Chapter 16

Foreclosure Rescue Scams (IL)

Michelle Weinberg is a senior staff attorney at the Legal Assistance Foundation of Metropolitan Chicago, 111 W. Jackson Boulevard, Suite 300, Chicago, Illinois 60604, 312371-8363, 312-341-1041 (fax), MAWlaw99@yahoo.com. She is director of Consumer Legal Assistance to the Elderly project. She is a 1992 graduate of Chicago-Kent College of Law, and began her career as a consumer lawyer in 1993 with the firm of Edelman & Combs, before opening a solo practice on Chicagos North Side. After two years solo, she practiced with the firm of Horwitz Horwitz & Associates in 1999-2001. Ms. Weinberg has handled a wide range of consumer cases, including claims under the Truth In Lending Act, the Fair Debt Collection Practices Act, and other consumer protection statutes, including numerous automobile and home improvement fraud cases. Ms. Weinberg has been a member of the National Association of Consumer Advocates (NACA) since 1997, and is currently a member of the board of directors of NACA. She is also a semi-professional musician and singer. Section 16.1 is an amended complaint alleging that a foreclosure rescue scam which involved a forged sale and a lease back of an elderly consumers home. It alleges state law claims to quiet title, for common law fraud, for violations of the Illinois Consumer Fraud Act, and for misconduct by a notary public. The amended complaint seeks to cancel the deed and to obtain damages. Section 16.2 is a set of interrogatories and a request for documents addressed to the lender. Section 16.3 is a memorandum opposing the motion to dismiss by the corporate mortgage lender who retained the notary, who notarized the allegedly forged deed, as the closing agent. The memorandum addresses the lender legal responsibility as a principal responsible for the notary agents fraud and ratification of the fraud by the home rescue scammer.

16.1 Complaint
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION [Consumer], ) ) Plaintiff, ) ) v. ) ) LARRY J. HOLCOMBE, ) FREMONT INVESTMENT AND ) LOAN COMPANY, EDWARD D. ) JOHNSON, WARREN NICKEL, ) FRED HAYWOOD, ERIKA NORTON, ) AND MARTAV SERVICES ) CORPORATION. ) Defendants. )

No. [redacted] consolidated with No. [redacted]

*PLAINTIFF DEMANDS TRIAL BY JURY

SECOND AMENDED COMPLAINT

INTRODUCTION [Consumer] brings this action to obtain redress for the Defendants fraud and violation of consumer protection statutes in connection with a scheme to rescue her home from foreclosure. As set forth below, [Consumer] complains that these defendants conspired to defraud her of the equity in her home, made numerous false and misleading representations to induce her to execute a real estate sales contract, and falsified numerous documents, including a warranty deed and mortgage loan documents, in order to complete the fraudulent transaction.

JURISDICTION AND VENUE 1. The Court has jurisdiction over the parties and the subject matter. All parties

necessary to the determination of this cause have been duly joined and are properly before the 2

Court. 2. Venue is proper pursuant to 735 ILCS 5/2-103(b), because the real estate which is

the subject of this complaint is situated in Cook County. PARTIES 3. Plaintiff [Consumer] is an individual who resides in the City of Chicago, Cook

County, Illinois. 4. Defendant Larry Holcombe (Mr. Holcombe) is an individual believed to reside

in the City of Chicago, Cook County, Illinois. 5. Defendant Fremont Investment & Loan Company (Fremont) is a California

Corporation with a Chicago Office located at 303 West Madison Street, Suite 900, Chicago, Illinois 60606. Its registered agent is CT Corporation System with an address for service of process listed as 208 S. La Salle Street Chicago, Illinois 60604. 6. Defendant Martav Services Corporation (Martav) is an Illinois Corporation. Its

registered agent is Edward D. Johnson, with a registered agent address for service of process listed as 18340 Glen Oak Avenue, Lansing, Illinois 60438. 7. Defendant Edward D. Johnson is the President of defendant Martav. He initiated

and materially participated in the fraudulent scheme described below. 8. Defendant Warren J. Nickel (Attorney Nickel) is an attorney licensed to

practice law in the State of Illinois. On information and belief, he materially participated in and was aware of the fraudulent scheme described below. 9. Defendant Erika Norton (Ms. Norton) is the Secretary of defendant Martav.

She is a notary public, commissioned in the State of Illinois. On information and belief, she materially participated in and was aware of the fraudulent scheme described below. 10. Defendant Fred Haywood (Mr. Haywood) is a real estate broker employed by

ADJ Investment Group, Inc., an Illinois corporation. On information and belief, he materially 3

participated in and was aware of the fraudulent scheme described below. FACTS RELATED TO MULTIPLE COUNTS 11. [Consumer] is 67 years old, and has resided in her home located at [Consumers

address], for approximately thirty years. 12. At all relevant times, [Consumer] has been the owner in fee simple of her home,

which is situated in Cook County, Illinois, and described as follows: [Location of consumers property]. Permanent index number ____________. 13. 14. [Consumer] is and at all times relevant has been in actual possession of her home. On or about April 1, 2002, [Consumer] received a solicitation by mail from

defendant Martav. The solicitation is attached hereto as Exhibit A, and is signed by Edward D. Johnson. 15. Martav targeted [Consumer] with its mail solicitation because her home was in

foreclosure and scheduled to be sold at a public sale on April 29, 2002, to satisfy a judgment amount of $59,458.59. See Bankers Trust Co. v. Wynne, 99-CH-15306. 16. Martav, through Johnson, offered to take over [Consumer]s property, become the

new owner, pay off her existing mortgage, as well as all other liens on the property, give her five thousand dollars, and allow her to remain in the property for a period of two years, during which time she would pay rent to Martav and/or Johnson, and get back on her feet financially so that she could repurchase the property when her credit had improved (in 1-2 years). 17. A few days after receiving the solicitation, [Consumer] contacted Edward D.

Johnson by phone to discuss the Martav offer. She informed Mr. Johnson at the outset that she was trying to save her home from foreclosure. Although the solicitation from Martav began with if you have no intention of saving the property, this is what Martav Services can do for you, 4

she informed him that she did intend to save the property. 18. Mr. Johnson reaffirmed that she would have 1-2 years to get the property back,

and added that Martav would also repair her leaky roof to make her more comfortable during this time period. 19. [Consumer] felt comfortable with Mr. Johnson, and could envision him as her

temporary landlord for a brief period of time, so she agreed to enter into the transaction with Martav. They arranged for Mr. Johnson to meet her at her home on April 9, 2002 to sign the necessary documents. 20. On April 9th, 2002, Mr. Johnson came to [Consumer]s home with Erika Norton,

who purported to be a notary public. 21. Ms. Norton asked to see [Consumer]s photo identification before signing any

documents. [Consumer] produced her identification and then turned her attention to the numerous documents that Mr. Johnson had brought with him. 22. The first document that Mr. Johnson presented to [Consumer] for signature was

entitled Real Estate Sales Contract and is attached hereto as Exhibit B. 23. Upon being presented with this document, [Consumer] took a moment to read

over its contents. She was confused and concerned about some of the language of the contract. 24. [Consumer] confronted Mr. Johnson with the fact that the property was not open

and vacant as described in the contract. 25. [Consumer] also noticed that the terms of the contract did not state that she had

the right to buy the property back within 1-2 years, as she had been promised in their earlier dealings. 5

26.

