PHYLLIS J. WEATHERMAN et al., Indiv. and on Behalf of all Others Similarly Situated v. GARY-WHEATON BANK OF FOX VALLEY, N.A., n/k/a The First National Bank of Chicago, N.A.
No. 83822
Supreme Court of Illinois
June 17, 1999
186 Ill. 2d 472
I would therefore reverse defendant‘s convictions and remand this cause for a new trial at which the trial court should consider defendant‘s request to use the mere-fact approach.
JUSTICE McMORROW joins in this dissent.
HARRISON, J., concurring in part and dissenting in part.
Lynn A. Goldstein and John C. Simons, of Chicago, for appellant.
Clinton A. Krislov and Jonathan Nachsin, of Krislov & Associates, Ltd., of Chicago, for appellees.
Bruce J. Baker, Paul E. Dengel and John C. Martin, of Schiff, Hardin & Waite, of Chicago, for amicus curiae Illinois Bankers Association.
James E. Trausch, of Jaros, Tittle & O‘Toole, Ltd., of Chicago, for amicus curiae Illinois Mortgage Bankers Association.
JUSTICE BILANDIC delivered the opinion of the court:
The issues presented in this appeal center on whether a lender violated the Illinois Consumer Fraud and Deceptive Business Practices Act (hereinafter Consumer Fraud Act) (
BACKGROUND
In October of 1992, plaintiffs, Phyllis J. Weatherman, Ruth A. Russell, and Ronald D. Vega, applied to defen
Before closing, defendant chose to assign plaintiffs’ mortgage to Midwest Mortgage Services, Inc. (Midwest), a wholesale mortgage banking company that buys and then sells mortgage loans into the secondary mortgage market. Defendant and Midwest have had a contract with each other since 1987 regarding the sale and purchase of mortgage loans. Also prior to closing, plaintiffs requested that defendant suspend the tax escrow. Defendant agreed and informed plaintiffs they would be charged a $343.13 fee to “control their own escrow.”
At closing, defendant provided plaintiffs with a “Settlement Statement” containing an itemized breakdown of all closing costs. That statement indicated that plaintiffs would be charged $77 in recording fees, which included a $15 fee to record the assignment of the mortgage to Midwest. Defendant paid that fee to the title company, which was paying for the recording. The
Plaintiffs thereafter filed a class action complaint in the circuit court of Cook County against defendant, the First National Bank of Chicago, and First Chicago Corporation. Acting on behalf of a putative class comprised of all mortgage borrowers to whom defendant charged either a mortgage assignment recording fee or an escrow suspension fee within the applicable limitations period, plaintiffs allege that defendant failed to inform them of the mortgage assignment recording fee until closing and failed to inform them of the escrow suspension fee until just a few days before closing. Plaintiffs claim that they received no benefit as a result of either the mortgage assignment recording fee or the escrow suspension fee and that, had they known before paying their lock-in fee that defendant would charge them these two fees, they “would have pursued refinancing with other lenders who did not require payment of these fees.” In addition, plaintiffs claim that defendant misrepresented that the fees were required and necessary charges to close and fund the loan. Plaintiffs further allege that they relied on defendant‘s omissions and misrepresentations. Based on these allegations, plaintiffs claim that defendant violated the Consumer Fraud Act by engaging in unfair, unauthorized and deceptive lending practices.
Defendant moved to dismiss plaintiffs’ complaint, asserting that First Chicago Corporation, as the parent company of the First National Bank of Chicago, is a separate entity and therefore should be dismissed. The motion also asserted that the complaint failed to state a
Defendant next filed a motion to dismiss the mortgage assignment recording fee claim under
“A. Whether a lender violates the Illinois Consumer Fraud and Deceptive [Business] Practices Act by giving an applicant for a loan, at the time a loan is applied for, a gross estimate of the recording fees to be paid at closing and not telling the loan applicant until closing that one of the fees included in the gross estimate was a fee to cover the cost of recording the assignment of the mortgage securing the loan.
