Dasilva et al v. Citimortgage, Inc. et al

Filing 77

MEMORANDUM Opinion and Order signed by the Honorable Ronald A. Guzman on 10/19/2012. Mailed notice (cjg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
MODUPE and ANTHONY
DASILVA,

)
)
)
Plaintiffs,
)
)
vs.
)
)
CITIMORTGAGE, INC., MORTGAGE )
ELECTRONIC REGISTRATION
)
SYSTEMS, INC., LAW OFFICE OF
)
IRA T. NEVEL, LLC, CITIBANK,
)
)
Defendants. )

Case No. 12 C 13
Judge Ronald A. Guzmán

MEMORANDUM OPINION AND ORDER
Plaintiffs Modupe and Anthony DaSilva brought suit against CitiMortgage, Inc.,
Citibank, Mortgage Electronic Registration Systems, Inc., (“MERS”) and the Law Office of Ira
T. Nevel, LLC (“Defendants”) alleging various claims related to the defendants’ purported
conduct in pursuing amounts owed by Plaintiffs on their mortgage. Plaintiffs seek leave to file a
second amended complaint (“SAC”), which CitiMortgage, CitiBank, and MERS oppose.1 For
the reasons set forth below, the motion is denied in part and granted in part.
A.

Background
On or about April 28, 2009, Plaintiffs executed a promissory note for the purchase of real

property located at 24379 Liberty Street, Crete, Illinois 60417. (Defs.’ Resp., Dkt. # 70 at 2; id.
Exs. A, B.) The promissory note was secured by a mortgage naming CitiMortgage as the lender
and MERS as the nominee for CitiMortgage. (Defs.’ Resp., Dkt. # 70 at 2; id. Exs. A, B.) In

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The Law Office of Ira T. Nevel is not a party to the brief filed opposing Plaintiff’s motion to
file the SAC; therefore, unless otherwise indicated, any reference to “Defendants” includes only
CitiMortgage, CitiBank, and MERS.

December of 2009 Plaintiffs defaulted on the loan. (Defs.’ Resp., Dkt. # 70 at 2; id. Ex. C.)
CitiMortgage commenced a foreclosure lawsuit against Plaintiffs on February 3, 2010 and a
judgment of foreclosure was entered against them on December 1, 2011. (Defs.’ Resp., Dkt. # 70
at 2; id. Ex. C.) The Court may take judicial notice of these prior proceedings and related court
documents attached to Defendants’ response because Plaintiffs raised the issues in their complaint
and they are central to Plaintiffs’ claims. Pugh v. Tribune Co., 521 F.3d 686, 691, n.2 (7th Cir.
2008) (court is permitted to take judicial notice of documents in public record without converting
the motion into one for summary judgment); Venture Assocs. Corp. v. Zenith Data Sys. Corp.,
987 F.2d 429, 431 (7th Cir. 1993).
The following facts are taken from the proposed SAC. In July of 2011, prior to the entry
of the judgment of foreclosure in state court, Plaintiffs sent a letter to CitiMortgage, Citibank, and
MERS requesting verification and validation of their debt along with a Qualified Written Request
(“QWR”) pursuant to the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. §2605(e).
(Pl. Prop. SAC, Dkt. # 67-1, ¶ 6.) CitiMortgage, CitiBank and MERS and their agents continued
to call Plaintiffs regarding their debt. (Id. ¶ 7.) On August 26, 2011 and in September 2011,
Plaintiffs sent letters to Defendants (the proposed SAC uses the collective term here) informing
them that Plaintiffs’ debt had not been validated and verified pursuant to the Fair Debt Collection
Practices Act (“FDCPA”) and RESPA. (Id. ¶ 8.) On October 7, 2011, Plaintiffs sent a QWR for
validation and verification of the debt to the Law Office of Ira T. Nevel and CitiMortgage. (Id. ¶
9.) They did not validate or verify the debt. (Id.) At some time in October 2011, CitiBank,
CitiMortgage and MERS sent a letter to Plaintiffs demanding a deed in lieu of foreclosure without

