                         In the
 United States Court of Appeals
             For the Seventh Circuit
                      ____________

Nos. 03-2663 and 03-2773
MARSHALL PARKS and CINDY PARKS,
                                        Plaintiffs-Appellees,
                                          Cross-Appellants,
                            v.

WELLS FARGO HOME MORTGAGE, INC.
f/k/a NORWEST MORTGAGE INC.,
                                      Defendant-Appellant,
                                           Cross-Appellee.
                      ____________
          Appeals from the United States District Court
               for the Central District of Illinois.
     No. 00-CV-1156—John A. Gorman, Magistrate Judge.
                      ____________
   ARGUED MAY 21, 2004—DECIDED FEBRUARY 23, 2005
                    ____________


 Before BAUER, KANNE, and WOOD, Circuit Judges.
  WOOD, Circuit Judge. When Norwest Mortgage, Inc.,
failed properly to pay two tax installments on property
mortgaged by Marshall and Cindy Parks, a bureaucratic
snarl ensued. The Parkses, along with Norwest, became
enmeshed in a legal fight to avoid losing their home.
Although they eventually succeeded in defeating the
claim of a tax scavenger who had fraudulently obtained
a tax deed on the Parkses’ home, the Parkses blamed
2                                 Nos. 03-2663 and 03-2773

Norwest for allowing the situation to get out of hand. They
sued Norwest (now part of Wells Fargo Home Mortgage,
Inc.) for breach of contract, breach of fiduciary duty, and
violation of duties imposed by the Illinois Consumer Fraud
Act (CFA), 815 ILCS 505/2, invoking the federal court’s
diversity jurisdiction. (Norwest was a Minnesota corpora-
tion with its principal place of business in that state; Wells
Fargo is incorporated in California and has its principal
place of business in Iowa; the Parkses, who originally
alleged only that they are “residents” of Illinois, have
now made it clear on the record that they are citizens of
Illinois.) We refer to the defendant-appellant as Norwest, in
keeping with the usage in the district court’s opinion.
  The Parkses prevailed on all points in the district court:
a jury found in their favor on their breach of contract
and breach of fiduciary duty claims and awarded emo-
tional distress and punitive damages totaling over $3
million; the court found Norwest liable under the CFA and
gave the Parkses additional damages as well as attor-
neys’ fees. Norwest appeals, arguing that the breach of
contract and fiduciary duty claims cannot support emo-
tional distress and punitive damages. It also contests
its liability under the CFA. Although we sympathize with
the Parkses’ frustration, we conclude that the law is on
Norwest’s side. We therefore vacate the award of damages
for emotional distress and the punitive damages and
reverse the district court’s finding of liability under the
CFA.


                              I
   The Parkses owned two adjacent properties, each with its
own tax identification number. In 1993, the Parkses
obtained a mortgage from Norwest on one of the two lots.
Illinois law provides for two methods of paying one’s
property taxes: the property owner may pledge assets
Nos. 03-2663 and 03-2773                                    3

and be responsible for paying taxes herself; or she may
set up an escrow account with the mortgagee, who in that
case is responsible for paying the taxes out of the escrow
account. The Parkses chose to use the second method
and had Norwest handle their property taxes.
  In 1994, the Parkses combined the two lots. The combined
parcel was given a new tax identification number. When the
service company Norwest used to administer its property
tax obligations paid the taxes for 1994 (the first installment
of which was due in May 1995), the company found the new
parcel number and paid accordingly. By the time the second
installment was due (August 1995), however, Norwest had
stopped using that facility. Norwest did not detect the
change in tax identification numbers; instead, it errone-
ously made the payment using the prior, now-invalid
number. Because of the error, that tax payment was
returned to Norwest. Norwest redeposited the payment into
the escrow account and the second payment was never
made. Norwest claimed that it sent a letter to the Parkses
advising them about the refund and asking for any informa-
tion about it; the Parkses denied ever receiving any such
letter, and apart from a computer log indicating that the
letter was sent, no evidence of the letter ever turned up.
  In the meantime, because the August 1995 payment
was never properly made, the tax authority considered
the Parkses’ taxes delinquent in that amount. Kathy
Artman, an alert tax scavenger, spotted the fact that the
county records showed no August 1995 payment for the
1994 taxes. She moved quickly—indeed, as it turned out,
too quickly—and purchased the taxes at a December 1995
tax sale. She gave no notice to either the Parkses or to
Norwest’s local office. It does appear that in February 1996,
Artman sent a notice to Norwest’s national headquarters,
but that notice was never routed to the appropriate office.
  After the 1995 glitch, Norwest continued to pay the
taxes on the Parkses’ property, using the correct tax
4                                  Nos. 03-2663 and 03-2773

