Kagan v. Waldheim Cemetery Company

2016 IL App (1st) 131274SIXTH DIVISION
April 8, 2016
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
LINDA S. KAGAN, on Behalf of Herself and ) Appeal from the Circuit Court
All Persons Similarly Situated, and ) of Cook County.
ELLIOT SAMUELS, Trustee of the Abe Samuels )
Trust and Executor of the Estate of Diane Samuels )
and on Behalf of Himself and All Persons Similarly )
Situated, )
)
Plaintiffs-Appellants, ) Nos. 11 CH 22722 &
) 11 CH 23177 Cons.
v. )
)
WALDHEIM CEMETERY COMPANY, ) Honorable Rodolfo Garcia,
ROSEMONT PARK, INC., and DAVID GALE, ) Judge Presiding.
)
Defendants )
)
(Zion Gardens, Inc., Defendant-Appellant; )
Bank of America, N.A., Successor to LaSalle )
Bank, N.A., Defendant-Appellee). )
)
_____________________________________________________________________
ZION GARDENS, INC., ) Appeal from the Circuit Court
) of Cook County.
Plaintiff-Appellant, )
)
v. ) No. 11 CH 33936
)
BANK OF AMERICA, N.A., Successor to LaSalle ) Honorable Rodolfo Garcia,
Bank, N.A., ) Judge Presiding.
Defendant-Appellee. )
JUSTICE HALL delivered the judgment of the court, with opinion.
Justices Hoffman and Delort concurred in the judgment and opinion.
OPINION
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶1 The plaintiffs, Linda S. Kagan and Elliot Samuels (the plaintiffs), appeal from an order of
the circuit court of Cook County dismissing their second amended consolidated complaint
against the defendants, Bank of America (the Bank), Waldheim Cemetery Company
(Waldheim), Zion Gardens, Inc. (Zion), Rosemont Park, Inc. (Rosemont), and David Gale.
Zion filed separate appeals from the order dismissing the second amended consolidated
complaint and from the dismissal of its separate amended complaint against the Bank.
¶2 On appeal, the plaintiffs contend that: (1) they stated a claim for breach of common law
fiduciary duty against the Bank; (2) a private right of action exists under the Cemetery Care
Act giving them standing to sue the Bank; (3) the circuit court abused its discretion when it
denied them leave to amend their second amended consolidated complaint; and (4) they
adequately pleaded a claim for violation of section 2Z of the Illinois Consumer Fraud and
Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/2Z (West 2012)).
¶3 In its separate appeal from the dismissal of the second amended consolidated complaint,
Zion seeks reversal of the dismissal order insofar as it rested on a finding (1) that the
beneficiaries of a cemetery care trust lacked standing to sue an independent trustee they
alleged was responsible for their injury or (2) a finding that the lien provision of the
Cemetery Care Act (760 ILCS 100/1 et seq. (West 2012)) was relevant to the issue of
standing, or could exonerate the Bank.
¶4 In its appeal from the dismissal of its amended complaint against the Bank, Zion
contends that Zion had standing to seek redress against the Bank for the benefit of the grave
owners and the general public as well as itself.
2
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶5 On the parties' motion, we consolidated the three appeals for review. For reasons that
follow, we affirm in part and reverse in part the orders of the circuit court.
¶6 BACKGROUND
¶7 The litigation in these cases centered on provisions of the Cemetery Care Act (Care Act)
(760 ILCS 100/1 et seq. (West 2012)). 1 The Care Act was enacted to remedy the evils
relating to possible frauds or mismanagement in the handling of care funds and in the
advertising and sales of services to which the funds for care were to be devoted. Union
Cemetery Ass'n of the City of Lincoln, Illinois v. Cooper, 414 Ill. 23, 34 (1953).
¶8 A cemetery licensed under the Care Act must establish a care fund into which deposits of
the funds collected from the purchasers of cemetery property and services are placed and
must hold the funds in trust. First of America Bank, Rockford, N.A. v. Netsch, 166 Ill. 2d
165, 179 (1995); 760 ILCS 100/4 (West 2012). The cemetery authority may act as trustee of
up to $500,000 in care funds, but it must retain an independent trustee for any amount over
$500,000. "The net income only from the investment of [special] care funds shall be
allocated and used for the purposes specified in the transaction by which the principal was
established in the proportion that each contribution bears to the entire sum invested." 760
ILCS 100/3 (West 2012).
¶9 In 2000, when the care funds exceeded $500,000, David Gail, vice-president of
Rosemont, entered into a trust agreement with LaSalle Bank. Rosemont was named the
settlor of the trust, and LaSalle was named the trustee of the trust into which the care funds
were deposited. Subsequently, the Bank became the trustee when it acquired LaSalle Bank.
Pertinent parts of the trust agreement provided as follows:
1
The complaints also alleged claims under the Illinois Cemetery Oversight Act (225 ILCS 411/5-1 et seq.
(West 2012)), but those claims are not raised in this appeal.
3
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
"3. This trust is established by Rosemont, as Settlor, which owns and operates
Rosemont Cemetery (hereinafter the "Cemetery"), for the purpose of managing funds
received and to be invested to provide income for future care services to be provided
by Cemetery in accordance with the Care Act and the terms hereof shall be construed
accordingly.
