Davis v. Elite Mortg. Services, Inc.

• Decision Date: 09 January 2009
• Docket Number: No. 06 C 2648.,06 C 2648.
• Citation: 592 F.Supp.2d 1052
• Parties: Thomas DAVIS, Plaintiff, v. ELITE MORTGAGE SERVICES, INC., Decision One Mortgage Co., Mortgage Electronic Registration Systems, Inc., Melvin Brooks, LeAndre Burnett, Lori Westerfield, Earnest Terrell Rowell, Johnnie Pierre, NovaStar Mortgage, Inc., and All Unknown Claimants, Defendants.
• Court: U.S. District Court — Northern District of Illinois

592 F.Supp.2d 1052

Thomas DAVIS, Plaintiff, v. ELITE MORTGAGE SERVICES, INC., Decision One Mortgage Co., Mortgage Electronic Registration Systems, Inc., Melvin Brooks, LeAndre Burnett, Lori Westerfield, Earnest Terrell Rowell, Johnnie Pierre, NovaStar Mortgage, Inc., and All Unknown Claimants, Defendants.

No. 06 C 2648.

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

January 9, 2009.

John S. Elson, Northwestern University School of Law, Chicago, IL, for Plaintiff.

Rodney Perry, Synde B. Keywell, Bryan Cave LLP, Kristina M. Van Buskirk, Neal, Gerber & Eisenberg LLP, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

ROBERT W. GETTLEMAN, District Judge.

Plaintiff Thomas Davis filed a fourteen-count third amended complaint against defendants Elite Mortgage Services, Inc. ("Elite"), Decision One Mortgage Co. ("Decision One"), Mortgage Electronic Registration Systems, Inc. ("MERS"), Melvin Brooks, LeAndre Burnett, Lori K. Westerfield, Earnest Terrell Rowell, Johnnie Pierre, NovaStar Mortgage, Inc. ("NovaStar"), E & I Funding Corp. ("E & I Funding"), and all unknown claimants. Plaintiff alleges that the defendants organized a fraudulent scheme to persuade him to sign documents that he believed would refinance his home but which instead conveyed his home to a third party. Specifically, Count III alleges that the transfer of title to plaintiff's home should be construed as creating an equitable mortgage rather than a formal conveyance of real property.

Defendant NovaStar has asserted five affirmative defenses: (1) defendant Pierre was a bona fide purchaser of the Property for value; (2) defendant NovaStar, as a mortgagee, was a bona fide purchaser for value; (3) waiver; (4) estoppel; (5) subrogation; and (6) laches. Plaintiff has moved for partial summary judgment on defendant NovaStar's first, second, third, and fourth affirmative defenses. In the alternative, plaintiff has moved for judgment on the pleadings under Fed.R.Civ.P. 12(c) or to strike these defenses under Fed.R.Civ.P. 12(f). For the reasons set forth below defendant's motion is granted.

FACTS

Plaintiff Thomas Davis, a 58-year-old retiree with one year of high school education, owned a residence and accompanying property located at 2737 W. Washington Boulevard in Chicago, Illinois. Plaintiff's family had owned the property and plaintiff had lived in the home since 1947. Plaintiff made monthly payments of $990.40 to Ameriquest Mortgage Company ("Ameriquest") on a loan secured by a mortgage on the property.

Plaintiff worked as a laborer for the Chicago Department of Sewers, now the Chicago Department of Water Management, until he retired in February 2003. When plaintiff left his job, he fell behind in his mortgage payments and other debts, and in January 2004 plaintiff filed for Chapter 7 bankruptcy. On April 29, 2004, the bankruptcy court discharged plaintiff's debts, but by agreement of plaintiff and Ameriquest that discharge order did not include the Ameriquest mortgage. At that time, the outstanding value of the mortgage was higher than the appraised value of plaintiff's home.

Plaintiff testified in his deposition in the instant case that in March 2004 Ameriquest threatened to foreclose on the mortgage and gave him until April 16, 2004, to refinance to avoid foreclosure. In March 2004, plaintiff called defendant Elite Mortgage Services, Inc. ("Elite") for assistance in preventing the foreclosure of his home. Elite referred plaintiff to defendant Brooks, and on April 30, 2004, after various meetings with Brooks, defendant Burnett, and defendant Westerfield, plaintiff signed a number of documents, including a "Contract for Deed." The contract stated that plaintiff would convey the property to Rowell for a price of $190,000, and that plaintiff would make monthly mortgage payments of $1,223.51. The contract also gave plaintiff the option to repurchase his home from Rowell in May 2005 for $190,000. In the event that plaintiff failed to make the final balloon payment for the balance of the purchase price or the accrued interest and other charges, Rowell would have the option "to assist the buyer with purchase or give purchaser notice of default." Plaintiff signed no document that gave him the right to continue living in his home after the conveyance of the property to defendant Rowell. Plaintiff testified that he did not understand when he signed the documents that he was conveying full, unconditional title to Rowell.

