Opinion
NO. 5-16-0306
12-12-2017
CITIMORTGAGE, INC., Plaintiff and Counterdefendant-Appellee, v. THE ESTATE OF MICHAEL W. MIFFLIN, KATHY D. MIFFLIN, UNKNOWN OWNERS, and NONRECORD CLAIMANTS, Defendants (The Estate of Michael W. Mifflin, Defendant and Counterplaintiff-Appellant).
NOTICE
Decision filed 12/12/17. The text of this decision may be changed or corrected prior to the filing of a Peti ion for Rehearing or the disposition of the same.
NOTICE
This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the Circuit Court of Union County.
No. 10-CH-18
Honorable Mark M. Boie, Judge, presiding.
PRESIDING JUSTICE BARBERIS delivered the judgment of the court.
Justices Goldenhersh and Chapman concurred in the judgment.
ORDER
¶ 1 Held: The circuit court did not err in granting summary judgment where the lien holder was a creditor that sought to collect purchased debt for its own account, and in finding that no fiduciary duty existed between the mortgagor and mortgagee.
¶ 2 The appellant, the Estate of Mifflin, appeals the circuit court's order granting the appellee's, CitiMortgage's, motion for summary judgment and denying the Estate of Mifflin's cross-motion for summary judgment. For the reasons that follow, we affirm.
¶ 3 BACKGROUND
¶ 4 On July 13, 2004, Michael Mifflin and Kathy D. Trexler-Mifflin, as husband and wife (Mifflin), executed a promissory note and mortgage for $75,000 in favor of Wilmington Finance, a division of AIG Federal Savings Bank (Wilmington AIG). The note and mortgage were filed and recorded with the Union County Recorder of Deeds on July 26, 2004. The note was payable in monthly installments of $524.41, with the first payment due on or before September 1, 2004. Mifflin executed an escrow waiver, whereby Wilmington AIG waived its normal requirements for an escrow account and placed responsibility on Mifflin to pay property taxes and maintain homeowner's insurance. In the event of nonpayment, Wilmington AIG retained "the right to reinstate a requirement that property taxes and insurance premiums be placed in escrow and paid monthly for the remaining term of the mortgage." Mifflin submitted payment for $524.41 to Wilmington AIG in September, October, and November 2004. Beginning in December 2004, Mifflin made payments directly to CitiFinancial in the amount of $524.41. On September 9, 2005, Wilmington AIG assigned Mifflin's mortgage to CitiFinancial.
¶ 5 On March 21, 2006, after several notices, CitiFinancial sent Mifflin a final delinquent tax notice for his 2004 property taxes. On May 13, 2006, CitiFinancial informed Mifflin that it had advanced the funds to pay for the 2004 delinquent property taxes.
¶ 6 On July 1, 2006, CitiFinancial merged with CitiMortgage. In December 2006, CitiMortgage sent Mifflin notice that it had not received confirmation of a renewal or replacement policy following the expiration of Mifflin's homeowner's insurance policy on
November 28, 2006. Roughly one month later, CitiMortgage sent Mifflin notice that proof of homeowner's insurance had not been received. Following further noncompliance, CitiMortgage informed Mifflin that pursuant to the escrow waiver provisions, it had procured a homeowner's insurance policy on February 16, 2007, backdated to November 28, 2006.
¶ 7 On April 12, 2007, CitiMortgage filed a foreclosure action against Mifflin claiming that his account was in default for past due principal and interest. On May 15, 2007, CitiMortgage sent Mifflin notice that his account was delinquent in the amount of $10,344.70. This amount was the result of past due payments, paid attorney fees, late charges, delinquent property taxes for 2004 and 2005, outstanding attorney fees, and homeowner's insurance that CitiMortgage procured on February 16, 2007. Shortly thereafter, CitiMortgage dismissed the foreclosure action following receipt of Mifflin's payment for the above delinquent amounts.
¶ 8 On December 19, 2007, CitiMortgage sent Mifflin notice that it had obtained a renewal policy for homeowner's insurance on the property and that an annual premium for $1882 had been advanced on his account. Mifflin argued that CitiMortgage's purchased insurance was duplicative, as he had obtained an insurance policy on his own. In 2008, CitiMortgage established an escrow account following Mifflin's continued failure to pay property taxes and maintain homeowner's insurance.
