Guaranty Residential Lend. v. International Mortg.

Decision Date21 January 2004
Docket NumberNo. 03 C 5485.,03 C 5485.
Citation305 F.Supp.2d 846
PartiesGUARANTY RESIDENTIAL LENDING, INC., Plaintiff, v. INTERNATIONAL MORTGAGE CENTER, INC., a/k/a HTFC Corporation, et al., Defendants.
CourtU.S. District Court — Northern District of Illinois

Kenneth Kline Shaw, Jr., Stanley W. Papuga, Kropik, Papuga & Shaw, Chicago, IL, Mitchel H. Kider, Weiner, Brodksy, Sidman & Kider, David M. Souders, Sandra L Brickel, Weiner, Brodsky, Sidman & Kider, Washington, DC, for Guaranty Residential Lending, Inc., plaintiff.

Joseph R. Ziccardi, Law Offices of Joseph R. Ziccardi, Raymond John Ostler, John Joseph Lydon, Gomberg, Shafman, Gold & Ostler, P.C., William J. Holloway, Yvonne C. Ocrant, Hinshaw & Culbertson, Albert Edwin Fowerbaugh, Jr., Jina L. Jonen, Lord, Bissell & Brook LLP, Chicago, IL, Mark T. Davenport, Don Colleluori, Figari Davenport & Graves, LLP, Dallas, TX, Myra L. Markey, Markey & Associates, Chicago, IL, Michael Charles Boltz, Kupisch & Carbon, Ltd., Bensenville, IL, for International Mortgage Center, Inc. aka HTFC Corp., Aaron Wider, Century Mortgage & Funding, Inc., Nations Title Agency of Illinois Inc., Lawyers Title Insurance Corporation, Janice Seeman, Tommy Pililimis, Steve Fobs, Jr, Stavros Bourmas aka Steve Bourmas, Anthony Mitchell, — HTFC Corporation, 200 Garden City Plaza, Suite # 200 Garden City, New York 11530, defendants.

MEMORANDUM OPINION AND ORDER

HART, District Judge.

Plaintiff Guaranty Residential Lending, Inc. alleges that it purchased six fraudulent mortgage loans (the "Subject Loans") on the secondary market and that the named defendants are responsible for the losses resulting from the Subject Loans. Plaintiff alleges a scheme in which residential properties located in Chicago, Illinois (the "Subject Properties") were purchased and then purportedly resold at inflated values, with the Subject Loans being based on the inflated values. As to at least four of the Subject Properties, the purported second purchasers and borrowers were already deceased at the time the Subject Loans were closed. When the Subject Loans defaulted, there was no mortgagee available for collection and the Subject Properties were worth substantially less than the principal of the Subject Loans. Plaintiff alleges it lost more than $770,000 on the Subject Loans. Four corporations and six individuals are named as defendants. One count of plaintiff's Complaint is a federal claim for violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961-68. All other counts contain state common law claims. The state law claims are supplemental to the federal RICO claim. See 28 U.S.C. § 1367. Plaintiff also asserts that there is diversity jurisdiction in that there is complete diversity of citizenship and the amount in controversy exceeds $75,000.1

Two motions to dismiss are pending.2 One motion is brought by defendant Lawyers Title Insurance Corporation ("Lawyers Title") and the other motion is brought by defendants Nations Title Agency of Illinois ("Nations Title") and Janice Seeman, who allegedly was Nations Title's closing manager.3 In their briefs, the parties generally fail to recognize the interrelationships between the applicable law and pleading standards applicable to this case. While state law4 provides the substantive law for the common law claims that are alleged, federal law establishes the pleading standard. Muzikowski v. Paramount Pictures Corp., 322 F.3d 918, 925-26 (7th Cir.2003); Johnson v. Hondo, Inc., 125 F.3d 408, 417 (7th Cir.1997); Lifton v. Board of Education of City of Chicago, 290 F.Supp.2d 940, 946 (N.D.Ill.2003). Thus, Illinois law provides the elements of each particular common law claim, but federal law controls as to what must be alleged in the Complaint. Except as to those claims based on fraud, notice pleading is all that is required. See Fed.R.Civ.P. 8. Where fraud is alleged, however, the circumstances must be alleged with particularity, though intent and knowledge may still be averred generally. See Fed.R.Civ.P. 9(b).

The Complaint contains eight counts denominated as follows: I: fraud by all defendants; II: conspiracy to defraud by all defendants; III: negligent misrepresentation by all defendants; IV: promissory estoppel5 by all defendants; V: RICO violations (18 U.S.C. §§ 1962(a), (c), & (d)) by all defendants based on predicate acts of mail fraud (id. § 1341), wire fraud (id. § 1343), and bank fraud (id. § 1344); VI: breach of contract by defendant International Mortgage Center, Inc. ("IMC") only; VII: unjust enrichment by IMC only; and VIII: constructive trust against IMC only.

