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September 30, 2005.


The opinion of the court was delivered by: DAVID COAR, District Judge


Now before this Court are Defendants motions to dismiss for failure to state a claim.

I. FACTS*fn1

  On May 28, 1999, Brenda Durham took out a loan from TLS in the principal amount of approximately $62,400.00 (the "Loan"). The Loan was secured by a first mortgage ("Mortgage") on Durham's residence in Chicago, with Durham as mortgagor and TLS as mortgagee. The Mortgage was duly registered in Cook County, Illinois. (Compl. ¶ 3.)

  In March 1999, plaintiff Brenda Durham was a single mother, living with her three children on the south side of Chicago, Illinois. Durham was the sole owner of a house previously owned by her father. After his death, Durham's siblings transferred their interests in the house to her by way of quitclaim deeds. The house had no mortgage liens on it, but Durham had fallen behind on her property taxes. Durham, who had only a few community college classes in addition to a high school diploma, had never taken out a mortgage before. She was not familiar with the financing process or the range of mortgage lending instruments in the market. (Id. ¶ 91-0.) A friend had told Durham, however, that defendant The Loan Store ("TLS") "helped people get loans." (Id. ¶ 11.)

  Durham accordingly called TLS's West 103rd Street branch in Chicago in March 1999, and arranged to meet with TLS vice president, Janice Caldwell, at Durham's home. During that meeting, Durham told Caldwell she wanted to take out a loan for $5,000-6,000.00 to pay her back property taxes. (Id. ¶ 12.) Caldwell asked about Durham's income. Durham stated that she received monthly public assistance, a food stamp allotment, and $50 in monthly child support, which she supplemented with irregular babysitting. (Id. ¶ 13.) Caldwell asked if Durham could "prove" her babysitting income but Durham replied that she and her neighbors customarily swapped babysitting, food, clothes, and furniture. (Id. ¶ 14.) When asked about her credit status, Durham indicated that she had no credit cards but believed she had good credit. She further stated that she had paid another lending company $100 in 1997 or 1998 to run a credit check but had been unable to pay the additional loan fees "up front" to get the desired loan, and did not know the results of the credit check. (Id. ¶ 15.) In addition, she told Caldwell she could not pay any money "up front" for a loan in 1999. Caldwell explained that fees and expenses could be deducted from the loan proceeds. (Id. ¶ 16.)

  Durham gave Caldwell a tour of the house and premises. The first floor was uninhabitable due to a fire in 1995, which had caused over $10,000 worth of damage. Durham and her children lived on the second floor. Because she did not have homeowner's insurance, Durham paid for repairs and minor renovations out of pocket when she could afford them. Substantial repairs were necessary. Durham estimated that the house and property were worth approximately $50,000, based on her property tax assessment. She indicated that she would like to run a childcare business from her home once she fixed it up. Caldwell then suggested that Durham seek a $30,000-40,000 loan to not only pay her back taxes but also make needed repairs to the house. (Id. ¶ 17, 21-22.) During the visit, Caldwell partially filled out a loan application form with Durham's information. She took the incomplete form with her when she left, leaving no copy for Durham. (Id. ¶ 20.)

