Title: Jarvis v. South Oak Dodge, Inc.

State: illinois

Issuer: Illinois Supreme Court

Document:

Docket No. 91354-Agenda 19-January 2002.
RICHARD JARVIS et al., Appellees, v. SOUTH OAK DODGE,
								INC., et al. (Gold Key Lease, Inc., Appellant).
Opinion filed June 20, 2002.
	 
	JUSTICE FITZGERALD delivered the opinion of the court:
	In this consumer fraud case, we examine the relationship
between Illinois' Motor Vehicle Leasing Act (Leasing Act) (815
ILCS 636/1 et seq. (West 2000)) and the federal Truth in Lending
Act (TILA) (15 U.S.C. §1601 et seq. (2000)). The question we
consider is whether the holder of a consumer lease is subject to
state law claims for misrepresentations made by the lessor to the
consumer that are not apparent on the face of the lease. We answer
this question in the negative.

BACKGROUND

	In June 1997, plaintiffs, Richard and Christine Jarvis, leased
a 1997 Dodge Stratus from defendant South Oak Dodge, Inc.
(dealer). The lease identified the dealer as the "lessor" and
defendant Gold Key Lease, Inc. (Gold Key) as the "holder" of the
lease. In accordance with the mandatory notice provision
contained in section 70 of the Leasing Act, the lease provided, in
bold-faced type, that any holder of the lease "is subject to all
claims and defenses which (1) the lessee could assert against the
lessor *** and (2) are apparent on the face of the consumer lease."
See 815 ILCS 636/70 (West 2000).
	In October 1998, plaintiffs filed a complaint against both
defendants in the circuit court of Du Page County.(1) In their
amended complaint, filed the following year, plaintiffs claimed
that the dealer's salesman fraudulently induced plaintiffs to enter
into the lease by making certain oral misrepresentations. Plaintiffs
alleged that the dealer's salesman falsely advised them that,
immediately upon execution of the lease, plaintiffs could pay off
the lease and purchase the vehicle at a certain price.
	In counts I and II of the amended complaint, plaintiffs claimed
that defendants violated the Consumer Fraud and Deceptive
Business Practices Act (815 ILCS 505/1 et seq. (West 2000)), and
committed common law fraud, respectively. In count III, directed
only against the dealer, plaintiffs sought revocation of their
acceptance of the lease. In count IV, which is the subject of this
appeal, plaintiffs sought rescission of the lease against Gold Key,
"[p]ursuant [t]o Federal Regulation 16 C.F.R. Sec. 433.2."
Plaintiffs claimed that, under this federal regulation, the holder of
a consumer lease is subject to all claims and defenses which the
lessee could assert against the lessor, and that Gold Key was thus
subject to a claim for rescission based on the misrepresentations
of the dealer/lessor.
	Gold Key filed a motion to dismiss under section 2-615 of the
Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2000)).
With respect to count IV, Gold Key argued that, based on the
statutory notice provision in the lease, it was subject to claims
which plaintiffs could assert against the dealer, only if such claims
were "apparent on the face" of the lease. Gold Key maintained that
plaintiffs' claim for rescission, based on alleged oral
misrepresentations made by the dealer's salesman, was not a claim
apparent on the face of the lease.
	The circuit court granted Gold Key's motion, dismissing
count IV with prejudice. The circuit court concluded that the
legislature's use of the conjunctive "and" between the two
elements of section 70 of the Leasing Act "necessarily must
indicate that the legislature required both listed elements to be
met," and that "the holder of a consumer lease is subject to the
claims and defenses which the lessee could assert against the
lessor if, and only if, those claims and defenses are apparent on the
face of the lease." The circuit court entered a finding of
appealability under Rule 304(a), and plaintiffs appealed. See 155
Ill. 2d R. 304(a). The appellate court reversed the dismissal of
count IV. 319 Ill. App. 3d 509.
	The appellate court agreed with plaintiffs that the conjunction
"and," between the two elements of section 70, should not be read
to limit the liability of the holder of a consumer lease to claims
"apparent on the face"of the lease, and that a lessee could pursue
whatever remedies were available to lessees prior to the adoption
of the Leasing Act. 319 Ill. App. 3d at 516-18. The appellate court
concluded, however, that plaintiffs could not seek rescission of the
lease based on the federal regulation cited in the amended
complaint and remanded the matter to the circuit court to allow
plaintiffs an opportunity to replead count IV. 319 Ill. App. 3d at
519-20.
	We allowed Gold Key's petition for leave to appeal (see 177
Ill. 2d R. 315), and now reverse the judgment of the appellate
court reversing the dismissal of count IV.

