Freedom Mortgage Corp. v. Burnham Mortgage Inc.

• Decision Date: 14 June 2010
• Docket Number: No. 03 C6508.,03 C6508.
• Citation: 720 F.Supp.2d 978
• Parties: FREEDOM MORTGAGE CORPORATION, Plaintiff, v. BURNHAM MORTGAGE, INC., Exeter Title Company, Ticor Title Insurance Company, James C. Peddle, Derrick Davis, Eric C. Vehovc, Market Value Appraisal, Inc., Maya N. Jordan, Larry D. Burkes, Kevin R. Brisker, John Jeffrey Hlava, Adam Bat, Adam Butar, Zbigniew Rymarz, Waldemar Florkiewicz, Dorothy Spann, Charlene Adams, Kuba Jasny, a/k/a Grosz Piotr, Barbara Odrzywolska, Marek Maka, a/k/a Leszek Dobrowski, Bogdan Pawlak, Krystian Zebrowski, and Piotr Uloszonekic, Defendants.
• Court: U.S. District Court — Northern District of Illinois

720 F.Supp.2d 978

FREEDOM MORTGAGE CORPORATION, Plaintiff,

v.BURNHAM MORTGAGE, INC., Exeter Title Company, Ticor Title Insurance Company, James C. Peddle, Derrick Davis, Eric C. Vehovc, Market Value Appraisal, Inc., Maya N. Jordan, Larry D. Burkes, Kevin R. Brisker, John Jeffrey Hlava, Adam Bat, Adam Butar, Zbigniew Rymarz, Waldemar Florkiewicz, Dorothy Spann, Charlene Adams, Kuba Jasny, a/k/a Grosz Piotr, Barbara Odrzywolska, Marek Maka, a/k/a Leszek Dobrowski, Bogdan Pawlak, Krystian Zebrowski, and Piotr Uloszonekic, Defendants.

No. 03 C6508.

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

June 14, 2010.

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Dennis A. Dressler, Christian J. Jorgensen, Kenneth D. Peters, Dressler & Peters, LLC, Vincent Thomas Borst, Robbins, Salomon & Patt, Ltd., Chicago, IL, for Plaintiff.

Thomas B. Underwood, Elizabeth Marie Neidig, Michael Duane Sanders, Purcell & Wardrope, Chtd., Thomas James Kanyock Madsen Farkas & Powen, Donald B. Levine, Barbara Andersen, Susan A. Stoddard, Latimer Levay Jurasek LLC, Eric J. Dorkin, Holland & Knight LLP, Stephen Devereux Vernon, Renee O'Neill Kelly, Brian Richard Zeeck, Daniel M. Purdom, Hinshaw & Culbertson, David A. Baugh, David R. Carlson, Gara M. Sliwka, Baugh Dalton Carlson & Ryan, Kristin G. Bagull, Mora, Baugh, Waitzman & Unger, LLC, Daniel Rozenstrauch, Darrell Widen, Law Office of Daniel Rozenstrauch, Christopher C. Kendall, The Law Office of Christopher C. Kendall, Chicago, IL, for Defendants.

Dorothy Spann, Chicago, IL, pro se.

MEMORANDUM OPINION AND ORDER

ROBERT W. GETTLEMAN, District Judge.

Freedom Mortgage Corporation (“Freedom”) has filed a thirty-two-count ¹ Fifth Amended Complaint against Burnham Mortgage, Inc. (“Burnham”), Exeter Title Company (“Exeter”), Ticor Title Insurance Company (“Ticor”), John Jeffrey Hlava (“Hlava”), and numerous others (the “Defendants”), asserting claims for breach of contract, fraud, negligent misrepresentation, civil RICO, breach of fiduciary duty, negligence, civil conspiracy, negligent retention, negligent supervision, vexatious refusal to pay insurance claim, and violation of the Illinois Consumer Fraud and Deceptive Practices Act, all arising out of an alleged mortgage fraud scheme concerning nine mortgaged properties.

