Sifuentes v. Rushmore Loan Management Services, LLC et al
Filing
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MEMORANDUM Opinion and Order : Signed by the Honorable Rebecca R. Pallmeyer on 3/26/2018. Mailed notice. (etv, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RUBEN SIFUENTES,
Plaintiff,
v.
RUSHMORE LOAN MANAGEMENT
SERVICES, LLC and SAFEGUARD
PROPERTIES MANAGEMENT, LLC,
Defendants.
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No. 17 C 3982
Judge Rebecca R. Pallmeyer
MEMORANDUM OPINION AND ORDER
Plaintiff Ruben Sifuentes is a Chicago homeowner who has been fighting a foreclosure
of his home mortgage loan for years. In this lawsuit, Sifuentes challenges the conduct of a
“property preservation” firm--Defendant Safeguard Properties Management, LLC (“Safeguard”)-and the loan serving company, Defendant Rushmore Loan Management Services, LLC
(“Rushmore”), who hired Safeguard. Plaintiff alleges that in 2016, he was engaged in efforts to
obtain a loan modification, and an order confirming a judicial sale had not yet been entered. On
two occasions, Plaintiff contends, Safeguard entered Plaintiff’s home while he was away,
changed the locks, and took Plaintiff’s personal property.
Plaintiff alleges that Defendants’
conduct violates the Fair Debt Collection Practices Act, 15 U.S.C. § 1692f(6) (Count I) and the
Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. (Count
II); and constitutes common law trespass (Count III). Defendants have moved to dismiss all
three counts. For the reasons stated here, the motions are denied.
BACKGROUND
According to the allegations of the complaint, deemed true for purposes of this motion,
foreclosure proceedings were filed against Plaintiff in 2012. (Complaint [1]. ¶ 9.) He was still
seeking refinancing in 2016, and obtained a court order staying the judicial sale on May 9, 2016.
(Id. ¶¶ 14-16.) On May 26, however, Plaintiff returned home from work to find the lock to his
front door had been changed. (Id. ¶¶ 17-18.) Plaintiff was able to enter his home through the
back door, which was left ajar; on entry, he found a notice from Safeguard, confirming that his
lock had been changed, but acknowledging that Safeguard had “determined the property was
occupied.” (Id. ¶¶ 19-21.) Despite this purported determination, Plaintiff alleges, Safeguard’s
agents had left his home “in a state of disarray.” (Id. ¶ 22.) Drawers and cabinets were
“opened and picked through,“ and several items of personal property had been taken, including
cuff links, business suits, jewelry, patio furniture, and “a small fire pit.” (Id.) Plaintiff reported the
incident to police, and his attorney contacted Rushmore’s attorney to confirm that Plaintiff
continued to live in his home. (Id. ¶ 23.)
The stay of the foreclosure proceedings was continued to August 4, 2016. (Id. ¶ 24.)
But on July 7, Safeguard entered Plaintiff’s home a second time, again changed the front door
lock, and this time installed a lockbox. (Id. ¶¶ 25, 26.) Plaintiff again contacted his attorney,
who obtained the lockbox code from Rushmore’s counsel. (Id. ¶ 28.) When he entered the
home, Plaintiff found that more items were missing, “including a winter jacket and a chainsaw,”
and that his “bedroom was in disarray.” (Id.) And it appeared that the back door had been
“pried open with a crowbar.” (Id. ¶ 27.) These allegations, Plaintiff alleges, support his claims
under the FDCPA, the Illinois Consumer Fraud Act, and the law of trespass.
ANALYSIS
Defendants have moved to dismiss all three counts. Defendant Safeguard contends that
its activities involve “property preservation,” not debt collection, and are not actionable under
FDCPA. (Safeguard’s Memorandum [20], at 6-7.) If the court dismisses that claim, Safeguard
urges, it should relinquish jurisdiction over Plaintiff’s state law claims. (Id. at 10.) On the merits
of the Consumer Fraud Act claim, Safeguard contends its property preservation activities are
authorized under the mortgage loan agreement, and are therefore not fraudulent. (Id. at 10-12.)
Defendant Rushmore echoes Safeguard’s argument that “securing property is not debt
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collection” (Rushmore’s Memorandum [22], at 4), and that the Consumer Fraud Act claim fails
because Plaintiff has not identified any “deceptive or unfair act or practice” on the part of
Defendants. Rushmore itself is not liable for any of Safeguard’s activities, Rushmore urges.
