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Wilbourn v. Advantage Financial Partners

March 22, 2010


The opinion of the court was delivered by: Hon. Joan H. Lefkow


Plaintiff, Bernadine Wilbourn, has brought suit against Advantage Financial Partners, LLC ("AFP"), Rusty Rant, Leonard Lombardo, Peter Fricano, Kelly E. McMullin and Kitty Jo McMullin ("the McMullins"), GMAC Mortgage, LLC ("GMAC"), Pedro Ramos*fn1 and unknown owners, as a result of an alleged equity-stripping scheme in which AFP and its agents induced Wilbourn into a sale/leaseback of her home while purporting to refinance her mortgage loan.*fn2

Count I is an action to quiet title against AFP, the McMullins, GMAC and unknown owners. Count II seeks rescission of the sale/leaseback transaction under 15 U.S.C. § 1635 of the Truth in Lending Act ("TILA") against the McMullins, GMAC, and unknown owners. Count III alleges a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), codified at 815 Ill. Comp. Stat. § 505/1 et seq, against AFP, Rantz, Lombardo, Fricano and GMAC. Count IV alleges common law fraud against AFP, Rantz, Lombardo, Fricano and GMAC. Count V seeks rescission of the sale/leaseback transaction on the basis of unconscionability against AFP, the McMullins, GMAC and unknown owners. Count VI alleges unjust enrichment by all defendants. Count VII is an action to quiet title specifically against Ramos. GMAC, the McMullins, and Fricano move to dismiss multiple counts pursuant to Federal Rule of Civil Procedure 12(b)(6). GMAC seeks dismissal of counts I, II, III, IV, V, and VI. The McMullins seek dismissal of counts I, II, V, and VI. Fricano seeks dismissal of counts III, IV, and VI, and asks the court to strike Wilbourn's prayer for punitive damages in Counts III and IV. Additionally, GMAC and the McMullins seek dismissal of the amended complaint for failure to comply with Federal Rule of Civil Procedure 9(b). For the reasons set forth below, defendants' motions [#28, #31, #41, #46] are granted in part and denied in part.


On September 10, 1998, Wilbourn purchased a single family home ("the home") located at 1042 N. Avers Avenue, Chicago, for $79,900. This is the only home Wilbourn has ever purchased and she lives there with six of her family members. She has an eleventh grade education and "is unsophisticated in matters of real estate sales, investment and finance." Am. Compl. ¶ 19. In connection with her purchase, she obtained a Fair Housing Act 30-year, fixed rate mortgage loan in the amount of $79,550 that required monthly payments of $800, including principal, interest, taxes, and insurance. Wilbourn remained current on her mortgage payments, and sometime around October, 2006 she sought a refinance loan for the purpose of making home repairs. Through a friend, Wilbourn learned of a man named Roy Williams who helped people obtain refinance loans. When she contacted Mr. Williams, he suggested two companies that could help her refinance, one of which was AFP. Although Wilbourn contacted both companies, only AFP responded.

I. The Sale/Leaseback Transaction

In late October 2006, Rantz, AFP's agent, informed Wilbourn that although her credit score was low, AFP specialized in offering refinance loans to individuals with poor credit. Rantz told Wilbourn that AFP could provide a refinance loan with the same monthly payment amount that she was currently making on her mortgage. In addition, Rantz told Wilbourn that AFP would help raise her credit score so that she could refinance at a lower interest rate after one year. Later that month, Lombardo, an agent of AFP, conducted an appraisal of the home. Wilbourn was not provided with a copy of the appraisal.

On November 14, 2006, Wilbourn met with Rantz, Lombardo, Lombardo's colleague, and Fricano, an attorney for AFP, at AFP's office in Glendale Heights for what she understood to be the closing of her refinance loan. Wilbourn attended the meeting alone and was not represented by counsel. At the closing, Rantz and Fricano requested Wilbourn's signature on multiple documents without explaining their import, although they generally described the transaction as a refinancing agreement with AFP. Rantz told Wilbourn that after the transaction her monthly mortgage payments would continue to be $800, including principal, interest, taxes, and insurance, but that the monthly amount would increase to $1,630 after two years. Rantz assured Wilbourn that she could refinance at a lower rate before the larger payments became due. The documents Wilbourn signed at the closing included a Residence Lease ("Lease"), an Option Rider to a Residential Real Estate Sales Contract ("Option"), and a HUD-1 Settlement Statement ("HUD-1").

