Manlangit ex rel. Manlangit v. FCI Lender Servs., Inc.
| Decision Date | 16 September 2020 |
| Docket Number | Case No. 19-cv-03265 |
| Parties | ROLANDO MANLANGIT and PEOPLE OF THE STATE OF ILLINOIS EX REL. ROLANDO MANLANGIT, Plaintiffs, v. FCI LENDER SERVICES, INC., ET AL., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
MEMORANDUM OPINION AND ORDER
Plaintiffs Rolando Manlangit and People of the State of Illinois ex rel. Rolando Manlangit bring suit against Defendants FCI Lender Services ("FCI"), Partners for Payment Relief, DE IV, LLC ("PPR"), attorney Jorie K. Johnson, attorney Daniel O. Barham, Barham Legal, LLC, and Barham & Maucere, LLC, (collectively "Barham") alleging violations of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., Illinois Collection Agency Act, 225 ILCS 425/1 et seq., and the Illinois Consumer Fraud Act, 810 ILCS 505/2. Before the Court are Defendants' motions to dismiss Plaintiff's First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6) [39 & 41]. For the following reasons, Defendants' motions are granted in part and denied in part.
The following facts are alleged in Plaintiffs' First Amended Complaint ("FAC") and the accompanying documents and are presumed true for purposes of the present motions. On August 25, 2005, Manlangit executed a Home Equity Line of Credit Agreement and Disclosure Statement (the "HECLA") with Countrywide Mortgage Ventures LLC to finance the purchase of a condominium. (Dkt. 30 at Appendix A). The credit limit under the HECLA is $19,050. (Id. at ¶ 46). The HECLA designates an initial Draw Period of 60 months that is automatically renewed for an additional 60 months absent notice to Manlangit. (Id. at Appendix A, ¶ 1). During the Draw Period, Manlangit can request loans up to the credit limit, and he is only required to pay periodic minimum payments consisting of "all unpaid finance charges, credit life insurance premiums, and other charges imposed during the billing cycle together with any [a]mount [p]ast [d]ue." (Id. at Appendix A, ¶¶ 1; 4F). Making these minimum payments during the Draw Period does not result in a reduction of the principal. (Id.) Following the Draw Period is a Repayment Period of 180 months during which Manlangit is required to make periodic minimum payments consisting of "1/80th of the outstanding principal balance ... as of the last day of the Draw Period plus all unpaid finance charges, credit life insurance premiums and other charges imposed during the billing cycle together with any [a]mount [p]ast [d]ue." (Id. at Appendix A, ¶¶ 1; 4G). The creditor is required to send periodic statements during the Draw Period and Repayment Period indicating the minimum payment due during the given period. (Id. at Appendix A, ¶ 4B). The HECLA also contains an optionalacceleration clause permitting the creditor to "declare all sums owing under [the] [a]greement ... immediately due and payable" for various reasons, including the failure to make a minimum payment under the agreement. (Id. at Appendix A, ¶¶ 13A(1); 13B(3)).
Manlangit also executed a Mortgage on August 25, 2005, securing his obligations under the HECLA. (Id. at Appendix B). The Mortgage provides that if Manlangit defaults on the HECLA, the holder of the Mortgage is entitled to foreclose. (Id.) Defendant PPR asserts that it is the current owner of the of the HECLA and Mortgage. (Id. at ¶ 41). PPR is in the business of acquiring defaulted mortgage loans at a discounted price and collecting on them. (Id. at ¶23).
Manlangit stopped making payments on the HECLA in 2013. (Id. at ¶¶ 40; 43). On February 6, 2019, PPR, represented by the Barham Defendants and Johnson,1 filed a Complaint to Foreclose Mortgage against Manlangit. (Id. at ¶ 75; Appendix E). In the foreclosure complaint, PPR claimed that it attempted to notify Manlangit of its intent to accelerate amounts due under the HECLA on March 2, 2018. (Id. at Appendix E, 7). The foreclosure complaint did not, however, include a claim for deficiency judgment against Manlangit. (Id. at Appendix E).
On September 21, 2018, October 22, 2018, and February 21, 2019, Defendant FCI, the HECLA loan servicer since 2017, sent Manlangit statements requesting payment under the HECLA. (Id. at ¶¶ 44, 73, Appendix C, D, G). The letters statethat there is a $15.00 fee for paying the debt online and an $18.00 fee for paying by telephone but no charge for paying by mail. (Id. at ¶ 103).
