Lockhart v. HSBC Fin. Corp.
| Decision Date | 01 August 2014 |
| Docket Number | No. 13 C 9323,13 C 9323 |
| Court | U.S. District Court — Northern District of Illinois |
| Parties | ELOISE LOCKHART, Plaintiff, v. HSBC FINANCE CORPORATION, et al., Defendants. |
MEMORANDUM OPINION AND ORDER
Eloise Lockhart has taken a shotgun approach to this case, filing a fifteen-count amended complaint against numerous Defendants, many of whom were sued under incorrect names, alleging a variety of claims without specifying as to whom they are against. R. 6. All of the conduct relates to a mortgage loan Lockhart took out many years ago and the efforts made to foreclose on Lockhart's home in state court proceedings. The Defendants in the case are as follows: HSBC Finance Corporation and HSBC Mortgage Services, Inc. (collectively referred to as "HSBC"), Household Finance Corporation III ("HFC III"),1 MERSCORP Holdings Inc. ("MERSCORP"), Mortgage Electronic Registration Systems, Inc. ("MERS"), Pilgrim Christakis LLP, f/k/a Grady Pilgrim Christakis Bell LLP ("Pilgrim Christakis"),Jeffrey Pilgrim, Brady Pilgrim, Arnold G. Kaplan, Freedman Anselmo Lindberg LLC ("FAL"), Steven C. Lindberg, and "Jane & John Does 1-10," as agents/employees of Pilgrim Christakis and Kaplan. Certain Defendants have filed motions to dismiss Lockhart's amended complaint, contending that it fails to state a claim under Federal Rule of Civil Procedure 12(b)(6).2 R. 35; R. 38; R. 42. For the following reasons, those motions are granted in part and denied in part.
Lockhart resides in Texas and is licensed to practice law in Illinois and Texas. R. 6 ¶ 5.3 HSBC is a large bank that, among other things, offers financing to consumers looking to purchase a home. R. 6 ¶ 6. MERSCORP is the sole shareholder of MERS, which operates an electronic registry used to track mortgage loans in the United States. Id. ¶ 15. FAL is a law firm located in Naperville, Illinois, that is "engaged in the business of using the mails and telephone to collect consumer debts originally owed to others, including residential mortgage debts[.]" R. 6 ¶¶ 35-36. Pilgrim Christakis is a law firm located in Chicago, Illinois, specializing in "commercial litigation, consumer finance law[,] and real estate business information." Id. ¶¶ 41-42. Steven Lindberg is an attorney at FAL; Jeffrey Pilgrim and Brady Pilgrim are attorneys at Pilgrim Christakis.
In October 1973, Lockhart purchased a piece of property located at 2020-22 W. 80th Street in Chicago, Illinois, to use as a residence for herself and her family. Id. ¶ 45. Lockhart estimates that in 2003 the fair market value of the property was between $150,000 and $200,000. Id. ¶ 46. In May 2003, Lockhart owed roughly $31,650 on her existing mortgage with an interest rate of 5.05%, making her monthly mortgage payment about $564. Id. ¶ 47.
In May 2003, Lockhart received a flyer stating that she was pre-approved to refinance her mortgage. Id. ¶ 49. Lockhart applied for a loan from the lender (Fieldstone Mortgage) on May 19, 2003, who stated that the loan would have a fixed rate of 8.625% over thirty years and that the loan did not include a prepayment penalty. Id. ¶ 51. Lockhart executed the "Mortgage and Note" on May 29, 2003. Id. ¶ 52. The terms of the loan were as follows: "[Lockhart] promised to pay the lender $105,000 at a fixed rate of 8.625% annual interest over a period of 30 years for monthly payments of $987.00 which included amounts to be escrowed for taxes and insurance." Id. The lender imposed a prepayment penalty along with other charges that Lockhart had to pay before obtaining the loan.4 Id. ¶ 53. The Escrow Account Disclosure statement revealed that $168.53 would be added to the monthly principal and interest payments to account for future county taxes and "hazard insurance" payments. Id. ¶ 55.
Sometime in 2004, Lockhart received a notice indicating that her taxes on the property were delinquent and that her property would be sold due to the unpaid taxes. Id. ¶ 56. HSBC, which was the "servicer on the loan," had not used Lockhart's escrow payments to pay the taxes owed and insurance. Id. ¶ 57. In October 2004, HSBC raised Lockhart's monthly mortgage payment by more than $500.00 per month. Id. ¶ 58. HSBC, as the loan servicer, had the ability to "force place insurance" in order "to protect the lender's interest if [Lockhart] had allowed the insurance to lapse or was in default." Id. ¶ 59. Lockhart alleges that HSBC generated additional profits at her expenses "[b]y charging [Lockhart] unreasonably inflated insurance premiums, paid through to an affiliate[.]" Id. ¶ 60.
In December 2004, Lockhart canceled the force placed insurance and obtained replacement insurance with Allstate. Id. ¶ 61. In February 2005, HSBC acknowledged that Lockhart's escrow accounts were now closed and that her monthly mortgage payment was $815.00 per month. Id. Nevertheless, "Defendant's (sic) continued to claim that the rightful mortgage payment was $1,350.00 per month." Id. ¶ 62.
