HSBC Bank USA, National Association v. Davis

Filing 141

MEMORANDUM Opinion and Order Signed by the Honorable John Robert Blakey on 4/3/2017. Mailed notice(gel, )

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
HSBC Bank USA, National Association,
as Indenture Trustee for People’s
Choice Home Loan,
Securities Trust Series 2005-3

Case No. 1:12-cv-06801
Judge John Robert Blakey

Plaintiff/Counter-Defendant
v.
Ruth Helen Davis,
Defendant/Counter-Plaintiff
MEMORANDUM OPINION AND ORDER
In this foreclosure action, pro se Defendant/Counter-Plaintiff Ruth Helen
Davis (“Davis”) has raised various affirmative defenses and brought multiple
counterclaims against Plaintiff/Counter-Defendant HSBC Bank USA, National
Association, as Indenture Trustee for People’s Choice Home Loan, Securities Trust
Series 2005-3 (“HSBC”). [115] at 1-6 (incorporating counterclaims originally alleged
in [77]).
HSBC has moved for summary judgment on all of Davis’ counterclaims and
affirmative defenses. Davis, meanwhile, has moved to strike the affidavit relied
upon by HSBC in its motion for summary judgment. For the reasons discussed
below, HSBC’s motion [119] is granted, and Davis’ motion [128] is denied.

I.

Background 1
On March 24, 2005, People’s Choice Home Loan, Inc. (“People’s Choice”) lent

Davis $161,500.00, and Davis executed a note (the “Note”) reflecting that same
amount in favor of People’s Choice. [122] at 2. That same day, Davis executed a
mortgage (the “Mortgage”) in favor of Mortgage Electronic Registration Systems,
Inc. (“MERS”), as Nominee for People’s Choice, to secure repayment of the loan and
the Note. Id. The property encumbered by the Mortgage is located at 2202 East
70th Place #204, Chicago, Illinois 60649. Id. The Mortgage was recorded with the
Cook County Recorder of Deeds on April 11, 2005. Id.
Pursuant to the Mortgage and related documentation, Davis agreed to: (1)
keep any “improvements now existing or hereafter erected on the property” insured
against loss by fire and other hazards, [121] at 23; (2) pay into escrow amounts due
for taxes and insurance premiums, id. at 22-23; and (3) furnish evidence of
insurance upon request. Id. at 38. Davis also agreed that if she did not provide
evidence of insurance upon request, the operative lender could independently

Plaintiff has failed to file an enumerated response to HSBC’s statement of facts, as required by
Local Rule 56.1. See [132] at 1-12 (Plaintiff’s self-styled response to HSBC’s statement of facts, a
four-page narrative replete with legal conclusions and inapposite observations). Accordingly,
HSBC’s Local Rule 56.1 statements are deemed admitted, and those same statements [122] form the
basis of this section. See McNeil v. United States, 508 U.S. 106, 113 (1993) (The Supreme Court has
“never suggested that procedural rules in ordinary civil litigation should be interpreted so as to
excuse mistakes by those who proceed without counsel.”); Coleman v. Goodwill Indus. of Se. Wis.,
Inc., 423 Fed. App’x 642, 643 (7th Cir. 2011) (“Though courts are solicitous of pro se litigants, they
may nonetheless require strict compliance with local rules.”); Wilson v. Kautex, Inc., 371 Fed. App’x
663, 664 (7th Cir. 2010) (“strictly enforcing Local Rule 56.1 was well within the district court’s
discretion,” even though the plaintiff was pro se) (citations omitted); N.D. Ill. L.R. 56.1(b)(3)(B) (“in
the case of any disagreement” with the movant’s Local Rule 56.1(a)(3) statement, the non-movant’s
response must contain “specific references to the affidavits, parts of the record, and other supporting
materials relied upon”).
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acquire insurance and charge her account. [122] at 4; [121] at 38. HSBC acquired
the Note from People’s Choice on June 1, 2005. [122] at 4.
A.

