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Thomas v. Urban Partnership Bank

United States District Court, Seventh Circuit

April 26, 2013

BARBARA THOMAS, Plaintiff,
v.
URBAN PARTNERSHIP BANK, RESIDENTIAL CREDIT SOLUTIONS, INC., and SHOREBANK, Defendants.

MEMORANDUM OPINION AND ORDER

GARY FEINERMAN, District Judge.

Barbara Thomas brought this suit against Urban Partnership Bank, Residential Credit Solutions, Inc. ("RCS"), and ShoreBank. Her central allegation is that Urban has sought to collect payments from her on her mortgage loan even though it does not own the loan. The amended complaint asserts numerous claims, organized into the following six counts: (1) violation of the federal Fair Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq.; (2) quiet title under Illinois law; (3) fraud, conversion, and unjust enrichment under Illinois law; (4) violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), 815 ILCS 505/1 et seq., and the Illinois Uniform Deceptive Trade Practices Act ("UDTPA"), 815 ILCS 510/1 et seq.; (5) violation of the Illinois Collection Agency Act ("ICAA"), 225 ILCS 425/1 et seq.; and (6) violation the Sherman Antitrust Act, 15 U.S.C. § 1 et seq. Doc. 33. Urban has moved to dismiss the amended complaint in its entirety under Federal Rule of Civil Procedure 12(b)(6). Doc. 35. The motion is granted in part and denied in part.

Background

In considering the motion to dismiss, the court assumes the truth of the amended complaint's factual allegations, though not its legal conclusions. See Munson v. Gaetz, 673 F.3d 630, 632 (7th Cir. 2012). The court also must consider "documents attached to the complaint, documents that are critical to the complaint and referred to in it, and information that is subject to proper judicial notice, " along with additional facts set forth in Thomas's brief opposing dismissal, so long as those facts "are consistent with the pleadings." Geinosky v. City of Chicago, 675 F.3d 743, 745 n.1 (7th Cir. 2012). The following facts are set forth as favorably to Thomas as permitted by the complaint and the other materials that must be considered on a Rule 12(b)(6) motion. See Gomez v. Randle, 680 F.3d 859, 864 (7th Cir. 2012).

Some basic facts about the mortgage industry put this case in context. Persons who own real property can take out mortgage loans from banks and other lending institutions; the loan is secured by the mortgaged property, meaning that if the borrower fails to repay the loan as required by the loan agreement, the lender can foreclose on the property in satisfaction of the loan. The task of collecting payments on the loan as they become due, applying the payments to the loan principal and interest, and otherwise dealing with the borrower is called "servicing" the loan. The owner of the loan-meaning the entity that is entitled to receive the loan payments, whether the lender or some other entity to which the lender has sold the loan-may but need not service the loan, for there is an industry of third-party firms that service loans. Banks often sell the loans they originate to other institutions; one such institution is the Federal National Mortgage Association, commonly known as Fannie Mae. Fannie Mae was created by the federal government to buy loans from banks as a way of providing banks with fast access to capital and thereby encouraging them to make more loans. Fannie Mae does not service the loans it owns, but rather contracts with third parties to perform that task on its behalf.

Thomas owns and possesses the property that is the subject of this suit. Doc. 33 at §§ 6, 10. Urban and ShoreBank are banks. Id. at §§ 7, 9. RCS is a corporation that services mortgages for non-party Fannie Mae. Id. at §§ 1, 8. In 2006, Thomas signed a promissory note and a mortgage agreement to mortgage her property to ShoreBank in exchange for a mortgage loan. Id. at §§ 1, 11-12; Doc. 33-2 (the note); Doc. 33-3 (the mortgage).

