and violation of the Equal Credit Opportunity Act, 15 U.S.C. § 1691(a) (“ECOA”).
Defendants move to dismiss the entire Complaint.
LEGAL STANDARD

The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal
sufficiency of a complaint, not to decide the merits of the case. Gibson v. City of
Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). A complaint should not be dismissed
for failure to state a claim “unless it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him to relief.” Conley v.
Gibson, 355 U.S. 41, 45-46 (1957). A complaint need only specify “the bare minimum
facts necessary to put the defendant on notice of the claim so that he can file an
answer.” Higgs v. Carver, 286 F.3d 437, 439 (7th Cir. 2002) (citing Beanstalk Group,
Inc. v. AM General Corp., 283 F.3d 856, 863 (7th Cir, 2002)). With these principles
in mind, we now address the motion before us.

DISCUSSION

L Truth in Lending Act

Ms. Wojak’s first cause of action is for violation of TILA. HES moves to
dismiss the TILA claim as not applying to the underlying facts because (1) the

arrangement between HES and Ms, Wojak was not a loan secured by a mortgage and

(2) HES is not a creditor.



Rattner and Weiss further move to dismiss the Consumer Fraud Act claim as to
them on the basis that since there is a corporate defendant, they cannot be individually
liable. We disagree. Ms. Wojak is not trying to hold Rattner and Weiss liable for
HES’ actions (i.e. by piercing HES’s corporate veil). Ms. Wojak seeks to hold Rattner
and Weiss liable for their own actions, “Section 10(a) of the Consumer Fraud Act
states that those damaged by violations of the Act may sue ‘any person’ who violates
the Act.” Garcia v. Overland Bond & Inv. Co., 668 N.E.2d 199, 207 (Ill. App. Ct.
1996) (reversing trial court’s dismissal of Consumer Fraud Act claim as to general
manager of co-defendant company). Furthermore, Section 1(c) of the Consumer Fraud
Act defines the term ‘person’ to include, among other things, any employee, officer,
or stockholder. 815 ILCS 505/1(c); see also Garcia, 688 N.E.2d at 207 (finding that
general manager of co-defendant company can be individually liable after noting that
Section 1(c) of the Consumer Fraud Act defines person to include ‘employees’). The
Consumer Fraud Act authorizes the claims against Rattner and Weiss as officers and
stockholders of HES. Moreover, Ms. Wojak’s allegations of Rattner and Weiss are
legally sufficient.

TI. Hlinois Interest Act
Ms. Wojak’s third count asserts a state law cause of action under the Illinois

Interest Act. The Interest Act specifically states: “Tt is lawful to charge, contract for,

-9-



warranty deed was really a constructive mortgage. For the same reasons, there is a set
of circumstances under which Ms. Wojak could prove that HES is a creditor.
WJ. Consumer Fraud Act

Ms. Wojak’s second count asserts a state law cause of action under the Tllinois
Consumer Fraud Act. The statute forbids:

[u]nfair methods of competition and unfair or deceptive acts or practices,

including but not limited to the use or employment of any deception,

fraud, false pretense, false promise, misrepresentation or the concealment,

suppression or omission of any material fact, with intent that others rely

upon the concealment, suppression or omission of such material fact, or

the use or employment of any practice described [815 Ill. Comp. Stat.

§ 510/2] in the conduct of any trade or commerce... ..
815 ILCS 505/2. To establish liability under the Consumer Fraud Act, a “plaintiff must
show ‘(1) a deceptive act or practice; (2) an intent by the defendant that the plaintiff
rely on the deception; and (3) that the deception occurred in the course of conduct
involving a trade or commerce.’” Thacker v. Menard, Inc., 105 F.3d 382, 386 (7th Cir.
1997) (quoting Perona v. Volkswagen of America, Inc., 658 N.E.2d 1349, 1352 (Ill.
App. Ct. 1995)). Additionally, the pleading “with particularity” requirement of Rule

9(b) of the Federal Rules of Civil Procedure applies to actions under the Consumer

Fraud Act. See Ho-Chunk Nation v. J.C. Penney Co., Inc., 1999 WL 495899 (N.D. TL.