***
5.2 All moneys transmitted by Settlor under this Trust Agreement shall be held in
trust by Trustee as to principal and shall be invested in the manner required by the
Cemetery Care Act.
***
5.4 Settlor covenants and agrees to use the income received from this Trust Fund
for the care, landscaping and maintenance service provided for in the Cemetery Care
Act to the extent of the income received.
***
6.10 Trustee shall be entitled to rely absolutely upon the truth of the recitals of
fact contained in deposit memorandums and documents required to be presented to it
under the terms of this Trust Agreement, and upon accounting information furnished
by Settlor and shall be fully protected and absolved from all liability in so doing; and
Trustee shall not in any way be responsible or liable of the proper application of any
amounts so paid by it or upon the direction of Settlor pursuant to any such
documentation.
7.1 In administering this trust, Trustee shall have the express powers enumerated
herein, together with all the powers conferred by law upon trustees in the Cemetery
4
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
Care Act and to the extent not covered then powers conferred by law upon trustees
generally in Illinois Statutes. In addition to, and not in limitation of the powers
vested and to be vested in it by law or enumerated in this Trust Agreement, Trustee
shall have the power to take any action with respect to the Trust Assets as is
appropriate in carrying out the purposes of this Trust Agreement. Trustee may
exercise these powers at any time and from time to time in any valid manner without
a court order."
¶ 10 In 2005, plaintiff Kagan paid $1,300 to Rosemont for perpetual care of a gravesite. In
1990 and 2006, respectively, plaintiff Samuels paid $41,493.78 and $4,291, to Rosemont for
perpetual care of multiple gravesites.
¶ 11 Beginning in 2005, Rosemont began to transfer funds from the trust account in such
amounts that by 2009, the principal of the trust was completely depleted, and the cemetery
was in a severe state of neglect. Under the Care Act, Rosemont was required to submit an
annual accounting of all care funds to the Illinois Comptroller (the Comptroller). 760 ILCS
100/12 (West 2012). Rosemont failed to file reports in 2005 through 2008 but requested and
received a filing extension for each of those years. In 2009, the Comptroller served Rosemont
with a notice of audit and an opportunity to respond. Rosemont submitted documentation to
the Comptroller confirming that it had withdrawn and spent nearly the entire principal of the
trust to operate the cemeteries under its control. 2
¶ 12 In 2011, Rosemont entered into an agreement with Waldheim whereby, for the sum of
$10, Waldheim would purchase and operate Rosemont's cemeteries. Waldheim created a
subsidiary, Zion, to operate the Rosemont cemeteries. As a condition of obtaining a license to
2
Besides Rosemont Park, Rosemont operated several other cemeteries in the area.
5
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
operate the cemeteries, Zion agreed to replenish the depleted trust principal. Subsequently,
Zion sent a letter to the holders of perpetual-care contracts informing them that those
contracts were no longer valid.
¶ 13 CIRCUIT COURT PROCEEDINGS
¶ 14 The Kagan and Samuels Complaints
¶ 15 In June 2011, plaintiff Kagan and plaintiff Samuels filed separate class action complaints
against the defendants. Both complaints sought redress for themselves and others who
purchased extended-care services from Rosemont. On August 23, 2011, following the circuit
court's consolidation of the Kagan and Samuels complaints, an amended consolidated
complaint was filed against the Bank, Zion 3 and the other named defendants alleging
conversion, common law breach of fiduciary duty, violations of the Illinois Cemetery
Oversight Act and the Care Act and violation of the Consumer Fraud Act. They also sought
an accounting.
¶ 16 The Bank filed a combined motion to dismiss the amended consolidated complaint
pursuant to section 2-619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619.1
(West 2012)). The circuit court granted the Bank's motion to dismiss in part finding that
under section 2-615 of the Code (735 ILCS 5/2-615 (West 2012)), the plaintiffs failed to state
causes of action for conversion and common law breach of fiduciary duty. The plaintiffs
were granted leave to replead the dismissed conversion and common law breach of fiduciary
duty counts.
¶ 17 The plaintiffs filed their second amended consolidated complaint, repleading the
conversion and common law breach of fiduciary duty claims solely to preserve them for
3
The Bank and Zion are the only party-defendants involved in these appeals.
6
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
appeal. While the circuit court had not dismissed the consumer fraud count, the plaintiffs
added the term "knowingly" to their claim of consumer fraud. Pursuant to section 2-615 of
the Code (735 ILCS 5/2-615 (West 2012)), the Bank moved to dismiss the second amended
consolidated complaint. On April 10, 2013, the circuit court granted the Bank's motion and
dismissed the second amended consolidated complaint with prejudice.
¶ 18 Zion's Complaint Against the Bank
¶ 19 In September 2011, Zion filed a separate lawsuit against the Bank alleging multiple
causes of action including, inter alia, illegal withholding of funds, breach of the trust
agreement, and violation of the Care Act. Pursuant to section 2-619.1 of the Code, the Bank
moved to dismiss Zion's complaint. The court dismissed the counts alleging illegal
withholding of funds, breach of the trust agreement and violation of the Care Act under
section 2-615, and Zion was granted leave to amend those counts.
