Dixon v. Mercury Finance Co.

May 6, 1998

Nos. 2--97--0705, 2--97--0706, 2--97--0707, cons.
________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
________________________________________________________________

PAMELA DIXON, ) Appeal from the Circuit Court
) of Lake County.
Plaintiff-Appellant, )
)
v. ) No. 95--LM--4223
)
MERCURY FINANCE COMPANY OF )
WISCONSIN, )
)
Defendant-Appellee )
) Honorable
(Rohr-Ville Motors, Inc., ) Emilio B. Santi,
Defendant). ) Judge, Presiding.
________________________________________________________________

REBECCA HOLLAND-WILSON, EUGENE ) Appeal from the Circuit Court
WILLIAMS, LETITIA S. COOK, and ) of Lake County.
CYNTHIA SMOOTS, )
)
Plaintiffs-Appellants, ) No. 94--CH--781
)
v. )
)
MERCURY FINANCE COMPANY OF )
WISCONSIN; ROHR-VILLE MOTORS, )
INC., d/b/a Saturn of Waukegan; )
and MERCURY FINANCE COMPANY OF )
ILLINOIS, ) Honorable
) Emilio B. Santi,
Defendants-Appellees. ) Judge, Presiding.
_________________________________________________________________

MERCURY FINANCE COMPANY OF ) Appeal from the Circuit Court
WISCONSIN, ) of Lake County.
)
Plaintiff and ) No. 95--LM--1848
Counterdefendant-Appellee, )
v. )
)
MIKE FRAZIER and WENDY FRAZIER, )
)
Defendants and ) Honorable
Counterplaintiffs- ) Emilio B. Santi,
Appellants. ) Judge, Presiding.
_________________________________________________________________


JUSTICE INGLIS delivered the opinion of the court:
In this consolidated case, plaintiff Pamela Dixon, plaintiffs
Rebecca Holland Wilson, Eugene Williams, Letitia Cook, and Cynthia
Smoots (the Holland-Wilson plaintiffs), and counterplaintiffs Mike
and Wendy Frazier ( all parties, collectively, plaintiffs), appeal
the order of the circuit court of Lake County granting summary
judgment in favor of defendants Mercury Finance Company of
Wisconsin (MFC Wisconsin) and Mercury Finance Company of Illinois
(MFC Illinois) (collectively, defendants). Plaintiffs alleged that
MFC Wisconsin violated the Sales Finance Agency Act (Act) (205 ILCS
660/1 et seq. (West 1994)) by failing to obtain a license and,
thus, their motor vehicle retail installment contracts with MFC
Wisconsin were void. We affirm.
MFC Wisconsin is a sister company to MFC Illinois. Both
companies purchase or make loans secured by motor vehicle
installment contracts. At times relevant to this action, MFC
Wisconsin was not licensed as a sales finance agency in Illinois
under the Act.
In December 1992, MFC Wisconsin opened a branch office in
Racine, Wisconsin, under the management of Kelly Hill, who was
transferred from the Waukegan office of MFC Illinois. Hill
continued her business relationships with a number of Illinois
dealerships while managing the Racine office. During the time Hill
managed MFC Wisconsin s Racine office, it purchased more than 700
contracts from Illinois dealerships.
Plaintiffs alleged that they all purchased cars with financing
from MFC Wisconsin. Plaintiffs alleged that MFC Wisconsin
originated the loan to purchase the car; MFC Wisconsin maintained
that each dealership assigned it the financing contract.
In November 1994, the Holland-Wilson plaintiffs filed suit
against MFC Wisconsin, alleging that MFC Wisconsin violated the Act
by failing to obtain a sales finance agency license. After
plaintiffs filed their suit, the Illinois Department of Financial
Institutions (Department) informed MFC Wisconsin that it was
conducting business in Illinois as a sales finance agency and, as
such, required an Illinois license. After some negotiation, the
Department sent MFC Wisconsin a cease and desist letter requiring
it to become licensed in Illinois in order to continue to purchase
Illinois contracts. MFC Wisconsin disagreed that it needed an
Illinois license but nevertheless agreed to stop purchasing
Illinois contracts.
