UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

FIFTH THIRD MORTGAGE COMPANY,

Plaintiff,

v.

IRA KAUFMAN, CHICAGO TITLE 

INSURANCE COMPANY, TRADITIONAL 

TITLE COMPANY, LLC, ELIOT 

HIGUEROS d/b/a E&H SERVICES, LLC, 

ZEAL MANAGEMENT, LLC, JOHN 

KELLY, RAZZAK KHADER, ZARAK 

KHAN, KRK FINANCIAL SERVICES, 

INC., d/b/a KRK MORTGAGE BANCORP 

and d/b/a KRK INSURANCE SOLUTIONS, 

THEODORE THEODOSIADIS, 4725 S. 

MICHIGAN LLC, JEFFREY TOWNSEND, 

and ATINUKE OKOYE,

Defendants.

No. 12 C 4693

Judge James B. Zagel

MEMORANDUM OPINION AND ORDER

Plaintiff Fifth Third Mortgage Company has brought this action for breach of contract 

against Defendant Chicago Title Insurance Company, and for fraud against Defendants Theodore 

Theodosiadis, Ira Kaufman, Traditional Title Company, LLC, John Kelly, and others. Currently 

before me are four motions to dismiss for failure to state a claim brought by the above named 

defendants respectively. For the following reasons, Chicago Title Insurance Company’s motion 

to dismiss Count I of the First Amended Complaint is denied. Theodore Theodosiadis’s motion 

to dismiss Count II of the First Amended Complaint is denied. Ira Kaufman’s and Traditional 

Title Company’s motion to dismiss is denied as to Count II and granted without prejudice as to 

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 1 of 10 PageID #:969
2

Counts III and IV. John Kelly’s motion to dismiss Counts III and IV of the First Amended 

Complaint is granted without prejudice.

BACKGROUND

This claim arises from three mortgage loans issued by Plaintiff to three different 

borrowers between May and October 2007 – the “Daughtery” loan, the “Stirb” loan, and the 

“Okoye” loan. Each of these loans was for the purchase of residential property on South 

Michigan Avenue in Chicago. By all appearances, these loans turned out to be fraudulent, the 

money borrowed by straw buyers with no intention or ability to pay it back.

Plaintiff alleges that the defendants all played a part in perpetrating this fraud. Messrs. 

Theodosiadis and Kelly were two sellers of the underlying properties. Mr. Kaufman was the 

seller’s attorney in connection with the Daughtery and Stirb loans. Mr. Kaufman’s connection to 

the Okoye loan is less clear, but it appears that he was compensated in the amount of $1,000 for 

“services rendered” in connection with that loan. Traditional Title, a company which Mr. 

Kaufman co-owned and managed, was the closing agent for the Daughtery loan. Finally, 

Plaintiff entered into a Closing Protection Contract (“CPC”) with Chicago Title Insurance 

Company in connection with the Daughtery loan. The CPC identified Traditional Title as 

Chicago Title Insurance Company’s “Issuing Agent or Approved Attorney.”

The scheme underlying Plaintiff’s claims allegedly saw certain defendants promise young 

women cash in return for acting as straw buyers for various residential properties. Plaintiff 

alleges that the defendants would aid the straw buyers in fraudulently securing the loans by 

creating for them fake employment histories, fake income histories and fake references. The 

goal, Plaintiff asserts, was to have the straw buyers close on several properties, with several 

different banks, in a short period of time, before the various mortgage servicers discovered the 

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 2 of 10 PageID #:970
3

straw buyers’ buying histories. This gave the false impression that each loan was the buyer’s 

sole real estate loan.

In addition to the residential unit purchased with a loan from Plaintiff, the straw buyer 

involved in the Daughtery loan bought seven other residential units, all at 4725 S. Michigan 

Avenue, listing each unit as the buyer’s primary residence. Crucially, Mr. Kaufman was the 

seller’s attorney and Traditional Title was the closing agent for each of these transactions. A 

company called 4725 S. Michigan LLC, of which Mr. Theodosiadis was one of two members, 

was responsible for selling all of these units.

Mr. Kelly was the seller responsible for the units purchased with the Stirb and Okoye 

loans respectively. Although these borrowers are also alleged to have purchased multiple units 

purporting to be their respective primary residences, it does not appear that Messrs. Kaufman or 

Kelly was involved in any of the other transactions.