¶ 20 Zion filed an amended complaint. Count I alleged an equitable cause of action against
the Bank based on the violations of the trust agreement, the Care Act, the Trusts and Trustees
Act (760 ILCS 5/1 et seq. (West 2012)), breaches of common law duties owed by a trustee,
fraud and collusion with Rosemont and sought a finding of malice and an award of punitive
damages. Count II sought a declaratory judgment that (1) Zion had standing to maintain its
action on behalf of itself, the care fund trust, the owners of the lots and gravesites and on
behalf of the general public and (2) the Bank was a fiduciary of the beneficiaries of the trust,
which included Rosemont, the owners of the lots and grave sites and the general public. For
purposes of appeal, count III realleged Zion's claim that the Bank illegally withheld funds,
which the circuit court had dismissed previously as moot.
7
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 21 The Bank moved to dismiss the amended complaint pursuant to section 2-619.1 of the
Code. On September 26, 2013, the circuit court dismissed Zion's amended complaint against
the Bank with prejudice. 4
¶ 22 These three appeals followed.
¶ 23 ANALYSIS
¶ 24 I. Dismissal of the Plaintiffs' Second Amended Consolidated Complaint
¶ 25 A. Standards of Review
¶ 26 Dismissal pursuant to section 2-615 is reviewed de novo. Compton v. Country Mutual
Insurance Co., 382 Ill. App. 3d 323, 325 (2008). Construction of a statute presents a
question of law which the court also reviews de novo. See Majid v. Retirement Board of the
Policemen's Annuity & Benefit Fund, 2015 IL App (1st) 132182, ¶ 13.
¶ 27 B. Discussion
¶ 28 The plaintiffs contend that the dismissal of the second amended consolidated complaint
against the Bank was error. They maintain that, for purposes of section 2-615 of the Code,
they sufficiently alleged causes of action against the Bank for breach of its fiduciary duty to
them, both under common law and the Care Act and for violation of the Consumer Fraud
Act. In its appeal from the dismissal of the second amended consolidated complaint, Zion
contends that the circuit court erred in determining that beneficiaries of a cemetery care trust
lack standing to sue and that section 15b of the Care Act, providing that a shortage in the care
fund created a lien in favor of the trust, supported the finding that the Care Act did not bar
the withdrawal of the principal from the care fund trust. 760 ILCS 100/15b (West 2012).
4
In dismissing the complaint with prejudice, the circuit court considered arguments under both section 2-
615 and section 2-619. It is unclear from the record whether the dismissal was based on either or both of those
sections.
8
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 29 The plaintiffs' second amended consolidated complaint against the Bank was dismissed
under section 2-615 of the Code. "A section 2-615 motion to dismiss attacks the legal
sufficiency of the complaint based upon defects appearing on the face of the complaint."
Compton, 382 Ill. App. 3d at 325-26. All well-pleaded facts and all reasonable inferences
from those facts are taken as true. Where unsupported by allegations of fact, legal and factual
conclusions may be disregarded. Compton, 382 Ill. App. 3d at 326. In determining whether
the allegations of the complaint are sufficient to state a cause of action, the court views the
allegations of the complaint in the light most favorable to the plaintiff. Compton, 382 Ill.
App. 3d at 326. Unless it is clearly apparent that the plaintiff could prove no set of facts that
would entitle him to relief, a complaint should not be dismissed. Compton, 382 Ill. App. 3d at
326.
¶ 30 1. Breach of Fiduciary Duty Under Common Law
¶ 31 A trustee owes a fiduciary duty to the beneficiaries of a trust and must carry out the trust
according to its terms and to act with the highest degree of fidelity and good faith. Herlehy v.
Marie V. Bistersky Trust, 407 Ill. App. 3d 878, 896 (2010). "To state a cause of action for
breach of a fiduciary duty, a plaintiff must allege and ultimately prove: (1) a fiduciary duty
on the part of the defendant; (2) a breach of that duty; (3) damages; and (4) a proximate cause
between the breach and the damages." Herlehy, 407 Ill. App. 3d at 896. The plaintiff's
allegations must be supported by facts. Chicago City Bank & Trust Co. v. Lesman, 186 Ill.
App. 3d 697, 701 (1989). A breach of the trust agreement by the trustee renders the trustee
liable for any loss to the estate as a result of the breach, and the beneficiaries must be placed
in the position they would have held but for the breach. Grot v. First Bank of Schaumburg,
292 Ill. App. 3d 88, 91-92 (1997).
9
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 32 The plaintiffs' common law breach of fiduciary duty claim against the Bank alleged as
follows:
"62. As trustees of Plaintiff's and the Class's perpetual-care monies, defendants
assumed fiduciary duties and responsibilities for those funds.
63. In addition or in the alternative, defendants Bank of America, Rosemont Park,
Inc. and [David] Gail were fiduciaries of the plaintiffs and the Class with respect to
all principal amounts in the perpetual-care trusts.
64. By allowing the principal of the perpetual-care funds in trust to be depleted,
defendants breached their fiduciary duties to the Plaintiffs and Class. This breach of
duty also violated the Oversight and Care Acts which required defendants to act in the
manner that a person of 'prudence, discretion and intelligence' would 'exercise in the
management of their own affairs.'