¶ 9 On June 11, 2010, CitiMortgage filed a complaint to foreclose Mifflin's mortgage. The complaint alleged that Mifflin's mortgage was "in default since November 1, 2009, with a principal balance due of $70,538.66," and had $9823.45 in unpaid principal,
interest, and other charges that had accrued from November 1, 2009, through May 31, 2010.
¶ 10 In November 2010, Mifflin responded by filing an answer, affirmative defenses, counterclaims, and a jury demand. Mifflin brought four separate counterclaims under the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 (West 2010)), the Fair Debt Collection Practices Act (FDCPA) (15 U.S.C.A. § 1692 et seq. (2006)), common law fraud, and claims for breach of fiduciary duty. In response, CitiMortgage filed verified answers to Mifflin's affirmative defenses and counterclaims, which included the following:
"6. Wilmington AIG assigned Mifflin's mortgage to [CitiFinancial] on September 5, 2005.
RESPONSE: [CitiMortgage] admits that Wilmington Finance assigned Mifflin's mortgage to CitiFinancial Mortgage, Co., Inc. on September 9, 2005.
7. Mifflin's mortgage was in default when his mortgage was assigned from Wilmington AIG to [CitiFinancial].
RESPONSE: Admit.
8. In July 2006, [CitiFinancial] merged with Plaintiff/Counter-defendant, CitiMortgage, Inc. ***.
RESPONSE: Admit."
¶ 11 On June 27, 2011, CitiMortgage filed a motion for summary judgment arguing that Mifflin had failed to plead factual or legal support for his asserted affirmative defenses and claims. Under the header "Statement of Undisputed Facts," CitiMortgage wrote the following: "The Mortgage was assigned by Wilmington AIG to [CitiFinancial] on September 16, 2005 (See Affidavit of Therese Hart, attached as Exhibit 2 at Ex. A)." Attached to the affidavit of Therese Hart (Hart), a business operations analyst at
CitiMortgage, was the assignment of the mortgage. Hart attested that Mifflin's mortgage was assigned on September 16, 2005, by Wilmington AIG to CitiFinancial, although the attached mortgage assignment did not reference CitiFinancial or the September 2005 date. CitiMortgage further contended that Mifflin failed to make full payments on the mortgage starting in January 2009. CitiMortgage argued that even though Mifflin made "payments in the amount of $525.00 at various times after his initial default, these payments were insufficient to bring the Mortgage current." As a result, CitiMortgage held Mifflin's payments as "unapplied funds."
¶ 12 On August 22, 2011, CitiMortgage filed a reply in support of its motion for summary judgment. CitiMortgage clarified that "[d]ue to a clerical error, the incorrect assignment was attached to Ms. Hart's affidavit in support of the Motion." CitiMortgage attached a different "Assignment of Mortgage," labeled Exhibit 1, which demonstrated that the assignment was executed on September 9, 2005, and recorded on September 16, 2005.
¶ 13 On August 26, 2011, Mifflin requested 29 interrogatories and 25 requests for production from CitiMortgage. After requesting additional time, CitiMortgage objected to all of Mifflin's interrogatories and a majority of the requests for production. On December 21, 2011, Mifflin filed a combined motion for hearing on discovery and motion to compel, or in the alternative, motion to dismiss. Subsequently, CitiMortgage filed a response in opposition to Mifflin's motion to compel. CitiMortgage argued that it had complied with discovery requests by "provid[ing] over 500 pages of documents, including relevant loan documents, the relevant assignment, the loan payment history,
and system notes related to the loan." Subsequently, the circuit court denied Mifflin's combined motion for hearing on discovery and motion to compel "in its entirety." Following Mifflin's motion to reconsider, the court granted limited discovery ordering CitiMortgage to comply with two interrogatories and four requests for production.
¶ 14 During the course of litigation, Mifflin paid off the balance of the loan. As a result, CitiMortgage filed a motion to dismiss the foreclosure complaint, which the circuit court granted on July 29, 2013. Mifflin's November 2010 counterclaims remained pending.
