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Pernice-Dembosz v. Countrywide Bank

May 13, 2008

ROSE PERNICE-DEMBOSZ AND MICHAEL DEMBOSZ, PLAINTIFFS,
v.
COUNTRYWIDE BANK, FSB, COUNTRYWIDE HOME LOANS, INC., BANK OF NEW YORK, ONE SOURCE MORTGAGE INC., AND CHARLES G. MANGOLD III, DEFENDANTS.



The opinion of the court was delivered by: Hon. George W. Lindberg

MEMORANDUM OPINION AND ORDER

Before the court is defendants Countrywide Bank, FSB ("Countrywide"), Countrywide Home Loans, Inc. (Countrywide HL"), and Bank of New York's ("BONY") (collectively "remaining defendants") joint motion for summary judgment. Plaintiffs Rose Pernice-Dembosz ("Mrs. Dembosz") and Michael Dembosz ("Mr. Dembosz") (collectively "plaintiffs") filed a four-count amended complaint alleging claims for various violations of the Truth in Lending Act ("TILA"), 15 U.S.C. § 1601, et seq., (Count I); a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (the "ICFA"), 815 ILCS 505/1, et seq., ("Count II"); breach of fiduciary duty ("Count III"); and negligent misrepresentation ("Count IV"). The TILA violations were alleged against all five defendants. The three state law claims -- a violation of the ICFA, breach of fiduciary duty and negligent misrepresentation -- were only alleged against defendants Countrywide, One Source Mortgage, Inc. ("One Source") and Charles G. Mangold III ("Mangold"). Compl. at ¶ 1.

On April 11, 2008, plaintiffs dismissed their claims against One Source and Mangold, pursuant to a settlement between those parties. Countrywide, Countrywide HL and BONY are the only three remaining defendants. Plaintiffs did not file a motion for summary judgment. For the reasons set forth more fully below, defendants' joint motion for summary judgment is granted in part and denied in part. The motion for summary judgment is granted as to Counts II, III, IV, and one claim in Count I and denied as to the remaining claims in Count I.

I. BACKGROUND FACTS

This case stems from a dispute between the parties regarding the terms of the current mortgage loan on plaintiffs' home in Tinley Park, Illinois. Plaintiffs are married and co-own the Tinley Park Home. Plaintiffs seek to rescind their mortgage loan and recover statutory damages for alleged TILA violations. Plaintiffs also seek damages on their state law claims. The following facts are undisputed unless specifically noted below.

In August 2005, Mrs. Dembosz saw a print advertisement for a mortgage loan with a lower interest rate than the one she and her husband were currently paying. At that time, Mrs. Dembosz and her husband had a mortgage loan with an interest rate between five and six percent. Because plaintiffs were interested in consolidating their household debt and lowering the interest rate on their mortgage, Mrs. Dembosz contacted the print advertiser, One Source, to learn more about the advertisement and to see if she and/or her husband qualified for the advertised loan. After discussions with One Source's owner, Mangold, and other One Source employees, plaintiffs decided to refinance their home loan, with One Source acting as their mortgage broker.

At the time plaintiffs contacted One Source about refinancing their home loan, they did not have particularly high credit scores and both plaintiffs had previously filed for bankruptcy. In an attempt to improve their credit scores and qualify for a lower mortgage interest rate, plaintiffs decided to refinance their home loan twice. Fieldstone Mortgage was the lender for the first refinancing, which closed on September 16, 2005. After refinancing with Fieldstone, plaintiffs paid off $68,897.41 in debt. That debt included a $34,076.41 equity line of credit, two car loan totaling $23,579, and two credit cards with balances of $11,242. Plaintiffs also received $27,133.08 in cash.

After making one payment on the Fieldstone loan, plaintiffs refinanced again on November 30, 2005. Countrywide was the lender for the second refinancing and both plaintiffs were present at the closing for the Countrywide mortgage loan. Mr. Dembosz is the only borrower listed on the Countrywide loan and related documentation. Mr. Dembosz received a $371,500 loan from Countrywide in exchange for a mortgage lien on the Tinley Park home. Countrywide HL serviced the Countrywide loan. Sometime after November 30, 2005, Countrywide sold the loan to BONY. The Countrywide Loan is an adjustable rate loan with a 3.25% introductory interest rate. That introductory interest rate could adjust upward or downward beginning on February 1, 2006.

Plaintiffs admit that they only briefly reviewed and/or scanned the closing documents for the Countrywide loan. Neither plaintiff thoroughly read or reviewed the documents they received and signed at the November 30, 2005 closing. One of the documents plaintiffs signed at the closing was an acknowledgment of receipt of a Notice of Right to Cancel form ("Notice"). The Notice provided details regarding the rights of the borrower and co-owners of the property subject to the mortgage lien to cancel the loan and corresponding mortgage. The Notice at issue in this case listed Mr. Dembosz as the only borrower on the loan and did not include Mrs. Dembosz's name in type-written form anywhere on the document.

Both plaintiffs signed an acknowledgment of receipt of Notices that the closing agent took with her after the closing. The receipt both plaintiffs signed stated that they "each acknowledge receipt of two copies of Notice of Right to Cancel, and one copy of the Federal Truth in Lending Disclosure Statement." At his deposition, Mr. Dembosz stated that he only received one copy of the Notice and not two as the signed acknowledgment indicated. Mr. Dembosz's copy of the Notice did not include Mrs. Dembosz's type-written name, or signature. Mrs. Dembosz testified that she did not receive any copies of the Notice. Mr. Dembosz also stated that he placed all of the documents that he received at the closing into a file folder. During the discovery phase of this case, Mr. Dembosz provided copies of the documents in the file folder to defendants. There was only one copy of the Notice in the file folder and that copy did not include Mrs. Dembosz's type-written name, or signature.

On February 1, 2006, the interest rate on the Countrywide mortgage loan adjusted upward. Thereafter, plaintiffs sent rescission notices to Countrywide and BONY, but neither defendant agreed to rescind the loan. Plaintiffs have not made any payments on the Countrywide loan since June 2007. On the present record, it is unclear whether plaintiffs would have the funds necessary, or the ability to obtain such funds, to repay the Countrywide loan if rescission is ordered.

II. LEGAL ANALYSIS

A. Summary Judgment Standard

To succeed on a motion for summary judgment, the moving parties must show that the pleadings, depositions, answers to interrogatories, and admissions on file, together with any admissible affidavits do not create a genuine issue of material fact and that they are entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A genuine issue of material fact only exists if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving parties. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In considering this motion for summary judgment, the ...


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