ANALYSIS

	A motion to dismiss under section 2-615 of the Code (735
ILCS 5/2-615 (West 2000)) challenges only the legal sufficiency
of the complaint. Board of Directors of Bloomfield Club
Recreation Ass'n v. The Hoffman Group, Inc., 186 Ill. 2d 419, 423
(1999). The critical inquiry is whether the allegations of the
complaint, when considered in a light most favorable to the
plaintiff, are sufficient to state a cause of action upon which relief
may be granted. Board of Directors of Bloomfield Club Recreation
Ass'n, 186 Ill. 2d  at 424; Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 490 (1996). All well-pleaded facts in the complaint must be
taken as true, but conclusions of law will not be taken as true,
unless supported by specific factual allegations. Ziemba v.
Mierzwa, 142 Ill. 2d 42, 47 (1991). We review the dismissal of a
complaint under section 2-615 de novo. Vernon v. Schuster, 179 Ill. 2d 338, 344 (1997).
	Whether the well-pleaded allegations of plaintiffs' amended
complaint are sufficient to withstand Gold Key's motion to
dismiss turns principally on an issue of statutory construction,
namely, the proper interpretation of the mandatory notice
provision in section 70 of the Leasing Act (815 ILCS 636/70
(West 2000)). Issues of statutory construction are also reviewed de
novo. In re Estate of Dierkes, 191 Ill. 2d 326, 330 (2000). Gold
Key maintains that the appellate court's construction of section 70
fails to give effect to the plain language of the Leasing Act and is
contrary to this state's policy against extending consumer
disclosure requirements beyond that mandated by federal law. We
agree.
	The purpose of the Leasing Act, effective January 1, 1997, is
to "promote the understanding of vehicle leasing in this State by
providing for the disclosure of lease obligations to consumer
lessees." 815 ILCS 636/5 (West 2000). To this end, section 25 of
the statute sets forth detailed requirements regarding both the form
and content of consumer leases. 815 ILCS 636/25 (West 2000).
Among other things, a consumer lease must contain "[a]ll items
required to be disclosed by the Consumer Leasing Act [15 U.S.C.
§1667 et seq. (2000)]." 815 ILCS 636/25(e)(1) (West 2000). The
Consumer Leasing Act, adopted by Congress in 1976 as an
amendment to subchapter I of TILA, requires the lessor to provide
the consumer certain information, including a statement as to
"whether or not the lessee has the option to purchase the leased
property and at what price and time." 15 U.S.C. §1667a(5) (2000).
Thus, the dealer's alleged misrepresentations in this case-that
plaintiffs could purchase the vehicle immediately upon execution
of the lease and at a specified price-concern details of the lease
transaction that must be disclosed under both federal and state law.
	Section 70 of the Leasing Act, at issue in this appeal, states:
			"No lessor shall take or receive a consumer lease which
fails to contain the following provision in at least 10-point, bold-faced type:
'NOTICE
				ANY HOLDER OF THIS CONSUMER LEASE IS
SUBJECT TO ALL CLAIMS AND DEFENSES
WHICH (1) THE LESSEE COULD ASSERT
AGAINST THE LESSOR OF THE VEHICLE
LEASED PURSUANT HERETO AND (2) ARE
APPARENT ON THE FACE OF THE CONSUMER
LEASE. RECOVERY BY THE LESSEE SHALL NOT
EXCEED AMOUNTS PAID BY THE LESSEE
HEREUNDER.' "  815 ILCS 636/70 (West 2000).
	Section 70 contains two elements which define the claims and
defenses to which the holder of a consumer lease is subject. These
elements are joined by the word "and." Generally, use of the
conjunctive "and" between two or more statutory elements
indicates that the legislature intended that all of the elements must
be satisfied in order to comply with the statute.  See 1A N. Singer,
Sutherland on Statutory Construction §21:14 (6th ed. 2002); see
also AFM Messenger Service, Inc. v. Department of Employment
Security, 198 Ill. 2d 380, 397 (2001) (because the three conditions
for statutory exemption were phrased in the conjunctive, all three
conditions must be satisfied for the exemption to apply).  Thus,
giving effect to the word "and" in its ordinary, conjunctive sense
means that a claim against the holder must be one that satisfies
both elements of section 70. The claim must be one that "the
lessee could assert against the lessor" and one that is "apparent on
the face" of the lease. 815 ILCS 636/70 (West 2000).
	This construction of section 70 is consistent with the stated
purpose of the Leasing Act: "to promote the understanding of
vehicle leasing." 815 ILCS 636/5 (West 2000). The disclosures
required under the statute, including the notice provision of section
70, can only promote understanding of vehicle leasing when the
disclosures mean what they say. Construing section 70 to mean
something other than what its plain language imports would foster
confusion and misunderstanding among consumers, thereby
defeating the statute's purpose.
