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Jones v. Countrywide Home Loans

February 11, 2010


The opinion of the court was delivered by: Judge Virginia M. Kendall


Plaintiff Joyce D. Jones ("Jones") filed suit against Countrywide Home Loans ("Countrywide"), Bank of America ("BOA"), MDR Mortgage Corporation ("MDR"), Specialty Title Services ("Specialty Title"), and unknown individual defendants (collectively, "Defendants") alleging negligence, fraud, discrimination, and other predatory lending practices in connection with the refinancing of Jones's home mortgage loan. Countrywide has moved to dismiss Counts II, III, VII, VIII, and IX of Jones's Complaint. BOA and Specialty Title Services have moved to dismiss the entire Complaint. Countrywide has also asserted thirteen affirmative defenses and filed a Counterclaim seeking a declaratory judgment that if Jones lacks sufficient funds to tender the rescission amount, she cannot state a claim for rescission of her refinanced loan. Jones has filed motions for leave to amend her Complaint, to strike statements from Specialty Title's Motion to Dismiss, to strike Countrywide's affirmative defenses, and to dismiss Countrywide's Counterclaim. For the reasons stated herein, Jones's Motion for Leave to File an Amended Complaint is granted. BOA's Motion to Dismiss is granted in its entirety, and all claims against it are dismissed without prejudice. Countrywide's and Specialty Title's Motions to Dismiss are granted in part and denied in part. As to Countrywide, Counts II and VII (ICFA claim) are dismissed with prejudice; Counts III, VIII, and IX (NIED claim) are dismissed without prejudice. As to Specialty Title, Counts I, II, III, V, VI, VII (ICFA claim), and IX (NIED claim) are dismissed with prejudice; Counts IV, VII (ITIA claim), and VIII are dismissed without prejudice. Jones's Motion to Strike Statements from Specialty Title's Introduction is denied. Jones's Motion to Strike Countrywide's Affirmative Defenses is dismissed as moot. Jones's Motion to Dismiss Countrywide's Counterclaim is denied.


After BOA, Countrywide, and Specialty Title filed their Motions to Dismiss, Jones moved for leave to file an amended complaint. Such leave should be freely given "when justice so requires." Fed. R. Civ. P. 15(a)(2). Defendants*fn1 oppose Jones's Motion, arguing that the proposed amended complaint does not cure the problems identified in their Motions to Dismiss. Even though Jones's proposed Amended Complaint contains a great deal of information more properly suited to her responses to the Motions, the Court grants her leave to amend in the interest of justice and because Jones appears pro se, requiring the Court to construe her pleadings liberally. See Korsunskiy v. Gonzales, 461 F.3d 847, 850 (7th Cir. 2006) ("If the judge can see what the pro se litigant is driving at, that is enough."). The Court therefore applies the Defendants' motions to dismiss to Jones's First Amended Complaint.


I. Background

The following facts are taken from Jones's First Amended Complaint and are assumed to be true for purposes of deciding the Motions to Dismiss. See Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995).

Jones owns a home in Chicago, Illinois. In December of 2007, she refinanced her home mortgage loan through MDR, financing from Countrywide. (First Am. Compl. ¶ 29.) The closing on the loan was held at the offices of Specialty Title, a title insurance company. (First Am. Compl. ¶ 6.) Countrywide was subsequently acquired by BOA in 2008; Jones's mortgage is currently serviced by BAC Home Loans Servicing, LP, a subsidiary of BOA. (First Am. Compl. ¶ 5.)

Concerned about the national foreclosure crisis and Countrywide's role as a sub-prime lender, Jones wrote to Countrywide in October of 2008 requesting a copy of any "pooling and servicing agreement" related to the mortgage. (First Am. Compl. ¶ 31-32.) Countrywide did not provide this information and did not adequately explain its refusal to do so. (First Am. Compl. ¶ 32.) Jones subsequently had a forensic audit completed of her mortgage transaction, during which several statutory and regulatory violations were uncovered. (First Am. Compl. ¶¶ 33-39.)

Jones then wrote to Countrywide on February 5, 2009, using the address provided to her on a Notice of Right to Cancel form provided at closing and an additional contact address for Countrywide provided in her monthly statement, and informed Countrywide that she was rescinding the mortgage transaction. (First Am. Compl. ¶ 41.) Countrywide responded to Jones on March 6, 2009 suggesting that she forward her rescission notice to the Countrywide Correspondence Unit, which she did on March 9, 2009. (First Am. Compl. ¶¶ 42-43.)

Countrywide did not respond to Jones's correspondence, but did report to at least one credit reporting agency that her account was in dispute. (First Am. Compl. ¶¶ 44, 47.) On March 25, 2009, Jones sent a tender offer letter to Countrywide offering to submit a final payment of $2054.29 on her mortgage loan, and later mailed a check in that amount to Countrywide's payment address. (First Am. Compl. ¶ 48.) Jones's tender offer letter stated that Countrywide was prohibited by federal regulation from providing derogatory reports to consumer credit reporting agencies; however, such reports were made to at least one agency following the date of the tender offer letter. (First Am. Compl. ¶¶ 53-54.)

