Court Opinion

ID: 9863353
Source: CourtListenerOpinion
Date Created: 2023-09-25 03:54:31.58436+00
Date Added: 2024-06-11T11:41:48.199256
License: Public Domain

JUSTICE LYTTON, dissenting: I dissent. I believe that defendant has the right to raise plaintiffs noncompliance with the Home Repair and Remodeling Act (Act) as an affirmative defense; furthermore, plaintiffs noncompliance with the Act precludes him from foreclosing on his mechanic’s lien. I In 2000, the Illinois General Assembly created the Act because “the business of home repair and remodeling is a matter affecting the public interest.” 815 ILCS 513/5 (West 2006). The purpose of the Act is “to safeguard the life, health, property and public welfare of [Illinois’s] citizens” through “improved communications and accurate representations between persons engaged in the business of making home repairs or remodeling and their consumers” in order to “increase consumer confidence, reduce the likelihood of disputes, and promote fair and honest practices.” 815 ILCS 513/5 (West 2006). To effectuate its purpose, the Act imposes certain requirements on individuals and businesses involved in home repair and remodeling. See 815 ILCS 513/20, 30 (West 2006). Section 20 of the Act requires that those engaged in the business of home repair and remodeling provide to their customers a copy of a pamphlet that explains consumers’ rights prior to the execution of any home repair or remodeling contract. 815 ILCS 513/20(a), (b) (West 2006). If the contract is for over $1,000, the homeowner must sign a form acknowledging that he received a copy of the pamphlet, and the contractor must retain the form. 815 ILCS 513/20(a) (West 2006). Additionally, section 30 of the Act requires that contractors obtain a signed written contract or work order for work over $1,000. 815 ILCS 513/30 (West 2006). Section 35 addresses enforcement of the Act: “The Attorney General or the State’s Attorney of any county in this State may bring an action in the name of the people of this State against any person to restrain and prevent any pattern or practice violation of this Act.” 815 ILCS 513/35(a) (West 2006). The Act contains no express provision conferring upon individuals, other than the Attorney General or State’s Attorneys, a cause of action to enforce the Act. See 815 ILCS 513/35 (West 2006). II The issue in this case is whether homeowners can raise a contractor’s violation of the Act as an affirmative defense when a contractor is suing a homeowner. Three Illinois courts have said that they can. See K. Miller Construction Co. v. McGinnis, 394 Ill. App. 3d 248, 913 N.E.2d 1147 (2009); Smith v. Bogard, 377 Ill. App. 3d 842, 879 N.E.2d 543 (2007); Central Illinois Electrical Services, L.L.C. v. Slepian, 358 Ill. App. 3d 545, 831 N.E.2d 1169 (2005). In McGinnis, the First District held that a contractor who did not comply with the Act was precluded from recovering on his mechanic’s lien foreclosure and breach of contract claims. McGinnis, 394 Ill. App. 3d at 253, 913 N.E.2d at 1152. In Bogard, the Fourth District held that a contractor’s violation of the Act precluded him from bringing a breach of contract, unjust enrichment or quantum meruit action. See Bogard, 377 Ill. App. 3d at 847-48, 879 N.E.2d at 548. In Slepian, this court ruled that a homeowner can raise a contractor’s violation of the Act as an affirmative defense to a suit to foreclose a mechanic’s lien. Slepian, 358 Ill. App. 3d at 550, 831 N.E.2d at 1173. However, Justice McDade finds that because defendant had no private right of action to enforce the Home Repair and Remodeling Act, she cannot raise the Act as an affirmative defense. I disagree. Courts analyzing similar consumer protection statutes have found that a defendant can raise a violation of a statute as an affirmative defense even though the statute does not provide a private right of action. In an