Hlava, an attorney and officer of Exeter, has filed a motion to dismiss all claims against him, arguing that he owed no duty of care to Freedom and that Freedom has failed to adequately allege the necessary elements. The nine claims against Hlava are Fraud with Respect to the Appraisals (Count VII), Negligent Misrepresentation with Respect to the Appraisals (Count VIII), Fraud with Respect to the Real Estate Closing and Related Settlement Statements (Count XIX), Negligent Misrepresentation with Respect to the Real Estate Closing and Related Settlement Statements (Count XX), Fraud with Respect to the Real Estate Closings and Related Settlement Statements (Count XXI), Civil RICO (Count XXII), Breach of Fiduciary Duty (Count XXIII), Negligence (Count XXV), and Civil Conspiracy (Count XXVIII).

Exeter has filed a motion to dismiss all eight claims against it: Fraud with Respect to the Appraisals (Count VII), Negligent Misrepresentation with Respect to the Appraisals (Count VIII), Fraud with Respect to the Real Estate Closing and Related Settlement Statements (Count XIX), Negligent Misrepresentation with Respect to the Real Estate Closing and Related Settlement Statements (Count XX), Civil RICO (Count XXII), Breach of Fiduciary Duty (Count XXIII), Negligence (Count XXV), and Civil Conspiracy (Count XXVIII). In addition, Exeter argues that Freedom's request for attorney's fees and prejudgment interest should be stricken from Counts VII, VIII, XIX, ² XX, XXIII, XXV, ³ and XXVIII.

Ticor has filed a motion to dismiss all claims against it except for breach of contract: Negligence Vicarious Liability (Count XXVII), Negligent Retention (Count XXIX), Negligent Supervision (Count XXX), Vexatious Refusal to Pay Insurance Claim (Count XXXI), and Violation of the Illinois Consumer Fraud and Deceptive Practices Act (Count XXXII).

Ticor has also filed a motion for partial summary judgment as to Freedom's Fifth Amended Complaint. ⁴ Ticor argues that Freedom's inclusion of three properties in its complaint (708 N. Drake, 728 N. Hamlin, and 4112 W. Potomac) is improper in light of prior rulings of the district court and the Seventh Circuit.

For the reasons discussed below: Hlava's motion to dismiss is granted as to Count XXII (Civil RICO) and denied as to Counts VII, VIII, XIX, XX, XXI, XXIII, XXV, and XXVIII; Exeter's motion to dismiss is granted as to Count XXII (Civil RICO) and denied as to Counts VII, VIII, XIX, XX, XXIII, XXV, and XXVIII; Ticor's motion to dismiss is granted as to Counts XXVII, XXIX, XXX, XXXI, and XXXII; Ticor's motion for partial summary judgment is granted; Freedom's request for attorney's fees is stricken from Counts VII, VIII, XIX, XX, XXIII, XXV, and XXVIII; and Freedom's request for prejudgment interest is stricken from Counts VIII, XX, XXV, and XXVIII.

FACTS

The facts alleged in the complaint are taken as true for purposes of the instant motion. Bontkowski v. First Nat'l Bank of Cicero, 998 F.2d 459, 461 (7th Cir.1993). This action was originally filed in the United States District Court for the District of New Jersey on February 13, 2003, and was transferred to the Northern District of Illinois on August 20, 2003. The case was assigned to Judge Mark Filip, ⁵ who left the bench in March 2008.

The facts underlying this action were stated in detail in Judge Filip's memorandum opinion and order, Freedom Mortg. Corp. v. Burnham Mortg., Inc., 2006 WL 695467 (N.D.Ill. Mar. 13, 2006), and will not be repeated here. On March 5, 2008, prior to Judge Filip's resignation from the bench, he issued an order (Docket No. 240) striking the pending motions without prejudice because the case was to be reassigned to another district judge. The case was thereafter reassigned to this court.

