Kellerman v. Mar-Rue Realty and Builders, Inc.

• Decision Date: 22 March 1985
• Docket Number: MAR-RUE,No. 84-558,84-558
• Citation: 132 Ill.App.3d 300,87 Ill.Dec. 267,476 N.E.2d 1259
• Parties: , 87 Ill.Dec. 267 Norman KELLERMAN and Vicki Kellerman, individually and on behalf of all persons similarly situated, Plaintiffs-Appellants, Cross-Appellees, v.REALTY AND BUILDERS, INC., Defendant-Appellee, Cross-Appellant.
• Court: United States Appellate Court of Illinois

Page 1259

476 N.E.2d 1259

132 Ill.App.3d 300, 87 Ill.Dec. 267

Norman KELLERMAN and Vicki Kellerman, individually and on behalf of all persons similarly situated Plaintiffs-Appellants, Cross-Appellees, v. MAR-RUE REALTY AND BUILDERS, INC., Defendant-Appellee Cross-Appellant.

No. 84-558.

Appellate Court of Illinois,

First District, Fifth Division.

March 22, 1985.

[87 Ill.Dec. 268] Block, Levy & Associates, Chicago (Russell C. Green, Chicago, of counsel), for plaintiffs-appellants, cross-appellees

Braun & Rivkin, Ltd., Chicago (Nancy M. Barrett, Chicago, of counsel), for defendant-appellee, cross-appellant.

MEJDA, Presiding Justice:

Plaintiffs and class representatives, Norman and Vicki Kellerman, appeal from an order of the circuit court granting defendant's Count I of plaintiffs' unverified complaint alleged that defendant was engaged in the development and sale of residential real estate, including the condominium known as the Mar-Rue Courts Complex. The defendant advertised for the sale of these condominiums in certain newspapers. These advertisements included purchase prices, down payments and interest rates on mortgage loans. After seeing one of these advertisements, plaintiffs were induced to examine the property in which they later purchased a unit. Plaintiffs alleged that at no time during the negotiations, nor in the contract itself, did defendant inform them that there were any undisclosed financing costs connected with the financing arrangements offered by or through the defendant. Upon the closing of the sale, plaintiffs were advised that they were required to purchase mortgage insurance as a condition of financing and that they were required to reimburse the lender the prepaid charge of $197.50 as an annual premium for this insurance. Plaintiffs alleged that the failure to disclose the mandatory purchase of mortgage insurance as a prerequisite to financing constituted deceptive advertising under Ill.Rev.Stat.1981, ch. 121 1/2, par. 157.21a. Plaintiffs sought an accounting of the mortgage insurance premiums on behalf of the class. Count II differed from Count I only in that plaintiffs alleged that the representations in the advertisements created a likelihood of confusion as to the nature of the financing arrangements in violation of Ill.Rev.Stat.1981, ch. 121 1/2, pars. 262 and 312(12). Defendant filed an answer denying the material allegations of the complaint.

                [87 Ill.Dec. 269]  Mar-Rue Realty and Builders, Inc., motion for summary judgment.  Plaintiffs contend that the trial court erred in entering summary judgment against them because the advertisements placed by defendant failed to disclose that the lender, Northwest Federal Savings and Loan (Northwest Federal), required payment of mortgage guaranty insurance premiums (mortgage insurance) as a condition of financing and that this failure constituted deceptive advertising.  Plaintiffs allege violations of section 157.21a of "An act to prevent untrue, deceptive or fraudulent advertising" (Ill.Rev.Stat.1981, ch. 121 1/2, par. 157.21a) (hereinafter cited as the Fraudulent Advertising Act), section 262 of the Consumer Fraud and Deceptive Practices Act (Consumer Fraud Act) (Ill.Rev.Stat.1981, ch. 121 1/2, par. 262) and section 312(12) of the Uniform Deceptive Trade Practices Act (Uniform Act) (Ill.Rev.Stat.1981, ch. 121 1/2, par. 312(12).)   Defendant cross-appeals from an order denying its motion for costs and attorney fees.  Defendant contends that plaintiffs' suit was without legal foundation because plaintiffs and their attorneys were aware of all material terms and conditions of the contract to purchase the condominiums prior to the closing and made no objection to them.  We affirm
                

Defendant's motion for summary judgment stated that Count I fails to state a cause of action because section 157.21a imposes criminal misdemeanor sanctions affording no basis for a private cause of action. As to Count II, the motion set forth that plaintiffs had not alleged that they would have done anything differently had they known of the mortgage insurance charge. Moreover, Norman Kellerman testified in a discovery deposition that he was aware of the mortgage insurance charge well before he closed the transaction to purchase his condominium unit. The motion included Kellerman's discovery deposition which disclosed the following additional facts. The language in the advertisement that attracted him to look at the unit was the "price of the unit and the interest rate." When he first viewed the condominium, he was given a packet of information in which he noticed a listing for the mortgage insurance charge but did not ask the sales agent to explain it. Later when defendant's agent completed the sales contract, Kellerman observed the charge on the contract but again did not inquire about the mortgage insurance. He was represented by counsel in this transaction both before and at the closing. He signed all documents presented to him either before