ShoreBank serviced the loan itself for the first several years; in July 2010, RCS sent a letter to Thomas notifying her that RCS would now be servicing the loan. Doc. 33 at §§ 1, 14; Doc. 33-4 (the letter). RCS serviced Thomas's loan from July 2010 through August 2011. Doc. 33 at § 14. Although the letter does not say on whose behalf RCS was servicing Thomas's loan, Thomas alleges Fannie Mae had purchased the loan from ShoreBank and that RCS was servicing the loan on Fannie Mae's behalf. Ibid. Thomas asserts that when a new servicer begins to service a mortgage, "this event means that the underlying mortgage probably has been sold at the same time; otherwise there is no reason to switch servicers." Ibid. Also, as of July 2010, there was a commitment in force between Fannie Mae and ShoreBank under which Fannie Mae would buy loans held by ShoreBank that were modified under the Making Home Affordable Modification Program ("HAMP"). Id. at §§ 1, 13; Doc. 34-2 (the commitment). In April 2010, Thomas applied for received a HAMP modification of her mortgage. Doc. 33 at §§ 1, 13; Doc. 34-3 (Thomas's HAMP application). For these reasons, Thomas alleges "upon information and belief" that Fannie Mae owns the promissory note and the mortgage. Doc. 33 at § 1.

In August 2010, ShoreBank went into receivership, with the FDIC acting as receiver. Id. at §§ 1, 15. That same month, the FDIC and Urban entered into a Purchase and Assumption Agreement ("Agreement") pursuant to which Urban purchased assets held by ShoreBank. Ibid.; Doc. 33-5 (the Agreement). Central to this litigation, and disputed by the parties, is the question whether Thomas's mortgage loan was among the assets Urban purchased from ShoreBank; Thomas says no, while Urban says yes. Doc. 33 at § 1. Thomas believes that her loan had already been transferred to nonparty Fannie Mae in or before July 2010, prior to the date of the Agreement, in which case the loan could not have been among the assets transferred by the Agreement from ShoreBank to Urban. Ibid.

Thomas also believes that even if ShoreBank continued to own her loan as of the date of the Agreement, the Agreement did not transfer the loan to Urban. In debating this point, the parties focus on two sections of the Agreement. The first, § 3.1, provides:

3.1 Assets Purchased by Assuming Institution. With the exception of certain assets expressly excluded in Sections 3.5 and 3.6, the Assuming Institution hereby purchases from the Receiver, and the Receiver hereby sells, assigns, transfers, conveys, and delivers to the Assuming Institution, all right, title, and interest of the Receiver in and to all of the assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing. Assets are purchased hereunder by the Assuming Institution subject to all liabilities for indebtedness, collateralized by Liens affecting such Assets to the extent provided in Section 2.1 Notwithstanding Section 4.8, the Assuming Institution specifically purchases all mortgage servicing rights and obligations of the Failed Bank.

Doc. 33-5 at 17. The "Failed Bank" is ShoreBank, the "Assuming Institution" is Urban, and the "Receiver" is the FDIC, acting as receiver of ShoreBank. Id. at 6. The second section is § 3.3, which states:

3.3 Manner of Conveyance; Limited Warranty; Nonrecourse; Etc. The conveyance of all assets, including real and personal property interests, purchased by the assuming institution under this agreement shall be made, as necessary, by receiver's deed or receiver's bill of sale, "as is", "where is", without recourse and, except as otherwise specifically provided in this agreement, without any warranties whatsoever with respect to such assets, express or implied, with respect to title, enforceability, collectibility [ sic ], documentation or freedom from liens or encumbrances (in whole or in part), or any other matters.

Doc. 33-5 at 18 (emphasis added). In the Agreement, § 3.3 printed in boldface and mostly capital letters, which implies a particular emphasis. Pointing to the language italicized by the court, Thomas alleges that no receiver's deed or receiver's bill of sale was made conveying the promissory note and mortgage from the FDIC to Urban. Doc. 33 at § 17. Urban has not sought to dispute this assertion by submitting any such deed or bill of sale.

