Suttle v. Calk et al

Filing 33

OPINION and ORDER: For the reasons stated herein, the motion to dismiss 19 is denied. Scheduling conference is set for 9/29/2020 at 11:00 a.m. Signed by the Honorable Joan H. Lefkow on 9/9/2020. Mailed notice (ags)

Case: 1:19-cv-04541 Document #: 33 Filed: 09/09/20 Page 1 of 10 PageID #:272

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
STEPHANIE SUTTLE,
Plaintiff,
v.
STEPHEN CALK and
THE FEDERAL SAVINGS BANK,
Defendants.

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Case No. 19 C 4541
Judge Joan H. Lefkow

OPINION AND ORDER
Stephanie Suttle has sued Stephen Calk and The Federal Savings Bank (“TFSB”) for
violations of the Truth in Lending Act (“TILA”), 15 U.S.C. §§ 1601 et seq., its implementing
Federal Reserve Board Regulation Z, 12 C.F.R. Pt. 226 (“Regulation Z”), the Illinois Consumer
Fraud and Deceptive Business Practices Act (“ICFA”), 815 ILCS 505/1 et seq., common law
fraud, and promissory estoppel. Defendants move to dismiss plaintiff’s first amended complaint
for failure to state a claim. (Dkt. 19.) The motion is denied. 1
BACKGROUND 2
In 2016, Suttle began working with NFM Lending to refinance her and her ex-husband’s
home mortgage to pay off her ex-husband’s interest in their marital home following their

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The court has federal question jurisdiction over Plaintiff’s federal law claims under 28 U.S.C.
§ 1331 and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367(a). (Plaintiff does
not invoke diversity jurisdiction, although it may exist.) Venue is proper in this district under 28 U.S.C.
§ 1391(b) because all of the defendants are located in the district, a substantial part of the events or
omissions giving rise to the claim occurred in the district, and a substantial part of the property that is the
subject of the action is situated in the district.
2

The following recitation of facts is taken from the well-pleaded allegations in Suttle’s first
amended complaint, which facts are presumed true for purposes of this motion. See Active Disposal, Inc.
v. City of Darien, 635 F.3d 883, 886 (7th Cir. 2011).

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divorce. Suttle communicated with Calk about her plans to refinance because Calk was an old
friend and the president of TFSB. On or about October 15, 2016, Calk solicited Suttle’s home
mortgage refinance business.
To obtain Suttle’s business, Calk represented that he had experience, wanted to help, was
a friend, and that TFSB would be cheaper and more efficient than other banks or lenders, among
other representations. Suttle relied on these representations and abandoned her application with
NFM Lending to complete her loan transaction with Calk and TFSB.
Suttle informed Calk that she had access to $330,000 in an IRA to buy out her exhusband’s interest in the home but needed another $60,000. She told Calk that she would have to
replace the money in her IRA within 60 days to avoid significant penalties. Calk advised her to
complete a loan application that would allow TFSB to issue a mortgage secured by her home to
pay back the IRA in time to avoid penalties.
Thereafter, Calk instructed Suttle to wire $417,000 to TFSB to pay off the mortgage with
her ex-husband. On October 21, 2016, before Suttle signed any loan documents, Suttle
transferred $417,000 to TFSB. Subsequently, Calk informed Suttle that he would wait for her
direction to pay off her ex-husband. Despite this communication, on or about October 26, 2016,
prior to her execution of any loan documents, Calk transferred $395,000 to Suttle’s ex-husband
without her knowledge or consent.
Suttle did not receive the loan documents until October 28, 2016. After she received the
documents, defendants applied intense pressure on her to sign. Defendants sent Suttle multiple
messages, e-mails, and phone calls until she signed. The documents that Suttle signed did not
reflect the loan agreement that the defendants promised.