The Escrow

Litton Loan Servicing LP (“Litton”) originally serviced the loan for HSBC. Id.
at 5. During that time, Litton maintained an escrow account, into which Davis paid
amounts required for real estate taxes and from which real estate taxes were paid.
Id. at 5.
On April 18, 2011, Litton sent Davis an annual escrow statement, which
explained that on June 1, 2011, her monthly escrow payment would increase to
$318.84. Id. at 5. Accordingly, Davis’ monthly payment (including the relevant
principal, interest and escrow) would become $1,365.26. Id. at 5-6.
On October 10, 2011, Litton made real estate tax payments in the aggregate
amount of $1,270.37. Id. at 6.

Following that payment, the balance on Davis’

escrow account was negative $364.78. Id.
On October 18, 2011, Litton advised Davis that the amount required to bring
her loan account current was $2,302.81. Id. This total reflected the amount held in
a suspense account for Davis, two monthly payments (including escrow) of
$1,365.26, and three late charges of $52.32 each. Id. Davis paid this full amount on
October 25, 2011. Id.
On November 1, 2011, servicing of the loan transferred from Litton to Ocwen
Loan Servicing, LLC (“OLS”). Id. at 5. Neither Litton nor OLS nor HSBC ever
waived Davis’ escrow obligations. Id. at 7.

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B.

The Temporary Insurance

On November 13, 2011, OLS sent a notice to Davis, requesting that she
furnish evidence of insurance because her prior policy was expiring. Id. at 8. Davis
did not respond. Id.
On December 18, 2011, OLS mailed a second notice to Davis, advising her
that: (1) it had “secured temporary coverage” over her property for the period from
November 1, 2011 through December 31, 2011, [121] at 80; and (2) this temporary
policy would be “cancelled at any time” at no cost to her upon receipt of proof of
insurance. Id. at 81. Davis also failed to respond to this message. [122] at 8.
On January 21, 2012, OLS mailed a third notice to Davis, informing her that
she would be charged for the previously-mentioned temporary insurance within 30
days if she did not produce proof of insurance. [121] at 85. Davis did not respond to
this letter either. [122] at 9.
On April 5, 2012, OLS sent Davis an annual escrow statement, which
reflected a payment of $1,605 for lender-placed insurance. [121] at 94. This escrow
statement also requested that Davis send a copy of the declaration page from her
current insurance policy, if she thought the information contained in the escrow
statement was incorrect. Id. at 94-95.
On April 27, 2012, Davis finally responded to OLS and sent along her proof of
insurance. [122] at 9. On May 4, 2012, OLS accordingly inactivated the temporary
insurance policy. Id. At that point OLS had not collected any funds from Davis

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related to the temporary insurance policy, such that no refunds were due. Id. at 910.
C.

The Default

Beginning in approximately February 2012, Davis began making payments
that were lower than required under the Mortgage. Id. at 7. OLS held these lower
payments in Davis’ suspense account until the total in the suspense account
equaled a regular payment, at which time OLS applied the funds to the loan. Id.
On May 4, 2012, HSBC, though OLS, sent Davis a Notice of Default. Id. at 7.
The Notice of Default advised Davis that she needed to pay the entire amount due
($2,937.67) by June 4, 2012, or HSBC would accelerate payment under the
Mortgage. Id. at 7-8.
In response to the Notice of Default, Davis sent OLS a personal check in the
amount of $1,046.42. Id. at 8. On May 24, 2012, OLS returned this check to Davis,
explaining that the check was returned because it did not satisfy the defaulted
amount. Id. Davis sent in another check for less than the defaulted amount, and
OLS returned this check on July 30, 2012, with the same explanation. Id. HSBC
then initiated this foreclosure action in August of 2012. [1] at 1-5.
II.

Legal Standard
Summary judgment is appropriate if the movant shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law. Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir.
2014). A genuine dispute as to any material fact exists if “the evidence is such that

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a reasonable jury could return a verdict for the nonmoving party.” Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The party seeking summary

judgment has the burden of establishing that there is no genuine dispute as to any
material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). In determining
whether a genuine issue of material fact exists, this Court must construe all facts
and reasonable inferences in the light most favorable to the nonmoving party. See
CTL ex rel. Trebatoski v. Ashland School Dist., 743 F.3d 524, 528 (7th Cir. 2014).
III.