The three mortgagors, the reader will not be surprised to learn, soon defaulted on the 

loans. Plaintiff eventually foreclosed on all three mortgages, which were eventually acquired by 

the Federal Home Loan Mortgage Corporation (“Freddie Mac”), apparently as part of the bank 

“bail-out” precipitated by the subprime mortgage crisis. Upon discovering the apparent fraud 

involved in each of the mortgages, however, Freddie Mac required Plaintiff to buy them back, 

indemnifying Freddie Mac for the losses stemming from the loans.

Plaintiff now seeks, inter alia, damages from Defendants in the amount of this loss.

DISCUSSION

When considering a motion to dismiss for failure to state a claim, the court treats all wellpled allegations as true, and draws all reasonable inferences in the plaintiff's favor. Justice v. 

Town of Cicero, 577 F.3d 768, 771 (7th Cir. 2009). “While a complaint attacked by a Rule 

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 3 of 10 PageID #:971
4

12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to 

provide the grounds of his entitlement to relief requires more than labels and conclusions, and a 

formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 555 (2007). Factual allegations must be enough to raise a right to relief 

above the speculative level, that is, the pleading must contain something more than a statement 

of facts that merely creates a suspicion of a legally cognizable right of action. Id.

I will take each Defendant’s motion in turn.

A. Chicago Title’s 12(b)(6) Motion to Dismiss Count I of the First Amended Complaint

As noted above, Plaintiff entered into the CPC with Chicago Title in connection with the 

Daughtery loan, with Traditional Title listed as Chicago Title’s “Issuing Agent or Approved 

Attorney.” In Count I, Plaintiff charges Chicago Title with breach of that contract.

Under the CPC, Traditional Title was obligated to comply with certain closing 

instructions. Among these were obligations to notify Plaintiff of any material fact that might 

influence the decision to make the loan, to notify Plaintiff of any discovery that a party to the 

transaction made a misrepresentation, and to suspend the transaction and notify Plaintiff if the 

closing agent learned that the borrower did not intend to occupy the property. Further, Chicago 

Title agreed under the CPC to reimburse Plaintiff for actual losses arising out of the failure of 

Traditional Title to comply with these instructions, to the extent that the instructions related to 

the collection and payment of funds due Plaintiff.

Plaintiff has adequately alleged that Mr. Kaufman, and, through him, Traditional Title, 

was aware that the borrower in connection with the Daughtery loan did not intend to use the 

property as her primary residence, despite representing as such in her loan papers. This is so 

because Plaintiff has alleged that Mr. Kaufman was the seller’s attorney in connection with 

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 4 of 10 PageID #:972
5

seven other residential real estate transactions, all sold to the same buyer, with each property 

noted as the buyer’s primary residence. Plaintiff also alleges that Traditional Title was the 

closing agent for each of those seven other transactions. Plaintiff asserts that Traditional Title 

failed to share this information with Plaintiff, as required by the closing instructions in the CPC.

Further, Plaintiff has alleged that this non-compliance with the closing instructions 

materially contributed to Fifth Third essentially entering into a mortgage agreement without a 

bona fide borrower. To the extent this is the case, closing instructions that would have averted 

such an outcome surely relate to the “collection and payment of funds due” Fifth Third, and 

Chicago Title certainly could be liable under the contract for losses that arise from such noncompliance.

On this point, at least, I find Chicago Title’s counter-arguments to be unpersuasive. To 

be sure, as Chicago Title notes, Plaintiff was able to successfully foreclose on the mortgage 

despite Traditional Title’s alleged non-compliance with the closing instructions. Chicago Title 

appears to urge that the upshot of this successful foreclosure is that Plaintiff was made whole –

that in the end, Fifth Third received no less than what it bargained for. This is an implausibly 

short-sighted assessment of the circumstances underlying this transaction.

