Find Legal Information

FIRST DIVISION
November 21, 2005

No. 1-04-3883

The plaintiffs, M. Lois Jackim, Meyer and Gertrude Kruglik,and Margery Shurman, are residents of a new retirement communityknown as Classic Residence by Hyatt at The Glen (the Glen), whichis owned, operated, and managed by the defendant CC-Lake, Inc.,and situated north of Chicago in Glenview, Illinois, on landformerly occupied by the Glenview Naval Air Station.⁽¹⁾ CC-Lake,Inc. (CC-Lake or provider), holds a permit under the IllinoisLife Care Facilities Act (210 ILCS 40/1 et seq. (West 2002)) tocontract to provide at the Glen a continuum of care known as"life care" to individuals who are at least 62 years old. Eachof the four plaintiffs executed a written "continuing careresidency agreement" with the defendant in December 2002 andtendered entrance fees prior to moving into the life carefacility. The contract indicates that monthly fees collectedfrom residents are intended to cover all of the Glen's operatingcosts and that at the end of any residency lasting longer thansix months, CC-Lake will refund up to 90% of the resident'sentrance fees. CC-Lake may first deduct unpaid monthly fees, aswell as "miscellaneous expenses" which include the costs ofremediating a resident's alterations to the property beyondordinary wear and tear. On July 15, 2004, the plaintiffs filed aclass action complaint in the circuit court of Cook County, inwhich they alleged CC-Lake and the Glen's residents formedlandlord-tenant relationships, that the refundable portion of theentrance fees was a security deposit for rent and propertydamage, and that CC-Lake violated the Illinois Security DepositInterest Act when it failed to credit residents with annualinterest on those fees. 765 ILCS 715/0.01 et seq. (West 2002). The circuit court, however, granted CC-Lake's motion to dismissthe complaint with prejudice pursuant to section 2-615 of theIllinois Code of Civil Procedure. 735 ILCS 5/2-615 (West 2002). CC-Lake's argument for dismissal was that the relationshipbetween a life care provider and a life care facility resident isdistinguishable from the traditional landlord-tenant arrangement,and that life care contracts are not leases within the meaning ofthe interest statute. The residents argue on appeal that theterminology in CC-Lake's life care contract is not dispositive oftheir relationship and that the contract contains all theessential elements of a lease.

A section 2-615 motion poses the question of whether thecomplaint states a cause of action. Doe v. Chicago Board ofEducation, 213 Ill. 2d 19, 21, 820 N.E.2d 418, 418-19 (2004). Adismissal pursuant to section 2-615 is reviewed de novo. Doe,213 Ill. 2d at 23-24, 820 N.E.2d at 421. When reviewing thesufficiency of the allegations in the complaint, we accept astrue all well-pled facts and all reasonably drawn inferences fromthose facts in favor of the plaintiff. Doe, 213 Ill. 2d at 28,820 N.E.2d at 423. Accordingly, the complaint and attachedcontract are the source of all the facts set out below.

The life care contract at issue was expressly "executed inaccordance with the Illinois Life Care Facilities Act [(210 ILCS40/1 (West 2002))] and will be in effect for the rest of [thecontracting individual's] life" provided that individual complieswith certain payment obligations and does not give CC-Lake "justcause" for termination. The statute referenced in the contractindicates in relevant part:

"(c) 'Life care contract' means acontract to provide to a person for theduration of such person's life or for a termin excess of one year, nursing services,medical services or personal care services,in addition to maintenance services for suchperson in a facility, conditioned upon thetransfer of an entrance fee to the providerof such services in addition to or in lieu ofthe payment of regular periodic charges forthe care and services involved.

(d) 'Provider' means a person whoprovides services pursuant to a life carecontract.

(e) 'Resident' means a person who entersinto a life care contract with a provider, orwho is designated in a life care contract tobe a person provided with maintenance andnursing, medical or personal care services.

(f) 'Facility' means a place or placesin which a provider undertakes to provide aresident with nursing services, medicalservices or personal care services, inaddition to maintenance services for a termin excess of one year or for life pursuant toa life care contract. ***

(g) 'Living unit' means an apartment,room or other area within a facility setaside for the exclusive use of one or moreidentified residents.

(h) 'Entrance fee' means an initial ordeferred transfer to a provider of a sum ofmoney or property, made or promised to bemade by a person entering into a life carecontract, which assures a resident ofservices pursuant to a life care contract.

***

(j) 'Medical services' means thoseservices pertaining to medical or dental carethat are performed in behalf of patients atthe direction of *** licensed ***professional and technical personnel.

(k) 'Nursing services' means thoseservices pertaining to the curative,restorative and preventive aspects of nursingcare ***.

(l) 'Personal care services' meansassistance with meals, dressing, movement,bathing or other personal needs ormaintenance, or general supervision andoversight of the physical and mental well-being of an individual, who is incapable ofmaintaining a private, independent residenceor who is incapable of managing his personwhether or not a guardian has been appointedfor such individual.

