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CLARK v. FAIRBANKS CAPITAL CORPORATION

May 29, 2003

EDDIE CLARK AND PEARL CLARK, PLAINTIFFS, VS. FAIRBANKS CAPITAL CORPORATION AND M&T TRUST, DEFENDANTS.


The opinion of the court was delivered by: Charles Norgle, District Judge

OPINION AND ORDER

Before the court is Defendant Fairbanks Capital Corporation's Motion for Summary Judgment as to Plaintiffs' Second Amended Complaint pursuant to Fed.R.Civ.P. 56. For the following reasons, Fairbanks' motion is granted.

I. BACKGROUND*fn1

On March 11, 1999, Plaintiffs, Eddie Clark and Pearl Clark (hereinafter collectively referred to as "the Clarks"), entered into a loan transaction with Contimortgage Corporation ("Contimortgage") borrowing $86,400. In exchange for the loan, the Clarks gave Contimortgage a mortgage on their home located at 251 W. 106th Place, Chicago, Illinois. On June 3, 1999, pursuant to a written Pooling and Servicing Agreement ("PSA"), Contimortgage pooled the Clarks' loan together with a number of other loans into the Contimortgage Home Equity Loan Trust 1999-3 ("the Trust").

Shortly after obtaining the loan, the Clarks defaulted. In February of 2000, Contimortgage initiated foreclosure proceedings against the Clarks in the Circuit Court of Cook County, Illinois. In the Spring of 2000, Contimortgage filed for Chapter 11 Bankruptcy Protection in the United States Bankruptcy Court for the Southern District of New York. On May 12, 2000, Contimortgage assigned the servicing rights to the loans contained within the Trust to Fairbanks Capital Corporation ("Fairbanks"). Def. SMF, Ex. 5. As a loan servicer for the Trust, Fairbanks was required to make reasonable efforts to collect home equity Joan payments and to establish and maintain a trust account for the purpose of depositing the loan payments on a daily basis. In September of 2000, Fairbanks filed an Amended Complaint in the state court foreclosure proceeding adding itself as a party to the Clarks' foreclosure lawsuit.

On December 12, 2000. the Clarks brought this action against Defendant Fairbanks alleging violations of the Home Ownership Equity Protection Act ("HOEPA") amendments to the Truth in Lending Act ("TILA") (15 U.S.C. § 1602 (aa)). Specifically, the Clarks claim that they are entitled to rescission of their loan agreement and monetary damages because Contimortgage failed to make certain required disclosures while consummating the Clarks' loan. The Clarks contend that Fairbanks, as a successor-in-interest to the (larks loan, is liable under the HOEPA amendments to TILA for Contimortgage's failure to make the required disclosure.

On November 2, 2001, Fairbanks filed its Motion for Summary Judgment contending that it was merely the servicer of the (larks loan, and as such it is not liable, because TILA expressly exempts Joan servicers from liability. On March 13, 2002, the Clarks filed a Motion for Leave to File a Second Amended Complaint. On May 31, 2002, the court granted the Clarks' motion for leave and the Clarks filed their Second Amended Complaint adding Manufacturers and Traders Trust Company ("M&T Trust") as an additional Defendant to this action. In July of 2002, Fairbanks filed its Motion for Summary Judgment as to Plaintiffs' Second Amended Complaint which is currently before the court.

II. DISCUSSION

A. Standard for Summary Judgment

Summary judgment is permissible when "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The nonmoving party cannot rest on the pleadings alone, but must identify specific facts, see Cornfield v. Consolidated high 8Th. Dist. No. 230, 991 F.2d 1316, 1320 (7th Cir. 1993), that raise more than a mere scintilla of evidence to show a genuine triable issue of material fact. See Murphy v. ITT Technical Services, Inc., 176 F.3d 934, 936 (7th Cir. 1999).

In deciding a motion for summary judgment, the court can only consider evidence that would be admissible at trial under the Federal Rules of Evidence. See Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996). The court views the record and all reasonable inferences drawn therefrom in the light most favorable to the non-moving party. Fed.R.Civ.P. 56(c); see also perdomo v. Browner, 67 F.3d 140, 144 (7th Cir. 1995). "In the light most favorable" simply means that summary judgment is not appropriate if the court must make "a choice of inferences." See United States v. Diebold, Inc., 369 U.S. 654, 655 (1962); see also First Nat'l Bank of Arizona v. Cities Service Co., 391 U.S. 253, 280 (1968); Wolf v. Buss (America) Inc., 77 F.3d 914, 922 (7th Cir. 1996). "The choice between reasonable inferences from facts is a jury function. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). When the defendant moves for summary judgment, the court must view the record and all inferences in a light most favorable to the plaintiff. Ameritech Benefit Plan Comm. v. Communication Workers of Am., 220 F.3d 814, 821 (7th Cir. 2000). However, "[c]onclusory allegations alone cannot defeat a motion for summary judgment." Thomas v. Christ hospital and Medical Center, No. 02-3373, 2003 U.S. App. LEXIS 7921. at * 11 (7th Cir. April 25, 2003) citing Lujan v. Nat'l Wildlife Federation, 497 U.S. 871, 888-89 (1990).

B. The HOEPA Amendments to TILA

HOEPA, enacted in 1994, is an amendment to TILA, and is Congress' response to the substantive abuses brought by lenders who provide alternative home loans. 15 U.S.C. § 1601, et, seq. Generally. HOEPA lays out the guidelines, rules, and parameters governing alternative mortgages. 15 U.S.C. § 1602. HOEPA and its regulations establish a cost threshold, which once exceeded, triggers a set of restrictions on lending practices related to high risk loans. See 15 U.S.C. § 1602 (aa)(1). HOEPA was enacted to prevent mortgage companies from taking advantage of the average homeowner acquiring an alternative home mortgage.

The legislative history of HOEPA, in both the Senate and House Reports, explains that the purpose of the HOEPA amendments to TILA is to address the problem of "reverse redlining," which is the practice of lenders targeting residents in certain geographic areas for credit on unfair terms. H.R.Rep. No. 103-652, at 158 (1994), U.S.Code Cong. & Admin, News 1994, pp. 1977, 1988. "The triggers in the legislation are not intended as caps, but rather to ensure that enhanced protections are provided to consumers that are most vulnerable to abuse without impeding the flow of credit." H.R.Rep. No. 103-652, at 159 (1994), U.S.Code Cong. & Admin. News 1994, pp. 1977, 1989. Such a ...


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