Justice REYES delivered the judgment of the court, with opinion.
¶ 1 This appeal arises from a mortgage foreclosure action filed by plaintiff, Financial Freedom Acquisition, LLC (Financial Freedom), against defendant, Standard Bank and Trust Company, as Trustee u/t/a dated March 18, 1991, a/k/a Trust No. 5193 (Standard Bank). Thereafter, Standard Bank filed a counterclaim against Financial Freedom alleging violations of the Truth in Lending Act (TILA) (15 U.S.C. § 1601 et seq. (2006)). The counterclaim sought damages as well as rescission of the loan transaction. Financial Freedom filed a motion to dismiss the counterclaim pursuant to section 2-619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2010)). Standard Bank now appeals from an order of the circuit court
¶ 3 On October 14, 2010, Financial Freedom filed a complaint to foreclose the mortgage on 10420 S. Circle Drive, Unit No. 21B, in Oak Lawn, Illinois (the property), against Standard Bank, a land trust and current owner of the property.
¶ 4 Attached to the complaint were copies of the mortgage and note. The mortgage at issue was an adjustable rate home equity conversion mortgage, a type of reverse mortgage insured by the federal government through the Secretary of Housing and Urban Development. The mortgage provided the mortgagor was Standard Bank. In exchange for an amount up to $237,000, Marquette National Bank was given a security interest in the property. Standard Bank was the sole signatory on the mortgage.
¶ 5 The mortgage contained an exculpatory clause executed by Standard Bank. The exculpatory clause provided in full:
¶ 6 The note was executed on June 9, 2009, and signed by Muraida and Standard Bank. The note provided Muraida would not be personally liable for the amounts due on the note; instead the future sale of the property itself would be payment of the note. Sale of the property through the lender would only occur upon Muraida's death, if all of Muraida's title in the property were transferred, or if Muraida failed to use the property as her principal residence for more than 12 consecutive months.
¶ 7 On July 19, 2011, Standard Bank, with leave of court, filed an answer to the complaint and a counterclaim. Standard Bank asserted that it entered into a consumer credit transaction with Financial Freedom's predecessor in interest, Marquette National Bank. Standard Bank alleged Financial Freedom failed to deliver material disclosures to Standard Bank as required by TILA. Standard Bank also asserted Financial Freedom failed to respond to the notice of rescission it sent on June 2, 2011, in violation of section 1635 of TILA. 15 U.S.C. § 1635 (2006).
¶ 8 On August 9, 2011, Financial Freedom filed a combined motion under section 2-615 and 2-619 of the Code to dismiss Standard Bank's counterclaim. 735 ILCS 5/2-619.1 (West 2010).
¶ 9 On November 2, 2011, OneWest Bank, FSB was allowed to substitute as party plaintiff.
¶ 10 On January 5, 2012, the circuit court conducted a hearing and entered an order which stated, "It is hereby ordered that Defendant Standard Bank and Trust Company, as Trustee u/t/a dated 03-18-1991 a/k/a Trust No. 5193's Counterclaim is dismissed with prejudice." The order did not indicate under which section of the Code the motion was granted.
¶ 11 On February 12, 2012, Financial Freedom filed a motion to voluntarily dismiss the foreclosure complaint. On March 2, 2012, the circuit court dismissed the foreclosure action with prejudice.
¶ 13 Standard Bank asserts three issues on appeal: (1) the circuit court erred in dismissing the counterclaim because Standard Bank, as a land trust, has a right to rescind the consumer credit transaction
¶ 14 Standard Bank's counterclaim was dismissed pursuant to a motion brought under section 2-619.1 of the Code. 735 ILCS 5/2-619.1 (West 2010). This section permits section 2-615 and section 2-619 motions to be filed together as a single motion, but the combined motion shall be divided into parts which are limited to and specify the single section of the Code under which relief is sought. 735 ILCS 5/2-619.1 (West 2010). In this case, the circuit court did not indicate under which section of the statute it was dismissing Standard Bank's counterclaim. Thus, we note a trial court may be affirmed on any basis that appears in the record. Gunthorp v. Golan, 184 Ill.2d 432, 438, 235 Ill.Dec. 21, 704 N.E.2d 370 (1998). Under either section 2-615 or 2-619, our review is de novo. Mauvais-Jarvis v. Wong, 2013 IL App (1st) 120070, ¶ 64, 370 Ill.Dec. 98, 987 N.E.2d 864. De novo consideration means we perform the same analysis that a trial court would perform. Khan v. BDO Seidman, LLP, 408 Ill.App.3d 564, 578, 350 Ill.Dec. 63, 948 N.E.2d 132 (2011).