analysis of this exact issue under the Motor Vehicle Retail Installment Sales Act (Sales Act) (815 ILCS 375/1 et seq. (West 1998)), this court, in a unanimous decision, ruled that a defendant could raise a plaintiffs violation of the Sales Act to defend against a plaintiffs claim even though the statute limits enforcement to the Attorney General or State’s Attorney. Route 50 Auto Sales, Inc. v. Muncy, 331 Ill. App. 3d 515, 516-17, 771 N.E.2d 635, 636 (2002). The court reasoned that “the defendants did not file an action to enforce the provisions of the [Sales] Act in this case. Instead, the defendants are raising the violation of the [Sales] Act as a defense against plaintiffs action.” Muncy, 331 Ill. App. 3d at 517, 771 N.E.2d at 636. Thus, the penalty provision of the Sales Act can be used as an affirmative defense to a plaintiffs claim for recovery. Muncy, 331 Ill. App. 3d at 517, 771 N.E.2d at 637. Similarly, regulations adopted by the Department of Housing and Urban Development (HUD) pursuant to the National Housing Act (12 U.S.C. §1701 et seq. (2006)) may be raised as an affirmative defense in foreclosure actions even though the regulations do not create a private right of action. See Wells Fargo Home Mortgage, Inc. v. Neal, 398 Md. 705, 922 A.2d 538 (2007); Prudential Insurance Co. of America v. Jackson, 270 N.J. Super. 510, 637 A.2d 573 (1994); Fleet Real Estate Funding Corp. v. Smith, 366 Pa. Super. 116, 530 A.2d 919 (1987); Bankers Life Co. v. Denton, 120 Ill. App. 3d 576, 458 N.E.2d 203 (1983); Cross v. Federal National Mortgage Ass’n, 359 So. 2d 464 (Fla. App. 1978); Federal National Mortgage Ass’n v. Ricks, 83 Misc. 2d 814, 372 N.Y.S.2d 485 (N.Y. Sup. Ct. 1975). The court in Denton stated: “The legislative purpose of the National Housing Act *** is to assist in providing a decent home and a suitable living environment for every American family. Thus, the primary beneficiaries of the act and its implementing regulations are those receiving assistance through its various housing programs. This would include the defendants as mortgagors of a H.U.D. insured mortgage. Therefore, in order to effectively insure that the interests of the primary beneficiaries of the H.U.D. mortgage servicing requirements are being protected, mortgagors must be allowed to raise noncompliance with the servicing requirements as a defense to a foreclosure action.” Denton, 120 Ill. App. 3d at 579, 458 N.E.2d at 205. To allow a mortgagee to foreclose on a home despite its violation of HUD regulations “would be to permit it to subvert the very goal the program was established to achieve and to make a mockery of the National Housing Act.” Ricks, 83 Misc. 2d at 825, 372 N.Y.S.2d at 496. Likewise, many states have held that a defendant can raise a plaintiffs failure to comply with the Farm Credit Act of 1971 (FCA) (12 U.S.C. §2001 et seq. (2006)) as a defense in a foreclosure proceeding even though the Act does not create a private right of action. See State ex rel. Farm Credit Bank of Spokane v. District Court of the Third Judicial District, 267 Mont. 1, 881 P.2d 594 (1994); Farm Credit Bank of Texas v. Sturgeon, 93 — 1536 (La. App. 3 Cir. 6/1/94); 640 So. 2d 666; Burgmeier v. Farm Credit Bank of St. Paul, 499 N.W2d 43 (Minn. App. 1993); Western Farm Credit Bank v. Pratt, 860 P.2d 376 (Utah App. 1993); Lillard v. Farm Credit Services of Mid-America, ACA, 831 S.W.2d 626 (Ky. App. 1991); Federal Land Bank of St. Paul v. Overboe, 404 N.W.2d 445 (N.D. 1987). The FCA was created to protect borrowers “to ensure that they received fair treatment, due process and every realistic opportunity to avoid liquidation and stay in business.” Redd v. Federal Land Bank of St. Louis, 851 F.2d 219, 222 (8th Cir. 1988). Allowing defendants to raise the FCA as a defense is necessary to achieve the statute’s goal of advancing agricultural development and protecting farmers. See