Mathers v. HSBC Bank et al
Filing
125
MEMORANDUM Opinion and Order. For the reasons stated herein, Defendants' Motion to Dismiss all federal claims is granted. Mathers' Motion for Preliminary Injunction is denied. The state law claims remain. Enter Memorandum Opinion and Order. Signed by the Honorable Harry D. Leinenweber on 8/13/2018:Mailed notice(maf)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
EDDIE MATHERS, individually
and as independent
representative for Joseph
Mathers,
Plaintiff,
Case No. 16 C 9572
v.
Judge Harry D. Leinenweber
HSBC BANK and OCWEN LOAN
SERVICES, LLC,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ Motion to Dismiss the federal
claims from the Complaint and Mathers’ Motion for Preliminary
Injunction.
For the reasons stated herein, Defendants’ Motion is
granted, and Mathers’ Motion is denied.
I.
Ms.
Eddie
Mathers
BACKGROUND
(“Mathers”
or
“Plaintiff”)
sued
two
financial institutions: Defendants HSBC Bank (“HSBC”) and Ocwen
Loan Servicing, LLC (“Ocwen”).
The following facts are derived
from Plaintiff’s Amended Complaint and, in accordance with the
standard at this stage, will be taken as true.
See Alam v. Miller
Brewing Co., 709 F.3d 662, 665-66 (7th Cir. 2013).
Mathers’ principal residence is a condominium located at 300
N. State Street, Apartment #3808, Chicago, Illinois where she has
resided since 1995. (Compl. ¶¶ 1, 7.)
She alleges her mortgage is
paid in full. (Id. ¶ 10.)
On
January
4,
2006,
Encore
Credit
Corporation
contacted
Plaintiff to tell her that she and her husband were eligible for
a loan on their condominium properties. (Id. ¶ 8.)
Plaintiff
advised Encore that she was not interested in a loan on Unit #3808,
but that she was interested in a loan on her other property, Unit
#2128. (Id. ¶¶ 10, 13; Jan. 15, 2006 Letter to Encore, Ex. to
Compl., Dkt. No. 43; Jan. 26, 2006 Letter to Encore, Ex. to Compl.,
Dkt. No. 43)
Regardless, Encore set up an Investor Loan #326556
for Unit #3808 rather than Unit #2128. (Id. ¶ 12.)
Plaintiff
received loan documents on Unit #3808 and, due to the error,
Plaintiff never signed those documents. (Id.)
Plaintiff again
advised Encore, via phone and mail, that she was not interested in
a loan on Unit #3808. (Id. ¶ 13.) Encore sent Plaintiff a Notice
of Right to Cancel the loan on Unit #3808, which Plaintiff executed
and mailed back on February 22, 2006. (Id. ¶ 15; Feb. 22, 2006
Letter to Encore, Ex. to Compl., Dkt. No. 43; Feb. 20, 2006 Notice
of Right to Cancel, Ex. to Compl., Dkt. No. 43.)
Mathers alleges
she also sent back the check for the loan, attaching a March 9,
2006 letter from HomEq Servicing, acknowledging receipt of the
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return of funds for the Encore Investor Loan #326556 regarding
Unit #3808. (Id. ¶ 21; March 9, 2006 Letter, Ex. to Compl.,
Dkt. No. 43.)
On February 27, 2006, Encore sent a letter regarding investor
loan #326556, but identifying the correct condominium, Unit #2128.
(Id. ¶ 17; Feb. 27, 2006 Letter to Pl., Ex. to Compl., Dkt. No.
43.)
All
subsequent
documentation
reflected
that
the
loan
concerned Unit #2128. (Id.) On June 2, 2006, the loan on Unit #2128
was transferred to Defendant Ocwen. (Id. ¶¶ 20-21; June 2, 2006
Letter to Pl., Ex. to Compl., Dkt. No. 43.)
Approximately three years later, HSBC filed a foreclosure
action in state court on Unit #3808. (Id. ¶ 22.)
The foreclosure
and sale of the Plaintiff’s property was terminated at the end of
2011, presumably due to settlement. (Id. ¶ 27.)
HSBC
and
Mathers
executed
a
settlement
In December 2011,
agreement,
allegedly
agreeing that Defendants would offer Mathers a new loan for
$143,000.00 secured by Unit #3808. (Id. ¶ 42.)
According to
Plaintiff, Defendants never paid Plaintiff the $143,000.00 and
never provided her with new loan documentation in accordance with
their settlement agreement. (Id. ¶¶ 28, 43.)