Because [Consumer] was entering into this transaction to save her property and

stay in her home, [Consumer] insisted that the buy-back provision be added to the contract and initialed by both parties. 27. The handwritten insertion provides that [Consumer] shall remain in the premises

above as a tenant. She will be required to pay rent. She has the first right to buy back the property (1-2 yrs). See Exhibit B. 28. After executing the real estate sales contract, Mr. Johnson went on to present

[Consumer] with several other documents. He placed them before her in a hurried manner, covered the majority of the contents of the documents with his hand, and pointed to where [Consumer] was supposed to sign. 29. [Consumer] does not recall the exact number of documents that she signed on

April 9, 2002. However, she remembers that the last document she was asked to sign was almost entirely blank. 30. Although Ms. Norton was present throughout the entire transaction, she did not

notarize a single document in [Consumer]s presence. [Consumer] found this suspicious and questioned Mr. Johnson accordingly. He stated that Ms. Norton would stamp the documents when they got back to the office. 31. At the conclusion of signing the numerous documents provided by Martav,

[Consumer] requested copies of the documents that she had signed for her records. Mr. Johnson gave her only a copy of the revised real estate sales contract, refusing to give her copies of remaining documents. He told her that she didnt need copies of the other documents. 32. Mr. Johnson informed [Consumer] that there would be a loan closing, but that she 6

would not need to attend because it was between him and the mortgage company. He did not give her a date or time for the closing. 33. At no point during [Consumer]s dealings with Mr. Johnson did she ever

authorize him to sell the property to a third party or to transfer title directly from herself to a person other than Martav or Mr. Johnson. 34. In fact, before leaving, Mr. Johnson explained to [Consumer] that he was now the

owner of the property and that he would expect her to be a responsible tenant and to refrain from certain activities, such as drug use, on the property. 35. Of course, [Consumer] agreed to occupy the property in a responsible manner

because this was her home she was trying to save from foreclosure. 36. On approximately April 14, 2002, two men arrived at [Consumer]s home

unannounced. They identified themselves as repairmen, and stated that they were looking at the house to see what repairs needed to be done. 37. On information and belief, these two men were defendants Larry Holcombe and

Fred Haywood. 38. On information and belief, Mr. Johnson propositioned Larry J. Holcombe, a 22

year-old janitor, about purchasing [Consumer]s home. 39. On information and belief, Mr. Johnson told Mr. Holcombe that he had a broker

who could get him the financing for the purchase. That broker was Fred Haywood, from ADJ Investment Group, Inc. 40. On information and belief, Mr. Haywood brokered a deal with defendant Fremont

to extend Mr. Holcombe financing in the amount of $120,000. 7

41.

On information and belief, Mr. Johnson contacted attorney Warren J. Nickel to

serve as [Consumer]s attorney. 42. 43. [Consumer] never met with, hired, or agreed to have Mr. Nickel represent her. On information and belief, based on certain loan documents produced by Title

One, Inc., Mr. Haywood and/or Mr. Johnson scheduled a loan closing for April 26, 2002. 44. On or about April 25, 2002, Mr. Johnson contacted [Consumer] and told her that

he would be closing the deal the next day. He did not inform her of the location or time of the closing, nor did he invite her to attend. 45. On information and belief, Stacy Eaton, Warren J. Nickel, Edward Johnson,

and/or Larry Holcombe attended the loan closing on April 26, 2002. 46. for her home. 47. Title One, Inc, and its employee Stacy Eaton, served as the closing agent at the Mr. Johnson did not inform [Consumer] that he had procured a third-party buyer

April 26th closing. 48. On information and belief, Stacy Eaton, and Title One, Inc. acted as the agents of

defendant Fremont by delivering all documents, obtaining necessary signatures to effect Fremonts loan, and then distributing the funds provided by Fremont in conjunction with the loan, pursuant to instructions provided by Fremont. 49. [Consumer] did not attend the April 26th closing, nor did she authorize anyone to

appear on her behalf, act as her proxy, or to sign her name to any documents at a loan closing. 50. On information and belief, one of the individuals present at the closing forged

and/or fraudulently affixed [Consumer]s signature on numerous documents, without her 8

knowledge or authority. These documents are attached hereto as Exhibits C-G. 51. On information and belief, Mr. Johnson, and/or an agent or employee of Martav

forged and/or fraudulently affixed [Consumer]s signature on the final HUD-1 settlement statement, which indicates that it was generated on April 26, 2002 at 3:11 p.m. The forged settlement statement, is attached hereto as Exhibit H. 52. On information and belief, Stacy Eaton materially participated in a conspiracy to

defraud [Consumer] by turning a blind eye to numerous forgeries that occurred at the closing, over which she presided, in order to enable the loan transaction to go forward. 53. Eaton affixed her signature to the forged HUD-1 settlement statement, which

states the HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused the funds to be disbursed in accordance with this statement. At the time Eaton signed the HUD-1, she knew that [Consumer] was not present at the closing, and that the signature that appeared on the HUD-1 could not therefore have been genuine. 54. Eaton also affixed her signature to the Statement Required for the Issuance of

ALTA Owners and Loan Policies, despite her actual or constructive knowledge that the signature thereon purporting to be that of [Consumer], was a forgery. 55. As the lenders closing agent charged with the duty to deliver all documents,

obtain all necessary signatures to effect the transaction, and disburse loan proceeds, Title One and Ms. Eatons knowledge and misrepresentation is attributable to Fremont. 56. On information and belief, Mr. Johnson altered the blank document that

[Consumer] had signed on April 9th, and transformed it into a warranty deed purporting to transfer title in [Consumer]s home directly from her to Mr. Holcombe. Mr. Johnson filled in the 9

name of [Consumer] as the grantor of the property, and inserted the name Larry Holcombe as the person to whom [Consumer] conveyed and warranted the property. See Exhibit I, attached. 57. On information and belief, Erika Norton inserted the date April 26, 2002, and

affixed her notary seal to Exhibit I on or about April 26, 2002. 58. At the closing on April 26th, a sellers second mortgage was executed on behalf

of [Consumer] in the amount of $6,000.00, i.e., as though [Consumer] was lending $6,000 to the purchaser of the property as part of the down payment, to be repaid in 360 installments of $39.92. [Consumer] was never informed of this mortgage, and has never received any payments pursuant thereto. This mortgage is attached hereto as Exhibit J. 59. Furthermore, although the settlement statement indicates that [Consumer]

received an additional $6,000 earnest money as a down payment, such payment was never tendered to or received by [Consumer]. See Exhibit H. 60. [Consumer]s closing costs included a payment to Martav in the amount of

$6,000.00, and a payment of $966.03 to Warren J. Nickel for attorneys fees, water-related costs, and for messenger services. [Consumer] never approved or agreed to pay any of these charges. See Exhibit H. 61. Fred Haywoods employer, ADJ Investment Group, received fees totaling

$4,335.00 from the borrower, Larry Holcombe. See Exhibit H. 62. After the closing on April 26, 2002, Mr. Johnson contacted [Consumer] by phone.

He informed her, that she would be meeting her new landlord, in fact she had already met him. 63. [Consumer] asked Mr. Johnson what he meant, since he was supposed to be her 10

landlord. He stated that he ended up not being able to purchase the property because he had recently purchased another house. 64. On May 1, 2002, Mr. Johnson informed [Consumer] that he would not be able to

tender the full $5,000 as required under the terms of the executed real estate sales contract. He tendered a check for $2,500.00 and required her to sign a receipt acknowledging a full and final payment. This is the sole payment that she has ever received relating to this transaction, and is attached hereto as Exhibit K. 65. On information and belief, Mr. Johnson, and/or an agent of Martav recorded the

fraudulent warranty deed purporting to convey [Consumer]s home to Larry Holcombe at the Cook County Recorder of Deeds on May 8, 2002. 66. On or about June 1, 2002, Mr. Holcombe came to [Consumer]s home in order to

have her sign a landlord-tenant lease agreement. During the course of their conversation, Mr. Holcombe expressed to [Consumer] that some low-down dirty things went down at closing. 67. [Consumer] signed the landlord-tenant agreement, while unaware of her rights to

her home. She agreed to pay a monthly rent of $876.00. When she signed this lease, she did so under duress and with the reasonable belief that she would be summarily evicted from her home of thirty years if she refused or failed to sign it. 68. From approximately July 1, 2002 through October 15, 2002, Mr. Holcombe

entered [Consumer]s home for the alleged purpose of repairing her leaky roof as Martav had promised. Mr. Holcombe also said that he would replace the drywall on one of her living room walls that had been damaged by the leaking. 69. On approximately July 15, 2002, Mr. Holcombes contractor completely gutted 11

the front room and upstairs bedroom, removing the drywall, ceiling, and insulation. 70. While overseeing this construction, Mr. Holcombe invited several neighbors into

[Consumer]s home to observe. 71. [Consumer] became upset and felt that her privacy was being invaded. She

informed Mr. Holcombe that she was going to call Mr. Johnson immediately to complain. 72. [Consumer] contacted Mr. Johnson by phone and explained that she was very

unhappy with the way that Mr. Holcombe was handling the construction and, in particular, that he had invited the neighbors into her home. 73. Mr. Johnson told [Consumer] that Mr. Holcombe shouldnt share her business

with the neighbors. He told [Consumer] to put Mr. Holcombe on the telephone so he could talk to him. Johnson and Holcombe spoke for several minutes. 74. When Mr. Holcombe hung up the telephone, he informed [Consumer] that Mr.