In September 2011, Urban began holding itself out as servicer of the loan and began sending mortgage bills to Thomas. Id. at § 18; Doc. 33-6 (letter from Urban to Thomas stating: "[E]ffective 9/1/2011, we are providing loan servicing on your account.... Effective 9/1/2011, your previous loan servicer, Residential Credit Solutions, will no longer accept payments for your loan. Beginning 9/1/2011, please make your payments to Urban Partnership Bank at the address provided below."). Thomas paid several of these bills. Doc. 33 at § 18. But at some point, Thomas stopped paying. Thomas alleges that Urban has damaged her credit and that she received a letter from Urban's law firm in November 2012 stating that the mortgage is now in default and that Urban intends to foreclose on Thomas's property. Doc. 33 at §§ 1, 19; Doc. 34-4 (letter from Urban's law firm to Thomas).

Discussion

Believing that Thomas must establish that Urban does not own her mortgage loan in order to succeed on any of her claims, Urban first argues that the materials that the court can consider on a Rule 12(b)(6) motion establish that Urban is indeed the loan's owner. Doc. 36 at 3-6. In the alternative, assuming that Urban's ownership of Thomas's loan cannot be established on the pleadings, Urban advances grounds for dismissing each of Thomas's claims. Id. at 6-15.

I. Whether The Pleadings Establish That Urban Owns Thomas's Mortgage

Thomas advances two arguments for the proposition that Urban does not own her mortgage. First, she argues that ShoreBank had already transferred the mortgage to Fannie Mae before ShoreBank transferred its remaining assets to Urban pursuant to the Agreement. Doc. 33 at § 16 ("The [Agreement] does not convey any mortgage loans from FDIC to [Urban]. It does not state that Urban Partnership purchased all mortgage loans owned by ShoreBank. This is no accident; the parties to the [Agreement] understood that many mortgage loans originated by ShoreBank could not be conveyed by the [Agreement], because ShoreBank had already securitized and sold off those loans to other entities."). Second, Thomas argues that even if ShoreBank still held her mortgage when its assets were transferred to Urban pursuant to the Agreement, the Agreement did not transfer all of ShoreBank's assets and in particular did not transfer her mortgage. The court is satisfied that the amended complaint sufficiently alleges that ShoreBank had transferred the mortgage to Fannie Mae prior to ShoreBank's failure and that Urban therefore could not have received the mortgage under the Agreement. It is therefore unnecessary to consider Thomas's second argument.

Thomas alleges that RCS began servicing her loan effective August 1, 2010, several weeks before ShoreBank's remaining assets were transferred to Urban under the Agreement, and that RCS is Fannie Mae's approved servicer. Thomas further alleges that she received a HAMP modification in April 2010, and that there was at the relevant time a contract between ShoreBank and Fannie Mae providing that Fannie Mae would buy loans held by ShoreBank that received HAMP modifications. Doc. 33 at §§ 1, 13-14, 16. Thomas infers from these alleged facts that ShoreBank had in fact sold the loan to Fannie Mae before ShoreBank's assets were transferred to Urban pursuant to the Agreement. Although Thomas does not provide any document directly supporting that inference, her allegations are sufficient for purposes of a motion to dismiss. One can reasonably infer from the alleged facts that ShoreBank had sold her loan to Fannie Mae and that this is why RCS began servicing the loan. That is not a necessary inference from her allegations, but it is a reasonable one, and the court must make all reasonable inferences in the nonmovant's favor in considering a Rule 12(b)(6) motion. See Citadel Group Ltd. v. Washington Regional Med. Ctr., 692 F.3d 580, 591 (7th Cir. 2012) ("We construe the amended complaint in the light most favorable to Citadel, accept Citadel's well-pleaded facts as true, and draw all reasonable inferences in Citadel's favor.").