Analysis
As a preliminary matter, the Court declines to strike the declaration2 of

Kevin Flannigan [121], Senior Loan Officer at OLS.

In broad strokes, Mr.

Flannigan describes OLS and HSBC’s business practices, their relationship with
Davis, and the documentary evidence commemorating the same. Id. at 1-10. Mr.
Flannigan’s declaration comports with the strictures of the Federal Rules, as it was
made on personal knowledge, sets out facts that would be admissible in evidence,
and shows that the affiant or declarant is competent to testify on the matters
stated. Fed. R. Civ. P. 56(c)(4).
Mr. Flannigan’s declaration also authenticates the documents relied upon by
HSBC, and establishes that these documents are “business records” within the
hearsay exception provided by Federal Rule of Evidence 803(6).

Among other

things, the declaration reflects that, based upon Mr. Flannigan’s “personal
knowledge,” the attached documents are “made and maintained in the ordinary
2

Though Mr. Flannigan’s statement purports to be an affidavit, it is neither witnessed nor sealed.
Instead, Mr. Flannigan’s statement is a declaration within the meaning of 28 U.S.C. § 1746. See
[121] at 10.

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course of OLS’s business. . . . around the time of [each] transaction or event”
reflected in the particular document. [121] at 1-2; see also Wells Fargo Bank, N.A.
v. Morgan, No. 12-cv-4797, 2013 WL 3670243, at *2-3 (N.D. Ill. July 12, 2013)
(finding an affidavit regarding loan servicing records satisfied the requirements of
the business records exception).
The Court now turns, with the aid of Mr. Flannigan’s declaration, to Davis’
counterclaims, which sound in breach of contract (Count I), breach of the implied
covenant of good faith and fair dealing (Count II), unjust enrichment (Count III),
and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS
505/1 et seq. (“ICFA”) (Count IV).
A.

Breach of Contract

The required elements for a breach of express contract claim under Illinois
law are: (1) the existence of a valid and enforceable contract; (2) performance by the
plaintiff; (3) a breach by the defendant; and (4) an injury. See VanDerMolen v.
Wash. Mut. Fin., Inc., 835 N.E.2d 61, 69 (Ill. App. Ct. 2005). HSBC contends that
the undisputed material facts demonstrate that Davis cannot establish either
breach or injury. The Court agrees.
The only damages identified by Davis (as the Court can best surmise from
her pro se pleadings) flow from the temporary insurance policy discussed by the
parties in early 2012. It is undisputed, however, that: (1) Davis was never actually
charged for the temporary insurance policy; and (2) Davis never incurred ancillary

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costs related to that same policy.

See supra at 3-4.

Davis accordingly cannot

demonstrate that she suffered the requisite injury.
Davis has also failed to adduce any evidence from which a reasonable juror
could conclude that HSBC breached its contractual obligations. She claims that
HSBC breached the Mortgage by: (1) implementing the temporary insurance policy;
and (2) charging her an inappropriate rate for the temporary insurance policy. Both
allegations are belied by the record.

It is undisputed that OLS secured the

temporary insurance only after Davis failed to furnish the requisite proof of
insurance, and OLS then cancelled the temporary insurance after Davis produced
the necessary proof, all at no cost to Davis. See supra at 3-4. In short, OLS and
HSBC acted in accordance with HSBC’s rights under the Mortgage.
Because Davis cannot adduce evidence of either injury or breach, her breach
of contract counterclaim fails as a matter of law.
B.

Implied Covenant of Good Faith and Fair Dealing

Davis’ independent claim for breach of the implied covenant of good faith and
fair dealing does not apply in this case. Under Illinois law, every contract “contains
an implied covenant of good faith and fair dealing between the parties, but the
implied covenant is not an independent source of duties; rather, it guides the
interpretation of the terms of the contract.”

LSREF3 Sapphire Trust 2014 v.

