IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

ERIC PATERSON,

Plaintiff,

v.

WELLS FARGO BANK, N.A., also

d/b/a WELLS FARGO HOME

MORTGAGE and WELLS FARGO

FINANCIAL, and DOES 1-15,

 Defendants.

Case No 11 C 7954

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court are Defendant’s Request for Judicial Notice

and Motion to Dismiss. For the reasons stated herein, the motions

are granted in part and denied in part.

I. BACKGROUND

Plaintiff Eric Paterson sues Defendant Wells Fargo Bank, N.A.

over his refinanced home loans. He alleges violations of the Truth

in Lending Act (“TILA”), 15 U.S.C. § 1601, et seq., the Illinois

Consumer Fraud Act (“ICFA”), 815 ILL. COMP. STAT. 505/2, and the

Illinois Fairness in Lending Act (“IFLA”), 815 ILL. COMP. STAT.

120/5. Plaintiff also brings common law claims of negligent

misrepresentation, fraud in the inducement, and breach of fiduciary

duty.

The following is a summary of the detailed allegations in the

Complaint. In March 2007, Plaintiff purchased his first home in

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St. Charles, Illinois for $188,250. He financed the purchase

through two mortgage loans from Bank of America, N.A. 

The first Bank of America loan was for $150,600 and had a 30-

year term and a fixed rate of interest of 6.375%. The second loan

was for $28,200 for 15 years at a fixed interest rate of 8.375%.

Plaintiff’s combined monthly payment on these loans (including

principal, interest, and escrowed tax payments) was $1,430.42. The

total combined cost to Plaintiff over the life of the loans would

have been $222,397.43. At the time Plaintiff refinanced, he held

$11,676 in equity. 

On or about January 9, 2009, Defendant’s employee Jon Mize

(“Mize”), “cold called” Plaintiff with an offer to refinance

Plaintiff’s mortgage loans and use Plaintiff’s home equity to pay

off his existing car loan. Mize made disparaging comments about

Plaintiff’s Bank of America loans and told Plaintiff that he could

get better loan terms by refinancing with Wells and making one

monthly mortgage payment instead of two. 

Plaintiff declined Mize’s initial offer to refinance. Mize

continued to pursue Plaintiff, however, and eventually Plaintiff

agreed to refinance, but without rolling in his car loan. 

Plaintiff told Mize that he was unfamiliar with lending procedures,

but that he trusted Mize and that he would rely on Mize’s judgment

to acquire the best loan terms for Plaintiff. 

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Plaintiff has a high school education, and had never

refinanced a mortgage before. Mize represented himself and

Defendant as trustworthy and experienced, repeatedly telling

Plaintiff that he would get the best loan terms available. Mize

and Defendant controlled all aspects of the refinancing process,

including choosing the loans for which Plaintiff applied and

completing the applications.

Three to five times in the application process, Mize suggested

loan terms to Plaintiff, only to tell him later that he no longer

qualified for them (despite Plaintiff’s actually strong credit

scores). Plaintiff repeatedly asked, and was assured, that his new

monthly payments would include property tax payments. Mize told

Plaintiff that he would not finalize the transaction unless he made

the loan “good” for Plaintiff.

On February 11, 2009, Plaintiff closed on his new loan in 20

minutes, with Mize as the closing agent and notary. At closing,

Mize instructed Plaintiff to take steps to improve his credit

score, telling him that he could then refinance again in six months

on even better terms. The refinanced loan had a 40-year term and

an adjustable rate that started at 8.5% (with a maximum rate of

14.5%). The principal amount of the loan was $186,691.69, which

given the appraised value of Plaintiff’s home ($187,000), left him

$308.31 in equity. The total cost of the refinanced loan will be

$477,426.34. The loan included a $7,180.43 “discount point” fee,

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and a $2,814.26 payment to Plaintiff. It also included a $473

payment to one of Plaintiff’s “creditors” – to whom Plaintiff

actually owed no money. Plaintiff accepted these arrangements on

Mize’s advice.

Plaintiff’s payments did not include the promised escrowed

taxes; an escrow account was established later, further increasing

the monthly payment. The loan has a three percent prepayment

penalty charge for the first 34 months. 

After the closing, Plaintiff took steps to further improve his

credit. In May 2009, however, after discussing his loan terms with

a friend, Plaintiff learned that refinancing within six months

would be impossible, as the prepayment penalty, which would have

been rolled into the new loan balance, would have made the new loan

principal exceed the value of his home. As a result of the loan,

Plaintiff’s monthly payments and cost of credit have increased, and

he struggles to make ends meet.

