Rasgaitis v. Waterstone Financial Group, Inc.
985 N.E.2d 621
Ill. App. Ct.2013Background
- Plaintiffs Jeanette and Robert Rasgaitis allege Waterstone Financial Group, Inc., along with Ronald Fara and Vicki Diggles, solicited them to mortgage their home and invest equity in life insurance policies and indexed annuities.
- Waterstone employed Fara and Diggles; Fara operated a Waterstone branch in Oak Brook and used the same office and phone for outside ventures; Diggles worked from that office.
- FINRA warnings from 2004–2006 warned against 100% mortgages; despite warnings, defendants allegedly urged 100% financing and investments in annuities.
- The scheme allegedly included misrepresentations that the investment plan was safe, guaranteed, and would provide liquidity and retirement income, with promised returns and the ability to withdraw funds.
- In November 2006 the plaintiffs obtained a $280,000 mortgage and funded life insurance policies and Midland annuities with the loan proceeds; disclosures about surrender charges and fees were provided in separate documents.
- The trial court dismissed the second amended complaint as time-barred; on appeal the court affirmed in part, reversed in part, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Discovery rule tolling applies to statute of limitations | Rasgaitis: discovery rule tolls, making timely filing despite shorter statutory periods. | Waterstone/Fara: limitations periods (insurance/annuities) apply and preclude claims absent tolling. | Yes; discovery rule tolls, making claims timely. |
| Cautionary language negates misrepresentation claims | Disclosures were not sufficiently detailed to negate material misrepresentations. | Bespeaks caution doctrine bars claims where disclosures are meaningful. | Disclosures here are insufficient to negate material misrepresentations; claims survive. |
| Agency/ Apparent authority sufficient to bind Waterstone | Fara and Diggles acted with apparent authority as Waterstone’s agents; Waterstone liable. | Insufficient proof of agency; no privity or authority shown. | Plaintiffs pled sufficient apparent authority to withstand dismissal. |
| Moorman doctrine bar on negligent supervision | Negligent supervision claims fall within exceptions or extracontractual duties. | Moorman bars purely economic loss for negligence; no valid exception here. | Moorman bars count V; other claims proceed. |
Key Cases Cited
- Knox College v. Celotex Corp., 88 Ill.2d 407 (1981) (discovery rule and starting point for limitations periods)
- Lagen v. Balcor Co., 274 Ill. App.3d 11 (1995) (bespeaks caution; detailed warnings can negate misrepresentation)
- Olczyk v. Cerion Technologies, Inc., 308 Ill. App.3d 905 (1999) (bespeaks caution; failure to disclose material adverse information)
- In re Chicago Flood Litigation, 176 Ill.2d 179 (1997) (negligence/strict liability exceptions to Moorman doctrine)
- Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69 (1982) (economic losses barred under tort theories absent exceptions)
- Zahl v. Krupa, 365 Ill. App.3d 653 (2006) (apparent authority analysis by agency)
- Duhl v. Nash Realty Inc., 102 Ill. App.3d 483 (1982) (statements of value and misrepresentation standards)
- Shapiro v. DiGuilio, 95 Ill.2d 184 (1983) (agency and corporate liability principles)
- Garrison v. Choh, 308 Ill. App.3d 48 (1999) (attachment requirements under 2-606)
- Consolidated reference, 394 Ill. App.3d 548 (2009) (state-law securities repose and notice concepts (cited in context))