Lee v. Nationwide Cassel, L.P.

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.