Federal National Mortgage Association v. Obradovich et al
Filing
254
MEMORANDUM Opinion and Order Signed by the Honorable Andrea R. Wood on 5/28/2020. Mailed notice. (dal, )
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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL NATIONAL MORTGAGE
ASSOCIATION,
Plaintiff,
v.
GEORGE L. OBRADOVICH, et al.,
Defendants.
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No. 14-cv-04664
Judge Andrea R. Wood
MEMORANDUM OPINION AND ORDER
Defendants and Counter-Plaintiffs George and Jennifer Obradovich (together, “the
Obradoviches”) owned a single-family home in Villa Park, Illinois, which they rented out to
tenants. After evicting their last tenants for failing to pay rent, the Obradoviches could no longer
make their own house payments and defaulted on their mortgage loan. They claim that their
mortgagee, Federal National Mortgage Association (“Fannie Mae”), through its loan servicer
Seterus Inc. (“Seterus”), hired contractors Safeguard Properties, LLC (“Safeguard”) and YJM
Development (“YJM”) to enter illegally and winterize the home, botching the job and damaging
the home in the process. Fannie Mae initiated this action to foreclose on the Obradoviches’
mortgage; in response, the Obradoviches asserted counterclaims against Fannie Mae, Seterus,
Safeguard, and YJM (collectively, “Counterclaim Defendants”) for entering and damaging their
home. Now before the Court are Fannie Mae’s motion for summary judgment to foreclose on the
house (Dkt. No. 182), and Fannie Mae and Seterus’s motion for summary judgment as to the
counterclaims (Dkt. No. 186), Safeguard’s motion for summary judgment as to the counterclaims
(Dkt. Do. 184), and YJM’s motion for summary judgment as to the counterclaims (Dkt. No.
180).
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FACTUAL BACKGROUND
Unless otherwise indicated, the following facts taken from the parties’ summary
judgment filings are undisputed.
This matter concerns real property located at 920 S. Summit Avenue in Villa Park,
Illinois (“Property”). On May 26, 2009, the Obradoviches executed and delivered a promissory
note in the original principal amount of $205,450 (“Note”) to Bank of America, Fannie Mae’s
predecessor in interest, to finance their purchase of the Property. (Obradoviches’ Resp. to Fannie
Mae’s Statement of Material Facts (“ORSOMF”) ¶ 1, Dkt. No. 194.) The Note was secured by a
mortgage on the Property. (Id. ¶ 3.) But the Obradoviches stopped making payments after
August 2013, and by September 2013, the Note and Mortgage were in default. (Fannie Mae’s
Statement of Material Facts (“Fannie Mae SOMF”) ¶ 7, Dkt. No. 168; ORSOMF ¶ 5.) The
Obradoviches attempted to avoid foreclosure by seeking a short sale of the Property and placed it
on the market on October 9, 2013. (Fannie Mae’s Resp. to Obradoviches’ Consolidated
Statement of Additional Material Facts (“Fannie Mae RSOMF”) ¶ 1, Dkt. No. 217.) On October
16, 2013, the Obradoviches accepted an offer for the Property. (Id. ¶ 3.)
Seterus acquired servicing rights for the mortgage loan (“Loan”) from Bank of America
on November 1, 2013. (Obradoviches’ Statement of Additional Material Facts (“OSOAMF”) ¶ 4,
Dkt. No. 206.)1 As part of its efforts to oversee loans, Seterus would order monthly property
inspections on all loans 45 or more days past due, until the loans were current or otherwise
resolved. (Fannie Mae RSOMF ¶ 5.) Seterus retained Safeguard, an independent subcontractor,
to provide property preservation services. (Fannie Mae SOMF, Ex. D., Lee Dep. at 17:8–12.) In
practice, Safeguard further outsourced this type of work, including property inspections, to local
1
Loan servicers are generally responsible for sending out monthly statements and monitoring mortgage
payments. See Gburek v. Litton Loan Serv. LLP, 614 F.3d 380 (7th Cir. 2010).
2
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independent subcontractors. (Fannie Mae SOMF, Ex. G, Meyer Dep. at 12:8–10, 14:23–15:8.)
Fannie Mae also published a guide for its servicers that performed property preservation work
(“Property Preservation Guide”). (OSOAMF ¶¶ 20–22.) The Obradoviches contend that Fannie
Mae and Seterus required their contractors to follow the guidelines in the Property Preservation
Guide when preserving properties. (OSOAMF, Ex. 1-C at 2, 8.) But Seterus contends that it did
not control how contractors fulfilled its work orders. (Fannie Mae RSOMF ¶ 20.)
On November 13, 2013, Jennifer Obradovich informed Seterus that the Obradoviches
were doing a short sale on the Property. (Fannie Mae RSOMF ¶ 7.) Nevertheless, on December
3, 2013, Seterus sent the Obradoviches a notice of intent to foreclose on the Property. (Id. ¶ 13.)
On December 9, 2013, the Obradoviches submitted to Seterus an application for approval of a
short sale in the amount of $155,000. (Defendants Obradoviches’ Statement of Material Facts in
Resp. to Plaintiff Fannie Mae’s Mot. for Summ. J. (“DOSOMF”) ¶¶ 18, 20, Dkt. No. 132.)
On January 2, 2014, a subcontractor hired by Safeguard visually inspected the Property
and determined it was vacant, noting that the inside of the Property appeared empty with no
personal property visible and the snow had not been shoveled. (Fannie Mae SOMF, Ex. G,
Meyer Dep. at 165:21–166:21.) Sometime in January 2014, Fannie Mae and Seterus ordered
Safeguard to change the locks at the Property and winterize it. (DOSOMF ¶ 21, Dkt. No. 132.)
Winterizing a property involves preparing the plumbing for freezing temperatures that might
cause leaks or breaks. On January 22, 2014, Safeguard requested permission from Seterus to
secure the Property. (Fannie Mae RSOMF ¶ 16.) Safeguard then retained YJM, an independent
subcontractor, to winterize the Property. (Safeguard’s Statement of Material Facts (“Safeguard
SOMF”) ¶ 26, Dkt. No. 162.)