65. Defendants are therefore liable to Plaintiffs and the Class for the principal
amounts depleted in the perpetual-care fund."
¶ 33 The plaintiffs did not allege any facts tending to prove a fiduciary duty owed to them by
the Bank. They did not allege that they were parties to or beneficiaries of a trust agreement.
The plaintiffs' legal conclusion that the Bank assumed fiduciary duties to them because the
Bank was the trustee of the care funds is contradicted by the facts the plaintiffs do allege. In
their second amended consolidated complaint, the plaintiffs stated that, pursuant to a contract
with Rosemont, the care funds were paid to Rosemont for the perpetual care for their
gravesites. By the terms of the trust agreement, the funds were held for the benefit of
Rosemont to enable it to provide perpetual care for the gravesites. Therefore, the allegation
that care funds were held in trust for the plaintiffs is not supported by the facts.
10
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 34 The plaintiffs point out that the trust agreement incorporated the Care Act and under the
Care Act, the plaintiffs and the class were beneficiaries of the trust agreement. However, as
set forth in the trust agreement, Rosemont set up the trust in order to comply with the
provision of the Care Act governing Rosemont's duties with respect to the care funds it
received from the sale of the perpetual-care contracts. See 760 ILCS 100/3 (West 2012). The
portions of the trust agreement relied on by the plaintiffs relate to the division of
responsibilities between Rosemont, as the settlor, and the Bank, as the trustee, in
management of the care funds. Nothing in the trust agreement supports the plaintiffs'
argument that the care funds were being held for the benefit of the plaintiffs as opposed to
being held to enable Rosemont to continue to provide perpetual care for the gravesites.
¶ 35 Moreover, the plaintiffs' damages claim lacked a factual basis. In the second amended
consolidated complaint, the plaintiffs alleged the Bank was liable to them for "the principal
amounts depleted in the perpetual-care fund." It is undisputed that as a condition of obtaining
a license to operate Rosemont's cemeteries, Zion agreed to replenish the depleted trust
principal. Therefore, the plaintiffs were in the same position they would have been if the
alleged breach had not occurred.
¶ 36 Finally, the plaintiffs maintain that the Care Act did not abolish the common law duties
owed by the Bank as a trustee, relying on Rush University Medical Center v. Sessions, 2012
IL 112906. In Sessions, the supreme court held that common law rights and remedies are not
abrogated by the legislature unless plainly and clearly stated, and there is no presumption as
to the abrogation of common law rights and remedies where the language is ambiguous or
questionable. See Sessions, 2012 IL 112906, ¶ 16. Our decision in this case rests on the
11
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
plaintiffs' failure to state a cause of action for a breach of fiduciary duty by a trustee under
common law, not on the ground that the Care Act abrogated such a cause of action.
¶ 37 Since the second amended consolidated complaint failed to allege facts that, if taken as
true, would ultimately prove that the Bank owed a fiduciary duty to the plaintiffs, the
plaintiffs did not state a cause of action against the Bank for breach of fiduciary duty under
common law. We conclude that the dismissal with prejudice of the plaintiffs' claim against
the Bank for breach of fiduciary duty under common law was proper.
¶ 38 2. Private Right of Action
¶ 39 The plaintiffs and Zion maintain that they have standing to sue the Bank for breach of
fiduciary duty and other violations of the Care Act. While acknowledging that the Care Act
does not expressly provide for a private right of action, the plaintiffs and Zion contend that
there is an implied private right of action under the Care Act. Metzger v. DaRosa, 209 Ill. 2d
30, 35 (2004) (a court may determine that a private right of action is implied in a statute).
There are four factors to consider in determining if a private right of action may be implied
from a statute: " '(1) the plaintiff is a member of the class for whose benefit the statute was
enacted; (2) the plaintiff's injury is one the statute was designed to prevent; (3) a private right
of action is consistent with the underlying purpose of the statute; and (4) implying a private
right of action is necessary to provide an adequate remedy for violations of the statute.' "
Metzger, 209 Ill. 2d at 36 (quoting Fisher v. Lexington Health Care, Inc., 188 Ill. 2d 455, 460
(1999)). Whether there is a private right of action under the Care Act presents an issue of first
impression.
12
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 40 The plaintiffs and Zion maintain that they are members of the class for whose benefit the
Care Act was enacted and that the Care Act was intended to remedy the injury they alleged to
have suffered. In support of their argument, they rely on several provisions of the Care Act.
¶ 41 Section 3 of the Care Act provides that "care funds *** shall be held intact" and "[t]he
net income only from the investment of such care funds shall be allocated and used for the
purposes specified in the transaction by which the principal was established in the proportion
that each contribution bears to the entire sum invested." 760 ILCS 100/3 (West 2012).
Section 4 of the Care Act states in pertinent part that "[w]henever a cemetery authority ***
accepts care funds *** such cemetery authority shall execute and deliver to the person from
whom [the funds are] received an instrument in writing which shall specifically state: (a) the
nature and extent of the care to be furnished, and (b) that such care shall be furnished only in
so far as the net income derived from the amount deposited in trust will permit." 760 ILCS
100/4 (West 2012). Section 5 provides in pertinent part that while a cemetery authority may
not advertise or contract to provide perpetual care, a cemetery authority may advertise or
contract that "care will be furnished from the net income only derived from funds held in
trust as provided in Section 3 of this Act." 760 ILCS 100/5 (West 2012). Section 6 states in
pertinent part that "[t]he trust funds authorized by Section 3 of this Act, and the income
therefrom *** shall be held for the general benefit of the lot owners and are exempt from
taxation." 760 ILCS 100/6 (West 2012).