1999).



HES maintains that the Contract provided for transfer of ownership with an
option to repurchase, which is different than a loan secured by a mortgage. In
determining whether or not this arrangement was really a mortgage, we look to Illinois
state law. See Redic v. Watts Realty Co., 762 F.2d 1181, 115-86 (4th Cir. 1985)
(applying North Carolina law “for determining whether a conveyance with an option
to repurchase represents a true sale or merely a loan with a security interest” for TILA
purposes). An Illinois statute is directly on point:

905/5. Constructive mortgage

§ 5, Every deed conveying real estate, which shall appear to have been

intended only as a security in the nature of a mortgage, though it be an

absolute conveyance in terms, shall be considered as a mortgage.
765 TLCS 905/5. Thus, the warranty deed Ms. Wojak conveyed to HES is capable of
being a mortgage for TILA purposes. Whether or not it will be treated as a mortgage
depends on several factors such as the existence of an indebtedness, the circumstances
surrounding the transaction, the disparity of the situations of the parties, the lack of
legal assistance, the unusual type of sale, the inadequacy of consideration, the way the
consideration was paid, the retention of the written evidence of the debt, an agreement
to repurchase, and the continued exercise of ownership privileges and responsibilities
by the seller, See McGill v. Biggs, 434 N.E.2d 772, 774 (Ill. App. Ct. 1982) (applying

predecessor Illinois statute containing the exact language of 765 ILCS 905/5). Clearly,

there is a set of circumstances possible under which Ms, Wojak could prove that the

-5-



months to make the required payment in order to exercise the option.” Defendants’
Memorandum at 5 (emphasis added).

While failing to acknowledge the true extent of the allegations, Defendants argue
that Ms. Wojak has nothing more than a breach of contract claim. We disagree. Ms.
Wojak has argued three statutory violations under TILA, which allegedly deceived her
into forming and not rescinding the Contract in the first place. The allegations also
demonstrate Defendants’ exploitation of Ms. Wojak’s predicament. With respect to
the oral agreement to extend the Contract, Ms. Wojak does not allege simply a breach
of that oral agreement. She alleges that Defendants tricked her into triggering the ten
percent penalty in the original Contract at a cost to her of approximately $20,000.

Defendants cite Central Diversey M.R.I. Center, Inc. v. Medical Management
Sciences, Inc., (N.D. Il. 1996), as requiring Ms. Wojak to demonstrate a “consumer
nexus” between the alleged acts and consumer protection concerns. Defendants’
Memorandum at 5 (citing Central Diversey, 952 F. Supp. 575). The “consumer nexus”
requirement is an exception that is entirely irrelevant to the case before us. See
Lefebvre Intergraphics, Inc. v. Sanden Machine Limited, 946 F. Supp. 1358, 1368
(N.D. Ill, 1996) (explaining that the consumer nexus requirement is only applicable to
Consumer Fraud Act suits brought “by a business that is not a consumer of the other

business’s products.”), Thus, Ms. Wojak need not plead or prove a consumer nexus.

-8-



Mimite Order Porm (0887)

United States District Court, Northern District of Illinois

; 5 Sitting Judge if Other

vine Magistrate Judge Charles P. Kocoras than Acsigned Judge

CASE NUMBER 02 C 1008 DATE 10/10/2002
CASE Wojak vs. Home Equity Savers, Ltd et al
TITLE

[ln the following box (a) indicate the party filing the motion, .g., plaintiff; defendant, 3rd party plaintiff, and (b) state briefly the mature
of the motion being proscnted.]

MOTION:

DOCKET ENTRY:

(ly Oo Filed motion of [ use listing in “Motion” box above.)

(2) oO Brief in support of motion due

(3) Oo Answer brief to motion due__- Reply to answer briefdue____.

(4) Oo Ruling/Hearingon set for__— at.

(5) ii Status hearing set for 10/16/2002 at 9:30 A.M..

(6) a Pretrial conference[held/continued to] [set for/re-set for]on set for at
{7) im] Trial{set for/re-set for] on _____at

(8) Oo |Bench/Jury trial] [Hearing] held/continued to____at

(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

OFRCP4Gn) C)Local Rule 41.1 OFRCP4k(a(1) 0 FRCP41{a)(2).