In
June
2015,
HSBC
filed
a
second
state-court
mortgage
foreclosure complaint, which was dismissed in February of 2016.
(Id.
¶ 45.)
On
May
17,
2016,
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HSBC
filed
a
third
mortgage
foreclosure in the Circuit Court of Cook County, No. 2016 CH 6805,
which is currently pending. (Id. ¶ 46.)
The state court entered
a Judgment for Foreclosure and Sale in that case on April 26, 2018.
(Ex. 76 to Pl.’s Mot. for Prelim. Inj., Dkt. No. 122.)
The main thrust of the Complaint is that Plaintiff never
entered into a loan or mortgage secured by Unit #3808 at any time,
but through intentional fraud or inadvertent error, the debt
supposed to be secured by Unit #2128 was secured by Unit #3808
instead.
The Complaint also asserts that even if a mortgage of
Unit #3808 did exist, Mathers rescinded that loan.
The Complaint does not allege any specific counts, but cites
violations of multiple federal laws as the basis for subject matter
jurisdiction: the Truth in Lending Act (“TILA”), 15 U.S.C. 1601 et
seq.; the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et
seq.; the Fair Accurate Credit Transaction Act, see 15 U.S.C. §§
1681c(g), 1681n; and Chapter 47 (False and Fraud Statements) of
the U.S. Criminal Code, 18 U.S.C. § 1001 et seq.
The Complaint
also alleges state law claims for fraud, breach of contract
(namely, the settlement agreement), violations of the Illinois
Consumer Fraud and Deceptive Business Practice Act, 815 ILCS 505/1
et seq., slander of title, and intentional infliction of emotional
distress.
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Defendants move to dismiss only the federal-law allegations,
arguing that the Complaint fails to state any federal claim upon
which relief may be granted.
See FED. R. CIV. P. 12(b)(6).
In
deciding a motion to dismiss, a court may consider “the complaint
itself, documents attached to the complaint, documents that are
critical to the complaint and referred to in it, and information
that is subject to proper judicial notice.”
Geinosky v. City of
Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012).
The Court will
consider each federal claim in turn.
II.
A.
DISCUSSION
Defendants’ Motion to Dismiss Federal Claims
1.
Truth in Lending Act Claims
a.
TILA Claim Against Ocwen
Ocwen moves to dismiss the Truth in Lending Act (“TILA”)
claim, arguing that, as a loan servicer, it cannot be held liable
for any alleged TILA violations. Ocwen is correct. “TILA expressly
disclaims liability for servicers unless they also own or owned
the obligation.”
Garcia v. HSBC Bank USA, N.A., No. 09 CV 1369,
2009 U.S. Dist. LEXIS 114299, at *6 (N.D. Ill. Dec. 7, 2009)
(collecting cases); see also Bills v. BNC Mortgage, Inc., 502 F.
Supp. 2d 773, 775 (N.D. Ill. 2007) (granting servicer’s motion to
dismiss because servicers are not liable under TILA). The Complaint
does not allege that Ocwen owns the loan at issue, nor is ownership
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established by the attached exhibits. Accordingly, the TILA claims
against Ocwen is dismissed with prejudice.
The Court notes that dismissal with prejudice is appropriate
here given that the Plaintiff has amended the complaint several
times already. (See Compls., Dkt. Nos. 1, 13, 31, 43.)
b.
TILA Claim Against HSBC
HSBC moves to dismiss the TILA claim against it on two
grounds, asserting first, that the Complaint fails to allege any
specific TILA disclosure violation, and second, that the claim is
untimely. In its first argument, HSBC points out that “[TILA] does
not substantively regulate consumer credit but rather ‘requires
disclosure
of
certain
terms
and
conditions
consummation of a consumer credit transaction.’”
of
credit
before
Rendler v. Corus
Bank, N.A., 272 F.3d 992, 996 (7th Cir. 2001) (citation omitted).
HSBC
argues
that
because
Mathers
fails
to
allege
specific
information that should have been disclosed here, she fails to
state a claim under TILA.
But TILA provides consumers with substantive rights beyond of
the disclosure of information.
One such right relevant here: TILA
provides consumers with an unqualified right to rescind a credit
transaction if a security interest is or will be retained in their
principal dwelling. 15 U.S.C. § 1635. Here, the Complaint alleges
that Mathers sent HSBC notice rescinding the loan secured by her
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home (Unit #3808) on February 22, 2006. (Compl. ¶ 15.)
