Opinion ID: 2066000
Heading Depth: 2
Heading Rank: 4

Heading: Care Act

Text: The Comptroller does challenge, however, the trial court's findings with respect to the Care Act. The Comptroller argues that the trial court erred in finding that recent amendments to the Care Act could not be applied constitutionally to a purchaser at the foreclosure sale of Floral Lawns Cemetery. The trial court found that application of the amended act to such purchaser would retroactively impair the Bank's vested contractual rights in violation of the contract clauses of the State and Federal Constitutions. Examination and interpretation of the relevant provisions of the Care Act are necessary to determine whether the trial court's judgment was proper. Generally, the Care Act authorizes a cemetery authority licensed under that statute to collect money from purchasers of cemetery property and services. The cemetery authority must then hold such money in trust for the future care of cemetery property. Care is defined in the Act as the maintenance of a cemetery and of the lots, graves, crypts, niches, family mausoleums, memorials, and markers therein; including cutting and trimming of lawn, shrubs and trees at reasonable intervals; keeping in repair the drains, water lines, roads, buildings, fences and other structures, in keeping with a well maintained cemetery. 760 ILCS 100/2 (West 1992). The cemetery authority must obtain a license from the Comptroller before it is authorized to collect care funds from purchasers of cemetery property and services. (760 ILCS 100/7 (West 1992).) To insure that the cemetery authority has sufficient resources to maintain the cemetery in the future, the Care Act requires the authority to deposit a prescribed amount of care funds into a trust to be used for that purpose. (760 ILCS 100/2a, 4 (West 1992).) The statute authorizes the Comptroller to investigate and examine a cemetery's trust funds and to revoke licenses issued under the Care Act. 760 ILCS 100/7 through 15 (West 1992). At issue in this appeal are those sections of the Care Act which govern the dissolution and sale of privately owned cemeteries. As originally enacted, section 15a of the Care Act specified that, where a cemetery authority owning, operating, or managing a privately operated cemetery has accepted care funds and seeks dissolution, notice must be given to the Comptroller of such intention to dissolve and proper disposition made of care funds. Ill.Rev.Stat. 1957, ch. 21, par. 64.15a. Section 15a of the statute has been amended several times since it was added to the Care Act in 1955. In 1986, that section was amended to add the following language: In the case of a sale of any privately operated cemetery or any part thereof or of any related personal property by a cemetery authority to a purchaser,    the purchaser is liable for any shortages existing before or after the sale in the care funds required to be maintained in trust pursuant to this Act. (Pub. Act 84-239, § 28, eff. March 2, 1986.) In 1991, section 15a was again amended to add and shall honor all instruments issued under section 4 for that cemetery at the end of the above paragraph. On January 1, 1994, yet another amendment to the Care Act took effect. This amendment deleted the aforementioned paragraph from section 15a of the statute and substituted, in its place, an entirely new provision, section 15b, which states, in relevant part: In the case of a sale of any privately operated cemetery or any part thereof or of any related personal property by a cemetery authority to a purchaser or pursuant to foreclosure proceedings    the purchaser is liable for any shortages existing before or after the sale in the care funds required to be maintained in a trust pursuant to this Act and shall honor all instruments issued under Section 4 for that cemetery. Any shortages existing in the care funds constitute a prior lien in favor of the trust for the total value of the shortages, and notice of such lien shall be provided in all sales instruments. (Emphasis added.) (760 ILCS 100/15b (West Supp.1993), added by Pub. Act 88-477, § 10, eff. January 1, 1994.) This section 15b further provides that [f]or purposes of this Section, a person, firm, corporation, partnership, or institution that acquires the cemetery through a real estate foreclosure shall be subject to the provisions of this Section. 