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validating or verifying the debt. (Id. ¶ 10.) After Plaintiffs sent the letter requesting validation
and verification of the debt, Defendants “continued collection activity.” (Id. ¶ 11.)
On January 3, 2012, Plaintiffs, acting pro se, brought suit against CitiMortgage, MERS,
Citibank, Ira T. Nevel and the Law Office of Ira T. Nevel (counsel for Defendants in the state
foreclosure action) for violations of the FDCPA and invasion of privacy.2 (Pl.’s Comp., Dkt. # 1.)
Defendants moved to dismiss the complaint for failure to state a claim. (Defs’ Mot. Dismiss, Dkt.
## 31, 33.) Plaintiffs retained counsel and responded to the motion to dismiss by filing their first
amended complaint (“FAC”). (Pls.’ FAC, Dkt. # 48.) On June 4, 2012, CitiMortgage, CitiBank
and MERS moved to dismiss the FAC for failure to state a claim. Plaintiffs then filed the SAC on
June 29, 2012. On CitiMortgage, CitiBank and MERS’s motion, the SAC was struck from the
record pursuant to Rule 15(a)(2), which requires the opposing party’s consent or court approval
before filing subsequent amended complaints. (7/12/12 Order, Dkt. # 66.)
Plaintiffs filed a motion for leave to file a SAC on July 16, 2012, seeking to separate the
specific statutory violations of the FDCPA into different counts. Specifically, the proposed SAC
alleges three counts under the FDCPA: Count I – violation of 15 U.S.C. § 1692g (a)(1) - (5) (b)
and (d) (against all defendants); Count II – violation of 15 U.S.C. § 1692d(5) (against
CitiMortgage, MERS, and CitiBank); Count III – violation of 15 U.S.C. § 1692e(5) (against
CitiMortgage, MERS, and CitiBank).

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In addition, Plaintiffs’ initial complaint brought suit for fraud, conspiracy, intentional infliction
of emotional distress, injunctive and declaratory relief, and sought punitive damages. These
claims and the request for punitive damages were not included in the FAC.
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CitiMortgage, MERS, and CitiBank object to the proposed amendment on the ground that
it is futile. Specifically, they contend that the SAC fails to allege facts in support of the
conclusion that they are debt collectors under the FDCPA. (Def.’s Resp., Dkt. #70 at 1, 9.)3
B.

Discussion
Rule 15(a) states that leave to file an amended complaint “shall be freely given.” Fed. R.

Civ. P. 15(a). The court shall permit a party to amend its complaint in the absence of a clear and
compelling reason. Johnson v. Cypress Hill, 641 F.3d 867, 871-72 (7th Cir. 2011). However, the
Court has broad discretion to deny leave to amend where there is undue delay, bad faith on the
part of the movant, repeated failure to cure deficiencies by way of previous amendments, undue
prejudice to the opposing party, or futility of the amendment. Id.
Defendants argue that Plaintiffs’ amendment would be futile. An amendment is futile
where it would not survive a motion to dismiss pursuant to Rule 12(b)(6). Smart v. Local 702
Int’l Bhd. Of Elec. Workers, 562 F.3d 798, 811 (7th Cir. 2009). In order to survive a motion to
dismiss, a complaint must contain sufficient facts, which are assumed to be true, to state a claim
for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). A claim is
facially plausible when the court can draw the reasonable inference from the presented facts that
the defendant is liable for the alleged wrong. Bell Atl. Co. v. Twombly, 550 U.S. 544, 556 (2007).
Plaintiffs allege in the proposed SAC that “Defendants are ‘debt collectors’ as the term is
defined by 15 U.S.C. §1692a (6), or have retained the services of debt collectors.” (Pls.’ Prop.

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The Law Office of Ira T. Nevel is also named as a defendant. Although there appears to be
confusion about whether the law office (versus the individual defendant, Ira T. Nevel) remains in
the case as a defendant, it is named in the caption of both the FAC and SAC and has never been
dismissed. Therefore, the Law Office of Ira T. Nevel is a defendant in the case, though it has not
filed an opposition to Plaintiffs’ motion for leave to file a SAC.
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SAC, Dkt. # 67-1, ¶ 5.) Defendants contend that Plaintiffs have failed to establish that they are
entitled to relief under the FDCPA because they are “debt collectors” as the term is defined in the
FDCPA. (Defs.’ Resp., Dkt. #70 at 5.)
The FDCPA imposes liability on “any debt collector who fails to comply with any
provision of this title with respect to any person.” 15 U.S.C. § 1692k(a). The term “debt
collector” is defined as “[a]ny person who uses any instrumentality of interstate commerce or
mails in any business the principal purpose of which is the collection of any debts, or who
regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be
owed or due another.” 15 U.S.C. §1692a(6).
Plaintiffs have failed to plead any facts in support of their assertion that Defendants are
debt collectors and state only generally that Defendants (as a group) “continued collection
activity” after Plaintiffs requested a validation and verification of their debt. These allegations
are insufficient to state a claim under the FDCPA. Cocroft v. HSBC Bank USA, No. 10 C 3408,
2012 WL 1378645, at *10 (N.D. Ill. Apr. 20, 2012) (dismissing FDCPA claim against HSBC
Bank and MERS, among others, because the “complaint contains no allegations that any of the
defendants are in the business of collecting debt, that they regularly collect debts owed to others,
or that they used names other than their own in attempting to collect a debt”); Munger v.
Deutsche Bank, No. 1:11–CV–00585, 2011 WL 2930907, at *6 (N.D. Ohio Jul. 18, 2011)
(concluding that MERS was not a debt collector because complaint contains “no allegation that
Defendant MERS was involved in any debt collection activity”) (citing Robbins v. MERS, Inc.,
2009 WL 3757443, at *5 (E.D. Mich. Nov. 9, 2009) (finding that MERS is not a debt collector
and noting that “[t]he complaint alleges that Defendants (collectively) have violated various