Once a
consumer has notified the lender of her intention to rescind, TILA
requires that “within 20 days after the receipt of a notice of
rescission, the creditor shall return to the obligor any money or
property given . . . and shall take any action necessary or
appropriate to reflect the termination of any security interest
created under the transaction.” 15 U.S.C. § 1635(b). TILA and its
corresponding regulations “do[] not permit the creditor to retain
its security interest, or to withhold money or property, pending
the consumer’s return of what she received under the agreement.”
Velazquez v. HomeAmerican Credit, Inc., 254 F. Supp. 2d 1043, 104445
(N.D.
Ill.
§ 226.23(d)(3)).
2003)
(citing
15
U.S.C.
§
1635(b);
12
C.F.R.
Thus, Defendants had 20 days from the receipt of
Mathers’ notice to “take any action necessary or appropriate to
reflect the termination of any security interest created under the
transaction.” 15 U.S.C. § 1635(b).
The creditor is required to
take such action prior to the consumer tendering money or property
acquired in the transaction.
See Velazquez, 254 F. Supp. 2d at
1045 (noting that the statutory scheme is “arguably inequitable”
in that respect); see also Williams v. Homestake Mortgage Co., 968
F.2d 1137, 1140 (11th Cir. 1992) (citing 17A Am. Jur. 2d Contracts
§ 590, at 600-01 (1991) (finding TILA’s scheme contrary to the
rule under common law rescission, where the rescinding party must
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tender first)). Here, the Complaint alleges that Mathers exercised
her unqualified right to rescind the mortgage loan on Unit #3808
within 3 days of executing the loan and that Defendants failed to
honor that rescission within 20 days (or at all). (Compl. ¶¶ 1415, 18.)
Given the liberal pleading standard afforded to pro se
complaints, this Complaint’s allegations are sufficient to state
a claim.
See Dowdy v. First Metro. Mortg. Co., No. 01C7211, 2002
WL 745851, at *2 (N.D. Ill. Jan. 29, 2002).
HSBC also contends that the TILA claim is untimely.
HSBC
argues that TILA’s right of rescission is completely extinguished
after a three-year period, citing Beach v. Ocwen Federal Bank, 523
U.S. 410, 412 (1998). Beach makes clear that any substantive right
to rescind is barred after TILA’s three-year statutory time frame
elapses.
See id. at 419 (“[T]he Act permits no federal right to
rescind, defensively or otherwise, after the 3-year period of §
1635(f) has run.”).
However, this is beside the point.
Mathers
alleges she invoked her right to rescission long before the threeyear time period expired, making that time limit (and Beach’s
holding)
irrelevant
here.
Far
more
relevant
is
Countrywide Home Loans, Inc., 135 S.Ct. 790 (2015).
Jesinoski
v.
In that case,
the Supreme Court clarified that a consumer does not need to bring
suit within TILA’s three-year period in order to rescind the loan;
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rather, a consumer may exercise the right to rescind merely by
notifying the creditor of her intention to rescind. Id. at 792.
Here, the Complaint alleges that Mathers invoked her right to
rescind
well-within
TILA’s
time
window.
The
executed
loan
documents are dated February 20, 2006. (See February 20, 2006
Mortgage Loan, Ex. A to Defs.’ Mot. to Dismiss, Dkt. No. 114.)
Mathers disputes the validity of those documents, but argues that
even if they are valid, she properly rescinded the loan under TILA.
The Complaint alleges that she received a Notice of Right to Cancel
the loan on Unit #3808 on February 14, 2006 and subsequently mailed
the executed form back on February 22, 2006, invoking her right to
rescind the loan. (Compl. ¶¶ 12, 14-15.) Further, the Complaint
adequately alleges that the Defendants were required to honor that
rescission, but never did. (Id. ¶¶ 23-25.)
Although the dates are
not perfectly clear (given that Mathers alleges she received the
notice of rescission prior to the loan date), the loan is dated
February
20,
2006
and
the
Complaint
alleges
the
rescission
documents were executed and sent back on February 22, 2006, which
is within TILA’s three-day window to rescind.
The question before the Court is not whether Mathers timely
invoked her right to rescind—she clearly alleged she did—but
whether Mathers timely filed suit on Defendants’ failure to honor
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that rescission.
This question, it turns out, is more complicated
than Defendants suggest.
The Seventh Circuit recently took up a case with remarkably
similar facts.
In Fendon v. Bank of America, N.A., 877 F.3d 714,
715-16 (7th Cir. 2017), the plaintiff borrowed money from his bank
and secured the loan with a mortgage on his home. He allegedly
rescinded the loan within TILA’s three-year window, but that the
bank failed to honor his rescission.
