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Home Loan Center, Inc., D/B/A Lendingtree Loans v. Althea Flanagan A/K/A Althea Flanagan-Seels A/K/A Althea Seels

April 2, 2012

HOME LOAN CENTER, INC., D/B/A LENDINGTREE LOANS PLAINTIFF,
v.
ALTHEA FLANAGAN A/K/A ALTHEA FLANAGAN-SEELS A/K/A ALTHEA SEELS, DUANE K. SEELS, THOMAS L. KIRSCH & ASSOCIATES, P.C., SUZETTE DAVIS-YOUNG, AND SUE GONZALEZ, DEFENDANTS.



The opinion of the court was delivered by: Matthew F. Kennelly , District Judge:

MEMORANDUM OPINION AND ORDER

Home Loan Center, Inc., d/b/a LendingTree Loans (LendingTree), has sued Althea Flanagan, Duane K. Seels, Thomas L. Kirsch & Associates, P.C. (Kirsch & Associates), Suzette Davis-Young, and Sue Gonzalez. LendingTree asserts claims of fraud against both Flanagans and negligence against Kirsch & Associates, Davis-Young, and Gonzalez. The Court has jurisdiction based on diversity of citizenship. Kirsch & Associates has moved for summary judgment, as have Davis-Young and Gonzalez. For the reasons stated below, the Court denies the motions.

Background

Because the defendants have moved for summary judgment, the Court views the evidence in the light most favorable to LendingTree, the non-moving party.

In 2007, LendingTree approved two loans, in the amounts of $224,900 and $75,000, for the purchase of a home in Munster, Indiana. LendingTree took the loan applications over the phone. The applicant claimed that he was Henry Flanagan. Flanagan says that he did not seek any loans from LendingTree and that his daughter Althea Flanagan stole his identity. LendingTree contends that Althea and her husband Seels actually made the loan applications. The applicant(s) made numerous misrepresentations, including misstating Flanagan's income and employment. The loan application stated that Flanagan owned a cleaning and lawn care business, but in fact he had been retired since 1985.

LendingTree attempted to verify some of the information that it received. It called Flanagan's purported place of business and left a message for him. Someone claiming to be Flanagan called LendingTree back. Althea Flanagan also faxed documentation related to the loan to LendingTree, claiming that she was doing so on behalf of her father. As part of its investigation, LendingTree received a letter that was purportedly from KSC Business Support Services. The letter stated that Flanagan owned his own business and had a monthly income of $8,000. LendingTree's file on Flanagan's loans also contains verification from a LexisNexis database that KSC was a real business. The file does not, however, contain any similar verification about Flanagan's business. In May 2007, the house in Munster was appraised and valued at $305,000, and LendingTree approved the loan applications on June 15, 2007.

The closing for the home purchase took place on June 27, 2007. It began at the offices of attorney Lee Newell in Calumet City, Illinois. Newell acted as an attorney for Flanagan. The closing agent was Kirsch & Associates, and Thomas Kirsch (Kirsch), the firm's principal, and two of its employees, Gonzalez and Davis-Young, were present. Davis-Young acted as a notary. Kirsch also acted as the attorney for the sellers. Also present were the sellers; Althea Flanagan; and a man claiming to be Henry Flanagan. Henry states that he was not at the closing, and LendingTree contends that the man who claimed to be Flanagan at the closing was in fact Seels. No representative from LendingTree attended the closing. LendingTree states that it never attends closings and relies on the closing agent and notary to meet the borrower in person, and it contends that this is common in the mortgage business.

During the closing, the man claiming to be Flanagan could not produce any identification, as was needed before he signed the loan documents. He claimed to have forgotten his driver's license and said that he would return home to get it. The parties to the sale agreed that it would be easier for him to bring his identification to Kirsch's office in Indiana.

Several hours later, the man claiming to be Flanagan arrived at Kirsch & Associates' office in Munster, Indiana. Kirsch, Gonzalez, and Davis-Young all looked at the license the man presented, which was in the name of Henry Flanagan. The picture on it showed a bald man without any facial hair, and the license stated that Flanagan's birthdate was in 1925, which would have made him eighty-one at the time of the closing. Gonzalez thought that the man presenting the license looked about thirty-five, and Kirsch noted that the man had a full head of hair and a full beard. Gonzalez told Kirsch that she did not think the license belonged to the man who claimed to be Flanagan. Kirsch asked the man why he had no hair in his license picture. The man replied that he had previously had cancer but was recovering. Both Davis-Young and Kirsch thought that the man claiming to be Flanagan looked younger than eighty but that he was not a young man. Kirsch estimated the man was seventy, and Davis-Young remembered that he had a cane. Kirsch attempted to verify that the man claiming to be Flanagan was who he said by asking him several questions about the loan documents. When the man answered the questions correctly, the Kirsch & Associates personnel were convinced, they say. The man signed the loan paperwork, and Davis-Young notarized it.