(m) 'Maintenance services' means food,shelter and laundry services." 210 ILCS 40/2(West 2002).

With this terminology in mind, we set out additional facts fromthe parties' life care agreement.

When construction is complete, provider CC-Lake will offer296 independent living units at the Glen, consisting of 251apartments in the main building and 45 villas. The independentliving units will range in size from a 1-bedroom/1-bath apartmentto a 2-bedroom/2 1/2-bath villa with a den and an attachedgarage. Each unit comes with a fully equipped kitchen, smokealarm, emergency call system, washer and dryer, and window andfloor coverings. Residents may furnish the units as they wish,within the standards described in a community handbook. Inaddition to the independent living units, the Glen will also havea "care center" which will offer (a) private suites for memorysupport, (b) assisted living residences, and (c) private, skillednursing suites. Provider CC-Lake is obligated to provide long-term care at the care center, including basic skilled nursingcare, assisted living and memory support, and is not obligated toprovide some of the other care defined in the Life CareFacilities Act, such as "medical services," which encompassesphysician care and dental care. 210 ILCS 40/2(j). If the Glen'scare center has not opened or is full, CC-Lake will pay for aresident to receive long-term care in a nearby facility. Inaddition, a "Care Team" consisting of four administrative andhealth care professionals will "monitor care at the Community,and participate in decisions regarding care and transfer."

Individuals interested in becoming residents of the Glen andreceiving long-term care from CC-Lake, however, must initiallymeet minimum financial and health criteria. A materialmisrepresentation in a resident's application for acceptance intothe community is one of the enumerated circumstances constituting"just cause" for the provider to terminate the relationship. Depending upon which independent living unit they select,residents of the Glen pay entrance fees ranging between $255,612and $840,000, and monthly fees ranging between $2,753 and $4,326. The life care contract characterizes residents' entrance fees asinterest-free loans to the provider, and promissory notes to thateffect are issued to residents. The contract also urgesresidents to seek independent tax advice but cautions them of arisk that the Internal Revenue Service may classify part or allof the entrance fees as a below-market loan to the provider andimpute taxable interest to the resident. If a second residentoccupies an independent living unit at the Glen, an additionalentrance fee of $25,000 and an additional monthly fee of $642 areassessed, regardless of the location or size of the unit. But asecond resident, even a spouse, must apply for admission to thecommunity and the provider has reserved sole discretion as towhether to accept applicants into the community.

Monthly fees, which as indicated earlier are intended tocover all the Glen's operating costs, may be adjusted upon 60days' notice. Some of the Glen's specified operating costsresult from the provision of meals, weekly housekeeping and semi-annual window washing, weekly towel and linen service, social,cultural, and recreational activities, local grouptransportation, the emergency call system, space for storage andautomobile parking, and routine property maintenance. Themonthly fees also cover utilities, taxes, property insurance,liability insurance, employment expenses, the costs ofmaintaining, repairing and replacing capital items, includingfurnishings, fixtures and equipment, a management fee fixed at 8%of revenues, and an annual lease payment which is initially setat $661,000 and to be adjusted every 10 years for inflation.

Monthly fees are not affected by a resident's temporary orpermanent transfer from one of the Glen's independent livingunits to the care center. A resident's refusal to transfer tothe care center when "requested" by the provider is anotherexample of "just cause" for ending the relationship. Theprovider is entitled to "request" a resident's transfer toanother care setting at the Glen after having a "consultation"with its Care Team and the resident, or the resident's physician,or the resident's family members. In addition, a resident may"elect to move" from one independent living unit to anotheravailable independent living unit and may "request a transfer" toa different care setting within the community. If a residentmakes what was expected to be a permanent transfer from anindependent living unit to the care center but becomes able toreturn to residential living, the provider will offer a unitcomparable to the one that was vacated, as soon as it becomesavailable. After initial occupancy, a resident has the right toterminate the life care agreement for any reason, by giving atleast 60 days' notice.

After agreeing to these terms in writing in December 2002,but prior to taking up residency at the Glen, plaintiff M. LoisJackim paid an entrance fee of $366,800, plaintiffs Meyer andGertrude Kruglik paid an entrance fee of $525,000, and plaintiffMargery Shurman paid an entrance fee of $610,000.

