EState Davis v. Bank

Decision Date12 January 2011
Docket NumberNo. 10–1549.,10–1549.
Citation633 F.3d 529
PartiesESTATE OF Dorothy DAVIS, Plaintiff–Appellant,v.WELLS FARGO BANK and Litton Loan Servicing, Defendants–Appellees.
CourtU.S. Court of Appeals — Seventh Circuit


William F. Spielberger (argued), William F. Spielberger & Associates, P.C., Chicago, IL, for PlaintiffAppellant.

Solomon Maman, James V. Noonan (argued), Noonan & Lieberman, Chicago, IL, for DefendantsAppellees.Before EVANS, SYKES, and HAMILTON, Circuit Judges.HAMILTON, Circuit Judge.

Dorothy Davis was the victim of a predatory mortgage loan in 1999. She sued the original lender and won a judgment that has not been collectable. In this lawsuit, Mrs. Davis (and now, after her death, her estate) sought damages from Wells Fargo Bank, which later bought her loan, and Litton Loan Servicing, which later took over the servicing of her loan. The lawsuit asserted claims for unconscionability and fraud under Illinois state law, as well as federal claims for violations of the Home Ownership and Equity Protection Act (“HOEPA,” 15 U.S.C. § 1639), and race discrimination under the Equal Credit Opportunity Act (“ECOA,” 15 U.S.C. § 1691(a)), and race discrimination under the Fair Housing Act (“FHA,” 42 U.S.C. § 3604(b)). The district court dismissed most claims under Rule 12(b)(6) as barred by applicable statutes of limitations and others on the merits, and granted summary judgment on the merits of one final claim. Mrs. Davis's estate appeals the dismissal of these claims. We agree with the district court's analysis of all but one claim. The exception is that we conclude that Mrs. Davis's ECOA claim of race discrimination should not have been dismissed at the pleading stage. The error was harmless, however, because the defendants were entitled to summary judgment on the merits of her claim of race discrimination. We affirm the judgment of the district court.

I. Statutes of Limitations

The respective limitations periods for each of Mrs. Davis's claims frame the issues we review in this appeal. Unconscionability and fraud claims are subject to a five-year statute of limitations under Illinois law. See 735 ILCS 5/13–205. HOEPA has a one-year statute of limitations for money damages and a three-year statute of limitations for rescission, 15 U.S.C. §§ 1635(f), 1640(e), and the ECOA has a two-year statute of limitations. 15 U.S.C. § 1691e(f). The FHA also has a two-year statute of limitations. 42 U.S.C. § 3613(a)(1)(A). The original predatory loan was made in 1999, but Mrs. Davis did not file this lawsuit until 2007. The district court determined that continuing violation theories under Illinois and federal law were not applicable. The district court therefore found that the statutes of limitations for Mrs. Davis's various claims barred her claims except to the extent they were based on only the following events: Litton's letter proposing a modification of Mrs. Davis's loan dated September 28, 2005; Wells Fargo's failure to inform Mrs. Davis prior to January 19, 2007, that it was the owner of her mortgage; and Litton's March 2007 payoff demand. See Davis v. Wells Fargo Bank, 2008 WL 1775481, at *4 (N.D.Ill. April 17, 2008). Thus, the formation of the mortgage contract in September 1999 fell outside the statute of limitations for each of Mrs. Davis's claims and was not directly actionable. Mrs. Davis has not offered any basis for challenging the district court's statute of limitations determinations. Like the district court, then, we review only whether Litton's September 28, 2005 loan modification proposal, Wells Fargo's failure to identify itself as the holder of Mrs. Davis's mortgage, or Litton's March 2007 payoff demand can support Mrs. Davis's claims.

II. Motion to Dismiss

We turn first to Mrs. Davis's claims that were dismissed under Rule 12(b)(6) for failure to state a claim upon which relief could be granted. We review these claims de novo. See Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir.2008). When analyzing the sufficiency of a complaint, we construe it in the light most favorable to the plaintiff, accept well-pleaded facts as true, and draw all inferences in the plaintiff's favor. See id. Mrs. Davis's claims could withstand the defendants' motion to dismiss only if she alleged enough facts to render the claims facially plausible, not just conceivable. See Ashcroft v. Iqbal, ––– U.S. ––––, ––––, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). To withstand a Rule 12(b)(6) challenge after Iqbal and Twombly, “the plaintiff must give enough details about the subject-matter of the case to present a story that holds together,” and the question the court should ask is could these things have happened, not did they happen.” Swanson v. Citibank, N.A., 614 F.3d 400, 404–05 (7th Cir.2010) (emphasis in original) (plaintiff's claim under Fair Housing Act survived motion to dismiss by “identify[ing] the type of discrimination that she thinks occur[red] ..., by whom ..., and when.... This is all that she needed to put in the complaint.”). Mrs. Davis's claims of unconscionability, fraud, violations of HOEPA, and discrimination under ECOA were based on the following events, as set forth in her second amended complaint. We accept these allegations as true for purposes of this appeal. See Hemi Group, LLC v. City of New York, ––– U.S. ––––, ––––, 130 S.Ct. 983, 986–87, 175 L.Ed.2d 943 (2010).

