereby. 735 ILCS 5/151504(a). There is no law that every relevant document which counsel seeks to
introduce as an exhibit at trial must be attached to his pleading, and indeed, such a
requirement would be unworkable and imprudent. Heuvelman v. Triplett Electrical
Instrument Co., 161 N.E.2d 875, 879 (1st Dist. 1959).
Similarly, in this case the agreement between the parties was founded on the
Mortgage and Note and not on the notice of default and acceleration or the notice
advising Defendants that they might want to seek approved housing counseling.
While those notices were required to be sent prior to the initiation of suit,
Defendants’ argument that Plaintiff’s claim was founded upon the notice of default
and notice advising them that they might want to seek approved housing counseling
is conclusory and not supported by the facts. Therefore, the parties’ agreement was
founded on the Mortgage and Note and Plaintiff met the requirements of 735 ILCS
5/2-606 and 735 ILCS 5/15-1502.5 when it attached the Mortgage and Note to its
Complaint.
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss is DENIED.
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Entered this 1st day of August, 2011.
s/ Joe B. McDade
JOE BILLY McDADE
United States Senior District Judge
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