B. In this case, the assignee of the assignment is a wholly-owned affiliate of the defendant.”
The circuit court also found that, pursuant to Supreme
The appellate court accepted defendant‘s petition for leave to appeal on the Rule 308 certified question, and consolidated that appeal with plaintiffs’ Rule 304(a) appeal from the circuit court‘s dismissal of the escrow suspension fee claim. The appellate court majority answered the certified question affirmatively on the basis that such conduct amounted to a deceptive and unfair practice. 286 Ill. App. 3d at 59-62. The appellate court rejected defendant‘s argument that conduct by a lender as set forth in the certified question complies with a federal statute such that it constitutes a defense to liability under the Consumer Fraud Act. 286 Ill. App. 3d at 55-58. The appellate court also held that plaintiffs failed to state a cause of action under the Consumer Fraud Act based on the escrow suspension fee. 286 Ill. App. 3d at 63-65. The dissent agreed with the majority‘s dismissal of the escrow suspension fee claim, but argued that disclosing the mortgage assignment recording fee under the circumstances in the certified question did not violate the Consumer Fraud Act. 286 Ill. App. 3d at 66-70 (DiVito, J., concurring in part & dissenting in part).
Both parties filed petitions for leave to appeal to this court. We denied defendant‘s petition for leave to appeal and entered a supervisory order remanding the cause to the appellate court for reconsideration of its denial of defendant‘s petition for rehearing regarding the mortgage assignment recording fee. Plaintiffs’ petition for leave to appeal, asserting that the circuit and appellate courts erred in dismissing the escrow suspension fee claim, was denied by this court without prejudice, so as to allow plaintiffs the opportunity to refile. On remand, the appellate court denied defendant‘s petition for rehearing,
ANALYSIS
I. Mortgage Assignment Recording Fee
We first review the question of law certified by the circuit court pursuant to Rule 308. As noted, the circuit court certified the question of law concerning the mortgage assignment recording fee following its denial of defendant‘s section 2-619 motion to dismiss plaintiffs’ mortgage assignment recording fee claim. The standard of review on appeal is therefore de novo. See In re Chicago Flood Litigation, 176 Ill. 2d 179, 189 (1997).
The Consumer Fraud Act is “a regulatory and remedial statute intended to protect consumers, borrowers and business persons against fraud, unfair methods of competition, and other unfair and deceptive business practices.” Cripe v. Leiter, 184 Ill. 2d 185, 190-91 (1998). The Consumer Fraud Act contains an exemption from liability for conduct authorized by federal statutes and regulations.
The federal statute relied on by defendant is the Real
In this case, the documents attached to plaintiffs’ complaint establish that, when plaintiffs applied for their mortgage loan, defendant provided them with a good-faith estimate of their settlement charges. That good-faith estimate included a line marked “recording fees,” which were listed at $80. Subsequently, at closing, plaintiffs were provided with a settlement statement that itemized all of their settlement charges, including a breakdown of their individual recording fees. That statement indicated that actual recording fees would be $77, which included a $15 mortgage assignment recording fee. Plaintiffs’ complaint alleges that, in charging the $15
Plaintiffs assert that defendant did not comply with RESPA because it failed to specifically identify the mortgage assignment recording fee in the good-faith estimate, such that there was no agreement by plaintiffs to pay the fee. We disagree.
Regulation X (
Regulation X explains in detail the requirements of a good-faith estimate. It defines a good-faith estimate as an estimate of charges that a borrower is likely to incur in connection with a settlement.
In light of the limited format set forth in the good-faith estimate form and the detailed format set forth in the HUD-1 settlement statement for identifying recording fees, we determine that a lender is not required to itemize all recording fees in the good-faith estimate. Rather, the lender is permitted to aggregate all recording fees on the single line provided for recording fees in the good-faith estimate form. We therefore conclude that RESPA authorizes a lender to reflect all recording fees as a gross estimate in the good-faith estimate. A gross estimate of recording fees satisfies the purpose of RESPA because it provides effective advance disclosure to a borrower and gives a borrower an opportunity to compare the recording fees of one lender with those of another lender.