A. The Lease

Under the Lease, Wilbourn owed AFP monthly rental payments of $1,630 from November 15, 2006 through December 31, 2007. The Lease further provided that, at signing, Wilbourn was deemed to have paid the full rent for November and December 2006 and partial rent of $830 per month for all of 2007. Wilbourn's monthly rent obligation was therefore reduced to $800 for all of 2007.

B. The Option Rider

Under the terms of the Option, Wilbourn paid AFP a non-refundable fee of $35,500 for the option to repurchase her home within the first year at a purchase price of $230,000. The expiration date on the option is listed as November 14, 2011. After the first year, the option purchase price was to be increased by 50% of the appreciation in the value of the home. In addition to the non-refundable fee, Wilbourn also paid $44,098.65 as a down payment on the option purchase price. According to the HUD-1, the $35,500 non-refundable fee and the $44,098.65 down payment were made at closing and funded from the equity in the home. The option further stated that AFP's right to sell or convey the home was at all times subject to Wilbourn's right to repurchase the home under the option.

C. The HUD-1

The HUD-1 sets out the payment allocations for the sale/leaseback transaction. AFP purchased Wilbourn's home for $230,000. AFP's purchase was financed by a mortgage loan issued by West Suburban Bank to AFP in the amount of $207,000. AFP's payment of the $230,000 purchase price included (1) payments on Wilbourn's behalf of $77,468.16, and (2) "benefits" to Wilbourn totaling $152,531.84. The $77,468.16 in payments to Wilbourn included $74,216.14 to pay off Wilbourn's mortgage; $1,909.25 for her 2006 property taxes; and $1,342.77 for water expenses. The $152,531.84 in "benefits" to Wilbourn included $58,500 set aside for home repairs, the $35,500 non-refundable option fee, the $44,098.65 down payment on the option purchase price, $2,500.19 for November 2006 and December 2006 rent, $9,960 as partial payment of monthly rents for January 2007 to November 2007,*fn4 a $375 "survey credit"; and $1,598 in settlement charges. Wilbourn disputes the charges on the HUD-1 and maintains that she received a total benefit of approximately $130,000, consisting of the $74,216.14 to pay off her prior mortgage and approximately $54,900 set aside for home repairs.*fn5

II. The McMullins' Purchase of the Home

From January 2007 to August 2008, Wilbourn received invoices from AFP and made monthly payments accordingly. Wilbourn believed she was making mortgage payments.*fn6 In September 2008, Wilbourn received a letter from Kelly McMullin stating that he had "invested" in the property approximately one year earlier and alerted her to the fact that AFP was not forwarding Wilbourn's rent payments to the mortgage holder. Compl. ¶ 56. He asked that she contact him about her home. Wilbourn was confused by the reference to rent. When she contacted Kelly McMullin, she learned that she did not have title to the home. Kelly McMullin told Wilbourn that he purchased the home after AFP failed to pay property taxes and requested that she make her future payments to him. Wilbourn verified that the McMullins were the owners by checking with the Cook County Recorder of Deeds Office. When she tried to contact AFP, she found that the telephone numbers for AFP's agent and its office were out of service. Wilbourn made monthly payments of $800 to the McMullins from September 2008 to November 2008, but then ceased making payments.

Unbeknownst to Wilbourn, the McMullins had purchased the home on February 26, 2007 for $230,000, of which $207,000 was loaned by BankUnited under a 30-year adjustable rate mortgage loan. BankUnited subsequently assigned the mortgage to GMAC. On December 12, 2008, GMAC filed for foreclosure on the home as a result of the McMullins' failure to make payments. On December 26, 2008, the McMullins filed suit against Wilbourn seeking overdue rent in the amount of $1,760 and possession of the premises. AFP never notified Wilbourn about the sale of the home or returned the option down-payment. AFP continued to accept Wilbourn's rent payments for over a year and a half after losing title to the property.


A motion to dismiss under 12(b)(6) of the Federal Rules of Civil Procedure asserts that the plaintiff's complaint "fail[s] to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). When ruling on a 12(b)(6) motion, the court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002). To survive a motion to dismiss, the plaintiff must plead facts sufficient to establish the plausibility of the requested relief. Ashcroft v. Iqbal, - U.S. -, 129 S.Ct. 1937, 1949, 173 L.Ed. 2d 868 (2009); see also Bell Atl. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed. 2d 929 (2007) ("Factual allegations must be enough to raise a right to relief above the speculative level." (citing 5 C. Wright & A. Miller, Federal Practice and Procedure ยง 1216 (3d ed. 2004))). Additionally, a plaintiff alleging fraud must comply with Rule 9(b), which requires that the complaint "state with particularity the circumstances constituting fraud or mistake." Fed. R. Civ. P. 9(b). "Malice, ...

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