760 ILCS 100/15b (West 1992), added by Pub. Act 88-477, § 10, eff. January 1, 1994. As noted, the trial court held that section 15b, which was added by the 1994 amendment to the Care Act, could not constitutionally be applied to a purchaser at the Bank's foreclosure sale. The court held that application of section 15b to a purchaser at a foreclosure sale would impair vested rights that the Bank acquired under its mortgage contracts, in violation of the contract clauses of the State and Federal Constitutions. To avoid any constitutional infirmity in the statute, the trial court concluded that the legislature intended that the amendments would apply prospectively only, and not to foreclosure sales where the mortgage foreclosed was executed prior to the effective date of the amendments. Accordingly, the court declared that a purchaser at the Bank's foreclosure sale could not be held liable for shortages in trust funds maintained under the Care Act. Although the parties devote a significant portion of their briefs to a discussion of whether section 15b violates the contract clauses of the Federal and State Constitutions, we need not decide that constitutional question. We conclude that it is appropriate to resolve the questions raised in this appeal through the process of statutory construction. The fundamental purpose of statutory construction is to ascertain and give effect to the legislature's intent. ( Burke v. 12 Rothschild's Liquor Mart, Inc. (1992), 148 Ill.2d 429, 441, 170 Ill.Dec. 633, 593 N.E.2d 522.) Ordinarily, the statutory language provides the best evidence of the legislature's intent. ( American Country Insurance Co. v. Wilcoxon (1989), 127 Ill.2d 230, 130 Ill.Dec. 217, 537 N.E.2d 284.) Where the language of a statute is plain and unambiguous, courts must give that language effect without considering other indicia of legislative intent. Business & Professional People for the Public Interest v. Illinois Commerce Comm'n (1991), 146 Ill.2d 175, 207, 166 Ill.Dec. 10, 585 N.E.2d 1032. The Comptroller argues that the plain language of section 15b demonstrates that the legislative intended that section to apply to all sales of privately operated cemeteries that occur after its January 1, 1994, effective date, including the Bank's foreclosure sale. The Comptroller argues that the trial court erred in concluding that the legislature did not intend section 15b of the Care Act to apply to the Bank's foreclosure sale. We disagree. We first note that section 22 of the Care Act expressly addresses this question and states that nothing in the Act shall be construed to impair the obligation of any contract. (760 ILCS 100/22 (West 1992).) Section 22 is consistent with the presumption that our courts have repeatedly applied, namely, that statutes are presumed to apply prospectively only and will not be given retroactive effect absent clear language within the statute indicating that the legislature intended such effect. (See People v. Fiorini (1991), 143 Ill.2d 318, 333, 158 Ill.Dec. 499, 574 N.E.2d 612.) This court has stated: In the absence of express language declaring otherwise, an amendatory act is ordinarily construed as being prospective in its operation. [Citations.] This general rule is based upon the principle that the legislature may not impair the obligation of contracts [citation] or interfere with vested substantive rights. ( Maiter v. Chicago Board of Education (1980), 82 Ill.2d 373, 390, 47 Ill.Dec. 721, 415 N.E.2d 1034.) The Comptroller argues that no retroactive application of section 15b is necessary. The Comptroller argues that section 15b applies to the Bank's foreclosure sale, because that sale had not yet occurred when section 15b took effect. In essence, the Comptroller argues that retroactive application of section 15b does not occur if the foreclosure sale occurs after that section's effective date, even if the mortgage foreclosed was executed before section 15b took effect. The Bank responds that the Comptroller is seeking to apply section 15b retroactively. The Bank contends that applying section 15b to its foreclosure sale would violate the general rule prohibiting retroactive application of statutes, because such application would impair rights that the Bank acquired in mortgage contracts executed before section 15b took effect. The Bank argues that the legislature intended section 15b to apply only to foreclosure sales in which the mortgage lien foreclosed was acquired after the effective date of the amendment. Our courts have defined a retroactive law as `one that takes away or impairs vested rights acquired under existing laws, or creates a new obligation, imposes a new duty, or attaches a new disability in