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YJM inspector Michael Cornell entered the Property on January 25, 2014 to change the
locks and winterize the house, a task that involved draining the heating system and putting
antifreeze in it, confirming that the main water supply was turned off, blowing out the lines to rid
them of any excess water, securing the main water valve with a zip tie, and completing a
pressure test to ensure there were no leaks. (YJM’s Statement of Material Facts (“YJM
SOMF”) ¶ 25–26, Dkt. No. 159.). The Obradoviches contend that Cornell failed to drain the hot
water heater pipes properly. (OSOMF ¶ 74.) As a result, water left in the radiators froze, causing
pipes to burst and water to seep out onto the floor of the house. (OSOMF ¶ 83.) For his part,
Cornell cannot recall the specific actions he took to winterize the Property. (Fannie Mae SOMF,
Ex. H, Cornell Dep. at 88:21–89:5.)
During a property inspection on March 12, 2014, Amy Morrison, a Safeguard vendor,
observed standing water in the Property’s living room. (Fannie Mae RSOMF ¶ 68.) Debbie
Obradovich, the Obradoviches’ realtor and the ex-sister-in-law of George Obradovich, visited
the Property on March 17, 2014 to show it to the short-sale purchasers and discovered that the
lock on the front door had been changed and the lockbox she had placed there was missing.
(Fannie Mae SOMF, Ex. 2, G. Obradovich Dep. at 16:4–9; OSOAMF, Ex. 3., D. Obradovich
Dep. at 31:23–33:1, Dkt. No. 206.) She was not able to enter the Property. (OSOAMF ¶ 70.)
Jennifer Obradovich called Seterus to obtain the codes to the new lockbox. (OSOAMF ¶ 71.)
Debbie Obradovich revisited the house after receiving the codes and observed water damage on
the living room floor, which she contends she instantly recognized as the result of the hot water
heater pipes being drained improperly. (OSOAMF ¶¶ 72–74; OSOAMF, Ex. 3, D. Obradovich
Dep. at 38:4–19, Dkt. No. 206.)
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The Obradoviches subsequently asked a friend, Scott Eickelmann, to visit the Property
and remove some of the Obradoviches’ personal property. (Fannie Mae RSOMF ¶ 76.)
Eickelmann did so on March 17, 2014, and while there, he observed a puddle of water eight feet
wide on the floor, damaged flooring, damaged radiators, mold, and insulation (originally from
the living room floor) in the basement. (Fannie Mae RSOMF ¶¶ 78–79, 81–82.) At George
Obradovich’s request, Eickelmann turned on the water to check for further damage to the
plumbing. (Fannie Mae RSOMF ¶ 84.) After Eickelmann did so, water came out of the radiators;
Eickelmann then shut off the water and cleaned up the resulting puddle. (Fannie Mae
RSOMF ¶¶ 86–88.)
Jennifer Obradovich called Safeguard to ask if the water damage would be repaired.
(Fannie Mae RSOMF ¶ 94.) On March 20, 2014, Safeguard dispatched Bart Lynam2 to the
Property to complete the winterization and have the water cut off at the street. (Fannie Mae
RSOMF ¶ 95.) Lynam concluded that someone had turned the water back on in the house, which
reintroduced water into the system. (OSOAMF, Ex. 5, Lynam Dep. at 115:12–116:5, Dkt. No.
206.) He also found that the gate valves, which kept water from flowing through the pipes, were
not closed. (Id. at 116:5–10.) If those valves failed, the city would need to turn off the water at
the curb to stop water from flowing through the system; turning off the water at the house alone
would not stop it. (Id. at 116:11–118:2.) Lynam mopped up the pooled water he found, capped
the water lines with the assistance of the city to stop water flowing into the system, and
submitted a bid estimating the water damage at $15,000 and the plumbing repair costs at $1,800.
(Fannie Mae RSOMF ¶¶ 102–03.) The parties dispute whether the water damage Lynam
observed was the result of an improper winterization.
2
Lynam worked for Foreclosure Preservation Corporation, a contractor retained by Safeguard. (Fannie
Mae SOMF ¶ 34.)
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Safeguard declined the claim for damage to the Property by April 9, 2014. (Id. ¶ 105.) On
May 23, 2014, Jennifer Obradovich spoke with Seterus about the claim and told Seterus that
Safeguard needed Seterus’s approval for the claim. (Id. ¶ 106.) Because Seterus considered the
allegation of improper winterization to be Safeguard’s problem, it did not investigate and instead
told the Obradoviches that it did not consider itself liable for Safeguard’s actions. (Id. ¶¶ 107–
09.) Mold then began to spread in the Property, and in June 2014, Lynam submitted a bid of
$5,037.50 to install a dehumidifier and remediate mold damage. (Id. ¶¶ 111–12.) Yet none of the
Counterclaim Defendants made any attempt to repair the Property. (Id. ¶¶ 115–17.)
Meanwhile, the Obradoviches and Fannie Mae continued to correspond regarding the
short-sale offer. After Fannie Mae asked the Obradoviches to raise their short-sale price to
$165,000 on February 24, 2014, it accepted a counteroffer from the buyers for $160,000.
(DOSOMF ¶ 24.) On March 10, 2014, Fannie Mae approved the short sale. (DOSOMF ¶ 24.)
However, after the buyers discovered the damage to the Property, they reduced their short-sale
offer to $135,000. (DOSOMF ¶ 31.) The Obradoviches submitted a property value dispute to
Fannie Mae and applied for a short sale at the buyers’ offer of $135,000. (DOSOMF ¶ 33.) The
Obradoviches contend that Fannie Mae failed to acknowledge the offer or repair the damage to
the Property by the April 25, 2014 closing date, and so the short sale did not take place.
(DOSOMF ¶ 34.) On May 22, 2014, Fannie Mae informed the Obradoviches that the short-sale
offer was denied. (DOSOMF ¶ 37.)
On March 25, 2014, Fannie Mae filed a foreclosure action in Illinois state court regarding
the Property. (Notice of Removal ¶ 1, Dkt. No. 1.) The Obradoviches removed the action to
federal court on June 20, 2014, filed their Answer and Counterclaim on July 23, 2014 (Dkt. No.