In this case, defendant, as a lender acting under the circumstances stated in the certified question, complied with the good-faith estimate disclosure requirements of RESPA. RESPA authorized defendant to disclose the mortgage assignment recording fee as part of its gross estimate of all recording fees on the good-faith estimate. Defendant did just that. In the good-faith estimate form given to plaintiffs, defendant set forth $80 on the single line for the estimated amount or range for all recording fees. That $80 estimate included within it the $15 mortgage assignment recording fee at issue. Contrary to plaintiffs’ argument, defendant was not required to itemize the recording fees in the good-faith estimate, as defendant later did in the HUD-1 settlement statement given to plaintiffs at closing. We also reject the appellate court‘s suggestion that RESPA required a separate listing of the mortgage assignment recording fee because the sample form includes an additional category entitled “Other fees.” See
Plaintiffs nevertheless contend that the $15 fee defendant charged for recording the assignment of plaintiffs’ mortgage to Midwest was not an authorized charge under RESPA. According to plaintiffs, this assignment was a separate transaction, unrelated to plaintiffs’ loan from defendant. We reject plaintiffs’ argument.
The plain meaning of the language used by the legislature is the best indication of legislative intent, to which this court will give effect in construing a statute. Nottage v. Jeka, 172 Ill. 2d 386, 392 (1996); Jones v. Hanley Dawson Cadillac Co., 848 F.2d 803, 806-07 (7th Cir. 1988). As noted,
Before concluding, we note that our findings are not affected by the fact that defendant and Midwest are affiliates. Although defendant intended, in advance of closing, to assign plaintiffs’ mortgage to Midwest, there is no support that it intended to assign the mortgage to an affiliate that was created for that purpose. Midwest and defendant entered into their contract in 1987 when both were independent entities.
Having determined that defendant‘s actions, as set forth in the certified question, complied with the disclosure requirements of RESPA, we examine whether such compliance constitutes a defense to liability under the Consumer Fraud Act. As earlier noted, section 10b(1) of
Plaintiffs’ reliance on Martin is misplaced. In Martin, the plaintiffs alleged that the defendant violated the Consumer Fraud Act because the defendant misrepresented the nature of a “foreign service fee” on the disclosure statement given to the plaintiffs in conjunction with the sale of commodity option contracts. The defendant responded that the Consumer Fraud Act did not apply because, by complying with the Commodity Futures Trading Commission‘s disclosure regulations, section 10b(1) of the Consumer Fraud Act provided a defense to liability. This court rejected the application of section 10b(1) because it determined that the defendant‘s mischaracterization of the terms in the disclosure statement was not specifically authorized by the Commission and was not in compliance with the Commission‘s regulations. Martin, 163 Ill. 2d at 50. The court reasoned that the disclosure statement failed to disclose that the foreign service fee was in fact an additional commission from which the defendant would derive compensation. Martin, 163 Ill. 2d at 51. By using the misleading and deceptive term “foreign service fee,” the defendant deceived the plaintiffs into believing that fee was an additional separate charge the defendants paid to third parties. Martin, 163 Ill. 2d at 51.
We conclude that defendant‘s compliance with RESPA in this case renders defendant exempt from liability under the Consumer Fraud Act. Actions specifically authorized by RESPA satisfy section 10b(1) of the Consumer Fraud Act because they are “[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” (
In light of the foregoing, we hold that defendant, as a lender that disclosed the mortgage assignment recording fee under the circumstances stated in the certified question, complied with RESPA. By complying with RESPA, a lender is exempt from liability under section 10b(1) of the Consumer Fraud Act. Defendant‘s acts, as set forth in the certified question, therefore did not violate the Consumer Fraud Act. Accordingly, we answer the certified question in the negative.
II. Plaintiffs’ Cross-Relief: Escrow Suspension Fee
We next address plaintiffs’ request for cross-relief. Plaintiffs argue that defendant violated the Consumer Fraud Act by charging them a fee to suspend the tax escrow, which fee was not disclosed until a few days before closing. Defendant first responds that this court lacks jurisdiction to consider plaintiffs’ arguments regarding the escrow suspension fee claim. Defendant bases this jurisdictional argument on the fact that
Rule 318, which provides the general rules governing civil appeals from the appellate court to this court, states in subsection (a) that in all appeals “any appellee, respondent, or coparty may seek and obtain any relief warranted by the record on appeal without having filed a separate petition for leave to appeal or notice of cross-appeal or separate appeal.”
