plaintiff can prove no sct of facts entitling him to relief. Venture Assocs. Corp. v. Zenith Data
Sys. Corp., 987 F.2d 429, 432 (7th Cir. 1993).
ANALYSIS

The Estute alleges that the fees charged to structure the mortgage, as well as the
mortgage itself, were illegal and unconscionable. The Estate secks relief under the Real Estate
Settlement Procedures Act (“RESPA”), 12 U.S.C. §§ 2601-2617, the Truth in Lending Act
(“TILA”), Pub. L. No. 90-321, 82 Stat. 146 (codified in scattered sections of 15 U.S.C.), the
Home Ownership and Equity Protection Act (“HOEPA”), Pub. L. 103-325, 108 Stat. 2190
(codified in scattered sections of 15 U.S.C.), the Fair Housing Act (“FHA”), 42 U.S.C. §§ 3601-
3619, the Equal Credit Opportunity Act (“EOCA”), 15 U.S.C. §§ 1691-1691 and section 1981
of the Civil Rights Act, 42 U.S.C, § 1981. The complaint also includes state-law claims of
breach of fiduciary duty, inducing breach of fiduciary duty, unjust enrichment and violations of
the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 Ill, Comp.
Stat. 505/1-505/12.

Defendants assert that the Estate’s claims are barred by the applicable statutes of
limitations. Plaintiff's RESPA, TILA and HOEPA claims have one-year statutes of limitations.
12 U.S.C. § 2614; 15 ULS.C. § 1640(e). Plaintiff's ECOA, FHA, and section 1981 claims have
two-year statutes of limitations, 15 U.S.C. § 1691e(f); 42 U.S.C. § 3613(a)(1 (A); Smith v. City
of Chi. Heights, 951 F.2d 834, 839 (7th Cir. 1992) (stating thal the statute of limitations for
section 1981 claims is the two-ycar statute of limitations for personal injuries in Illinois).
Plaintiff's {CFA claim has a three-year statute of limitations. 815 Tl]. Comp. Stat. 505/10a(e),

Defendants assert that all of these statutes of limitations started to run on October 2, 1998, the


claims—need not be addressed as we have already found that Plaintiff’s claims are not barred by
the applicable statutes of limitations.
CONCLUSION
For the rcasons stated above, Defendants Meritage Mortgage Corporation and MDR
Mortgage Corporation’s motion to dismiss is denied in its entirety. (R. 12-1.) This case is

hereby set for a status hearing on December 9, 2003 at 9:45 am.

ENTERED: LE. by

Judge Ruben Castillo
United States District Court

Dated: November 18, 2003


Henderson (or her Estate) discovered the resulting injury. Plaintiff alleges that because
Henderson suffered from advanced Alzhcimer’s disease when the loan was consummated, she
lacked the mental capacity to discover her injury, and therefore invokes the federal discovery rule
to toll the statutes of limitations. Defendants contend that “mental illness, even where rising to
the level of insanity, [will not] delay the statute of limitations from running.” Fbrahimi v. E.F-
Lluiton & Co., Inc., 852 F.2d 516, 521 (10th Cir. 1988), The Tenth Circuit in Fbrahimi relied in
part on a passage in Crawford v. United States, 796 F.2d 924, 927 (7th Cir. 1986), stating that
“(iJ the running of the statute of limitations depended on what the particular plaintiff actually
knew given his mental or other incapacitics, the discovery rule would swallow most of the
provisions related to tolling, at least for disabilitics that affected cognition and were in existence
at the time of the accident.” However, the next sentence in Crawford states that the Court did
not determine “when if cver mental incapacity tolls the administrative statute of limitations.”
Crawford, 796 I'.2d at 927.

The Seventh Circuit later addressed this very question in Barnhart v. United States, 884
F.2d 295 (7th Cir. 1989)? Although the court once again did not affirmatively determine when
mental disorders tol] statute of limitations, it provided significant guidance on how the question
should be answered. In Barnhart, the Seventh Circuit considered whether “an adult with no legal
guardian” could rely on the discovery rule to toll the statute of limitations if the adult’s mental

state “rendered him incapable of ‘discovering’ the cause of his injury.” Barnhart, 884 F.2d at

? While both Crawford and Barnhart addressed the application of the discovery nulc to
the administrative statute of limitations under the Federal Tort Claims Act, the effect of mental
disorders on the application of the discovery rule applies generally to all statutes of limitations.
See, e.g., Brown v. City of Chi., No, 00-C-3514, 2001 WL 1002484, at *4 (N.D. Ill. Aug. 30,
2001); Dallman v. Satura of Chi., No. 95-C-395, 1996 WL 41240, at *2 (N.D. I. Jan. 31, 1996).