identification number from May 1996 through August 1998.
The true situation emerged with the second installment of
the taxes for 1997, which was due in September 1998. Both
Artman and Norwest paid the taxes. Ironically, this seems
to have been only the second time Artman had paid taxes
on the property. The county received Artman’s payment
first. When Norwest’s payment arrived, it was again
returned and credited to the Parkses’ escrow account.
  The period of redemption associated with the tax sale
ended on December 11, 1998. The Parkses failed to redeem,
and the tax deed was awarded to Artman on December 21,
1998. Once again, Artman did nothing to notify the Parkses
of this event, but she falsely verified in state court that she
had given notice of her acquisition of the deed to the
Parkses through personal service.
   On Saturday, January 30, 1999, Artman appeared at
the Parkses’ residence and claimed that she owned the
property. On Monday, the Parkses notified Norwest, which
immediately put two researchers on the job to find out what
could be going on. Their investigation revealed at last that
the second 1994 tax payment had been returned and that
Norwest had contacted the county in December 1995 after
it failed to hear from the Parkses. According to Norwest’s
notes, the county informed them that the “first half [was]
also paid by customer.” Norwest thought that the county
must have meant the second half; had that been so, it was
understandable that Norwest’s payment was returned,
because it would have been duplicative. The county,
however, meant what it said. It was Artman who had made
the second payment, not the Parkses. Norwest’s tax depart-
ment also discovered the February 1996 “take notice” letter
from Artman that had been misrouted and never sent to the
tax department. At that point, Norwest retained counsel to
fight the execution of the tax deed.
 On February 4, 1999, the Parkses filed an emergency
motion to stay execution of the tax deed judgment in state
Nos. 03-2663 and 03-2773                                  5

court. The next day the court stayed the order of possession
and gave leave to Norwest to intervene. Norwest and the
Parkses moved to vacate the tax deed on the basis
that Artman had fraudulently procured the deed by lying
about the notice. The court agreed and vacated the deed
judgment, finding that Artman had committed “actual
fraud” in falsely swearing in her petition that she had
caused the sheriff to make personal service on “parties
residing in the county,” when she did not.
   Norwest redeemed the taxes and the tax deed was
vacated in August 1999. Five months later, the court issued
an order stating that it “vacate[d] and extinguish[ed] all
right, title, interest, claim or demand, whatsoever that
Kathy Artman may have acquired” in the Parkses’ property.
The Parkses also negotiated an agreement with Artman
whereby she paid part of the Parkses’ legal expenses.
Unsatisfied, the Parkses then brought the present lawsuit
against Norwest. The breach of contract and breach of
fiduciary duty claims were tried to a jury, which found for
the Parkses on January 14, 2003. The jury awarded the
Parkses $4,000 in compensatory damages, $150,000 in
emotional distress damages, and $3 million in punitive
damages. The Illinois Consumer Fraud Act claim was tried
to the court, which found in favor of the Parkses on March
31, 2003, awarding damages, attorneys’ fees, and costs.
Norwest moved for a new trial, or in the alternative, for
remittitur of the punitive damages. The district court
denied the new trial but did reduce the punitive damages to
$820,000. Norwest’s appeal covers everything except its
liability for the $4,000 in compensatory damages.
6                                 Nos. 03-2663 and 03-2773

                             II
                             A
  We consider first Norwest’s challenge to the emotional
damage component of the jury’s verdict in the breach of
contract and breach of fiduciary part of the case. Illinois,
whose law applies to this case, does not ordinarily
allow punitive and emotional distress damages for breaches
of contract. See Morrow v. L.A. Goldschmidt Assocs., Inc.,
492 N.E.2d 181, 183-84 (Ill. 1986) (holding that a plaintiff
must prove an independent tort to recover exemplary
damages). “[D]amages for breach will not be given as
compensation for mental suffering, except where the breach
was wanton or reckless and caused bodily harm, or where
defendant had reason to know, when the contract was
made, that its breach would cause mental suffering for
reasons other than mere pecuniary loss.” Maere v. Chur-
chill, 452 N.E.2d 694, 697 (Ill. App. Ct. 1983). Even in cases
where plaintiffs have sued builders and contractors over
construction defects in their homes, courts have refused to
award punitive damages unless the conduct causing the
breach is also a tort. Morrow, 492 N.E.2d at 184. The
breach must amount “ ‘to an independent tort and there
[must be] proper allegations of malice, wantonness or
oppression.’ ” Id. (quoting Bank of Lincolnwood v. Comdisco,
Inc., 444 N.E.2d 657, 662 (Ill. App. Ct. 1986)).
  The Parkses claim that because they stood to lose their
home if the taxes were not paid correctly, that emotional
damages are appropriate. But this is merely to say that the
damages from this breach of contract are particularly
serious, not that the case presents something more than
a contractual issue. There is no evidence in the record
that Norwest failed to pay the Parkses’ taxes out of
malice or wantonness or oppression. See id. Norwest
made three mistakes. First, it failed to investigate the
return of the second installment of property taxes in 1995,
Nos. 03-2663 and 03-2773                                     7