¶ 42 We agree with the plaintiffs that they satisfy the first two factors. Union Cemetery Ass'n
of the City of Lincoln, 414 Ill. at 34 (the Care Act was enacted to remedy the evils relating to
possible frauds or mismanagement in the handling of care funds and in the advertising and
sales of services to which the funds for care were to be devoted). Under section 5 of the
13
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
Care Act, a cemetery authority is not permitted to advertise or contract for perpetual care, but
may enter into a contract with a party for gravesite care to be furnished only from the net
income of the principal amount paid for the care. 760 ILCS 100/5 (West 2012). The
plaintiffs entered into such contracts with Rosemont and therefore, are members of the class
for whose benefit the statute was enacted. See Helping Others Maintain Environmental
Standards v. Bos, 406 Ill. App. 3d 669, 686 (2010) (the statute's policy provision specifically
referenced protecting the environment for the benefit of the people living near livestock
facilities). The plaintiffs alleged they were injured as a result of the mismanagement of the
care funds to the point that the principal amount of the fund was completely depleted. Since
this alleged mismanagement was an "evil" the Care Act was enacted to remedy, the plaintiffs
have alleged an injury the Care Act was designed to prevent. Helping Others, 406 Ill. App.
3d at 686.
¶ 43 As to the third factor, we find that implying a private right of action is not consistent with
the Care Act's underlying purpose. In order to fulfill its purpose of protecting the care funds
from fraud or mismanagement, the Care Act requires a cemetery authority to obtain a license
from the Comptroller before it may collect care funds from the purchasers of cemetery
property and services. 760 ILCS 100/7 (West 2012). To insure that there are sufficient
resources to maintain the cemetery in the future, the cemetery authority must deposit a
prescribed amount of care funds into a trust to be used for that purpose. First of America
Bank, Rockford, N.A. v. Netsch, 166 Ill. 2d at 179 (citing 760 ILCS 100/2a, 4 (West 1992)).
Once licensed, a cemetery authority accepting care funds is required to file an annual report
setting forth the principal amount held by the trustee of its care fund, the investments of the
principal, the income received and the expenses incurred. 760 ILCS 100/12 (West 2012).
14
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
The cemetery authority must keep books and records to enable the Comptroller to ascertain
whether the cemetery authority is complying with the Care Act. 760 ILCS 100/13 (West
2012). The Comptroller is not permitted to accept the surrender of a license issued under the
Care Act absent satisfactory evidence of the cemetery authority's release from all trust
liabilities and obligations and unless or until the care funds have been transferred to a
successor licensed under the Care Act. 760 ILCS 100/15.2 (West 2012).
¶ 44 The Comptroller may revoke the license of a cemetery authority for violation of the
provisions of the Care Act. 760 ILCS 100/15 (West 2012). The Care Act provides for a
hearing prior to revocation of a license and for review pursuant to the Administrative Review
Law (735 ILCS 5/3-101 et seq. (West 2012)). There are felony criminal penalties for certain
violations of the Care Act as well as fines. 760 ILCS 100/24 (West 2012).
¶ 45 Under the statutory scheme outlined above, the legislature placed the licensing,
investigations and determination of violations of the Care Act and the penalties to be
imposed under the authority of the Comptroller. To allow private actions for damages would
not further the Care Act's purpose of protecting care funds from fraud or mismanagement. A
damages award would not resolve the fraud or mismanagement on the part of a cemetery
authority as a license revocation, an action available only to the Comptroller.
¶ 46 The plaintiffs have failed to satisfy the fourth factor. The Care Act is replete with
sanctions and remedies for violations of its provisions. See Rekosh v. Parks, 316 Ill. App. 3d
58, 74 (2000) (the sanctions imposed for violations of the Funeral Directors and Embalmers
Licensing Code (225 ILCS 41/1-1 et seq. (West 1998)), including fines, license suspension
and revocation, inspections and investigations, were not so deficient as to require the court to
imply a private right of action). In addition, the Care Act also provides that in a sale or
15
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
foreclosure of a cemetery, the purchaser is responsible for any shortages in the care funds
existing before or after the sale and "shall honor all instruments issued under Section 4 for
that cemetery." 760 ILCS 100/15b (West 2012); see 760 ILCS 100/4 (West 2012) (setting
forth the information required to be given a purchaser when depositing care funds with the
cemetery authority).
¶ 47 The cases relied on by the plaintiffs in which a private right of action has been implied
are distinguishable. In Corgan v. Muehling, 143 Ill. 2d 296 (1991), our supreme court held
that the implication of a private right of action was within the scope of section 26 of the
Psychologist Registration Act (Ill. Rev. Stat. 1981, ch. 111, ¶ 5327)) and consistent with its
purpose to protect the public from incompetent and unqualified psychologists. Section 26
gave the State's Attorney the authority to enjoin an uncertified person from representing
himself as a psychologist. The court concluded that persons injured by uncertified
psychologists would not avail themselves of administrative or criminal proceedings, and in
order to uphold and implement the public policy of the Act, it was necessary to imply a
private right of action. Corgan, 143 Ill. 2d at 314-15.
