Case Title: Lee v. Nationwide Cassel, L.P.

Citation: 

Docket Number: 80465

State: illinois

Court: Illinois Supreme Court

Date: 1996-11-21T00:00:00Z

Document:
NOTICE: Under Supreme Court Rule 367 a party has 21 days after the 
filing of the opinion to request a rehearing. Also, opinions are 
subject to modification, correction or withdrawal at anytime prior 
to issuance of the mandate by the Clerk of the Court. Therefore, 
because the following slip opinion is being made available prior to 
the Court's final action in this matter, it cannot be considered 
the final decision of the Court. The official copy of the following 
opinion will be published by the Supreme Court's Reporter of 
Decisions in the Official Reports advance sheets following final 
action by the Court. 
 
              Docket No. 80465--Agenda 27--September 1996. 
    RODNEY LEE et al., Appellees, v. NATIONWIDE CASSEL, L.P., et al., 
                               Appellants. 
                    Opinion filed November 21, 1996. 
 
     JUSTICE HEIPLE delivered the opinion of the court: 
     Plaintiff Rodney Lee and counterclaimant Edelmira Rivera 
(hereinafter plaintiffs) sought to enjoin the enforcement of 
certain motor vehicle installment sales contracts by 
defendant/counterdefendant Nationwide Cassel, L.P., d/b/a 
Nationwide Acceptance Corp. and N.A.C. Management Corp. 
(hereinafter defendant). Plaintiffs also sought compensatory and 
punitive damages under the Illinois Consumer Fraud and Deceptive 
Business Practices Act (815 ILCS 505/2 (West 1992)) and the 
Illinois Sales Finance Agency Act (205 ILCS 660/16 (West 1992)). 
The circuit court of Cook County consolidated the two cases and 
dismissed plaintiffs' claims on the pleadings. 735 ILCS 5/2--615 
(West 1992). The appellate court reversed and remanded. 277 Ill. 
App. 3d 511. We allowed defendant's petition for leave to appeal. 
155 Ill. 2d R. 315. For the reasons that follow, we affirm in part 
and reverse in part. 
 
                      FACTUAL AND PROCEDURAL HISTORY 
     In August 1991, Lee's roommate, Dennis L. Davis, attempted to 
purchase a car from Tower Oldsmobile, Inc. Davis completed a credit 
application at the dealership in order to obtain financing for the 
vehicle. Defendant, a sales finance agency which purchases 
installment contracts from dealerships, was notified of Davis' 
application and ordered a credit report. Based on the credit 
information, the dealership refused to approve Davis' application 
unless he provided a co-signer for the purchase of the vehicle. 
     At Davis' request, Lee agreed to act as co-signer. Lee 
completed a credit application at the dealership which identified 
him as a "co-signer for Davis." Defendant obtained a credit report 
on Lee, after which the dealership approved financing of the 
vehicle. Both Davis and Lee signed the sales contract on lines 
marked "buyer," even though the contract contained a separate line 
marked "guarantor." 
     The facts of Rivera's claim are similar. Her friend, Rommel 
Gonzalez, attempted to purchase a vehicle at Olympic Hyundai. When 
Gonzalez applied for financing at the dealership, defendant 
requested credit information on him. The dealership refused to 
approve the loan unless Gonzalez provided a co-signer. Rivera 
agreed to act as co-signer, and furnished credit information to 
defendant. The financing was then approved. Gonzalez and Rivera 
signed the contract on lines marked "buyer," leaving blank the line 
entitled "guarantor." 
     Sometime after Davis and Gonzalez took delivery of the 
vehicles, each of them failed to make scheduled loan payments to 
defendant. Without instituting legal proceedings against Davis, 
defendant demanded that Lee pay the debt, and attempted to enforce 
a wage assignment against him. Defendant also demanded payment from 
Rivera and instituted a collection action against her and Gonzalez. 
     Lee then filed a complaint seeking to enjoin defendant's 
enforcement of the contract against him. Lee alleged that section 
18 of the Motor Vehicle Retail Installment Sales Act (815 ILCS 
375/18 (West 1992)) prevents defendant from holding him liable 
under the contract because he did not actually receive the vehicle 
and he was not the parent or spouse of a person who actually 
received the vehicle. Lee also sought compensatory and punitive 
damages under the Consumer Fraud and Deceptive Business Practices 
Act (815 ILCS 505/1 et seq. (West 1992)) and the Sales Finance 
Agency Act (205 ILCS 660/1 et seq. (West 1992)) for defendant's 
alleged attempts to create and enforce liability on his part for 
the debt when section 18 of the Motor Vehicle Retail Installment 
Sales Act precludes such liability. In the collection suit brought 
against her, Rivera filed a counterclaim containing substantially 
the same allegations as those in Lee's complaint. 
     After consolidating the two actions, the circuit court granted 
defendant's motion to dismiss based on section 2--615 of the Code 
of Civil Procedure (735 ILCS 5/2--615 (West 1992)). The court found 
that under Magna Bank v. Comer, 274 Ill. App. 3d 788 (1992), the 
plaintiffs' signatures on the contracts as buyers made them jointly 
liable with their friends who also signed as buyers, 
notwithstanding the allegations that plaintiffs, unlike their 
friends, never actually received the vehicles. The court stated in 
its memorandum of opinion that it was obligated to "follow the 
decision of the Fourth District [of the] Appellate Court [in Comer] 
if it applies since there is no First District decision on this 
issue." The circuit court also dismissed the counts based on the 
Consumer Fraud and Deceptive Business Practices Act and the Sales 
Finance Agency Act because plaintiffs failed to allege any fraud or 
misrepresentation by defendant. 
     The appellate court reversed and remanded. 277 Ill. App. 3d 
511. It noted that since the time of the trial court's dismissal of 
plaintiffs' claims, two appellate court opinions from the First 
District had departed from Comer by holding that section 18 of the 
Motor Vehicle Retail Installment Sales Act limits primary liability 
under an automobile installment contract to those consumers who 
take physical possession of the vehicle. See Arca v. Colonial Bank 
& Trust Co., 265 Ill. App. 3d 498 (1994); Taylor v. Trans 
Acceptance Corp., 267 Ill. App. 3d 562 (1994). The instant 
appellate court panel likewise rejected Comer and followed Arca and 
Taylor by holding that plaintiffs were not liable under the 
contracts because they did not actually receive the vehicles. In 
addition, the court held that plaintiffs had set out facts with 
sufficient particularity to state a claim under the Consumer Fraud 
and Deceptive Business Practices Act by alleging that defendant 
attempted to create and enforce liability against them when it knew 
they could not legally be held liable under the contracts. 
 
