United States District Court, N.D. Illinois
March 15, 2004.
In re: GUS LIMBEROPOULOS, Debtor; PETER LIMBEROPOULOS, Plaintiff; V. FIRST MIDWEST BANK, f/k/a Bremen Bank & Trust Co., First Midwest Bank, f/k/a Bremen Bank & Trust Co., not individually but as Trustee under Trust Agreement Number 87-3184, Harry Limberopoulos, Gus Limberopoulos, Louis Siamatas, and Ted Limberopoulos, Defendants
The opinion of the court was delivered by: WILLIAM J. HIBBLER, District Judge
Appeal from Bankruptcy Adversary Proceeding Judgment in Case No.
00 A. 00250
MEMORANDUM OPINION AND ORDER
Before the Court is Plaintiffs, Peter Limberopoulos', objections to
the Bankruptcy Court's Supplemental Proposed Findings of Facts and
Conclusions of Law ("Supplemental Findings"). For the reasons set forth
below, Limberopoulos' objections are overruled, and the Bankruptcy
Court's recommendations are accepted.
On January 3, 2001, the Bankruptcy Court issued Proposed Findings of
Fact and Conclusions of Law. On May 21, 2002, the District Court adopted
those findings and conclusions
except with regard to Count I of Limberopoulos' complaint, in which
he claimed that First Midwest Bank f/k/a Bremen Bank ("Bank") violated
the Illinois Consumer Fraud Act, 815 ILCS 505/1 et seq.
("ICFA"), The District Court directed the Bankruptcy Court to make
findings of fact with respect to the materiality of the alleged
concealment under the ICFA.
Limberopoulos obtained a loan from the Bank in 1988. The evidence at
trial established that all but three of Limberopouolos' tendered payments
to the Bank were properly credited against the loan. These three payments
were made on April 10, 1992; December 7, 1992; and January 11, 1993. The
Bank accepted these three payments without objection or comment and
acknowledged receipt of the payment and the loan number for which the
payments were intended. The Bank, however, failed to apply these payments
to reduce the loan balance. For the April 10, 1992, and the January
11, 1993 payments, the Bank applied them to the loan upon its receipt of
the payments, but the Bank subsequently mistakenly reversed these
applications. The Bank did not inform Liberopoulos of its failure to
apply the payments at the time of payment or thereafter.
On June 20, 2002, the Bankruptcy Court issued its Supplemental
Findings, recommending that judgment be entered in favor of the Bank with
respect to Count I of the complaint.
II. STANDARD OF REVIEW
In non core proceedings (i.e., cases that arc not directly
related to matters arising under Title 11), a bankruptcy judge must
submit proposed findings of fact and conclusions of law to the district
court. 28 U.S.C. § 157(c)(1). The district court then conducts a
de novo review of any portion of the bankruptcy judge's proposed
findings of fact and conclusions of law to which a party has made a
specific written objection. 28 U.S.C. § 187(c)(1); Fed.R. Bank.
Proc. 9033(d). The district court may accept, reject, or modify the
proposed findings of fact or conclusions of law, receive further
evidence, or recommit the matter to the bankruptcy judge with
instructions. Fed.R. Bank. Proc. 9033(d), Accordingly, the Court will
conduct a de novo review of the record to resolve Limberopoulos'
A. Illinois Consumer Fraud Act
To establish a violation of the ICFA, the plaintiff must demonstrate
that: (1) the defendant performed a deceptive act or practice; (2) the
defendant intended that the plaintiff rely on the deception; (3) the
deception occurred in the course of conduct involving a trade or
commerce; and (4) the consumer fraud proximately caused the plaintiff's
injury. Connick v. Suzuki Motor Co., Ltd., 174 Ill.2d 482,
501, 675 N.E.2d 584, 593 (1997). Although the policy of the ICFA is
to give broad protection to the consumer, Siegel v. Levy Organization
Dev. Co., 153 Ill.2d 534, 541-42, 607 N.E.2d 194, 198 (1992), a
plaintiff must still demonstrate deception by the defendant because the
ICFA prohibits deception, not error. Lagen v. Balcor Co.,
274 Ill. App.3d 11, 23, 653 N.E.2d 968, 977 (Ill.App. 2 Dist. 1995);
Stem v. Norwest Mortgage, Inc., 284 Ill. App.3d 506, 513,
672 N.E.2d 296, 302-03 (Ill.App. 1 Dist. 1996). The Illinois Supreme Court
has held that an omission of a material fact or a material
misrepresentation constitutes a deceptive act. Connick, 174
Ill.2d at 504-05; 675 N.E.2d at 595. An omission is material if the
plaintiff would have acted differently had she been aware of it, or if it
concerned the type of information upon which she would be expected to
rely in making her decision to act, Id.