¶ 48 Relying on Corgan, the plaintiffs argue that the fact the Care Act provides for injunctive
relief does not mean that a private right of action is not available to them. However, in
Corgan, the defendant was unlicensed to begin with and thus an injunction would not deter
the defendant from continuing to hold him out as and practice as a psychologist in the same
way an award of damages would deter him. Since the plaintiffs' alleged injury was the
depletion of the care fund, a damages award would not implement the purpose of the Care
Act. The purpose of the Care Act is to eliminate fraud and mismanagement in the handling of
care funds by cemetery authorities and is addressed by the sanctions for violations of the
16
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
Care Act and by the provisions for replenishing the care funds where a shortage exists. The
provisions of the Care Act are sufficient to remedy the injury alleged by the plaintiffs, and
therefore, it is not necessary to imply a private right of action.
¶ 49 The plaintiffs' reliance on Sawyer Realty Group, Inc. v. Jarvis Corp., 89 Ill. 2d 379(1982) is also misplaced. In Sawyer Realty Group, Inc., the supreme court found an implied
private right of action under the Real Estate Brokers and Salesmen License Act (Ill. Rev.
Stat. 1977, ch. 111, ¶ 5701 et seq.) which, in addition to departmental enforcement, provided
a real estate recovery fund to compensate persons who were unable to satisfy valid judgments
against registered brokers or salesmen. Sawyer, 89 Ill. 2d at 390-91 (citing Ill. Stat. 1977, ch.
111, ¶ 5716). The Care Act does not contain a similar provision for recovery of depleted
care funds by plaintiffs in a civil suit.
¶ 50 We hold that there is no right of private action under the Care Act, and therefore, neither
the plaintiffs nor Zion have standing to sue for violations of the Care Act. In light of our
holding, we need not address Zion's argument that the lien provision contained in the Care
Act did not deprive it of standing or exonerate the Bank from liability in this case. See 760
ILCS 100/15b (West 2012).
¶ 51 II. Denial of Leave to Amend
¶ 52 A. Standard of Review
¶ 53 The circuit court's decision to deny leave to amend a complaint is reviewed for an abuse
of discretion. Compton, 382 Ill. App. 3d at 331. "A court abuses its discretion only if it acts
arbitrarily, without the employment of conscientious judgment, exceeds the bounds of reason
and ignores recognized principles of law; or if no reasonable person would take the position
adopted by the court." Payne v. Hall, 2013 IL App (1st) 113519, ¶ 12.
17
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 54 B. Discussion
¶ 55 The plaintiffs contend that the circuit court abused its discretion when it denied their
request to amend their second amended consolidated complaint to further support their claim
to the existence of a private right of action under the Care Act. We determine that the
plaintiffs forfeited this issue on appeal.
¶ 56 In responding to the Bank's "second motion to dismiss," the plaintiffs attached a June 13,
2011 e-mail from Julia M. Ellis on behalf of the Illinois Comptroller's office. According to
the research performed by an attorney in the Comptroller's office as to the potential liability
of the Bank, the attorney concluded that the Illinois Comptroller did "not have standing to
bring this action. David Gail the trustor (and maybe Waldheim as the successor trustor?)
have a cause of action against the [Bank] for breach of fiduciary duties. The beneficiaries
may also have a cause of action."
¶ 57 During the hearing on the Bank's second motion to dismiss, the plaintiffs argued that
there was a private right of action as evidenced by the contents of the June 13, 2011 e-mail
from the Comptroller's office. Noting that the Bank was challenging the pleadings and that
the plaintiffs had been allowed to file a second amended complaint, filed May 12, 2012, the
circuit court stated as follows:
"[Y]ou're free to add allegations in your amended complaint consistent with whatever
information you have. But the 2-615 motion directs my attention only to the
pleadings, and unless you've attached exhibits to your pleading in the manner that
you're seeking to direct my attention to right now, I think it is outside the scope of
[the Bank's] motion.
18
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
MR. HURST [plaintiff's attorney]: Okay. That's fine, [Y]our Honor. If [Y]our
Honor finds that is—a necessarily [sic] element is lacking under the four-factor test
—which I don't think it is.
***
I think I can show you other reasons why we meet all the elements, but if that's
the case, then I would like leave to amend."
The trial court's final order dismissing the second amended consolidated complaint as to the
Bank does not reflect that it denied the plaintiffs' motion for leave to amend. The record
does not reflect that the plaintiffs ever sought a ruling on their oral motion for leave to amend
the second amended consolidated complaint prior to filing the notice of appeal in this case.
¶ 58 "[I]t is the responsibility of the party filing a motion to request the trial judge to rule on it,
and when no ruling has been made on a motion, the motion is presumed to have been
abandoned absent circumstances indicating otherwise." Rodriguez v. Illinois Prisoner Review
Board, 376 Ill. App. 3d 429, 433 (2007). A party's failure to obtain a ruling on a motion does
not translate to a denial of the motion by the court. Rodriguez, 376 Ill. App. 3d at 432.