14), and filed their First Amended Counterclaim (Dkt. No. 97) on April 12, 2016. The
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Obradoviches assert the following counterclaims against all Counterclaim Defendants: trespass
(Count I), violation of the Illinois Consumer Fraud and Deceptive Business Practices Act
(“ICFA”), 815 ILCS 505/1 et seq. (Count II), and negligence (Count III). Against Seterus,
Safeguard, and YJM, the Obradoviches also assert claims for violation of the Fair Debt
Collection Practices Act (“FDCPA”), 15 U.S.C. § 1692 et seq. (Count IV). Fannie Mae now
moves for summary judgment on its claim for foreclosure (Dkt. No. 182), and the Counterclaim
Defendants move for summary judgment as to all the Obradoviches’ claims against them (Dkt.
Nos. 180, 184, 186).
DISCUSSION
Summary judgment is appropriate when there are no genuine issues of material fact and
the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Gross v. PPG
Indus., Inc., 636 F.3d 884, 888 (7th Cir. 2011). When considering a summary judgment motion,
the Court draws all reasonable inferences from the evidence in favor of the nonmoving party.
McCann v. Iroquois Mem’l Hosp., 622 F.3d 745, 752 (7th Cir. 2010). To defeat the motion, the
nonmovant must come forward with sufficient evidence from which a reasonable factfinder
could find in his or her favor. As the Seventh Circuit has explained, “[s]ummary judgment is ‘not
a dress rehearsal or practice run; it is the put up or shut up moment in a lawsuit, when a party
must show what evidence it has that would convince a trier of fact to accept its version of the
events.’” Steen v. Myers, 486 F.3d 1017, 1022 (7th Cir. 2007) (quoting Hammel v. Eau Galle
Cheese Factory, 407 F.3d 852, 859 (7th Cir. 2005)). “[The Court] must assume the truth of the
non-moving party’s evidence on summary judgment, but that duty ‘does not extend to drawing
inferences that are supported by only speculation or conjecture.’” Swetlik v. Crawford, 738 F.3d
818, 829 (7th Cir. 2013). The same standard applies to cross-motions for summary judgment.
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See, e.g., Int’l Bd. Of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404
(7th Cir. 2002). “Each motion is to be evaluated independently, and denial of one does not
necessitate the grant of the other.” Dominguez v. Quigley’s Irish Pub, Inc., 790 F. Supp. 2d 803,
810 (N.D. Ill. 2011).3
I.
Fannie Mae’s Foreclosure Claim
“[F]ederal courts in diversity cases (and any other cases in which state law supplies the
rule of decision) apply state ‘substantive’ law but federal ‘procedural’ law.” Gacek v. Am.
Airlines, Inc., 614 F.3d 298, 301–02 (7th Cir. 2010). In this case, the Court applies the
substantive law of Illinois. Under the Illinois Mortgage Foreclosure Law, 735 ILCS 5/15–1501 et
seq., a mortgage is defined as “any consensual lien created by a written instrument which grants
or retains an interest in real estate to secure a debt or other obligation,” 735 ILCS 5/15–1207, and
“to foreclose” means “to terminate legal and equitable interests in real estate pursuant to a
foreclosure.” 735 ILCS 5/15–1203. Illinois law requires that a copy of the Note and Mortgage be
attached to the complaint in a mortgage foreclosure action. 735 ILCS 5/15–1504. Accordingly,
“a prima facie case for foreclosure is established with the introduction of the mortgage and the
note, after which the burden shifts to the mortgagor to prove any affirmative defenses.” Kondaur
Capital Corp. v. Sreenan, No. 1–12–2711, 2013 WL 6869788, at *6 (Ill. App. Ct. Dec. 30,
2013); see also 735 ILCS 5/15-1504(a)(2).
Here, it is undisputed that the Obradoviches executed and then defaulted under the terms
of the Note and Mortgage. (ORSOMF ¶¶ 1, 3, 16.) Fannie Mae attached a copy of the Mortgage
3
The Obradoviches spend much of their briefs complaining that Fannie Mae failed to comply with the
local rules by submitting a statement of material facts alongside its original motion for summary
judgment. N.D. Ill. Local Rule 56.1(a). The Court addressed this issue on the record by expressly granting
leave for the parties to supplement their briefings to come into compliance with the Local Rules. (Dkt.
No. 187.) Accordingly, the matter has been resolved.
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and the Note to the Complaint and as exhibits to Fannie Mae’s statement of material facts.
Moreover, the operative terms of the Note and Mortgage are unambiguous. The Note defines a
default as a failure to pay “the full amount of each monthly payment on the day it is due.” (Note
at 1, Compl., Dkt. No. 1-1.) The Mortgage states that it secures repayment of the Loan, which is
defined as “the debt evidenced by the Note, plus interest.” (Mortgage at 3, Compl., Dkt. No. 11.) The Mortgage further states that in the event of a default, the Note Holder may require
immediate payment of the full amount of the unpaid principal and all interest owed on that
amount. (Note at 2, Compl., Dkt. No. 1-1.) Fannie Mae thus has established a prima facie case
for foreclosure.
In opposing summary judgment, the Obradoviches argue that Fannie Mae has failed to
address their affirmative defenses. Those affirmative defenses include the claim that, “to the
extent that Plaintiff does not hold the original ‘blue ink’ promissory note, Plaintiff lacks standing
to foreclose;” as well as assertions that damages are barred by the equitable doctrines of laches,
unclean hands, waiver, or estoppel; that any injury to Fannie Mae is a result of Fannie Mae’s
own conduct, specifically, a failure to conduct affairs in good faith or comply with the Making
Home Affordable Program or Home Affordable Foreclosure Alternatives programs; and that
damages are barred by a failure to mitigate them. (Answer at 6–7, Dkt. No. 11.)
The Obradoviches’ reliance on these affirmative defenses to defeat summary judgment
fails, however, for the simple reason that they have not pointed to any evidence in the record to
establish a triable issue of material fact as to any of them. The Obradoviches, as the defendants,
not Fannie Mae, as the plaintiff, bear the burden of proving any affirmative defenses. See, e.g.,
Equal Emp’t Opportunity Comm’n v. AutoZone, Inc., 707 F.3d 824, 831–32 (7th Cir. 2013)
(because issue preclusion is an affirmative defense, the party asserting it bears the burden of
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proof). The Obradoviches cannot rest on their pleadings alone but must produce evidence to
show that any of their affirmative defenses present an issue for trial. They have failed to present
any such evidence.
