Jackim v. Cc-Lake, Inc.

• Decision Date: 21 November 2005
• Docket Number: No. 1-04-3883.,1-04-3883.
• Citation: 842 N.E.2d 1113
• Parties: M. Lois JACKIM, Meyer and Gertrude Kruglik, and Margery Shurman, Plaintiffs-Appellants, v. CC-LAKE, INC., Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 1113

842 N.E.2d 1113

M. Lois JACKIM, Meyer and Gertrude Kruglik, and Margery Shurman, Plaintiffs-Appellants, v. CC-LAKE, INC., Defendant-Appellee.

No. 1-04-3883.

Appellate Court of Illinois, First District, First Division.

November 21, 2005.

Rehearing Denied February 26, 2006.

Louis B. Garippo; and Elizabeth A. Kaveny and David R. Nordwall of Propes & Kaveny LLC, Chicago, for Plaintiffs-Appellants.

Michael A. Weinberg of Novack and Macey LLP, Chicago, for Defendant-Appellee.

Justice McBRIDE delivered the opinion of the court:

The plaintiffs, M. Lois Jackim, Meyer and Gertrude Kruglik, and Margery Shurman, are residents of a new retirement community known as Classic Residence by Hyatt at The Glen (the Glen), which is owned, operated, and managed by the defendant CC-Lake, Inc., and situated north of Chicago in Glenview, Illinois, on land formerly occupied by the Glenview Naval Air Station.¹ CC-Lake, Inc. (CC-Lake or provider), holds a permit under the Illinois Life Care Facilities Act (210 ILCS 40/1 et seq. (West 2002)) to contract to provide at the Glen a continuum of care known as "life care" to individuals who are at least 62 years old. Each of the four plaintiffs executed a written "continuing care residency agreement" with the defendant in December 2002 and tendered entrance fees prior to moving into the life care facility. The contract indicates that monthly fees collected from residents are intended to cover all of the Glen's operating costs and that at the end of any residency lasting longer than six months, CC-Lake will refund up to 90% of the resident's entrance fees. CC-Lake may first deduct unpaid monthly fees, as well as "miscellaneous expenses" which include the costs of remediating a resident's alterations to the property beyond ordinary wear and tear. On July 15, 2004, the plaintiffs filed a class action complaint in the circuit court of Cook County, in which they alleged CC-Lake and the Glen's residents formed landlord-tenant relationships, that the refundable portion of the entrance fees was a security deposit for rent and property damage, and that CC-Lake violated the Illinois Security Deposit Interest Act when it failed to credit residents with annual interest on those fees. 765 ILCS 715/0.01 et seq. (West 2002). The circuit court, however, granted CC-Lake's motion to dismiss the complaint with prejudice pursuant to section 2-615 of the Illinois Code of Civil Procedure. 735 ILCS 5/2-615 (West 2002). CC-Lake's argument for dismissal was that the relationship between a life care provider and a life care facility resident is distinguishable from the traditional landlord-tenant arrangement, and that life care contracts are not leases within the meaning of the interest statute. The residents argue on appeal that the terminology in CC-Lake's life care contract is not dispositive of their relationship and that the contract contains all the essential elements of a lease.

A section 2-615 motion poses the question of whether the complaint states a cause of action. Doe v. Chicago Board of Education, 213 Ill.2d 19, 21, 289 Ill.Dec. 642, 820 N.E.2d 418, 418-19 (2004). A dismissal pursuant to section 2-615 is reviewed de novo. Doe, 213 Ill.2d at 23-24, 289 Ill.Dec. 642, 820 N.E.2d at 421. When reviewing the sufficiency of the allegations in the complaint, we accept as true all well-pled facts and all reasonably drawn inferences from those facts in favor of the plaintiff. Doe, 213 Ill.2d at 28, 289, Ill.Dec. 642, 820 N.E.2d at 423. Accordingly, the complaint and attached contract are the source of all the facts set out below.

The life care contract at issue was expressly "executed in accordance with the Illinois Life Care Facilities Act [ (210 ILCS 40/1 (West 2002)) ] and will be in effect for the rest of [the contracting individual's] life" provided that individual complies with certain payment obligations and does not give CC-Lake "just cause" for termination. The statute referenced in the contract indicates in relevant part:

"(c) `Life care contract' means a contract to provide to a person for the duration of such person's life or for a term in excess of one year, nursing services, medical services or personal care services, in addition to maintenance services for such person in a facility, conditioned upon the transfer of an entrance fee to the provider of such services in addition to or in lieu of the payment of regular periodic charges for the care and services involved.