(10) Ml (Other docket entry) ENTER MEMORANDUM OPINION: We grant in part defendant’s motion
(Doc 24-1) to dismiss and deny it in part, Count III is dismissed as to all defendants. Count V is
dismissed as to Rattner and Weiss.

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

No notices required, advised in open court.
3

No notices required,

numberof notices
Y | Notices mailed hy judge's stuff. cr 11 one’
Notified counsel by telephone. 0 date docketed :

Dosketing to mail notices

Mail AQ 450 form,

Copy to iRueermagistyte judge,

loniurzoa

date mailed notice
courtroom ‘

scT depuly's

initials

Dute/time received in 7
central Clerk's Office esl cpt okie



in the wrongdoing.” Id. Since Ms. Wojak has alleged active participation by Rattner
and Weiss in slandering her title, they cannot be dismissed from the cause of action.
V. — Equal Credit Opportunity Act

HES, Rattner, and Weiss move to dismiss Ms. Wojak’s ECOA claim on the
same grounds as HES sought to dismiss the TILA claim. We deny the motion with
respect to ECOA for the same reasons as we denied the motion with respect to TILA.

Rattner and Weiss further move to dismiss the ECOA claim as to them on the
basis that since there is a corporate defendant, they cannot be individually liable.
Count V of the Complaint alleges that “HES, Rattner and Weiss intentionally and

”

maliciously filed a baseless counterclaim . . ..” Complaint § 53. Because the
counterclaim was actually only filed by HES, we dismiss Count V as to Rattner and
Weiss.
CONCLUSION
Based on the foregoing analysis, we grant the motion to dismiss in part and deny
it in part. Count III is dismissed as to all Defendants. Count V is dismissed as to
Rattner and Weiss.

CRQe f loco

Charles P, Kocoras
Chief Judge
United States District Court

Dated: _October 10, 2002

-ll-



and receive any rate or amount of interest or compensation with respect to the
following transactions: . . . (1) Loans secured by a mortgage on real estate.” 815 ILCS
205/4(1)(1). Either the arrangement between Ms. Wojak and HES was a sale of her
home coupled with a right to repurchase it, or the arrangement was a loan secured by
a mortgage on real estate. Either way, there cannot be any liability under the Interest
Act under the exclusion cited above.

IV. Slander of Title

Ms. Wojak’s fourth count asserts a slander of title cause of action against
Defendants, Defendants move to dismiss the count on the basis that Ms. Wojak has no
standing to suc because she has no ownership interest in the home. We have already
stated that, under Tllinois law, the purported transfer of ownership to HES may be
deemed a constructive mortgage. Thus, Ms. Wojak does have standing to sue for
slander of title.

Rattner and Weiss further move to dismiss the slander of title claim as to them
on the basis that since there is a corporate defendant, they cannot be individually liable.
In Illinois, the general rule is that “corporate employees are not vicariously liable for
tortious acts of the corporation in which they do not participate.” Garcia, 668 N.E.2d

at 206, A corporate employee, however, can be held liable “ifhe actively participates

-10-



In their motion to dismiss Ms. Wojak’s Consumer Fraud Act claim, Defendants
do not argue that Ms. Wojak fails to comply with Rule 9(b)’s raised pleading
requirements. Defendants move to dismiss the claim on the grounds that it alleges facts
actionable only under a breach of contract theory. Defendants argue that Ms, Wojak
is “attempting to tum a garden-variety breach of contract claim into a Consumer Fraud
Act claim.” Defendants’ Memorandum at 5. In support of this argument, however,
Defendants address only one of the four alleged acts and omissions, which Ms. Wojak
claims are actionable under the Consumer Fraud Act, and rely on case law that is not
applicable to the circumstances.