Plaintiffs argue that the circuit and appellate courts erred in finding that they failed to state a cause of action under the Consumer Fraud Act with regard to defendant‘s charging a fee to suspend plaintiffs’ escrow. As noted, the circuit court granted defendant‘s motion to dismiss the escrow suspension fee claim pursuant to section 2-615. Such a motion attacks the legal sufficiency of the complaint by alleging defects on the face of the complaint. Bryson v. News America Publications, Inc., 174 Ill. 2d 77, 86 (1996). The standard of review on appeal from an order granting a section 2-615 motion to dismiss is de novo. Mt. Zion State Bank & Trust v. Consolidated Communications, Inc., 169 Ill. 2d 110, 127 (1995). We must determine whether the allegations of plaintiffs’ complaint, when construed in the light most favorable to plaintiffs, are sufficient to establish a cause of action upon which relief may be granted. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 490 (1996). In making this determination, all well-pleaded facts in the complaint and all reasonable inferences therefrom are accepted as true. Bryson, 174 Ill. 2d at 86. Only those facts apparent from the face of the pleadings, including exhibits attached to the pleadings (
To state a cause of action under the Consumer Fraud Act, a plaintiff must allege: (1) a deceptive act or practice by the defendant; (2) the defendant‘s intent that the plaintiff rely on the deception; and (3) that the deception occurred in the course of conduct involving trade and commerce. Connick, 174 Ill. 2d at 501. The Consumer Fraud Act defines “unfair or deceptive acts or practices” to include 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.”
Plaintiffs’ complaint alleges that defendant violated the Consumer Fraud Act by charging plaintiffs an escrow suspension fee because: (1) defendant failed to inform plaintiffs until three or four days before the closing that it would charge plaintiffs a fee to manage their own escrow; and (2) the fee was unfair and unauthorized in that defendant misrepresented that the fee was a required charge and necessary to close and fund the loan, when, in fact, the Mortgage Escrow Account Act (Escrow Act) (
We first address plaintiffs’ allegation that defendant failed to inform plaintiffs about the escrow suspension fee until a few days before closing. The good-faith estimate form plaintiffs received from defendant at the time they applied for their loan is attached to plaintiffs’ complaint. This form indicates that defendant informed plaintiffs of the amount of the tax escrow. Plaintiffs
Plaintiffs also allege that imposing the escrow
The Escrow Act addresses the options available to a lender and a borrower to secure the payment of real estate taxes on mortgaged property.
Our holding in Stern v. Norwest Mortgage, Inc., 179 Ill. 2d 160 (1997), does not require us to find that the escrow suspension fee violated the Escrow Act. In Stern,
The fee in Stern related to an option covered by the Escrow Act. The escrow suspension fee at issue here, on the other hand, involves an option not addressed by the Escrow Act, i.e., the ability of borrowers to pay their taxes without setting up any sort of tax account with the lender. Consequently, unlike the lender in Stern, the lender here is not reducing or eliminating a benefit bestowed by the legislature on the borrower. Rather, this case involves a fee voluntarily agreed to by the borrower to obtain a tax payment option not granted by the Escrow Act after plaintiffs voluntarily rejected their options under section 6 of the Escrow Act. This court has recognized the rights of competent parties to enter into contracts. See Braye v. Archer-Daniels-Midland Co., 175 Ill. 2d 201, 215 (1997). Plaintiffs were not forced to pay the fee because they could have avoided paying the fee by adhering to the original agreement, providing for the establishment of an escrow account. Instead, they chose to deviate from the original agreement, avoid either of
Accordingly, we hold that the allegations in plaintiffs’ complaint regarding defendant‘s charging an escrow suspension fee are insufficient to state a cause of action against defendant for violating the Consumer Fraud Act. The circuit court thus properly dismissed this claim.
CONCLUSION
For the foregoing reasons, we reverse the appellate court‘s holding that answered the certified question in the affirmative, but we affirm the appellate court‘s holding that affirmed the circuit court‘s dismissal of plaintiffs’ escrow suspension fee claim. We remand this cause to the circuit court for further proceedings consistent with this opinion.