The ICFA does not mandate that the defendant have deliberately intended
to deceive the plaintiff, so long as the misrepresentation or omission
was intended to induce the plaintiff's reliance. Cripe v.
Letter, 184 Ill.2d 185, 191, 703 N.E.2d 100, 103 (1998);
Mackinac v. Arcadia
Nat'l Life Ins. Co., 271 Ill. App.3d 138, 141-42, 648 N.E.2d 237,
239-40 (1995). When considering whether the element of reliance is
met, good or bad faith is not important, and an innocent
misrepresentation or omission may be actionable. Siegel, 153
Ill.2d at 542, 607 N.E.2d at 198, A party is considered to intend the
necessary consequences of his own acts or conduct. Dwyer v. American
Express Co., 273 Ill. App, 3d 742, 750, 652 N.E.2d 1351, 1357 (Ill.
App. 1 Dist. 1995), Actual reliance is not required. Siegel, 153
Ill.2d at 542, 607 N.E.2d at 198.
B. Deceptive Act or Practice
Limberopoulos attempts to establish a deceptive act by proving that the
Bank did not disclose its failure to apply three payments made on
Limberopoulos' loan. The Bankruptcy Court held that the Bank did not
commit a deceptive practice under the ICFA because the Bank's failure to
disclose its incorrect applications of the loan payments was not
material. The Bankruptcy Court reasoned that even if the Bank had
disclosed its incorrect application of the loan payments, Limberopoulos
would not have acted differently. Supplemental Findings at 3. The
Bankruptcy Court held that an earlier disclosure would only have resulted
in an earlier demand that the payments be properly applied. Id.
As explained above, an omission is material if the plaintiff would have
acted differently had he been aware of it, or if it concerned the type of
information upon which he would be expected to rely in making his
decision to act. Connick, 174 Ill.2d at 504-05; 675 N.E.2d at
595. At least two courts in this district have held that this test for
materiality is an objective one: whether a reasonable person could be
expected to rely on the information. See, e.g., Tylka v. Gerber
Prod.s Co., 178 F.R.D. 493, 498 (N.D. Ill. 1998); Cirone
Shadow v. Union Nissan of Waukegan, 955 F. Supp. 938 (N.D. Ill.
1997). Limberopoulos claims that the Bankruptcy Court erroneously
personal circumstances in deciding that he would not have acted
differently had he been aware of the failure to apply the payments.
Limberopoulos argues that a reasonable person would have acted
differently had it known that the Bank would not apply the payments to
the loan because "[i]t is difficult to imagine that a customer would
continue to do business with a bank that did not apply loan payments." In
addition, Limberopoulos argues that the Bankruptcy Court improperly
failed to consider the effect of the omissions, the non
disclosure of the failure to apply payments to the loan, at the time
Limberopoulos tendered the payments, instead considering only the effect
of the omissions after they occurred.
This Court agrees with the Bankruptcy Court that the Bank's omissions
were not material. First, there is no question that Limberopoulos owed
all the funds it tendered to the Bank pursuant to the forbearance
agreement of April 8, 1992, between Limberopoulos and the Bank. Second,
there is no dispute that Limberopoulos desired to make the payments to
reduce the outstanding balance on the loan and to avoid a threatened
mortgage sale. Third, Limberopoulos provides no citation to the record to
support its contention that the Bank, at the time it received the
payments, was not going to apply them to the commercial loan. In fact,
the evidence shows otherwise as the Bank applied the April 10 and January
11 payments to the commercial loan upon receipt. The Bank later
mistakenly reversed this application. The Bank's initial application of
these payments to the loan precludes the Court from considering whether a
reasonable person would have acted differently upon knowing of the
failure to apply the payments to the loans at the time the payments were
made, because these payments ware applied to the loan at the
time they were made.
Fourth, Limberopoulos misconstrues the "reasonable person" standard.