The Obradoviches also attack the sufficiency of the affidavits Fannie Mae attaches in
support of its request for foreclosure: an affidavit attesting to the amount owed on the Loan and a
loss mitigation affidavit attesting to Fannie Mae’s compliance with applicable loss mitigation
programs.4 (Pl.’s Mot. for Summ. J, at 14, 93, Dkt. No. 125.) The Obradoviches contend that the
affidavits are merely boilerplate documents unsupported by evidence and not based on personal
knowledge. Indeed, supporting affidavits do need to be based on personal knowledge. See Fed.
R. Civ. P. 56(c)(4). Here, however, both affiants work as document management specialists for
Seterus, a role that requires them to be familiar with the practices and procedures of Fannie Mae
and Seterus. Both affiants state that they have worked with the business records at issue in this
very case. And both identify and attach copies of the documents they relied upon in creating their
affidavits. In sum, the affidavits are grounded in observation and personal experience as required
by Federal Rule of Civil Procedure 56(c)(4). Visser v. Packer Eng’g Assocs., Inc., 924 F.2d 655,
659 (7th Cir. 1991).
Finally, the Obradoviches contend that Fannie Mae should be denied summary judgment
on their foreclosure claim because they have failed to address the Obradoviches’ counterclaims.
4
Illinois Supreme Court Rule 114(a) provides that a plaintiff in a foreclosure action must show that it has
complied with any applicable loss mitigation programs before moving for a judgment of foreclosure. Ill.
Sup. Ct. R. 114(a). Fannie Mae acknowledges in its reply brief that it filed the affidavits to show
compliance with Rule 114(a). The affidavit specifies the type of loss mitigation applicable to the
Mortgage, the steps taken to offer a loss mitigation program to the Obradoviches, and the status of those
mitigation efforts. Wells Fargo Bank, N.A. v. Smith, 125 N.E. 3d 1241, 1245 (Ill. App. Ct. 2019). The
affidavit thus satisfies the requirements of the Rule. That Fannie Mae used a fill-in-the-blank template in
constructing the affidavit does not, as the Obradoviches contend without support, indicate that Fannie
Mae failed to comply with the substantive requirements of the Rule.
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That argument fails as well. Whether the Obradoviches have defaulted on their mortgage loan is
a matter independent from whether the Obradoviches may pursue monetary damages for their
claims of trespass, negligence, and violation of various Illinois consumer protection acts
In short, the Obradoviches have not demonstrated a genuine issue of fact with respect to
Fannie Mae’s foreclosure action. Accordingly, Fannie Mae’s motion for summary judgment on
that claim is granted.
II.
The Obradoviches’ Counterclaims
The Court now turns to the Counterclaim Defendants’ motions for summary judgment on
the various counterclaims.
A.
Trespass
In Count I of their Counterclaim, the Obradoviches assert claims against all the
Counterclaim Defendants for trespass. Under Illinois law, “[a] trespass is an invasion of the
interest in the exclusive possession of land, as by entry upon it.” In re Chi. Flood Litig., 680
N.E.2d 265, 277 (Ill. 1997) (internal quotation marks omitted). “To sustain a cause of action for
trespass to real property, a plaintiff must allege a wrongful interference with his actual
possessory rights in the property.” Loftus v. Mingo, 511 N.E.2d 203, 210 (Ill. 1987). Someone
may be liable for an intrusion by a third party “if he acts with the knowledge that his conduct
will, with a substantial degree of certainty, result in the intrusion.” Dietz v. Ill. Bell Tel. Co., 507
N.E. 2d 24, 26 (Ill. App. Ct. 1987). In addition, a person who aids, abets, assists, or directs the
commission of a trespass by another is therefore liable for that trespass. Id.
The Obradoviches assert that Fannie Mae and Seterus directed Safeguard or its
contractors to enter the Property forcibly and in reckless disregard for the Obradoviches’
property rights. Indeed, it is undisputed that YJM entered the Obradoviches’ property at
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Safeguard and Fannie Mae’s behest, performed at least a partial winterization, and changed the
lock on the front door of the house, thus interfering with the Obradoviches’ possessory rights.
The question, then, is whether any reasonable factfinder could conclude that this interference
was wrongful.
The Counterclaim Defendants contend that any interference with the Obradoviches’
possessory rights in the Property was necessarily proper because the Obradoviches expressly
consented to that sort of entry. Section 9 of the Mortgage provides that if the borrowers (i.e., the
Obradoviches) fail to perform their obligations under the Mortgage or abandon the Property, the
lender is entitled to do “whatever is reasonable or appropriate to protect [the lender’s] interest in
the Property.” (Mortgage § 9, Compl., Dkt. No. 1-1.) Such reasonable or appropriate actions
would include “securing and/or repairing the Property.” Id. The Obradoviches, however, contend
that they never abandoned the Property, and so Fannie Mae did not act reasonably or
appropriately in entering the property and performing a winterization.
In Illinois, mortgagees have the option of seeking an expedited judgment and sale when
residential property has been abandoned. See 735 ILCS 5/15-1505.8. The Obradoviches do not
dispute that they were not using the Property as a permanent residence. But for residential
property to be considered abandoned, it must also satisfy at least two conditions from a list of
eleven set out by Illinois statute. See 735 ILCS 5/15-1200.5 (setting forth the definition of an
“abandoned” residential property and listing eleven criteria that demonstrate abandonment).
Such conditions include that the residential property has multiple closed off or smashed
windows; it has broken or continuously unlocked doors; gas, electrical, or water services have
been terminated; or the mortgagor has indicated in a written statement a clear intent to abandon
the property. Id.