respect of transactions or considerations already past.' ( United States Steel Credit Union v. Knight (1965), 32 Ill.2d 138, 142, 204 N.E.2d 4.) Thus, retroactivity is defined in terms of the effect a law would have on vested contractual rights, not in terms of the time when a party happens to assert those rights. ( McAleer Buick-Pontiac Co. v. General Motors Corp., Pontiac Motor Division & Buick Motor Division (1981), 95 Ill.App.3d 111, 113-14, 50 Ill.Dec. 500, 419 N.E.2d 608; see also General Telephone Co. v. Johnson (1984), 103 Ill.2d 363, 383, 83 Ill.Dec. 133, 469 N.E.2d 1067.) The rule against giving a statute retroactive application is grounded at least in part upon the constitutional guarantee against impairment of the obligation of contracts, a guarantee that could be violated if a law enacted subsequent to a party's acquiring vested contractual rights were applied to that contract. ( McAleer Buick-Pontiac, 95 Ill.App.3d at 113-14, 50 Ill.Dec. 500, 419 N.E.2d 608.) Here, we must determine whether application of section 15b to the Bank's foreclosure sale would impair vested rights that the Bank acquired under its mortgage contracts with the owners of Floral Lawns. See Delbecarro v. Cirignani (1994), 261 Ill.App.3d 644, 648, 199 Ill.Dec. 185, 633 N.E.2d 981. In considering this question, we note that section 15b changed the Care Act in two respects. First, it expanded the liability of purchasers of cemetery property for trust fund shortfalls. Prior to 1994, purchasers were liable only in the case of a sale by a cemetery authority to a purchaser. (760 ILCS 100/15a (West 1992).) Under the amended statute, on the other hand, purchasers are liable for shortfalls, not only when a cemetery is sold by a cemetery authority, but also when the cemetery property is sold pursuant to foreclosure proceedings. The amendment also expanded the Care Act in another respect. Section 15b purported to create a prior lien in favor of the trust for shortages in care funds. Prior to 1994, trust fund shortages did not have priority over preexisting liens. As stated, the Comptroller argues that the changes that section 15b effectuated did not impair or interfere with any rights that the Bank acquired under the mortgage contracts. The contracts at issue consist of two promissory notes and two mortgages securing the notes with real estate, which were executed in June 1987 and January 1988, respectively. The Comptroller contends that nothing in the mortgage contracts gave the Bank the right to a first lien on Floral Lawns Cemetery. According to the Comptroller, the Bank agreed in the contract to lend Floral Lawns a certain sum of money. In return, the contract obligated Floral Lawns to repay the loan amount with interest, and gave the Bank the right to institute foreclosure proceedings against Floral Lawns in the event of a default. The contracts also gave the Bank the right to obtain a deficiency judgment against the owners of Floral Lawns if the outstanding loan exceeded the amount recovered in the foreclosure sale. The Comptroller argues that section 15b does not impair the Bank's right to bring foreclosure proceedings, its right to sell the property or its right to obtain a deficiency judgment. Rather, the Comptroller claims that the only effect section 15b has upon the Bank's contract is the source from which the Bank must collect the outstanding debt. Because section 15b imposes a prior lien in favor of the trust for care fund shortfalls, the Bank will receive less money from the foreclosure sale, and will have to collect the balance of the debt from those persons personally liable for the loan, pursuant to the deficiency judgment. We reject the Comptroller's argument and find that application of section 15b of the Care Act to the Bank's preexisting mortgage contracts with Floral Lawns would substantially impair those contracts, bringing into question the constitutional validity of section 15b. The terms to which contracting parties give assent may be express or implied in their dealings. (See General Motors Corp. v. Romein (1992), 503 U.S. 181, 188, 112 S.Ct. 1105, 1110, 117 L.Ed.2d 328, 337.) The contracts at issue reveal that the Bank loaned approximately $300,000 to the owners of Floral Lawns. Because the Bank is not in the business of making unsecured loans in six-figure amounts, it obtained, as security for the loans, liens on the cemetery property. Our court has recognized that liens are property rights entitled to constitutional protection. ( Hogan v. Bleeker (1963), 29 Ill.2d 181, 189, 