Spens v. Citizens Fed. Sav. & L. Ass'n of Chicago Heights

• Decision Date: 30 May 1973
• Docket Number: No. 72 C 818.,72 C 818.
• Citation: 364 F. Supp. 1161
• Parties: William Y. and Joan L. SPENS et al., Plaintiffs, v. CITIZENS FEDERAL SAVINGS & LOAN ASSOCIATION OF CHICAGO HEIGHTS et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

364 F. Supp. 1161

William Y. and Joan L. SPENS et al., Plaintiffs, v. CITIZENS FEDERAL SAVINGS & LOAN ASSOCIATION OF CHICAGO HEIGHTS et al., Defendants.

No. 72 C 818.

United States District Court, N. D. Illinois, E. D.

May 30, 1973.

Seymour F. Simon, Kevin M. Forde, Max M. Fleisher, H. Reed Harris, Chicago, Ill., for plaintiffs.

George A. Platz, Sidley & Austin, Chicago, Ill., for defendants.

DECISION ON DEFENDANTS' MOTION TO DISMISS ALL COUNTS EXCEPT COUNT II

McMILLEN, District Judge.

Defendants as a single group have filed a motion to dismiss all counts of the Complaint as amended, pursuant to F.R.Civ.P. 12. All defendants are Federal or Illinois savings and loan associations in Cook County, Illinois and make no distinctions between themselves with respect to the motion now being decided. The defendants' motion is directed solely to the sufficiency of the allegations of the Complaint as amended, but briefing has been suspended with respect to Count II in order to permit discovery and/or stipulations. Since Count II is not presently involved, we will likewise defer any decision on the plaintiffs' claim to represent a class under Rule 23.

Plaintiffs allege that they have borrowed money from a defendant by means of a mortgage on their homes. Counts I, III, V and VII are brought under Federal law, and Counts IV, VI and VIII are pendent actions under Illinois law. All counts complain of various practices by the defendants as mortgagees and lending institutions. For the purpose of this motion, we must assume that all of the well-pleaded allegations of fact are true, and that the Complaint should be allowed to stand if plaintiffs could prove any set of facts thereunder which would entitle them to relief. However, the Complaint is quite verbose and must be stripped down to its essentials in order to be properly evaluated as a legal pleading. We find and conclude, for reasons expressed hereinafter, that plaintiffs have not alleged any Federal causes of action in the seven counts involved in this decision.

Count I alleges that each defendant engages in an "illegal tie-in agreement" by conditioning its loans upon the pre-payment of real estate taxes. This practice is alleged to restrain trade and commerce between defendants and other lending institutions, in that plaintiffs are deprived of the alternative of depositing their pre-paid tax fund in interest-bearing accounts, and defendants obtain the use of plaintiffs' money without paying interest on it. Plaintiffs have cited 28 U.S.C. § 1337 as the jurisdictional basis for their complaint and are relying on Section 1 of the Sherman Anti-Trust Act (15 U.S.C. § 1) in attacking the alleged tying agreement required by the defendants.

The deficiency with Count I is that it charges each individual defendant with its own separate and independent tying requirement, an insufficient restraint to violate the Federal anti-trust laws. The Federal statutes have been construed to apply only to a defendant which has sufficient "market power" to impose its tying requirement upon the customer, as in Fortner Enterprises, Inc. v. United States Steel Corp., 394 U.S. 495, 89 S.Ct. 1252, 22 L.Ed.2d 495 (1969). More traditional cases holding that a defendant did in fact have sufficient economic power to become subject to the Federal jurisdiction are United States v. Loew's Inc., 371 U.S. 38, 83 S.Ct. 97, 9 L.Ed.2d 11 (1962) and Northern Pacific Railroad Co. v. United States, 356 U.S. 1, 78 S.Ct. 514, 2 L.Ed.2d 545 (1958). Count I in the case at bar is essentially a complaint by one borrower against one savings and loan defendant. The amount of interstate commerce involved in such a transaction is minimal, at most. No individual defendant is alleged to have sufficient economic power to impose its pre-paid tax requirement on a plaintiff against his will.

We also find and conclude that conditioning a mortgage loan upon the pre-payment of taxes is not the kind of tying sale prohibited by the foregoing cases. It is not alleged that a plaintiff cannot obtain a mortgage elsewhere without this condition. The transactions in the case at bar are based on plausible business reasons and not merely to "sell" something to the plaintiffs which they would not otherwise take. This conclusion is buttressed by the fact that several Federal and state regulations authorize, but do not require, the defendants to collect pre-payment of taxes as a condition of mortgaging. E. g., 12 C.F.R. § 545.6-11 and Ill.Rev.Stat. (1971), Ch. 32, Sec. 795(c)(5). We believe this case is in the category of those such as Washington Gas Light Co. v. Virginia Electric and Power Co., 438 F. 2d 248 (4th Cir. 1971) where the court held that the sale of underground wiring was a concomitant of the sale of electric power and not a separate product.

Passing over Count II for future consideration, we come to Count III which alleges that defendants collectively control a substantial portion of the funds required for the building and sale of single family residences in Cook County. Plaintiffs allege that defendants have "collectively" used their dominant position to extract pre-paid tax funds from the plaintiffs by an illegal tying requirement and without payment of interest. However, this Count does not allege collective action between the defendants to restrain commerce and does not purport to allege a conspiracy in restraint of trade. We can find no Federal claim stated in it. For the reasons expressed with respect to Count I and for the further reason that plaintiffs have failed to allege a simple, plain and concise claim showing some basis for Federal jurisdiction (F.R.Civ.P. 8), Count III should be dismissed.

Count IV seeks to invoke pendent jurisdiction for defendants' alleged violation of the Illinois usury laws (Ill.Rev.Stat., Ch. 74, §§ 4, 4(a), 5 and 6, 1971). Plaintiffs' theory is that, since defendants charge the highest allowable rate of interest under Illinois law on the mortgage...