On February 1, 1995, the Holland-Wilson plaintiffs filed an
amended complaint. Count I sought to set aside the contract as
void; count II sought damages under section 16 of the Act (205 ILCS
660/16 (West 1994)). MFC Wisconsin filed a motion to dismiss the
complaint. The trial court denied the motion with respect to count
I but dismissed count II, finding that the Holland-Wilson
plaintiffs failed to identify any losses they suffered with
sufficient particularity.
Effective July 11, 1995, MFC Wisconsin assigned all Illinois
finance contracts to MFC Illinois. The Holland-Wilson plaintiffs
thereafter added MFC Illinois as a defendant to this action by
virtue of the assignments.
The Holland-Wilson plaintiffs then filed a motion for class
certification. While the motion for class certification was
pending, defendants filed a motion for summary judgment, which was
denied. The trial court directed the Holland-Wilson plaintiffs to
prepare a motion for summary judgment before it would address the
class certification motion. Thereafter, the trial court concluded
that there were no issues of material fact and that defendants were
entitled to judgment as a matter of law. The trial court held that
plaintiffs financing contracts were voidable due to the
Department s intercession. The trial court reasoned that the
Department s action of requiring MFC Wisconsin to assign its
Illinois contracts to MFC Illinois ratified the financing
contracts. The Holland-Wilson plaintiffs filed an objection to the
court s ruling on the grounds that the trial court refused to rule
on the class certification before the motion for summary judgment
and because defendants had no pending motion for summary judgment
before the court. The trial court overruled the objections and
entered judgment, dismissing the claims against defendants. As the
same issues were involved in the consolidated cases, the trial
court also dismissed Dixon s and the Fraziers actions against
defendants. Plaintiffs timely appeal.
Plaintiffs raise five issues on appeal, contending that the
trial court erred by (1) concluding that the financing contracts
provided by defendants were illegal but not void; (2) ruling that
the Department s actions ratified the financing contracts; (3)
granting summary judgment in favor of defendants where defendants
had no pending motion for summary judgment; (4) refusing to hear
plaintiffs motion for class certification and instead ordering
plaintiffs to file a motion for summary judgment; and (5)
dismissing count II of the amended complaint for failing to allege
a loss under the Act.
Before addressing the issues raised by plaintiff on appeal, we
briefly examine the standards under which we review the propriety
of a grant of summary judgment. Summary judgment is properly
granted if the pleadings, depositions, and admissions on file,
together with any affidavits, show there is no genuine issue as to
any material fact and that the moving party is entitled to judgment
as a matter of law. 735 ILCS 5/2-1005 (West 1994); Leschinski v.
Forest City Steel Erectors, 243 Ill. App. 3d 124, 127 (1993). In
ruling on the motion, the court is required to construe all
evidentiary material strictly against the movant and liberally in
favor of the respondent. Pagano v. Occidental Chemical Corp., 257
Ill. App. 3d 905, 908 (1994).
A reviewing court reviews the propriety of an order granting
summary judgment de novo and may affirm the decision on any ground
in the record, regardless of whether the trial court relied on that
ground or whether the court s reasoning was correct. Grot v.
First Bank of Schaumburg, 292 Ill. App. 3d 88, 93 (1997). If,
after reviewing the pleadings and evidentiary material before the
trial court, the reviewing court determines that a material issue
of fact exists or that the summary judgment was based on an
erroneous interpretation of the law, then reversal is warranted.
Pagano, 257 Ill. App. 3d at 909.
Plaintiffs first contend that the financing contracts were
void and should be set aside. Plaintiffs advance three reasons in
support of their contention. First, plaintiffs argue that the
financing contracts were made in violation of the Act, a mandatory
licensing statute, because MFC Wisconsin was not licensed under the
Act. According to plaintiffs, MFC Wisconsin was not an assignee of
each plaintiff s car loan, but rather, originated the loan to each
plaintiff. Plaintiffs contend that defendants acted as sales
finance agencies by originating the loans. Thus, according to
plaintiffs, defendants violation of the Act renders the contracts
void. Second, plaintiffs argue that MFC Wisconsin s promise to
extend financing to each plaintiff constituted illegal
consideration, thereby rendering the contracts void. Third,
plaintiffs assert that the financing contracts conflicted with
Illinois public policy.
