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Carlos v. Beneficial Financial I, Inc.

United States District Court, N.D. Illinois

November 21, 2017

Hector M. Carlos and Maria D. Carlos, Plaintiffs,
Beneficial Financial I Inc., et al., Defendants.


          Ronald A. Guzmán United States District Judge

         For the reasons stated below, Beneficial's motion to dismiss [41] is granted in part and denied in part. The breach of contract and TILA claims are dismissed with prejudice, Plaintiffs are given 14 days to file an amended complaint containing a revised ICFA count as discussed herein, and the motion to dismiss the RESPA count is denied.



         Plaintiffs allege that on October 23, 2002, they refinanced their mortgage with Beneficial Financial I, Inc. (“Beneficial”) by executing a note in the amount of $132, 296.53, which was secured by a mortgage on their home. (Am. Compl., Dkt. # 36, ¶¶ 8-9, 16.) According to Plaintiffs, Beneficial charged them interest on a daily, not monthly, basis “in derogation of the loan documents.” (Id. ¶ 35.) “Under Beneficial's method, interest apparently accrued daily such that if [Plaintiffs] made a payment more than thirty days after the previous payment, they would be charged extra interest in addition to that included in the . . . mortgage payment, even if both payments were timely.” (Pls.' Resp., Dkt. # 49, at 2.) In addition, as a result of the way in which Beneficial accounted for Plaintiffs' loan, they “accumulated an interest arrearage of at least $51, 958.34, including an unauthorized $41, 131.16 ‘deferred interest' balloon payment.” (Am. Compl., Dkt. # 36, ¶ 11.) According to Plaintiffs, the manner in which the loan was calculated and the “additional” charges were explained to them for the first time in summer 2017. (Id. ¶¶ 43, 45.)

         Throughout 2014, Plaintiffs provided multiple notices of error, requests for information and qualified written requests (“QWR”) to Beneficial through their then-attorney due to the confusion as to how much they owed. (Id. ¶¶ 58, 62.) Beneficial failed to correct the purported errors or provide the requested information, and instead gave “non-responsive and largely incoherent” answers. (Id. ¶ 59.) In or about May 2015, Beneficial accelerated Plaintiffs' loan, calling the entire balance due, including the approximately $41, 000.00 “deferred interest balloon payment.” (Id. ¶ 69.)

         Beneficial was responsible for servicing the loan from approximately October 23, 2002 to June 1, 2015, when it transferred servicing of the loan to defendant Caliber Home Loans, Inc. (“Caliber”). (Id. ¶¶ 22, 53.) Beneficial allegedly failed to provide Caliber with Plaintiffs' full payment history as well as the QWRs and requests for information from Plaintiffs to Beneficial. (Id. ¶¶ 72-73.) Beneficial assigned the loan to U.S. Bank on or about July 22, 2015. (Id. ¶¶ 22-23.) When Beneficial transferred the loan to Caliber and U.S. Bank, it had calculated Plaintiffs' outstanding interest balance to be $51, 958.34. (Id. ¶ 46.) Caliber and U.S. Bank continued to incorrectly account for Plaintiffs' mortgage debt. (Id. ¶ 13.) After a trial modification, U.S. Bank, through Caliber, offered Plaintiffs a permanent modification of their loan. On September 2, 2015, U.S. Bank filed a foreclosure action against Plaintiffs, during which Plaintiffs, through counsel, negotiated and entered into a loan modification that included the $41, 131.16 in deferred interest. (Id. ¶¶ 120-26, 140.) The foreclosure case has been dismissed.

         Beneficial moves to dismiss the claims alleged against it, which include breach of contract, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), violations of the Truth in Lending Act (“TILA”), and violations of the Real Estate Settlement Procedures Act (“RESPA”).


         A motion under Rule 12(b)(6) challenges the “sufficiency of the complaint to state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[A] complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). These allegations “must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The allegations that are entitled to the assumption of truth are those that are factual, rather than mere legal conclusions. Iqbal, 556 U.S. at 678-79.

         A. Breach of Contract

         Beneficial contends that the breach of contract count against it must be dismissed on several grounds, but because the first ground is dispositive, that is the only one the Court will address. It is undisputed that Plaintiffs and U.S. Bank entered into a modification of the original loan entered into between Plaintiffs and Beneficial, and that the modification was accepted by Plaintiffs. (Id. ¶ 141 ([Plaintiffs] timely accepted the modification. . . .”).) As a result, Plaintiffs can only sue for breach of contract based on the terms of the modified agreement with U.S. Bank. See Galesburg 67, LLC v. Nw. Television, Inc., No. 15 C 5650, 2017 WL 3608204, at *4 (N.D. Ill. Aug. 22, 2017) (“When, as here, a contract is modified or amended by a subsequent agreement, ‘any lawsuit to enforce the [agreement] must be brought on the modified agreement and not on the original agreement.'”) (citation omitted). Thus, Beneficial's motion to dismiss the breach of contract count is granted.

         B. ICFA

         Beneficial also moves to dismiss the ICFA claim against it. Plaintiffs allege that Beneficial engaged in unfair and/or deceptive acts and practices by: (1) incorrectly charging interest daily instead of monthly, resulting in a purported balloon payment and “negative amortizing loan, ” and leading to allegedly unauthorized loan “restructurings” and modifications; (2) failing to inform Plaintiffs of the interest computation; and (3) “recklessly transferring [Plaintiffs'] loan” to U.S. Bank. (Am. Compl., Dkt. # 36, ¶ 230.) “[T]he elements of a claim under [the] ICFA are 1) a deceptive or unfair act or practice by the defendant; 2) the defendant's intent that the plaintiff rely on the deceptive or unfair practice; 3) the unfair or deceptive practice occurred during a course of conduct involving trade or ...

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