(Id. at 2-3.) Neither Defendant has addressed the substance of the trespass allegations.
I.
Defendants’ Conduct is Actionable under FDCPA
Plaintiff Sifuentes is a citizen and resident of Illinois; both Defendants are LLCs
organized in Delaware and maintain principal places of business outside Illinois. Unless the
LLCs’ members include Illinois citizens, the parties are diverse in citizenship. But Plaintiff has
not suggested that $75,000 is at stake, and all parties assume that the court’s jurisdiction rests
on Plaintiff’s FDPCA claim, so the court begins its analysis there.
In response to what it called “abundant evidence” of “abusive, deceptive, and unfair debt
collection practices by many debt collectors,” Congress passed the FDCPA in 1977. The Act
regulates the conduct of debt collectors, defined as “any person 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). Among other things, the Act forbids various types of “false,
deceptive, or misleading” representations or means to collect a debt, 15 U.S.C. § 1692e, as well
as those that are “unfair or unconscionable.” 15 U.S.C. § 1692f. The Act specifically prohibits
“any conduct the natural consequence of which is to harass, oppress, or abuse any person in
connection with the collection of a debt.” 15 U.S.C. § 1692d. Under 15 U.S.C. § 1692f(6), it is
an “unfair or unconscionable” practice, in violation of the FDCPA, for anyone who does not have
a present right to possession of the property to take or threaten “nonjudicial action to effect
dispossession or disablement of property.”
Safeguard contends it is not a debt collector for purposes of the FDCPA, but section
1692a(6) expands the definition of “debt collector” for purposes of liability under section
1692f(6); for purposes of that subsection, a debt collector “also includes any person” engaged in
interstate commerce “in any business the principal purpose of which is the enforcement of
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security interests.” Id. § 1692a(6).
Plaintiff Sifuentes explicitly alleges that Safeguard’s
“principal purpose is the enforcement of security interests.” (Compl. ¶ 35.) Safeguard clings to
Hunte v. Safeguard Properties Management LLC, No. 16 C 11198, 2017 WL 2445137 (N.D. Ill.
June 6, 2017), where Judge Feinerman of this court granted a motion to dismiss plaintiff’s
FDCPA claim. In reaching that conclusion, the court noted that the plaintiff there had identified
“enforcement of security interest” as Safeguard’s “principal purpose,” but contradicted himself
by also alleging that Safeguard’s “principal purpose” was managing and preserving foreclosed
properties. 2017 WL 2445137, *2. No such contradiction appears in the complaint in this case.
As the Hunte court observed, id., where plaintiff alleges that Safeguard’s principal purpose is
enforcement of a security interest, those allegations are sufficient to render Safeguard liable as
a debt collector, at the pleading stage.
Numerous courts in this district have so concluded. In Bywater v. Wells Fargo Bank,
N.A., No. 13 C 4415, 2014 WL 1256103 (N.D. Ill. Mar. 24, 2014) the agent for a company that
provides “home preservation services” was alleged to have forcibly entered plaintiff’s home,
“changed the locks, and damaged or stole many of [plaintiff’s] personal items, including jewelry,
electronics, and appliances.” 2014 WL 1256103 *1. The court had no trouble concluding that
defendants’ business of “securing properties” brought them within the definition of “debt
collector” set forth in s 1692a(6). Id. *5. The Bywater court also concluded that the invasive
activity described in the complaint—similar to what Sifuentes alleges here--is prohibited by
§ 1692f(6). Id. See also Matthews v. Homecoming Fin. Network, No. 03 C 3115, 2005 WL
2387688, *1 (N.D. Ill. Sept. 26, 2005) (allegations that defendants “forcibly entered [plaintiff’s]
house [before having right to possession], removed his personal property, and changed the
locks” alleged violations of FDCPA § 1692a(6); Frazier v. US Bank Nat’l Ass’n, No. 11 C 8775,