	Moreover, this construction of section 70 is consistent with
this state's policy against extending consumer disclosure
requirements beyond that mandated by federal law. As set forth in
section 1641(a) of TILA, Congress has precluded assignee liability
unless the TILA violation is "apparent on the face" of the assigned
documents. Taylor v. Quality Hyundai, Inc., 150 F.3d 689, 691
(7th Cir. 1998). Section 1641(a) states:
			"Except as otherwise specifically provided in this
subchapter, any civil action for a violation of this
subchapter *** which may be brought against a creditor
may be maintained against any assignee of such creditor
only if the violation for which such action or proceeding
is brought is apparent on the face of the disclosure
statement, except where the assignment was involuntary.
For the purpose of this section, a violation apparent on the
face of the disclosure statement includes, but is not
limited to (1) a disclosure which can be determined to be
incomplete or inaccurate from the face of the disclosure
statement or other documents assigned, or (2) a disclosure
which does not use the terms required to be used by this
subchapter." (Emphasis added.) 15 U.S.C. §1641(a)
(2000).
Although section 1641(a) expressly refers only to assignees of a
"creditor," the Consumer Leasing Act makes section 1641(a)
applicable to assignees of a "lessor." See 15 U.S.C. §1667d (2000)
("For purposes of this section [governing civil liability of lessors],
the term 'creditor' as used in sections 1640 and 1641 of this title
shall include a lessor as defined in this part").  Accordingly, under
federal law, a subsequent holder, i.e., an assignee, of a consumer
lease is liable only for TILA violations "apparent on the face" of
the lease.
	 In Jackson v. South Holland Dodge, Inc., 197 Ill. 2d 39
(2001), this court considered whether an assignee who is free from
liability under federal law, based on section 1641(a) of TILA, may
nonetheless be liable for state consumer fraud claims based on
misrepresentations made by the dealer. In Jackson, the plaintiff
entered into a retail installment contract with the dealer in
connection with the purchase of a vehicle. The dealer subsequently
assigned the contract to Chrysler Financial Corporation (Chrysler).
The plaintiff brought a class action lawsuit against the dealer and
Chrysler, alleging, in relevant part, a violation of the Consumer
Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et
seq. (West 1994)). The plaintiff claimed that the manner in which
the dealer disclosed the price for the extended warranty in the
retail installment contract was deceptive and misleading. Chrysler
filed a motion to dismiss under section 2-615 of the Code (735
ILCS 5/2-615 (West 1998)), arguing that because the
misrepresentation by the dealer was not "apparent on the face" of
the assigned document, it could not be held liable. Chrysler
maintained that compliance with its obligations under TILA as an
assignee-to review the assigned document for irregularities
apparent on the face of the document-barred the plaintiff's state
law claim. The trial court agreed with Chrysler, and the appellate
court affirmed.
	In resolving the issue of Chrysler's potential liability, we
looked to our earlier opinion in Lanier v. Associates Finance, Inc.,
114 Ill. 2d 1 (1986). In Lanier, we held that the creditor's
compliance with the disclosure requirements of TILA was a
defense to liability under our consumer fraud statute and for
common law misrepresentation. Lanier, 114 Ill. 2d  at 11, 18. We
held that the same result should obtain in the Jackson case and
affirmed the dismissal of the plaintiff's consumer fraud claim.
Jackson, 197 Ill. 2d  at 50. We explained:
			"[T]here is no reason why Lanier's reach should not
extend to instances where an assignee is free from liability
under federal law because of the TILA exemption in
section 1641(a). As we noted in Lanier, there is a
consistent policy throughout Illinois law against extending
disclosure requirements beyond what is mandated by
federal law. Lanier, 114 Ill. 2d  at 17. If an assignee were
liable under the Consumer Fraud Act, though exempt
from liability under TILA, it would impose disclosure
requirements on assignees beyond those mandated by
federal law. This would frustrate the overarching reasons
put forth by Congress in enacting the assignee exemption,
i.e., to narrow assignee liability, to make compliance
easier for creditors, and to eliminate confusion as to the
responsibilities of assignees. [Citation.] Thus, we
conclude that an assignee is not responsible for the
misrepresentations made by the dealer to the consumer
outside of reviewing the face of the assigned document
for apparent defects." Jackson, 197 Ill. 2d  at 49-50.
	The result in the present case can be no different. Under
section 1641(a) of TILA, the assignee of a consumer lease is liable