Johnson had told him not to do anymore work and to leave the house in its current state of disrepair and just collect her rent money. 75. However, Mr. Holcombes construction work continued for several more months.

He initiated several construction projects, but left them substantially unfinished. 76. leak. 77. For a period of approximately one month, Mr. Holcombe left the second-floor He contracted for a roof replacement, but after completion, the roof continues to

dormer open while construction was in progress. Squirrels infested her home, and rain poured in because portions of the house remained open to the elements. 78. Again [Consumer] contacted Mr. Johnson, crying and upset. She left him several 12

messages, telling him that Mr. Holcombe had walked off the job and refused to return her phone calls. Mr. Johnson never returned her calls. 79. replaced. 80. On or about, October 1, 2002, while Mr. Holcombe was at [Consumer]s home To date, the front room and upstairs drywall and insulation have not been

installing windows, [Consumer] complained about the various unfinished construction projects and explained that these repairs were supposed to make her more comfortable. She told Mr. Holcombe that she felt he was just trying to run her out of the property. 81. In response, Mr. Holcombe stated that he would not complete these repairs until

[Consumer] moved out of the house, and that he didnt understand why she even wanted to stay there anymore. 82. On approximately November 15, 2002, [Consumer] informed Mr. Holcombe that

unless he completed the repairs she would no longer pay rent because her home was nearly uninhabitable. 83. 84. Mr. Holcombe did not complete the necessary repairs. Over Thanksgiving weekend, Mr. Holcombe came to [Consumer]s home while

she was gone and had a locksmith change the locks to deny [Consumer] access to her home. 85. [Consumer] contacted the Chicago Police Department and obtained access within

approximately twenty-four hours, on or about November 29, 2002. 86. On or about November 29th, Mr. Holcombe served [Consumer] with a 5 day

notice to pay rent along with keys to the new locks. 87. On December 5, 2002, Mr. Holcombe served [Consumer] with a Notice of 13

Termination of Tenancy, demanding $1600 in unpaid rent within 10 days. When it was not received by January 2nd, he filed a forcible entry and detainer action against her. 88. On February 5, 2003, [Consumer] filed an action to quiet title to her home. COUNT I Quiet Title 89. 90. Plaintiff incorporates by reference paragraphs 1-88 above. Defendant Holcombe unlawfully claims the right to possession and title of

[Consumer]s home by virtue of the fraudulent warranty deed purportedly executed and delivered on April 26, 2002, and recorded in the office of the recorder of deeds of Cook County, Illinois on May 8, 2002 as document number _________________. 91. Defendant Fremont, and/or any current holder of the mortgage given by Larry

Holcombe, claims a security interest which is based on the fraudulent deed. 92. The interest in the property claimed by defendants Holcombe and Fremont is

invalid because, at the time plaintiff signed the deed, the instrument was incomplete and induced by fraud. 93. Specifically, the deed did not bear the name of any grantee, including without

limitation the name of the defendant, Larry Holcombe, was not dated, and therefore was never delivered to [Consumer]. 94. Plaintiff had no dealings with defendant Holcombe prior to or on the date that the

fraudulent deed was purportedly executed, April 26, 2002. 95. Plaintiff has never authorized any of the defendants, or any other person, to fill in

the name of the grantee on the deed.

14

96. 97.

Plaintiff has therefore never acknowledged the invalid deed. The claim of defendant Holcombe under the deed, and that of Fremont under the

mortgage, constitute a cloud upon the title of plaintiffs home, which greatly diminishes its value and interferes with its sale. 98. this court. 99. Plaintiff has no adequate remedy at law. Plaintiff now offers to do equity to defendants in any manner deemed equitable by

WHEREFORE, Plaintiff prays as follows: a. That the Court deem the aforementioned Warranty Deed, Cook County Recorder of Deeds Document Number ____________, to constitute an illegal and void cloud on title to said real estate; b. That the Court order the aforementioned Warranty Deed, Cook County Recorder of Deeds Document Number _____________, to be canceled of record, and decree the title to said real estate to be free and clear of any deed in favor of Larry Holcombe or any other purported assignee by him; c. That the Court declare the mortgage executed by Larry Holcombe to defendant Fremont be null and void; and, d.. That the Court grant Plaintiff such other and further relief as it deems equitable and proper. COUNT II Common Law Fraud Fremont 100. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought

15

against Fremont, solely. 101. Defendants agent, Stacy Eaton, was a material participant in a fraudulent scheme

to defraud [Consumer] of the equity in her home as alleged above. 102. Defendants agent ratified the fraudulent conduct by defendants Martav, Johnson,

Holcombe, Haywood, and Norton by turning a blind eye to numerous forgeries executed in her presence during the loan closing over which she presided. 103. Her participation in the fraud was a proximate cause of [Consumer]s damages as

it allowed the fraudulent sale transaction to go forward. 104. Defendant Fremont derived benefits, in the form of interest payments on or profit

by selling a $120,000 mortgage, from its agents participation in the above-described fraudulent scheme. Defendants conduct was egregious and warrants substantial punitive damages to punish defendant and to deter defendant and others from engaging in similar conduct in the future. WHEREFORE, PLAINTIFF DEMANDS A TRIAL BY JURY, and prays that said Jury enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate. COUNT III Common Law Fraud Johnson 105. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought

against defendant Johnson, solely. 106. Defendant made numerous material false representations and deceptive

16

omissions, as set forth above, to [Consumer]. 107. Defendant knew his representations and omissions were false and misleading at

the time they were made. 108. Defendant made the false representations and deceptive omissions intentionally in

order to deceive [Consumer] and to induce her to enter into the subject transaction. 109. [Consumer] reasonably relied on defendants false representations and deceptive

omissions, and was in fact induced to enter into the transaction to her severe detriment. 110. Defendants Martav, Johnson, Haywood, Nickel and Norton, engaged in the

foregoing conduct as part of a scheme to defraud distressed property owners. On information and belief, based on a review of public property records and counsels investigation, Johnson has similarly defrauded other homeowners who have lost their properties or substantial equity therein. 111. Defendants conduct was egregious and warrants substantial punitive damages to

punish defendants and to deter defendants and others from engaging in similar conduct in the future. WHEREFORE, PLAINTIFF DEMANDS A TRIAL BY JURY, and prays that said Jury enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate.

COUNT IV Common Law Fraud Martav 112. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought 17

against defendant Martav, solely. 113. Defendant made numerous material false representations and deceptive omissions

to [Consumer], through its agent Mr. Johnson, as set forth above. 114. Defendants agent knew his representations and omissions were false and

misleading at the time they were made. 115. Defendant made the false representations and deceptive omissions intentionally in

order to deceive [Consumer] and to induce her to enter into the subject transaction. 116. [Consumer] reasonably relied on defendants false representations and deceptive

omissions, and was in fact induced to enter into the transaction to her severe detriment. 117. Defendants Martav, Johnson, Haywood, Nickel and Norton, engaged in the

foregoing conduct as part of a scheme to defraud distressed property owners. On information and belief, based on a review of public property records and counsels investigation, Johnson has similarly defrauded other homeowners who have lost their properties or substantial equity therein. 118. Defendants conduct was egregious and warrants substantial punitive damages to

punish defendant and to deter defendant and others from engaging in similar conduct in the future. WHEREFORE, PLAINTIFF DEMANDS A TRIAL BY JURY, and prays that said Jury enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate.

