Porter v. Fairbanks

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

MARGARET M. PORTER, )

) Case Number: 01 C 9106

Plaintiff, )

) Judge John F. Grady

v. )

) Magistrate Judge Nan R. Nolan

FAIRBANKS CAPITAL CORP. et al., )

)

Defendants. )

PLAINTIFF’S MOTION TO SUPPLEMENT RECORD WITH RESPECT

TO MOTIONS TO DISMISS AND TO LIFT STAY OF DISCOVERY

Plaintiff respectfully requests leave to supplement the record on the motions to dismiss (one by each defendant) pending before the Court with (a) an “Interim Servicing Agreement” between defendant CitiFinancial and defendant Fairbanks (Appendix A) and (b) the full text of the “Asset Purchase Agreement” between defendant CitiFinancial and defendant Fairbanks (Appendix B), including particularly a “Power of Attorney” that follows numbered page 27 of Appendix B.

Plaintiff further requests that the Court lift the stay of discovery heretofore entered and permit plaintiff to conduct discovery with respect to the transfer of servicing between CitiFinancial and Fairbanks and which loans are classified by Fairbanks as “current”.

In support of this motion, plaintiff states:

i) Count XII of the second amended complaint alleges that between April 1, 2001 and April 15, 2001, Fairbanks and CitiFinancial entered into an agreement pursuant to which servicing rights on plaintiff’s loan and numerous other loans (“CitiFinancial portfolio”) were transferred to Fairbanks, that the right to collect payments on the CitiFinancial portfolio was transferred to Fairbanks, but that borrowers were not informed of this transfer until a notice was sent out in mid-May 2001, stating that the change would become effective June 2, 2001.

ii) Plaintiff alleges that this violated the Cranston-Gonzales amendment to the Real Estate Settlement Procedures Act, 12 U.S.C. §2605, which requires advance notice of the change in servicing.

iii) The key date is “the effective date of transfer of the servicing of the mortgage loan”, which is defined (§ 2605(i)(1)) as “the date on which the mortgage payment of a borrower is first due to the transferee servicer of a mortgage loan pursuant to the assignment, sale, or transfer of the servicing of the mortgage loan.”

iv) “[A] plaintiff is free, in defending against a motion to dismiss, to allege without evidentiary support any facts he pleases that are consistent with the complaint, in order to show that there is a state of facts within the scope of the complaint that if proved (a matter for trial) would entitle him to judgment.” Early v. Bankers Life and Cas. Co., 959 F.2d 75, 79 (7^th Cir. 1992).

v) The “Interim Servicing Agreement” provides (Appendix A, §7) that during the period between April 6, 2001 and June 1, 2001, Fairbanks shall be entitled to receive all funds paid with respect to the CitiFinancial Portfolio. The “effective date of transfer of the servicing of the mortgage loan” is thus April 6, 2001.

vi) The “Interim Servicing Agreement” further provides that CitiFinancial “shall continue to service the Loans in name only” between April 6, 2001 and June 1, 2001. (Appendix A, §4)

vii) It was also agreed that Fairbanks would take over the employees who serviced the loans for CitiFinancial, and that effective April 6, 2001, Fairbanks “shall have complete control over [CitiFinancial’s] employees, including the supervision and assignment of such employees and any employment-related or servicing-related decisions.” (Appendix A, §3(c))

viii) The “Asset Purchase Agreement” (Appendix B) includes a “Power of Attorney” in which CitiFinancial appointed Fairbanks its attorney-in-fact with authority to “execute any documents or instruments necessary to collect payments against, or to liquidate or cancel any mortgage subject to, the Purchase Agreement in accordance with such Purchase Agreement, including the endorsement of any check or other instrument made payable to Seller [CitiFinancial] . . . .” Thus, when borrowers’ checks payable to CitiFinancial arrived, Fairbanks could endorse them and deposit them in its account.

ix) It is apparent from the “Interim Servicing Agreement” and the Power of Attorney that Count XII of plaintiff’s complaint is correct, that Fairbanks had the right to the payments on the CitiFinancial portfolio on and after April 6, 2001, and that CitiFinancial and Fairbanks engaged in a subterfuge to evade compliance with the notification provisions of § 2605(e) for over a month.

x) Plaintiff has managed to obtain this evidence without the benefit of discovery. It is clear from the “Interim Servicing Agreement” itself that there are other documents which contain pertinent information (e.g., the “Employee Assumption Agreement” and the “Lease Agreement” referred to therein) and witnesses with relevant knowledge (e.g., whoever drafted and signed the “Interim Servicing Agreement” and the “Power of Attorney”).

xi) CitiFinancial had submitted 6 pages of the “Asset Purchase Agreement,” not including the Power of Attorney, as an exhibit to its reply brief in support of its motion to dismiss, representing to the Court that these were the only “relevant pages of the Agreement.” (Reply brief, p. 3) CitiFinancial further represented that “this Court can and should consider the Agreement made between CF and Fairbanks to determine whether Plaintiff has properly stated a claim under RESPA” on the theory that the agreement is “central to her [plaintiff’s] claim for violation of RESPA” (Reply brief, p. 3 n. 1). Based on the incomplete Asset Purchase Agreement, CitiFinancial argued in its reply brief (p. 3) that “The agreement between CF and Fairbanks provides that ‘The date on which the servicing of the Mortgage Loans for RESPA purposes is transferred to [Fairbanks] pursuant to this Agreement . . . shall be June 1, 2001'".

xii) It is apparent from the “Interim Servicing Agreement” and the missing pages of the “Asset Purchase Agreement,” particularly the Power of Attorney, that the actual substance of the arrangements between CitiFinancial and Fairbanks Capital was the precise opposite of what CitiFinancial represented based on the incomplete “Asset Purchase Agreement.” As plaintiff alleged, Fairbanks had the right to and would in fact collect all payments on the loans from April 6, 2001.

xiii) Significantly, another court recently found that Fairbanks attempted to deceive it and is unworthy of belief. In re Maxwell, 2002 WL 1586325, *13 (D.Mass., July 16, 2002). The court there found that “Fairbanks, in a shocking display of corporate irresponsibility, repeatedly fabricated the amount of the Debtor's obligation to it out of thin air. There is no other explanation for the wildly divergent figures it concocted in correspondence with the Debtor and her agents and in pleadings and documents filed with the bankruptcy court.”

xiv) This Court should permit plaintiff to conduct discovery to uncover the facts, rather than rely on defendants’ representations, supported by incomplete and misleading excerpts from documents.

Respectfully submitted,

_______________________

Daniel A. Edelman

Cathleen M. Combs

James O. Latturner

Adela C. Lucchesi

EDELMAN, COMBS & LATTURNER, LLC