II. LEGAL STANDARD

At this stage, the Court accepts as true all well-pleaded

facts in the Complaint and draws all inferences in Plaintiff’s

favor. See Cole v. Milwaukee Area Tech. Coll. Dist., 634 F.3d 901,

903 (7th Cir. 2011). A complaint must contain a “short and plain

statement of the claim” containing sufficient factual matter to

allow the Court to reasonably infer that Defendant is liable for

the alleged misconduct. FED. R. CIV. P. 8(a)(2); Ashcroft v. Iqbal,

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556 U.S. 662, 678 (2009). Fraud claims must be pled with

particularity. FED. R. CIV. P. 9(b). 

III. ANALYSIS

A. Defendant’s Request for Judicial Notice

Defendant asks the Court not to notice particular facts, but

to consider certain loan-related documents without converting its

motion to one for summary judgment. See FED. R. CIV. P. 12(d).

Courts may consider new documents provided with a motion to

dismiss, if they “are referred to in plaintiff’s complaint and are

central to [his] claim.” Venture Assocs. Corp. v. Zenith Data Sys.

Corp., 987 F.2d 429, 431 (7th Cir. 1993). 

There is no objection to the Court considering Defendant’s

Exhibits C-F, which are executed copies of loan documents

referenced on the Complaint. The Court will consider them.

Regarding Defendant’s Exhibits A and B, these documents are not

mentioned in the Complaint, and were executed on dates similarly

unmentioned in the pleadings. The Court will not consider them. 

Defendant’s Exhibit G is a copy of the Notice of Right to

Cancel executed by Plaintiff on February 11, 2009. Plaintiff

attached an unexecuted copy of the same document to his Complaint;

therefore, Defendant claims, the executed copy is appropriate for

consideration. As discussed below, however, the timeliness of

Plaintiff’s TILA claim depends on whether he was given two copies

of this disclosure (he claims that he was not). See 12 C.F.R.

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§ 226.23(b)(1). Thus, the second copy is integral to Defendant’s

defense, but not the Complaint. Cf. Mayoral v. WMC Mortg., LLC,

No. 08 C 7292, 2009 WL 3272697, at *3 (N.D. Ill. Oct. 6, 2009)

(refusing to consider such a Notice under similar circumstances).

Defendant’s request is denied as to its Exhibit G. The Court

similarly declines to consider Plaintiff’s declaration in resolving

the motion to dismiss. 

B. TILA Rescission

Plaintiff claims that Defendant failed to provide him with two

copies of the required notice of right to rescind. See 12 C.F.R.

§ 226.23(b)(1). If true, this failure extended Plaintiff’s right

to rescind from three days to three years. 12 C.F.R.

§ 226.23(a)(3). 

Defendant moves to dismiss Count I, arguing that the executed

copy of the Notice attached to its request for judicial notice,

along with the unexecuted copy Plaintiff attached to his Complaint,

proves that two copies were delivered. However, the Defendant’s

copy is not part of the pleadings. Even if it were, the existence

of a second copy does not mean that two were given to Plaintiff in

the manner required by the regulations. See Robbins v. Nationwide

Advantage Mortg. Co., No. 10–CV–822–JPS, 2011 WL 6888573, at *1 n.2

(E.D. Wis. Dec. 30, 2011) (noting that the existence of two copies

does not prove that the consumer received two copies he could keep,

as required). Therefore, Plaintiff’s allegation that he received

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only one copy of the required disclosure is sufficient; Defendant’s

Motion to Dismiss is denied as to Count I. 

C. Breach of Fiduciary Duty

The Court turns next to the fiduciary claim, as several of

Plaintiff’s other claims depend upon its sufficiency. Under

Illinois law, relationships like mortgagor-mortgagee are not

automatically fiduciary in nature, but may become so in particular

circumstances. Pommier v. Peoples Bank Marycrest, 967 F.2d 1115,

1119 (7th Cir. 1992). To support this claim, Plaintiff had to

plead facts indicating that he placed his trust in Defendant, who

accepted that trust and as a result gained dominion and influence

over Plaintiff. Id. In assessing whether a fiduciary relationship

exists, courts consider factors such as “kinship, age disparity,

health, mental condition, education, business experience, and the

extent of reliance.” Id. (Eventually, Plaintiff will have to

prove this relationship by clear and convincing evidence, not a

mere preponderance.) 

At this stage, Plaintiff has adequately pled a breach of a

fiduciary duty. He particularly alleged, e.g., his own limited

education and experience as compared to Mize and Defendant; that he

explicitly, avowedly placed his trust in them, which was accepted;

and that they controlled the application decisions, process, and

closing, all while assuring him that they were acting in his best

interest. Instead of doing so, he alleges, they lied about his

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loan terms and creditworthiness, overcharged him, and failed to

give him important information. That is sufficient, at this stage,

to proceed on a breach of fiduciary duty claim. See Suarez v. JP

Morgan Chase Bank, NA, No. 10–cv–3382, 2011 WL 2149427, at *7-8

(N.D. Ill. June 1, 2011).