18

COUNT V Common Law Fraud Nickel 119. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought

against defendant Warren Nickel solely. 120. Defendant was a material participant in a fraudulent scheme to defraud

[Consumer] of the equity in her home as alleged above. 121. Defendant ratified the fraudulent conduct by defendants Martav, Johnson,

Holcombe, Haywood, and Norton by acting as the attorney representative for [Consumer] despite having never met her, and having actual knowledge that she did not hire him or agree to have him represent her. 122. Defendant accepted the fruits of the fraudulent scheme orchestrated by the other

defendants including collecting $966.03 in attorneys fees for his participation in the loan closing that occurred on April 26, 2002. 123. Defendants Martav, Johnson, Haywood, Nickel and Norton, engaged in the

foregoing conduct as part of a scheme to defraud distressed property owners. On information and belief, based on a review of public property records and counsels investigation, Johnson has similarly defrauded other homeowners who have lost their properties or substantial equity therein. 124. Defendants conduct was egregious and warrants substantial punitive damages to

punish defendant and to deter defendant and others from engaging in similar conduct in the future. WHEREFORE, PLAINTIFF DEMANDS A TRIAL BY JURY, and prays that said

19

Jury enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate.

COUNT VI Common Law Fraud Haywood 125. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought

against defendant Fred Haywood solely. 126. Defendant was a material participant in the fraudulent scheme to defraud

[Consumer] of the equity in her home as alleged above. 127. Defendant ratified the fraudulent conduct by defendants Martav, Johnson,

Holcombe, and Norton by brokering a loan transaction for defendant Holcombe with actual or constructive knowledge of the fraudulent scheme being perpetrated by defendants Martav, Johnson and Norton. 128. Defendant accepted the fruits of the fraudulent scheme orchestrated by the other

defendants, including collecting $4,335.00 in fees relating to the loan closing that occurred on April 26, 2002. 129. Defendants Martav, Johnson, Haywood, Nickel and Norton, engaged in the

foregoing conduct as part of a scheme to defraud distressed property owners. On information and belief, based on a review of public property records and counsels investigation, Johnson has similarly defrauded other homeowners who have lost their properties or substantial equity therein. 130. Defendants conduct was egregious and warrants substantial punitive damages to 20

punish defendant and to deter defendant and others from engaging in similar conduct in the future. WHEREFORE, PLAINTIFF DEMANDS A TRIAL BY JURY, and prays that said Jury enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate.

COUNT VII Common Law Fraud Holcombe 131. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought

against defendant Larry Holcombe solely. 132. Defendant was a material participant in the fraudulent scheme to defraud

[Consumer] of the equity in her home as alleged above and made numerous material false representations and deceptive omissions in connection therewith. 133. Defendant ratified the fraudulent conduct by defendants Martav, Johnson, and

Norton by agreeing to purchase property from Martav despite actual or constructive knowledge that [Consumer] lived in the property, intended to remain in the property, and that she did not agree to sell her property to defendant Holcombe. 134. Defendant further ratified the fraudulent conduct by defendants Martav, Johnson,

and Norton by proceeding with the loan closing despite actual or constructive knowledge that [Consumer]s name was forged on numerous documents at the loan closing. 135. Defendant accepted the fruits of the fraudulent scheme orchestrated by the other

defendants, by obtaining title to [Consumer]s property without depositing earnest money with 21

her and without notifying her of or making any payments pursuant to the Sellers second mortgage executed at the closing. 136. After fraudulently obtaining title, Defendant furthered this fraudulent scheme to

oust [Consumer] from her home, by gutting her house under the guise of conducting repairs, locking her out of the house, and then filing an eviction lawsuit against her. Defendants conduct was egregious and warrants substantial punitive damages to punish defendant and to deter defendant and others from engaging in similar conduct in the future. WHEREFORE, PLAINTIFF DEMANDS A TRIAL BY JURY, and prays that said Jury enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate.

COUNT VIII Common Law Fraud Norton 137. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought

against defendant Erika Norton solely. 138. Defendant was a material participant in a fraudulent scheme to defraud

[Consumer] of the equity in her home as alleged above. 139. Defendant ratified the fraudulent conduct by defendants Martav and Johnson by

notarizing the falsified quit claim deed after it had been wholly transformed in order to transfer title directly from [Consumer] to defendant Holcombe several weeks after [Consumer] signed the blank deed. 140. Defendant, as a Secretary of the Martav Corporation accepted the fruits of the 22

fraudulent scheme outlined above from which Martav collected $6,000.00 in fees at the loan closing that occurred on April 26, 2002. 141. Defendants Martav, Johnson, Haywood, Nickel and Norton, engaged in the

foregoing conduct as part of a scheme to defraud distressed property owners. On information and belief, based on a review of public property records and counsels investigation, Johnson has similarly defrauded other homeowners who have lost their properties or substantial equity therein. 142. Defendants conduct was egregious and warrants substantial punitive damages to

punish defendant and to deter defendant and others from engaging in similar conduct in the future. WHEREFORE, PLAINTIFF DEMANDS A TRIAL BY JURY, and prays that said Jury enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate.

COUNT IX Illinois Consumer Fraud Act Fremont 143. Plaintiff incorporates paragraphs 1-88 above by reference herein. This Count is

brought against defendant Fremont solely. 144. At all times relevant herein, there was in effect the Illinois Consumer Fraud Act,

815 ILCS 505/2 which states in pertinent part: [U]nfair or deceptive acts or practices, including but not limited to the use or the employment of any deception, fraud, false pretense, false promise, misrepresentation or 23

the concealment, suppression or omission of any material fact, with intent that others rely upon such concealment, suppression or omission of such material fact, or the use or employment of any practice described in section 2 of the Uniform Deceptive Trade Practices Act, approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. In construing this section consideration shall be given to the interpretation of the Federal Trade Commission and the Federal courts relating to Section 5(a) of the Federal Trade Commission Act. 145. Defendants agent, Stacy Eaton, was a material participant in a fraudulent scheme

to defraud [Consumer] of the equity in her home as alleged above. 146. Defendants agent, Eaton, ratified the fraudulent conduct by defendants Martav,

Johnson, Holcombe, Haywood, and Norton by turning a blind eye to numerous forgeries executed in her presence during the loan closing over which she presided. 147. Defendants agent, Eaton, participated in an unfair or deceptive act or practice, in

making, altering, issuing, and/or delivering loan documents, and disbursing loan proceeds through deception, fraud, false pretenses, and/or misrepresentation. Defendants agent also violated substantial provisions of the Truth In Lending Act, the Real Estate Settlement Procedures Act, and other consumer protection laws. 148. The fraud ratified and furthered by Defendants agent was material, in that it

concerned essential terms of the contract. 149. The misrepresentations ratified and furthered by Defendants agent were made for

the purpose of inducing [Consumer] to enter into the transaction. 24

150. 151. business.

Defendants unfair and deceptive practices caused actual damages to [Consumer]. The conduct alleged above occurred in the course of defendants trade or

WHEREFORE, Plaintiff requests that the Court enter judgment in her favor and against Defendant and award the following relief: Actual, consequential and punitive damages, litigation expenses and costs; and such other or further relief as the Court deems appropriate. COUNT X Illinois Consumer Fraud Act Martav 152. Plaintiff incorporates paragraphs 1-88 above by reference herein. This Count is

brought against defendant Martav solely. 153. At all times relevant herein, there was in effect the Illinois Consumer Fraud Act,

815 ILCS 505/2 which states in pertinent part: [U]nfair or deceptive acts or practices, including but not limited to the use or the 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 such concealment, suppression or omission of such material fact, or the use or employment of any practice described in section 2 of the Uniform Deceptive Trade Practices Act, approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. In construing this section consideration shall be given to the interpretation of the Federal Trade Commission and the Federal courts relating to Section 5(a) of the Federal Trade Commission Act.

25

154.