only for defects "apparent on the face" of the lease. The holder's
liability under the Leasing Act must be similarly limited. The plain
language of section 70 reflects this limitation.
	Plaintiffs argue, however, that section 70 should be read in
concert with the federal regulation cited in their amended
complaint. See 16 C.F.R. §433.2 (2000). Plaintiffs contend that
when so read, section 70 preserves against the holder of a
consumer lease all claims and defenses that a lessee could assert
against the lessor. We disagree.
	The federal regulation on which plaintiffs rely was issued by
the Federal Trade Commission (FTC), the "overall enforcing
agency" designated by TILA. 15 U.S.C. §1607(c) (2000). This
FTC regulation requires that the following notice, commonly
referred to as the "FTC Holder Notice," appear in all "consumer
credit contracts":
"NOTICE
			ANY HOLDER OF THIS CONSUMER CREDIT
CONTRACT IS SUBJECT TO ALL CLAIMS AND
DEFENSES WHICH THE DEBTOR COULD ASSERT
AGAINST THE SELLER OF GOOD OR SERVICES
OBTAINED PURSUANT HERETO OR WITH THE
PROCEEDS HEREOF. RECOVERY HEREUNDER BY
THE DEBTOR SHALL NOT EXCEED AMOUNTS
PAID BY THE DEBTOR HEREUNDER."  16 C.F.R.
§433.2 (2000).
	Unlike section 70 of the Leasing Act, the FTC Holder Notice
does not limit a holder's liability to claims "apparent on the face"
of the assigned documents. Construing section 70 in concert with
the FTC Holder Notice would therefore render the "apparent on
the face" language ineffective. It is well settled, however, that a
statute should be construed so that no word or phrase is rendered
meaningless or superfluous. People v. Maggette, 195 Ill. 2d 336,
350 (2001); Kraft, Inc. v. Edgar, 138 Ill. 2d 178, 189 (1990).
	In addition, plaintiffs' reliance on the FTC Holder Notice
assumes that the notice is applicable to consumer leases. The
appellate court determined, however, that the FTC Holder Notice
does not apply to consumer leases because consumer leases do not
fit within the definition of "consumer credit contracts" to which
the notice does apply. 319 Ill. App. 3d at 518-19. Plaintiffs have
not directly challenged the appellate court's determination of this
issue.
	In any event, the FTC Holder Notice has been largely
superceded by subsequent federal legislation, namely, section
1641(a) of TILA. The regulation containing the FTC Holder
Notice was issued in 1975. See 16 C.F.R. §433.2 (2000), citing 40
Fed. Reg. 53,506 (1975); Taylor, 150 F.3d  at 692. In 1980,
Congress amended TILA and, in so doing, narrowed considerably
the potential scope of assignee liability. Taylor, 150 F.3d  at 692-93. The result of this amendment, section 1641(a), expressly limits
the liability of an assignee to defects "apparent on the face" of the
assigned documents. 15 U.S.C. §1641(a) (2000). As we
recognized in Jackson, "the unmistakable effect of the 1980
amendment is to trump the FTC's Holder Notice." Jackson, 197 Ill. 2d  at 54, citing Taylor, 150 F.3d  at 692-93. Accordingly, we
reject plaintiffs' argument that section 70 of the Leasing Act
should be read in conjunction with the FTC Holder Notice.(2)
	We also reject plaintiffs' argument that construing section 70
to limit the liability of the holder of a consumer lease to claims
apparent on the face of the lease is "harsh and unjust." We see no
injustice in refusing to make the holder of a consumer lease
responsible for the allegedly fraudulent conduct of the lessor.
Furthermore, the limitation on an assignee's liability is not
absolute. In addition to liability for defects apparent on the face of
the assigned documents, assignees are liable for their own
preassignment fraud. For instance, an assignee would be liable
under state law where it participated in a scheme with the motor
vehicle dealer to defraud a lessee. See Jackson, 197 Ill. 2d  at 52.
We note also that consumers such as plaintiffs are always free to
pursue relief for the lessor's misrepresentations or other fraud by
proceeding against the lessor. At the time of the appeal in this
case, plaintiffs' claims against the dealer/lessor for violation of the
Consumer Fraud Act, common law fraud, and revocation of their
acceptance of the lease were pending in the circuit court.
	Having determined that the holder of a consumer lease is
subject only to those claims which "the lessee could assert against
the lessor" and are "apparent on the face" of the lease (815 ILCS
636/70 (West 2000)), we conclude that the appellate court erred in
reversing the dismissal of count IV of plaintiffs' amended
complaint against Gold Key. Plaintiffs' claim seeking rescission
of the lease attempts to hold Gold Key liable for
misrepresentations of the dealer/lessor which are not apparent on
the face of the lease. Gold Key's obligation, however, under both
TILA and the Illinois Leasing Act, was limited to a review of the
assigned lease for defects apparent on its face.