Although the Court could not find an ICFA case defining the reasonable
person standard, in other Illinois claims, the
standard for reasonableness is measured by what a reasonable person
would do under circumstances similar to those presented.
See, e.g., Hobart v. Shin, 185 Ill.2d 283, 294, 705 N.E.2d 907,
913 (1998); Miller v. Civil Constructors, Inc., 272 Ill. App.3d 263,
269, 651 N.E.2d 239, 244 (Ill.App.2d Dist. 1995). Thus, the
Bankruptcy Court did not err in considering that: (1) the evidence showed
that during the course of the loan from 1988 through 1993, the Bank
properly applied every payment upon receipt with the only exception being
the December 7, 1992 payment; (2) there was a substantial balance left on
the loan even after all of the payments had been made; and (3) the Bank
had a continuing right to accrue interest on the correct balance of the
loan and to exercise its foreclosure rights. Although the Bank's
consideration of Limberopoulos' status as a sophisticated business man
who kept records of the amounts owing on his loans ventures into the
subjective realm of the loan transaction, this Court finds that the
Bankruptcy Court's decision that the Bank's omission was not material to
a reasonable person is sufficiently supported by the other circumstances
considered by the Bankruptcy Court.
Contrary to Limberopoulos' claims, it is not so difficult to imagine
that a customer in his position would continue to do business with the
Bank, even if the Bank had disclosed the failure to apply the payments
when the failure to apply occurred. As the Bankruptcy Court explained,
the Bank had properly applied the vast majority of the loan payments to
the loan. In addition, there was still a substantial balance left on the
loan even after the payments were applied to the loan. Limberopoulos does
not cite any legal or factual case supporting his theory that a person in
that situation would go through the trouble of refinancing their loan
through another bank instead of merely demanding proper application of
the payments to the loan.
C. Intent to Induce Reliance on the Deception
The Bankruptcy Court also held, alternatively, that even if the Bank
did commit a deceptive act or practice, there was no evidence presented
that the Bank intended Limberopoulos to rely on the Bank's failure to
disclose the incorrect application of payments. Limberopoulos, however,
contends that the Bank indeed intended him to rely on the Bank's
omissions so that he would continue to make payments and not seek to
refinance the loan through another bank. Limberopoulos contends that the
Bank's failure to inform him that it would not apply his payments to the
loan would have the "natural" consequence that Limberopoulos would
continue to tender payments to the Bank.
Limberopoulos, however, gets the test wrong. Limberopoulos' continued
payments must be a "necessary" consequence of the Bank's omission of its
failure to apply the loan payments in order to prove that the Bank
intended Limberopoulos to rely on its omission, Dwyer, 273
Ill. App.3d at 750, 652 N.E.2d at 1357. The Bank did not have a strong
incentive to keep its three mistakes a secret as American Express did in
Dwyer, and the sole purpose of applying payments to a loan is
not to continue to receive payments as in Warren v. LeMay,
142 Ill. App.3d 550, 566, 491 N.E.2d 464, 474 (Ill.App. 5 Dist. 1986).
Rather, Limberopoulos' payment was a necessary consequence of the
agreement between the Bank and Limberopoulos that set forth
Limberopoulos' terms of payment. In the Bank's desire to maintain
customers and to keep payments coming, the Bank would have a strong
disincentive to hide a failure to apply payments. The Bank's incentive
would be to rectify its mistake as soon as possible and apply the
payment to the loan.
Furthermore, the Bank did not know at the time it received the three
payments that it was not going to apply the payments to reduce the loan
balance, and thus it could not have intended
Limberopoulos to rely on that. In addition, as explained above,
Limberopoulos continued to owe a great deal of money on the loan, which
he was required to pay to the Bank pursuant to a binding agreement
between them. Therefore, the Bank did not need the omission to induce
Limberopoulos to make payments. Finally, Limberopoulos also cannot show
that the Bank intended him to rely on the Bank's omission at the time of
payment because the Bank did originally apply the April 10 and January 11
payments to the commercial loan upon receipt.
Limberopoulos' objections are overruled, and the Bankruptcy Court's
recommendations arc accepted. Judgment is hereby entered in favor of the
Bank with respect to Count I of Limberopoulos' complaint.
IT IS SO ORDERED.
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