The fact that Plaintiff initially rejected the offer to “roll”

his car loan into a refinanced loan does not defeat his claim; the

alleged fiduciary relationship of trust and dominance developed

after that initial contact. Nor does Defendant offer any support

for its claim (raised first in its reply) that no fiduciary

relationship could arise before the parties’ relationship was

formalized by contract. Count IV stands. 

D. Fraud in the Inducement and Negligent Misrepresentation

Plaintiff’s alternative claims for common law fraud and

negligent misrepresentation are premised on the same alleged

misstatements, and attacked on the same grounds. The Court

therefore addresses them together. To state an Illinois common law

fraud claim, Plaintiff must allege that: (1) Defendant made a

false statement of material fact; (2) knowing its falsity; (3)

intending Plaintiff to act on it; (4) Plaintiff justifiably relied

upon it; and (5) Plaintiff was damaged by that reliance. See

Connick v. Suzuki Motor Co., 675 N.E.2d 584, 591 (Ill. 1996).

“Negligent misrepresentation has essentially the same elements,”

except that the defendant need not know that the statement was

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false; it need only have been careless or negligent in ascertaining

the statement’s truth if it owed Plaintiff a duty of accurate

information. Kopley Group V., L.P. v. Sheridan Edgewater

Properties, Ltd., 876 N.E.2d 218, 228 (Ill. App. Ct. 2007).

Reasonable reliance is usually a question of fact, but can be

determined as a matter of law if no trier of fact could find it

reasonable. Cozzi Iron & Metal, Inc. v. U.S. Office Equipment,

Inc., 250 F.3d 570, 574 (7th Cir. 2001).

Plaintiff claims that Defendant knowingly made numerous

misstatements, including: that the new loan had better terms than

his old ones that Plaintiff would be able to refinance again

shortly after closing, and that the loan would include a tax

escrow. He alleges that the misstatements were intended to, and

did, induce Plaintiff to refinance with Defendant. As a result, he

alleges, his equity was stripped and he had higher monthly loan

payments over a longer loan term.

In its reply, Defendant argues that many of the claimed lies

were true, or else mere puffery. Plaintiff had no chance to

respond to these claims, however; they are waived. 

Defendant properly presents two related arguments. Because

the misstatements conflict with the terms of the contract, it

claims, the counts either fail as a matter of law or reliance on

the statements was per se unreasonable. Generally, a party has no

fraudulent inducement claim if it had a chance to read the contract

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terms which contradict the false statements. Regensberger v. China

Adoption Consultants, Ltd., 138 F.3d 1201, 1207 (7th Cir. 1998).

This “duty to learn” may generally bar a fraud claim, see

Belleville Nat. Bank v. Rose, 456 N.E.2d 281, 284 (Ill.App.Ct.

1983), or defeat a claim of reasonable reliance. See Regensberger,

138 F.3d at 1207.

There are, however, exceptions to that rule. Plaintiff

suggests several; the Court need address only one. Illinois courts

may excuse ignorance of contract terms where, as alleged here, a

fiduciary rushed the plaintiff in signing the documents, giving him

little chance to scrutinize them. See Tuchowski v. Rochford, 368

Ill.App.3d 441, 444-45 (2006) (citing Melvin State Bank v. Crowe,

239 N.E.2d 483 (Ill. App. Ct. 1968)). The Court cannot agree with

Defendant that the Seventh Circuit eviscerated that exception in

Carr v. CIGNA Securities, Inc., 95 F.3d 544, 548 (7th Cir. 1996).

That case focused on Oregon law, involved clearer disclosures than

those alleged here, and noted that some fiduciary relationships may

still dispel the duty to learn. Id. at 547-48. Accordingly, at

this stage, the duty to learn the contents of the mortgage contract

does not bar Plaintiff’s common law claims (Counts III and VI). 

E. Deception under ICFA

Plaintiff also brings a deception claim under the ICFA, which

requires: (1) a deceptive act or practice by defendant; (2) its

intent that Plaintiff rely on the deception; and (3) that the

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deception took place during a course of conduct involving trade or

commerce. Robinson v. Toyota Motor Credit Corp., 775 N.E.2d 951,

960 (Ill. 2002). The deception also must have proximately caused

the injury. Cozzi, 250 F.3d 570 at 576.

The Court has already addressed, above, why Defendant’s dutyto-learn argument fails at this stage. (Defendant does not seem to

argue that fiduciary relationship exception cannot apply under the

ICFA.) The Court notes that Defendant’s cited cases either did not

involve a fiduciary claim, Bank of Am., N.A. v. Shelbourne Dev.