¶ 15 Following Mifflin's death in February 2015, his sister, Rebecca Mifflin, was named administrator of his estate (Estate of Mifflin) and filed a motion to substitute parties pursuant to section 2-1008 of the Code of Civil Procedure (735 ILCS 5/2-1008 (West 2010)). Shortly thereafter, the parties filed cross-motions for summary judgment. The Estate of Mifflin filed a motion for partial summary judgment under the FDCPA on liability only. In response, CitiMortgage filed a motion for summary judgment against Mifflin's November 2010 counterclaims, stating that the following facts were undisputed:
"a. On August 24, 2004, [CitiFinancial] approved the purchase by [CitiFinancial] of the Loan from Wilmington, evidenced by a 'CitiFinancial Secondary Market Quality Control Analysis' and a 'CitiFinancial Mortgage Secondary Underwriting Spreadsheet.' *** Each of those documents demonstrates that [CitiFinancial] approved its purchase of the Loan on August 24, 2004.
b. Mifflin made his first payment on the Loan, due on September 1, 2004, to Wilmington by Check No. 4697, dated August 2[7], 2004. ***
c. Pekin Insurance Company, the insurer of the hazard insurance policy on the Property, sent notice to Mifflin on September 10, 2004 in which it stated that it issued an endorsement to the insurance policy for the Property,
effective September 26, 2004, that changed the mortgagee insured under the policy to [CitiFinancial], and enclosed a copy of the endorsement. ***
d. [CitiFinancial] received from Wilmington the proceeds of Mifflin's first payment and recorded receipt of that payment."
¶ 16 CitiMortgage further alleged that Mifflin made the second (check number 4716) and third (check number 4740) mortgage payments on October 5, 2004, and November 8, 2004, to Wilmington AIG. Following Wilmington AIG's endorsements to CitiFinancial, CitiFinancial posted payment. CitiMortgage also asserted that Mifflin made the fourth (check number 4755), fifth (check number 4769), and sixth (check number 4781) mortgage payments to CitiFinancial, rather than Wilmington AIG, on December 10, 2004, January 11, 2005, and February 15, 2005, respectively.
¶ 17 The Estate of Mifflin filed a response to CitiMortgage's motion for summary judgment arguing that CitiMortgage judicially admitted that Mifflin's mortgage was in default when the mortgage was assigned from Wilmington AIG to CitiFinancial in September 2005. The Estate of Mifflin argued that CitiMortgage was bound by its judicial admissions, and, as such, CitiMortgage was a debt collector under the FDCPA.
¶ 18 Subsequently, CitiMortgage argued that it had "admitted only that the Mortgage was assigned on the date set forth in the written assignment and that Mifflin was in default on that date." CitiMortgage asserted that it had not judicially admitted that the "Loan" had been transferred on September 9, 2005. Instead, CitiMortgage asserted that it would have denied the allegation had Mifflin used the term "Note or Loan," because CitiFinancial owned Mifflin's debt sometime before September 2004.
¶ 19 On April 18, 2016, the circuit court granted summary judgment in favor of CitiMortgage and against the Estate of Mifflin on the FDCPA and breach of fiduciary duty claims. The court found that CitiMortgage was "clearly a 'creditor' under the definitions of the FDCPA." In particular, the court determined that CitiMortgage's exhibits "clearly indicate[d] Wilmington [AIG's] intention to assign the Mifflins' loan to [CitiFinancial], and [CitiFinancial's] approval of the assignment on August 24, 2004." The court found that it was significant that Wilmington AIG endorsed Mifflin's first three mortgage payments to CitiFinancial. The court also found that the evidence further demonstrated that Mifflin sent his fourth mortgage payment directly to CitiFinancial on December 10, 2004, which "clearly indicat[ed] that [Mifflin] had knowledge" that CitiFinancial was servicing the loan. As further support, the court relied on Pekin Insurance Company's (Pekin) homeowner's insurance declaration that listed CitiFinancial as Mifflin's mortgagee, effective September 26, 2004.
