In the

United States Court of Appeals

For the Seventh Circuit

____________

No. 03-4021

CARROLL GUISE, REGINA GUISE,

and MILDRED GUISE,

Plaintiffs-Appellants,

v.

BWM MORTGAGE, LLC, HOMECOMINGS

FINANCIAL NETWORK, INC., CLEARWATER

TITLE CO., et al.,

Defendants-Appellees.

____________

Appeal from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 03 C 4123—Suzanne B. Conlon, Judge.

____________

ARGUED APRIL 7, 2004—DECIDED AUGUST 4, 2004

____________

Before FLAUM, Chief Judge, and DIANE P. WOOD and

WILLIAMS, Circuit Judges.

FLAUM, Chief Judge. The plaintiffs claim relief under the

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

alleging that the defendants engaged in unlawful lending

practices in connection with a mortgage on their home. The

district court dismissed their lawsuit on the pleadings and

denied their motion for leave to file an amended complaint.

For the reasons stated herein, we affirm. 
2 No. 03-4021

I. Background

Plaintiffs Regina Guise and Carroll Guise hired The Loan

Arranger, LLC (“The Loan Arranger”) to serve as their

mortgage broker. The Loan Arranger helped them to obtain

a loan from BWM Mortgage, LLC for the purpose of refinancing their existing mortgage loan. On January 28, 2002,

the Guises and BWM Mortgage, LLC closed the loan. The

loan note indicates that the plaintiffs borrowed $180,000

from BWM Mortgage, LLC, and the mortgage note indicates

that the plaintiffs granted BWM a security interest in their

Chicago, Illinois home. In connection with the loan, the

Guises were assessed a finance charge of $434,890.22. 

The Loan Arranger aided the Guises in purchasing title

insurance and title endorsements from Clearwater Title

Company (“Clearwater”), a company that is under common

ownership and management with The Loan Arranger.

Clearwater charged $800 for the title insurance and $345

for the title endorsements. According to the U.S. Department

of Housing and Urban Development Settlement Statement

(“settlement statement”) appended to the complaint, the

Guises also paid $450 to Lakeshore Title Agency for the

purpose of conducting a title search. 

Plaintiffs brought a multiple count complaint against BWM

Mortgage, LLC; Homecomings Financial Network, Inc.,

Clearwater Title Company; The Loan Arranger; Michael

Robins; and DOES 1-5. Count I of the complaint claims

violations of TILA and seeks damages and rescission of the

mortgage loans on behalf of a putative class, and Count II

sought the same solely on behalf of the Guises. Count III

alleges violations of the Illinois Consumer Fraud Act, 815

ILCS 505/2, on behalf of the Guises and the putative class.

The complaint alleges that the fees paid by the Guises to

Clearwater for title insurance and endorsements exceeded

the $601 fee quoted for the same services by Chicago Title

Insurance Company, a rival title insurance provider. The
No. 03-4021 3

Guises allege that The Loan Arranger profited from the

Guises’ allegedly overpriced transaction with Clearwater, and

that this compensation therefore qualified as additional compensation to the mortgage broker subject to disclosure under

TILA, 15 U.S.C. § 1605(a) and federal Regulation Z, 12 C.F.R.

§ 226.4(c)(7)(I). The plaintiffs argue that because the title

insurance and endorsement fees were not disclosed as

finance charges, the statement of finance fees was understated in excess of the permitted margin of error provided

in 25 U.S.C. § 1605(f)(2)(A) and 12 C.F.R. § 226.23(g). For

that reason, the plaintiffs argue that they are entitled to

rescind their loan.

The defendants moved to dismiss the plaintiffs’ suit on

the pleadings. Shortly afterward, the plaintiffs moved for

leave to amend their complaint. The district court granted

BWM’s motion for judgment on the pleadings with respect

to the plaintiffs’ rescission claim, finding that the finance

charges disclosed were within the applicable TILA tolerance.

The district court also denied the plaintiffs’ motion for leave

to amend the complaint, concluding that the plaintiffs’

proposed amendments could not cure the deficiencies in the

first complaint. The plaintiffs now appeal. 

II. Discussion

The plaintiffs argue that the district court erred in dismissing their claims for rescission on the pleadings. This

Court reviews a decision to grant judgment on the pleadings

pursuant to Federal Rule of Civil Procedure 12(c) de novo,

using the standard applicable to dismissals under Federal

Rule of Civil Procedure 12(b)(6) for failure to state a claim

on which relief can be granted. R.J. Corman Derailment

Serv., LLC v. Int’l Union of Operating Eng’rs, 335 F.3d 646,

647 (7th Cir. 2003). We accept the facts alleged in the

complaint in the light most favorable to the plaintiffs, the

non-moving party. Id. We also “consider new factual
4 No. 03-4021

allegations raised for the first time on appeal provided they

are consistent with the complaint.” Chavez v. Illinois State

Police, 251 F.3d 612, 650 (7th Cir. 2001) (internal quotations omitted). “A court will grant a Rule 12(c) motion only

when it appears beyond a doubt that the plaintiff cannot

prove any facts to support a claim for relief and the moving

party demonstrates that there are no material issues of fact

to be resolved.” Brunt v. Serv. Employees Int’l Union, 284

F.3d 715, 718-19 (7th Cir. 2002).