  During the March 1999 meeting, Caldwell failed to discuss loan options or explain concepts like fixed versus variable interest rates, balloon payments, processing fees, and amortization, among others with Durham. (Id. ¶ 25.) Durham told Caldwell she wanted a fixed rate loan because she had been told that was what she should request. She expressed a desire to pay off any loan in 15 years, although Caldwell told her payoff times ranged from 15 to 30 years. (Id. ¶ 26.) After the meeting, Durham heard nothing from Caldwell for several weeks. At the time, Durham had no telephone and could not get one because she had an outstanding balance with Ameritech. Caldwell arranged to have a telephone company employee establish phone service at Durham's house in the name of "Mary Wilson," whom Durham did not know. The phone service was disconnected at some point after the Loan closing. In late March or early April 1999, Durham contacted Caldwell for an update. Caldwell told Durham that Durham's credit was "good" and that an appraiser would be coming to appraise Durham's house and property. At some point thereafter, a male appraiser whom Durham understood had been sent by Caldwell came to Durham's house. The front door windows and two windows on the first floor were boarded up at the time from the 1995 fire. The garage needed entrance and front doors. The appraiser, however, spent almost all of his 30 minute visit standing in one spot in the basement, taking notes. When Durham asked if he wished to tour the house, he said he could see all he needed. He did not tour the second floor or the rest of the first floor. He did not take room dimensions. He did not, to Durham's knowledge, examine the garage. (Id. ¶ 28.) Durham asked for a copy of the appraisal but was told she would receive one from TLS. Also in April 1999, a male insurance agent who stated he was from Farmers Insurance Group of Companies visited the house. He told Durham he was a friend of Caldwell's and that Caldwell had sent him to write a homeowner's policy. During his 15 minute visit, he said he did not need to see the interior of the house. He told Durham the only things that the house needed were a repair to the front door and some tuckpointing. The "agent" did not discuss coverage amounts or options or premiums. Shortly before the Loan closing, Farmers Insurance Group sent Durham a letter stating that it would not cover the house because of outstanding repairs that must be made. (Id. ¶ 29.)

  In mid-May 1999, Caldwell told Durham that her loan had been approved and that the package was being express mailed to TLS' office. Caldwell did not request any additional information from Durham, but told her that the Loan had to be closed very quickly. Caldwell told Durham to go to Netco, a title company, on May 25, 1999, where she would meet Vernell Bradley, the TLS branch president, for the closing. (Id. ¶ 30.) Caldwell did not tell Durham the amount of the loan, but asked how much Durham could pay per month. Durham stated she could pay $350 to $400 per month. (Id. ¶ 31.) On the afternoon of May 25, 1999, Caldwell drove Durham to the closing ("Initial Closing") at Netco, where Bradley and a Netco employee were also present. Prior to the Initial Closing, Durham had not seen any loan documents or even a copy of the loan application. At the Initial Closing, Caldwell informed Durham, for the first time, that the loan amount was $62,400, approximately double the amount Durham had anticipated. The monthly payments were approximately $730 per month. Durham indicated that she would "try to find a way" to pay them, based on her desires to start a licensed childcare business and find a tenant for one floor of her house. Caldwell directed Durham to sign the loan documentation quickly because Netco was about to close for the day. Durham did not have the opportunity to review any of the many documents at any length, and was confused by a number of discrepancies she saw in the paperwork and by the closing process itself. (Id. ¶ 32-36.)

  Specifically, Durham noted the following discrepancies in the loan paperwork: the loan amount was double what she anticipated, as were the monthly payments; the loan application showed an income of almost four times what she had estimated for Caldwell; the valuation of the property was double what she had anticipated; the papers reflected that Durham had been employed for five years, which was not what she had told Caldwell; there were conflicting truth in lending disclosures, one of which reflected a balloon payment of over $55,000 due at the end of the amortization period; and the loan application and Real Estate Settlement Procedures Act of 1974 Statement showed sums due to Prime Professionals (for $5,122) and Process Works (for $5,800) plus an additional RESPA Statement debit for "sold 1995-Ist 1998 property taxes" ($7,648.79), when Durham had never heard of Prime Professionals or Process Works. Durham questioned Caldwell about these items and was told that the income and assets figures were necessary to get the loan but that Durham did not need to report these inflated amounts to the IRS. Caldwell described the employment history also as necessary for the loan. With regard to the sums earmarked for Prime Professionals and Process Works, Caldwell stated that those were sums third parties had expended to purchase Durham's back property taxes and that Durham would be refunded any overpayments and should not worry. As for the balloon payment, Caldwell told Durham she could refinance the mortgage at any time. Durham asked Caldwell how she got the loan approved and said she did not want to get in trouble or be hurt; she was told there were "things" Durham did not need to know. (Id. ¶ 37-38.) After signing the documents, Durham was told the check was "on its way." (Id. ¶ 39.)