CONCLUSION

	For the reasons discussed above, we reverse the judgment of
the appellate court reversing the dismissal of count IV, affirm the
judgment of the circuit court dismissing this count, and remand the
cause to the circuit court for further proceedings on plaintiffs'
claims against the dealer.

Appellate court judgment reversed;
circuit court judgment affirmed;
cause remanded.
	For the reasons set forth in my special concurrence in Jackson
v. South Holland Dodge, Inc., 197 Ill. 2d 39, 58-60 (2001)
(Kilbride, J., specially concurring), I agree with the majority's
judgment in this case but disagree with the majority's reasoning.
The majority correctly concludes plaintiffs have not sufficiently
plead a cause of action under the Consumer Fraud and Deceptive
Business Practices Act (Act) (815 ILCS 505/1 et seq. (West 1994))
against the holder of the lease, Gold Key Lease, Inc. I respectfully
contend, however, that the majority has again over-extended our
holding in Lanier.
	In Lanier, we noted that section 10b(1) of the Act provides
that it does not apply to " '[a]ctions or transactions specifically
authorized by laws administered by any regulatory body or officer
acting under statutory authority of this State or the United
States.' " (Emphasis added.) Lanier, 114 Ill. 2d  at 17, quoting Ill.
Rev. Stat. 1981, ch. 121½, par. 270b(1) (now 815 ILCS
505/10b(1) (West 2000)). Lanier thus limited exemptions from
liability to conduct that is directly required by TILA and not to
conduct that does not violate TILA. In this case, the majority has
again misapplied Lanier by holding that if there is no technical
violation of TILA, then the conduct is specifically authorized by
TILA. The accurate rule under Lanier is that, unless there is a
patent TILA violation (see 15 U.S.C. §1641(a) (1994)) or unless
a plaintiff can show active and direct, preassignment fraud on the
part of the assignee, a plaintiff cannot maintain a cause of action
against an assignee. 
	For these reasons, I respectfully concur only in the judgment
and I do not endorse the reasoning employed by the majority to
reach that judgment.
1.    1A third defendant, Chrysler Financial Corporation, was also named,
but claims against this defendant have been dismissed and are not a part
of this appeal. See 319 Ill. App. 3d 509, 512.

2.    2Tangentially, we note that the FTC Holder Notice has not been
rendered completely meaningless by section 1641(a) of TILA. The
notice "continues to fill a valuable role by confirming the right of
buyers to withhold payment from sellers or assignees, if it becomes
apparent that the car purchased is a lemon." Jackson, 197 Ill. 2d  at 54,
citing Ellis v. General Motors Acceptance Corp., 160 F.3d 703, 709
(11th Cir. 1998). The present case does not present this limited scenario.