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Instead of the mortgage refinance loan that Calk promised, Suttle received a one-year,
high-interest bridge loan. But she was unaware of the nature of the transaction because the terms
of the loan documents were unclear, inconspicuous, and impossible to understand. In addition,
Suttle did not receive mandatory disclosure forms required under TILA.
Shortly thereafter, Suttle contacted Calk for the funds to repay her IRA to avoid the early
withdrawal tax penalties. Calk informed Suttle that he was unable to return her money because
TFSB had paid her ex-husband and the funds she transferred to TFSB were being held as
collateral (presumably for the loan to Suttle).
Suttle was charged a $9,840 administration fee for making the loan and has been billed
5% of the $417,000 principal on a monthly basis, which is automatically deducted from her cash
collateral. She was not informed of, nor did she knowingly agree to, any of the loan terms, fees,
or arrangements.
On July 5, 2018, Suttle sent the defendants a written notice to rescind the transaction. The
defendants did not respond, and this action followed.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a
claim on which relief may be granted. In ruling on a Rule 12(b)(6) motion, the court accepts as
true all well-pleaded facts in the plaintiff’s complaint and draws all reasonable inferences from
those facts in the plaintiff’s favor. Active Disposal, Inc. v. City of Darien, 635 F.3d 883, 886 (7th
Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the
defendant with fair notice of a claim’s basis but must also establish that the requested relief is
plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L.Ed.2d 868
(2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L.Ed.2d 929 (2007).

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The allegations in the complaint must be “enough to raise a right to relief above the speculative
level.” Twombly, 550 U.S. at 555, 127 S. Ct. 1955. At the same time, the plaintiff need not plead
legal theories; it is the facts that count. Hatmaker v. Mem’l Med. Ctr., 619 F.3d 741, 743 (7th
Cir. 2010); see also Johnson v. City of Shelby, 574 U.S. 10, 135 S. Ct. 346, 346 (2014) (per
curiam) (“Federal pleading rules call for a short and plain statement of the claim showing the
pleader is entitled to relief; they do not countenance dismissal of a complaint for imperfect
statement of the legal theory supporting the claim asserted.”).
ANALYSIS
I.

Truth-in-Lending-Act Claims (Counts I and II)
Suttle’s TILA claim primarily rests on her allegations that she was entitled to two copies

of a notice of the right to rescind that disclosed the material terms of the loan, the security
interest in the home, the right to rescind, how to rescind, the effects of rescission, and the date
the rescission option expired, as required by 15 U.S.C. § 1635 and Regulation Z, 12 C.F.R. §
226.23. 3 She did not receive those disclosures and therefore, she argues, may invoke her right to
rescind the transaction within three years under 12 U.S.C. § 1635(a), (f). Defendants argue that
Suttle’s TILA claim fails because the transaction of which she complains involves a “residential
mortgage transaction,” which is exempt from TILA’s disclosure and rescission provisions. See
Dunn v. Bank of Am. N.A., 844 F.3d 1002, 1005 (8th Cir. 2017); French v. Wilson, 446 F. Supp.
216, 218 (D.R.I. 1978); Saldate v. Wilshire Credit Corp., 268 F.R.D. 87, 96 (E.D. Cal. 2010).
TILA is a federal consumer protection statute intended to promote the “‘informed use of
credit’ by assuring ‘meaningful disclosure of credit terms to consumers.’” Ford Motor Credit

3

Suttle incorporates other allegations related to her “bait and switch” claims that are not germane
to the disclosure requirements of TILA. At least, Suttle does not argue that Calk’s oral representations
violate any specific disclosure requirement.