Dorothy Davis, a widowed, elderly, African–American homeowner, lived in a single-family home in Kankakee, Illinois. In 1999, Larry Turner approached Mrs. Davis and recommended that she allow him to make repairs to her home and garage. Mrs. Davis told Turner that she still owed money on the house and told him the terms of her mortgage. Turner offered to help her obtain a new home loan at a better rate than she was then paying. The loan that Turner was pushing on Mrs. Davis would also pay him $17,000 for the home repairs he said Mrs. Davis needed, and would consolidate some of Mrs. Davis's other outstanding debt. On September 23, 1999, Turner came to Mrs. Davis's home with Frank Saenz, an agent of Mortgage Express, the originating lender and not a party to this case. Mrs. Davis did not receive a Good Faith Estimate in connection with the Mortgage Express loan and did not receive a copy of the closing documents. She signed the loan documents that Turner and Saenz presented to her under pressure, without reading the documents and without understanding their terms. When the loan closed, Mrs. Davis had borrowed $87,550. Settlement charges totaled a whopping $32,916.10. Mrs. Davis's monthly payments under the loan terms would be $780.64, even though her monthly income amounted to only $1,100.

In 2001, Mrs. Davis brought suit against Mortgage Express (d/b/a PGNF Home Lending Corporation) for breach of contract, unjust enrichment, and violations of the Illinois Consumer Fraud and Deceptive Businesses Practices Act in Kankakee County, Illinois. Her case was presented to a jury on February 14, 2007, apparently in the absence of the named defendant. The jury rendered a verdict in favor of Mrs. Davis, finding that Mortgage Express had breached the mortgage loan contracts and had been wrongfully enriched. The court also found for Mrs. Davis on her fraud claim, and the court entered a verdict of $136,500 against Mortgage Express. Mortgage Express went out of business in April 2007, and Mrs. Davis was unable to collect the judgment from Mortgage Express.

In the meantime, however, Mrs. Davis's loan had changed hands.1 Mortgage Express assigned it to The Provident Bank on September 23, 1999. On June 24, 2002, The Provident Bank filed a foreclosure action against Mrs. Davis. Mrs. Davis answered and raised as an affirmative defense that Mortgage Express had violated the Illinois Consumer Fraud and Deceptive Business Practices Act. At some point, The Provident Bank assigned Mrs. Davis's loan to Wells Fargo, and Wells Fargo was substituted as the plaintiff in the foreclosure action against Mrs. Davis.2

Besides pursuing foreclosure, the defendants made other attempts to collect on Mrs. Davis's mortgage loan. On September 28, 2005, while both the foreclosure and fraud lawsuits were still pending, Mrs. Davis received a proposed loan modification agreement from Litton. The proposal was said to be based on the mortgage contract between Mrs. Davis and Wells Fargo “in its capacity as Trustee, under the Pooling and Servicing Agreement dated September 1, 1999, Home Equity Loan Asset Backed Certificates, Series 1993–3.” After Mrs. Davis won her case against Mortgage Express, her counsel contacted Wells Fargo's attorney by phone and by mail to inform him of the verdict against Mortgage Express. The defendants continued their attempts to collect on the mortgage loan after the jury found the original loan was fraudulent. About five weeks after the verdict against Mortgage Express, Litton sent a loan payoff statement to Mrs. Davis demanding payment of $156,497.27. The payoff statement was based, in part, on the closing costs and settlement fees that had been found to be fraudulent in the February 2007 trial. Then, on April 27, 2007, Wells Fargo appeared in court to pursue the foreclosure action that was still pending against Mrs. Davis in Kankakee County, seeking damages in that case, again based in part on the fraudulent closing costs and settlement fees built into Davis's original mortgage contract with Mortgage Express.

Although not contained in Mrs. Davis's federal complaint, the record shows that on February 27, 2008, after a trial, the Kankakee County court dismissed Wells Fargo's foreclosure action against Mrs. Davis, finding that it had failed to prove its claim. This ruling was based in large part on the fact that the settlement charges wrapped in the loan had been found to be fraudulent in Mrs. Davis's action against Mortgage...

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