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Gondeck v. A Clear Title and Escrow Exchange, LLC

United States District Court, Seventh Circuit

August 28, 2013

JAMES GONDECK and PETER G. O'MALLEY, Plaintiffs,
v.
A CLEAR TITLE AND ESCROW EXCHANGE, LLC, STEPHEN J. CORMIER, JUSTYNA MICHALOWSKA, FIDELITY NATIONAL TITLE GROUP (d/b/a CHICAGO TITLE INSURANCE COMPANY and TICOR TITLE), CHICAGO TITLE INSURANCE COMPANY, TICOR TITLE INSURANCE COMPANY, SRV ASSOCIATES, LLC, THE LUX GROUP, LLC, SRV HOLDINGS & ASSOCIATES, LLC, MAREK R.
v.
HARRISON, and MICHAEL SPIES, Defendants.

MEMORANDUM OPINION AND ORDER

GARY FEINERMAN, District Judge.

Plaintiffs James Gondeck and Peter G. O'Malley allege in this suit that they were the victims of a fraudulent scheme involving the improper withdrawal and misappropriation of funds they had deposited into an escrow account maintained by Defendant A Clear Title and Escrow Exchange, LLC ("A Clear Title") at Fifth Third Bank. Doc. 68. The suit has been the subject of three prior opinions. 2012 WL 5200091 (N.D. Ill. Oct. 22, 2012); 2012 WL 3638321 (N.D. Ill. Aug. 22, 2012); 2012 WL 773119 (N.D. Ill. March 8, 2012). Now before the court is Plaintiffs' motion for summary judgment against A Clear Title on Counts XIII (breach of contract), XIV (breach of fiduciary duty), and XVI (negligence) of their second amended complaint. Doc. 188. A Clear Title did not respond, but Defendants Chicago Title Insurance Company and Ticor Title (together, "Chicago Title") have filed a response because Plaintiffs have sought to hold them vicariously liable on an agency theory for A Clear Title's conduct. Doc. 202 at 6 n.1. For the following reasons, Plaintiffs' motion is denied.

Background

Although the full factual background of this case is extensive, the facts necessary to resolve Plaintiffs' motion-which are stated as favorably to A Clear Title as permitted by the record and Local Rule 56.1-are relatively simple.

A. Gondeck's Transaction with A Clear Title

In 2010, Gondeck sought financing to purchase land and construct a new home in Long Grove, Illinois. Doc. 214 at ¶ 1. Gondeck initially tried traditional lending sources but was unhappy with the terms being offered. Id. at ¶ 2. In or around July 2010, Defendant Michael Spies presented Gondeck with an alternative source of financing called the Proof of Funds ("POF") Program, which involved Defendant Marek Harrison and his affiliated companies, Defendants SRV Associates, LLC, Lux Group, LLC, and SRV Holdings & Associates, LLC (collectively, "SRV"). Id. at ¶ 9. Gondeck was told that if he deposited $250, 000 into A Clear Title's escrow account at Fifth Third Bank, that money would be used as "proof of funds" that would assist Harrison and SRV negotiate a bank guarantee or standby letter of credit. Id. at ¶ 10 (citing Plaintiffs' second amended complaint, Doc. 68 at ¶¶ 49-50).

On July 6, 2010, Gondeck and A Clear Title entered into an Escrow Release, under which Gondeck was to deposit $250, 000 ("Gondeck Escrow Funds") into A Clear Title's escrow account. Doc. 203 at ¶ 9; Doc. 203-1 at 183. The Escrow Release was signed on A Clear Title's behalf by its Managing Member, Defendant Stephen Cormier. Doc. 203 at ¶ 9. The Escrow Release stated that the Gondeck Escrow Funds were "for the purchase of completing POF (proof of funds) for the negotiation of a BG (bank guarantee), " that the "funds shall be held in escrow for 21 (twenty-one) days, " and that A Clear Title "further agrees to release said funds back to Mr. Gondeck on the 22nd day unless instructed otherwise by Mr. Gondeck." Doc. 203 at ¶ 10; Doc. 203-1 at 183. In exchange for Gondeck's deposit, an unnamed investor was to provide Gondeck with $2.2 million in funding and take a fifty-percent equity stake in Gondeck's future home. Doc. 214 at ¶ 12; Doc. 203-1 at 195. On July 6, 2010, Spies emailed Gondeck, under the subject "$250k Deposit Terms, " saying:

In consideration of your POF [Proof of Funds] deposit of $250k, I will provide the following:
-Restructure the Alakai Hotel & Suites operating agreement to include you as a 1/5 partner post acquisition.
-Refund $81.3k, $16.1k, and $55k for a total of 152.4k at closing of the Alakai (this figure can be reduced by Sovren/MVG refunds that may be occur prior to the Alakai closing).
-I will keep my $500k POF on deposit with ACTAEE (Chicago Title Agent) in order to help facilitate your Long Grove project and Don's lake house.
-I will facilitate a 100% Loan to Value - 50% JV on your project which would have no debt servicing....

Doc. 214 at ¶ 14; Doc. 203-1 at 195.

A day later, on July 7, 2010, Gondeck entered into a Sole Order Escrow Agreement with A Clear Title. Doc. 203 at ¶ 11; Doc. 203-1 at 185. Cormier signed the Agreement on A Clear Title's behalf. Doc. 203 at ¶ 11. The Agreement stated that the Gondeck Escrow Funds would be deposited into escrow and that "said funds are solely owned by Mr. James Gondeck." Id. at ¶ 12; Doc. 203-1 at 185. The Agreement further provided that "[i]n no case shall the above mentioned deposits be surrendered except on an ...


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