Barkston Properties, LLC, No. 14-cv-7968, 2016 WL 302150, at *3 (N.D. Ill. Jan. 25,
2016); see also Fifth Third Bank (Chicago) v. Stocks, 720 F. Supp. 2d 1008, 1012

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(N.D. Ill. 2010) (“an implied covenant of good faith cannot overrule or modify the
express terms of a contract”).
In fact, an “independent cause of action for breach of that implied covenant
does not exist except in the narrow context of cases involving an insurer’s obligation
to settle with a third party who has sued a policyholder.” D’Attomo v. Baumbeck, 36
N.E.3d 892, 911-12 (Ill. App. Ct. 2015). Davis’ claim is far afield of this narrow
exception, and HSBC’s motion for summary judgment is accordingly granted as to
Count II.
C.

Unjust Enrichment

Under Illinois law, to sustain a claim of unjust enrichment, the plaintiff must
show that the defendant has “unjustly retained a benefit to its detriment, and that
the retention of the benefit violates the fundamental principles of justice, equity,
and good conscience.” Devco v. T10 Meltel, LLC, No. 15-cv-3558, 2017 WL 750603,
at *2 (N.D. Ill. Feb. 27, 2017) (quotation omitted). The “theory of unjust enrichment
is an equitable remedy based upon a contract implied in law.” Toulon v. Cont’l Cas.
Co., No. 15-cv-138, 2015 WL 4932255, at *4 (N.D. Ill. Aug. 18, 2015) (quotation
omitted). As such, when “two parties’ relationship is governed by contract, they
may not bring a claim of unjust enrichment unless the claim falls outside the
contract.” Enger v. Chicago Carriage Cab Corp., 812 F.3d 565, 571 (7th Cir. 2016)
(quotation omitted).
In “determining whether a claim falls outside a contract, the subject matter
of the contract governs, not whether the contract contains terms or provisions

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related to the claim.” Util. Audit, Inc. v. Horace Mann Serv. Corp., 383 F.3d 683,
689 (7th Cir. 2004).

Alternatively phrased, “a plaintiff cannot acknowledge

throughout that there is an express contract, as the plaintiff does here, and still
claim damages for unjust enrichment.” Devco, 2017 WL 750603, at *5.
Davis’ counterclaim for unjust enrichment fails to clear this fundamental
hurdle.

Indeed, her claim for unjust enrichment concerns “inflated insurance

premiums related to force-placed insurance policies”—the very same temporary
insurance policies contemplated by the Mortgage and related documents. See, e.g.,
[121] at 38 (“Unless you provide us with evidence of the insurance coverage required
by your agreement with us, we may purchase insurance at your expense . . . .”).
Davis has also failed to identify any “unjustly retained benefit” in this case.
Here again, it is undisputed that: (1) Davis was never actually charged for the
temporary insurance policy; and (2) Davis never incurred any costs related to that
same policy. See supra at 3-4.
Because Davis’ claim falls within the parties’ express contract and she cannot
identify the requisite improper benefit, HSBC is entitled to summary judgment on
Count III.
D.

The ICFA

A plaintiff alleging a claim under the ICFA must establish that: (1) the
defendant engaged in a deceptive act or unfair practice; (2) the defendant intended
for plaintiff to rely on this same deceptive act or unfair practice; (3) the deceptive
act or unfair practice occurred in a course of conduct involving trade or commerce;

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(4) the plaintiff sustained actual damages; and (5) the damages were proximately
caused by the defendant’s deceptive act or unfair practice.

See Blankenship v.