Defendant engaged in unfair or deceptive acts or practices by the use of

deception, fraud, false pretenses, and/or misrepresentation in the making, altering, issuance and/or delivery of the real estate sales contract, loan documents, and the disbursement of loan proceeds. Defendant also violated substantial provisions of the Truth In Lending Act, the Real Estate Settlement Procedures Act, Illinois law relating to mortgage brokers, and other consumer protection laws. 155. The misrepresentations and omissions were material, in that they concerned

essential terms of the contract. 156. The misrepresentations were made for the purpose of inducing [Consumer] to

enter into the transaction. 157. 158. business. WHEREFORE, Plaintiff requests that the Court enter judgment in her favor and against Defendant and award the following relief: Actual, consequential and punitive damages, litigation expenses and costs; and such other or further relief as the Court deems appropriate. Defendants unfair and deceptive practices caused actual damages to [Consumer]. The conduct alleged above occurred in the course of defendants trade or

COUNT XI Illinois Consumer Fraud Act Johnson 159. Plaintiff incorporates paragraphs 1-88 above by reference herein. This Count is

brought against defendant Edward Johnson only. 160. At all times relevant herein, there was in effect the Illinois Consumer Fraud Act,

815 ILCS 505/2 which states in pertinent part: 26

[U]nfair or deceptive acts or practices, including but not limited to the use or the 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 such concealment, suppression or omission of such material fact, or the use or employment of any practice described in section 2 of the Uniform Deceptive Trade Practices Act, approved August 5, 1965, in the conduct of any trade or commerce are hereby declared unlawful whether any person has in fact been misled, deceived or damaged thereby. In construing this section consideration shall be given to the interpretation of the Federal Trade Commission and the Federal courts relating to Section 5(a) of the Federal Trade Commission Act. 161. Defendant engaged in unfair or deceptive acts or practices by the use of

deception, fraud, false pretenses, and/or misrepresentation in the making, altering, issuance and/or delivery of the real estate sales contract, loan documents, and the disbursement of loan proceeds. Defendant also violated substantial provisions of the Truth In Lending Act, the Real Estate Settlement Procedures Act, Illinois law relating to mortgage brokers, and other consumer protection laws. 162. The misrepresentations and omissions were material, in that they concerned

essential terms of the contract. 163. The misrepresentations were made for the purpose of inducing [Consumer] to

enter into the transaction. 164. 165. Defendants unfair and deceptive practices caused actual damages to [Consumer]. The conduct alleged above occurred in the course of defendants trade or 27

business. WHEREFORE, Plaintiff requests that the Court enter judgment in her favor and against Defendant and award the following relief: Actual, consequential and punitive damages, litigation expenses and costs; and such other or further relief as the Court deems appropriate.

COUNT XII Misconduct By Notary Public Norton 166. Plaintiff incorporates by reference paragraphs 1-88 above. This Count is brought

against defendant Erika Norton solely. 167. Norton, was present on April 9, 2002, when [Consumer] signed the document that is

attached as an exhibit hereto, which document purports to be a Warranty Deed, but which document was essentially blank at the time [Consumer] signed said document. 168. Said document is dated April 26, 2002 and the notary acknowledgment on said

document is dated April 26, 2002. 169. Ms. Norton notarized the purported deed over two weeks after having witnessed

[Consumer]s signature, during which time the name of the grantee and the date of the deed were added to the document [Consumer] had signed after she had signed said document. 170. The certification made by Ms. Norton contains the statement that [Consumer] ...

appeared before me this day in person, and acknowledged that she signed, sealed and delivered the said instrument as her free and voluntary act for the uses and purposes set forth, including the release and waiver of her homestead. 171. The Illinois Notary Public Act (5 ILCS 312/1-101 et. seq.) states that a notary public

is liable to the persons involved for all damages caused by the notarys official misconduct. 5 ILCS 28

312/7-101. 172. The Illinois Notary Public Act defines official misconduct as the wrongful exercise of

a power or the wrongful performance of a duty. 173. The certification that [Consumer] signed said instrument on April 26, 2002 is false

and constitutes the wrongful performance of a duty on the part of Ms. Norton as a Notary Public. 174. The certification that [Consumer] delivered said instrument as her free and voluntary

act is false and constitutes the wrongful performance of a duty because the instrument was blank at the time it was signed and [Consumer] did not deliver said instrument as her free and voluntary act. 175. The certification that [Consumer]s signature intended to release and waive her right

of homestead is false and constitutes the wrongful performance of a duty on the part of Ms. Norton as a notary public because the Illinois Notary Public Act prohibits a notary public from preparing any legal instrument. 176. The release and waiver of the right of homestead requires a legal instrument that may

not be prepared by a notary public, such as a deed, and thus to the extent that Ms. Nortons certification attempts to release and waive the right of homestead it is the wrongful exercise of a power that the notary public does not have and should be considered official misconduct. WHEREFORE, Plaintiff prays that the Court enter judgment in her favor and against the Defendant and award the following relief: Actual, consequential and punitive damages, and such other or further relief as the Court deems appropriate.

Respectfully submitted,

29

______________________________ One of Plaintiffs Attorneys [Consumers attorney]

30

16.2 Interrogatories and a Document Request Addressed to the Lender

IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION LARRY J. HOLCOMBE Plaintiff, v. [CONSUMER], Defendant ) ) ) ) ) ) ) ) ) )

No. [redacted]

[CONSUMER], Plaintiff, v. LARRY J. HOLCOMBE, FREMONT INVESTMENT AND LOAN COMPANY, Defendants.

) ) ) ) ) ) ) ) ) )

No. [redacted[

[CONSUMER]S FIRST DISCOVERY REQUEST Plaintiff [Consumer] (Plaintiff), through her attorneys, the Legal Assistance Foundation of Metropolitan Chicago, and pursuant to Rule 214 of the Illinois Supreme Court, hereby requests that Defendant Fremont Investment and Loan Company (Fremont) respond to the following interrogatories and produce the below-listed documents at the Legal Assistance Foundation of Metropolitan Chicago, 111 West Jackson Boulevard, Suite 300, Chicago, Illinois, on or before (28) days after service hereof, in accordance with Illinois Supreme Court Rule 201.

31

Unless otherwise stated, the time period of these requests is from March, 2002 to the present.

INTERROGATORIES 1. State the name, job title, and business address of each person providing information in

response to these discovery requests. ANSWER:

Identify and provide the following information for all employees and agents of Fremont

who had any involvement in the transaction involving plaintiffs home, located at [Consumers address], or in the administration of defendant Larry Holcombes account, including but not limited the origination, underwriting, disbursement and assignment of the subject account: full name, present or last known home and business addresses and telephone numbers; date first employed by you; whether presently employed by you; all job title(s) and dates during which each job was held; and if not presently employed, Social Security number and exact date of birth. State, generally, each individuals involvement (e.g., preparation of documents, notarizing signatures, approval of financing terms, communications with the borrower; sending of notices, disbursement of funds, review of documents or acceptance of assignment, construction subcontractors/trades, etc.).

32

3. Identify each person who participated in the closing for the loan provided by Fremont to the Defendant, Larry Holcombe, and specify which individuals are/were agents or employees of Fremont.

4. Identify the following individuals, stating for each full name, present or last known home and business addresses (complete with corresponding apartment or suite number), and telephone numbers: Larry Holcombe, Fred Haywood.

5. State the date and subject matter of any and all communications (oral or written): (a) between or among any of the parties to this action, and (b) between you and any other person or entity (other than your counsel), relating to the subject account and/or transaction. Identify or produce all documents reflecting or relating to such communications, including but not limited to letters, faxes, notes, internal memoranda, calendars, computer data, and credit applications, disclosures, etc.

6.

State the date and amount of each payment (a) disbursed from the loan proceeds of the

subject transaction and/or account; (b) received by Fremont from anyone in connection with the subject account (regardless of whether the payment came from the loan proceeds or another source); and (c) paid to or received by anyone else in connection with the subject account (regardless of whether the payment came from the loan proceeds or another source). Identify the 33

payor and payee of each such payment made or received, including but not limited to payments made to appraisers, title companies, credit reporting agencies, couriers and contractors, and identify or produce all documents relating to same, including all canceled checks and receipts.