193 N.E.2d 844.) At the time the Bank made the loans and acquired its liens on the cemetery property, there was no statute imposing a prior lien on the cemetery property. The Bank and the owners of Floral Lawns contracted in light of the existing law. Thus, the Bank bargained for, and in fact received, a first lien on the real estate. The liens were marketable assets that the Bank could have sold for value. Several years after the Bank took the notes and mortgages, the Care Act was amended to create a prior lien in favor of the trust for shortages in care funds. Application of this amendment to the Bank's contracts would attach a new disability with respect to the Bank's notes and mortgages. (See United States Steel Credit Union v. Knight (1965), 32 Ill.2d 138, 204 N.E.2d 4.) While the Bank would retain the right to initiate foreclosure proceedings, it could not look to the collateral, which it bargained for when it took the notes and mortgages, to satisfy the debt. Instead, it would have to try to satisfy the debt by collecting an unsecured deficiency judgment against the debtor. Total destruction of contractual expectations is not necessary for a finding of substantial impairment. (See United States Trust Co. v. New Jersey (1977), 431 U.S. 1, 26-27, 97 S.Ct. 1505, 1520, 52 L.Ed.2d 92, 112-13.) Here, applying the amendment, which creates a prior lien amounting to more than $277,500 in favor of the trust, would severely limit the value and enforceability of the mortgage contracts and would substantially impair those contracts. Similarly, at the time the Bank acquired its lien on Floral Lawns Cemetery, there was no statute imposing liability for trust fund shortfalls on purchasers at foreclosure sales. Purchasers were liable only when the property was sold by a cemetery authority. Holding a purchaser at the Bank's foreclosure sale liable for trust fund shortfalls will deprive the Bank of its security to the same extent as the prior lien provision. Application of section 15b to purchasers at the Bank's foreclosure sale will substantially reduce the value of the cemetery property and, in effect, will deprive the Bank of the collateral it obtained under the mortgage contracts. We therefore conclude that, if section 15b was construed as applying to the Bank's foreclosure sale, it would retroactively impair the Bank's contract with Floral Lawns. Such a construction would directly conflict with section 22 of the Care Act, which expressly states that nothing in that Act shall be construed to impair the obligation of any existing contract. (760 ILCS 100/22 (West 1992).) Such a construction would also violate the general rule that statutes affecting substantive rights do not apply retroactively, absent express language declaring otherwise. Maiter v. Chicago Board of Education (1980), 82 Ill.2d 373, 390, 47 Ill.Dec. 721, 415 N.E.2d 1034. Here, any doubts regarding section 15b's validity may be avoided by simply concluding that the legislature intended that section to apply only where such application would not impair an existing contract. This court has a duty to adopt a construction that avoids inconsistency and ensures harmony among statutory provisions, where such a construction is available. ( Santiago v. Kusper (1990), 133 Ill.2d 318, 327, 140 Ill.Dec. 379, 549 N.E.2d 1251.) We do not find section 15b, when read in the context of the entire statute, so clear as to support the conclusion that the legislature intended it to apply retroactively to foreclosure sales involving mortgage contracts executed before the effective date of that section. Our court has recognized that a statute tending to impair the obligation of a contract may be inapplicable as to contracts existing at the time of its passage but valid as to future contracts. ( Schewe v. Glenn (1922), 302 Ill. 462, 467, 134 N.E. 809.) The State may properly legislate as to future contracts and, if such law is prospective only, it is valid. Here, we adopt a construction of section 15b that renders it valid and hold that the section applies prospectively only to foreclosure sales involving mortgage contracts executed after the January 1, 1994, effective date of Public Act 88-477. For the reasons stated, we vacate that portion of the circuit court's order which declared section 15b unconstitutional. We affirm that portion of the circuit court's judgment which granted summary judgment to the plaintiff. Circuit court judgment affirmed in part and vacated in part. MILLER, J., took no part in the consideration or decision of this case.