¶ 20 Following the circuit court's order, the Estate of Mifflin filed a Rule 304(a) motion for a special finding regarding the FDCPA and breach of fiduciary duty claims. Ill. S. Ct. R. 304(a) (eff. Feb. 26, 2010). On July 12, 2016, the court granted the Estate of Mifflin's motion, finding that no just reason existed to delay the appeal of the court's April 18, 2016, order. The Estate of Mifflin filed a timely notice of appeal on July 15, 2016.
¶ 21 ANALYSIS
¶ 22 The Estate of Mifflin argues that the circuit court erred in granting summary judgment in favor of CitiMortgage. First, the Estate of Mifflin argues that CitiMortgage judicially admitted that Mifflin's mortgage was in default in September 2005 when
CitiFinancial accepted Wilmington AIG's assignment of Mifflin's defaulted mortgage and note. Thus, the Estate of Mifflin argues that CitiFinancial, now CitiMortgage, lost creditor status on September 9, 2005. For support, the Estate of Mifflin references CitiMortgage's January 28, 2011, verified answers, which stated in pertinent part:
"6. Wilmington AIG assigned Mifflin's mortgage to [CitiFinancial] on September 5, 2005.
RESPONSE: [CitiMortgage] admits that Wilmington Finance assigned Mifflin's mortgage to CitiFinancial Mortgage, Co., Inc. on September 9, 2005.
7. Mifflin's mortgage was in default when his mortgage was assigned from Wilmington AIG to [CitiFinancial].
RESPONSE: Admit.
8. In July 2006, [CitiFinancial] merged with Plaintiff/Counter-defendant, CitiMortgage, Inc. ***.
RESPONSE: Admit."
¶ 23 CitiMortgage argues that the undisputed facts show that CitiFinancial acquired Mifflin's loan no later than September 2004, which was before the loan was in default status. CitiMortgage contends that its verified answers demonstrated that CitiMortgage "intended only to admit the date of the written Assignment and not the Loan-the debt-transferred on that day." CitiMortgage argues that its statement was not a judicial admission because its response did not show a "deliberate, clear, unequivocal statement" regarding the date when Wilmington AIG "transferred the debt," which, CitiMortgage contends, would have been the acquisition date of the note. In support, CitiMortgage asserts that a mortgage follows the note and a mortgage assignment may merely memorialize a prior transfer. Thus, the date of the mortgage assignment, as CitiMortgage argues, has no bearing on when the note was actually transferred to CitiFinancial.
¶ 24 We initially note that summary judgment should be granted where there is no genuine issue of material fact, such that the movant is entitled to judgment as a matter of law. 735 ILCS 5/2-1005(c) (West 2012). The purpose of summary judgment procedure is not to try facts, but to determine whether a genuine issue exists as to any material fact which would require a trial. Commercial Products Corp. v. Briegel, 101 Ill. App. 2d 156, 160 (1968). The entry of summary judgment is reviewed de novo. Rosestone Investments, LLC v. Garner, 2013 IL App (1st) 123422, ¶ 23.
¶ 25 We first address the Estate of Mifflin's argument regarding CitiMortgage's alleged judicial admissions. Judicial admissions are formal admissions in pleadings that have the effect of withdrawing a fact from issue and dispensing wholly with the need for proof of the fact. Konstant Products, Inc. v. Liberty Mutual Fire Insurance Co., 401 Ill. App. 3d 83, 86 (2010). Illinois law is well-established that a verified pleading remains part of the record even upon the filing of an amended pleading. Id. When an original pleading is verified, factual admissions remain binding on the party that made it, unless the pleader files an amended pleading which alleges that the prior admission was the product of mistake or inadvertence. Id.
¶ 26 Here, it is undisputed that Mifflin filed verified counterclaims, and CitiMortgage responded by filing verified answers that Wilmington AIG had assigned Mifflin's defaulted mortgage to CitiFinancial in September 2005. However, there is no need for this court to determine whether CitiMortgage's January 28, 2011, verified answers constitute binding judicial admissions. Even if we assume that CitiMortgage judicially admitted that CitiFinancial acquired the defaulted mortgage and note on September 9,
2005, the existence of the defaulted account does not automatically render CitiMortgage a debt collector, as the Estate of Mifflin contends.