                                 ANALYSIS 
                          I. Co-Signer Liability 
     In considering a motion to dismiss, we accept as true all 
well-pleaded facts and draw all inferences from those facts in 
favor of the nonmovant. Meerbrey v. Marshall Field & Co.,  139 Ill. 2d 455 , 473 (1990). We will sustain a dismissal for failure to 
state a claim only if it clearly appears that no set of facts could 
be proved under the allegations which would entitle the party to 
relief. Meerbrey, 139 Ill. 2d  at 473. 
     Section 18 of the Motor Vehicle Retail Installment Sales Act 
is entitled "Co-signers" and provides as follows: 
               "18. Each person, other than a seller or holder, 
          who signs a retail installment contract may be held 
          liable only to the extent that he actually receives the 
          motor vehicle described or identified in the contract, 
          except that a parent or spouse who co-signs such retail 
          installment contract may be held liable to the full 
          extent of the deferred payment price notwithstanding such 
          parent or spouse has not actually received the motor 
          vehicle described or identified in the contract and 
          except to the extent such person other than a seller or 
          holder, signs in the capacity of a guarantor of 
          collection. 
               The obligation of such guarantor is secondary, and 
          not primary. The obligation arises only after the seller 
          or holder has diligently taken all ordinary legal means 
          to collect the debt from the primary obligor, but has not 
          received full payment from such primary obligor or 
          obligors. 
               No provisions in a retail installment contract 
          obligating such guarantor is valid unless: 
               (1) there appears below the signature space provided 
          for such guarantor the following: 
               `I hereby guarantee the collection of the above 
          described amount upon failure of the seller named herein 
          to collect said amount from the buyer named herein.'; and 
               (2) unless the guarantor, in addition to signing the 
          retail installment contract, signs a separate instrument 
          in the following form: 
 