Subsequently, the court found that Judge Filip's March 13, 2006, opinion barred the federal suit under claim preclusion and the Rooker-Feldman doctrine, and the Defendants' motions for summary judgment were granted. On June 23, 2009, the Seventh Circuit reversed and remanded, finding that Freedom's claim was not entirely blocked by its credit bids and noting that the district court “should not [allow the suit] to grow a beard.” Freedom Mortg. Corp. v. Burnham Mortg., Inc., 569 F.3d 667, 672 (7th Cir.2009). This opinion rules on a new complaint and four motions filed since then, giving the suit a clean shave.

DISCUSSION

MOTIONS TO DISMISS-Hlava, Exeter, and Ticor

Legal Standard

The purpose of a motion to dismiss is to test the sufficiency of the complaint, not to rule on its merits. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir.1990). When considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court accepts all well-pleaded allegations of the complaint as true and draws all reasonable inferences in the plaintiff's favor. McMillan v. Collection Prof'ls, Inc., 455 F.3d 754, 758 (7th Cir.2006). Nevertheless, the complaint must plead sufficient facts to suggest plausibly that the plaintiff is entitled to relief. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007).

Allegations of fraud are subject to a heightened pleading standard. Fed.R.Civ.P. 9(b). Fraud must be pled with particularity, which means the complaint must allege the “who, what, when, where and how” of the fraud. DiLeo v. Ernst & Young, 901 F.2d 624, 627 (7th Cir.1990). At the motion to dismiss stage, Rule 9(b) requires only that the plaintiff identify the alleged misrepresentations, not actually prove that the statement was false. See Bankers Trust Co. v. Old Republic Ins., Co., 959 F.2d 677, 683 (7th Cir.1992). This standard also applies to allegations of predicate acts of fraud in the RICO context. See Slaney v. Int'l Amateur Athletic Fed'n, 244 F.3d 580, 597-99 (7th Cir.2001); Haroco, Inc. v. Am. Natl. Bank and Trust Co., 747 F.2d 384, 405 (7th Cir.1984) (finding that the plaintiff adequately specified the transactions, the false representations, and the identities of those involved). The pleadings must be specific enough to put defendants on notice of the conduct alleged.

Attorney's Fees and Prejudgment Interest

“The law in Illinois clearly is that absent a statute or a contractual agreement attorney fees and the ordinary expenses and burdens of litigation are not allowable to the successful party.” Kerns v. Engelke, 76 Ill.2d 154, 166, 28 Ill.Dec. 500, 390 N.E.2d 859 (Ill.1979) (citation omitted); see also House of Vision, Inc. v. Hiyane, 42 Ill.2d 45, 51-52, 245 N.E.2d 468 (Ill.1969). In addition, “[i]t is clear that Illinois statutes do not authorize prejudgment interest in tort cases. ‘Absent such statutory authority, the “recovery of prejudgment interest in this state cannot be sustained.” ’ ” ⁶ N. Trust Co. v. County of Cook, 135 Ill.App.3d 329, 336, 90 Ill.Dec. 157, 481 N.E.2d 957 (1 Dist.1985) (quoting Gardner v. Geraghty, 98 Ill.App.3d 10, 14, 53 Ill.Dec. 517, 423 N.E.2d 1321 (1 Dist.1981)). “However, where a fiduciary or confidential relationship exists and is violated, interest upon a recovery may be permitted irrespective of a statute. Courts have allowed interest on recoveries only in cases where equitable considerations so warrant.” In re Marriage of Pitulla, 202 Ill.App.3d 103, 118, 147 Ill.Dec. 479, 559 N.E.2d 819 (1 Dist.1990) (citing LaBarbera v. LaBarbera, 116 Ill.App.3d 959, 968, 72 Ill.Dec. 431, 452 N.E.2d 684 (1 Dist.1983)). Further, prejudgment interest is available in fraud cases. Obermaier v. Obermaier, 128 Ill.App.3d 602, 610, 83 Ill.Dec. 627, 470 N.E.2d 1047 (1 Dist.1984).

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