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Charles David Little, Jr. and Sayle M. Little v. Hsbc Mortgage Corp.

July 20, 2012


The opinion of the court was delivered by: Magistrate Judge Maria Valdez


This matter is before the Court on Defendant's Rule 12(b)(6) Motion to Dismiss Counts IV and V of Plaintiffs' First Amended Complaint [Doc. No. 25].*fn1 For the reasons that follow, the motion is granted.


The amended complaint alleges that around May 12, 2010, approximately six years after obtaining a residential mortgage from Defendant HSBC Mortgage Corp., USA ("HSBC"), Plaintiff homeowners entered into a verbal "Revised Mortgage Payment Agreement." (Compl. ¶¶ 7, 9.) Under the revised agreement, Plaintiffs were to pay their April 2010 mortgage payment in three equal installments, which were to be added to their May - July 2010 mortgage payments. (Id. ¶ 9.) Plaintiffs authorized HSBC to make direct withdrawals from Plaintiffs' bank account for those three months. (Id.)

The increased mortgage payments were withdrawn from Plaintiffs' bank account in May and June, but around June 26, 2010, Plaintiffs contacted HSBC to advise that those payments had not posted to their loan account. (Id. ¶¶ 10-12.) The July mortgage payment was also deducted from Plaintiffs' bank account but was not posted to the loan account either. (Id. ¶¶ 16-18.) In August 2010, Plaintiffs were advised by HSBC that due to an internal error, their payments were posted to another customer's account. (Id. ¶ 25.) But despite Plaintiffs' written and oral complaints to HSBC beginning in June 2010 and continuing through February 2011, the problem remained unresolved. (Id. ¶¶ 12-15, 19-22, 25-27, 29-47.)

On July 28, 2010 and October 27, 2010, HSBC sent letters stating that Plaintiffs' loan was in default in the amount of $10,443.10; neither letter acknowledged Plaintiffs' earlier requests that the May-July payments be properly posted to their loan account. (Id. ¶¶ 17-18, 23.) Around July 30, 2010, HSBC filed a foreclosure action against Plaintiffs in state court. (Id. ¶ 24.) The foreclosure complaint was dismissed for want of prosecution on May 2, 2011. (Id. ¶ 48.)

Plaintiffs' amended complaint alleges violations of the Real Estate Settlement Procedures Act, 12 U.S.C. § 2605(e) [Count I] as well as state law claims of Gross Negligence [Count II]; Wrongful Foreclosure/ Breach of Contract [Count III]; Malicious Prosecution [Count IV]; and Libel [Count V]. Plaintiffs further claim that due to HSBC's allegedly wrongful actions, their credit was damaged, they lived in fear that they would lose their home, they suffered extreme emotional distress, and plaintiff C. David Little, Jr. was denied employment opportunities due to the mortgage foreclosure action on his credit report. (Compl. ¶ 49.) Defendant answered Counts I-III and now seeks to dismiss Counts IV and V.


Federal Rule of Civil Procedure 12(b)(6) requires a court to accept all of the plaintiff's well-pleaded facts as true as well as reasonable inferences drawn therefrom. Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009). A plaintiff must provide a "short and plain statement of the claim showing that the pleader is entitled to relief" in order to defeat a motion to dismiss. Fed. R. Civ. P. 8(a)(2); see Bell Atl. v. Twombly, 550 U.S. 544, 555 (2007). The complaint must also "suggest that the plaintiff has a right to relief, raising that possibility above a 'speculative level.'" EEOC v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th Cir. 2007) (quoting Twombly, 550 U.S. at 555).

A. Count IV - Malicious Prosecution

Defendant argues that the malicious prosecution count must be dismissed because Plaintiffs failed to plead all of the essential elements of the claim. In order to prove a claim for malicious prosecution, a plaintiff must show: "(1) the commencement or continuance of an original criminal or civil judicial proceeding by the defendant; (2) the termination of the proceeding in favor of the plaintiff; (3) the absence of probable cause for such proceeding; (4) the presence of malice; and (5) damages." Logan v. Caterpillar, Inc., 246 F.3d 912, 921-22 (7th Cir. 2001). Every element must be proven; "the absence of even one element will preclude recovery for malicious prosecution." Id. at 922. Moreover, malicious prosecution claims are disfavored under Illinois law, and the elements must be strictly construed. Rumer v. Zeigler Coal Co., 522 N.E.2d 830, 833-34 (Ill. App. Ct. 1988); see Serfecz v. Jewel Food Stores, 67 F.3d 591, 602 (7th Cir. 1995).

Defendant argues that Plaintiff has failed to sufficiently plead the elements of favorable termination, the absence of probable cause, malice, and special injury.

1. Favorable Termination

In order for a judgment to be considered in a plaintiff's favor for purposes of a malicious prosecution claim, the judgment must have "deal[t] with the factual issue of the case, whether the judgment be rendered after a trial or upon motion for summary judgment." Rumer, 522 N.E.2d at 833 (citation and internal quotation omitted). "Settlements, voluntary dismissals or even involuntary dismissals are not such terminations." Id. (holding that a dismissal with prejudice for failure to ...

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