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Co. v. Milhollin, 444 U.S. 555, 559, 100 S.Ct. 790 (1980) (quoting 15 U.S.C. § 1601(a)).
Pursuant to Congressional authority, the Federal Reserve Board promulgated Regulation Z,
which sets forth detailed disclosure requirements to be made in consumer credit transactions.
TILA and Regulation Z extend special protections to homeowners, including a right of
rescission for any loan transaction in which the borrower’s principal dwelling is used as
security. See 15 U.S.C. § 1635(a); 12 C.F.R. § 226.23. Under Regulation Z, a creditor is required
to “deliver two copies of the notice of the right to rescind to each consumer entitled to the right
to rescind.” 12 C.F.R. § 226.23(b)(1). The notice “shall be on a separate document that identifies
the transaction” and shall “clearly and conspicuously” disclose the consumer’s right to rescind
the transaction. Id. If proper disclosures are made, the homeowner's rescission period ends at
“midnight of the third business day following consummation [of the loan], delivery of the notice
[of the right to rescind], or delivery of all material disclosures, whichever occurs last.” 12 C.F.R.
§ 226.23(a)(3). If the required notice or material disclosures are not delivered, the right to rescind
shall expire three years after consummation. See 12 C.F.R. § 226.23(a)(3).
Defendants’ argument, that the loan transaction is exempt from TILA’s disclosure and
rescission provisions, fails. See 12 U.S.C. § 1635(e). Under § 1635(x), a residential mortgage
transaction means “a transaction in which a mortgage, deed of trust, purchase money security
interest arising under an installment sales contract, or equivalent consensual security interest is
created or retained against the consumer's dwelling to finance the acquisition or initial
construction of such dwelling.” According to Regulation Z, a residential mortgage transaction
“does not include a transaction involving a consumer’s principal dwelling if the consumer had
previously purchased and acquired some interest to the dwelling, even though the consumer had
not acquired full legal title.” 12 C.F.R. Pt. 226, Supp. I, Subpt. A § 226.2(a)(24)5(i). “Examples

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of new transaction involving a previously acquired dwelling include . . . an extension of credit
made to a joint owner of property to buy out the other joint owner’s interest.” Id. at (ii).
Suttle specifically alleges that she obtained the extension of credit from TFSB to buy out
her ex-husband’s interest in their marital home. Even if TFSB had provided the loan Suttle
requested, it would not have been exempt from TILA. More to the point, the consumer credit
transaction reflected in the documents attached to defendants’ motion is not a residential
mortgage transaction and is therefore subject to Regulation Z, including the rescission rules of §
226.23. See 12 C.F.R. Pt. 226, Supp. I, Subpt. A § 226.2(a)(24)5(ii).
Suttle contends that she has a right to rescind the transaction under 12 C.F.R.
§ 226.23(a)(1) and, because defendants failed to provide her with two copies of a notice of the
right to rescind as required by subsection (a)(2), she properly rescinded on July 5, 2018, within
the three-year window allowed by subsection (a)(3). Consequently, Suttle has sufficiently
pleaded facts to survive a motion to dismiss. 4
II.

State Law Claims
Suttle’s complaint asserts state law claims for violation of the ICFA (Count III), for

common law fraud (Count IV), and promissory estoppel (Count V). For the following reasons,
the court denies defendants’ motion to dismiss. 5

4

Defendants’ argument in reply that Regulation Z does not apply because it is not rational and
that the transaction at issue is a multipurpose one could have been raised in its opening memorandum but
was not, so it will not be considered here. Narducci v. Moore, 572 F. 3d 313, 324 (7th Cir. 2009) (“[T]he
district court is entitled to find an argument raised for the first time in a reply brief is forfeited.”).
5

Defendants do not mention Rule 9(b) and have thereby waived its requirements. Omans v.
Manpower, Inc., No. 11 C 8178, 2012 WL 1565339, at *5 (N.D. Ill. May 2, 2012) (“Defendant did not
move to dismiss this count on Rule 9 grounds, and Rule 9 objections are thereby waived.”); United Nat.
Records, Inc. v. MCA, Inc., 609 F. Supp. 33, 38–39 (N.D. Ill. 1984) (“A party who fails to raise
a Rule 9(b) objection normally waives the requirement.”); see also Gensler v. Strabala, 764 F.3d 735,
739 (7th Cir. 2014) (declining to affirm dismissal of complaint on the alternative ground that it lacked
sufficient particularity because appellee did not invoke Rule 9(b)).