7.

State the name, residence and business addresses and phone numbers, and job position of

all person(s) and/or entities not identified in response to any preceding Interrogatory, who had any involvement in or has knowledge of any facts relating to matters alleged in the Complaint, and/or who may testify as witnesses at the trial or any hearing hereof. Identify each and every written or recorded statement made by such potential witnesses.

REQUESTS FOR PRODUCTION OF DOCUMENTS 1. Please produce all documents (including all computer or digital media-stored data) relating

to [Consumer], defendant Larry Holcombe, the subject property, and the subject transaction and/or account, or which are indexed, filed or retrievable under their name or any number, symbol, designation or code (such as a transaction number or Social Security number) assigned to them or to the subject transaction(s), including all documents relating to the origination, approval, disbursement, assignment and administration of the loan(s), all agreements between Fremont and/or Chicago Title (including all agreement relating to brokers representations and warranties, bulk assignment or wholesale agreements, and pooling and servicing agreements), general instructions to closing agents, documents reflecting or referring to subcontractor payments, invoices, construction materials receipts, and all correspondence related to the subject 34

transaction.

2.. Any and all loan applications, loan worksheets or analyses, and/or other related documents prepared in connection with the loan transaction between Fremont and Larry Holcombe.

3. Any and all documents from whatever source relating in any way to Fremonts determination of the fair market value of the property which is the alleged security for the Defendant Larry Holcombes mortgage with Fremont.

4. Any and all account cards or ledger sheets showing debits, credits, and/or running balances, relating to the loan transaction between the Defendant Holcombe and Fremont.

5. Copies of the outside and inside of file folders for the loan transaction between Fremont, and the Defendant Holcombe.

6. Any and all documents, not covered by another section of this request, that were purportedly signed by [Consumer] which otherwise relate or refer to the transactions between the Defendant Holcombe and Fremont.

7. Any and all documents Fremont intends to introduce at trial.

8. All documents relating to any judicial or administrative proceeding, public or private 35

consumer protection agency or office, and all customer complaints in which Fremont was alleged to have made misrepresentations or violated any consumer protection statutes, rules or regulations relating to mortgages, mortgage brokers, or consumer credit.

9. Copies of all insurance policies which may afford coverage as to the matters complained of, or under which a claim was made. Include any policy which refers to consumer protection coverage and any comprehensive general liability policy.

10. All documents identified in response to the above Interrogatories, and all documents referred to or reviewed in preparing the response to the above Interrogatories, not otherwise called for in these document production requests.

Respectfully submitted,

[Consumers attorney] One of [Consumer]s Attorneys

CERTIFICATE OF SERVICE The undersigned certifies that a copy of [Consumer]s First Discovery Request, addressed to Defendant Fremont Investment & Loan, was sent by certified mail to, The Law Offices of Keith L. Spence 33 Denise Court Matteson, IL 60443 on or before 5:00 p.m. on April 8, 2003.

_________________________ 36

16.3 Memorandum Opposing Motion to Dismiss by Corporate Mortgage Lender Who Retained the Notary
IN THE CIRCUIT COURT OF COOK COUNTY, ILLINOIS COUNTY DEPARTMENT, CHANCERY DIVISION [CONSUMER], ) ) Plaintiff, ) v. ) ) LARRY J. HOLCOMBE, ) FREMONT INVESTMENT AND ) LOAN COMPANY, EDWARD D. ) JOHNSON, WARREN NICKEL, ) FRED HAYWOOD, ERIKA NORTON, ) AND MARTAV SERVICES ) CORPORATION. ) ) Defendants. )

No. [redacted] consolidated with [redacted]

Judge Schiller

[CONSUMER]S RESPONSE IN OPPOSITION TO FREMONTS MOTION TO DISMISS Plaintiff, [Consumer], respectfully submits the following in opposition to the Motion to Dismiss filed by Defendant Fremont Investment & Loan (Fremont). INTRODUCTION [Consumer]s First Amended Complaint sets forth eighty-six factual paragraphs describing in detail how Defendants Mar Tav Services Corporation (Mar Tav), Edward D. Johnson, Warren Nickel, Fred Haywood, and Erika Norton orchestrated and executed a scheme to defraud her of the equity in her home. (Plaintiffs First Amended Complaint Am. Cmplt. at 16-63). She alleges that Johnson, acting as the agent of Mar Tav, offered to rescue her from foreclosure through a sale-lease-back transaction, in which he would take title to her home and act as her temporary landlord for 1-2 years while [Consumer] prepared to buy back the house. 37

(Am. Cmplt., 14-19). In so pleading, she specifies that these were material misrepresentations made to induce her to enter into the transaction, and that in fact, Mr. Johnson intended to immediately sell her home to a third party buyer, who would then evict her from her home by rendering it uninhabitable through numerous so called repairs. Defendants Nickel, Norton, Haywood, Holcombe, and Fremont, through its agent Eaton, knowingly participated in this fraudulent scheme and benefitted therefrom. Fremont asks the court to dismiss Counts I and II of Plaintiffs complaint for failing to plead sufficient factual allegations against defendant Fremont and/or its agent to state a cause of action for fraud under the common law and Illinois Consumer Fraud and Deceptive Business Practices Act. Fremont argues that Plaintiffs complaint concludes that Ms. Eaton was an agent of Fremont without averring with the required particularity why the actions of the closing agent Stacy Eaton are attributable to Fremont, and which misrepresentations are attributable to Fremont. However, [Consumer] alleges that (a) Ms. Eaton acted as closing agent, and (b) in that capacity she acted pursuant to Fremonts instructions, in order to consummate a loan with Larry Holcombe on April 26, 2002. (Am. Cmplt., 48, 49, 52, 53). Moreover, Plaintiff attaches documents showing Eaton was the Lenders agent at closing. (Am. Cmplt., Exhibits D & H). These facts permit a reasonable inference of agency at the pleading stage. Throughout its motion, defendant analyzes the actions of Ms. Eaton in isolation, and then argues that they do not amount to misrepresentations, while turning a blind eye to the fact that Ms. Eaton knowingly presided over a fraudulent loan transaction at which Plaintiffs name was forged to numerous documents, personally certified as to the truth and accuracy of the 38

transaction over which she presided, and thereby knowingly ratified the fraudulent transaction. Her actions are attributable to defendant Fremont and Plaintiff should be permitted to proceed on her fraud claims as demonstrated below. STANDARD OF REVIEW When ruling on a section 2-615 motion to dismiss, the court must view the complaints allegations in the light most favorable to the plaintiffs. Robinson v. Toyota Motor Credit Corp., 2002 Ill. LEXIS 323 at *24 (Ill. May 22, 2002). As such, the court must accept as true all well pleaded facts and all reasonable inferences drawn therefrom. Chandler v. American General Fin., Inc., 329 Ill. App. 3d 729, 735, 768 N.E.2d 60, 65 (1st Dist. 2002). The court, should not dismiss on the pleadings unless it clearly appears that the no set of facts can be proved which will entitle the plaintiff to recover. Id. citing Bryson v. News America Publications, Inc., 174 Ill.2d 77, 86-87, 672 N.Ed.2d 1207 (Ill. 1996). Following this standard, the Defendants motion to dismiss should be denied, as demonstrated below. I. PLAINTIFF HAS PLED SUFFICIENT FACTS TO PROVE AGENCY Plaintiffs complaint alleges that Stacy Eaton served as the lenders closing agent at the April 26, 2002, loan closing. As the closing agent, she acted on behalf of Fremont by delivering all documents, obtaining necessary signatures to effect Fremonts loan, and then distributing the funds provided by Fremont in conjunction with the loan. (Am. Cmplt., 48, 53). Fremont, as a corporation, can act only through human agents, in this case, Stacy Eaton. While the existence of an agency relationship between a mortgagee and a title company may be a question of fact, it is well established that a title company closing agent is the agent of the lender for purposes of conducting the transaction. See Newman v. 1st 1440 Investment, Inc., 39