[87 Ill.Dec. 270] or at the closing after his attorney had reviewed and approved them for his signature. Neither Kellerman nor his attorney objected to the mortgage insurance charge at any time either before or at the closing. Kellerman was not coerced by defendant to arrange for financing from Northwest Federal and made no attempt to secure financing from any other financial institution. No documents or other depositions were filed to contradict his testimony. After hearing arguments on the motion, the trial court granted defendant's motion for summary judgment. Defendant subsequently moved for expenses and attorney fees (Ill.Rev.Stat.1983, ch. 110, par. 2-611) alleging that plaintiffs' class action suit was baseless because plaintiffs and their attorney were aware right from the start of the mortgage insurance requirement. The trial court denied the motion. Plaintiffs appeal the granting of defendant's motion for summary judgment [132 Ill.App.3d 304] and defendant cross-appeals the denial of its motion for expenses and attorney fees.

OPINION

As to Count I, plaintiffs allege that the trial court erred in entering summary judgment for defendant because a private right of action for deceptive advertising should have been implied under section 157.21a of the Fraudulent Advertising Act. In the instant case, defendant included the argument that Count I fails to state a cause of action with its motion for summary judgment. Our supreme court has expressly disapproved such hybrid motions for the reason that combining an inquiry into whether a pleading is sufficient to state a cause of action with an examination which almost necessarily assumes that a cause of action has been stated is likely to confuse both the parties and the court. The court allowed, however, that to remand the cause to the trial court for separate consideration of motions would "occasion delay and waste of judicial resources." (Janes v. First Federal Savings & Loan Association (1974), 57 Ill.2d 398, 407, 312 N.E.2d 605.) We adopt that reasoning and conclude that the most expeditious manner of disposing of this appeal is to consider the proceeding before us as to Count I as a motion to strike the complaint because substantially insufficient in law. (See Ill.Rev.Stat.1983, ch. 110, par. 2-615; Denton Enterprises, Inc. v. Illinois State Toll Highway Authority (1979), 77 Ill.App.3d 495, 498, 32 Ill.Dec. 921, 396 N.E.2d 34.)

In asserting that a private right of action under section 157.21a should be recognized, plaintiff urges that the rationale employed in Rice v. Snarlin, Inc. (1970), 131 Ill.App.2d 434, 266 N.E.2d 183, is applicable to the instant case. In Rice, which dealt with the Consumer Fraud Act (Ill.Rev.Stat.1967, ch. 121 1/2, pars. 261 through 272), the court reasoned that by creating liability on the part of the seller, the legislature intended to invest the consumer with the right to enforce his claim. (131 Ill.App.2d 434, 442, 266 N.E.2d 183.) The court based its decision allowing a private right of action under the Consumer Fraud Act on a belief that the Illinois legislature intended to enact broad protective coverage of consumers from deceptive or unfair selling and advertising techniques used by businesses. (See also American Buyers Club of Mt. Vernon, Illinois, Inc. v. Honecker (1977), 46 Ill.App.3d 252, 5 Ill.Dec. 666, 361 N.E.2d 1370.) Following the Rice decision, the Illinois legislature revised the Consumer Fraud Act expressly granting a private right of action. See Ill.Rev.Stat.1973, ch. 121 1/2, par. 270a.

Although Rice was based on sound reasoning, we perceive important differences between the Consumer Fraud Act interpreted in Rice and the Fraudulent Advertising Act of which section 157.21a is a part. The preface to the Consumer Fraud Act specifically states that the Act is "to protect consumers and borrowers against fraud and certain other practices by or on behalf of sellers and lenders of money * * *." The preface to the Fraudulent Advertising Act states simply that its purpose is "to prevent untrue, deceptive or fraudulent advertising." Although the Attorney General has discretionary authority to proceed against anyone violating a provision of the Consumer Fraud Act (Ill.Rev.Stat.1981, ch. 121 1/2, pars. 263 through 267), no criminal sanctions are imposed as punishment. Section 157.21a, however, provides that any violation of this provision is "a class A misdemeanor." This section and other sections of this Act were amended in 1973 to conform the penalties imposed with the Unified Code of Corrections. (Ill.Ann.Stat., ch. 121 1/2, par. 157.21a (Smith-Hurd 1984-85).) For these reasons, we believe the legislature intended section 157.21a as a criminal section and we decline to imply a private right of action under that section. Because the Illinois legislature amended the Consumer Fraud Act expressly allowing consumers a right of action, a party seeking civil damages would undoubtedly be able to state a cause of...