¶ 15 A motion to dismiss pursuant to section 2-619 of the Code admits the legal sufficiency of a plaintiff's complaint but raises defects, defenses, or other affirmative matters appearing on the face of the complaint or which are established by external submissions acting to defeat the complaint's allegations. 735 ILCS 5/2-619 (West 2010); Kedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill.2d 112, 115, 189 Ill.Dec. 31, 619 N.E.2d 732 (1993); Russell v. Kinney Contractors, Inc., 342 Ill.App.3d 666, 670, 276 Ill.Dec. 987, 795 N.E.2d 340 (2003). In contrast, a motion to dismiss pursuant to section 2-615 of the Code attacks the legal sufficiency of a complaint by alleging defects on the face of the complaint. 735 ILCS 5/2-615 (West 2010); Vitro v. Mihelcic, 209 Ill.2d 76, 81, 282 Ill.Dec. 335, 806 N.E.2d 632 (2004).
¶ 16 When ruling on a section 2-615 motion, the relevant question is whether, taking all well-pleaded facts as true, the allegations in the complaint, construed in a light most favorable to the plaintiff, are sufficient to state a cause of action upon which relief may be granted. Canel v. Topinka, 212 Ill.2d 311, 317, 288 Ill.Dec. 623, 818 N.E.2d 311 (2004). A motion to dismiss should not be granted "unless it is clearly apparent that no set of facts can be proved that would entitle the plaintiff to relief." Tedrick v. Community Resource Center, Inc., 235 Ill.2d 155, 161, 336 Ill.Dec. 210, 920 N.E.2d 220 (2009). Illinois is a fact-pleading state; conclusions of law and conclusory allegations unsupported by specific facts are not sufficient to survive dismissal. Anderson v. Vanden Dorpel, 172 Ill.2d 399, 408, 217 Ill.Dec. 720, 667 N.E.2d 1296 (1996). Section 2-616 of the Code provides that at any time before final judgment amendments to pleadings may be allowed on just and reasonable terms. 735 ILCS 5/2-616 (West 2010). "Leave to amend should be granted unless it is apparent that, even after the amendment, no cause of action can be stated." Platinum
¶ 18 In order to assess the sufficiency of Standard Bank's TILA claim against Financial Freedom, we must first examine the statutory and regulatory framework under which it arises. The purpose behind the enactment of TILA was "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit, and to protect the consumer against inaccurate and unfair credit billing and credit card practices." 15 U.S.C. § 1601(a) (2006); see Beach v. Ocwen Federal Bank, 523 U.S. 410, 412, 118 S.Ct. 1408, 140 L.Ed.2d 566 (1998).
¶ 19 To aid in the understanding and application of TILA, the Federal Reserve Board was vested with the power to implement regulations regarding TILA. U.S. Bank National Ass'n v. Manzo, 2011 IL App (1st) 103115, ¶ 25, 356 Ill.Dec. 115, 960 N.E.2d 1238. TILA's implementing regulation is known as Regulation Z. 12 C.F.R. § 226 et seq. (2006). "Regulation Z and the official staff commentary are generally dispositive unless contrary to the express language of TILA or otherwise irrational." Manzo, 2011 IL App (1st) 103115, ¶ 27, 356 Ill.Dec. 115, 960 N.E.2d 1238 (citing Household Credit Services, Inc. v. Pfennig, 541 U.S. 232, 124 S.Ct. 1741, 158 L.Ed.2d 450 (2004)).
¶ 20 "Under the Truth in Lending Act, 82 Stat. 146, 15 U.S.C. § 1601 et seq., when a loan made in a consumer credit transaction is secured by the borrower's principal dwelling, the borrower may rescind the loan agreement if the lender fails to deliver certain forms or to disclose important terms accurately." Beach, 523 U.S. at 411, 118 S.Ct. 1408 (citing 15 U.S.C. § 1635 (1994)). TILA requires creditors to provide borrowers with "clear and accurate disclosures of terms dealing with things like finance charges, annual percentage rates of interest, and the borrower's rights." Beach, 523 U.S. at 412, 118 S.Ct. 1408 (citing 15 U.S.C. §§ 1631, 1632, 1635, 1638 (1994)). Failure by the lender to deliver these disclosures permits an obligor to rescind the loan transaction. 15 U.S.C. § 1635(a) (2006). TILA provides two types of remedies for violations of the statute: (1) rescission; and (2) damages. 15 U.S.C. §§ 1635, 1640 (2006). For the reasons which follow, under no set of facts can Standard Bank assert a claim of rescission under TILA. As to statutory damages, we find Standard Bank has forfeited the argument.