(d) `Provider' means a person who provides services pursuant to a life care contract.

(e) `Resident' means a person who enters into a life care contract with a provider, or who is designated in a life care contract to be a person provided with maintenance and nursing, medical or personal care services.

(f) `Facility' means a place or places in which a provider undertakes to provide a resident with nursing services medical services or personal care services, in addition to maintenance services for a term in excess of one year or for life pursuant to a life care contract.

* * *

(g) `Living unit' means an apartment, room or other area within a facility set aside for the exclusive use of one or more identified residents.

(h) `Entrance fee' means an initial or deferred transfer to a provider of a sum of money or property, made or promised to be made by a person entering into a life care contract, which assures a resident of services pursuant to a life care contract.

* * *

(j) `Medical services' means those services pertaining to medical or dental care that are performed in behalf of patients at the direction of * * * licensed * * * professional and technical personnel.

(k) `Nursing services' means those services pertaining to the curative, restorative and preventive aspects of nursing care * * *.

(l) `Personal care services' means assistance with meals, dressing, movement, bathing or other personal needs or maintenance, or general supervision and oversight of the physical and mental well-being of an individual, who is incapable of maintaining a private, independent residence or who is incapable of managing his person whether or not a guardian has been appointed for such individual.

(m) `Maintenance services' means food, shelter and laundry services." 210 ILCS 40/2 (West 2002).

With this terminology in mind, we set out additional facts from the parties' life care agreement.

When construction is complete, provider CC-Lake will offer 296 independent living units at the Glen, consisting of 251 apartments in the main building and 45 villas. The independent living units will range in size from a 1-bedroom/1-bath apartment to a 2-bedroom/2 1/2-bath villa with a den and an attached garage. Each unit comes with a fully equipped kitchen, smoke alarm, emergency call system, washer and dryer, and window and floor coverings. Residents may furnish the units as they wish, within the standards described in a community handbook. In addition to the independent living units, the Glen will also have a "care center" which will offer (a) private suites for memory support, (b) assisted living residences, and (c) private, skilled nursing suites. Provider CC-Lake is obligated to provide long-term care at the care center, including basic skilled nursing care, assisted living and memory support, and is not obligated to provide some of the other care defined in the Life Care Facilities Act, such as "medical services," which encompasses physician care and dental care. 210 ILCS 40/2(j). If the Glen's care center has not opened or is full, CC-Lake will pay for a resident to receive long-term care in a nearby facility. In addition, a "Care Team" consisting of four administrative and health care professionals will "monitor care at the Community, and participate in decisions regarding care and transfer."

Individuals interested in becoming residents of the Glen and receiving long-term care from CC-Lake, however, must initially meet minimum financial and health criteria. A material misrepresentation in a resident's application for acceptance into the community is one of the enumerated circumstances constituting "just cause" for the provider to terminate the relationship. Depending upon which independent living unit they select, residents of the Glen pay entrance fees ranging between $255,612 and $840,000, and monthly fees ranging between $2,753 and $4,326. The life care contract characterizes residents' entrance fees as interest-free loans to the provider, and promissory notes to that effect are issued to residents. The contract also urges residents to seek independent tax advice but cautions them of a risk that the Internal Revenue Service may classify part or all of the entrance fees as a below-market loan to the provider and impute taxable interest to the resident. If a second resident occupies an independent living unit at the Glen, an additional entrance fee of $25,000 and an additional monthly fee of $642 are assessed, regardless of the location or size of the unit. But a second resident, even a spouse, must apply for admission to the community and the provider has reserved sole discretion as to whether to accept applicants into the community.

Monthly fees, which as indicated earlier are intended to cover all the Glen's operating costs, may be adjusted upon 60 days' notice. Some of the Glen's specified operating costs result from the provision of meals, weekly housekeeping and semi-annual window washing, weekly towel and linen service, social, cultural, and recreational activities, local group transportation, the emergency call system, space for storage and automobile parking, and routine property maintenance. The monthly fees also cover utilities, taxes, property insurance, liability insurance, employment expenses, the costs of maintaining, repairing and replacing capital items, including furnishings, fixtures and equipment, a management fee fixed at 8% of revenues, and an annual lease payment which is initially set at $661,000 and...