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A. Applicability of the ICFA (Count III)
Defendants move to dismiss Suttle’s ICFA claim, arguing that it fails to state a claim
under Maryland law. Federal courts hearing state law claims under supplemental jurisdiction
apply the forum state’s choice of law rules to select the applicable state substantive law. McCoy
v. Iberdrola Renewables, Inc., 760 F.3d 674, 684 (7th Cir. 2014). Illinois applies the Restatement
(Second) of Conflicts of Laws to determine which state’s law should apply. Ruiz v. Blentech
Corp., 89 F.3d 320, 323 (7th Cir. 1996). Section 148 of the Restatement outlines factors to
consider “when the plaintiff’s action in reliance took place in whole or in part in a state other
than that where the false representations were made….” These include:
a. The place, or places where the plaintiff acted in reliance upon the defendant’s
representations;
b. The place where the plaintiff received the representations;
c. The place where the defendant made the representations;
d. The domicile, residence, nationality, place of incorporation and place of business of
the parties;
e. The place where a tangible thing which is the subject of the transaction between the
parties was situated at the time; and
f. The place where the plaintiff is to render performance under a contract which he has
been induced to enter by the false representations of the defendant.
Restatement (Second) of Conflict of Laws § 148 (1971).
The general approach to Section 148, described in comment j, states that, “[i]f any two …
of the contacts, apart from the defendant’s domicile, state of incorporation or place of business,
are located wholly in a single state, this will usually be the state of the applicable law with
respect to most issues…. [T]he same would be true if any two of the other contacts mentioned
immediately above were located in the state in question even though this state was not the place
where the plaintiff received the representations.” Id. Suttle alleges facts supporting more than
two of these factors: that the defendants made the representations in Illinois; received and held
on to her $417,000 cash security in an account in Illinois; and instructed her to make payments to

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an account in Illinois. This is sufficient at the pleading stage to establish that Illinois law
applies. 6 As the defendants do not argue for dismissal based on the sufficiency of pleading the
claim for violation of the ICFA, the claim survives.
B. Common Law Fraud (Count IV)
Suttle alleges that she signed the contract in justifiable reliance on the defendants’ false
statements that she would be offered a standard mortgage refinance loan in a cheaper and more
efficient manner than NFM Lending could provide because she trusted Calk based on his
employment history, their personal relationship, and his assurances. Defendants argue that Suttle
could not have justifiably relied on the defendants’ statements after she signed loan documents
(filed with the motion to dismiss 7) that specify the term, interest rate, and fees associated with
the loan, in contradiction of her allegations.
Suttle’s allegations amount to a claim of fraud in the inducement of contract. When a
contract is induced by fraud, it is voidable. See Halla v. Chi. Title & Tr. Co., 104 N.E.2d 790,

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The court is not conclusively ruling that Illinois law applies. Such a ruling is not necessary—
indeed, not appropriate—based on the limited facts currently before the court. In concluding that the
district court improperly dismissed an ICFA claim of non-resident members of a putative class, the
Seventh Circuit explained in Morrison:
Perhaps [the alleged facts are] not enough to compel a conclusion that Illinois law applies;
* * * But if we can’t say that the complaint and answer contain enough to point unerringly
to Illinois law, we can say that the complaint does not defeat application of Illinois law. …
[The district court] did not take evidence, make findings of fact, or weigh the
incommensurable factors in [the] formula; it was not entitled to do any of these things on
a motion to dismiss the complaint.
Morrison v. YTB Int'l, Inc., 649 F.3d 533, 535 (7th Cir. 2011).
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Exhibits to a motion to dismiss that are referred to in the complaint and are central to a
plaintiff’s claims are to be considered on a motion to dismiss just as if the plaintiff had attached them as
exhibits to her complaint. Wright v. Associated Ins. Cos. Inc., 29 F.3d 1244, 1248 (7th Cir. 1994). When
allegations in a complaint conflict with exhibits attached to a motion to dismiss that are considered, the
exhibits control when they reveal facts that foreclose recovery as a matter of law. Whirlpool Fin. Corp. v.
GN Holdings, Inc., 873 F. Supp. 111, 123 (N.D. Ill. 1995), aff’d, 67 F.3d 605 (7th Cir. 1995).

