Sklodowski v. Countrywide Home Loans, Inc.

Citation: Not availableDocket: 1-04-1809 Rel

Court: Appellate Court of Illinois; June 16, 2005; Illinois; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Robert L. Sklodowski initiated a class action lawsuit against Countrywide Home Loans, Inc. for breach of a mortgage note, breach of fiduciary duty, and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The trial court dismissed the claims related to fiduciary duty and consumer fraud, and later granted summary judgment on the breach of contract claim. Sklodowski contended that Countrywide breached the mortgage note by delaying escrow refunds for 14 days, which he argued was not a 'prompt' refund as stipulated in the mortgage agreement. He also claimed that this delay constituted consumer fraud and that Countrywide breached its fiduciary duty by failing to pay interest on the escrow funds during the 14-day waiting period. The mortgage, originally with Covenant Mortgage Corporation and later transferred to Countrywide, required the lender to refund any escrow funds upon full payment of the mortgage. Sklodowski received a payoff statement indicating an escrow balance and was informed of the 14-day processing policy for refunds. Ultimately, the court affirmed the dismissals and summary judgment in favor of Countrywide on all counts, including an additional claim of unjust enrichment for holding the escrow funds without interest.

Countrywide filed a motion to dismiss the amended complaint under section 2-615 of the Illinois Code of Civil Procedure, arguing that the complaint did not establish a cause of action for any of the four counts. The trial court partially granted the motion, dismissing counts II (breach of fiduciary duty), III (Consumer Fraud Act violation), and IV (unjust enrichment) with prejudice but denied it regarding count I (breach of contract). The plaintiff subsequently sought class certification and moved for summary judgment on the breach of contract count, asserting that Countrywide's 14-day policy for refunding escrow funds was not 'prompt' as required by the mortgage agreement and lacked justification for the delay. 

In support, the plaintiff provided a deposition from Lynne Hiskett, a Countrywide vice president, who confirmed the 14-day refund policy, noted that all checks were mailed on the 14th day after loan repayment, and stated that escrow funds were held in a non-interest-bearing account. The plaintiff, having sold his condominium, received his escrow refund check 20 days after the loan payoff due to it being sent to his former address first. Countrywide countered with a cross-motion for summary judgment, claiming compliance with the mortgage contract based on federal guidelines that require escrow funds to be returned 'promptly,' defined as within 30 days after payoff. The trial court denied the plaintiff’s motion and granted Countrywide’s, entering judgment in its favor on the breach of contract count.

The plaintiff appealed, arguing that the trial court erred in granting summary judgment to Countrywide. Summary judgment is appropriate where no genuine issue of material fact exists, and the moving party is entitled to judgment as a matter of law. The appeal raised a novel legal question: whether Countrywide's 14-day refund policy met the contract's requirement for prompt refunding. The court concluded that, based on the Fannie Mae mortgage agreement and the case facts, Countrywide's policy did comply with the contract.

The primary principle in contract interpretation is to ascertain the parties' intentions through the ordinary meaning of the contract language. In this context, the term "promptly" must be understood specifically within the mortgage industry. The plaintiff's cited cases, which do not pertain to the mortgage context, are deemed irrelevant. For instance, Amella v. United States addresses "forthwith" in an admiralty statute concerning negligence claims, while City of New York v. McAllister Brothers, Inc. similarly interprets "forthwith" in a different admiralty context. Both cases lack precedential value in interpreting "promptly" in Illinois mortgage law. Additionally, Dickerman v. Northern Trust Co. is also irrelevant, and Lithflux Mineral & Chemical Works v. W. H. F. Jordan, Jr. lacks binding authority as it predates 1935 and deals with "prompt shipment" in a shipping contract, which does not apply here. The court finds no support for the plaintiff's claim that Countrywide failed to "promptly refund" his escrow funds, particularly since Countrywide issued a refund check 14 days post-loan repayment. Countrywide supports its position with references to relevant authorities, including the Fannie Mae Servicing Guide for Single Family Residential Mortgages, which underlines the compliance of its 14-day refund policy with the applicable mortgage provisions.