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provision[s] of the FDCPA, but [it] does not allege that MERS is a debt collector, that MERS
engaged in any actions of a debt collector, or that MERS in particular violated any provision of
the FDCPA”)).
Moreover, the Court notes that the FDCPA explicitly excludes from its definition of debt
collector “any person collecting or attempting to collect any debt owed or asserted to be owed or
due another to the extent such activity . . . concerns a debt which was originated by such a
person.” 15 U.S.C. §1692a(6)(F)(ii). Creditors are generally “restrained by the desire to protect
their good will when collecting past due accounts” and are not covered by the FDCPA. Schlosser
v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003). “Instead, the Act is aimed at debt
collectors, who may have ‘no future contact with the consumer and often are unconcerned with
the consumer’s opinion of them.’” Id. (citation omitted). “In general, a creditor is broadly
defined as one who ‘offers or extends credit creating a debt or to whom a debt is owed,’ whereas
a debt collector is one who attempts to collect debts ‘owed or due or asserted to be owed or due
another.’” Id. (citation omitted).
CitiMortgage was the original lender of the loan on which Plaintiffs defaulted; thus, it is
excluded from the definition of a “debt collector” under the FDCPA.4 Wilkinson v. Wells Fargo
Bank., 268 Fed. Appx. 476, 477 (7th Cir. 2008) (upholding district court’s determination that
Wells Fargo, as a creditor bank, was not a “debt collector” under the FDCPA). Nor is MERS, as

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Plaintiffs do not allege in the proposed SAC that CitiMortgage was the original lender, but, as
noted above, the Court has taken judicial notice of the relevant Mortgage and Note, which
demonstrate that CitiMortgage was the original lender.
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a nominee,5 a debt collector. Radford v. Wells Fargo Bank, No. 10–00767 SOM–KSC, 2011 WL
1833020, at *15 (D. Haw. May 13, 2011).
Although the Law Office of Ira T. Nevel did not oppose Plaintiffs’ motion for leave to
file the SAC, the deficiencies in the proposed SAC also apply to it. Therefore, for the reasons
stated above, the SAC fails to state a claim for relief under the FDCPA and Plaintiffs’ request to
file the SAC is denied.
This conclusion leaves Plaintiffs with the pending FAC, which alleges a claim against all
of the defendants under the FDCPA (Count I) and a claim for invasion of privacy by intrusion
upon seclusion against all defendants (Count II). The FDCPA count in the FAC fails for the same
reasons it fails in the proposed SAC – it contains no facts in support of the allegation that any of
the defendants (referred to only collectively) are debt collectors. “While legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.” Ashcroft,
556 U.S. at 679. The FAC is devoid of any facts supporting the legal conclusion that any of the
defendants are debt collectors under the FDCPA. Accordingly, the FDCPA count in the FAC is
dismissed, as stated more fully below.
C.

Conclusion
For the foregoing reasons, Plaintiffs’ motion for leave to file the proposed SAC [67-1] is

denied. In addition, the FDCPA claim in the FAC is dismissed. Plaintiffs were alerted to the
deficiencies in their complaints through CitiMortgage, CitiBank’s and MERS’ two motions to
dismiss and have had three opportunities to properly plead their FDCPA claim as to these
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Plaintiffs allege that MERS is the assignee of CitiMortgage. (Pls.’ Prop. SAC, ¶ 7.) However,
the Mortgage attached by the defendants to their response to Plaintiffs’ leave to amend identifies
MERS as a nominee. Because the document controls, Ctrs. v. Centennial Mortg. Inc., 398 F.3d
930, 933 (7th Cir. 2005), the Court uses the term nominee.
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defendants. They have failed to do so; thus, the dismissal of the FDCPA claim as to
CitiMortgage, CitiBank, and MERS is with prejudice. Plaintiffs are given one more opportunity
to properly plead an FDCPA claim against the Law Office of Ira T. Nevel. Any third amended
complaint naming the Law Office of Ira T. Nevel shall be filed no later than November 2, 2012.
The Law Office of Ira T. Nevel shall answer or otherwise plead no later than November 16, 2012.

Given that there are no currently pending federal claims, the Court declines to exercise
supplemental jurisdiction over the state law invasion of privacy claim, which is dismissed without
prejudice.

Date:

October 19, 2012

__________________________________
United States District Judge
Ronald A. Guzman

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