Burgmeier, 499 N.W.2d at 50; Lillard, 831 S.W.2d at 629; Overboe, 404 N.W.2d at 449. In Production Credit Ass’n of Fargo v. Ista, 451 N.W.2d 118 (N.D. 1990), the North Dakota Supreme Court explained: “There is a vast difference between allowing use of a regulatory violation as a ‘shield’ in the form of an equitable defense to foreclosure, and allowing its use as a ‘sword’ to create a state-based tort action for recovery of damages where no direct private right of action for damages is recognized.” Ista, 451 N.W.2d at 125. Applying this reasoning to the Home Repair and Remodeling Act, I find the analysis of the North Dakota Supreme Court compelling. Although a statute may inhibit its use as a private right of action, it may be employed as a defense against a violation of statutory requirements. Considering the intent and purpose of the Home Repair and Remodeling Act, I find no reason to deviate from the rationale in our previous holding in Muncy. Like the Sales Act, the Home Repair and Remodeling Act was created to ensure that businesses treat consumers fairly and honestly. Compare Bogard, 377 Ill. App. 3d at 845, 879 N.E.2d at 546 (purpose of Home Repair and Remodeling Act is to promote fair and honest practices), with Chrysler Credit Corp. v. Ross, 28 Ill. App. 3d 165, 168, 28 N.E.2d 65, 68 (1975) (purpose of retail installment sales statutes is to protect consumers from fraud, deception and other unscrupulous practices). Allowing a contractor to sue a homeowner without regard to whether the contractor complied with the Act would defeat the Act’s purpose of protecting consumers and render the Act meaningless. See Bogard, 377 Ill. App. 3d at 848, 879 N.E.2d at 548 (refusing to allow contractor to recover under theories of unjust enrichment and quantum meruit because “ [allowing a contractor a method of recovery when he has breached certain provisions of the Act would run afoul of the legislature’s intent of protecting consumers, would reward deceptive practices, and would be violative of public policy”). Although the legislature has restricted the use of the Act as an offensive tool, it has not prohibited a homeowner from using the Act as a defense against a contractor who seeks payment on a contract that the statute makes unlawful. Thus, a homeowner may raise a contractor’s failure to comply with the requirements of the Act as an affirmative defense. Ill Justice McDade and Justice Schmidt incorrectly hold that plaintiff’s failure to comply with the provisions of the Act did not preclude him from foreclosing on his mechanic’s lien. The legal capacity to foreclose a mechanic’s lien depends on the validity of the lien. G.M. Fedorchak & Associates, Inc. v. Chicago Title Land Trust Co., 355 Ill. App. 3d 428, 433, 822 N.E.2d 905, 909 (2005). The lien must be based on a valid contract; if it is not, the lien is unenforceable. G.M. Fedorchak, 355 Ill. App. 3d at 433, 822 N.E.2d at 909. When a contract does not comply with the Act, it is invalid and cannot form the basis of a breach of contract action or an action to foreclose a mechanic’s lien. See McGinnis, 394 Ill. App. 3d at 253-54, 913 N.E.2d at 1152; Bogard, 377 Ill. App. 3d 842, 879 N.E.2d 543; Slepian, 358 Ill. App. 3d at 550, 831 N.E.2d at 1173. In McGinnis, the McGinnises orally agreed to pay Miller, a contractor, $187,000 for remodeling work in 2004. In 2005, the project expanded significantly and the McGinnises orally agreed to pay over $500,000. In 2006, Miller completed the project. The McGinnises paid Miller $177,580.33 but refused to pay any more. Miller filed a complaint against the McGinnises, alleging that he was entitled to (1) a hen on the McGinnises’ property for over $300,000, (2) recover the unpaid balance based on breach of the oral contract, and/or (3) compensation for his labor, materials, and services on a quantum meruit theory. The McGinnises filed a motion to