711 F.3d 788
7th Cir.2013Background
- Jacksons obtained a $282,500 30-year fixed-rate mortgage from AWL/Countrywide in April 2003; mortgage on their home recorded May 2003 in Hamilton County, Indiana.
- Jacksons used MFMS as a mortgage broker to obtain the loan; several defendants are involved in the mortgage process.
- The Jacksons defaulted in March 2010; no foreclosure action occurred by defendants.
- In December 2011 they filed a suit in Hamilton County seeking quiet title and alleging negligent evaluation of repayment ability and unconscionability.
- Defendants removed to the Southern District of Indiana; district court dismissed all counts in September 2012; Jacksons appeal challenging negligence, unconscionability, and quiet title.
- Court affirms dismissal as to all claims under Indiana law and discusses jurisdiction and choice-of-law issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty in negligence claim | Jacksons claim defendants owed a duty. | No duty owed absent special relationship. | No duty found; negligence claim properly dismissed. |
| Fiduciary duty in lending relationship | Mortgage lenders owe fiduciary duties. | No fiduciary duty absent confidential relationship. | No fiduciary duty; claim dismissed. |
| Unconscionability of loan | Contract was substantively/procedurally unconscionable. | No unconscionability shown under Indiana law. | Unconscionability claims rejected. |
| Quiet title action viability | Theories (note/bifurcation/possession) support quiet title. | These theories do not prove ownership under Indiana law. | Quiet title claim dismissed. |
Key Cases Cited
- Pisciotta v. Old National Bancorp, 499 F.3d 629 (7th Cir. 2007) (elements of negligence; duty required)
- Bader v. Johnson, 732 N.E.2d 1212 (Ind. 2000) (no fiduciary duty absent special relationship)
- Block v. Lake Mortg. Co., 601 N.E.2d 449 (Ind. Ct. App. 1992) (no confidential relationship in lender-borrower default)
- Am. Heritage Banco, Inc. v. Cranston, 928 N.E.2d 239 (Ind. Ct. App. 2010) (mortgage relation does not create fiduciary duty)
- Huntington Mortg. Co. v. DeBrota, 703 N.E.2d 160 (Ind. Ct. App. 1998) (mortgages do not automatically create confidential relation)
- Catalan v. GMAC Mortg. Corp., 629 F.3d 676 (7th Cir. 2011) (confidential relationship not implied by mortgage)
- DiMizio v. Romo, 756 N.E.2d 1018 (Ind. Ct. App. 2001) (procedural unconscionability standards)
- Ashcraft v. Weaver, 950 N.E.2d 1236 (Ind. Ct. App. 2011) (understanding contract terms presumed)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (2007) (plausibility standard for complaint sufficiency)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (fraud/conspiracy allegations require plausible claims)