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Fagan v. Capital One, N.A.

United States District Court, N.D. Illinois, Eastern Division

May 5, 2017

CAPITAL ONE, N.A., Defendant.



         Stuart 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.


         In 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. 2010).

         In 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.

         Capital 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.

         The 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.

         On June 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.

         The 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. Ibid.

         On June 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.

         On July 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.


         The 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 ...

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