On May 3, 2019, PPR voluntarily dismissed its foreclosure complaint against Manlangit. (Id. at ¶ 84) (Dkt. 41 at 2). Subsequently, Manlangit filed the present suit, alleging that by attempting to collect on the HECLA through the foreclosure complaint and the mailed statements, Defendants violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., Illinois Collection Agency Act, 225 ILCS 425/1 et seq., and the Illinois Consumer Fraud Act, 810 ILCS 505/2.
A motion to dismiss tests the sufficiency of a complaint, not the merits of the case. Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). "To survive a motion to dismiss under Rule 12(b)(6), the complaint must provide enough factual information to state a claim to relief that is plausible on its face and raise a right to relief above the speculative level." Haywood v. Massage Envy Franchising, LLC, 887 F.3d 329, 333 (7th Cir. 2018) (quotations and citation omitted). See also Fed. R. Civ. P. 8(a)(2) (). A court deciding a Rule 12(b)(6) motion accepts plaintiff's well-pleaded factual allegations as true and draws all permissible inferences in plaintiff's favor. Fortres Grand Corp. v. Warner Bros. Entm't Inc., 763 F.3d 696, 700 (7th Cir. 2014). Dismissal for failure to state a claim is proper "when the allegations in a complaint, however true, could not raise a claim of entitlement to relief." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 558, 127 S. Ct. 1955,1966 (2007). Deciding the plausibility of the claim is "'a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.'" McCauley v. City of Chi., 671 F.3d 611, 616 (7th Cir. 2011) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S. Ct. 1937, 1950 (2009)).
Count I of the FAC alleges that PPR and the Barham Defendants violated § 1692e the Federal Debt Collection Practices Act ("FDCPA"), 15 U.S.C. § 1692 et seq. by filing a foreclosure action after the Illinois statute of limitations on the HECLA had expired and that the Barham Defendants violated the same provision by attempting to collect debt on behalf of an unlicensed buyer (PPR). Count II alleges that FCI violated §§ 1692e and 1692f of the FDCPA by (1) attempting to collect debt under the HECLA after the Illinois statute of limitations had expired and (2) attempting to collect service fees in excess of the debt due under the HECLA. Counts III and IV allege that PPR violated the Illinois Consumer Fraud Act ("ICFA"), 810 ILCS 505/2 and Illinois Collection Agency Act ("ICAA"), 225 ILCS 425/1 et seq. by filing a foreclosure action after the Illinois statute of limitations had expired and collecting debts from Illinois residents without a license.
The Court first considers the common question raised in Counts I through III based on the Illinois statute of limitations.
Attempting to collect on a time-barred debt is a violation of §§ 1692e and 1692f of the FDCPA which prohibit debt collectors from using unfair, "false, deceptive, ormisleading representations or means" in collecting a debt. Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1083 (7th Cir. 2013); Eul v. Transworld Sys., No. 15 C 7755, 2017 WL 1178537, at *8 (N.D. Ill. Mar. 30, 2017) (). The parties agree that the Illinois statute of limitations on a written contract is ten years and five years on an oral contract. 735 ILCS 5/13-205 & 206. Defendants argue that the HECLA is a written contract and governed by a ten-year statute of limitations.
When deciding the applicability of the five- or ten-year statute of limitations period, Illinois courts adhere to "a strict interpretation of the meaning of a written agreement for purposes of the statute of limitations." Portfolio Acquisitions, L.L.C. v. Feltman, 909 N.E.2d 876, 880 (Ill. App. Ct. 2009). "A contract will only be deemed written if parties are identified and all the essential terms are in writing and ascertainable from the instrument itself[—] [i]f resort to parol evidence is necessary to identify the parties or essential terms, the contract is considered an oral contract for purposes of the statute of limitations." Id. "The essential elements or terms of a promise to pay are: (1) the parties to the agreement, (2) the nature of the transaction, (3) the amount in question, and (4) at least a reasonable implication of an intention to repay the debt." Kranzler v. Saltzman, 942 N.E.2d 722, 726 (Ill. App. Ct. 2011).
Applying this strict interpretation to the HECLA, the Court concludes that the agreement is an oral contract subject to the five-year statute of limitations period.Manlangit is correct that because the amount loaned to him is absent from the HECLA, parol evidence is necessary to establish the amount in question. Although Defendants argue that the credit limit of $19,050.00 is sufficient to establish the amount in question, courts considering the applicability of the statute of limitations to an agreement to lend money have asked whether the agreement specifies the actual amount owed, rather than the amount of credit available to the borrower. See e.g., Ramirez v. AP Account Servs., LLC, No. 16-CV-2772, 2017 WL 25179, at *3 (N.D. Ill. Jan. 3, 2017) (...
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