Ms. Wojak complains of four acts and omissions that allegedly violate the
Consumer Fraud Act: (1) “Defendants induced plaintiff to enter into a credit obligation
without complying with TILA”; (2) “Defendants charged plaintiff an unconscionable
rate of interest without disclosing what it was”; (3) “Defendants concealed from
plaintiff her right to rescind the contract”; and (4) “HES failed to disclose to plaintiff,
at the time it entered into the extension agreement, that it intended to demand payment
of the 10%” of the market value of the house. Complaint ff] 33 and 37. Despite these

four allegations, Defendants state that the Consumer Fraud Act claim is “based on the

single allegation that [HES] orally agreed to allow [Ms. Wojak] an additional two



home to a third party and pocket ten percent of the proceeds (approximately $20,000)
for itself. Complaint at Ex. B, Contract f[ 7(a).

Ms. Wojak paid all the monthly installments but was unable to tender the
$11,242.45 and Expenses required to repurchase her home before her right to
repurchase expired under the terms of the written Contract. Just before expiration of
the twenty-four months, HES allegedly agreed to permit Ms. Wojak to repurchase her
home two months later if she made two additional $300 monthly payments in the
meantime. Ms, Wojak paid the two additional monthly payments and then repaid the
$11,242.45 and Expenses to repurchase her home. At or around that time, ILES
demanded, in addition to the $11,242.45 and Expenses, about $20,000 representing the
amount HES stood to gain if it sold the home to a third party under paragraphs 6 and
7 of the Contract.

On February 11, 2002, Ms. Wojak filed this action against HES and HES owners
and officers, Mr. Rattner and Ms. Weiss. The Complaint asserts five causes of action:
(1) violation of the Truth in Lending Act, 15 U.S.C. 1601 et seg. (“TILA”); (2)
violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815

ILCS 505/2 (the “Consumer Fraud Act”); (3) violation of the Illinois Interest Act, 815

ILCS 205/4.1a (the “Interest Act”); (4) slander of title under Illinois tort law; and (5)



favorable to Plaintiff Katherine Wojak. See Bontkowski v. First Nat'l Bank of Cicero,
998 F.2d 459, 461 (7th Cir. 1993).

Ms. Wojak lives in a home at 3149 Belwood Lane in Glenview, Illinois. In late
1999, she was in dire need of $11,242.45 to redeem her home, which had been sold for
taxes. Her home was worth about $200,000. HES is a corporation that solicits
business from people in danger of losing their homes. HES initiated contact with Ms.
Wojak in a letter (the Letter”), which described HES’s business in part as follows:

Home Equity Savers, Ltd. have been assisting homeowners in saving

their properties formore than seven years, regardless of their credit status.

We have many creative financing options available and we customize to

fit your needs. We have helped hundreds of people in your position, and

we can help you too.

Complaint at Ex. A, Letter.

On November 13, 1999, HES and Ms. Wojak executed a contract (the
“Contract”). Pursuant to the Contract, Ms. Wojak deeded her home to HES and
became obligated to make $300 monthly payments until she repurchased her home
from HES. Complaint at Ex. B, Contract 42, 3, and 4a. In return, HES paid off the
$11,242.45 in sold taxes and granted her the right to repurchase her home within
twenty-four months for $11,242.45 (plus HES’s out of ‘pocket expenses (“Expenses”),

which are unimportant to this case). Jd 7 4(i). The Contract further stated that if she

did not repurchase her home within the twenty-four month window, HES could sell the

-2-


UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION DOCKETED

OCT 1 1 2002
KATHERINE WOJAK, )
Plaintiff, }

vs. } 02 C 1008
HOME EQUITY SAVERS, LTD.; MITCHELL }
RATINER; and MARIANN WEISS, )
Defendants. }
MEMORANDUM OPINION

MEMUOBRANDY YS

CHARLES P. KOCORAS, Chief District Judge:

This matter comes before the court on a motion by Defendants Home Equity
Savers, Ltd. (“HES”), Mitchell Rattner, and Mariann Weiss to dismiss the Amended
Complaint (“Complaint”) in its entirety pursuant to Rule 12(b)(6) of the Federal Rules
of Civil Procedure. For the reasons set forth below we grant the motion in part and
deny it in part.

BACKGROUND
Because this is a motion to dismiss, we accept al] well pleaded facts and

allegations in the Complaint as true and draw all reasonable inferences in a light most

fo