¶ 22 Standard Bank's counterclaim seeks rescission of the June 9, 2009, loan transaction. TILA includes guidelines with respect to the method of rescission. Section 1635(a) provides "the obligor shall have the right to rescind * * * by notifying the creditor, in accordance with regulations of the Board, of his intention to do so." 15 U.S.C. § 1635(a) (2006). The obligor has three business days following the consummation of the transaction to rescind the loan "until midnight of the third business day following the consummation of the transaction or the delivery of the information and rescission forms required under this section together with a statement containing the material disclosures required under this subchapter, whichever is later,
¶ 23 Standard Bank contends its filing was timely, as it did not receive disclosures and therefore it is allowed to file its counterclaim within three years of the consummation of the loan transaction. Standard Bank's counterclaim was filed on July 19, 2011, more than three days but less than three years from the consummation of the loan transaction and, therefore, was timely.
¶ 24 Although the counterclaim was timely filed, Standard Bank is not entitled to rescind the loan transaction because it is not an "obligor." Neither TILA nor Regulation Z defines "obligor." Black's Law Dictionary defines "obligor" as "[o]ne who has undertaken an obligation; a promisor or debtor." Black's Law Dictionary 1181 (9th ed. 2009). "The right to rescind may be exercised only by the obligor, i.e. the person to whom credit is extended. [Citation.] Thus, an individual who is not named on the Note executed by his or her spouse is not an `obligor' and does not have a right to rescind." (Emphasis added.) Ferreira v. Mortgage Electronic Registration Systems, Inc., 794 F.Supp.2d 297, 302-03 (D.Mass.2011).
¶ 25 In Barash v. Gale Employees Credit Union, 659 F.2d 765 (7th Cir.1981), the court considered a guarantor on the note to be an obligor for the purposes of TILA. In that case, the husband sought to borrow money from the defendant credit union. To obtain the loan, the wife signed as guarantor on the note and executed a wage assignment in favor of the defendant. The court stated the wife undertook "substantial obligations" to the defendant and allowed her to recover statutory damages. Id. at 766. To hold otherwise, the court concluded, "would be to countenance a practice under which a creditor would be the beneficiary of substantial, albeit contingent, obligations running from a guarantor, but would be free of any reciprocal responsibilities whatever." Id.
¶ 26 In this case, both Muraida and Standard Bank signed the note. Standard Bank, however, executed an exculpatory clause expressly disclaiming:
In executing this document, Standard Bank retained no obligation under the note. This complete disclaimer of all liability left Standard Bank "free of any reciprocal responsibilities whatever" and thus with no obligations under the loan documents. Barash, 659 F.2d at 766. Further, the record is devoid of any evidence Standard Bank received a benefit from the loan transaction. See Aurora Firefighter's Credit Union v. Harvey, 163 Ill.App.3d 915, 920, 114 Ill.Dec. 873, 516 N.E.2d 1028 (1987). Standard Bank's disclaimer of all liability left Muraida as the only obligor. Because TILA only provides the right of rescission to the obligor of the
¶ 28 Standard Bank's counterclaim also requests statutory damages pursuant to section 1640 of TILA. 15 U.S.C. § 1640 (2006). Financial Freedom contends Standard Bank forfeited this argument by not raising it on appeal. Illinois Supreme Court Rule 341(h)(7) (eff. Feb. 6, 2013) states in relevant part, "Points not argued are waived and shall not be raised in the reply brief, in oral argument, or on petition for rehearing." Due to Standard Bank's failure to raise the issue of statutory damages on appeal, we find the argument to be forfeited.
¶ 29 We note the circuit court dismissed Standard Bank's counterclaim with prejudice. Section 2-616 of the Code provides at any time before final judgment amendments to pleadings may be allowed on just and reasonable terms. 735 ILCS 5/2-616 (West 2012). A cause of action should not be dismissed pursuant to section 2-615 unless it is clearly apparent that no set of facts can be alleged which would entitle the plaintiff to recovery. Tedrick, 235 Ill.2d at 161, 336 Ill.Dec. 210, 920 N.E.2d 220. In this case, Standard Bank cannot allege a cause of action for rescission as it is not an obligor on the loan. For these reasons, we affirm the decision of the circuit court dismissing the counterclaim with prejudice.