6



~

day that Henderson entered into the mortgage agreement.’ See Thomas v. Ocwen Fed. Bank FSB,
No. 01-C-4249, 2002 WL 99737, at *2 (N.D. Ill. Jan. 25, 2002) (stating that the closing day
represents “the day upon which claims under RESPA and disclosure claims under TILA typically
accruc”).

The Estate responds that the statutes of limitations have not expired because, under the
federal discovery rule, the claims did not accrue on the loan’s closing date. The Estate also
argues that, even if the statutes of limitations have expired, this Court should equitably toll them.
The federal discovery rule, on the one hand, provides that a claim does not accrue, and the statute
of limitations does not begin to run, until (1) a “party performs the alleged unlawful act” and (2)
“the party bringing a claim discovers an injury resulting from this unlawful act.” Doe v. Paukstat
863 F. Supp. 884, 889 (E.D. Wis. 1994) (citing Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1139
(7th Cir. 1992)). The equitable tolling doctrine, on the other hand, “permits a plaintiff to avoid
the bar of the statute of limitations if despite all due diligence he is unable to obtain vital
information bearing on the existence of his claim.” Cada v. Baxter Healthcare Corp., 920 F.2d
446, 451 (7th Cir. 1990). Under the equitable tolling doctrine, “the plaintiff is assumed to know
that he has been injured, so that the statute of limitations has begun to run; but he cannot obtain
information necessary to decide whether the injury is due to wrongdoing and, if so, wrongdoing
by the defendant.” fd.

Turning to the question of when Plaintiff's claims accrucd, it is undisputed that the

alleged unlawful act occurred when the loan was consummated, but the parties dispute when

‘ Defendants also assert that Plaintiffs common-law claims are barred by the federal
statutes of limitations because they duplicate the harms addressed in the federal claims.

5



We must now determine when the Estate discovered Henderson’s claims. ‘The complaint
is silent about who was responsible for administering the Estate prior to Johnson’s appointment
as independent administrator. Drawing all reasonable inferences in favor of the Estate, we
assume that the Estate discovered Lfenderson’s claims when Johnson discovered them. There are
several dates when Johnson could have discovered Henderson’s claims: when the loan closed
(October 2, 1998); when construction started on Henderson’s home (early 1999); when Johnson
learned about the home-equity loan (April 9, 2002); or when Johnson received the loan
documents (August 2002). Again, viewing the facts and al] reasonable inferences in the light
most favorable to Plaintiff, we conclude, at this stage of the procecdings, that Johnson was
unaware of [1enderson’s injury until April 9, 2002.7 Thus, we conclude for the purposes of the
motion to dismiss that the statutes of limitations did not begin to accrue until that date. The
present action was [iled on February 28, 2003, well within all applicable statutes of limitations,
so Plaintiff's claims are not time-barred. Of course, discovery in this case may reveal thal the
Estate discovered Henderson’s injury prior to April 9, 2002, in which case Defendants are free to
renew this argument by filing an appropriate motion for summary judgment.

The remaining issues before this Court—whether the statute of limitations should be
equitably tolled, whether the shorter federal statutes of limitations should apply to Plaintiff's

state-law claims and whether this Court has subject-matter jurisdiction over Plaintiff's state-law

} Alternatively, if there was no administrator appointed for Henderson’s Estate, the claims
may have accrued when Johnson was appointed independent administrator. See Clifford v.
United States, 738 F.2d 977, 980 (8th Cir. 1984) (holding that the statute of limitations does not
start to run until an individual with knowledge of the injury also has the legal right or duty to
suc).



