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Starke v. Select Portfolio Servicing, Inc.

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

December 18, 2017

TRACY A. STARKE, Plaintiff,


          SARA L.ELLIS, United States District Judge

         Although Plaintiff Tracy A. Starke entered into a deed-in-lieu of foreclosure agreement in May 2015 with Defendant Select Portfolio Servicing, Inc. (“SPS”) to satisfy her outstanding mortgage payments, SPS refuses to honor that agreement and has called her over 1, 200 times since that time to collect on the debt. In response, Starke brings this action against SPS, claiming breach of contract and violations of the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 Ill. Comp. Stat. 505/1 et seq., the Telephone Consumer Protection Act (“TCPA”), 47 U.S.C. § 227 et seq., and Regulation X of the Real Estate Settlement Procedures Act (“RESPA”), 12 C.F.R. § 1024 et seq. SPS has filed a motion to dismiss Starke's complaint. The Court finds that Starke has sufficiently alleged the elements for a breach of contract claim and damages for her ICFA claim. She also has sufficiently pleaded revocation of consent for her TCPA claim, particularly in light of the fact that consent is an affirmative defense. Finally, the Court concludes that § 1024.35 of Regulation X provides a private right of action, allowing Starke to seek recovery against SPS for its alleged violation of that section.


         On February 24, 2006, Starke executed a mortgage in favor of Nationpoint to secure a promissory note in the amount of $135, 200. In December 2013, SPS took over the servicing of Starke's mortgage. Suffering financial hardship, Starke defaulted on her payments. Between April 2014 and February 2015, she sought home retention alternatives to foreclosure from SPS to no avail.

         On May 18, 2015, SPS offered Starke the opportunity to participate in the federal government's Home Affordable Foreclosure Alternatives Program. Starke accepted, executing a deed-in-lieu of foreclosure agreement, which assigned, conveyed, and transferred all of her interest in and to the subject property to SPS. In exchange, SPS agreed to accept the property in full satisfaction of Starke's obligation to SPS. SPS was to prepare and record a lien release in full satisfaction of the mortgage, foregoing all rights to a deficiency judgment.

         Shortly after executing the agreement, Starke received a call placed by SPS on her cellular telephone, in which SPS attempted to collect Starke's obligation to SPS. SPS obtained Starke's cellular number from her Uniform Residential Loan Application. Starke told SPS that she had executed the deed-in-lieu of foreclosure agreement and asked SPS to stop placing collection calls to her. Despite this request, Starke received no less than 1, 200 collection calls from SPS between May 2015 and May 2017.

         On October 15, 2015, SPS notified Starke that it needed a final meter reading and clearance letter from the Village of Romeoville to proceed with the deed-in-lieu of foreclosure process. Starke received the requested information from the Village on October 19, 2015 and forwarded it to SPS. SPS then advised Starke on both October 26 and 29, 2015 that it did not need anything more from her. But on November 9, 2015, SPS told Starke that it needed an assignment of mortgage to proceed, repeating this claim on November 17, 2015, December 29, 2015, January 20, 2016, February 17, 2016, and February 18, 2016.

         On April 13, 2016, SPS told Starke that her mortgage was being referred to an attorney to initiate mortgage foreclosure proceedings. On November 7, 2016, Starke, through her attorneys, sent a Notice of Error pursuant to 12 C.F.R. § 1024.35(d) and a Request for Information pursuant to 12 C.F.R. § 1024.36 to SPS, indicating that she had executed a deed-in-lieu of foreclosure agreement. But SPS continued to treat her loan as if it was in default, reporting on November 10, 2016 an amount past due of $17, 784 and a balance of $121, 743 to consumer reporting agencies. On November 16, 2016, SPS acknowledged receipt of Starke's letters, but it continued reporting her allegedly past due amounts to the consumer reporting agencies. On December 14, 2016, SPS provided Starke a written response to her Notice of Error and Request for Information, stating that the deed-in-lieu of foreclosure remained pending because the Village of Romeoville would not issue a clearance letter to proceed until it performed a walk-thru appraisal on Starke's property. SPS also responded that Starke had fallen behind on her account by twenty-two payments.


         A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed.R.Civ.P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of a claim's basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.


         I. Breach of Contract (Count I)

         SPS argues that the Court should dismiss Starke's breach of contract claim because Starke has not sufficiently alleged the material terms of the contract. To state a breach of contract claim under Illinois law, Starke must allege “(1) offer and acceptance, (2) consideration, (3) definite and certain terms, (4) performance by the plaintiff of all required conditions, (5) breach, and (6) damages.” Ass'n Benefit Servs., Inc. v. Caremark Rx, Inc., 493 F.3d 841, 849 (7th Cir. 2007) (citation omitted). Neither party has produced a written contract governing the agreement between SPS and Starke, but SPS does not deny the existence of the agreement. And although SPS claims Starke has not set forth the terms of the deed-in-lieu of foreclosure agreement, Starke has alleged that the parties agreed that she would convey all of her interest in and to the property to SPS in exchange for SPS providing a lien release in full satisfaction of the mortgage with SPS foregoing all rights to a deficiency judgment. Starke further alleges that she has performed all conditions necessary, assigning the property to SPS, surrendering possession of the property, and obtaining clearance from the Village of Romeoville as requested. She claims that SPS breached the agreement by failing to prepare and record the lien release and continuing to treat the mortgage as if it is in default. These allegations sufficiently state a breach of contract claim, putting SPS on fair notice of its alleged breaches.[2] See Peerless Network, Inc. v. MCI Commc'n Servs., Inc., No. 14 C 7417, 2015 WL 2455128, at *5-7 (N.D. Ill. May 21, 2015) (siding with those courts finding that a plaintiff is not required to cite specific contract provision that have been breached but must at least place the defendant “on fair notice of the ‘contractual duty' it breached”).

         SPS also argues that, to the extent the Court allows the breach of contract claim to proceed, Starke's request for attorneys' fees and costs arising from the breach should be dismissed because Starke does not allege the agreement allows for such damages nor is there statutory authority allowing her to collect attorneys' fees and costs for a breach of contract. Starke acknowledges that, under the American Rule, recognized in Illinois, “absent a statute or contractual provision, a successful litigant must bear the burden of his or her own attorney's fees.” Champion Parts, Inc. v. Oppenheimer & Co., 878 F.2d 1003, 1006 (7th Cir. 1989). In recognition ...

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