Failure to obtain a ruling on a motion prior to filing a notice of appeal serves as an
abandonment of the motion and results in the procedural default of any issue pertaining to the
motion for purposes of appeal. Rodriguez, 376 Ill. App. 3d at 433.
¶ 59 The record reflects that following the request to amend, the plaintiffs' counsel proceeded
to argue that the plaintiffs had met all of the elements necessary to determine that a private
cause of action existed under the Care Act. After the circuit court granted the Bank's motion
to dismiss, the plaintiffs filed their notice of appeal. Under the circumstances, the
presumption that the plaintiffs abandoned their motion to amend applies in this case.
19
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 60 We conclude that the plaintiffs abandoned their motion for leave to amend their second
amended consolidated complaint, and the issue raised with respect to the motion for leave to
amend is procedurally defaulted.
¶ 61 III. Consumer Fraud Claim
¶ 62 A. Standard of Review
¶ 63 Dismissal pursuant to section 2-615 is reviewed de novo. Compton, 382 Ill. App. 3d at
325. Construction of a statute presents a question of law which the court also reviews de
novo. See Majid, 2015 IL App (1st) 132182, ¶ 13.
¶ 64 B. Discussion
¶ 65 The plaintiffs contend that the dismissal of their consumer fraud count against the Bank
was error. They note that under section 2Z of the Consumer Fraud Act, "knowingly"
violating the Care Act is an unlawful practice within the meaning of the Consumer Fraud
Act. See 815 ILCS 505/2Z (West 2012). They argue that "knowingly" does not require that
they prove the intent on the Bank's part to disregard the law.
¶ 66 In determining whether a complaint states a cause of action, all well-pleaded facts are
taken as true and all reasonable inferences from those facts are construed in favor of the
nonmoving party. Compton, 382 Ill. App. 3d at 326. In determining whether the allegations
of the complaint are sufficient to state a cause of action, we view the allegations of the
complaint in the light most favorable to the plaintiff. Compton, 382 Ill. App. 3d at 326. In
order for the plaintiffs to succeed in stating a cause of action under the Consumer Fraud Act,
they must plead and allege facts, which if true, ultimately proved that the Bank knowingly
violated the Care Act.
20
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 67 In their second amended consolidated complaint, the plaintiffs alleged the Bank
knowingly violated the Care Act by allowing the depletion of the principal of Rosemont's
perpetual-care funds. In support of their claim, the plaintiffs set forth the following factual
allegations: (1) under the Care Act, the Bank was required to ensure that the trust principal
remained untouched and that only the net income from the trust was used to fund the care
and maintenance of the gravesites; (2) the trust agreement required the Bank to comply with
the Care Act, and the Bank was on notice that the trust was not in compliance with the Care
Act since the Bank's statements showed that Rosemont was withdrawing principal from the
trust, and (3) from 2005 on, the Bank had not issued a certification of the annual reports
required to be filed by Rosemont.
¶ 68 "The cardinal rule in statutory construction is that the court must ascertain and give effect
to the intent of the legislature." In re Marriage of King, 208 Ill. 2d 332, 340 (2003). The
Consumer Fraud Act does not define the term "knowingly." Where no definition is provided,
an unambiguous term is given its plain and ordinary meaning. Majid, 2015 IL App (1st)
132182, ¶ 16. "The statute must be applied so that no part is rendered superfluous." Majid,
2015 IL App (1st) 132182, ¶ 16. The parties' disagreement over the meaning of a statutory
term does not render it ambiguous. Commonwealth Edison Co. v. Illinois Commerce
Comm'n, 2014 IL App (1st) 132011, ¶ 21.
¶ 69 If the term used in the statute has a settled legal meaning, the courts will normally infer
that the legislature intended to incorporate the established meaning. Maksym v. Board of
Election Commissioners, 242 Ill. 2d 303, 320 (2011) (the legal meaning of the term
"residence" had been settled in Illinois for over 100 years and in virtually every setting in
which the court construed the term). The plaintiffs maintain that the term "knowingly" has a
21
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
settled legal meaning because of its use in section 4-5 of the Criminal Code of 2012(See 720
ILCS 5/4-5 (West 2012)) and statutes, such as the Illinois False Claims Act (740 ILCS
175/3(b)(1) (West 2012)). However, in both cases, the statute specifically defines "knowing"
or "knowledge" in order to determine a violation of that particular statute. Moreover, in
People v. Thoennes, 334 Ill. App. 3d 320 (2002), the reviewing court cited both section 4-5
of the Criminal Code and the dictionary definition of "knowingly" in determining whether
the defendant had committed the offense charged in that case. See Thoennes, 334 Ill. App. 3d
at 327. The plaintiffs have not established that the term "knowingly," has a settled legal
meaning that we must apply in construing section 2Z.
¶ 70 The term "knowingly" does have a plain meaning. See People v. Sanders, 368 Ill. App.
3d 533, 537 (2006) (in general, "a jury need not be instructed on the term 'knowingly'
because that term has a plain meaning within the jury's common knowledge"). "Knowing" or
"knowingly" is defined as "awareness or understanding; well-informed *** [d]eliberate;
conscious ." Black's Law Dictionary 888 (8th ed. 2004).