Section VI, 105 of the Fannie Mae Servicing Guide mandates that escrow funds should be refunded to the mortgagor within 30 days of loan payoff. Although these guidelines are not legally binding, they are relevant for interpreting the terms of Fannie Mae mortgages, including the one in this case. The plaintiff did not contest these guidelines or provide compelling reasons against their application. Countrywide's practice of refunding escrow funds 14 days post-loan payoff aligns with the mortgage’s requirement for a "prompt" refund. This policy is supported by various state statutes that require refunds within 30 to 60 days, as well as court rulings that deemed 20 to 23 days as acceptable time frames for refunds. The plaintiff's arguments regarding Countrywide's ability to process refunds faster than 14 days are deemed irrelevant; thus, Countrywide did not breach its contract. Consequently, the trial court's denial of the plaintiff’s motion for summary judgment and its ruling in favor of Countrywide were correct. Additionally, the plaintiff's claim regarding a violation of the Consumer Fraud Act was dismissed, as he failed to present sufficient factual allegations to support his claim within Illinois's fact-pleading framework.

A motion under section 2-615 of the Code accepts all well-pled facts as true while ignoring unsupported legal and factual conclusions. The reviewing court must evaluate whether the complaint’s allegations, viewed favorably to the plaintiff, establish a valid cause of action. The standard of review is de novo. To plead a private cause of action under the Consumer Fraud Act, a plaintiff must allege: (1) a deceptive act by the defendant; (2) intent for the plaintiff to rely on this deception; (3) that the deception occurred during trade or commerce; (4) actual damages to the plaintiff; and (5) that these damages were proximately caused by the deception. Claims under the Consumer Fraud Act require specificity akin to common law fraud, and the complaint must detail the deceptive nature of the defendant's actions; failure to do so warrants dismissal.

In the case, the plaintiff alleged that Countrywide engaged in deceptive practices by not promptly returning funds after debt payment, causing financial loss. The breach of contract claim echoed these allegations, asserting that Countrywide violated the mortgage's terms by delaying refunds and thereby depriving the plaintiff of use and interest on his funds. However, these claims were fundamentally about a breach of contract, not consumer fraud. The court concluded that merely failing to fulfill a contractual obligation does not constitute a deceptive act under the Consumer Fraud Act, establishing that such claims do not suffice as a basis for consumer fraud. The court affirmed that the Consumer Fraud Act does not extend to every contract dispute, maintaining the distinction between breach of contract and a valid consumer fraud claim.

A breach-of-contract claim cannot support a claim under the Consumer Fraud Act, resulting in the plaintiff's failure to state a claim. The plaintiff contended that Countrywide's failure to earn interest on escrow funds after repaying a debt constituted an unfair deceptive act. However, this claim fails as the mortgage agreement explicitly states that Countrywide is not required to pay interest on such funds unless specified otherwise. The plaintiff did not provide evidence of a separate agreement or relevant Illinois law mandating interest payment. Furthermore, the plaintiff's claim of unfairness under the Consumer Fraud Act lacks sufficient factual support for any of the three criteria necessary to establish unfairness: public policy violation, immorality or unscrupulousness, or substantial injury to consumers. The trial court properly dismissed this claim.

Regarding the breach of fiduciary duty, to succeed, the plaintiff must demonstrate the existence of a fiduciary duty, a breach of that duty, and a causal link to the injury suffered. Even assuming a fiduciary relationship existed, the plaintiff failed to allege a breach, as the mortgage agreement explicitly stated that no interest on escrow funds was required. Consequently, the breach of fiduciary duty claim also fails. The trial court's dismissal of both counts was affirmed, and the plaintiff waived the right to appeal the dismissal of an unjust enrichment claim by not addressing it.