Urban submits that Thomas's belief that ShoreBank sold the loan to Fannie Mae is "speculative." Doc. 36 at 5. That characterization ignores the specific factual allegations noted above, which make it reasonable to infer that Fannie Mae purchased the loan. Urban also points out that Thomas "does not allege that she has been contacted by Fannie Mae (or anyone else) for payment or in any way related to the servicing of her Loan. Of course, she cannot allege that she has ever made a payment to Fannie Mae either." Id. at 5 n.1. But where, as here, a complaint's allegations are sufficient to establish a fact for Rule 12(b)(6) purposes, the plaintiff's failure to include other allegations that might have established that fact more firmly does not warrant dismissal. A requirement that a complaint include every factual allegation that might support the plaintiff's claims would effectively nullify Rule 8(a)(2)'s requirement of only "a short and plain statement of the claim showing that the pleader is entitled to relief." See Mehta v. Beaconridge Improvement Ass'n, 432 F.Appx. 614, 616 (7th Cir. 2011) ("To cross the [Rule 8(a)(2)] threshold, a plaintiff must provide enough details about the subject matter of the case to present a story that holds together.").

Next, Urban argues that "the letter upon which [Thomas] relies in assuming that the Loan was transferred to Fannie Mae expressly states that ShoreBank merely transferred the servicing of the Loan to RCS and that ShoreBank's rights under the Loan's documents are not otherwise affected." Doc. 36 at 5. Were the second part of this sentence true, then Thomas might have pleaded herself out of court by attaching to the complaint a document that refuted her assertion that ShoreBank sold the loan to Fannie Mae. See Thompson v. Ill. Dep't of Prof'l Regulation, 300 F.3d 750, 754 (7th Cir. 2002) ("when a written instrument contradicts allegations in a complaint to which it is attached, the exhibit trumps the allegations ") (internal quotation marks omitted); In re Wade, 969 F.2d 241, 249 (7th Cir. 1992) ("A plaintiff may plead himself out of court by attaching documents to the complaint that indicate that he or she is not entitled to judgment."). But Urban is wrong to maintain that the letter "expressly states... that ShoreBank's rights under the Loan's documents are not otherwise affected." What the letter says is that "[t]he assignment, sale or transfer of the servicing of your mortgage loan does not affect any term or condition of the mortgage instruments, other than terms directly related to the servicing of your loan." Doc. 33-4 at 2. That the substitution of one servicer for another does not alter the rights and obligations created by the loan agreement is an unremarkable proposition; it hardly implies that the loan itself has not been transferred-after all, if Fannie Mae had purchased the loan, it would have assumed ShoreBank's rights and obligations-and the quoted material says nothing about "ShoreBank's rights under the Loan's documents." Urban also is wrong to maintain that the letter "expressly states that ShoreBank merely transferred the servicing of the Loan to RCS." The letter says that RCS had taken over servicing the loan from ShoreBank, but there is no "merely"; the letter does not say or imply that ShoreBank had not transferred ownership of the loan as well.

Finally, Urban asserts that "[h]ad she investigated her claim prior to filing, [Thomas] would know that RCS served as ShoreBank's servicer. Indeed, had she read [RCS's letter to Thomas] in its entirety, she would have known that fact." Doc. 40 at 3. Urban does not point to any particular sentence or paragraph of RCS's letter to Thomas (Doc. 33-4), and the court does not perceive any indication in that letter that RCS had been retained by ShoreBank to service the loan. The letter simply does not say on whose behalf-ShoreBank's, Fannie Mae's, RCS's, or anyone else's-RCS was undertaking that task. And Urban fails to point to any allegation of Thomas's or to any other passage in the documents attached to her complaint that supports the proposition that RCS was acting as ShoreBank's servicer.

Thus, for purposes of Rule 12(b)(6), the court will proceed on the premise that Fannie Mae bought the loan from ShoreBank and that Fannie Mae, not Urban, has been the owner of the loan since July or August 2010. If this premise is not factually accurate, then Urban should have ...


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