Pushpin Holdings, LLC, 157 F. Supp. 3d 788, 792 (N.D. Ill. 2016).
As a preliminary matter, Davis has once again failed to adduce any evidence
of the requisite “actual damages.” See supra at 7; see also Camasta v. Jos. A. Bank
Clothiers, Inc., 761 F.3d 732, 739 (7th Cir. 2014) (“In a private ICFA action, the
element of actual damages requires that the plaintiff suffer actual pecuniary loss.”)
(quotation omitted).
Davis’ ICFA claim also fails insofar as she has not adduced any material
evidence from which a reasonable juror could conclude that HSBC engaged in the
requisite deceptive act or unfair practice. Under the undisputed facts, HSBC and
OLS comported with the language of the governing contracts. See supra at 8.
The Court’s analysis remains unchanged even assuming arguendo that a
breach occurred. Indeed, a “breach of contractual promise, without more, is not
actionable under the [Illinois] Consumer Fraud Act.” Langendorf v. Conseco Senior
Health Ins. Co., 590 F. Supp. 2d 1020, 1022 (N.D. Ill. 2008) (quoting Avery v. State
Farm Ins. Co., 835 N.E.2d 801, 844 (Ill. 2005)). In Avery the Illinois Supreme Court
explained:
What plaintiff calls ‘consumer fraud’ or ‘deception’ is
simply defendants’ failure to fulfill their contractual
obligations. Were our courts to accept plaintiff’s assertion
that promises that go unfulfilled are actionable under the
Consumer Fraud Act, consumer plaintiffs could convert
any suit for breach of contract into a consumer fraud
action. However, it is settled that the Consumer Fraud
Act was not intended to apply to every contract dispute or
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to supplement every breach of contract claim with a
redundant remedy. We believe that a “deceptive act or
practice” involves more than the mere fact that a
defendant promised something and then failed to do it.
That type of “misrepresentation” occurs every time a
defendant breaches a contract
Avery, 835 N.E.2d at 844.
Davis’ counterclaim under the ICFA is untenable, in light of the undisputed
record and Avery.
E.

Plaintiff’s Affirmative Defenses

HSBC has also moved for summary judgment on each of Davis’ affirmative
defenses, suggesting that they are unsupported by the record, legally deficient, or
both. The Court will address each in turn.
1.

Putative Defects With The Note and Mortgage

Davis’ first two affirmative defenses read, in their entirety: “1. Mortgage is
defective. 2. Mortgage Note is defective.” [115] at 3. HSBC argues that summary
judgment is appropriate on these defenses, insofar as the “Mortgage and Note,
endorsed in blank, show no defects on their face.” [120] at 12. The Court agrees.
Based on the undisputed record, see supra at 2, the Mortgage and Note are not
defective, such that summary judgment is appropriate on Davis’ first two
affirmative defenses.
The Court also notes that these assertions do not qualify as affirmative
defenses. An affirmative defense “limits or excuses a defendant’s liability even if
the plaintiff establishes a prima facie case.” Tober v. Graco Children’s Prods., Inc.,
431 F.3d 572, 579 n. 9 (7th Cir. 2005).
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Phrased another way, “an affirmative

defense is a ‘defendant’s assertion of facts and arguments that, if true, will defeat
the plaintiff’s claim, even if all the allegations in the complaint are true.’” Bell v.
Taylor, 827 F.3d 699, 704-05 (7th Cir. 2016) (quoting Defense, Black’s Law
Dictionary (10th ed. 2014)).
2.

Affidavit

Davis’ third and fourth affirmative defenses provide:
3. Affidavit of Debt submitted by Ocwen Loan Servicing is
defective. Debt Affidavit claims monthly payment of
$1514.28. Plaintiffs’ claim monthly payments did not
increase from $1365.26
4. Affiant, Harrison Whittaker, who submitted the
Affidavit of Debt from Ocwen (his testimony has been
discredited by judges in several courts) as the court
"having no confidence in his sufficient knowledge about
how and when the records were made or the regular
business practices . . . .”
[115] at 3.
Here again, summary judgment is appropriate, as these contentions are not
affirmative defenses—they do not limit or excuse Davis’ “liability even if the
plaintiff establishes a prima facie case.” Tober, 431 F.3d at 579 n. 9. Of course,
Davis has had ample opportunity to challenge HSBC’s affidavits through other
procedural avenues (and indeed she has invoked such measures, in her parallel
motion to strike the affidavit of Kevin Flannigan [128], discussed supra).
3.

Chain of Transfer

Davis’ fifth affirmative defense reads: “Ocwen Loan Servicing did not have
proper chain of transfer through servicing to service the mortgage note.” [115] at 3.

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HSBC simultaneously contests this assertion and notes that it is legally irrelevant:
whether Litton effectivity transferred the servicing of the loan to OLS does not
impact Davis’ obligations vis-à-vis HSBC under the Note and the Mortgage.
HSBC’s position accurately reflects the governing contractual documents, see supra
at 2-5, and summary judgment is accordingly granted on Davis’ fifth affirmative
defense.
4.

