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Cross v. Irwin

United States District Court, S.D. Illinois

February 15, 2017

ALFRED CROSS, Plaintiff,
v.
RANDALL NILE IRWIN, PEOPLES NATIONAL BANK, JEFFERSON COUNTY TITLE COMPANY, NVK PROPERTIES, LLC and MICHAEL HOLTZ, Defendant.

          MEMORANDUM AND ORDER

          J. PHIL GILBERT DISTRICT JUDGE.

         This matter comes before the Court on plaintiff Alfred Cross's response (Doc. 7) to the Court's January 18, 2017, order to show cause (Doc. 5) why the Court should not deny his motion for leave to proceed in forma pauperis (Doc. 3) and dismiss his case for lack of jurisdiction because his complaint fails to state of cause of action over which this Court has subject matter jurisdiction. The Court directed Cross to specify in his response which provisions of the Real Estate Settlement Procedures Act (“RESPA”), 12 U.S.C. § 2601 et seq., he asserts any defendant has violated and to briefly summarize the acts alleged to constitute that violation. The Court further directed him to specify any other federal law for which there is a civil remedy that he asserts any defendant has violated. The Court warned Cross that if he failed to respond to this order to show cause by identifying a non-frivolous federal claim conferring federal question jurisdiction on this Court, the Court could deny Cross's motion for leave to proceed in forma pauperis and could dismiss this case without prejudice for lack of jurisdiction.

         Cross alleges, among other things, that defendants Randall Nile Irwin and/or NVK Properties LLC (“NVK”) agreed to pay him a $210, 000 commission for acting as Irwin's agent in negotiating the purchase of a hotel in Mt. Vernon, Illinois, and for upgrading and operating that hotel. Cross alleges he reasonably relied on the promise of a commission to repair, upgrade, operate and manage the Mt. Vernon hotel. Cross claims that the settlement sheet prepared for the January 16, 2015, closing - the Form HUD-1 - anticipated payment of his commission. In a separate agreement with Irwin, Cross agreed that Irwin could have up to May 1, 2015, to pay the commission. Cross signed the sales contract and the original settlement sheet as the agent of NVK.

         Two months later, Cross obtained a copy of the settlement sheet from defendant Jefferson County Title Company. He noticed that the first page had been altered from the original settlement sheet to reallocate the amount originally listed as “Permanent working capital” due from the buyer ($200, 000) to be included in the “Buyer's Expenses” line. The change did not affect the gross amount due from the buyer or the total settlement charges. The second page of the altered settlement sheet was identical to the second page of the original settlement sheet, including Cross's signature. Cross believes defendants Peoples National Bank and Jefferson County Title Company were complicit in changing the settlement sheet to enable Irwin to use the reallocated $200, 000 for things other than working capital. Notably, neither settlement sheet indicates on Line 703 an amount to be paid by the buyer or seller at settlement as a commission.

         In the meantime, in anticipation of payment of the commission by May 1, 2015, Cross took out a loan with a repayment date of June 1, 2015.

         Cross was never paid his commission; he alleges that instead of paying the commission, Irwin took the money to invest in real estate in Salem, Illinois, owned by Irwin. There is no longer enough money in Irwin's bank account to pay Cross his commission. Cross asserts the alteration of the settlement sheet and the failure to pay his commission at the closing from the amounts in escrow violated RESPA.

         In his response, Cross admits that RESPA does not apply to loans primarily for business or commercial purposes. Regulations promulgated under RESPA provide:

(a) Applicability. RESPA and this part apply to federally related mortgage loans, except as provided in paragraphs (b) and (d) of this section.
(b) Exemptions.
* * *
(2) Business purpose loans. An extension of credit primarily for a business, commercial, or agricultural purpose, as defined by 12 CFR 1026.3(a)(1) of Regulation Z. Persons may rely on Regulation Z in determining whether the exemption applies.

12 C.F.R. § 1024.5. Regulation Z, in turn, provides, in pertinent part:

The following transactions are not subject to this part or, if the exemption is limited to specified provisions of this part, are ...

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