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Vangsness, et al. v. Deutsche Bank National Trust Co.

November 29, 2012


Name of Assigned Judge Sitting Judge if Other or Magistrate Judge Philip G. Reinhard than Assigned Judge



For the reasons set forth below, defendants motion to dismiss is granted in part and denied in part. Count I is dismissed with prejudice. Count III is dismissed without prejudice. The claims in Count IV based on the January 31, 2010 and March 31, 2010 letters are dismissed with prejudice. The motion to dismiss as to the Count IV claim based on the request received by Saxon October 6, 2009 is denied. Count II is stricken and plaintiffs are ordered to replead their ICFA claims by pleading fraud and deception claims (meeting the requirements of Rule 9(b)) in separate counts from unfair conduct claims. Plaintiffs shall set out in each count the facts alleged in support of the claims in that count rather than incorporating facts by reference. Plaintiffs amended pleadings shall be filed on or before December 28, 2012. The parties are ordered to schedule a settlement conference before Magistrate Judge Mahoney to be held no later than February 1, 2013.

O[ For further details see text below.] Notices mailed by Judicial staff.

Copy to Magistrate Judge Mahoney.


Plaintiffs, Corwin J. Vangsness and Carolyn Vangsness, bring this action against defendants, Deutsche Bank National Trust Co., as trustee for Morgan Stanley Home Equity Loan Trust 2007-1 ("Bank") and Saxon Mortgage Services, Inc. ("Saxon") alleging violation of the federal Home Affordable Mortgage Program (HAMP) (Count I), violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. ("ICFA") (Count II), breach of contract (Count III), and violation of the federal Real Estate Settlement Procedures Act (RESPA) 12 U.S.C. § 2605(e) (Count IV). Jurisdiction is premised on 28 U.S.C. § 1331 based on the federal questions alleged in Counts I and IV. Defendants move to dismiss for failure to state a claim upon which relief can be granted. Fed. R. Civ. P. 12(b)(6).

The facts are taken from the complaint as well as from state-court and bankruptcy-court records. See Ennenga v. Starns, 677 F.3d 766, 774 (7th Cir. 2012) (A court may take judicial notice of actions taken in an earlier state-court action without converting a motion to dismiss to a motion for summary judgment.) Plaintiffs executed a note secured by a mortgage on their personal residence in October 2006. Bank is the trustee of the trust that holds this note and mortgage. In 2009, plaintiffs sought to modify the terms of this loan. Plaintiffs negotiated with Saxon (the loan servicing agent for Bank) concerning a modification. They sent a rate modification request to Saxon which was received on October 6, 2009. This request contained the following language: "Borrower requests a copy of the Note, HUD1, TIL, and all disclosures related to the closing of this loan. Under (section 2605(e)) of RESPA you are required to acknowledge this request within 20 days."

On October 22, 2009, plaintiffs filed a voluntary bankruptcy petition under Chapter 7 of the bankruptcy code. On December 1, 2009, the bankruptcy trustee filed a no asset/no distribution report. On January 26, 2010, plaintiffs were granted a discharge, and on January 29, 2010, the bankruptcy case was closed.

On January 31, 2010, plaintiffs sent Saxon a modification request. On March 8, 2010 Bank filed a mortgage foreclosure action against plaintiffs in state court. On March 31, 2010, plaintiffs sent Saxon another modification request. A judgment of foreclosure was entered in favor of Bank and against plaintiffs on July 7, 2010. Plaintiffs filed a petition for relief from judgment pursuant to 735 ILCS 5/2-1401 on September 29, 2010. This petition was denied on October 21, 2010. In the order denying the petition, the state court found "that if there was a violation of RESPA for non-response to a QWR [qualified written request,] that violation does not constitute an affirmative defense to this foreclosure action." Plaintiffs appealed this order. On February 25, 2011, the Illinois Appellate Court dismissed the appeal as premature.

On May 19, 2011, plaintiffs moved the state court for a finding pursuant to Illinois Supreme Court Rule 304(a) that there was no just reason to delay enforcement or appeal of the order denying the 2-1401 petition for relief from judgment. In this motion, plaintiffs stated that defendants argument to the appellate court for dismissal of the appeal of the denial of the 2-1401 petition had been that no final and appealable order had been entered in the foreclosure. This requested finding was never entered.

On June 1, 2011, plaintiffs filed a new motion to vacate judgment of foreclosure, this time pursuant to 735 ILCS 5/2-1301 rather than 5/2-1401. Section 2-1301(e) provides that a court in its discretion may "before final order or judgment, set aside any default, and may on motion filed within 30 days after entry thereof set aside any final order or judgment upon any terms and conditions that shall be reasonable." A ruling was never made on this motion.

On August 24, 2011, Bank moved to vacate the judgment of foreclosure entered in its favor on July 7, 2010 and to dismiss the action without prejudice due to a loss mitigation hold to allow the borrowers to reinstate the mortgage. Bank was granted leave to "reinstate this cause, and reinstate all previously entered orders" in the event borrowers "default on the loss mitigation plan." The foreclosure action, including all prior orders and pleadings, was reinstated by order of the state court on December 21, 2011. Plaintiffs filed this federal court action on January 3, 2012 and the state court stayed its proceedings pending resolution of the federal action.

Defendants contend Count I must be dismissed because HAMP does not create a federal individual right of action. Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 555 (7th Cir. 2012). Plaintiffs now ...

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