Estoppel

Davis’ sixth affirmative defense contends as follows: “Ocwen Loan Servicing
committed Estoppel through returning Defendant’s checks for principle and interest
after initially accepting them when it was clearly written on them that they were
for principle and interest.” [115] at 3.
This assertion flies in the face of the Mortgage’s plain language, which
explicitly permitted HSBC to: (1) accept any payment or partial payment
insufficient to bring the loan current, without waiving any rights under the
Mortgage or prejudicing HSBC’s rights to refuse such partial payments in the
future; and (2) hold a payment in suspense because it was insufficient to make the
loan current. [122] at 2-3; [121] at 21. In light of the undisputed record, HSBC is
entitled to summary judgment on this affirmative defense.
5.

Taxes

Davis’ seventh affirmative defense alleges, in toto: “Ocwen Loan Servicing did
not pay taxes.” [115] at 3. This assertion is underdeveloped and inconsistent with

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the record, see supra at 2-5, such that HSBC is entitled to summary judgment on
the same.
6.

Insurance

Davis’ eighth affirmative defense contends: “Ocwen Loan Servicing attached
Forced-Placed insurance on property that already had insurance. Defendant sent
them the Declaration Page which was not acknowledged.” [115] at 3. Here again,
the undisputed record reflects that OLS secured the temporary insurance only after
Davis failed to furnish proof of insurance, and OLS then cancelled the temporary
insurance after Davis produced the requisite proof, at no cost to Davis. See supra at
3-4. These actions were entirely consistent with the parties’ contractual obligations,
and HSBC is entitled to summary judgment on this putative affirmative defense.
7.

Language

Davis’ ninth putative affirmative defense claims that OLS “had customer
service reps that spoke little or very limited English transacting their business.”
[115] at 3. This irrelevant assertion is not a legally sufficient affirmative defense.
See Tober, 431 F.3d at 579 n. 9. HSBC is granted summary judgment on Davis’
ninth affirmative defense.
8.

Escrow

Davis’ tenth affirmative defense contends: “Ocwen Loan Servicing collected
escrow when previous service company had restored account back to initial principle
and interest payments.” [115] at 3. This claim is also unsupported by the record.
In fact, neither Litton nor OLS nor HSBC ever waived Davis’ escrow obligations,

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and Davis actually paid amounts owed as escrow to both OLS and Litton. See supra
at 2-5. HSBC is entitled to summary judgment on this assertion.
9.

OLS and HSBC

Davis’ eleventh affirmative defense suggests that “HSBC and other plaintiffs
are responsible and accountable for the actions of Ocwen.” [115] at 3. This legal
conclusion is not an affirmative defense, as it would not serve to “defeat the
plaintiff’s claim, even if” it were true. Bell, 827 F.3d at 705 (internal quotation
omitted). HSBC is entitled to summary judgment on this issue.
10.

Reservation of Right

In her twelfth affirmative defense, Davis purportedly “reserves the right to
add additional Affirmative Defenses.” [115] at 3. This “is not a proper affirmative
defense. If at some later point in the litigation” Davis comes to believe “that the
addition of another affirmative defense is warranted,” she may seek leave to amend
her pleadings “pursuant to Rule 15(a); such a request will be judged by the
appropriate standards.” Reis Robotics USA, Inc. v. Concept Indus., Inc., 462 F.
Supp. 2d 897, 907 (N.D. Ill. 2006).
11.

Misleading Statements

In her thirteenth and fourteenth affirmative defenses, Davis alternatively
claims that “Plaintiffs’ have shown a history of making statements to Defendant
that were not true,” and recounts various interactions between herself and HSBC’s
counsel before status hearings in this case. [115] at 3. These contentions do not

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constitute appropriate affirmative defenses, and HSBC is entitled to summary
judgment on both.
IV.

Conclusion
For the foregoing reasons, HSBC’s motion for summary judgment [119] is

granted, and Davis’ motion to strike [128] is denied. The case remains set for a
status hearing for 4/13/2017, at 9:45 a.m., in Courtroom 1725. The parties should
come prepared to discuss final resolution of the case by dispositive motion or
otherwise.
Date: April 3, 2017

Entered:

____________________________________
John Robert Blakey
United States District Judge

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