It may well be that a foreclosure, even at a severe loss, that arises as a result of, say, a 

downturn in the real estate market, still leaves a lender with no less than what the lender 

bargained for. A foreclosure that arises because the borrower was fraudulently manufactured 

(that is, the borrower for all practical purposes did not exist) is another story – Plaintiff bargained 

for a bona fide borrower. Without that, an immediate default was all but guaranteed. Taking 

Plaintiff’s allegations as true, the sham-nature of the bargain cannot be excused or ignored 

simply because one of the remedies that would have been available to Plaintiff had the 

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 5 of 10 PageID #:973
6

transaction been legitimate remained available to the Plaintiff despite the fraud. Cf. First 

American Title Insurance Company v. Vision Mortgage Corporation, Inc., 689 A.2d 154, 157 

(N.J. Super. Ct. App. Div. 1997). Plaintiff has adequately pled an actual loss for which Chicago 

Title could be liable under the CPC.

B. Theodore Theodosiadis’s 12(b)(6) Motion to Dismiss Count II of the First Amended 

Complaint

In Count II, Plaintiff alleges fraud in connection with the Daughtery loan against Mr. 

Theodosiadis among others. To state a claim for common law fraud, Plaintiff must plead: (1) a 

false statement of material fact; (2) that the defendant had knowledge that the statement was 

false; (3) that the defendant intended that the statement induce the plaintiff to act; (4) that the 

plaintiff relied on the truth of the statement; and (5) damages resulting from the reliance. See 

Connick v. Suzuki Motor Co., Ltd., 174 Ill.2d 482, 496 (1996).

Further, under Fed. R. Civ. P. 9(b), “in alleging fraud or mistake, a party must state with 

particularity the circumstances constituting fraud or mistake. Malice, intent, knowledge, and 

other conditions of a person’s mind may be alleged generally.”

Plaintiff has alleged fraud against Mr. Theodosiadis sufficient to survive a 12(b)(6) 

motion. Plaintiff asserts that Mr. Theodosiadis knew the sale of the property underlying the 

Daughtery loan was fraudulent because Mr. Theodosiadis’s company (whose members were 

limited to Mr. Theodosiadis and one other individual) sold seven other units in the same building 

to the same buyer – each of which was identified as the buyer’s primary residence. Plaintiff 

asserts that Mr. Theodosiadis intended for Plaintiff’s belief that it was dealing with a bona fide 

purchaser to help induce Plaintiff to approve the loan, financially benefitting Mr. Theodosiadis to 

Plaintiff’s detriment.

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 6 of 10 PageID #:974
7

Mr. Theodosiadis points to Plaintiff’s failure to allege any “specific communication or 

misrepresentation,” or to “quote the content of any such communication or misrepresentation,” 

attributable to Mr. Theodosiadis, but this argument does not help him. A statement need not 

have been made at all, whether verbally or on paper. See Glazewski v. Coronet Ins. Co., 108 

Ill.2d 243, 250 (1985). Plaintiff alleges an act of deceit – engaging in a sale without a bona fide 

purchaser. Taking Plaintiff’s assertions as true, Mr. Theodosiadis deliberately participated in a 

transaction that, on the face of the knowledge attributed to him, was fraudulent. He is alleged to 

have done so to the detriment of Plaintiff and to his own benefit. That is enough at this stage of 

the proceeding.

C. Mr. Kaufman’s and Traditional Title’s 12(b)(6) Motion to Dismiss Counts II, III and IV 

of the First Amended Complaint

Count II of the First Amended Complaint also alleges fraud against Mr. Kaufman and 

Traditional Title in connection with the Daughtery loan. Relevant to the instant motion, Counts 

III and IV allege fraud against Mr. Kaufman in connection with the Stirb and Okoye loans 

respectively.

With respect to Count II, Plaintiff’s Complaint is sufficient as to Mr. Kaufman and 

Traditional Title for reasons similar to those described above regarding Mr. Theodosiadis. Here, 

instead of selling multiple properties to a single buyer, all purportedly to be used as that buyer’s 

primary address, Plaintiff alleges that Mr. Kaufman was the seller’s attorney for each of those 

transactions. Traditional Title, a company co-owned and managed by Mr. Kaufman, was the 

closing agent for each of the transactions. Plaintiff alleges that Mr. Kaufman and Traditional 

Title each benefited financially from the sales.

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 7 of 10 PageID #:975
8

As with Mr. Theodosiadis, taking Plaintiff’s assertions as true, Mr. Kaufman and 

Traditional Title deliberately participated in a transaction that, on the face of the knowledge 

attributed to them, was fraudulent. They are alleged to have done so to the detriment of Plaintiff 

and to their own benefit. This is sufficient to survive their 12(b)(6) attack on the Complaint.

