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05/18/95 FIRST AMERICA BANK v. DAWN CLARK NETSCH

May 18, 1995

FIRST OF AMERICA BANK, ROCKFORD, N.A., F/K/A UNITED BANK OF ILLINOIS, N.A., APPELLEE,
v.
DAWN CLARK NETSCH, COMPTROLLER, STATE OF ILLINOIS, APPELLANT.



Chief Justice Bilandic delivered the opinion of the court: Justice Miller took no part in the consideration or decision of this case.

The opinion of the court was delivered by: Bilandic

CHIEF JUSTICE BILANDIC delivered the opinion of the court:

Plaintiff, First of America Bank (the Bank), brought a declaratory judgment action in the circuit court of Winnebago County against Dawn Clark Netsch, Comptroller of the State of Illinois. The Bank sought a declaration of its obligations and the Comptroller's authority under the Illinois Funeral or Burial Funds Act (Burial Funds Act) (225 ILCS 45/1 et seq. (West 1992)), the Illinois Pre-Need Cemetery Sales Act (Pre-Need Act) (815 ILCS 390/1 et seq. (West 1992)), and the Cemetery Care Act (Care Act) (760 ILCS 100/1 et seq. (West 1992)). The circuit court granted the Bank's motion for summary judgment. The circuit court also declared certain amendments to the Care Act unconstitutional as applied to the Bank in that they violated the contract clauses of the State and Federal Constitutions. Although the Bank's appeal was initially filed in the appellate court, that court subsequently transferred the appeal to this court pursuant to Supreme Court Rule 302(a)(1) (134 Ill. 2d R. 302(a)(1)).

I. FACTS

The following facts may be gleaned from the record. The Bank holds two mortgages on real estate owned by Floral Lawns Cemetery (Floral Lawns). The owners of Floral Lawns defaulted on the mortgages held by the Bank and on unrelated mortgages. A foreclosure proceeding was instituted against Floral Lawns in the circuit court of Winnebago County. In the foreclosure proceeding, the Bank was held to have priority over all other liens on the real estate. Accordingly, the Bank was in a position to reduce its foreclosure complaint to judgment and to sell the property at a sheriff's sale.

During the pendency of the foreclosure proceeding, it became apparent that substantial sums were missing from certain trust funds that the owners of Floral Lawns were obligated to maintain pursuant to the Burial Funds Act, the Pre-Need Act, and the Care Act. Each of these statutes requires a cemetery owner to place certain amounts of money received from purchasers of cemetery property, merchandise or services in trust funds to cover the costs of such future merchandise and services. The Bank estimated that approximately $128,000 was missing from the Burial Funds Act trust fund, $33,600 from the Pre-Need Act trust fund, and $277,500 from the Care Act trust fund. The Comptroller, who is authorized to administer the three acts and to oversee the trust funds, revoked licenses that were issued to Floral Lawns under the three statutes.

The Bank contacted the Comptroller to determine whether the Bank or a purchaser at a foreclosure sale would be liable for shortages in the trust fund accounts. Ultimately, the Bank filed a three-count complaint in the circuit court of Winnebago County, seeking declaratory relief. According to the allegations in the complaint, the Comptroller's office had made statements to the Bank indicating that the Bank and/or a purchaser at a foreclosure sale would be liable for trust fund shortages and that no license would issue to a purchaser who did not replenish the funds. The complaint sought a declaration of rights under each of the statutes. Count I concerned the Burial Funds Act, count II concerned the Pre-Need Act, and count III concerned the Care Act.

In each count of the complaint, the Bank sought a declaration: (1) that the Bank would not incur liability for trust fund shortfalls by reducing its countercomplaint for foreclosure to judgment and causing the property to be sold at a sheriff's sale; (2) that a purchaser at a sheriff's sale would not be held liable for trust fund shortfalls that may exist under any of the three statutes; and (3) that the Comptroller could not condition licensure under any of the statutes upon the purchaser's agreement to replenish missing trust funds.

The Bank alleged that the Comptroller had no authority under any of the statutes to require a purchaser at a foreclosure sale to replenish trust funds or to make the issuance of a license contingent upon replenishment of trust funds. The Bank's complaint admitted that the Care Act specifically provided that a purchaser of a privately operated cemetery is liable for shortages in trust funds existing before and after such sale. The Bank's complaint alleged, however, that the statute applied only where a cemetery voluntarily dissolved and did not apply to a purchaser at a sheriff's sale. The Bank alleged that a finding that the Bank or a purchaser was liable for missing trust funds under any of the statutes would have a substantial negative impact on the Bank's attempt to sell the real estate.

The Comptroller's answer to the complaint denied that it had made statements regarding the liability of the Bank or a purchaser for trust fund shortages under the Burial Funds Act, the Pre-Need Act or the Care Act. The Comptroller admitted that its "policy" was to require any party who sought a license under the Burial Funds Act or the Pre-Need Act to replenish shortages in trust funds or to provide the merchandise and services that had been paid to the cemetery by consumers. With regard to the Care Act, the Comptroller alleged that the statute spoke for itself. The Comptroller also raised, as an affirmative defense, the allegation that no justiciable controversy existed between the parties.