Plaintiffs arguments, however, overlook the statutory
remedies available under the Act. The Act provides that [n]o
person may engage in the business of a sales finance agency in this
State without first obtaining a license as provided in this Act.
205 ILCS 660/3 (West 1994). Concerning violations, the Act
provides that [a]ny person who engages in business as a sales
finance agency without the license required by this Act shall be
guilty of a Class A misdemeanor. 205 ILCS 660/15 (West 1994).
The Act s damages provision states:
An individual who sustains loss as a result of a sales
finance agency s violation of this Act may, in a civil action
against the sales finance agency, recover damages, or may, in
an action brought by the sales agency to collect an
indebtedness arising out of a retail sales transaction, raise
such damages by way of a counterclaim or offset. In either
such action, the court may allow as an additional part of the
recovery, offset or counterclaim, penal damages in an amount
not more than 25% of the principal amount of the retail
contract, retail charge agreement, or evidence of indebtedness
which is the subject of the action. 205 ILCS 660/16 (West
1994).
The Act does not allow a plaintiff to declare a contract void;
it only allows a plaintiff to recover damages for losses incurred
due to a violation of the Act. Here, plaintiffs have not alleged
or demonstrated any losses arising from MFC Wisconsin s failure to
obtain an Illinois license. Plaintiffs do not allege that they
would have received a different or better deal had they obtained
financing through an Illinois licensee. Plaintiffs also do not
offer evidence that MFC Wisconsin violated any of the other
requirements of the Act. This lack of harm is fatal to plaintiffs
claims.
Indeed, we discern in the Act a balance between the competing
public policies of oversight of consumer credit transactions and
the freedom to contract. The Act provides that [n]o suspension,
revocation or surrender of a license issued under this Act impairs
or affects the obligation of any retail installment contract,
retail charge agreement or evidence of indebtedness acquired
previously thereto by the licensee. 205 ILCS 660/10.3 (West
1994). Similarly, section 13.70 of the Business Corporation Act of
1983 provides that the failure of a foreign corporation to obtain
a certificate of authority to transact business in this State does
not impair the validity of any contract or act of the corporation.
805 ILCS 5/13.70 (West 1994). From these sections, we discern the
legislature s pragmatic approach to the realities of business in a
large and integrated multi-state economy, balancing the competing
policies of protecting the public and promoting the free flow of
commerce.
In addition, we note that the Department acted to enforce the
public policy of the State by requiring that MFC Wisconsin either
obtain an Illinois license or assign the contracts to an Illinois
licensee. MFC Wisconsin has maintained throughout the course of
this matter that it was not doing business in Illinois. The
Department s forbearance from criminal prosecutions under section
15 of the Act reinforces MFC Wisconsin s contention that it was at
all times acting in good faith. Pursuant to the Department s
action, MFC Wisconsin assigned the financing contracts to MFC
Illinois, thereby losing the benefits of its bargains with
plaintiffs. We note plaintiffs do not allege that MFC Wisconsin
acted in bad faith and did not tender their vehicles for return.
To strip MFC Wisconsin of its contracts and require it to pay for
plaintiffs cars in the absence of specific and articulable harm to
plaintiffs is excessively harsh. Under the facts of this case,
where the sales finance agency has apparently conducted business in
good faith and where plaintiffs cannot demonstrate any harm arising
from the sales finance agency s failure to obtain a license, we see
no reason to invalidate the contract based upon other grounds not
specifically set forth in the Act.
We also find the authority cited by plaintiffs in support of
their argument to be distinguishable. Initially, we note that in
the large majority of cases, the licensing statute was enacted in
order to protect public health and safety. In these cases, a
violation of the licensing requirements could have a significant
impact on public health or safety. See, e.g., Kaplan v. Tabb
Associates, Inc., 276 Ill. App. 3d 320 (1995) (architectural
license); Ransburg v. Haase, 224 Ill. App. 3d 681 (1992)
(architectural license); Tovar v. Paxton Community Memorial
Hospital, 29 Ill. App. 3d 218 (1975) (medical license); Broverman
v. City of Taylorville, 64 Ill. App. 3d 522 (1978) (pollution); E
& B Marketing Enterprises, Inc. v. Ryan, 209 Ill. App. 3d 626, 630
(1991) (physician fee splitting compromised patient s interests);
Klubeck v. Division Medical X-Ray, Inc., 108 Ill. App. 3d 630, 635
(1982) (public health compromised by indirect payment to medical
service provider). Here, by contrast, public health or safety is
not endangered by MFC Wisconsin s failure to obtain a license. We
also find plaintiffs remaining authority to be distinguishable.