¶ 27 Our United States Supreme Court in Henson v. Santander Consumer USA Inc. recently determined that "you have to attempt to collect debts owed another before you can ever qualify as a debt collector." (Emphasis in original.) Henson v. Santander Consumer USA Inc., 582 U.S. ___, ___, 137 S. Ct. 1718, 1724 (2017). In fact, the Supreme Court determined that a defaulted debt purchaser could be a creditor if it collected purchased defaulted debt for its own account. Id. The Court reasoned that "while the creditor definition excludes persons who 'receive an assignment or transfer of a debt in default,' it does so only (and yet again) when the debt is assigned or transferred solely for the purpose of facilitating collection of such debt for another." (Emphases in original.) Id.
¶ 28 Here, regardless of whether Mifflin's account was in default in September 2005, CitiFinancial was collecting purchased debt for its own account and did not receive the debt to facilitate the collection of such debt for another. As a result, CitiMortgage is not barred from qualifying as a creditor under the FDCPA's plain terms. Instead, the evidence, which the Estate of Mifflin failed to object to at the summary judgment proceedings, supports a finding that CitiMortgage purchased Mifflin's debt with the purpose of collecting Mifflin's mortgage payments for its own account. In particular, the record demonstrates that CitiFinancial approved the purchase of Mifflin's loan on August 24, 2004. Additionally, the detailed payment history shows that CitiFinancial received Mifflin's mortgage payments starting in September 2004, and that Pekin's insurance
declaration notice to Mifflin evidences CitiFinancial as named mortgagee, effective September 26, 2004. Thus, we conclude that the circuit court's granting of summary judgment was proper where CitiMortgage was a creditor under the FDCPA.
¶ 29 Next, the Estate of Mifflin argues that the circuit court erred in granting summary judgment in favor of CitiMortgage with respect to Mifflin's claims for breach of fiduciary duty. The Estate of Mifflin argues that the alleged agreement to establish an escrow account did not eliminate CitiMortgage's duty to provide accounting of the funds in escrow. In particular, the Estate of Mifflin argues that CitiMortgage unilaterally created an escrow account, and that CitiMortgage breached its fiduciary duty when it retained funds; charged unnecessary and unreasonable fees, including a duplicative insurance policy in 2007; listed negative escrow balances; and refused to provide accounting. In response, CitiMortgage asserts that no fiduciary duty arises in Illinois between a mortgagee and mortgagor where a mortgagee uses an escrow account to pay for homeowner's insurance premiums and expenses associated with property taxes.
¶ 30 Under Illinois law, the customary mortgagor-mortgagee relationship is not sufficient, in itself, to show the existence of a fiduciary or special relationship. La Throp v. Bell Federal Savings & Loan Ass'n, 68 Ill. 2d 375, 391 (1977). In order to state a claim for fiduciary duty, a party must allege that a fiduciary duty exists, that the duty was breached, and that such breach proximately caused the injury for which plaintiff complains. Neade v. Portes, 193 Ill. 2d 433, 444 (2000). Fiduciary relationships may arise where one party exercises domination and influence, such as between attorney and client, principal and agent, or other relationships as developed by facts and circumstances
alleged where, due to a close relationship, the other party relies heavily on the judgment of the other. McErlean v. Union National Bank of Chicago, 90 Ill. App. 3d 1141, 1148 (1980); Mid-America National Bank of Chicago v. First Savings & Loan Ass'n of South Holland, 161 Ill. App. 3d 531, 538 (1987). However, a slight dominant business position will not operate to turn a formal, contractual relationship into a fiduciary relationship. Mid-America National Bank of Chicago, 161 Ill. App. 3d at 538. An escrow agent owes a fiduciary duty to act only in accordance with the terms of the escrow instructions (Meyers v. Rockford Systems, Inc., 254 Ill. App. 3d 56, 65 (1993)), and courts have held escrowees accountable for acting outside said instructions. See International Capital Corp. v. Moyer, 347 Ill. App. 3d 116, 124 (2004). The entry of summary judgment is reviewed de novo. Rosestone, 2013 IL App (1st) 123422, ¶ 23.