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The Counterclaim Defendants make no effort to show that any of the statutory factors
applied to the Property. While the Counterclaim Defendants contend that the Obradoviches
abandoned the Property, the only evidence they offer in support of that assertion is that no one
was living in the Property after September 2013, neither of the Obradoviches stepped foot in the
Property in 2014 or had knowledge of the interior of the house, the snow was not shoveled at the
time of an inspection, and personal property was not visible through the windows. Illinois law,
however, has specific requirements for a residential property to be considered abandoned and the
undisputed evidence does not meet those requirements. Notably, the Obradoviches contend that
they never professed an intent to abandon the Property, and the parties do not dispute that the
Obradoviches must have had some personal property in the house, as Scott Eickelmann removed
personal property sometime after the Counterclaim Defendants purportedly determined that the
Property had been abandoned. Based on the arguably conflicting evidence, a reasonable jury
could conclude that the Obradoviches had not abandoned the Property and that the Counterclaim
Defendants violated the Obradoviches’ possessory interest in the Property by trespassing to
perform an unwanted winterization.
Even assuming that there was an unlawful trespass, Fannie Mae, Seterus, and Safeguard
contend that they cannot be held liable for it because the persons who entered the Property were
not their agents. The doctrine of respondeat superior allows a principal to be held liable for the
tortious actions of agents under the principal’s control. Lawlor v. N. Am. Corp. of Ill., 983
N.E.2d 414, 427 (Ill. 2012). The determination of whether a particular individual or entity acted
as the agent of another is factually intensive and turns primarily on the extent of the control that
the alleged agent retained over the performance of its work. Horwitz v. Holabird & Root, 816
N.E.2d 272, 279 (Ill. 2004). “The test of agency is whether the alleged principal has the right to
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control the manner and method in which work is carried out by the alleged agent and whether the
alleged agent can affect the legal relationships of the principal.” Anderson v. Boy Scouts of Am.,
Inc., 589 N.E.2d 892, 894 (Ill. 1992). Other relevant factors include “(1) the question of hiring;
(2) the right to discharge; (3) the manner of direction of the servant; (4) the right to terminate the
relationship; and (5) the character of the supervision of the work done.” Lawlor, 983 N.E.2d at
427. Notably, while an independent contractor typically works to produce a particular result but
in performing that work is permitted to use “discretion in things not specified,” Horwitz, 816
N.E.2d. at 279, the fact that the tortfeasor was an independent contractor does not bar liability for
the principal where an agency relationship nonetheless exists. Petrovich v. Share Health Plan of
Ill., Inc., 719 N.E.2d 756, 765 (Ill. 1999).
Here, Fannie Mae and Seterus contend that they did not supervise subcontractors such as
Safeguard and YJM, direct their hiring practices, or otherwise direct the performance of their
duties; thus, Safeguard and YJM were not agents of Fannie Mae or Seterus and the latter entities
cannot be held responsible for the former’s actions. The Obradoviches, on the other hand, point
out that Fannie Mae developed the guidelines in the Property Preservation Guide to control the
manner or method by which its subcontractors carried out property preservation. The Property
Preservation Guide specifically states that it is “intended for use when preserving vacant
properties for mortgage loans that are in default.” (OSOAMF, Ex. 1-C at 77, Dkt. No. 206.) And
it details procedures for confirming vacancy, changing locks, and shutting off water, which are
described as “[s]pecific server requirements.” (OSOAMF, Ex. 1-C at 78.)
Fannie Mae and Seterus dispute the Obradoviches’ characterization of the Property
Preservation Guide. But the Property Preservation Guide does appear to provide strict
requirements for how property preservation services should be carried out by contracted vendors.
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With respect to winterization, for example, the vendor must shut off the water source at both the
curb and the main interior water supply, drain all plumbing and heating systems, and complete
the winterization process within a specific timeframe. (OSOAMF, Ex. 1-C at 84.) While the
effective date of the Property Preservation Guide in the record is November 12, 2014, Fannie
Mae and Seterus do not claim that the guide is out of date or otherwise not representative of the
standards Fannie Mae and Seterus set for their property servicers during the relevant time period.
Whether the Property Preservation Guide, or something like it, governed Fannie Mae’s and
Seterus’s relationships with YJM and Safeguard and effectively removed the latter’s discretion is
a disputed question of fact. Since a jury could conclude that a principal-agency relationship
existed, with Fannie Mae or Seterus as a principal and YJM or Safeguard as an agent, Fannie
Mae and Seterus’s request for summary judgment on the trespass claim is denied.
The Court turns next to Safeguard, which was retained by Fannie Mae and Seterus for the
purpose of retaining other local contractors to carry property preservation. Safeguard contends
that it did not control the manner and method by which YJM and other subcontractors performed
their tasks and so Safeguard cannot be held liable as principal to YJM’s agent. With respect to
the Property Preservation Guide, Safeguard contends that any guidelines contained within it do
not apply to the issue at hand. Safeguard further argues that it hires independent contractors to
perform certain tasks because those subcontractors were experts on those tasks. As evidence,
Safeguard points to the testimony of YJM employee Cornell, who, when asked if “[Safeguard]
wouldn’t necessarily know how someone went about [winterizing a property]?” responded
“Correct.” (Safeguard SOMF, Ex. 10, Cornell Dep. at 106:4–17, Dkt. No. 162.) But Cornell’s
testimony does not exclude the possibility that Safeguard nonetheless required subcontractors to
follow the Property Preservation Guide or some other guidelines. Such a practice would not be
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inconsistent with Cornell’s testimony—Safeguard could certainly demand that contractors follow
specific guidelines without knowing precisely how a contractor performed the finer details of a
given task. Moreover, Fannie Mae and Seterus assert that Safeguard was responsible for the
winterization process (and thus for any consequences). In sum, there is a dispute of fact as to
whether Safeguard controlled the process by which YJM performed its work such that YJM
should be considered Safeguard’s agent. Thus, Safeguard’s motion for summary judgment as to
the trespass claim is denied as well.
B.
Illinois Consumer Fraud and Deceptive Business Practice Act
The ICFA protects consumers “against fraud, unfair methods of competition, and other
unfair and deceptive business practices.” Windy City Metal Fabricators & Supply, Inc. v. CIT
Tech. Fin. Servs., Inc., 536 F.3d 663, 669 (7th Cir. 2008). The ICFA’s protections are generally
limited to consumers, defined as “any person who purchases or contracts for the purchase of
merchandise not for resale in the ordinary course of his trade or business but for his use or that of
a member of his household.” 815 ILCS 505/1(e). The statute addresses both deceptive and unfair
business practices. To establish an ICFA claim based on deceptive conduct, the plaintiff must
prove the following elements: “(1) the defendant committed a deceptive act or practice; (2) the
defendant intended for the plaintiff to rely on the deception; (3) the deception happened in the
course of trade or commerce; and (4) the deception proximately caused the plaintiff’s injury.”