See, e.g., Frankel v. Allied Mills, Inc., 369 Ill. 578 (1938)
(licensing statute does not contain section to enforce contracts
upon loss of license); Waterford Executive Group, Ltd. v.
Clark/Bardes, Inc., 261 Ill. App. 3d 338 (1994) (same); White v.
Chicago Title & Trust Co., 99 Ill. App. 3d 323 (1981) (same);
American Buyers Club of Mt. Vernon, Illinois, Inc. v. Grayling, 53
Ill. App. 3d 611, 616 (1977) (violation of substantive federal
truth-in-lending requirements).
Plaintiffs also approach the problem from the viewpoint that
part of the consideration for the transaction, namely MFC
Wisconsin s promise to provide them financing, is illegal in light
of MFC Wisconsin s failure to obtain a license under the Act.
According to plaintiffs, the illegal consideration renders the
contract unenforceable. We disagree. The illegality in this
situation stems from MFC Wisconsin s failure to obtain a license,
not from its extension of credit to plaintiffs. See 205 ILCS
660/15 (West 1994). Moreover, when informed of the fact that MFC
Wisconsin was not licensed under the Act, the Department acted to
vindicate the public interest by requiring MFC Wisconsin to assign
all its Illinois contracts to an Illinois licensee. MFC Wisconsin
complied. The Department sought no other sanctions against MFC
Wisconsin. Plaintiffs have provided no evidence that the financing
agreement itself violated any laws or that the subject matter of
the financing agreement or any other detail of the transaction was
illegal.
Plaintiffs also contend that the transaction contravened
public policy. We reject this argument, as the Act itself in
section 10.3 strikes a balance between public protection and the
freedom to contract. 205 ILCS 660/10.3 (West 1994). Moreover, the
Department s intervention vindicated the public policy. As
discussed previously, the Department required MFC Wisconsin to
assign the Illinois contracts to an Illinois licensee. This action
protected the public interest, and, in the absence of any harm to
plaintiffs, no further action on their behalf is necessary.
Next, plaintiffs argue that the trial court erred by
determining that the Department s intervention ratified the
financing contracts. As we have already decided the issue on the
grounds discussed above, we need not consider plaintiffs argument
in this regard.
Plaintiffs next argue that the trial court abused its
discretion by refusing to rule on their motion to certify a class
before it heard plaintiffs motion for summary judgment. We
disagree. Section 2 802(a) of the Code of Civil Procedure provides
that [a]s soon as practicable after the commencement of an action
brought as a class action, the court shall determine by order
whether it may be so maintained. 735 ILCS 5/2 802(a) (West 1996).
As soon as practicable does not mean, however, that a court need
delay ruling on a motion to dismiss until after it has ruled on the
issue of class certification. Schlessinger v. Olsen, 86 Ill. 2d 314, 320 (1981). The Schlessinger court adopted the reasoning of
the federal district court in Garcia v. Rush-Presbyterian-St.Luke s
Medical Center, 80 F.R.D. 254, 260 (N.D. Ill. 1978), which, in
ruling on a similar issue, stated:
'Recent decisions *** have expressed a strong preference for
early certification as required by the explicit language of
[Fed. R. Civ. P. 23(c)(1)]. [Citations.] It has been
suggested that the rationale of these cases, if carried to a
logical extreme, would require certification to precede even
disposition of motions [to dismiss]. [Citation.] However,
where, as here, defendants summary judgment motions allow the
court to explore and define the proper range of judicial
inquiry on the allegations of the complaint, disposition of
those motions before certification is appropriate.'
Schlessinger, 86 Ill. 2d at 320.
In addition, the seventh circuit recently discussed a similar
circumstance to the case at bar, stating,
The bank elected to move for summary judgment before the
district judge decided whether to certify the suit as a class
action. This is a recognized tactic, [citations] and does not
seem to us improper. It is true that [Fed. R. Civ. P.