Minute Ceder Foxe (0897)

United States District Court, Northern District of Illinois

Name of Assigned Judge Ruben CastiJlo Sittiog Judge if Other
or Magistrate Judge than Assigned Judge
CASE NUMBER 03 C 1538 DATE 11/18/2003
CASE Josephine Henderson vs. Meritage Mortgage Corp., et al.
TITLE

[ln the following box (a) indicate the party filing the motion, e.g,, plaintiff, defendant, 3rd parry plaintiff, and (h) state briefly the natun:
of the motion being presented. |

MOTION:

DOCKET ENTRY:

(ay) a Filed motion of [ usc listing in “Motion” box above.]

(2) Brief in support of motion due

Q) Answer brief to motion due, ___. Reply to answer briefdue___
(4) Ruling/Hearingon_ set for at.

Status hearing set for 12/9/03 at 9:45 a.m.

a
oo0damgoada

(6) Pretrial conference[held/continued to] [set for/re-set for] on set for at :
(7) Trial[set for/re-set for] on at _
(8) [Bench/Jury trial) [Heating] held/continued to al.
(9) This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) (Local Rule 41.1 OPRCP41(a)(1) OO FRCPAI(a\(2),
(0) [Other docket entry] © Enter Memorandum Opinion and Order, Defendants’ motion to dismiss is
denied.

di) [For further detail see order attached to the original minute order.]

No notices required, advised in open court, Doeuinient

Number

No notives required,
lo notives requir umber nt notices

one
NOV. 3 0.2005
Ww

locketing doety intial

Notices mailed by jucge’s stalf.

Notified counsel by telephone,

wv | Docketing to mail notices.

Mail AO 450 form,

Copy to judge/magistrate judge.

ate mail wntice

courtroom
RO deputy’s
initials

Date/time received in
contral Clerk's Office mating deputy nile



299, The court ultimately concluded that the plaintiffs mental disorder did not preclude him
from discovering his injury because he had filed a timely action against a different defendant and
because his mental disorder only eroded or impaired his “desire to proceed with a recognized
cause of action,” Jd. at 299-300. Finally, the court stated that application of the discovery rule in
this context should “focus on awareness or ability to comprehend.” /d. at 299. The court noted
that it was not “foreclos[ing] the possibility that a mental disability preventing a plaintiff from
discovering or understanding the cause of an injury (or rendcring him or her entirely incapable of
bringing a legal action) might toll the statute of limitations in similar cases.” Jd. at 299-300; see
also Miller v. Runyon, 77 F.3d 189, 191 (7th Cir. 1996) (“[T]he traditional rule that mental
illness tolls a statute of limitations [applies] only if the illness in fact prevents the sufferer from
managing his affairs and thus from understanding his legal rights and acting upon them.”)
(emphasis in original)

Plaintiff alleges that Henderson could not read, do simple arithmetic, consistently
recognize her own son, feed or dress herself, remember the date or use the phone to make calls.
Viewing these facts and all reasonable inferences in the light most favorable to Plaintiff, we
conclude that Henderson lacked the ability to comprchend her injury and, due to advanced
Alzheimer’s Disease, to act upon her legal rights. By focusing on Henderson’s “awareness or
ability to comprehend,” as instructed by Barnhart, rather than on what Henderson actually knew,
as cautioned against in Crawford, we conclude that Plaintiffs claim accrucd, at the earliest, on

July 31, 2001, when Henderson died and her claims passed to her Estate. Once her claims passed

to her Estate, Henderson’s mental disorder was no longer relevant.



Mortgage Group, Inc., a loan servicing group to whom Meritage transferred the loan, filed a
foreclosure complaint against Henderson. (d., Compl. {J 30-31.) Johnson contends that neither
he nor Henderson received notice of the foreclosure until Johnson was served with eviction
papers on April 9, 2002, almost one year after Henderson’s death. (/d. 4] 32.) Johnson further
asserts that he had no knowledge of the home-equity loan until he received notice of the eviction
(Ud., Ex. C, Johnson Aff. 4 19.) In August 2002 Johnson searched through his mother’s things
and discovered materials concerning the home-equity loan. (/d., Comp. §j 34.) Johnson then
enlisted the help of an attomey to obtain copies of the closing papers from Meritage. (/d.)

Johnson responded to the foreclosure proceedings in the Circuit Court of Cook County by
filing a countersuit alleging that neither he nor his mother had notice of the mortgage, foreclosure
or sale, (/d., Compl. 33.) On November 21, 2002, his claim was dismissed without prejudice
because it was brought by the next of kin rather than by the Estate. (/d. 35.) Johnson then
applied to become the independent administrator of the Estate, which was granted on January 9,
2003, (7d) On February 28, 2003, he filed the present complaint.