In March 2005, Lockhart called a hotline number (611) that had been set up for homeowners to call if they were in "foreclosure distress." Id. ¶ 63. Lockhart, in a three-way call with a counselor with the hotline and an employee of HSBC, was told by the HSBC employee that she owed $1,350.00 for both February and March ($2,700 total) and that as of April 2005, she would be three months in arrears. Id. ¶¶ 64-65. The HSBC employee further stated that if the two payments were notreceived by April 1, 2005, the loan would be referred to foreclosure. Id. ¶ 65. Lockhart alleges that she agreed to send two payments of $1,350 by April 1, 2005, and "HSBC agreed to investigate [her] claim that her property payment was about $815.00 [per month] and not $1,350.00[.]" Id. ¶ 66. Lockhart claims that she made two payments by express mail on March 29, 2005 (which HSBC claimed on March 29, 2005, that they did not receive); and later, two additional payments through Western Union on the eve of March 31, 2005, to avoid foreclosure proceedings. Id. ¶¶ 68-69.
Lockhart received a letter from HSBC on April 15, 2005, which stated that her monthly mortgage payment was $815. On May 19, 2005, Steven Lindberg, an attorney at FAL, mailed a letter to Lockhart claiming that he was a debt collector for HFC III, who now owned Lockhart's note. Id. ¶ 73. The letter also stated the owner of the note was exercising its right to accelerate the note and in turn demanding that Lockhart pay the total outstanding amount of $108,977.59. Id. Furthermore, the letter stated that Lockhart had thirty days under federal law to dispute the action. Id. ¶ 74. In response, Lockhart sent Lindberg a letter disputing the debt, in part directing him to the money order number for at least one $1,000 payment in 2004 that she claims HSBC never credited to her account. Id. ¶ 75.
FAL did not respond to Lockhart's letter or wait thirty days after it sent the letter to initiate further proceedings. Id. ¶ 76. Instead, on May 25, 2005, FAL filed a foreclosure complaint, 05 Ch 9047 ("Case One"), listing "Mortgage Electronic Systems, INC [MERS] As Nominee For Household Finance Corporation III [HFCIII]." Id. HSBC also alleged in Case One that it "owned and held the mortgage and note as mortgagee on the May 29, 2003 Mortgage," id. ¶ 78, though Lockhart claimed that was also untrue because Fieldstone Mortgage was the actual owner, id. ¶¶ 81-82. Furthermore, the initial foreclosure complaint bears a recording identification number of 0315726217, which identifies a different mortgage—one covering a condominium property in Oak Park, Illinois. Id. ¶¶ 85-86. Lockhart alleges that "Defendants" altered her mortgage "by attaching the false recording identification to make it appear that Defendants MERS/HSBC had standing as record lien holders when they had no such standing." Id. ¶ 87.
On July 5, 2005, Lockhart filed a "verified answer" to Case One in which she denied, among other allegations, that MERS/HFC III was the lender on her mortgage and that she was in default. Id. ¶¶ 77, 91. Ten days later, on July 15, 2005, Lindberg moved to voluntarily dismiss Case One, and it was dismissed without prejudice. Id. ¶ 92. "[O]n virtually the same day," HSBC wrote a letter to Lockhart claiming that she owed over $7,000 in arrears under the mortgage and that payment was due by August 1, 2005. Id. ¶ 95.
On August 2, 2005, sixteen days after Case One was dismissed, FAL wrote to Lockhart stating she owned $112,226.12 because her note had been accelerated because she was in default. Id. ¶ 99. On August 5, 2005, MERS and HSBC filed a second foreclosure action, 05-Ch-13290 ("Case Two"). Id. ¶ 100. The complaint in Case Two included a legal description of the two lots that Lockhart owned. Id. ¶101. Lockhart answered that complaint and again denied that MERS or HSBC had standing to pursue the mortgage foreclosure action. Id. ¶ 102.
The terms of the loan allowed Lockhart to rescind the loan within three years of the date the loan was executed (May 29, 2003). Id. ¶¶ 112-13. On May 1, 2006, while Case Two was still pending, Lockhart informed the Defendants that she planned to exercise her right to rescind the loan. Id. ¶ 112. In her notice of rescission, Lockhart alleged that the Defendants violated certain laws. Id. ¶ 115. According to Lockhart, "Defendants" received her notice on May 1, 2006, yet "Douglas Oliver"5 waited until June 1, 2006, to respond. Id. ¶ 113. Lockhart claims that she was only provided "with one federal Notice of Right to Cancel in a form that she could keep, instead of the two required under federal law." Id. ¶ 115. On June 11, 2007, Lockhart and Defendants each voluntarily dismissed their respective cases. Id. ¶ 117.
On June 26, 2007, Lindberg sent Lockhart a letter stating that HSBC was the holder of the mortgage and note, and that Lockhart owed at least $139,140.30. Id. ¶ 118. On September 7 2007, "Defendants" filed their third foreclosure complaint, 07-Ch-24236 ("Case Three"), which is currently...
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