dismiss, arguing that Miller could not recover because he never provided a written contract as required by the Act. The trial court granted the McGinnises’ motion to dismiss. The appellate court affirmed the trial court’s dismissal of Miller’s foreclosure and breach of contract claims, stating: “We find no merit to Miller’s contention that his hen foreclosure claim in count I and his breach of contract claim in count II can stand in the face of the plain language of the Act that bars recovery for work that exceeds $1,000 on a residence without a written contract or work order.” McGinnis, 394 Ill. App. 3d at 253, 913 N.E.2d at 1152. The court concluded, “In the absence of a written contract or work order, Miller’s time and materials oral contract is unenforceable under the Act.” McGinnis, 394 Ill. App. 3d at 253, 913 N.E.2d at 1152. In Bogard, a contractor provided homeowners with an oral estimate of “$20,000 or less” for a room addition but did not provide a written contract or a consumer rights pamphlet. The homeowners filed a motion to dismiss the contractor’s breach of contract action against them, claiming that the contractor was precluded from recovery. The trial court agreed, and the appellate court affirmed the trial court’s decision, stating: “We find the Act applies to Smith, that Smith violated several provisions of the Act, and those violations support the dismissal of his breach-of-contract claim.” Bogard, 377 Ill. App. 3d at 847-48, 879 N.E.2d at 548. In Slepian, a contractor filed a complaint to foreclose a mechanic’s lien against homeowners, alleging that they failed to pay for labor and materials the contractor provided under an oral contract for work on their property. The homeowners raised an affirmative defense, alleging that because the contractor violated the Act, the oral contract for services was void and, therefore, could not form the basis of recovery under a mechanic’s lien. The trial court found in favor of the contractor. This court disagreed with the trial court’s decision, stating: “The language of the Act clearly and unambiguously requires anyone engaged in the business of home repair and remodeling to obtain a signed contract before initiating work that will exceed $1,000 in cost. The trial court erred in concluding the Act did not apply in the instant case, and the court should now hear any claims that were dismissed on that basis.” Slepian, 358 Ill. App. 3d at 550, 831 N.E.2d at 1173. We reversed and remanded the trial court’s decision. Slepian, 358 Ill. App. 3d at 550, 831 N.E.2d at 1173. Here, plaintiff filed a suit to foreclose his mechanic’s lien against defendant. Defendant filed an answer to the complaint, alleging that she stopped payment on her check to plaintiff because his work was defective. She further claimed that defendant violated the Home Repair and Remodeling Act by failing to provide her with a consumer rights pamphlet and obtain a signed written contract from her. There is no question that defendant’s failure to provide defendant with a consumer rights pamphlet and obtain a signed written contract prior to performing work on defendant’s home violated the Act. See 815 ILCS 513/20(a), 30 (West 2006); McGinnis, 394 Ill. App. 3d at 253, 913 N.E.2d at 1152; Bogard, 377 Ill. App. 3d at 847-48, 879 N.E.2d at 548; Slepian, 358 Ill. App. 3d at 550, 831 N.E.2d at 1173. Nevertheless, Justice McDade contends that these violations were merely “procedural errors.” I disagree with this characterization. The Home Repair and Remodeling Act is written in mandatory terms requiring contractors to provide customers with a copy of a consumer rights pamphlet and obtain a signed written contract before beginning work. See 815 ILCS 513/20(a), 30 (West 2006). A contractor’s failure to obtain a written contract prior to performing work over $1,000 is “unlawful.” 