LEGAL STANDARDS

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) tests the sulficiency
of the complaint, not the merits of the suit. Gibson vy. City of Chi., 910 F.2d 1510, 1520 (7th Cir.
1990). This Court views all facts alleged in the complaint, as well as any inferences reasonably
drawn from those facts, in the light most favorable to the plaintiff. Autry v. Northwest Premium
Servs., Inc., 144 F.3d 1037, 1039 (7th Cir. 1998). This Court may also review any documents
referred to in the complaint. See Albany Bank & Trust Co. v. Exxon Mobil Corp., 310 F.3d 969,

971 (7th Cir. 2002). We will grant a motion to dismiss only if it appears beyond doubt that the



death certificate included dementia. (/d., Ex. A, Certificate of Death.) Her son, Frank Johnson,
the independent administrator of the Estate, brings this action on her behalf.

From at least September 1998 until her death in 2001, Henderson “suffered from
advanced Alzheimer’s diseasc, dementia and other mental disorders.” (Jd., Compl. J 2.) During
this time, Johnson lived with Henderson and observed her on a daily basis. (/d., Ex. C, Johnson
Aff. 6.) ln his sworn affidavit, Johnson noted that by 1998, Henderson could not read, do
simple arithmetic, consistently recognize her own son, feed or dress herself, remember the date
or use the phone to make calls, (/d., Ex. C, Johnson Aff. 4 7-8, 11-13.) Johnson had to wam
Henderson about interacting with sales people. (/d., Ex. C, Johnson Aff. § 13.) He also noted
that Henderson “was under the delusion that she had no bills, including water, gas or phone bills,
and was incapable of paying them.” (/d., Ex. C, Johnson Aff. 4 10.) “She put all correspondence
and invoices, unopened, in a dining room drawer.” (/d.)

MDR is a mortgage brokerage. Sometime in September 1998, an MDR agent approached

Henderson and encouraged her to obtain a home-equily loan to finance home improvements.
(Jd., Compl. ] 6.) On October 2, 1998, MDR sccured through Meritage, a mortgage lender, a
$40,200 home-equity loan for Henderson. (Jd. 4] 8.) Henderson, nearly 83 years old, agreed to
make 330 monthly payments of $434.96. (/d. 2, 8.) At the time of the loan, Henderson owned
her home outright and she lived on a monthly income of $946 from Social Sceurity benefits and a
widow’s pension. (/d. {| 2, 6.) Thus, the loan’s payment schedule would consume 46% of her
monthly income until she was over 110 years old. (7d. J 8.)

The home improvements started sometime in 1998 or early 1999, but were never

completed, (/d., Ex. C, Johnson Aff. 417.) On September 23, 1999, Resource Bancshares



«

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION DOCKETED
Estate of JOSEPHINE HENDERSON, )
brought by Independent Administrator, )

Frank Johnson, )
)
Plaintiff, )
) No. 03 C 1538

ve y

) Judge Ruben Castillo
MERITAGE MORTGAGE CORP. )
and MDR MORTGAGE CORP., )
)
Defendants. )

MEMORANDUM OPINION AND ORDER
The Estate of Josephine Henderson (“the Estate”) filed suit against Meritage Morlgage
Corporation (“Meritage”) and MDR Mortgage Corporation (“MDR”) claiming that the fees
assessed for a home-equity loan madc to Henderson violated federal and state law, Presently
before this Court is Defendants’ motion to dismiss the complaint. (R. 12-1, Defs.’ Mot. to
Dismiss.) Defendants’ motion raises two arguments: (1) Plaintiff's complaint fails to state a
claim upon which relief can be granted because all claims are barred by the applicable statutes of
limitations; and (2) even if the state-law claims arc not barred, the Court lacks subject-matter
jurisdiction over them. For the reasons provided below, we deny Defendants’ motion to dismiss
in ils entirety.
RELEVANT FACTS

Josephine Henderson dicd intestate on July 31, 2001. (R. 1, Compl. {| 2.) Although

vascular disease ultimately caused Henderson's death, other significant conditions noted on her