which led to Artman’s purchase of the taxes. Second, it
failed to route the “take notice” form that Artman sent
in 1995 to the correct department. Third, it failed prop-
erly to investigate the return of the 1997 taxes in 1998.
On the other hand, once Norwest became aware that
Artman had been issued a tax deed, it acted quickly to
protect its interest (and that of the Parkses) in the property.
The Parkses provided no evidence that Norwest’s failures to
act appropriately were purposefully done to harm the
Parkses.
  Although Norwest’s missteps did put at risk the
Parkses’ ownership of their home, the kind of emotional
disturbance they suffered falls outside the ambit of contract
law. We have no doubt that anyone would suffer emotional
harm from losing his or her home, or even from facing such
a possibility. But that loss is, in contractual terms, a
consequential harm from Norwest’s failure to perform the
duty it undertook in its agreement with the Parkses.
Norwest promised to do one specific thing: to pay the
property taxes associated with the mortgaged parcel(s). Its
failure to perform that undertaking cannot give rise to
anything more than liability for the direct consequences of
its omission. See, e.g., Hanumadass v. Coffield, Ungaretti &
Harris, 724 N.E.2d 14, 18 (Ill. App. Ct. 1999) (holding that
a lawyer-client relationship does not give rise to a duty to
protect the client’s emotional well-being). For example, if an
employer fires an employee, in breach of an employment
contract, no doubt the employee experiences some emotional
harm from the firing. But the employer is liable for no more
than the damages that flow directly from the breach,
normally salary or other compensation. Put differently,
absent fraud or malice, contractual damages are measured
ordinarily by the value of the promise; they do not, like tort
damages, attempt to restore the party to the status quo
ante. Compare Oliver Wendell Holmes, The Path of the Law,
10 HARV.L.REV. 457, 462 (1897) (“The duty to keep a
8                                 Nos. 03-2663 and 03-2773

contract at common law means a prediction that you must
pay damages if you do not keep it—and nothing else.”) with
W. Keeton, et al., PROSSER AND KEETON ON THE LAW OF
TORTS § 2 at 7 (5th Ed. 1984) (“the civil action for a tort . .
. is commenced and maintained by the injured person, and
its primary purpose is to compensate for the damage
suffered, at the expense of the wrongdoer.”). The existence
of a contract limits the damages; both parties know from
the start the possible extent of their liability. In tort, in
contrast, the person causing injury takes the victim as she
finds her, and sometimes that can mean large damages.
Here, Norwest’s duty was contractual—to pay the Parkses’
property taxes on time, and to account to the Parkses for
the money spent. Without more, the breach of that duty
does not support emotional damages.


                              B
  Next, we consider Norwest’s challenge to the award of
punitive damages. We review the appropriateness of
punitive damages de novo. Lampley v. Onyx Acceptance
Corp., 340 F.3d 478, 482 (7th Cir. 2003). We consider
whether the evidence, when viewed in a light most favor-
able to the prevailing party, suffices to support the ver-
dict. Medcom Holding Co. v. Baxter Travenol Labs., Inc.,
106 F.3d 1388, 1402 (7th Cir. 1997).
  Illinois law disfavors punitive damages. See Smith v.
Prime Cable of Chicago, 658 N.E.2d 1325, 1336 (Ill. App. Ct.
1995). They are recoverable only “where the alleged miscon-
duct is outrageous either because the acts are done with
malice or an evil motive or because they are performed with
a reckless indifference toward the rights of others.” Id.
Ordinary negligence does not support an award of punitive
damages. This means that the Parkses had to prove more
than “mere inadvertence, mistake, [or] errors of judgment.”
Loitz v. Remington Arms Co., 563 N.E.2d 397, 402 (Ill.
Nos. 03-2663 and 03-2773                                   9

