In the recent case of Parks v. Wells Fargo Home Mortgage, Inc., Plaintiffs, Marshall and Cindy Parks (the “Parks”), executed a mortgage in favor of Norwest Mortgage, Inc. (“Norwest”) (now known as Wells Fargo Home Mortgage) for a transaction involving two separate lots. As part of the transaction, a property tax escrow account was established from which Norwest paid the property tax installments.
The Parks later combined the lots and obtained one new tax identification number for the property. As a result of an error, the second installment for the May 1995 tax bill incorrectly referred to the old tax identification number. Consequently, the tax payment previously made by Norwest out of the escrow was returned to it. Norwest assumed that the payment was returned because the Parks had made the payment.
After the taxes were declared delinquent, the property was purchased by Kathy Artman (“Artman”) at the 1995 tax sale; however, no notice was provided to the Parks or Norwest. Under Illinois law, a tax purchaser such as Artman is required to give notice to the property owner and the mortgagee regarding the purchase of delinquent taxes. After Artman obtained a tax deed, the Parks learned the property had been sold. Norwest and the Parks vacated the tax deed and paid the taxes in order to redeem the property.
The Parks then sued Norwest for breach of contract and fiduciary duty and for violation of the Illinois Consumer Fraud Act and Deceptive Business Practices Act (the “Act”). The jury awarded the Parks $4,000 in compensatory damages, $150,000 for emotional distress, $3 million in punitive damages, which were reduced to $820,000 by the trial court, and attorneys’ fees under the Act. Norwest appealed the jury’s verdict.
The Appellate Court vacated the awards for emotional distress and punitive damages and the award of attorneys’ fees. In order for a plaintiff to be entitled to emotional distress and punitive damages in the context of a beach of contract action, the plaintiff must establish that the defendant acted with malice, wantonness, or oppression. The Appellate Court found that there was no evidence that Norwest failed to pay the Parks’ taxes out of malice, wantonness or oppression. While Norwest made a mistake when it failed to investigate the reason for the return of the second installment payment in 1995, once Norwest became aware that Artman had obtained a tax deed, it acted quickly to protect its interest and the Parks’ interest in the property. There was no evidence that Norwest’s failure to act appropriately was purposefully done to harm the Parks.
While the Appellate Court acknowledged that persons in the Parks’ situation would suffer emotional harm, the loss suffered by the Parks was a consequential harm from Norwest’s failure to perform the duty it undertook in its agreement with the Parks. Thus, the Appellate Court concluded that Norwest’s failure to pay the property taxes could not give rise to anything more than liability for the consequences of its omissions.
In addition, the Appellate Court held that the Parks were not entitled to attorneys’ fees because they could not state a cause of action under the Act. In order to state a cause of action under the Act and thus be entitled to attorneys’ fees, a plaintiff must prove the existence of: (1) an unfair or deceptive act or practice by the defendant; (2) the defendant’s intent that the plaintiff rely on the deception; and (3) the occurrence of the deception in the course of conduct involving trade or commerce. The Appellate Court found that Norwest did not intend that the Parks rely on their misstatements concerning the Parks’ real estate taxes since the Parks’ reliance on such misstatements would mean that the Parks would lose their home and Norwest would lose its security interest. Under such circumstances, the Appellate Court found that the Parks could not state a cause of action against Norwest since Norwest’s misstatements inflicted as much injury on itself as on anyone else. Thus, the Appellate Court reversed the finding of liability and the award of attorneys’ fees under the Act.
As the Parks case demonstrates, in order to obtain emotional distress or punitive damages, a plaintiff must prove that the defendant acted with malice, wantonness or oppression. Without proof of such conduct, a plaintiff may only recover damages for breach of contract.