Id. at 716. The bank
foreclosed, and the property was sold. Id. Several years later, on
the day the final judgment confirming the foreclosure was entered,
the plaintiff filed a TILA action seeking damages and rescission
in federal court. Id.
The Seventh Circuit held that any damage
claim for TILA violations was untimely given that TILA sets a oneyear period of limitations for damage suits. Id.
Thus, the
plaintiff had only one-year to file a lawsuit based on the bank’s
failure to honor the rescission. Id.
And the rescission claim
fared no better because it was barred by Rooker-Feldman, seeing as
the plaintiff’s property had already been foreclosed in the state
court action by the time plaintiff filed suit. Id.
The Seventh
Circuit explained that under Rooker-Feldman, “[f]ederal district
courts lack authority to revise the judgments of state courts.”
Id.
(citations
affirmed
the
omitted).
district
Accordingly,
court’s
dismissal
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the
of
Seventh
the
Circuit
complaint
on
timeliness grounds. Id.
Notably, Justice Easterbrook stated,
albeit in dicta, that “[i]f [the plaintiff] had filed suit before
2011, when the foreclosure action started, he might have had a
strong argument that rescission may be enforced at any time,
subject only to the doctrine of laches that governs equitable
actions in the absence of a statutory time limit.
Tied as it is
to § 1640(a), the one-year limit in § 1640(e) would not have
applied.” Id. at 716; but cf. Fendon v. Bank of Am., N.A., No. 16
C 3531, 2017 WL 914782, at *4 (N.D. Ill. Mar. 8, 2017) (collecting
cases and stating that “[t]he court agrees with other courts in
this district who have concluded that TILA’s one-year limitations
period for damages actions applies to suits seeking enforcement of
rescission.”), aff’d, 877 F.3d 714 (7th Cir. 2017) (Court notes
that the Seventh Circuit opinion did not comment on the district
court’s statement that the one-year limitations period applies to
rescission claims).
Fendon directs the result here.
Just like the plaintiff
there, Mathers filed her Complaint too late to maintain a claim
for damages or rescission.
The Complaint alleges that Mathers
invoked her right to rescind on February 22, 2006, but that
Defendants failed to honor the rescission. (Compl. ¶¶ 14-15, 2325.)
A failure to rescind is a separate TILA violation, giving
rise to claims for damages and/or rescission.
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See Jenkins v.
Mercantile Mortg. Co. 231 F. Supp. 2d 737, 745 (N.D. Ill. 2002)
(citation omitted). Mathers’ claim accrued around the end of March
2006 when Defendant failed to honor her rescission within the 20day period as required.
(Bankr.
N.D.
Ill.
2009)
See In re Hunter, 400 B.R. 651, 657
(claims
for
failure
to
effectuate
rescission accrue twenty days after the creditor receives the
notice of rescission).
TILA entitled Mathers to sue within a one-
year period for the violation, but Mathers did not file suit until
October 7, 2016, over ten years later. 15 U.S.C. § 1640(e).
is too late.
That
See Fendon, 877 F.3d at 716.
Similarly, Mathers’ rescission claim is also barred. Like the
plaintiff
in
Fendon,
Mathers
filed
suit
after
foreclosure proceeding was already underway.
the
mortgage
The state court
proceeding resulted in a Judgment for Foreclosure and Sale entered
on April 26, 2018. (Ex. 76 to Pl.’s Mot. for Prelim. Inj.,
Dkt. No. 122.) “Federal district courts lack authority to revise
the judgments of state courts.
See Fendon v. Bank of Am., N.A.,
877 F.3d 714, 716 (7th Cir. 2017) (citations omitted); see also
Mains
v.
Citibank,
N.A.,
852
F.3d
669,
677
(7th
Cir.
2017)
(“Insofar as [the plaintiff] alleges he had the right to rescind
in 2015, he also runs into Rooker-Feldman.
The existence of such
a right is possible only if the state court’s prior foreclosure
judgment is set aside.”), cert. denied, 138 S.Ct. 227.
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Here,
Mathers’ rescission claim is barred by Rooker-Feldman given the
state court’s foreclosure judgment. See id. Thus, both forms of
relief—damages
and
rescission—are
precluded
here.
As
Fendon
noted, Mathers may have had a valid claim for rescission that
continued
after
TILA’s
one-year
statutory
period
for
damages
actions expired, but that claim was barred once the state court
entered its foreclosure judgment.
Accordingly, Mathers’ TILA
claim against HSBC must be dismissed with prejudice.