Kirsch then faxed the closing documents and a photocopy of Flanagan's driver's license to Holly Hare, a LendingTree representative. Kirsch did not indicate to LendingTree that the man claiming to be Flanagan looked significantly different from the picture on the driver's license. Having received the documents, Hare funded the loans and directed Gonzalez to disburse to the sellers the loan proceeds, which had been held in escrow.

After the closing, Althea Flanagan and Seels lived in the Munster house. Henry Flanagan remained in his home in Chicago. Someone executed a deed in Henry's name purporting to transfer the Munster house to Althea. Henry denies that he executed the deed.

In July 2007, LendingTree sold its rights under the loans and its mortgages to other banks. Specifically, it sold the $224,900 senior loan to Countrywide Home Loans and the $75,000 loan to Wells Fargo.

On January 27, 2009, Countrywide notified LendingTree of problems with the loan it had purchased. Countrywide stated that Henry Flanagan had reported that Althea Flanagan had stolen his identity and used it to obtain the loan without his knowledge. When Countrywide received notice of these allegations, it audited the loan and learned that the applicant had misstated Flanagan's income and employment. As a result of these misstatements, Countrywide demanded that LendingTree repurchase the loan, as the contract between the two lenders required. Countrywide also began proceedings to foreclose its mortgage in early 2009.

Wells Fargo sent LendingTree a similar notice on May 29, 2009. Wells Fargo stated that there was significant evidence that Flanagan did not live in the house in Munster, contrary to what the loan application had stated. The evidence included the fact that public records showed that Flanagan still lived in Chicago; public records showed that Althea Flanagan lived at the house in Munster; Flanagan had submitted an identity theft affidavit stating he had lived at his Chicago residence for nearly fifty years; and in a Munster police report, Flanagan claimed that Althea had stolen his identity and bought a house with it. Wells Fargo demanded that LendingTree repurchase the loan because the loan documentation had falsely stated that Flanagan would live in the Munster house.

Together, Countrywide and Wells Fargo demanded that LendingTree pay them more than $325,000 to repurchase the loans. LendingTree did not dispute that it was required to repurchase the two loans. Robert Kaiser, LendingTree's impaired asset manager, decided that it was preferable to settle with the banks instead of repurchasing the loans. LendingTree paid Countrywide $40,213.32 and Wells Fargo $40,765.36, and the banks kept the loans and mortgages.

Discussion

On a motion for summary judgment, the Court "view[s] the record in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party's favor." Trinity Homes LLC v. Ohio Cas. Ins. Co., 629 F.3d 653, 656 (7th Cir. 2010). Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). In other words, a court may grant summary judgment "[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

LendingTree contends that the Kirsch law firm, Gonzalez, and Davis-Young are liable for negligence. When "none of the parties raise[ ] the choice of law issue, [the Court] appl[ies] the substantive law of Illinois, the forum state." Camp v. TNT Logistics Corp., 553 F.3d 502, 505 (7th Cir. 2009). LendingTree and Kirsch do not contest that Illinois law applies in this case. The individual defendants do not discuss choice of law, but in their opening brief they cite decisions by Indiana courts. In their reply brief, however, the individual defendants appear to accept LendingTree's contention that Illinois law applies, because they cite no Indiana court decisions but instead discuss the elements of negligence as established in Illinois law. The Court therefore applies Illinois law. See NPF WL, Inc. v. Sotka, 99 C 7966, 2000 WL 574527, at *6 (N.D. Ill. May 10, 2000) (when party cited Ohio and other foreign law but did not explain why foreign law applied, court assumed that parties did not dispute that Illinois law applied).

Illinois law requires a plaintiff asserting a negligence claim to prove facts that establish the existence of a duty; breach of the duty; and injury proximately caused by the breach. Camp, 553 F.3d at 505--06. The defendants make a ...


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