  After Durham left the Initial Closing, she became increasingly concerned about the unanswered questions regarding the loan and the paperwork. She asked her brother, Calvin Durham, to review the paperwork. On May 26, 1999, Durham filled out the Notice of Right to Cancel form in her packet and faxed it to Caldwell. That evening, Caldwell telephoned Durham and berated her for cancelling the loan after all the time and effort Caldwell had expended. Caldwell implied that Durham should be afraid she would lose her house when her back taxes came due in August if she did not accept the loan. Durham agreed to return to Netco on May 28, 1999, to close on the loan again. (Id. ¶ 40-43.)

  On May 28, 1999, Durham and her brother, Calvin, met with Bradley and the same Netco employee for the second closing. Caldwell was not present. Papers from the Initial Closing and the Second Closing were intermingled. Bradley directed Durham to tear up her documents from the Initial Closing, which she partially did. Again, the emphasis was on getting the paperwork signed quickly and pressing time constraints; Durham was directed to backdate all the documents to May 25, 1999. This time, Bradley additionally told Durham she would have to write a letter explaining how she wished to use the loan proceeds. Durham was unable to write a letter that met Bradley's approval and review and sign all the forms at the same time, so Bradley dictated a letter to Calvin Durham which Plaintiff was directed to sign. The letter stated that Durham would make improvements, purchase kitchen fixtures, fence her yard, rebuild the garage, and remodel the basement with a wet bar and his and her's showers. Durham did not know what a wet bar was and she already had a shower in her basement. Durham again questioned the figures about income, employment status, loan amount, real property taxes and the balloon payment, but Bradley told her only Caldwell could answer those questions. In addition, Durham questioned additional fees listed on the Second Closing documents and was told that they reflected the cost of generating new paperwork. At the conclusion of the Second Closing, Durham was given a check for $36,459.03, representing the remaining loan proceeds.

  After the Initial and Second Closings, Durham had signed two conflicting loan applications, two conflicting RESPA Statements, four conflicting truth in lending statements, a good-faith estimate, two conflicting itemizations of amount financed, two conflicting estimates of fees and costs, an escrow election letter, an escrow disclosure agreement, and an impound account agreement, and three directions of where to send her monthly payments, each of which bore a different company name and address and amount. In addition, Durham signed a Home Ownership and Equity Protection Act of 1994 ("HOEPA") Acknowledgment of Receipt of Notice with regard to Regulation Z with a date of receipt noted as May 20, 1999, although Durham did not receive the document prior to the Initial Closing. (Id. ¶ 50.) After reviewing these documents in early June 1999, Durham called Caldwell to ask about discrepancies. Caldwell responded that the documents from the Second Closing had to be redone. Durham attempted to make a loan payment as directed by Caldwell, but her check was returned with a letter stating that the company listed had not yet purchased her loan. In addition, although Caldwell continued to assure Durham that any overpayment for back taxes would be refunded, Durham received nothing from either Prime Professionals or Process Works. Netco, which initially withheld $7,648.79, eventually refunded $2,514. When Durham requested a copy of the property appraisal, Caldwell refused to provide it because Durham had paid for it out of the loan proceeds and not "up front."

  On about July 28, 1999, a woman named "Angela" called Durham and identified herself as being from the main TLS office in St. Louis, Missouri. Angela stated that she needed to verify information about Durham's income and employment, and that Durham needed to sign four letters from her "employers" and two payoff letters from the "two companies who did work for her." At Durham's request, Angela sent a copy of the loan file to Durham via overnight mail. The four letters purport to state that the signatory individuals paid Durham weekly amounts for childcare services. Durham did not know any of the signatories and had never seen the letters before. The two payoff letters were on plain paper and purported to be statements from Prime Professionals and Process Works, respectively, that they had performed work for Durham and had an unpaid balance. In early August 1999, Calvin Durham went to the addresses listed on the letters for Prime Professionals and Process Works. The Prime Professionals address did not exist and the Process Works address was that of an elderly woman who had lived there for thirty years. TLS personnel reported that checks to Prime Professionals and Process Works had been cut at the Second Closing and had ...

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