Appellate court judgment affirmed in part and reversed in part; cause remanded.
JUSTICE RATHJE took no part in the consideration or decision of this case.
JUSTICE HARRISON, concurring in part and dissenting in part:
I concur with the majority‘s holding that plaintiffs’ complaint was insufficient to state a cause of action for a violation of the Consumer Fraud Act based upon defendant‘s charging an escrow suspension fee. Contrary to the majority, however, I believe that defendant‘s actions with regard to the mortgage assignment recording fee
The Consumer Fraud Act should be liberally construed. Connick v. Suzuki Motor Co., 174 Ill. 2d 482, 503 (1996). Additionally, this court has stated that when ruling on a motion to dismiss because the claims are barred by other affirmative matter that avoids the legal effect or defeats the claim (
Whether conduct is unfair under the Consumer Fraud Act is determined on a case-by-case basis. See Saunders v. Michigan Avenue National Bank, 278 Ill. App. 3d 307, 313 (1996). As the majority notes, the Consumer Fraud Act defines “unfair or deceptive acts or practices” to include the use or employment of, inter alia, any “misrepresentation or the concealment, suppression or omission of any material fact, with intent that others rely upon the concealment, suppression or
Plaintiffs’ complaint asserted that the omission to tell them of the fee until the closing and the misrepresentation that the fee was a required charge which was necessary to close and fund the loan violated the Consumer Fraud Act. Plaintiffs further alleged that defendant intended them to rely on this omission and misrepresentation. An omission or concealment of a material fact in the conduct of trade or commerce constitutes consumer fraud. Connick, 174 Ill. 2d at 504;
Plaintiffs adequately pled a violation of the Consumer Fraud Act based on a material omission by defendant, where they alleged that had they known before paying the lock-in fee that the lender would charge them the mortgage assignment fee, they would have pursued refinancing with other lenders who did not require payment of this fee. See Butitta v. First Mortgage Corp., 218 Ill. App. 3d 12, 19-20 (1991) (plaintiffs failed to state a cause of action for a violation of the Consumer Fraud Act where they failed to allege: (1) they would have acted differently had they been aware of the disputed charges prior to closing; (2) any misrepresentation by defendant; or (3) any facts indicating that the disputed fees were improper or illegal).
The majority concludes that charging a mortgage as
RESPA requires lenders to provide borrowers with a good-faith estimate of the amount of settlement charges a borrower is likely to incur.
The majority holds that “RESPA authorized defendant to disclose the mortgage assignment recording fee as part of its gross estimate of all recording fees on the good-faith estimate.” 186 Ill. 2d at 485. Accordingly, it was permissible for defendant to “aggregate all recording fees on the single line provided for recording fees in the good-faith estimate form.” 186 Ill. 2d at 484. The fatal flaw in this reasoning is that it implicitly equates the fee for recording the assignment of the mortgage to Midwest with a recording fee associated with the loan transaction.
Indeed, while RESPA authorizes lenders to estimate the recording costs incurred in making loans, it does not, as section 10b(1) requires, “specifically authorize” a lender to assess a mortgage assignment recording fee, to fail to disclose it until the closing, or to falsely represent to the borrowers that the fee, for a distinct transaction between the lender and a third party, was a required charge necessary for the lender to close and fund the loan. Therefore, because RESPA does not authorize the conduct described in the certified question, I would find that defendant is unable to use RESPA to invoke the Consumer Fraud Act‘s section 10b(1) exemption from liability.
The majority attempts to distinguish Martin v. Heinold Commodities, Inc., 163 Ill. 2d 33 (1994), the case relied upon by plaintiffs to support their claim that defendant cannot rely on the defense provided in section 10b(1). However, I see no qualitative difference in the conduct of the defendant in Martin, which this court found did not warrant section 10b(1) protection, and the conduct of defendant herein. In Martin, while the defendant literally complied with the disclosure regulations of the Commodity Futures Trading Commission in a summary disclosure statement to a plaintiff class of inves
For the foregoing reasons, I would answer the certified question in the affirmative, holding that defendant‘s actions with regard to the mortgage assignment fee constituted a violation of the Consumer Fraud Act. In all other respects I concur.