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795 (Ill. 1952) (noting “the familiar rule that a contract induced by fraud is… voidable at the
election of the party claiming to have been defrauded”); Cannon v. Burge, 752 F.3d 1079, 1091
(7th Cir. 2014) (same). Under Illinois common law, “in order to constitute ‘fraud invalidating a
contract’ a representation (1) must be one of material fact which has been made for the purpose
of inducing the other party to act, (2) must be known to be false by the maker, but reasonably
believed to be true by the other party, and (3) must be relied upon by such other party and acted
upon to his damage.” Ainsworth Corp. v. Cenco Inc., 437 N.E.2d 817, 821, 107 Ill. App. 3d 435,
439 (1982) (citations omitted). The existence of a written agreement does not prohibit the court
“from inquiring into surrounding circumstances to ascertain whether it was fairly made and
accurately reflected the intention of the parties.” Id.
Despite the conflict between her allegations and the loan documents, recovery is not
foreclosed as a matter of law because Suttle claims to have been induced to sign the documents
by Calk’s false statement of material fact that she had been provided a standard mortgage
refinance loan and his pressuring her to sign (evidence of his intent to induce). As pleaded,
Suttle’s common law fraud claim survives the motion to dismiss.
C. Promissory Estoppel (Count V)
Defendants seek dismissal of Suttle’s promissory estoppel claim on the basis that she
cannot pursue a quasi-contractual claim where an express contract exists. To state a claim for
promissory estoppel under Illinois law, a plaintiff must prove the following: “(1) defendant made
an unambiguous promise to plaintiff; (2) plaintiff relied on such promise; (3) plaintiff’s reliance
was expected and foreseeable by defendants; and (4) plaintiff relied on the promise to its
detriment.” Newton Tractor Sales, Inc. v. Kubota Tractor Corp., 906 N.E.2d 520, 523–24, 233
Ill. 2d 46, 51, (2009). Promissory estoppel is available only where there is no express

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contract. See Prodromos v. Poulos, 560 N.E.2d 942, 948, 202 Ill. App. 3d 1024, 1032 (Ill. App.
Ct. 1991) (“As a rule, plaintiffs cannot pursue quasi-contractual claims where there is an express
contract between the parties.”); Prentice v. UDC Advisory Servs., Inc., 648 N.E. 2d 146, 150,
271 Ill. App. 3d 505, 511 (Ill. App. Ct. 1995)(“[I]f a party’s performance under a written contract
is the same performance which satisfies the requirement of detrimental reliance, then that party is
barred from seeking redress under the doctrine of promissory estoppel.”)
Suttle alleges that “Calk unambiguously promised [to] get her a mortgage refinance loan
at lower cost and faster than the one she was currently applying for with NFM Lending,” but
TFSB provided a one-year loan with a higher interest rate. TFSB’s performance under the
written agreement, then, is not the same as the performance Calk promised, so the claim is not
foreclosed by the principle on which defendants rely. Suttle also alleges facts sufficient to infer
that she relied on Calk’s promise by withdrawing her application with NFM Lending and using
TFSB, that her reliance was expected and foreseeable because she needed the loan quickly and
trusted Calk, and that her reliance was to her detriment because it caused her to suffer damages
in the form of fees, interest, and IRA withdrawal penalties. These allegations are sufficient to
permit an inference that TFSB is liable under this theory.
CONCLUSION
For the reasons stated above, the motion to dismiss is denied. The case will be called for
a scheduling conference on September 29, 2020 at 11:00.

Date: September 9, 2020

_______________________________
U.S. District Judge Joan H. Lefkow

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