Saunders v. Michigan Ave. Nat. Bank

• Decision Date: 07 March 1996
• Docket Number: No. 1-94-1047,1-94-1047
• Parties: , 214 Ill.Dec. 1036 Stella SAUNDERS, Plaintiff-Appellant, v. MICHIGAN AVENUE NATIONAL BANK, a national banking association, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

Page 602

662 N.E.2d 602

278 Ill.App.3d 307, 214 Ill.Dec. 1036

Stella SAUNDERS, Plaintiff-Appellant, v. MICHIGAN AVENUE NATIONAL BANK, a national banking

association, Defendant-Appellee.

No. 1-94-1047.

Appellate Court of Illinois,

First District, Fourth Division.

March 7, 1996.

Appeal from the Circuit Court of Cook County, No. 91-CH-11695; The Hon. Aaron Jaffe, Judge Presiding.

Daniel A. Edelman, Cathleen M. Combs, Tara L. Goodwin of Edelman & Combs, Chicago. Lawrence Walner of Lawrence Walner & Associates, Chicago, for Appellant.

Aronberg, Goldgehn, Davis & Garmisa, Chicago (Nathan H. Lichtenstein, John M. Riccione, William J. Serritella, Jr., of counsel), for Appellee.

Justice THEIS delivered the opinion of the court:

Plaintiff, Stella Saunders (Saunders), appeals from the trial court's order granting defendant's motion to dismiss her third amended complaint. Saunders sued defendant, Michigan Avenue National Bank (Bank), after the Bank charged her over $200 for an overdraft of approximately $4.61. Saunders brought the action on behalf of herself and others similarly situated.

On appeal, Saunders argues that the trial court erred in dismissing her complaint, claiming that she stated the following causes of action: (1) violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act); (2) the imposition of an unenforceable penalty; (3) breach of the duty of good faith and fair dealing; and (4) the Bank's overdraft policy was unconscionable. In addition to its contention that Saunders fails to state a claim, the Bank argues that Federal banking laws preempt Saunders' claims. Finally, the Bank contends that Saunders waived review of certain counts by failing to address them in her notice of appeal. We affirm.

In February of 1988, Saunders opened a checking account with the Bank. At the time she opened her account, the Bank provided Saunders with written information describing the services and charges associated with the account. Specifically, Saunders received a pamphlet which stated that the Bank charged $20 per day for overdrafts. The pamphlet, however, did not define the term "overdraft."

On October 31, 1990, a check in the amount of $8.10 was presented to the Bank against Saunders' account, which had a balance of only $3.49. The Bank honored the check and charged Saunders the $20 overdraft fee. When a second check was presented against Saunders' overdrawn account on November 14, 1990, the Bank returned it for insufficient funds (NSF). The Bank refused to honor the second check when it was returned again for payment on November 20, 1990.

As a result of the first check, the Bank imposed the $20 overdraft charge against Saunders' account on 11 separate occasions. This resulted in a negative balance of $244.61. Finally, on December 20, 1990, Saunders deposited the $244.61 and closed her account.

On February 19, 1993, Saunders filed a second amended complaint, alleging the following counts: (I) violation of the Consumer Fraud Act (815 ILCS 505/2 (West 1992)); (II) the charges constituted an unenforceable penalty; (III) the charges were unconscionable; and (IV) the Bank violated the Illinois Interest Act (815 ILCS 205/4a (West 1992)), respectively. On July 1, 1993, the trial court granted the Bank's motion to dismiss on counts I, II and IV with prejudice. The court struck count III of the second amended complaint, the unconscionability claim, with leave to replead.

In August of 1993, Saunders filed her third amended complaint, alleging that the Bank breached the covenant of good faith and fair dealing and that the charges were unconscionable. The trial court dismissed Saunders' third amended complaint on March 21, 1994. Without leave of court, Saunders filed her appendix and exhibits to the third amended complaint on March 29, 1994. Included in this filing was Saunders' second amended complaint which was referenced in, but omitted from, the third amended complaint. That same day, Saunders filed her notice of appeal from the order entered on March 21, 1994. For the reasons stated below, we affirm.

The standard of review of appeal from a motion to dismiss is whether the complaint sufficiently states a cause of action. Commerce Bank, N.A. v. Plotkin, 255 Ill.App.3d 870, 194 Ill.Dec. 409, 627 N.E.2d 746 (1994). We do not consider the merits of the claim. Commerce Bank, N.A. All well-pleaded facts are accepted as true. Bel-Grade, Inc. v. Etheridge, 229 Ill.App.3d 624, 170 Ill.Dec. 549, 593 N.E.2d 91 (1992). With these principles in mind, we turn to the issues at hand.

