United States District Court, N.D. Illinois, Eastern Division
STUART E. FAGAN and SUSAN L. FAGAN, Plaintiffs,
CAPITAL ONE, N.A., Defendant.
MEMORANDUM OPINION AND ORDER
FEINERMAN, UNITED STATES DISTRICT JUDGE
and Susan Fagan brought this diversity suit against Capital
One, alleging that it violated Illinois law during the
pendency of their home loan application. Doc. 9. Capital One
has moved to dismiss the suit under Federal Rule of Civil
Procedure 12(b)(6). Doc. 26. The motion is granted in part
and denied in part.
resolving a Rule 12(b)(6) motion, the court assumes the truth
of the operative complaint's well-pleaded factual
allegations, though not its legal conclusions. See Zahn
v. N. Am. Power & Gas, LLC, 815 F.3d 1082, 1087 (7th
Cir. 2016). The court must also 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 the Fagans' brief opposing
dismissal, so long as those additional facts “are
consistent with the pleadings.” Phillips v.
Prudential Ins. Co. of Am., 714 F.3d 1017, 1019-20 (7th
Cir. 2013). The facts are set forth as favorably to the
Fagans as those materials allow. See Pierce v. Zoetis,
Inc., 818 F.3d 274, 277 (7th Cir. 2016). In setting
forth those facts at the pleading stage, the court does not
vouch for their accuracy. See Jay E. Hayden Found. v.
First Neighbor Bank, N.A., 610 F.3d 382, 384 (7th Cir.
April 2015, Capital One reviewed the Fagans' home loan
application and conditionally agreed to a $417, 000, 30-year
fixed rate mortgage at an annual interest rate of 3.625%.
Doc. 9 at 2. At that point, the Fagans would have been
subject to a $450 fee if they withdrew their application.
Id. at 3. On April 25, Lacea Renta, a Capital One
mortgage loan officer, told Stuart that the interest rate was
locked for 60 days and requested documents to start
processing the loan. Ibid. The Fagans submitted all
requested documents within the 60-day period. Ibid.
One assigned Michael Schneider, a Dedicated Loan Specialist,
to assist the Fagans with the loan processing phase.
Ibid. On May 11, Schneider told Stuart in an email
that Capital One had verified enough liquid funds for the
Fagans to close the loan. Id. at 3-4. On May 13,
Stuart provided Schneider with copies of his 2014 federal and
state income tax returns. Id. at 4. On May 15,
Schneider emailed Stuart a list of the outstanding conditions
for the loan, which included “proof of extension and
extension approval or complete 2014 tax returns.”
Id. at 5. Later that day, Stuart notified Schneider
that he had just transmitted the requested tax materials to
Capital One. Ibid.
Fagans left for a trip to Europe on May 20. Id. at
7. They had prearranged with Capital One to sign documents at
a U.S. Consulate during the trip. Ibid. (A May 19
email from Schneider to Stuart reads: “At this point,
there are no additional documents that I am needing from you.
The way the closing will work, is your title company will be
sending you the documents by either e-mail or fed-ex to sign.
You would then bring them to the U.S. Embassy to have them
notarized and mail them back to your title company.”
Ibid.) On May 22, while the Fagans were overseas,
Capital One sent a “Statement of Credit Denial,
Termination or Change” to their home in Wheaton,
Illinois. Ibid. The letter stated that Capital One
had denied the Fagans' loan application because their
debt obligations were excessive relative to their income.
Ibid. On May 23, before the Fagans learned of that
letter, Capital One asked them to provide another copy of
their 2014 tax extension request. Ibid. The Fagans
promptly complied. Ibid.
2, Renta told Stuart that Capital One either had denied or
was going to deny the loan application because of instability
in his income. Id. at 8. Renta stated that
Stuart's 2014 income had not been taken into
consideration because he had filed a tax return extension.
Ibid. Renta was “being deceptive” during
this conversation, because Capital One's true motive in
denying the application was to induce the Fagans to reapply
for a loan at a higher interest rate- interest rates on
30-year fixed rate mortgages had been rising, and they
continued to rise until August. Id. at 3, 8-9.
Fagans asked Capital One to reconsider their loan application
in light of Stuart's 2014 and 2015 income. Id.
at 9. On June 5, Renta asked Stuart to send her the
Fagans' 2014 tax returns. Ibid. Stuart did not
have easy access to his tax documents while in Europe, but
reminded Schneider via email that he had already submitted
his 2014 returns. Id. at 10. Schneider did not
respond. Ibid. On June 11, Stuart emailed Renta to
tell her that he had uploaded another copy of his 2014
returns to the Capital One website; he also attached the
returns to the email. Ibid. Stuart spoke to another
Capital One employee, Sean Knudsen, on June 18. Id.
at 11. Knudsen told Stuart that there was no record of
Capital One having received the 2014 returns. Ibid.
The next day, Renta told Stuart via email that she had no
record of having received the 2014 returns and that she could
not open the 2014 returns attached to his email.
19, Stuart sent Renta a link to his 2014 tax returns.
Id. at 12. Renta initially responded that the link
did not work, but she later confirmed that she could access
the returns. Ibid. On June 24, Renta asked Stuart to
explain the discrepancy between his 2013 and 2014 income, and
he did so promptly. Id. at 13. On June 29, Renta
emailed Stuart: “It looks as if we are not able to
reactivate the loan, but the underwriter has told me that
[your] income and reasoning is ok. I can start a new
application at closest pricing I can get to what you
originally were locked in at. I should be able to get you at
3.75% as this is the lowest rate I have available on the rate
sheet.” Ibid. As noted, the original rate
offered to the Fagans was 3.625%. Id. at 2.
13, Renta told Stuart that the closure of the loan
application was not the Fagans' fault. Id. at
14. Renta then offered to open a new loan application at a
higher interest rate-this time 3.875%-and Stuart declined.
Ibid. Stuart reached out to Renta on July 15 to ask
what rate Capital One could offer at that time, and Renta
offered 4%. Id. at 15. The Fagans ultimately secured
a home loan through another lender. Ibid.
complaint asserts four claims: (1) common law fraud; (2)
deceptive practices under the Illinois Consumer Fraud and
Deceptive Business Practices Act (“ICFA”), 815
ILCS 505/1 et seq.; (3) breach of contract; and (4)
breach of the implied covenant of good faith and fair
dealing. Id. at 16-17. The Fagans have ...