¶ 31 Here, the record supports a finding that Mifflin signed an escrow waiver in July 2004, which waived Wilmington AIG's normal escrow requirements. The escrow waiver stated the following:
"In consideration of Wilmington Finance *** or their assignee agreement to waive their normal requirement providing for the escrow of taxes and insurance, the undersigned hereby agree to pay said property taxes and insurance premiums promptly when due and to provide receipts to Wilmington Finance *** if requested to do so.
Failure to pay said taxes or insurance premiums when due or to make monthly mortgage payments as agreed shall give Wilmington Finance *** the right to reinstate a requirement that property taxes and insurance premiums be placed in escrow and paid monthly for the remaining term of the mortgage." (Emphases added.)
¶ 32 As stated above, CitiMortgage retained the right to reinstate an escrow account in the event that Mifflin failed to pay property taxes and maintain current homeowner's
insurance. When Mifflin failed to comply, CitiMortgage took the necessary steps to collect outstanding amounts by requesting documentation and proof of payment. When those efforts failed, CitiMortgage was forced to procure homeowner's insurance policies and advance sufficient funds to pay for delinquent property taxes. Although the Estate of Mifflin alleges that CitiMortgage's purchased insurance policy in 2007 was duplicative, the record does not support this contention, given that Mifflin did not provide CitiMortgage sufficient documentation to show that he had obtained homeowner's insurance on his own. Rather, the record evidences that Mifflin continued a pattern of nonpayment for annual property taxes and homeowner's insurance premiums. As a result, CitiMortgage established an escrow account in 2008.
¶ 33 The Estate of Mifflin argues that by establishing the escrow account, CitiMortgage was placed in a dominant role in the lender-borrower relationship. However, we cannot find that a special relationship existed in this matter simply because an escrow account was established in 2008. CitiMortgage's actions were not such that it acted for the benefit of Mifflin or that there was a special relationship in which Mifflin relied heavily on CitiMortgage's judgment. Instead, we agree with the circuit court that CitiMortgage was forced to procure homeowner's insurance policies, advance funds for delinquent property taxes, and pay additional expenses to protect its interest in the secured property to prevent foreclosure. Thus, through Mifflin's continued failures to pay required annual expenses, he agreed that CitiMortgage could reinstate the escrow account requirements in 2008, which was provided for in the written escrow waiver provision that he signed in July 2004.
¶ 34 We further note that during the course of litigation, Mifflin paid off the balance of the loan. Thus, even if a fiduciary duty arose, Mifflin did not incur any injury, a requisite showing in order to prove a breach of fiduciary duty. Under the voluntary payment doctrine, money voluntarily paid under claim of right to the payment, and with knowledge of facts by the person making the payment, cannot then later be recovered, absent fraud, duress, or mistake. Dreyfus v. Ameritech Mobile Communications, Inc., 298 Ill. App. 3d 933, 938 (1998). "In other words, to negate the applicability of the doctrine, plaintiff must 'not only show that the claim asserted was unlawful but also that payment was not voluntary, that there was some necessity which amounted to compulsion.' " Id.
¶ 35 Here, Mifflin had full knowledge of the facts that his account was in default after CitiMortgage filed a complaint to foreclose the mortgage on June 11, 2010. In paying the full balance of the loan, he admitted that the amount due was correct and that it was his responsibility to pay. The record does not support a finding that Mifflin's decision to pay the full loan balance was the result of compulsion, especially given that he was represented by counsel at that time. As a result, the voluntary payment doctrine further bars Mifflin's claim for a breach of fiduciary duty. Thus, we conclude that the court did not err in granting summary judgment where CitiMortgage owed no fiduciary duty to Mifflin.
¶ 36 CONCLUSION
¶ 37 The circuit court did not err in granting summary judgment where CitiMortgage was a creditor that sought to collect purchased debt for its own account, and in finding
that no fiduciary duty existed between CitiMortgage and Mifflin. The order of the circuit court of Union County is hereby affirmed.
¶ 38 Affirmed.