Cocroft v. HSBC Bank USA, N.A., 796 F.3d 680, 687 (7th Cir. 2015). A showing of actual
reliance is not required. Id. Meanwhile, three considerations guide a court’s determination of
whether conduct qualifies as unfair under the ICFA: “(1) whether the practice offends public
policy; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes
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substantial injury to consumers.” Windy City MetalFabricators & Supply, Inc., 536 F.3d at 669.
However, “[a] court may find unfairness even if the claim does not satisfy all three criteria.” Id.
The Obradoviches claim that the Counterclaim Defendants violated the ICFA by locking
them out of the Property without telling them, even though they were in the process of selling the
home, and intentionally causing or failing to repair damage to the Property to bully the
Obradoviches into an expedited foreclosure process. The Obradoviches claim that as a result of
this conduct, they lost the short sale and were left with a damaged Property. For their part,
Fannie Mae and Seterus attempt to disclaim liability by contending that they were not actively
involved in any alleged deception or unfair practice. But the Obradoviches contend that Fannie
Mae and Seterus instructed Safeguard to winterize and change the locks on the Property, did not
repair damage from the allegedly botched winterization, and refused to accept a reduced shortsale offer to account for the damage. All those actions implicate the direct involvement of Fannie
Mae and Seterus.
As Fannie Mae and Seterus correctly observe, the Obradoviches point to no evidence in
support of their contention that the Property was intentionally damaged. Nor do the
Obradoviches offer evidence suggesting that Fannie Mae and Seterus engaged in a deception in
refusing to honor what the Obradoviches saw as an obligation to repair the Property. The cited
deposition testimony suggests only that Fannie Mae and Seterus refused to repair the Property,
that they believed Safeguard was responsible for any repairs, and that a short sale did not take
place because the reduced offer was not accepted. (Fannie Mae SOMF, Ex. D., Lee Dep. at
100:7–14, 100:23–101:5.) The original notice of foreclosure had been sent well before the
winterization effort, and the Obradoviches were well aware that they were not making payments
on the Loan. That Fannie Mae chose to file an action to foreclose the Property is, without
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contrary evidence, not surprising. In sum, the Obradoviches must offer something more to
support the idea that Fannie Mae and Seterus committed a deceptive act and intended for the
Obradoviches to rely upon that conduct.
The Obradoviches’ unfair conduct theory fares better. As noted above, to determine
whether a practice is unfair under the ICFA, the Court asks whether the practice offends public
policy, is immoral, oppressive, or unscrupulous, or causes substantial injury to the consumer.
Windy City Metal Fabricators & Supply, Inc., 536 F.3d at 669. The Seventh Circuit has provided
that in determining whether conduct meets that standard, “the relevant inquiry is whether a
defendant’s conduct is so oppressive as to leave the consumer with little alternative except to
submit to it.” Batson v. Live Nation Entm’t, Inc., 746 F.3d 827, 833 (7th Cir. 2014) (quoting
Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951, 961 (Ill. 2002)) (internal quotation
marks omitted). With respect to the present case, a jury could conclude that invading and
modifying the property of a homeowner in the manner claimed by the Obradoviches was
sufficiently oppressive. Because the Counterclaim Defendants changed the locks on the Property
without the Obradoviches’ consent, they had “little alternative except to submit to” the
modifications. Id. Moreover, those actions caused injury to the Obradoviches in the form of a
damaged house and lost short sale.
The Obradoviches have pointed to enough evidence in the record to create a dispute of
material fact as to whether the Counterclaim Defendants’ conduct was unfair. Summary
judgment is therefore denied with respect to the ICFA claim to the extent it is predicated on
unfair conduct.
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C.
Negligence
In Count III of their Counterclaim, the Obradoviches assert a claim for negligence against
all the Counterclaim Defendants. Specifically, they contend that the Counterclaim Defendants
failed to take reasonable steps to protect the Property after entering it, changing the locks, and
winterizing it. They further claim that the Counterclaim Defendants failed to use reasonable care
in selecting contractors, breached a duty to act by allowing and contributing to the destruction of
the Property, and ignored their duty of reasonable care even though they knew their actions
would likely injure the Obradoviches.
“To prove a defendant’s negligence under Illinois law, a plaintiff must establish the
existence of a duty of care owed by the defendant to the plaintiff, a breach of that duty, and an
injury proximately caused by that breach.” Hutchison v. Fitzgerald Equip. Co., Inc., 910 F.3d
1016, 1022 (7th Cir. 2018). “Every person owes a duty of ordinary care to all others to guard
against injuries which naturally flow as a reasonably probable and foreseeable consequence of an
act.” Simpkins v. CSX Transp., Inc., 965 N.E.2d 1092, 1097 (Ill. 2012) (internal quotation marks
omitted). As with the tort of trespass, the doctrine of respondeat superior provides an exception
to the general rule that a person injured by the negligence of another must seek his remedy
against the individual who caused the injury. Sperl v. C.H. Robinson Worldwide, 946 N.E.2d
463, 470 (Ill. App. Ct. 2011) (“Under the doctrine of respondeat superior, a principal may be
held liable for the negligent actions of an agent that caused a plaintiff's injury, even if the
principal does not himself engage in any conduct in relation to the plaintiff.”). In addition,
Illinois courts recognize “a duty to a third party to control the individual who is the source of the
harm when a defendant has a special relationship with that person, such as a master-servant or
employer-employee relationship.” Simpkins, 965 N.E.2d at 1098.
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As with the trespass claim, Fannie Mae, Seterus, and Safeguard contend that summary
judgment should be granted in their favors because no agency relationships exist between them
and the parties that actually trespassed on the Property. But as explained above, the
Obradoviches have demonstrated the existence of a genuine issue of fact as to whether principalagency relationships existed between Fannie Mae and Seterus as principals, on the one hand, and
YJM and Safeguard as agents, on the other hand. Sperl, 946 N.E.2d at 471. Thus, summary
judgment cannot be granted on that basis.