The Bank filed a motion for summary judgment, and the Comptroller filed a motion to dismiss. On November 3, 1993, the trial court granted the Bank's motion for summary judgment. The trial court found that neither the Bank nor the purchaser of the cemetery at a foreclosure sale could be held liable for shortages in trust fund accounts maintained under the Burial Funds Act or the Pre-Need Act. The court also held that the Comptroller could not require the purchaser of the cemetery at a sheriff's sale to replenish shortages in such trust funds as a condition of licensure. As to the Care Act, the court found that a purchaser at a sheriff's sale could not be liable for trust fund shortfalls so long as the sale occurred prior to July 1, 1994. The trial court mistakenly believed that July 1, 1994, was the effective date of Public Act 88-477, which amended the Care Act. This amendment provides, inter alia, that in any sale of a private cemetery, including foreclosure sales, purchasers are liable for trust fund shortages and that shortages in Care Act trust funds constitute a prior lien in favor of the trust. Pub. Act 88-477, ยง 10, eff. January 1, 1994.

On February 18, 1994, after considering the Comptroller's motion to reconsider, the trial court acknowledged that the amendment to the Care Act took effect on January 1, 1994. The court found, however, that application of the amendment to a sheriff's sale conducted pursuant to the foreclosure of the Bank's mortgages would impair the Bank's vested contractual rights under the mortgages, in violation of the contract clauses of the State and Federal Constitutions. The court further held that the legislature did not intend the amendment to apply retroactively. Accordingly, the court held that the Comptroller could not hold a purchaser liable for trust fund shortages under the Care Act and could not condition licensure under that statute on replenishment of trust fund shortages. The court did not revise those portions of its previous order that concerned the Burial Funds and Pre-Need Acts. As stated, the Comptroller appealed from the trial court's order.

II. ANALYSIS

A. Justiciable Issue

The Comptroller initially argues that the trial court should not have construed the scope of the Burial Funds, Pre-Need and Care Acts because nojusticiable controversy existed between the parties within the meaning of the declaratory judgment statute (735 ILCS 5/2-701 (West 1992)). The Comptroller apparently concedes that the Bank may properly seek a judicial declaration with respect to liability the Bank may incur under those statutes if it sells the cemetery property in a foreclosure sale. The Comptroller argues, however, that no actual controversy exists with regard to the liability that a potential purchaser at a foreclosure sale may incur under the Acts.

In support of this argument, the Comptroller notes that a potential purchaser is not a party to this action. The Comptroller also notes that, while most cemeteries are licensed under the Care Act, a purchaser need not obtain a license under the Burial Funds Act or the Pre-Need Act to operate as a cemetery. The Comptroller also contends that, if a potential purchaser applies for and is wrongfully denied a license to operate under those statutes because of the Comptroller's policy, the purchaser has an adequate remedy under the administrative review provisions of those statues. Thus, the Comptroller argues, the trial court erred in granting declaratory relief as it related to the liability of a potential purchaser at a foreclosure sale, because no actual controversy was presented with regard to such a purchaser. We disagree.

Section 2-701(a) of the Code of Civil Procedure provides, in relevant part, that a trial court "may, in cases of actual controversy, make binding declarations of rights, having the force of final judgments, whether or not any consequential relief is or could be claimed, including the determination, at the instance of anyone interested in the controversy, of the construction of any statute *** or other governmental regulation *** and a declaration of the rights of the parties interested." (735 ILCS 5/2-701(a) (West 1992).) A complaint for declaratory judgment must recite in sufficient detail an actual and legal controversy between the parties and must demonstrate that the plaintiff is interested in the controversy. Underground Contractors Association v. City of Chicago (1977), 66 Ill. 2d 371, 375-76, 5 Ill. Dec. 827, 362 N.E.2d 298.

An "actual controversy" exists if there is a legitimate dispute admitting of an immediate and definite determination of the parties' rights, the resolution of which would help terminate all or part of the dispute. (See Kerr Steamship Co. v. Chicago Title & Trust Co. (1983), 120 Ill. App. 3d 998, 1003, 76 Ill. Dec. 355, 458 N.E.2d 1009.) The requirement that an actual controversy be present does not mean that a party must have been wronged or suffered an injury. (See Stone v. Omnicom Cable Television of Illinois, Inc. (1985), 131 Ill. App. 3d 210, 214, 86 Ill. Dec. 226, 475 N.E.2d 223.) Rather, an actual controversy may be found "where the mere existence of a claim, assertion or challenge to the plaintiff's legal interests portends the ripening seeds of litigation." ( Stone, 131 Ill. App. 3d at 214.) An "interest in the controversy" means that the plaintiff must have a personal claim or right which is capable of being affected. See Underground Contractors Association v. City of Chicago (1977), 66 Ill. 2d 371, 375-76, 5 Ill. Dec. 827, 362 N.E.2d 298.

The declaratory judgment procedure was designed to settle and fix rights before there has been an irrevocable change in the position of the parties that will jeopardize their respective claims of right. (See Gagne v. Village of LaGrange (1976), 36 Ill. App. 3d 864.) The remedy is used to afford security and relief against uncertainty so as to avoid potential litigation. (See Gagne, 36 Ill. App. 3d 864, 345 N.E.2d 108.) In order to carry out the purposes for which the remedy was designed, our courts have repeatedly held that the declaratory judgment statute must be liberally construed and should not be ...


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