I am not satisfied, however, that the same may be said of Counts III and IV. The 

borrowers in connection with the Stirb and Okoye loans are similarly alleged to have purchased 

multiple residential units in a short period of time, with each purported to be the borrowers’ 

respective primary residences. Unlike the allegations regarding the Daughtery loan, however, 

the Complaint does not allege that Mr. Kaufman was involved with either the Stirb borrower or 

the Okoye borrower in the purchase of more than one property. The allegations as to Counts III 

and IV thus do not support the same inference (present in Count II) that Mr. Kaufman knew 

something was amiss.

Plaintiff points to Mr. Kaufman’s connection with High Point Developers, Inc., a now 

dissolved corporation that received payments in connection with the Stirb and Okoye loans. 

High Point Developers was owned by an individual named Yaseen Ahmed, a non-party, who 

was the other member of 4725 S. Michigan, LLC, the entity through which Mr. Theodosiadis 

sold the units in connection with the Daughtery loan.

In light of this connection, Plaintiff asserts that, to the extent Plaintiff has properly 

alleged that Mr. Kaufman was part of a fraudulent scheme with respect to the Daughtery loan 

and the properties at 4725 S. Michigan Ave. (Count II of the Complaint), it would “defy 

common sense to suggest that [Mr. Kaufman] was a ‘clean’ participant” with respect to the Stirb 

and Okoye loans and the properties at 5416 S. Michigan Ave.

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 8 of 10 PageID #:976
9

Perhaps, but that is insufficient to survive the defendants’ 12(b)(6) attack on Counts III 

and IV. The connection Plaintiff has alleged between Mr. Kaufman, High Point, the properties 

at 4725 S. Michigan, and the properties at 5416 S. Michigan may well be grounds for “suspicion 

of a legally cognizable right of action,” but that is not enough. Plaintiff’s factual allegations 

must be sufficient to raise their claimed right to relief above the speculative level. Vague and 

equivocal assertions such as “[i]t was Kaufman’s job to make sure that High Point...got its piece 

of the pie” will not do.

D. Mr. Kelly’s 12(b)(6) Motion to Dismiss Counts III and IV of the First Amended 

Complaint

Counts III and IV also allege fraud against Mr. Kelly in connection with the Stirb and 

Okoye loans respectively. As is the case with Plaintiff’s allegations against Mr. Kaufman under 

Counts III and IV, Plaintiff’s allegations against Mr. Kelly are insufficiently precise. Mr. Kelly 

was the seller involved in the Stirb and Okoye transactions. Unlike Mr. Theodosiadis, however, 

the Complaint does not allege that Mr. Kelly sold more than one piece of property to any single 

buyer, much less to a single buyer who indicated that multiple properties were all her primary 

residence.

Without this inference of irregularity, Plaintiff’s Complaint as to Mr. Kelly falls short of 

pleading the “knowledge” necessary to state a claim for fraud. It is true that Rule 9(b) permits 

knowledge to be pled generally, but this iteration of Plaintiff’s Complaint appears to go no 

further than to circularly allege in conclusory fashion that, because Mr. Kelly was involved in a 

fraudulent transaction, he must have personally known that the borrowers’ conduct was 

fraudulent. A formulaic recitation of the elements of the cause of action will not suffice.

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 9 of 10 PageID #:977
10

CONCLUSION

For the foregoing reasons, Chicago Title’s motion to dismiss Count I is denied, Theodore 

Theodosiadis’s motion to dismiss Count II is denied, and Ira Kaufman and Traditional Title’s 

motion to dismiss Count II is denied. Ira Kaufman’s motion to dismiss Counts III and IV is 

granted, and John Kelly’s motion to dismiss Counts III and IV is also granted. I grant these two 

motions to dismiss without prejudice. Plaintiff has requested, and is granted, leave to file a 

Seconded Amended Complaint as to Messrs. Kaufman and Kelly in connection with Counts III 

and IV.

ENTER:

James B. Zagel

United States District Judge

DATE: February 7, 2013

Case: 1:12-cv-04693 Document #: 68 Filed: 02/07/13 Page 10 of 10 PageID #:978