1990). They had to demonstrate that Norwest exhibited a
“conscious and deliberate disregard” for their rights. Burke
v. 12 Rothschild’s Liquor Mart, Inc., 593 N.E.2d 522, 531
(Ill. 1992).
  The district court found that Norwest had not acted out of
malice or with an evil motive, but that it had shown a
reckless indifference towards the Parkses’ rights. Norwest
responds that it made three mistakes, which amounted to
no more than simple negligence. Let us look again at the
record. Norwest failed to investigate the return of the
second installment of property taxes in 1995. The tax
payment was returned because Norwest had made the
payment to the old identification number. The return of a
tax payment does not automatically signal a problem.
Often, homeowners will also make a tax payment, even
though they do not have to, and the payment made by
the bank will be returned. Had this been a situation
where both the Parkses and Norwest made the tax pay-
ment, Norwest’s actions would have been appropriate.
Unfortunately, however, this was not a situation where two
payments were made; rather, no payment was made,
leading to Artman’s purchase of the taxes at a tax sale.
Artman then sent Norwest a “take notice” form, alerting
them that she had purchased the taxes. Artman, however,
sent that form to the wrong Norwest office, and it was never
routed to the appropriate department. Two years then
passed without any indication of a problem until 1998 when
a tax payment for 1997 was returned and Norwest again
failed to investigate that refund.
   Nothing in this scenario suggests that Norwest’s actions
amounted to “such gross negligence as to indicate a wanton
disregard of the rights of others.” Loitz, 563 N.E.2d at 402.
Perhaps most important, the interests of the Parkses and
Norwest were aligned. Norwest had given the Parkses a
mortgage on their property, secured by the property itself.
If the Parkses were to lose their house to Artman, Norwest
10                                 Nos. 03-2663 and 03-2773

would lose its security. Any reckless indifference Norwest
exhibited towards the Parkses would have been equally
detrimental to its own ability to rely on the property as
security for the repayment of the mortgage.
  One of the purposes of punitive damages is to punish a
defendant who might otherwise find that its behavior
was cost-effective. See A. Mitchell Polinsky & Steven
Shavell, Punitive Damages: An Economic Analysis, 111
HARV. L. REV. 869, 887 (1998) (“[I]f a defendant can some-
times escape liability for the harm for which he is responsi-
ble, the proper magnitude of damages is the harm the
defendant has caused, multiplied by a factor reflecting the
probability of his escaping liability.”). As we have just
noted, Norwest stood to lose as much as the Parkses by its
handling of the taxes. The risk of losing its security interest
provided an ample incentive to Norwest to put measures in
place to prevent this type of occurrence. Indeed, Norwest
had a system in place. Granted, the system failed in this
particular case, but that failure does not mean that punish-
ment is appropriate. As soon as Norwest learned of the
problem, it set out to make matters right, and it succeeded
in doing so in relatively short order. Its liability to the
Parkses must be limited to the amount of actual damages
caused, and so we hold that the award of punitive damages
must be vacated.


                              C
   Finally, we turn to the Parkses’ entitlement to recover
under the CFA. To state a violation of the CFA, the plain-
tiffs must prove three elements: (1) an unfair or deceptive
act or practice by the defendant; (2) the defendant’s intent
that plaintiff rely on the deception; and (3) the occurrence
of the deception in the course of conduct involving trade or
commerce. Siegel v. Levy Org. Dev. Co., Inc., 607 N.E.2d
194, 198 (Ill. 1992). The district court found that although
Nos. 03-2663 and 03-2773                                   11

the mistakes made by Norwest were not intentional,
nevertheless its conduct in the face of the three mistakes
“rose to the level of misconduct that is actionable under the
CFA.” We review the district court’s interpretation of the
law de novo. Cerros v. Steel Tech., Inc., 288 F.3d 1040, 1044
(7th Cir. 2002).
  The district court found that Norwest’s failure to in-
form the Parkses about the true state of their taxes was
a material omission, and that Norwest intended for the
Parkses to rely on the tax statement. Although true to
a point, it is unclear what sort of “reliance” Norwest
intended. Surely Norwest intended that the Parkses rely on
the statement as a true statement of their escrow account,
but Norwest did not intend for the Parkses to fail to pay
their taxes. In this case, the Parkses’ reliance on the
misstatements meant both that they could lose their home
and Norwest could lose its security. Although in some
circumstances innocent misrepresentations may form the
basis of a CFA claim, we can find no Illinois case that
extends the law to a situation like this one, in which a
failure to disclose information inflicted as much injury
on the defendant as on anyone else. There was no benefit
that could flow to Norwest as a result of its failure to detect
the tax payment mix-up, and so we find that the available
evidence fails to support a claim under the CFA.


                             III
  We realize that, for a brief time, the Parkses must have
been seriously worried about the prospect of losing their
home as a result of Norwest’s errors. Nonetheless,
Norwest’s actions were not the sort that can support
emotional or punitive damages, nor can they form the basis
of a claim under the CFA. We therefore VACATE the award
of emotional distress and punitive damages and REVERSE
the district court’s finding of liability under the CFA.
12                           Nos. 03-2663 and 03-2773

A true Copy:
      Teste:

                    ________________________________
                    Clerk of the United States Court of
                      Appeals for the Seventh Circuit




               USCA-02-C-0072—2-23-05
