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Zions First National Bank v. Green

November 16, 2007

ZIONS FIRST NATIONAL BANK, PLAINTIFF,
v.
PAUL GREEN, SHERRELL GREEN, AND DOROTHY LOADES, DEFENDANTS.



The opinion of the court was delivered by: Honorable David H. Coar

MEMORANDUM OPINION AND ORDER

Plaintiff Zions First National Bank ("Zions" or "Plaintiff") brought this mortgage fraud action against Defendants Paul Green, Sherrell Green, and Dorothy Loades ("Loades") (collectively "Defendants"), incorporating common law claims of fraud, conspiracy, and negligent misrepresentation and pursuant to this Court's diversity jurisdiction. Now before this Court is Defendant Loades's motion to dismiss all counts against her (Docket No. 18). For the reasons stated below, the motion is DENIED in part and GRANTED in part.

FACTS*fn1

In December of 2004, Paul Green and Sherrell Green (collectively "the Greens"), along with Bobbie Green Campbell and his wife Eugene Campbell (collectively "the Campbells"), approached real estate agent Bruce Hackel ("Hackel") to purchase a property located at 23450 Western Avenue in Park Forest, Illinois ("the Property"). At the time, the property was owned by Bill Ricketts ("Ricketts"), and consisted of land and an office building listed for sale at $550,000. The actual value of the Property is, and at all times was, in the range of $320,000-425,000. Nonetheless, the Greens hoped to finance the purchase at a value of $1,100,000, with the excess funds to be refunded to a company by the name of Fresh Start, Inc -- a company owned and/or operated by Green -- ostensibly for the purpose of improving the property. Dorothy Loades was enlisted to appraise the property, and on February 27, 2005, she valued it at $1,125,000 ("Loades appraisal").

Based in some part on the Loades appraisal, Zions agreed to provide a $825,000 mortgage loan to the Campbells to finance their purchase of the property. On June 2, 2005, Ricketts transferred title to Property to the Campbells. The purported purchase price was $1.1 million, financed with an $825,000 mortgage loan from Zions to the Campbells. Line 1308 of the Settlement Statement dictated that $550,000 of the purchase amount would be paid to Fresh Start, Inc. as part of the transaction.

In June of 2006, the Campbells defaulted on their mortgage and Zions had a receiver appointed for the property. At that time Zions discovered that the Property was in a general state of disrepair. Little to none of the $550,000 earmarked for property improvements had been applied to that purpose. Following the entry of a foreclosure judgment, Zions had an appraisal performed on the Property as of March 8, 2007. That appraisal shows the liquidation value of the Property to be $320,000, and the fair market value of the Property to be $425,000. Zions is the current owner of the Property, having obtained title to the Property through the foreclosure process. Through the foreclosure, Zions obtained a $300,000 joint and several deficiency judgment against the Campbells, but to date has not collected any amounts owed pursuant to that judgment.

On July 5, 2007, Plaintiff filed a complaint with this Court, alleging: common law fraud against the Greens and Loades (Count I); conspiracy against the Greens and Loades (Count II); and, in the alternative, negligent misrepresentation against Loades (Count III). For the reasons stated below, this Court finds that dismissal of some claims against this Defendant is appropriate.

LEGAL STANDARD

On a motion to dismiss, the Court accepts all well-pleaded allegations in the plaintiff's complaint as true. Fed. R. Civ. Plaintiff. 12(b)(6). The purpose of a 12(b)(6) motion is to decide the adequacy of the complaint, not to determine the merits of the case. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990) (citation omitted). A complaint should not be dismissed "unless it appears beyond all doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

A complaint that complies with the Federal Rules of Civil Procedure cannot be dismissed because it fails to allege facts. The Rules require simply that the complaint state a claim; they do not require the complaint to plead facts that would establish the validity of that claim. Higgs v. Carver, 286 F.3d 437, 439 (7th Cir. 2002). "All that need be specified are the bare minimum facts necessary to put the defendant on notice of the claim so that he can file an answer." Id. (citing Beanstalk Group, Inc. v. AM General Corp., 283 F.3d 856, 863 (7th Cir. 2002)). The Seventh Circuit has held that stating a claim in a complaint in federal court requires only "a short statement, in plain (that is, non-legalistic) English, of the legal claim." Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041 (7th Cir. 1999). Plaintiffs "don't have to file long complaints, don't have to plead facts, don't have to plead legal theories." Id.

That said, allegations of fraud are subject to the heightened pleading standard of Federal Rule of Civil Procedure 9(b). See, e.g., Goren v. New Vision Intl., 156 F.3d 721, 726 (7th Cir. 1998). Under Rule 9(b), a plaintiff must plead "all averments of fraud ... with particularity." Fed. R. Civ. P. 9(b). This amounts to requiring that plaintiff plead the "who, what, when and where of the fraud." United States ex rel. Garst v. Lockheed-Martin Corp., 328 F.3d 374, 376 (7th Cir. 2003); see also Tricontinental Indus., Ltd. v. , 475 F.3d 824 (7th Cir. 2007.) ("To satisfy this requirement, Tricontinental must plead the "who, what, when, where, and how" involved in the alleged fraud.") (citing DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990) (emphasis added). In other words, a plaintiff must provide the "identity of the person who made the misrepresentation, the time, place and content of the misrepresentation, and the method by which the misrepresentation was communicated to the plaintiff." Jepson, Inc. v. Makita Corp., 34 F.3d 1321, 1327 (7th Cir. 1994) (quoting Uni*Quality, Inc. v. Infotronx, Inc., 974 F.2d 918, 924 (7th Cir. 1992)). Rule 9(b)'s particularity requirement may be relaxed "when the details are within the defendant's exclusive knowledge." Id. at 1328.

Fraudulent conspiracy claims are also subject to the heightened pleading standard of Fed.R.Civ.P. 9(b). Wolf v. City of Chicago Heights, 828 F.Supp. 520, 524 (N.D. Ill. 1993); see also Borsellino v. Goldman Sachs Group, Inc., 477 F.3d 502 (7th Cir. 2007) ("A claim that 'sounds in fraud' -- in other words, one that is premised upon a course of fraudulent conduct -- can implicate Rule 9(b)'s heightened pleading requirements.").

ANALYSIS

With respect to the claims of common law fraud and conspiracy to commit that fraud, Defendant Loades generally claims that Plaintiff has not stated its case with particularity. As both parties acknowledge, Rule 9(b) requires that a plaintiff set forth the who, what, where, when, and how of the allegedly fraudulent conduct so that the defendant can adequately form a response to the fraud allegation. Defendant also maintains that the Complaint does ...


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