2013 WL 1337263, *10 (N.D. Ill. Mar. 29, 2013) (“Following Nadalin [v. Auto. Recovery Bureau.
Inc., 169 F.3d 1084 (7th Cir. 1999], courts in this District have recognized that a plaintiff may
state a § 1692f(6) claim in the personal property repossession context when the plaintiff alleges
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that ‘[the defendant] was enforcing a security interest and did not have a present right to
possess the collateral.’”); Hill v. Wells Fargo Bank, N.A., No. 12 C 7240, 2015 WL 232127, *5
(N.D. Ill. Jan. 16, 2015) (denying motion to dismiss FDCPA claim brought by homeowners who
“repeatedly informed [defendant ‘preservation services’ firm] that their home was occupied and
yet still face break-in attempts”); Federal National Mortgage Assoc. v. Obradovich, No. 14 C
4664, 2016 WL 1213920 (N.D. Ill. Mar. 29, 2016) (denying motion to dismiss FDCPA claim
against Safeguard for entering and damaging mortgage borrower’s home); Flippin v. Aurora
Bank, FSB, No. 12 C 1996, 2012 WL 3260449 *2 (N.D. Ill. Aug. 8, 2012) (allegations that
defendant, at bank’s direction, “changed the locks on the house and ‘winterized’ it by turning off
the water supply and disconnecting the hot water heater” stated a violation of FDCPA); compare
Alqaq v. CitiMortgage, Inc., No. 13 C 5130, 2014 WL 1689685, at *3-4 (N.D. Ill. Apr. 28, 2014)
(actions taken by Safeguard after foreclosure proceedings were completed were incidental to
debt collection and therefore insufficient to constitute “enforcement of a security interest” as
required by section 1692f(6).)
Apart from Alqaq, which involved foreclosure activity, Safeguard makes no mention of
any of this authority. Instead, Safeguard devotes substantial attention in its memorandum to the
salutary nature of property preservation services. (Safeguard Memorandum [20], at 2-8.) The
court has no doubt that neighborhoods benefit when vacant and abandoned properties are
maintained and properly secured. Plaintiff here alleges, however, that his own property was
neither vacant nor abandoned when Safeguard entered it, changed the locks, and seized
certain of Plaintiff’s personal items. The court agrees with its colleagues that attempting to
enforce a mortgage security interest by way of locking a borrower out of his property is conduct
prohibited by § 1692f(6) of the FDCPA.
Defendant Rushmore’s challenge to Count I requires less analysis. Rushmore alleges
that Plaintiff has not sufficiently alleged any conduct on its part.
As the court reads the
complaint, however, it is apparent that Plaintiff alleges Safeguard was acting as Rushmore’s
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agent.
Plaintiff alleges that “Rushmore used Safeguard to lock Plaintiff out of his home.”
(Compl., at 1; ¶ 59.) Rushmore “utilized Safeguard’s property services” for Plaintiff’s home “on
multiple occasions,” and added a charge for these services to Plaintiff’s mortgage obligation.
(Id. ¶¶ 6, 39.) Plaintiff’s attorney contacted Rushmore’s counsel for relief after the first break0in,
and when Plaintiff was locked out a second time, it was Rushmore’s attorney who provided a
code to the lockbox that Safeguard had installed. (Id. ¶¶ 23, 28.) To allege that an agency
relationship exists, a plaintiff need only “allege a factual predicate to create the inference of
agency.” Whitley v. Taylor Bean & Whitacker Mortg. Corp., 607 F. Supp.2d 885, 895 (N.D. Ill.
2009); Sefton v. Toyota Motor Sales U.S.A., No. 09 C 3787, 2010 WL 1506709, at *3 (N.D. Ill.
Apr. 14, 2010). In Jackson v. Bank of New York, No. 11 C 6410, 2012 WL 2503956, *1 (N.D. Ill.
June 28, 2012), plaintiff alleged that on behalf of the mortgage loan servicer, Safeguard had
“changed the locks, winterized [plaintiff’s] house and removed [her] personal property, all
without prior notice or judicial authorization.” Those allegations, the court concluded, provided a
sufficient factual predicate that Safeguard acted on behalf of the lender and the loan servicer.
Id. *2. Discovery may show that Rushmore had no knowledge of Safeguard’s activities and
would not have authorized them. 1 At this stage, however, Plaintiff’s allegations are adequate to
state a claim that Rushmore is liable for Safeguard’s activities as its principal.
Both Defendants’ motions to dismiss Count I are denied.
II.
Consumer Fraud Act Claims Survive this Motion
Having concluded that Plaintiffs have adequately alleged an FDCPA claim, the court
turns to state law claims over which it exercises supplemental jurisdiction.