Group, Inc., 732 F.Supp.2d 809 (N.D. Ill. 2010), or involved a

failed one, see RBS Citizens, N.A. v. Sanyou Import, Inc., No. 11

C 1820, 2011 WL 2712744, at *3 (N.D. Ill. July 13, 2011). 

Furthermore, Plaintiff appears to be correct that reasonable

reliance on the misstatements is not an element of an ICFA

deception claim, despite a few District Court and Illinois

Appellate Court cases to the contrary. As the Seventh Circuit

recognized in Cozzi, federal courts should follow the Illinois

Supreme Court, which has stated that reliance is not a requirement

under the ICFA. Cozzi, 250 F.3d at 576 (7th Cir. 2001) (citing

Connick, 675 N.E.2d at 593.). Robinson v. Toyota Motor Credit

Corp., the more recent Illinois Supreme Court case on which

Defendant relies, did not change this rule as relevant here – it

involved allegedly deceptive contract terms, not pre-contractual

misrepresentations. Robinson, 775 N.E.2d at 962, 964 (noting that

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there were insufficient facts alleged to support a deception claim,

and the contract terms were clear.) Accordingly, Count II’s

deception claim survives. 

F. Unfairness under ICFA

The ICFA also prohibits unfair acts or practices. Id. at 960.

Conduct is “unfair” if it: (1) violates public policy; (2) is

immoral, unethical, oppressive, or unscrupulous; and (3)

substantially injures consumers. Id. All three criteria need not

be satisfied; “[a] practice may be unfair because of the degree to

which it meets one of the criteria or because to a lesser extent it

meets all three.” Id. at 961 (citation and internal quotations

omitted). The ICFA should be liberally construed to protect

consumers. Id. at 960.

Plaintiff alleges that Defendant’s conduct violated the public

policy of the Illinois Fairness in Lending Act (“IFLA”), 815 Ill.

Comp. Stat. 120/3. In its reply, Defendant essentially concedes

that this element is adequately pled. The Court agrees. 

The second prong is met where the conduct is “so oppressive

that the consumer has little choice but to submit.” Siegel v.

Shell Oil Co., 612 F.3d 932, 935 (7th Cir. 2010). The third is met

if the injury “(1) [is] substantial; (2) [is not] outweighed by any

countervailing benefits to consumers or competition that the

practice produces; and (3) [is one] that consumers themselves could

not reasonably have avoided.” Id. 

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Defendant argues that Plaintiff had other loan options, and

was not coerced or threatened; therefore, it claims, he had other

meaningful options, and the conduct was not oppressive. Second, it

argues, he cannot establish injury, in that he could have avoided

the claimed harm by reading, and refusing to sign, the loan

documents. Plaintiff contends that Defendant created an

environment of trust, claiming to work in Plaintiff’s best

interests while exploiting his trust and relative ignorance.

Therefore, he claims, the conduct was oppressive and he could not

have reasonably avoided his injury. 

Plaintiff’s argument on the second two prongs is not strong.

Nonetheless, in light of the fact that: (a) the Court is

permitting the fiduciary claim to proceed; (b) the first prong was

adequately pled, and (c) the ICFA is to be liberally construed to

protect consumers, the Court will not dismiss the Count II

unfairness claim at this juncture. 

G. IFLA Claim

Finally, Plaintiff brings a claim under the Illinois Fairness

in Lending Act (“IFLA”), 815 ILL. COMP. STAT. 120/5. Defendant moves

to dismiss this count, noting that: “[i]f the same events or

circumstances would constitute the basis for an action under [the

IFLA] or an action under any other Act, the aggrieved person . . .

may not bring actions . . . under more than one of the two

Acts. . . .” Id. at (b). (emphasis added). 

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Plaintiff argues that the IFLA’s legislative history indicates

that this bar was aimed only at eliminating duplication between the

IFLA and the Illinois Human Rights Act. However, the Court knows

of no cases, nor does Plaintiff cite any, that have followed such

an interpretation. Indeed, the cases appear to reject Plaintiff’s

very argument. See, e.g., Smith v. United Residential Servs. &

Real Estate, Inc., 837 F.Supp.2d 818, 824 n. 9 (N.D. Ill. July 25,

2011). The Court agrees that the statutory language is clear.

Plaintiff asks the Court, if it must dismiss one count to avoid

duplication, to dismiss Count V. Accordingly, Count V is

dismissed. 

IV. CONCLUSION

For the reasons stated herein, Defendant’s request for

“judicial notice” is granted as to Exhibits C, D, E, and F and

denied as to Exhibits A, B, and G. Additionally, Defendant’s

motion to dismiss is granted as to Count V, and denied as to the

remaining claims.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge

United States District Court

DATE:9/27/2012

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