DANIEL AVILA, on behalf of himself and all persons similarly situated, Plaintiff,
CITIMORTGAGE, INC. and RESTORE CONSTRUCTION, INC., Defendants.
MEMORANDUM OPINION AND ORDER
RONALD A. GUZMAN, District Judge.
Defendant Citimortgage, Inc. ("Citi") moves pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6) to dismiss the breach of contract, breach of fiduciary duty and conversion claims asserted in Counts I-III of the complaint and Rule 12(f) to strike the class allegations from them. For the reasons set forth below, the Court grants the motion to dismiss and denies the motion to strike.
On February 10, 2005, plaintiff executed a mortgage in favor of Citi on his property at 4734 South Bishop Street in Chicago, Illinois. ( See Compl., Ex. A, Mortgage at 15-16.) The mortgage required plaintiff to maintain property insurance "in the amounts... and for the periods that [Citi] requires." ( Id. at 6.) It also states:
Unless Lender and Borrower otherwise agree in writing, any insurance proceeds... shall be applied to restoration or repair of the Property, if the restoration or repair is economically feasible and Lender's security is not lessened. During such repair and restoration period, Lender shall have the right to hold such insurance proceeds until Lender has had an opportunity to inspect such Property to ensure the work has been completed to Lender's satisfaction, provided that such inspection shall be undertaken promptly. Lender may disburse proceeds for the repairs and restoration in a single payment or a series of progress payments as the work is completed.... If the restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by this [mortgage], whether or not then due, with the excess, if any, paid to Borrower... (hereafter, "loss provision").
( Id. at 6-7; see id. at 4.)
On July 4, 2010, plaintiff's property was damaged by a fire. (Compl. ¶ 85.) His insurer deposited about $150, 000.00 with Citi to be used to repair the property. ( Id. ¶ 78.) Citi paid $51, 532.18 of the insurance proceeds to the contractor plaintiff hired to do the work, though the work had been done poorly or not at all. ( Id. ¶¶ 78-80, 85-88.) Moreover, Citi did not attempt to get the money back from the contractor and applied the remainder of the proceeds to plaintiff's debt. ( Id. ¶¶ 14-15.)
Plaintiff alleges that since April 15, 2003, Citi has entered into thousands of mortgages containing a similar loss provision pursuant to which it has received insurance proceeds pending property restoration but has instead applied them to the borrowers' debts. ( Id. ¶ 31.)
Motion to Dismiss
On a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded factual allegations of the complaint, drawing all reasonable inferences in plaintiff's favor. Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009). "[A] complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations" but must contain "enough facts to state a claim for relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).
To state a viable contract claim, plaintiff must allege, among other things, that he performed his contractual obligations, Citi did not perform its obligations and plaintiff was damaged as result. See Mannion v. Stallings & Co., Inc., 561 N.E.2d 1134, 1138 (Ill.App.Ct. 1990) (setting forth elements of contract claim). Defendant contends that these allegations are lacking.
With respect to the breach and damage elements, the Court disagrees. The mortgage loss provision gives Citi two options. If restoration is economically feasible, Citi "shall" apply the insurance proceeds to the restoration work. ( See Compl., Ex. A, Mortgage at 6.) If restoration is not economically feasible, Citi "shall" apply the insurance proceeds to the borrower's debt. ( Id. ) Plaintiff alleges that Citi did neither. Rather, it paid part of his insurance money to a contractor for shoddy or non-existent work and applied the rest of it to plaintiff's debt. ( See Compl. ¶¶ 23-34.) These allegations are sufficient to suggest that Citi breached the loss provision and plaintiff was damaged as a result.
The Court agrees, however, that plaintiff has not alleged, explicitly or implicitly, that he complied with his contractual obligations. Thus, the Court ...