1993 U.S. Dist. LEXIS 354, *12, (N.D.Ill., January 14, 1993). The closing agent follows closing instructions issued by the mortgagee in presiding over the loan closing and then acts at the further direction of the lender in the capacity of escrow agent for disbursing loan proceeds. See Reich v. Chicago Title Insurance Company, 853 F. Supp. 1325, 1327-28 (D. Kan. 1994)(a Fair Labor Standards Act case that closely examined the work of residential loan closers); Hickey v. Great Western Mortgage Corporation, 1995 U.S. Dist. LEXIS 4495, at *13 (N.D. Ill. April 4, 1995). These acts meet the general definition of an agent, which is generally defined as one who undertakes to manage some affairs to be transacted for another by his authority, on account of the latter, who is called the principal . . . . The test of agency is the existence of the right to control the method or manner of accomplishing a task by the alleged agent, as well as the agents ability to subject the principal to liability. Wargel v. First Natl Bank of Harrisburg, 121 Ill.App.3d 730, 736, 460 N.E.2d 331334 (5th Dist. 1984). In Wargel, the evidence established that a bank was the agent of an insurance company, notwithstanding a contrary statement in the written contract between them, because the insurance company prescribed the forms, procedures, and guidelines used by the bank in processing insurance applications in connection with loans. The insurance company authorized the bank to accept premiums, notify the borrower that their application had been approved, and to send documents to the insured borrower, and thus, the court held that the bank acted as the insurance companys agent. Id. Here, Fremont prescribed or provided the forms, procedures and guidelines to be used at the closing and was bound to the loan agreement as soon as the closing agent obtained the borrowers signatures. Having alleged that Ms. Eaton acted as closing agent, pursuant to 40

Fremonts instructions, in order to consummate a specific loan transaction, it follows that she was in fact the agent of Fremont on April 26, 2002. Defendant cites Capitol Indemnity Corporation v. Stewart Smith Intermediaries, Inc., 229 Ill. App.3d 199, 125 (1992), to support its contention that [Consumer] failed to allege sufficient facts to support an inference of agency. In that case, the court found the plaintiff reinsurance company failed to plead any agency relationship, where it failed to allege what acts the defendant broker took on its behalf, plaintiffs knowledge of those acts, or even the course of dealings between the two parties involved in reinsurance transaction at issue. Id. at 126-127. In so finding, the court emphasized that where the plaintiff is a third-party to the agency relationship, the existence of an agency relationship will be liberally construed in its favor. Moreover, agency in such cases is typically considered a factual question, because it is unrealistic and unnecessary that a plaintiff include such details [i.e. the right of the principal to control the agent, ability of agent to enter into binding negotiations on behalf of the principal, and extent that wrongful acts committed in course of agency] without the benefit of discovery. Id. at 126. In this case, [Consumer] was not present at the loan closing where her name was signed to numerous documents, and has not yet had the benefit of conducting discovery. She has pled those facts to which she reasonably has access, i.e. that Eaton acted as the closing agent, in so acting represented Fremont at the closing both following its directions and authorizing the distributions of its funds. Taken in the light most favorable to her, these facts permit a reasonable inference that Eaton acted as Fremonts agent. II. FREMONT IS LIABLE FOR COMMON LAW FRAUD AND UNDER THE ILLINOIS CONSUMER FRAUD ACT BECAUSE ITS AGENT RATIFIED THE FRAUD PERPETRATED AGAINST PLAINTIFF BY THE 41

OTHER DEFENDANTS AND FREMONT ACCEPTED THE FRUITS OF THAT FRAUD. Defendant contends that Plaintiffs complaint fails to adequately state claims for fraud, and breach of the Illinois Consumer Fraud Act. As demonstrated below, a lender who knowingly accepts the benefits of a fraud and whose agent ratifies the fraud may be held liable for both of these counts under well established Illinois authorities. A. Plaintiff Has Stated All of the Elements of Fraud [Consumer] has alleged with particularity the manner in which Defendants Mar Tav and Edward Johnson fraudulently misrepresented to her that they would rescue her from foreclosure, when in fact, they had orchestrated a scheme to steal the equity in her home, sell her property to a third-party buyer at a price that she would be unable to afford to pay back, and then quickly evict her from her home by making it uninhabitable through numerous unfinished repairs. The complaint alleges where, when, and to whom these defendants made material misrepresentations in order to induce her to enter into the real estate transaction. (Am. Cmplt., 16, 18, 28, 30-32, 39, 41, 46, 51, 54-57, 62, 63, 66-79). Plaintiff further describes how this plan was brought to fruition through the acts of Warren Nickel, who posed as [Consumer]s attorney, Erika Norton, who improperly notarized documents after they had been wholly transformed, and Fred Haywood who brokered a loan for Defendant Holcombe, all knowing that Ms. was being defrauded out of the equity of her home. Fremont does not attack the sufficiency of Plaintiffs complaint in detailing the fraudulent scheme employed by the above-named defendants to strip her of title to her home, and does not ask the court to dismiss her Quiet Title Count. Rather, defendant argues that

42

[Consumer] has failed to allege specific facts establishing that Fremont is responsible for the fraudulent acts of these other participants. In so arguing, defendant glosses over the fact that its agent, Ms. Stacy Eaton, was a knowing participant in this fraud. B. Fremonts Agent Ratified the Fraud Eaton served as closing agent for the loan from Fremont to Defendant Holcombe on April 26, 2002. The April 26th closing was a critical event in the Mar Tav scheme without obtaining financing for Holcombe, defendants entire fraudulent scheme would have been jeopardized because the pending foreclosure may have proceeded to sale. [Consumer] did not attend the closing. She did not sign a single document at the closing or on the day of closing. Nevertheless, Eaton presided over a loan closing where [Consumer]s name was forged to numerous documents. The forged signatures contained on Exhibits C-G of Plaintiffs First Amended Complaint do not even resemble [Consumer]s genuine signature that appears on the Warranty Deed, Plaintiffs Exhibit I. Ms. Eaton allowed the loan closing to proceed despite [Consumer]s obvious absence, and the numerous forgeries. Ms. Eaton herself signed two forged documents to allow the loan transaction to go forward. The first, Plaintiffs Exhibit D, was a Lenders Disbursement Statement to which [Consumer]s signature had been forged. On the second, Plaintiffs Exhibit H, Eaton certified as the closing agent that the HUD-1 Settlement Statement which I have prepared is a true and accurate account of this transaction. I have caused the funds to be disbursed in accordance with this statement. The Settlement Statement bears the purported signature of [Consumer], who was obviously not present, and whose name had been forged thereon. 43

Fremont attempts to minimize Ms. Eatons participation in the above-described fraudulent scheme by examining her actions alone, apart from their context within the overall fraudulent transaction. Defendant states, the signing of the HUD-1 by Eaton, however, does not verify that the borrowers signature is true and correct or that she was present but is a certification of the accuracy of the disbursements. (Def. Mot., p. 2). However, the Settlement Agent Certification that Eaton signed as Fremonts agent, certifies that it is a true and accurate account of this transaction a certification that Eaton could not have made in good faith, having witnessed numerous forgeries in [Consumer]s obvious absence. In fact, Eaton was a material participant in the fraud, who enabled the fraudulent scheme to go forward by turning a blind eye to the forgeries perpetrated by defendants in [Consumer]s absence. Courts in numerous jurisdictions have recognized that liability in tort can go beyond the immediate wrongdoer to those who have assisted, encouraged or ratified the wrongdoers acts. Adcock v. Brakegate, LTD., et. al., 164 Ill.2d 54, 62 (Ill 1994)(civil conspiracy claim); Jeminson v. Montgomery Real Estate & Co., 396 Mich. 106; 240 N.W. 2d 205 (1974). Lenders have been held liable where information is available to the lender from the transaction documents that suggests a fraud has taken place. See Mayberry v. Said, 911 F. Supp. 1393 (D. Kan. 1996), later opinion, 927 F. Supp. 1456 (D. Kan. 1996)(lender held liable for odometer fraud where it ratified the fraud and accepted the benefits therefrom). Moreover, liability for common law fraud extends to those who did not participate in the fraud if they knowingly accepted the fruits of the fraud. Cumis Insurance Society, Inc. v. Peters et.al., 983 F. Supp. 787, 794 (N.D. Ill. 1997); Terrell v. Childers, 920 F. Supp. 854, 866 (N.D. Ill. 1996). In Terrell, a professional baseball player sued his financial advisers for fraud in managing 44