23(c)(1)] requires certification as soon as practicable, which
will usually be before the case is ripe for summary judgment.
[Citations.] But 'usually' is not 'always,' and 'practicable'
allows for wiggle room. Class actions are expensive to
defend. One way to try to knock one off at low cost is to
seek summary judgment before the suit is certified as a class
action. A decision that the claim of the named plaintiffs
lacks merit ordinarily, though not invariably, [citations] ***
disqualifies the named plaintiffs as proper class
representatives. The effect is to moot the question whether
to certify the suit as a class action unless the lawyers for
the class manage to find another representative. Cowen v.
Bank United of Texas, FSB, 70 F.3d 937, 941 (7th Cir. 1995).
We find the reasoning of these cases to be persuasive here as
well. In the case at bar, plaintiffs delayed moving for class
certification until after defendants had made a number of motions,
including at least one motion for summary judgment. Although
plaintiffs filed their motion for summary judgment at the trial
court s request, this fact does not invalidate the procedure used
in this case, where the scope of the judicial inquiry on the issues
had yet to be defined. Moreover, even if we were to reverse the
trial court, plaintiffs could still move to certify a class. We
discern no prejudice to plaintiffs arising from the trial court s
procedure in this case, and we find that there was no abuse of
discretion.
Plaintiffs next argue that the trial court erred by granting
summary judgment in favor of defendants because defendants had no
pending motion for summary judgment before the trial court. We
disagree. Plaintiffs had filed a motion for summary judgment,
which was properly before the trial court. The denial of
plaintiffs' motion was effectively a ruling in favor of defendants
even though defendants had no pending motion for summary judgment.
Magnus v. Lutheran General Health Care System, 235 Ill. App. 3d
173, 184-85 (1992).
Plaintiffs final contention is that the trial court
erroneously dismissed count II of their complaint for failing to
sufficiently plead that plaintiffs had sustained a loss under
section 16 of the Act (205 ILCS 660/16 (West 1994)). We disagree.
Section 16 provides that [a]n individual who sustains loss as a
result of a sales finance agency s violation of this Act may, in a
civil action against the sales finance agency, recover damages
***. 205 ILCS 660/16 (West 1994). Plaintiffs have alleged only
that they paid principal and interest due under the void contract.
As plaintiffs argument is based on obligations under a void
contract, it necessarily fails in light of our earlier disposition
of this issue. In any event, we hold that the mere allegations of
paying obligations owed on a void contract are insufficient as a
matter of law to state a claim under the Act.
Plaintiffs cite Armstrong v. Edelson, 718 F. Supp. 1372 (N.D.
Ill. 1989), for the proposition that allegations of a sales finance
agency s violation of the Act sufficiently state a loss under the
Act. There, the plaintiffs alleged that a contractor induced them
to enter into a home repair contract that was backdated and
therefore could not be canceled. The plaintiffs alleged that the
contract required them to pay for home repair work that they never
received or that was defectively performed. The contract was
assigned to a sales finance agency that was alleged to have
violated the Act because it purchased the contract even though
there was no description of the services that were to be provided.
The district court held that the plaintiffs stated a claim under
the Act because of the uncertainty in the contract over what
services the contractor was to perform. Armstrong, 718 F. Supp. at
1378. In the present case, by contrast, plaintiffs alleged that
they received the cars for which they bargained and, in exchange,
paid their obligations under the financing agreement. Plaintiffs
did not allege that the cars were defective, or that the financing
agreements were illegal or unconscionable. Armstrong does not
support plaintiffs argument.
We also find Kedzie & 103rd Currency Exchange, Inc. v. Hodge,
156 Ill. 2d 112 (1993), and Automotive Material Co. v. American
Standard Metal Products Corp., 232 Ill. App. 532 (1924), rev d, 327 Ill. 367 (1927), to be distinguishable because each dealt with
obligations arising under contracts void for reasons of public
policy. As determined above, the contracts at issue in this case
are not void and do not violate public policy. Thus, we find that
the trial court properly dismissed plaintiffs claim under section
16 of the Act (205 ILCS 660/16 (West 1994)).
For the foregoing reasons, the judgment of the circuit court
of Lake County is affirmed.
Affirmed.
GEIGER, P.J., and McLAREN, J., concur.