The Illinois
Consumer Fraud Act is “a regulatory and remedial statute intended to protect consumers,
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Plaintiff alleges that Illinois Attorney General Lisa Madigan sued Safeguard in
2013, seeking injunctive relief for its practice of unlawfully dispossessing Illinois residents who
were legal occupants of their homes. (Compl. ¶ 66.) Rushmore’s knowledge of this legal
proceeding could have put Rushmore on notice of Safeguard’s conduct. Safeguard asks the
court to strike the allegations (Safeguard Memorandum [20], ¶¶ 45-48), but offers no authority
for its assertion that the suit and resulting consent judgment are inadmissible. The court
declines to strike the allegation.
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borrowers, and business persons against fraud, unfair methods of competition, and other unfair
and deceptive business practices.” Batson v. Live Nation Entm't, Inc., 746 F.3d 827, 830 (7th
Cir. 2014) (citing Robinson v. Toyota Motor Credit Corp., 201 Ill. 2d 403, 416–17, 775 N.E.2d
951, 960 (2002)). The statute provides redress for deceptive business practices and also for
business practices that, while not deceptive, are unfair. See ibid.; Wigod v. Wells Fargo Bank,
N.A., 673 F.3d 547, 574–75 (7th Cir.2012). “The Act is ‘liberally construed to effectuate its
purpose.’ ” Wigod, 673 F.3d at 574 (quoting Robinson, 201 Ill. 2d at 417, 775 N.E.2d at 960). A
plaintiff may sue under the ICFA for deceptive conduct or for unfair conduct. While an allegation
of deceptive conduct triggers the heightened pleading standard of FED. R. CIV. P. 9(b), “a cause
of action for unfair practices under the [Illinois] Consumer Fraud Act need only meet the notice
pleading standard of Rule 8(a), not the particularity requirement in Rule 9(b).” Windy City Metal
Fabricators & Supply, Inc. v. CIT Tech. Fin. Servs., Inc., 536 F.3d 663, 670 (7th Cir.2008).
Plaintiff Sifuentes’s allegations of a Consumer Fraud Act violation are thin, but the court
concludes he has met this minimal pleading standard. Here, as in similar cases, plaintiff alleges
“an unfair act—self-help to take possession of mortgaged property outside the judicial process
mandated by state law.” Bywater, 2014 WL 1256103, *4. Such an unfair act, the court held,
violates the Consumer Fraud Act; the court declined to decide whether plaintiff’s allegations also
established an ICFA deceptive practices claim.
See also Flippin, 2012 WL 3260449 * 3
(“Plaintiffs' allegations that defendants locked her out of her house and took her property without
a legal or factual basis for doing so adequately state an ICFA claim.”); Boyd v. U.S. Bank, N.A.,
787 F.Supp.2d 747, 755–57 (N.D. Ill. 2011) (allegations that defendants broke into and
padlocked plaintiff's home “dispossessing him of his property, without notice or court approval”
were sufficient to withstand motion to dismiss ICFA claim).
Defendants again make no mention of these precedents. Defendant Safeguard cites
Schweihs v. Chase Home Finance, LLC, 2016 IL 120041, 77 N.E.3d 450 (2016), where plaintiff
alleged infliction of emotional distress on the part of a property preservation service hired by
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defendant lender. (Safeguard Memorandum, at 10-11.) Before entering the property to make
repairs, as permitted by the mortgage loan agreement, the preservation service’s agent had
knocked on the plaintiff’s door, talked with his neighbors, and determined that the gas was
turned off and debris and garbage littered the interior. 2016 IL 120041 ¶¶ 8-11. In affirming
dismissal of plaintiff’s tort claims, the Illinois Supreme Court made no mention of the Consumer
Fraud Act. Rushmore’s memorandum cites case law concerning deceptive, rather than unfair,
practices, and urges that nothing about the circumstances suggests deception: After Sifuentes
was locked out of his home a second time, Rushmore points out, “he was restored to
possession when the lockbox code was forwarded to him.” (Rushmore Memorandum [22],
at 6.) Rushmore believes these circumstances defeat the conclusion that Defendants intended
to keep Plaintiff out of his home, but a reasonable jury could conclude otherwise. The motions
to dismiss this count are denied.
III.
Trespass Claims are Unchallenged
Neither Defendant has challenged Plaintiff’s trespass allegations and, as his federal
claim survives this motion, his state tort claim does, as well.
CONCLUSION
Defendants’ motions to dismiss [19, 21] are denied. Defendants are directed to answer
the complaint within 21 days. A Rule 16 conference is set for May 9, 2018 at 9:00 a.m.
ENTER:
Dated: March 26, 2018
_________________________________________
REBECCA R. PALLMEYER
United States District Judge
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