Whether or not the Counterclaim Defendants owed the Obradoviches a duty of care that
was breached also presents a genuine dispute of material fact. The Obradoviches contend that
Seterus recruited Safeguard, which in turn recruited YJM, to winterize the Property in violation
of the guidelines set forth in the Property Preservation Guide promulgated by Fannie Mae.
(OSOAMF, Ex. 1-C at 77, Dkt. No. 206.) The Obradoviches have adduced evidence that YJM
damaged the Property by failing to drain all water from the plumbing system (OSOMF ¶ 74), and
thereafter, Safeguard, Seterus, and Fannie Mae all refused to investigate, pay for the damage, or
order the Property be repaired, which resulted in mold damage to the Property and the failure of
the short sale that the Obradoviches had arranged (OSOMF ¶¶ 106, 109, 114–117). While the
Counterclaim Defendants dispute that any of them were obligated to follow the Property
Preservation Guide or were in any way responsible for causing or repairing the damage to the
Property, the Obradoviches have provided enough evidence to show a dispute of fact exists. The
Counterclaim Defendants’ requests for summary judgment with respect to the negligence claims
are therefore denied.
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D.
Fair Debt Collection Practices Act
Finally, in Count IV of their Counterclaim, the Obradoviches contend that Seterus,
Safeguard, and YJM violated the FDCPA. The FDCPA prohibits debt collectors from pursuing
abusive, deceptive, or unfair debt-collection practices. See 15 U.S.C. § 1692 et seq. Here, the
Obradoviches contend that Seterus, Safeguard, and YJM violated the FDCPA in four ways: (1)
they violated § 1692e by falsely claiming a right to enter the Property; (2) they violated § 1692d
by facilitating the denial of the short-sale offer by damaging and refusing to repair damage done
to the Property; (3) they violated § 1692f by using unfair means in trying to collect the
Obradoviches’ debt—namely, entering, changing locks, and engaging in property preservation
services prematurely; and (4) they assessed unauthorized fees in violation of §§ 1692e, 1692f,
and 1692g.
The Court begins with the last of the four alleged violations. The Obradoviches appear to
have abandoned their claim asserting unauthorized collection of fees, as they make no mention
of it during the briefing and offer no evidence in support of their allegations. It does appear that
Seterus may have charged late fees in connection with missed payments on the Loan. (See
OSOAMF Ex. B., Lee Dep. at 18:19–21, Dkt. No. 206.) But the Obradoviches offer neither
argument nor evidence suggesting that those fees, or any other unspecified fees, were
unauthorized or part of a wrongful debt-collection action. Accordingly, any such argument has
been waived. See, e.g., Gburek v. Litton Loan Serv’g., LP, 614 F.3d 380, 387 (7th Cir. 2010)
(declining to address defendants’ underdeveloped argument); Buirge v. Berryhill, No. 17-cv5448, 2018 WL 4144621, at *2–3, (N.D. Ill. Aug. 30, 2018) (holding that plaintiff waived
several arguments at the summary judgment stage because his briefing merely made
undeveloped assertions without providing supporting caselaw or legal analysis).
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Turning to the other three claims, the Court first considers whether any of Seterus,
Safeguard, or YJM qualify as debt collectors under the FDCPA. The FDCPA defines a debt
collector as any person who “uses any instrumentality of interstate commerce or the 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). See also Gburek, 614 F.3d at 384. The Seventh Circuit, in
another case involving Safeguard, recently clarified that property preservation alone does not
constitute debt collection under the FDCPA. See Schlaf v. Safeguard Prop., LLC, 899 F.3d 459,
468 (7th Cir. 2018). In Schlaf, a mortgage servicer contracted with Safeguard for the latter to
perform occupancy inspections. Safeguard left door hangers on a doorknob outside the property
providing instructions for the mortgagors to contact the mortgage servicers but it did not give
any details about the debt or demand payment. Id. at 459. In finding that Safeguard was not a
debt collector, the Seventh Circuit emphasized that limited, indirect action taken without
reference to a debt is not sufficient to trigger the protections of the statute. Id. at 469 (“[T]he
FDCPA is aimed at curbing abuses by third-party debt-collection agents who are much more
involved in actual debt collection than Safeguard, whose primary purpose is property
preservation.”).
In this case, the undisputed evidence demonstrates that neither YJM nor Safeguard
qualifies as a debt collector under the FDCPA. With respect to YJM, the parties agree that YJM
entered the Property solely to perform a winterization and change locks, and never attempted to
communicate with the Obradoviches regarding any subject. The Obradoviches do not point to
any evidence suggesting that YJM was retained to collect money for the unpaid mortgage, did
anything other than enter to secure the Property, or had debt-collecting as its principal purpose or
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practice. As property preservation alone is not enough to make one a debt collector, YJM is
entitled to summary judgment on the Obradoviches’ counterclaim under the FDCPA.
Similarly, the Obradoviches have failed to adduce any evidence that Safeguard’s conduct
brings it within the purview of the FDCPA. The parties agree that Fannie Mae and Seterus
contracted with Safeguard to provide property preservation services—specifically, winterization
and changing of locks. Likewise, Safeguard’s purpose in delegating those tasks to YJM was to
preserve the Property. Safeguard did not involve itself in any attempt to collect a debt from the
Obradoviches.
Nonetheless, the Obradoviches contend that because YJM and Safeguard relied on the
Mortgage as authorizing their actions with respect to the Property, they are necessarily liable as
debt collectors enforcing security interests. But none of the evidence suggests that YJM or
Safeguard attempted to collect a debt owed under the Mortgage. YJM and Safeguard merely
relied upon the Mortgage as authorization for entry into the Property—the Mortgage gave Fannie
Mae and Seterus a right to enter or secure the Property under specific circumstances, and Fannie
Mae and Seterus contracted with Safeguard, which subsequently contracted with YJM, to
exercise that right on Fannie Mae’s and Seterus’s behalf. In short, YJM and Safeguard’s roles in
securing the Property are too remote and incidental to be considered debt collection. See Schlaf,
899 F.3d at 464.
Seterus, however, finds itself in a different position. The undisputed evidence establishes
that Seterus acquired the debt owed by the Obradoviches and communicated with them regarding
the amount owed. (Fannie Mae SOMF, Ex. D., Lee Dep. at 18:8–23.) Moreover, the parties
agree that Seterus acquired servicing rights for the Loan after it was already in default. (Fannie
Mae RSOMF ¶ 4.) See Carter v. AMC, LLC, 645 F.3d 840, 843 (7th Cir. 2011) (servicing agents
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are not debt collectors under the FDCPA unless the debt was already in arrears). The Seventh
Circuit has held that the FDCPA “treats assignees as debt collectors if the debt sought to be
collected was in default when acquired by the assignee, and as creditors if it was not.” Schlosser
v. Fairbanks Capital Corp., 323 F.3d 534, 536 (7th Cir. 2003).