The Bank contends that the National Bank Act preempted Saunders' arguments concerning the propriety of the overdraft charges. 12 U.S.C.A. § 1 (1992). Specifically, the Bank argues that Saunders' claims were preempted by section 7.8000 of the Federal Regulations which provides that:

"A national bank may establish any deposit account service charge * * * notwithstanding any state laws which prohibit the charge assessed or limit or restrict the amount of that charge. Such state laws are preempted by the comprehensive federal statutory scheme governing the deposit-taking function of national banks." 12 C.F.R. § 7.8000(c) (1994).

In response, Saunders claims that the Bank waived this issue by raising it for the first time on review. While the Bank argues that jurisdictional questions may be raised at any time, Saunders correctly notes that preemption is a constitutional question, not a jurisdictional issue.

Generally, reviewing courts will not rule upon constitutional issues unless they were raised and passed upon by the trial court. Edelman v. California, 344 U.S. 357, 73 S.Ct. 293, 97 L.Ed. 387 (1953); Beckman v. Freeman United Coal Mining Co., 123 Ill.2d 281, 122 Ill.Dec. 805, 527 N.E.2d 303 (1988). In the instant case, the issue of preemption raises constitutional concerns, not jurisdictional issues. We are not asked to determine whether the power to hold the proceeding lies with Federal or State courts. See People v. Kerr-McGee Chemical Corp., 142 Ill.App.3d 1104, 97 Ill.Dec. 344, 492 N.E.2d 1003 (1986). Rather, we are deciding whether Saunders' State statutory and common law challenges can survive in light of Federal legislation. Thus, the issue of whether the National Bank Act preempts Saunders' claims is resolved by applying the principles of the Supremacy Clause of the U.S. Constitution and is inherently a constitutional issue. (U.S. Const., art. VI, cl. 2.) As the Bank failed to raise this issue in the trial court, the issue is not properly before us.

Similarly, we find the Bank's argument that Saunders waived her right to appeal counts from her second amended complaint to be unavailing. The notice of appeal specified an appeal from only the March 21, 1994, order dismissing Saunders' third amended complaint. The Bank contends that Saunders' appeal is limited to those counts contained in her third amended complaint. As such, Saunders would be barred from seeking review of the Consumer Fraud Act and penalty counts from her second amended complaint.

We recognize that "[w]here an amendment is complete in itself and does not refer to or adopt the prior pleading, the earlier pleading ceases to be a part of the record for most purposes, being in effect abandoned and withdrawn." Foxcroft Townhome Owners v. Hoffman Rosner, 96 Ill.2d 150, 154, 70 Ill.Dec. 251, 252, 449 N.E.2d 125, 126 (1983), quoting Bowman v. County of Lake, 29 Ill.2d 268, 272, 193 N.E.2d 833 (1963). Courts adhere to this rule to ensure that the court and the opposing party will be aware of the points at issue. Foxcroft Townhome Owners, 96 Ill.2d at 154, 70 Ill.Dec. at 252, 449 N.E.2d at 126. In this case, however, Saunders' third amended complaint does refer to the prior complaints. Specifically, footnote one of the third amended complaint provides that "[t]he prior complaints are attached as Appendix A to preserve the previously dismissed claim [sic ] for appeal." As such, the third amended complaint properly referenced the prior complaints, preserving the issues for review.

The Bank notes that Saunders failed to attach the prior complaints to the third amended complaint. Saunders waited until March 28, 1994, approximately six months after filing the third amended complaint, to attach the appendix and exhibits without leave of court. We do not believe Saunders' oversight is fatal. A notice of appeal is to be liberally construed. Burtell v. First Charter Service Corp., 76 Ill.2d 427, 31 Ill.Dec. 178, 394 N.E.2d 380 (1979). This court is not deprived of jurisdiction where the deficiency in the notice of appeal was one of form only, and not of substance. Burtell. We are unpersuaded that the Bank was prejudiced by Saunders' failure to attach the prior complaints. The third amended complaint expressly stated that the prior complaints were incorporated for purposes of preserving the issues for appeal. As such, Saunders' filings served the purpose of informing the Bank that it would seek review of issues raised in the prior complaints. Burtell. Finding that all of Saunders' arguments are properly before us, we will now address the substantive issues on appeal.

In count I of her second amended complaint, Saunders claimed that the Bank's conduct violated the Consumer Fraud Act. In order to state a claim under the Consumer Fraud Act, Saunders must allege only the following: (1) a deceptive act or unfair practice; (2) an intent on the Bank's part that Saunders rely on the deception; and (3) that the deception occurred during trade or commerce. Siegel v. Levy Organization Development Co., 153 Ill.2d 534, 180 Ill.Dec. 300, 607 N.E.2d 194 (1992). Saunders argues that she states a claim under the Consumer Fraud Act by alleging first that the Bank's conduct was deceptive and then that the overdraft scheme was unfair. We will address each argument in turn.

Saunders alleges that the Bank's conduct was deceptive because the agreement did...