          `EXPLANATION OF GUARANTOR'S OBLIGATION 
               You ... (name of guarantor) by signing the retail 
          installment contract and this document are agreeing that 
          you will pay $ ... (total deferred payment price) for the 
          purchase of ... (description of goods or services) 
          purchased by ... (name of buyer) from ... (name of 
          seller). 
               Your obligation arises only after the seller or 
          holder has attempted through the use of the court system 
          to collect this amount from the buyer. 
               If the seller cannot collect this amount from the 
          buyer, you will be obligated to pay even though you are 
          not entitled to any of the goods or services furnished. 
          The seller is entitled to sue you in court for the 
          payment of the amount due.' 
               The instrument must be printed, typed, or otherwise 
          reproduced in a size and style equal to at least 8 point 
          bold type, may contain no other matter (except a union 
          printing label) than above set forth and must bear the 
          signature of the co-signer and no other person. The 
          seller must give the co-signer a copy of the retail 
          installment contract and a copy of the co-signer 
          statement." 815 ILCS 375/18 (West 1992). 
     Plaintiffs contend that they are exempt from liability under 
this section because they did not actually receive the vehicles 
that were the subject of the contracts, and because they are 
neither parents nor spouses of their friends who did actually 
receive the vehicles. Plaintiffs also allege that defendant 
instructed the dealership to have them sign the contracts as 
buyers, and that they were never shown or asked to sign an 
instrument entitled "Explanation of Guarantor's Obligation" as 
described in the statute. 
     Defendant contends that plaintiffs are primarily obligated for 
the debts because they signed the contracts as buyers rather than 
guarantors. Defendant also argues that under section 18, plaintiffs 
"actually received" the motor vehicles because plaintiffs were 
listed as owners on the certificates of title issued for the 
vehicles. 
     As originally enacted in 1967, section 18 simply provided that 
a person "other than the retail buyer or spouse of the buyer" could 
not be held liable under a motor vehicle installment contract 
unless that person received and signed a form entitled "Explanation 
of Co-Signer Obligation." This form explained that the co-signer 
could be sued and held liable for the full amount of the debt even 
though the buyer might have funds to pay the amount due. Ill. Rev. 
Stat. 1969, ch. 121«, par. 578. 
     Section 18 was substantially amended in 1975, resulting in the 
version at issue, quoted above in its entirety. This 1975 amendment 
changed the statute by providing that no person who signs a motor 
vehicle installment contract may be held liable for the debt unless 
he actually receives the vehicle, is the parent or spouse of 
someone who actually receives the vehicle, or signs in the capacity 
of a guarantor of collection. The amended statute further provides 
that the obligation of a guarantor of collection is secondary, and 
not primary. The statute explains that this secondary liability 
arises only after attempts to collect the full amount of the debt 
from the primary obligor through the legal process have failed. 
     A comparison of the 1975 amended statute with its predecessor 
conclusively demonstrates that plaintiffs may not be held liable 
under the instant installment sales contracts. Defendant contends 
that plaintiffs are primarily liable because they signed the 
contracts as buyers and not as guarantors. Under the amended 
statute, however, primary liability depends not on the capacity in 
which a person purportedly signs the contract, but rather on the 
person's actual receipt of the vehicle. The 1975 amendment 
specifically deleted the term "retail buyer" from the statute and 
substituted the word "person" in its place. The effect of this 
change is to prohibit a person from being held primarily liable 
under a motor vehicle installment contract if that person does not 
actually receive the vehicle and is not the spouse or parent of a 
person who actually receives the vehicle. 
     Defendant argues that plaintiffs did "actually receive" the 
vehicles as required by the amended statute because their names 
were placed on the vehicles' titles. This argument erroneously 
equates "actual receipt" with "legal receipt" and thereby 
completely ignores the effect of the 1975 amendment. Prior to the 
amendment, any "retail buyer" of a vehicle under an installment 
contract could be held liable for the debt regardless of whether he 
"actually received" the vehicle. The name of any such "retail 
buyer" would, of course, be placed on the vehicle's title. By 
omitting any reference to the "retail buyer," the amended statute 
renders irrelevant for purposes of installment sales liability the 
vehicle's legal ownership status. [fn 1]  Among those persons who 
sign the sales contract, only those who actually receive physical 
possession of the vehicle may be held primarily liable. 
     Plaintiffs allege that they did not actually receive the 
vehicles described in the contracts, but were instead included in 
the sales transactions solely as co-signers for their friends. 
Plaintiffs also allege that they have not had the vehicles in their 
physical possession at any time. Under these alleged facts, 
plaintiffs may not be held primarily liable under the contracts. In 
addition, we note that plaintiffs allege that they did not sign the 
statutorily mandated form explaining the obligation of a guarantor. 
Given this alleged fact, plaintiffs also may not be held 
secondarily liable. 815 ILCS 375/18 (West 1992). 
     Defendant contends in the alternative that if primary 
liability under section 18 is predicated solely on actual receipt 
of the vehicle as evidenced by physical possession rather than by 
legal ownership, then the statute is unconstitutionally vague under 
the due process clause of the United States Constitution (U.S. 
Const., amend. XIV). We find this contention to be without merit. 
It is our duty to construe acts of the legislature so as to affirm 
their constitutionality and validity if it can reasonably be done. 
People v. Bales,  108 Ill. 2d 182 , 188 (1985). The determination of 
whether a statute is void for vagueness must be made in the factual 
context of each case. Bales, 108 Ill. 2d  at 189. Under the alleged 
facts, defendant was clearly on notice that plaintiffs would not 
actually receive the vehicles by taking physical possession of 
them. The statute is therefore not unconstitutionally vague. 
     We hold that the circuit court erred in finding plaintiffs 
liable under the contracts. 
 