The stated purpose of TILA is to “assure a meaningful

disclosure of credit terms so that the consumer will be able

to compare more readily the various credit terms available

to him.” 15 U.S.C. § 1601(a). To aid consumers in assessing

the cost of obtaining credit, TILA requires lenders to furnish

a written statement summarizing the loan transaction,

including all related finance charges. 15 U.S.C. § 1605(a).

The statement of finance charges need not be perfectly

accurate in order to be in compliance with § 1605(a). In

credit transactions secured by real property, a finance charge

“shall be treated as being accurate . . . [if] the amount disclosed as the finance charge . . . does not vary from the actual finance charge by more than an amount equal to onehalf of one percent of the total amount of credit extended.”

15 U.S.C. § 1605(f)(2)(A). The regulation implementing this

provision, known as Regulation Z, follows this language:

“the finance charge. . . shall be considered accurate for

purposes of this section if the disclosed finance charge . . .

is understated by no more than 1/2 of 1 percent of the face

amount of the note or $100, whichever is greater.” 12 C.F.R.

§ 226.23(g). In this case, the plaintiffs borrowed $180,000.

Therefore, any finance charge disclosed by The Loan

Arranger is accurate for purposes of TILA and Regulation

Z if it is within 0.5% of $180,000, or $900, of the actual

finance charge incurred. 

TILA defines the types of fees and charges that must be

included in the computation of finance charges. When the
No. 03-4021 5

extension of credit is secured by an interest in real property, the “[f]ees or premiums for title examination, title insurance, or similar purposes,” in addition to other fees not

relevant here, are to be exempted from computation of the

finance charge. 15 U.S.C. § 1605(e)(1). Regulation Z, the

federal regulation that implements TILA, similarly provides

that “fees for title examination, abstract of title, title

insurance, property survey, and similar purposes” are not

finance charges “if the fees are bona fide and reasonable.”

12 C.F.R. § 226.4(c)(7)(i). 

The plaintiffs allege that the title insurance fees charged

by Clearwater were not exempt from computation in the

finance fee due to an alleged collusion between The Loan

Arranger and Clearwater. In the Guises’ view, Clearwater

may have billed them for title insurance and title endorsements in name, but in substance, these charges were actually for the purpose of providing additional compensation to

their mortgage broker, The Loan Arranger. Their complaint

illustrates this alleged fraud by stating that the title

insurance charges were “double a reasonable charge” as

compared with prevailing market rates. If The Loan

Arranger benefitted from Clearwater’s overpriced sale of

title insurance, The Loan Arranger was required by

§ 1605(e)(1) and 12 C.F.R. § 226.4(c)(7)(i) to disclose the

profit as a finance charge, the Guises allege. 

On appeal, the plaintiffs have expanded upon the allegations put forth in the complaint. Before this Court, the

plaintiffs argue that they paid $450 to Lakeshore for title

insurance, and that this fee must be aggregated with the

$1145 paid to Clearwater in order to accurately assess the

full extent of the overcharge. Because this new allegation is

inconsistent with the assertion in the complaint that the

$450 paid to Lakeshore was for a title search, rather than

for title insurance, we confine our analysis to the original

allegation. See Holman v. Indiana, 211 F.3d 399, 405-06

(7th Cir. 2000) (stating that new facts alleged on appeal are
6 No. 03-4021

irrelevant if they are inconsistent with the complaint).

Additionally, because the settlement statement appended

to the complaint confirms that Lakeshore charged the $450

fee in exchange for undertaking a title search, we need not

consider the plaintiffs’ new position. See Ogden Martin

Systems of Indianapolis, Inc. v. Whiting Corp., 179 F.3d

523, 529 (7th Cir. 1999) (stating that the written instrument annexed to a pleading controls when a plaintiff presents an inconsistent allegation). 

Confining our analysis to the allegations in the pleadings,

it is our conclusion that the plaintiffs have failed to state a

claim under TILA. Even if Clearwater passed a portion of

the allegedly overpriced title insurance and title endorsements fees to The Loan Arranger, the understatement of

the finance fee is too insignificant to entitle the Guises to

rescission of their loan under 15 U.S.C. § 1635. Clearwater

collected $1145 from the plaintiffs. According to the complaint, $1145 is “double a reasonable charge,” as it is

“nearly twice the amount ($601) quoted by Chicago Title . . .

for the same coverage.” The complaint does not insinuate

that Clearwater failed to furnish title insurance and title

endorsements in exchange for the $1145 paid. Therefore,

the basis of the plaintiffs’ claim is that Clearwater charged

fees that exceeded the market rate by $544, and that this

$544 was a hidden financing fee. Because the alleged overcharge of $544 is well within the permitted margin of error

of $900 under § 1605(f) and 12 C.F.R. § 226.23(g) for a loan

of $180,000, the Guises’ claim is not cognizable under TILA.