¶ 31 Accordingly, the decision of the circuit court granting Financial Freedom's motion to dismiss with prejudice is affirmed.
¶ 32 Affirmed.
Justice GORDON dissented, with opinion.
¶ 33 Justice GORDON, dissenting.
¶ 34 I must dissent because Standard Bank has alleged sufficient facts to support each element required in its claim for rescission.
¶ 35 As the majority observes, when ruling on a section 2-615 motion to dismiss, we must accept all well-pleaded facts as true and must construe them in the light most favorable to the claimant. Supra ¶ 16 (citing Canel v. Topinka, 212 Ill.2d 311, 317, 288 Ill.Dec. 623, 818 N.E.2d 311 (2004)).
¶ 36 To assert a claim for rescission under the TILA, Standard Bank must allege that, (1) "in the case of any consumer credit transaction," (2) "a security interest * * * is or will be retained or acquired in any property" and (3) the property "is used as the principal dwelling of the person to whom credit is extended." 15 U.S.C. § 1635(a) (2006).
¶ 37 When interpreting a statute, we turn first and foremost to the plain language of the statute itself. People v. Chapman, 2012 IL 111896, ¶ 23, 358 Ill.Dec. 640, 965 N.E.2d 1119. When the language is clear, we apply it as written. Chapman, 2012 IL 111896, ¶ 23, 358 Ill.Dec. 640, 965 N.E.2d 1119.
¶ 38 First, while Standard Bank must allege that it is acting "in the case of any consumer credit transaction" (15 U.S.C. § 1635(a) (2006)), that is different from requiring it to show that it is the consumer in the transaction. The statute expressly states that the word "consumer" is used as an adjective to describe the type of credit transaction to which the TILA applies, and there is no dispute that the case at bar involves a reverse mortgage or that a reverse mortgage is a type of "consumer credit transaction" to which the TILA applies. 15 U.S.C. § 1602(h) (2006) ("The adjective `consumer', used with reference to a credit transaction, characterizes the transaction* * *"). Thus, under the plain language of the statute, Standard Bank has alleged the first element.
¶ 39 Second, Standard Bank alleges that a "security interest" was "retained or acquired" in the property. 15 U.S.C. § 1635(a) (2006). The term "security interest" is used as part of the definition of a reverse mortgage transaction: "The term `reverse mortgage transaction' means a nonrecourse transaction in which a mortgage, deed of trust, or equivalent consensual security interest is created against the consumer's principal place of dwelling * * *." 15 U.S.C. § 1602(bb) (2006). As part of its counterclaim, Standard Bank attached a copy of the mortgage which showed the security interest, so the second element is satisfied.
¶ 41 Although all three elements are satisfied, the majority denies Standard Bank's claim on the ground that it is not an obligor as that term is used in the statute. Supra ¶ 24. As discussed in the last paragraph, the statute uses different terms to refer to the obligor and to the consumer, thus indicating that they are separate entities. C.f. In re Smith-Pena, 484 B.R. 512, 525 (Bankr.D.Mass.2013) (rejecting the argument that the word "consumer" was "the de facto definition of `obligor,'" the court found the word "`obligor' to differ from consumer"). The statute states that, in a consumer credit transaction where a security interest is retained "in any property which is used as the principal dwelling of the person to whom credit is extended, the obligor shall have the right to rescind." (Emphasis added.) 15 U.S.C. § 1635(a) (2006). In this sentence, the statute juxtaposes the term "the person to whom credit is extended" against the term "the obligor," indicating that they are completely separate and different terms.
¶ 42 Nonetheless, the majority concludes that the "obligor" is the consumer. Supra ¶ 26 (the consumer is "the only obligor"). However, this is a reverse mortgage. The consumer does not pay anything to the bank; it is the bank that has an obligation to the consumer. After the mortgage is triggered, then the consumer certainly has no obligation. At that point, the consumer cannot be obliged to do anything, at least not by a court of law.
¶ 43 For these reasons, I would find that Standard Bank has alleged sufficient facts to survive a dismissal motion under the express language of the TILA, and I must respectfully dissent.