The question, then, is whether Seterus’s property preservation services were “in
connection with the collection of any debt” or in an effort “to collect or attempt to collect any
debt.” 15 U.S.C. §§ 1692c, 1692f. See also Gburek, 614 F.3d at 384. Factors relevant to this
inquiry include the relationship between the parties and “the purpose and context of the
communication, judged by an objective standard.” Schlaf, 899 F.3d at 467 (quoting Gburek, 614
F.3d at 385) (internal quotation marks and alterations omitted). Based on the record, a reasonable
jury could find that Seterus hired Safeguard to enter and winterize their Property to collect on a
debt. The Obradoviches and Seterus’s relationship was one between debtors in default and debt
collector. And Seterus had already sent the Obradoviches a notice of intent to foreclose on the
Property when it directed Safeguard to change the locks—suggesting that Seterus was preparing
to take possession of and sell the Property, not merely protecting its interest in it. (Fannie Mae
RSOMF ¶ 13; DOSOMF ¶ 21.) Therefore, Seterus is not entitled to summary judgment on the
FDCPA claims based on its argument that it did not perform debt collection services.
The Obradoviches have also demonstrated a genuine dispute of fact as to whether Seterus
violated § 1692f(6) when it directed its contractor to enter the Property without permission,
change the locks, and winterize it prematurely. Section 1692f(6) prohibits debt collectors from
taking any nonjudicial action to dispossess the debtor of their property when the collector has no
present right to possess the property. 15 U.S.C. § 1692f(6). In determining whether a debt
collector had the right to possess a property, the Court looks to the applicable state self-help
repossession statute, which may be found at 810 ILCS 5/9–609. See Barnes v. Nw. Repossession
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LLC, 210 F. Supp. 3d 954, 961 (N.D. Ill. 2016). Section 9-609(b)(2) permits a secured party to
repossess its collateral after a default only if such repossession does not constitute a breach of the
peace.
In this case, the parties do not dispute that Seterus was a secured party and that the
Obradoviches were in default, so the only element at issue is whether Seterus breached the peace
when it entered the Property. Illinois courts applying § 9-609(b)(2) have held that mere trespass
is not necessarily enough to constitute a breach of the peace, but a trespass may breach the peace
if it involves cutting through or breaching a door, gate, barricade, or other entryway. ThompsonYoung v. Wells Fargo Dealer Servs., Inc., 2014 IL App (1st) 132479-U ¶ 16 (Ill. App. Ct. 2014).
See also Pantoja-Cahue v. Ford Motor Credit Co., 872 N.E.2d 1039, 1046 (Ill. App. Ct. 2007)
(breaking into debtor’s locked garage to repossess his car amounted to a breach of the peace).
But see Chrysler Credit Corp. v. Koontz, 661 N.E.2d 1171, 1173–75 (Ill. App. Ct. 1996) (debt
collector’s trespass onto debtor’s front yard to repossess his car was insufficient to constitute a
breach of the peace). Here, a reasonable jury could find that the circumstances under which
Seterus told its agent to go inside the Property without permission resulted in a breach of the
peace and therefore violated 15 U.S.C. § 1692f(6). Seterus’s motion for summary judgment as to
§ 1692f is therefore denied.5 But because the Obradoviches’ briefing fails to develop any
arguments that Seterus violated §§ 1692d and 1692e, Seterus is entitled to summary judgment as
to claims brought under those sections. See Gburek, 614 F.3d at 387.
5
The Obradoviches argue that Seterus is not entitled to assert the bona fide error defense to any FDCPA
claims under 15 U.S.C. § 1692(k)(c). (Obradoviches’ Consolidated Resp. and Mem. in Opp’n to Summ. J.
at 29, Dkt. No. 205.) But as Seterus concedes, it has not raised such a defense as a basis for granting
summary judgment. (Reply in Supp. of Fannie Mae and Seterus’s Mot. for. Summ. J. at 23, Dkt. No.
216.) Therefore, the Court declines to address the issue.
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In sum, since Safeguard and YJM’s actions were not inherently associated with collecting
a debt, the Court grants summary judgment in their favor with respect to Count IV. But because
Seterus may qualify as a debt collector under the FDCPA and the Obradoviches have created a
genuine dispute as to whether it engaged in unfair debt collection practices under § 1692f(6), the
Court denies Seterus’s request for summary judgment as to that claim.
CONCLUSION
For the foregoing reasons, Fannie Mae’s motion for summary judgment on its foreclosure
claim (Dkt. No. 125) is granted. The motions by Counterclaim Defendants Fannie Mae, Seterus,
Safeguard, and YJM for summary judgment (Dkt. Nos. 157, 160, 166) are granted in part and
denied in part. Specifically, the motions are denied with respect to the Obradoviches’
counterclaims of trespass. The motions are granted with respect to the counterclaims under the
ICFA to the extent they are based on deceptive conduct, but denied with respect to any
counterclaims under the ICFA based on unfair conduct. All Counterclaim Defendants’ motions
are denied with respect to the negligence counterclaims. Finally, Safeguard and YJM’s motion as
to the FDCPA counterclaims and Seterus’s motion as to violations of §§ 1692d, 1692e, and
1692g of the FDCPA are granted, but Seterus’s motion is denied with respect to the
Obradoviches’ counterclaim under FDCPA § 1692f.
ENTERED:
Dated: May 28, 2020
__________________________
Andrea R. Wood
United States District Judge
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