Plaintiff received $18,000 for signing the refinancing documents, and beginning in May 2004 he began making monthly payments of $1,223.51 on Rowell's mortgage. These payments were $223.51 higher than his prior monthly payments. Plaintiff made these monthly payments in Rowell's name using Rowell's social security number with payment coupons bearing the name "Earnest Terrell Rowell." According to plaintiff, he believed that these payments were being credited to the equity he had been building in his property.

Plaintiff did not regain full title to his home in April 2005. Instead, he signed another document labeled "Contract for Deed" on May 1, 2005, which extended his mortgage payment obligations for another year, giving him the option to repurchase his home from Rowell in May 2006 for $190,000. No payments made by plaintiff on the mortgage were credited toward the $190,000 plaintiff was required to pay Rowell to regain title to his home. Plaintiff and Rowell also signed a document entitled "Chicago Residential Lease," which provided that plaintiff would lease the home from Rowell, and that his monthly rent payments would be "made out to mortgage companies."

Plaintiff made the required monthly payments on Rowell's mortgage from May 2004 through November 2005-twenty monthly payments in total. Beginning in December 2005, plaintiff had trouble making the payments on time. In January 2006, plaintiff's monthly mortgage payment was increased to $1,279.51. On February 14, 2006, plaintiff recorded with the Cook County Recorder of Deeds a "Notice of Equitable Mortgage" setting forth his claim to the sole legal title to the property.

Plaintiff missed his April 2006 payment, and in May 2006 Rowell served plaintiff with a notice of intent to file a complaint for forcible entry and a detainer. On May 11, 2006, Rowell conveyed title to the property to defendant Johnnie Pierre for $345,000. Pierre's purchase of the property was financed with a mortgage loan from NovaStar which recorded the mortgage with the Cook County Recorder of Deeds on May 19, 2006. Thereafter, Plaintiff filed the instant suit.

DISCUSSION

Legal Standard: Summary Judgment

Summary judgment is appropriate if the evidence demonstrates that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Vision Church v. Village of Long Grove, 468 F.3d 975, 988 (7th Cir.2006). The burden is on the moving party to identify portions of the pleadings, answers to interrogatories, and affidavits which demonstrate an absence of material fact. See Celotex, 477 U.S. at 323, 106 S.Ct. 2548 (1986). The burden then shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(c). When reviewing a summary judgment motion, the court must read the facts in the light most favorable to the non-moving party. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The court's role "is not to evaluate the weight of the evidence or to determine the truth of the matter, but instead to determine whether there is a genuine issue of triable fact." Doe v. R.R. Donnelley & Sons Co., 42 F.3d 439, 443 (7th Cir.1994).

NovaStar's Affirmative Defenses of Bona Fide Purchaser

The first issue concerns NovaStar's bona fide purchaser affirmative defenses. Bona fide purchase is a valid affirmative defense for which the defendant bears the burden of proof. Independent Coal & Coke Co. v. United States, 274 U.S. 640, 650, 47 S.Ct. 714, 71 L.Ed. 1270 (1927) (citing Wright-Blodgett Co. v. United States, 236 U.S. 397, 403, 35 S.Ct. 339, 59 L.Ed. 637); Daniels v. Anderson, 252 Ill. App.3d 289, 296, 191 Ill.Dec. 773, 624 N.E.2d 1151 (Ill.App. 1st Dist.1993). "A bona fide purchase interest in property takes that interest free and clear from all claims except those of which [one] has notice." Daniels, 252 Ill.App.3d at 296, 191 Ill.Dec. 773, 624 N.E.2d 1151. Notice may be actual or constructive and "contemplates the existence of circumstances or facts either known to a prospective purchaser or of which he is chargeable with knowledge which imposes upon such purchaser the duty of inquiry." Burnex Oil Co. v. Floyd, 106 Ill.App.2d 16, 21, 245 N.E.2d 539 (1st Dist.1969).

Under the doctrine of constructive notice, the law imputes to a buyer or lien claimant knowledge of the facts that a diligent inquiry would have brought to light. Miller v. Bullington, 381 Ill. 238, 44 N.E.2d 850 (1942). The Illinois Supreme Court has long held that a purchaser must inquire into "persons in possession of real estate and by what tenure they hold and by what interest they claim, and is put on notice of all claims, legal and equitable, which the pursuit of such inquiry would disclose." Ambrosius v. Katz, 2 Ill.2d 173, 182, 117 N.E.2d 69 (1954); Miller, 381 Ill. at 243, 44 N.E.2d 850; Stein v. Green, 6 Ill.2d 234, 242, 128 N.E.2d 743 (1955) (holding that it is the purchaser's responsibility to investigate the property and inquire as to the rights of any individual in possession of the property). Because possession has "substantial significance and consequences," it must be "visible, open, exclusive and unambiguous." Burnex, 106 Ill.App.2d at 21-22, 245 N.E.2d 539; Millikin Trust Co. v. Gregory, 292 Ill.App. 28, 29, 10 N.E.2d 853 (3d Dist.1937) ("Possession, before it...