On a Rule 12(b)(6) motion to dismiss, plaintiff's well-pleaded allegations of fact are taken as true and all reasonable inferences are drawn in plaintiff's favor. Leatherman v. Tarrant County Narcotics Intelligence & Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 122 L.Ed.2d 517 (1993); Dixon v. Page, 291 F.3d 485, 486 (7th Cir.2002); Stachon v. United Consumers Club, Inc., 229 F.3d 673, 675 (7th Cir.2000). Ordinarily, a complaint need not set forth all relevant facts or recite the law; all that is required is a short and plain statement showing that the party is entitled to relief. Fed.R.Civ.P. 8(a)(2); Boim v. Quranic Literacy Institute, 291 F.3d 1000, 1008 (7th Cir.2002); Anderson v. Simon, 217 F.3d 472, 474 (7th Cir.2000), cert. denied, 531 U.S. 1073, 121 S.Ct. 765, 148 L.Ed.2d 666 (2001); Scott v. City of Chicago, 195 F.3d 950, 951 (7th Cir.1999). Ordinarily, a plaintiff in a suit in federal court need not plead facts; conclusions may be pleaded as long as the defendant has at least minimal notice of the claim. Fed.R.Civ.P. 8(a)(2); Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002); Scott, 195 F.3d at 951; Albiero v. City of Kankakee, 122 F.3d 417, 419 (7th Cir.1997); Jackson v. Marion County, 66 F.3d 151, 153-54 (7th Cir.1995). However, to the extent fraud is alleged, it must be pleaded with particularity. See Fed.R.Civ.P. 9(b); Slaney v. The International Amateur Athletic Federation, 244 F.3d 580, 597 (7th Cir.), cert. denied, 534 U.S. 828, 122 S.Ct. 69, 151 L.Ed.2d 35 (2001); Shapo v. O'Shaughnessy, 246 F.Supp.2d 935, 955-56 (N.D.Ill.2002). Additionally, even if not required to plead specific facts, a plaintiff can plead itself out of court by alleging facts showing there is no viable claim. See Slaney, 244 F.3d at 597; Kauthar SDN BHD v. Sternberg, 149 F.3d 659, 669-70 n. 14 (7th Cir.1998), cert. denied, 525 U.S. 1114, 119 S.Ct. 890, 142 L.Ed.2d 788 (1999); Jackson, 66 F.3d at 153-54.

Ordinarily, as long as they are consistent with the allegations of the complaint, a plaintiff may assert additional facts in its response to a motion to dismiss. Brokaw v. Mercer County, 235 F.3d 1000, 1006 (7th Cir.2000); Forseth v. Village of Sussex, 199 F.3d 363, 368 (7th Cir.2000); Albiero, 122 F.3d at 419; Gutierrez v. Peters, 111 F.3d 1364, 1367 n. 2 (7th Cir.1997). However, Rule 9(b) requires that the necessary allegations be in the complaint itself. Kennedy v. Venrock Associates, 348 F.3d 584, 593 (7th Cir.2003); Abrams v. Van Kampen Funds, Inc., 2002 WL 1160171 *2 (N.D.Ill. May 30, 2002); Chicago District Council of Carpenters Welfare Fund v. Angulo, 169 F.Supp.2d 880, 886 (N.D.Ill.2001); Implant Innovations, Inc. v. Nobelpharma AB, 1995 WL 562092 *5 (N.D.Ill. Sept. 14, 1995). Additional allegations contained in the responsive brief, however, may indicate that plaintiff should be given the opportunity to amend the Complaint to comply with Rule 9(b). See Ziemba v. Cascade International, Inc., 256 F.3d 1194, 1213 (11th Cir.2001); Angulo, 169 F.Supp.2d at 886; Implant Innovations, 1995 WL 562092 at *5. While additional allegations contained in a responsive brief are not considered to be incorporated in the complaint, documents that are referred to in the complaint and that are central to a claim that is made may be considered to be part of the complaint even if not actually attached to the complaint. Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 661 (7th Cir.2002); Duferco Steel Inc. v. M/V Kalisti, 121 F.3d 321, 324 n. 3 (7th Cir.1997); Venture Associates Corp. v. Zenith Data Systems Corp., 987 F.2d 429, 431 (7th Cir.1993). However, where a dispute exists as to whether a document provided by the moving party is authentic or complete, the document will not be considered on a motion to dismiss even if the document was referenced in the complaint and central to a claim. Divane v. Nextiraone, LLC, 2002 WL 31433504 *2 (N.D.Ill. Oct. 30, 2002). Where the document may properly be considered, though, the actual document will override inconsistent descriptions of the document alleged in the body of the complaint. See Rosenblum, 299 F.3d at 661 (quoting 5 Wright & Miller, Federal Practice & Procedure: Civil 2d § 1327 at 766 (1990)); In re Wade, 969 F.2d 241, 249 (7th Cir.1992); Beam v. IPCO Corp., 838 F.2d 242, 244-45 (7th Cir.1988).

In the complaint itself, it is unnecessary to specifically identify the legal basis for a claim as long as the facts alleged would support relief. Forseth, 199 F.3d at 368; Scott, 195 F.3d at 951; Albiero, 122 F.3d at 419; Bartholet v. Reishauer A.G. (Zurich), 953 F.2d 1073, 1078 (7th Cir.1992); Dodaro v. Village of Glendale Heights, 2003 WL 1720030 *8 (N.D.Ill. March 31, 2003). The plaintiff is not bound by legal characterizations of the claims contained in the complaint. Forseth, 199 F.3d at 368; Kirksey v. R.J. Reynolds Tobacco Co., 168 F.3d 1039, 1041 (7th Cir.1999). However, in response to a motion to dismiss that raises the issue, the plaintiff must identify a legal basis for a claim and make adequate legal arguments in support of it. Kirksey, 168 F.3d at 1041-42; Stransky v. Cummins Engine Co., 51 F.3d 1329, 1335 (7th Cir.1995); Levin v. Childers, 101 F.3d 44, 46 (6th Cir.1996); Gilmore v. Southwestern Bell Mobile...

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