                     II. Fraud and Deceptive Practices 
     Plaintiffs allege that defendant violated the Consumer Fraud 
and Deceptive Business Practices Act (815 ILCS 505/2 (West 1992)) 
and the Sales Finance Agency Act (205 ILCS 660/16 (West 1992)) by 
attempting to create and enforce liability against them under the 
contracts when such liability was precluded by section 18 of the 
Motor Vehicle Retail Installment Sales Act (815 ILCS 375/18 (West 
1992)). Defendant responds that its actions were based on its 
belief that plaintiffs could be held liable under section 18 if 
they signed as buyers and placed their names on the vehicles' 
titles. 
     The Consumer Fraud and Deceptive Business Practices Act 
prohibits "the use or 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 the concealment, suppression or omission of such 
material fact." 815 ILCS 505/2 (West 1992). The Sales Finance 
Agency Act (205 ILCS 660/1 et seq. (West 1992)) prohibits, inter 
alia, conduct by a sales finance agency that is deceptive, 
fraudulent, or committed in willful violation of the Motor Vehicle 
Retail Installment Sales Act or with actual knowledge that the 
Motor Vehicle Retail Installment Sales Act is being violated. 205 
ILCS 660/8.7, 8.9, 8.3, 8.5 (West 1992). 
     An examination of the pleadings filed in this action reveals 
that plaintiffs have failed to allege facts sufficient to state a 
claim against defendant under either the Consumer Fraud and 
Deceptive Business Practices Act or the Sales Finance Agency Act. 
Plaintiffs allege that defendant directed the auto dealerships to 
have plaintiffs sign the contracts as buyers and place plaintiffs' 
names on the vehicles' titles. As discussed above, this alleged 
conduct by defendant was entirely ineffective to obligate 
plaintiffs under the contracts. The futility of defendant's conduct 
does not, however, render that conduct fraudulent. 
     A fraudulent statement is one that is made with knowledge that 
it is false or with reckless disregard of its truth or falsity. 
McMeen v. Whipple,  23 Ill. 2d 352 , 355 (1961). Defendant's alleged 
misrepresentation that plaintiffs were primarily liable under the 
contracts was based upon an erroneous interpretation of section 18 
of the Motor Vehicle Retail Installment Sales Act (815 ILCS 375/18 
(West 1992)). The appellate court in Magna Bank v. Comer, 274 Ill. 
App. 3d 788 (1992), arrived at this same erroneous interpretation 
when called upon to construe the statute. Given this uncertainty 
about the applicable law, the pleadings here fail to adequately 
allege that defendant knew that plaintiffs could not be held liable 
under the contracts, or that defendant acted with reckless 
disregard of whether plaintiffs could be held liable. Similarly, 
plaintiffs have not alleged that defendant engaged in the 
concealment, suppression, or omission of a material fact, since 
plaintiffs' immunity from liability was not a fact known to 
defendant, but rather was a disputed question of law. 
     Finally, plaintiffs have likewise failed to state a claim 
under the Sales Finance Agency Act by alleging that defendant 
willfully or with actual knowledge violated section 18 of the Motor 
Vehicle Retail Installment Sales Act because, under the state of 
the law at the time, it was impossible for defendant to have had 
actual knowledge that plaintiffs could not be held liable under the 
contracts. The trial court thus did not err in dismissing 
plaintiffs' claims for failing to allege fraud with specificity. 
 
                                CONCLUSION 
     For the foregoing reasons, we reverse in part and affirm in 
part the judgments of the appellate and circuit courts, and remand 
this cause to the circuit court for further proceedings consistent 
with this opinion. 
 
Appellate court judgment affirmed in part 
                                                    and reversed in part; 
                                  circuit court judgment affirmed in part 
                                                    and reversed in part; 
                                                          cause remanded. 
 
 
 
[fn 1] We note that section 18 has recently been amended once 
again.  Pub. Act 89--650, eff. January 1, 1997 (amending 815 ILCS 
375/18). Under the new version of the statute, any person who signs 
a motor vehicle retail installment contract and is listed on the 
certificate of title issued for the vehicle is primarily liable for 
the debt.  Defendant contends that this amendment demonstrates that 
all persons listed on the vehicle's title are primarily liable 
under the version of the statute at issue as well.  We believe the 
amendment compels precisely the opposite conclusion.  If 
defendant's contention were correct, there would have been no need 
to amend the statute.