Count I of Jones's First Amended Complaint alleges that Defendants and their agents violated the Truth in Lending Act, 15 U.S.C. § 1635, by failing to deliver valid material disclosures at the time of closing on her refinanced mortgage loan. (First Am. Compl. ¶¶ 56-62). Counts II and III allege negligent misrepresentation and breaches of fiduciary duty in connection with the loan closing. (First Am. Compl. ¶¶ 63-71 & 72-78.) Count IV alleges that Defendants and their agents discriminated against Jones, who is African-American, because of her race in that she received less favorable terms and conditions of her loan than similarly qualified Caucasian borrowers. (First Am. Compl. ¶¶ 79-82.) Counts V and VI allege that Defendants and their agents violated the Fair Housing Act, 42 U.S.C. § 3605, and the Equal Credit Opportunity Act, 15 U.S.C. § 1691, by subjecting Jones to higher interest rates and closing costs because of her race. (First Am. Compl. ¶¶ 83-96 & 97-98.) Count VII alleges that Defendants and their agents violated the Illinois Consumer Fraud Act, 815 ILCS 505/2, and the Illinois Title Insurance Act, 215 ILCS 155/21 & 24, via their conduct in the loan transaction. (First Am. Compl. ¶¶ 99-103.) Count VIII alleges violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681, and the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605, in connection with the loan and Countrywide's subsequent reporting to the credit reporting agencies. (First Am. Compl. ¶¶ 104-13.) Count IX alleges that Defendants intentionally and negligently caused Jones emotional distress by mishandling her loan transaction and then "ignoring [her] efforts to correct the wrong." (First Am. Compl. ¶¶ 119-32.)

II. Standard of Review

When considering a motion to dismiss under Rule 12(b)(6), a court must accept as true all facts alleged in the complaint and construe all reasonable inferences in favor of the plaintiff. See Murphy, 51 F.3d at 717. To state a claim upon which relief can be granted, a complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "Detailed factual allegations" are not required, but the plaintiff must allege facts that, when "accepted as true, . . . 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). In analyzing whether a complaint has met this standard, the "reviewing court [must] draw on its judicial experience and common sense." Iqbal, 129 S.Ct. at 1950. A claim has facial plausibility when the pleaded factual content allows the court to draw a reasonable inference that the defendant is liable for the misconduct alleged. See id. at 1949.

III. BOA's Motion to Dismiss

BOA moves to dismiss on the grounds that Jones has alleged no claim against it beyond stating that Countrywide was acquired by BOA in 2008. Jones argues that as a result of this acquisition, BOA assumed an interest in her Note and Mortgage that legally binds BOA to the terms of the Note and Mortgage. (First Am. Compl. ¶ 5.) Jones also states that her Mortgage is currently serviced by a subsidiary of BOA, but does not allege that the subsidiary engaged in any wrongdoing. (First Am. Compl. ¶ 5.) Jones makes no allegations that BOA was involved in the negotiation of, or closing on, her loan, and thus BOA's only possible liability to her would be as Countrywide's corporate parent.

As a general rule, a parent company and its subsidiary are "two separate entities and the acts of one cannot be attributed to the other." Cent. States, Se. & Sw. Areas Pension Fund v. Reimer Express World Corp., 230 F.3d 934, 944 (7th Cir. 2000). A plaintiff who seeks to "pierce the veil between a parent and a subsidary" must show that one corporation is merely "a dummy or sham for another." APS Sports Collectibles, Inc. v. Sports Time, Inc., 299 F.3d 624, 631 (7th Cir. 2002). Additionally, the legal separation of two distinct corporate entities may only be disregarded when the circumstances are such "that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice." Van Dorn Co. v. Future Chemical & Oil Corp., 753 F.2d 565, 570 (7th Cir. 1985).

Here, Jones has not alleged any facts that would allow her to pierce the corporate veil between BOA and Countrywide and thus render BOA liable for its subsidiary's actions. See, e.g., Pantoja v. Countrywide Home Loans, Inc., 640 F. Supp. 2d 1177, 1192 (N.D. Cal. 2009). BOA's Motion to Dismiss is therefore granted.

IV. Specialty Title's and Countrywide's Motion to Dismiss

Specialty Title moves to dismiss Jones's Complaint in its entirety, arguing that Jones has failed to state any valid claim against it. In Jones's original complaint, she made only one allegation naming Specialty Title. That deficiency has been cured in the First Amended Complaint, which includes specific allegations against Specialty Title in all Counts. (See First Am. Compl. ¶¶ 59, 65, 75, 77, 80, 84, 98, 100, 108 & 125.)

Countrywide moved to dismiss Counts II, III, VII, VIII, and IX of the original Complaint, and answered the remaining Counts. With one exception, the First Amended Complaint has not changed the substance of the allegations against Countrywide in the answered Counts. The Court will therefore consider the arguments presented in Countrywide's Motion to Dismiss in light of the First Amended Complaint.

A. Count I

Jones alleges in Count I that the Defendants provided invalid material disclosures to her at the loan closing in violation of the Truth in Lending Act, 15 U.S.C. ยง 163 ("TILA"). Specialty Title moves to dismiss, arguing that it is not ...

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