2.
Fair Credit Reporting Act Claim
Defendants move to dismiss any claim based on the Fair Credit
Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq.
Congress enacted
the Fair Credit Reporting Act to regulate all facets of the
preparation, dissemination, and use of credit reports.
Jur. Proof of Facts 3d 287.
See 44 Am.
FCRA “require[s] that consumer
reporting agencies adopt reasonable procedures for meeting the
needs of commerce for consumer credit, personnel, insurance, and
other information in a manner which is fair and equitable to the
consumer.” 15 U.S.C. § 1681.
In addition to imposing obligations
on consumer reporting agencies, FCRA contains requirements for
entities
agencies.
like
Defendants
that
furnish
information
to
those
Hukic v. Aurora Loan Servs., 588 F.3d 420, 433 (7th
Cir. 2009). The FCRA requires that “[a]fter receiving notice . . .
of a dispute with regard to the completeness or accuracy of any
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information
provided”
to
a
consumer
reporting
agency,
the
furnisher must conduct an investigation regarding the disputed
information and report the results to the agency. 15 U.S.C.
§ 1681s–2(b)(1).
If the investigation concludes that a disputed
item is inaccurate or cannot be verified, the furnisher must
promptly
modify,
delete,
or
block
the
information. 15 U.S.C. § 1681s–2(b)(1)(E).
reporting
of
that
Here, the Complaint
does not allege that Mathers contacted any credit agency to alert
them to an inaccuracy in her credit report. (See generally Compl.)
Further, the Complaint contains no allegations that Defendants
furnished
Defendants
inaccurate
did
not
information
investigate
to
or
a
credit
promptly
agency
delete
information relayed to a credit agency. (See id.)
claim is dismissed with prejudice.
or
that
inaccurate
As such, this
See Ori v. Fifth Third Bank,
603 F. Supp. 2d 1171, 1174 (E.D. Wis. 2009).
3.
Fair and Accurate Credit Transaction Act Claim
The Fair and Accurate Credit Transaction Act (“FACTA”), 15
U.S.C. §§ 1681c(g), 1681n, was enacted as an amendment to the Fair
Credit Reporting Act to prevent thieves from pulling credit card
numbers from printed consumer receipts.
See 51 A.L.R. Fed. 2d
273. FACTA regulates, among other things, the information included
on consumer receipts, see 15 U.S.C. § 1681c(g).
It is unclear to
the Court how the facts alleged relate to FACTA’s provisions. Based
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on the absence of any alleged facts supporting a claim under FACTA,
the FACTA claims are dismissed with prejudice.
4.
Fraud and False Statements Claim
Defendants move to dismiss the claims based on a violation of
Chapter
47
of
statements.
the
U.S.
Criminal
Code
for
fraud
and
false
See 18 U.S.C. § 1001 et seq. Chapter 47 is part of
the criminal code.
The criminal code does not provide a private
right of action to private citizens, which means that Mathers (or
any other individual citizen) cannot bring a lawsuit based on its
statutory provisions.
See Cent. Bank of Denver, N.A. v. First
Interstate Bank of Denver, N.A., 511 U.S. 164, 190 (1994) (noting
that a private right of action is not inferred from a criminal
prohibition).
To pursue an alleged violation under Chapter 47,
Mathers must refer a claim to the U.S. Attorney’s Office.
The
Government, not private citizens, chooses whether and when to bring
criminal charges.
Accordingly, any claim based on the criminal
code in the Complaint is dismissed with prejudice.
B.
Mathers’ Motion for Preliminary Injunction
Mathers asks this Court for a preliminary injunction staying
the sale of Unit #3808.
As discussed above, the Court “lack[s]
authority to revise the judgments of state courts.”
877 F.3d at 716 (citations omitted).
Here, the state court has
already entered a judgment of foreclosure.
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See Fendon,
As such, this Court
has no jurisdiction and Mathers must seek relief from state court.
As to claims other than rescission, as made clear from the above
discussion, Mathers cannot establish that she is likely to succeed
on the merits of those federal claims.
See Winter v. Nat. Res.
Def. Council, Inc., 555 U.S. 7, 20 (2008).
Accordingly, Mathers
motion for preliminary injunction is denied.
III.
CONCLUSION
For the reasons stated herein, Defendants’ Motion to Dismiss
all federal claims is granted.
Injunction is denied.
Mathers’ Motion for Preliminary
The state law claims remain.
IT IS SO ORDERED.
Harry D. Leinenweber, Judge
United States District Court
Dated: 8/13/2018
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