Lee v. Nationwide Cassel, L.P.
State: Illinois
Docket No: 80465
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
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