815 ILCS 513/30 (West 2006). Nothing in the Act excuses a contractor’s failure to strictly abide by the Act’s terms. Because defendant did not sign the work order or any other written contract with plaintiff, there is no valid contract between plaintiff and defendant that could form the basis for plaintiffs mechanic’s lien. See Bogard, 377 Ill. App. 3d at 847-48, 879 N.E.2d at 548; Slepian, 358 Ill. App. 3d at 550, 831 N.E.2d at 1173. Thus, since plaintiff’s mechanic’s lien is not based on a valid contract, it is unenforceable. See G.M. Fedorchak, 355 Ill. App. 3d at 433, 822 N.E.2d at 909. The trial court properly entered summary judgment in favor of defendant. IV The majority’s decision in this case has far-reaching implications that will affect not only the Home Repair and Remodeling Act but at least 18 other Illinois consumer protection statutes that contain enforcement provisions like the one in the Act, which allow only the Attorney General and/or State’s Attorney to bring an action to restrain violations.8 Until now, this court, like countless others, has held that a consumer can raise a violation of such consumer protection statutes as an affirmative defense to a plaintiffs claim for recovery. See Muncy, 331 Ill. App. 3d at 517, 771 N.E.2d at 637; Slepian, 358 Ill. App. 3d at 550, 831 N.E.2d at 1173. Consumer protection statutes are to be liberally construed to effectuate their purpose of protecting consumers. See Price v. Philip Morris, Inc., 219 Ill. 2d 182, 233-34, 848 N.E.2d 1, 32 (2005). Until today, this court has enforced the intent of these statutes in decisions such as Muncy and Slepian. The majority’s opinion in this case, which precludes defendant from raising a violation as a defense, is a narrow, restrictive interpretation of the Act that substantially erodes the effectiveness of the statutory scheme of Illinois’s consumer protections. For these reasons, I dissent.  Those statutes are Residential Improvement Loan Act (815 ILCS 135/6 (West 2006)); Credit Card Issuance Act (815 ILCS 140/8 (West 2006)); Unsolicited Credit Card Act of 1977 (815 ILCS 150/4 (West 2006)); Copper Purchase Registration Law (815 ILCS 325/8 (West 2006)); Fraudulent Sales Act (815 ILCS 350/11 (West 2006)) (created to prevent fraud and misrepresentations often associated with “going out of business” and “removal sales” (815 ILCS 350/2 (West 2006))); Motor Vehicle Retail Installment Sales Act (815 ILCS 375/23 (West 2006)) (intended to protect consumers from fraud, deception and other unscrupulous practices (see Ross, 28 Ill. App. 3d at 168, 28 N.E.2d at 68)); Ophthalmic Advertising Act (815 ILCS 385/8 (West 2006)) (purpose is to “require advertisers of ophthalmic materials to tell the whole truth to the general public” for the public’s protection, safety, and health (815 ILCS 385/1 (West 2006))); Platinum Sales Act (815 ILCS 395/7 (West 2006)); Resident Alien Course Act (815 ILCS 400/4 (West 2006)); Retail Installment Sales Act (815 ILCS 405/30 (West 2006)) (intent is to make borrowers more aware of consequences of incurring debts (see Garza v. Chicago Health Clubs, Inc., 347 F. Supp. 955, 962-63 (N.D. Ill. 1972))); Second-Hand Watch Act (815 ILCS 410/5 (West 2006)); Transportation Ticket Fraud Act (815 ILCS 415/3 (West 2006)); Travel Promotion Consumer Protection Act (815 ILCS 420/7 (West 2006)); Used Lubricant Act (815 ILCS 435/2 (West 2006)); Home Repair Fraud Act (815 ILCS 515/4 (West 2006)) (goal is to “prohibit and prevent knowing use of fraud to induce an unwitting homeowner to actually enter into an agreement for home repair” (People v. Flynn, 341 Ill. App. 3d 813, 830, 792 N.E.2d 527, 542 (2003))); Internet Caller Identification Act (815 ILCS 517/15 (West 2008)); Job Referral and Job Listing Services Consumer Protection Act (815 ILCS 630/12 (West 2006)); Motor Vehicle Leasing Act (815 ILCS 636/ 75(1) (West 2006)) (intended 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 2006))).