his finances. The court held that under Illinois law, a person who knowingly accepts the fruits of fraudulent conduct is also guilty of that fraud. Id., quoting Shackett v. Philko Aviation, Inc., 590 F. Supp. 664, 668 (N.D.Ill. 1984)(fraud in sale of airplane). The Terrell court found liability where the evidence showed that one of the defendants had accepted commissions she knew were based on fraudulent transactions. Likewise, Ms. Eaton acted as closing agent for a transaction with the knowledge that documents were being forged, and the transaction was, therefore, fraudulent. She knowingly accepted the benefits of the transaction, the fees paid to Law Title for closing the loan, and accepted benefits on Fremonts behalf, i.e. the closing costs and future interest on Defendant Holcombes $120,000 mortgage. Ms. Eaton knowingly participated in the fraud, ratified the fraudulent and her conduct was undertaken on behalf of Fremont. Defendant may argue that Plaintiff has not pleaded that Eaton had knowledge of the larger Mar Tav fraudulent scheme, i.e. the plan to strip her of the equity in her home, and therefore should not be held liable for their fraudulent conduct. However, Eaton had knowledge of the numerous forgeries, which are themselves a species of fraud. See Eliason et al. v. Wilborn et al., 335 Ill. 352, 357-359 (Ill. 1929). Courts do not permit individuals to be willfully blind in order to avoid liability for the fraudulent acts that they witness. A defendant which deliberately closes its eyes so that it will not discover what it suspects is going on, can be charged with a form of knowledge, or reckless disregard for the truth. Bosco v. Serhant, 836 F. 2d 271, 276 (7th Cir. 1987)(involving brokerages liability in securities fraud case). Likewise, a defendant cannot escape liability by deliberately avoiding knowledge of the illegal nature of the scheme. Terrell, supr, at 866. In this case, Ms. Eaton either observed or presided over the loan closing at which 45

numerous documents were obviously forged. She had constructive knowledge of this fact since [Consumer] was not present at the closing and no one produced authority to sign on her behalf. If she failed to investigate the authenticity of the signatures that she witnessed in light of these facts pointing to fraudulent conduct, then she will be held to have knowledge thereof for choosing to be willfully blind rather than investigate the suspiciousness of the transaction. If, with knowledge, she accepted the forged signatures to allow the loan transaction to go forward, then she is liable for ratifying the fraudulent conduct of the remaining defendants. In either case, her actions are attributable to defendant Fremont, on whose behalf she was acting as agent. In Hoffman et al. v. Schroeder et al., 38 Ill. App. 2d 20, 32-33 (Ill. App. Ct. 1962), the court considered the liability of a lender for the failure of a notary to properly identify individuals whose signatures she certified, but who were in fact imposters forging the signature of another. The court held that the failure of a notary, who is the mortgagees employee and used by it to take the acknowledgment of a document, properly to identify the person whose acknowledgment is taken, is chargeable to the mortgagee. Like the bank in Hoffman, Fremont is liable for its agents acts of ratifying and accepting the fruits of the fraud in which she knowingly participated. Defendant cites three cases in support of its contention that Plaintiff failed to plead the fraud counts with particularity. See Prime Leasing, Inc. v. Kendig, 2002 Ill. App. LEXIS 544; Robinson v. Toyota Motor Credit Corporation, 2002 Ill. LEXIS 323; Neptuno Treuhard-Und Verwaltungsgesellschaft MBH v. Arbor, 295 Ill. App.3d 567 (1998). Fremont relies on Prime Leasing, to suggest that in an action of fraud the Plaintiffs must provide the exact statements which were false. (Def. Mot. at p. 1, 3). However, it is well established in Illinois, that fraud 46

may include, anything calculated to deceive and may consist of a single act, a single suppression of truth, suggestion of falsity, or direct falsehood, innuendo, look or gesture. Miller v.William Chevrolet/Geo, Inc., 326 Ill. App. 3d 642, 648, 762 N.E.2d 1, 7 (1st Dist. 2001), citing Russow v. Bobola, 2 Ill. App. 3d 837, 841, 277 N.E.2d 769, 771 (2nd Dist. 1972). Furthermore, in cases under the Illinois Consumer Fraud Act, an omission or concealment of a material fact in the conduct of trade or commerce constitutes consumer fraud. Connick v. Suzuki Motor Co., Ltd., 174 Ill.2d 482, 505, 674 N.E.2d 584, 596 (Ill. 1996). Thus, the Complaint need not specify exact words which the Defendants uttered; conduct which conceals material facts is also actionable. Additionally, Prime Leasing is distinguishable from the case at bar. The Prime Leasing plaintiffs alleged that corporate officers misrepresented the financial condition of the retail chain by ratifying financial reports, thus inducing the creditors to invest. Prime Leasing, 2002 Ill. App. LEXIS 544 at *6-8. The court found that the complaint merely stated that Pryant [a defendant] participated in the fraud in one or more the decisions to re-date [account] receivables. Prime Leasing, supra, at * 15. Similarly, for the other defendants, it stated that they only represented that the financial information received by the plaintiffs was accurate. Id. The court dismissed the fraud cause of action for both defendants because the complaint never said the exact misrepresentation that each defendant made, how, or to whom he made them. Id. In the case at bar, [Consumer] does allege specific acts that Fremonts agent, Eaton, engaged in, i.e. knowingly presiding over a loan transaction where [Consumer]s name was forged to numerous documents, and allowing the loan closing to proceed despite this knowledge. (Am. Cmplt., 48-53). Thus, Prime Leasing is inapplicable to this case. 47

The additional two cases cited by defendant are equally inapplicable to the case at bar. In Neptuno, the court dismissed plaintiffs fraud counts because the defendant had merely stated his personal opinion about an employee in a letter of recommendation, on which the plaintiff relied to its detriment in hiring the recommended employee. Neptuno Treuhard-Und Verwaltungsgesellschaft MBH v. Arbor, 295 Ill. App.3d 567, 572-573. (1998). In this case, none of the facts pled by [Consumer] to support her fraud counts could be construed to be an opinion, and defendant has not so argued. Although Fremont cites Neptuno for the general proposition that a Plaintiff pleading fraud must reasonably rely on the material misrepresentations, it does not argue that her reliance was unreasonable or unjustifiable. (Def. Mot. p. 2). Likewise in Robinson v. Toyota Motor Credit Corporation et al, 2002 Ill. LEXIS 323, the court dismissed the plaintiff car-lessees Consumer Fraud Act count against the defendant Toyota dealors and their assignee, because the Plaintiff pled only acts that were unfair rather than deceptive. Id., at * 21-22. The court held that the one business practice alleged by plaintiff to be deceptive was barred by the doctrine of res judicata. In contrast, [Consumer] has alleged that Fremonts agent engaged in the deceptive practice of presiding over a fraudulent loan transaction where Plaintiffs signature was forged numerous times on the documents required for the loan to proceed. Rather than halt the loan transaction, Fremonts agent turned a blind eye to these acts of forgery, in an effort to allow the closing to proceed. These acts are not, as those in Robinson, merely unfair but are deceptive. CONCLUSION As demonstrated above, Plaintiff has sufficiently stated a claim against Fremont for ratifying and accepting the fruits of the fraud. The complaint clearly states all of the 48

elements of fraud as to Holcombe, Johnson, Mar Tav, Haywood, Nickel, Norton, and Eaton, who was agent for Fremont, and thus satisfies the pleading requirements for fraud under common law and the Illinois Consumer Fraud and Deceptive Business Practices Act. Plaintiff should be permitted to proceed on her fraud claims against Fremont. For the foregoing reasons, the defendants motion to dismiss should be denied. Respectfully submitted, _____________________ [Consumers attorney] One of Plaintiffs Attorneys

[Consumers attorney]

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