¶ 71 In support of its argument that a knowing violation under section 2Z of the Consumer
Fraud Act requires "intent," the Bank relies on Kunkel v. P.K. Dependable Construction,
LLC, 387 Ill. App. 3d 1153 (2009). In Kunkel, the reviewing court held that there was no
violation of section 2Z where the plaintiffs failed to establish a knowing violation of the
Home Repair and Remodeling Act (Home Repair Act) by the contractor for failing to give
the plaintiffs a copy of the consumer rights brochure required by section 20(a) of the Home
Repair Act (815 ILCS 513/20(a) (West 2002)). The court determined that "the plaintiffs
provided no evidence on the defendants' state of mind in not providing the brochure, and
22
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
there is no evidence in the record to support a knowing violation of the [Home Repair Act]."
Kunkel, 387 Ill. App. 3d at 1160.
¶ 72 In Wendorf v. Landers, 755 F. Supp. 2d 972 (N.D. Ill. 2010), the district court relied on
Kunkel in determining that the plaintiff failed to state a cause of action under section 2Z of
the Consumer Fraud Act. The defendant argued that the plaintiffs failed to allege that the
defendant "knowingly" violated the Illinois Physical Fitness Services Act (Fitness Act)
(815 ILCS 645/4, 5 (West 2010)). The court rejected the plaintiffs' argument that "if
defendant knew about the PFSA and violated it, it knowingly violated it," stating as follows:
"Although case law is sparse, it appears that violation of the PFSA does not constitute
a violation of the [Consumer Fraud Act] unless the PFSA violation was committed
knowingly, meaning with intent to disregard the law. [Citations.] To determine that
any violation of the PFSA by a party who knew of the existence of it is also a
violation of [the Consumer Fraud Act] would render the 'knowingly' requirement in
section 2Z superfluous, as there would be no need to distinguish an inadvertent
violation from a knowing violation." (Emphasis in original.) Wendorf, 755 F. Supp.
2d at 978.
Since the plaintiffs did not allege that the defendant intentionally violated the Fitness Act,
and there are no allegations from which such an inference could be made, the court
determined that the plaintiffs failed to state a cause of action for violation of section 2Z of the
Consumer Fraud Act. Wendorf, 755 F. Supp. 2d at 978.
¶ 73 We find Kunkel distinguishable since the decision in that case was based on the evidence
presented at trial, whereas the present case is still at the pleading stage. Moreover, even if we
were to agree with the Bank that the plaintiff was required to allege and prove that the Bank
23
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
intentionally violated the Care Act, the allegations of the second amended consolidated
complaint and the reasonable inferences drawn therefrom were sufficient. The allegations
that the Bank was a party to the trust agreement, that the Bank had knowledge of the Care
Act and that principal, not just interest, was being withdrawn from the trust, taken as true,
ultimately would prove that the Bank committed a "knowing" violation of the Care Act when
it allowed Rosemont to withdraw principal to the point of depleting the care trust.
¶ 74 Finally, while the trust agreement shields the Bank from liability, the trust agreement also
requires the Bank as trustee to administer the trust in accordance with its purpose, namely, to
insure the continued existence of the care funds. For purposes of resolving a section 2-615
motion to dismiss, we need not reconcile these provisions.
¶ 75 We conclude that the plaintiffs have stated a cause of action under section 2Z of the
Consumer Fraud Act for the Bank's violation of the Care Act. Therefore, the circuit court
erred in dismissing count VI of the second amended consolidated complaint.
¶ 76 IV. Dismissal of Zion's Amended Complaint
¶ 77 The dispositive issue in Zion's appeal is whether it had standing to maintain an action
against the Bank either on behalf of itself or on behalf of the gravesite owners whose funds
made up the principal of the care fund of which the Bank was trustee. Our determination that
no private right of action exists under the Care Act and that the Bank did not owe a fiduciary
duty to the gravesite owners disposes of Zion's appeal from the dismissal of its amended
complaint. 5
5
The agreed order of January 24, 2012 dismissed Zion's claim for the turnover of funds held by the Bank as
moot because the Bank agreed to turn over the funds to the new trustee. The order preserved for all parties any
claims or defenses, including claims with respect to the funds. In its amended complaint, Zion sought ancillary
relief in the form of expenses, attorney fees and costs in connection with its efforts to recover the funds from the
Bank. However, Zion states in footnote 18 in its appellant's brief that it "does not believe it appropriate to present its
appeal on the re-pleaded Count III in this proceeding."
24
Nos. 1-13-1274, 1-13-1331 & 1-13-3131 Cons.
¶ 78 CONCLUSION
¶ 79 We affirm the dismissal of the second amended consolidated complaint except for the
plaintiffs' claim against the Bank for violation of section 2Z of the Consumer Fraud Act. The
case is remanded for further proceedings on the section 2Z claim. We affirm the dismissal of
Zion's amended complaint.
¶ 80 No. 1-13-1274, Affirmed in part and reversed in part; cause remanded.
¶ 81 No. 1-13-1331, Affirmed.
¶ 82 No. 1-13-3131, Affirmed.
25