The plaintiffs urge that TILA and Regulation Z require a

different calculation. In their view, if any portion of the title

insurance and endorsement fee was unreasonable or not

bona fide, then the entire $1145 paid to Clearwater qualifies as an undisclosed broker’s fee, notwithstanding the

fact that the Guises received title insurance in exchange.

They maintain that Regulation Z compels this result.

Regulation Z excludes title insurance fees from the calcula-
No. 03-4021 7

tion of the finance charge only “if the fees are bona fide and

reasonable in amount,” 12 C.F.R. § 226.4(c)(7)(i), in contrast

to excluding those fees “to the extent that” the fees are bona

fide and reasonable in amount. Because the plain language

of Regulation Z does not address fees charged for legitimate

title insurance that are above market rates, the plaintiffs

read the regulation to equate merely overpriced title

insurance fees with fees charged for title insurance when no

title insurance is actually provided in return. Under their

theory, because the entire $1145 fee charged by Clearwater

is allegedly not reasonable, and because $1145 is greater

than the tolerated margin of error for a loan of $180,000, see

§ 1605(f) and 12 C.F.R. § 226.23(g), the plaintiffs are

entitled to rescission.

This argument is problematic for at least two reasons. First,

the Guises’ suggested reading of 12 C.F.R. § 226.4(c)(7)(i)

would create tension with the plain language of § 1605(e)(1),

the section of TILA that the regulation seeks to implement.

Section § 1605(e)(1) expressly excludes title insurance fees

from computation of finance charges. To deny Clearwater

credit for the portion of the $1145 that represents a reasonable fee for the title insurance and endorsements it provided would render the § 1605(e)(1) exemption meaningless

and would subject lenders to liability beyond TILA’s sanction. Second, the Guises’ approach artificially inflates the

alleged finance charge of $544 by lumping it with the

allegedly reasonable fee of $601 charged for the title insurance received. An allegedly partial overcharge does not

convert the entire title insurance transaction into a finance

charge, it only demonstrates that some amount of the fee

was not eligible from exclusion from the finance charge

computation.

Next, the plaintiffs argue that the district court had no

factual basis to conclude on the pleadings that a portion of

the title insurance fee was reasonable or bona fide. The
8 No. 03-4021

plaintiffs argue that only a jury could determine if the

charges were bona fide as a matter of law. We disagree. The

plaintiffs did not allege in their complaint or proposed

amended complaint that they did not receive title insurance

and endorsements from Clearwater, nor did the complaint

allege any facts to give rise to the inference that Clearwater

failed to perform those services. The district court had no

reason to conclude that the transaction was anything but

bona fide. See Brannam v. Huntington Mortgage Co., 287

F.3d 601, 606 (6th Cir. 2002) (stating that a charge is bona

fide if the “services for which the fees are imposed are

performed”). The plaintiffs also argue that the district court

erred in finding that $601 would have been a reasonable fee

for Clearwater to charge for furnishing title insurance and

endorsements. However, their complaint cites the $601 fee

quoted by Chicago Title as a benchmark for the prevailing

market rate for those services and describes the $1145

charge as “double a reasonable charge” in comparison to the

Chicago Title quotation. The district court was correct to

rely on the plaintiffs’ repeated assertions. “Judicial admissions are concessions in the pleadings that bind the party

making them and that withdraw a fact from contention.”

Taylor v. Monsanto Co., 150 F.3d 806, 809 (7th Cir. 1998).

We now turn to the plaintiffs’ final argument. The

plaintiffs maintain that the district court erred in denying

them leave to amend their complaint. Federal Rule of Civil

Procedure 15 states that leave to amend “shall be freely

given when justice so requires.” Fed. R. Civ. P. 15. However,

under Rule 15, a district court may deny leave to amend on

the grounds of undue delay, bad faith, dilatory motive,

prejudice, or futility. Indiana Funeral Directors Ins. Trust v.

Trustmark Ins. Corp., 347 F.3d 652, 655 (7th Cir. 2003).

The district court’s decision to grant or deny a motion for

leave to file an amended pleading is “a matter purely within

the sound discretion of the district court.” J.D. Marshall

Int’l, Inc. v. Redstart, Inc., 935 F.2d 815, 819 (7th Cir.
No. 03-4021 9

1991). In this case, the district court concluded that the

proposed amended complaint failed to cure the deficiencies

of the original complaint.

The proposed amended complaint alleges that, had the

Guises sought a quote for title insurance and endorsements in

connection with their mortgage refinancing from Chicago

Title Insurance Company, Stewart Title Company, or First

American Title Company, they would have been quoted

amounts ranging from $568 to $761. The plaintiffs did not

seek to withdraw their prior allegation that Clearwater had

provided them with title insurance and endorsements for

$1145. None of the allegations in the proposed amended

complaint would entitle the plaintiffs to rescission of their

loan, as the $1145 charged by Clearwater is still within the

allowable tolerance under TILA even if the $568 fee was

taken as the reasonable market rate for the services

provided. The district court did not abuse its discretion in

denying leave to amend on this basis. 

III. Conclusion

For the reasons stated herein, we AFFIRM the decision of

the district court. 
10 No. 03-4021

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—8-4-04