The residents argue on appeal that although the life careagreement they entered into does not use the terms "lease,""rent," "landlord," "tenant," and "security deposit," this courtshould interpret the contract without regard to its labels inorder to determine if a landlord-tenant relationship actuallyexists between the parties. This court is not bound by theparties' characterization of their relationship and may disregardinaccurately applied labels or technical terms. ChemicalPetroleum Exchange, Inc. v. Metropolitan Sanitary District ofGreater Chicago, 81 Ill. App. 3d 1005, 1009, 401 N.E.2d 1203,1206 (1980). Furthermore, the terms of the Security DepositInterest Act are implied into every residential lease. 765 ILCS715/0.01 et seq. (West 2002); Wang v. Williams, 343 Ill. App. 3d495, 499, 797 N.E.2d 179, 182-83 (2003). The residents contendthat since their life care agreement includes all the essentialelements of a residential lease, designating the refundableportion of the facility entrance fees as an interest-free loan tothe life care provider was "a charade" and that the fees areactually a "thinly disguised security deposit as defined underthe [Security Deposit Interest Act]." 765 ILCS 715/0.01 et seq(West 2002). They also argue that most of the Glen's entranceand monthly fees are attributable to the use, occupancy, andenjoyment of the premises, rather than to the provision of healthcare, since the fees range by several hundred thousand dollarsdepending upon which independent living unit is occupied and onlyone tier of health care is offered. They contend this pricingstructure reflects that the "dominant" purpose of the parties'relationship is "the provision of upscale residential housing"and that the "secondary" purpose is the "provi[sion of] life careservices." They conclude that unless their class actioncomplaint is reinstated on appeal, CC-Lake will be allowed toavoid its statutory interest obligation.

Section 1 of the Security Deposit Interest Act provides inrelevant part:

"A lessor of residential real property,containing 25 or more units in either asingle building or a complex of buildingslocated on contiguous parcels of realproperty, who receives a security depositfrom a lessee to secure the payment of rentor compensation for damage to property shallpay interest to the lessee *** on any depositheld by the lessor for more than 6 months." 765 ILCS 715/1 (West 2002).

A lessor who willfully fails to pay statutory interest is alsoliable for court costs and attorney fees. 765 ILCS 715/2 (West2002).

The primary rule of statutory construction is to ascertainand give effect to the legislature's true intent and meaning. Kunkel v. Walton, 179 Ill. 2d 519, 533, 689 N.E.2d 1047, 1053(1997). The statutory language is considered the best indicationof the legislature's intent. Kunkel, 179 Ill. 2d at 533, 689N.E.2d at 1053. "Where the meaning of an enactment is unclearfrom the statutory language itself, the court may look beyond thelanguage employed and consider the purpose behind the law and theevils the law was designed to remedy." Kunkel, 179 Ill. 2d at533-34, 689 N.E.2d at 1053. In addition, where statutorylanguage is ambiguous, it is appropriate for the court to examinethe legislative history. Kunkel, 179 Ill. 2d at 534, 689 N.E.2dat 1053-54. However, when the legislature's language is clear,it will be given effect without resort to other aids forconstruction. Kunkel, 179 Ill. 2d at 534, 689 N.E.2d at 1054. When the legislature's intent is clear from the plain andordinary language of the statute, we have no authority toconstrue it otherwise. Gittleman v. Create, Inc., 189 Ill. App.3d 199, 202, 545 N.E.2d 237, 239 (1989). We are also mindfulthat the Security Deposit Interest Act is considered "a penalstatute which must be strictly construed" and that it should notbe "extended to embrace matters beyond its terms." Munroe v.Brower Realty & Management Co., 206 Ill. App. 3d 699, 704, 565N.E.2d 32, 36 (1990).

With unqualified and unconditional wording, the intereststatute directs a "lessor" of "residential real property" whoreceives funds from a "lessee" "to secure the payment of rent orcompensation for damage to property" to pay interest on thosefunds to the lessee. 765 ILCS 715/1 (West 2002). The generaldefinition of "lessor" found in the dictionary is "a person,group, etc., who grants a lease"; and a "lessee" is "a person,group, etc., to whom a lease is granted." Random House Webster'sUnabridged Dictionary 1103 (2d ed. 1998). A "lease" is "acontract renting land, buildings, etc., to another; a contract orinstrument conveying property to another for a specified timeperiod or for a period determinable at the will of either lessoror lessee in consideration for rent or other compensation." Random House Webster's Unabridged Dictionary 1095 (2d ed. 1998). Finally, "rent" means "a payment made periodically by a tenant toa landlord in return for the use of land, a building, anapartment, an office, or other property." Random House Webster'sUnabridged Dictionary 1632 (2d ed. 1998).

After considering the parties' contractual rights andobligations in light of the clear, plain language of the intereststatute, we conclude that the statute does not apply to theparties or the funds at issue in this appeal. The defendant lifecare provider CC-Lake does not stand in a "lessor"/"lessee"relationship with the plaintiff residents of the Glen within themeaning of the interest statute and the entrance fees collectedfrom the residents are not "security deposit[s]" within themeaning of the interest statute. In fact, CC-Lake's obligationsas a provider under the Life Care Facilities Act aresignificantly different in both character and scope from theobligations of a "lessor" of "residential real property." 765ILCS 715/1 (West 2002). CC-Lake has agreed to shelter theplaintiff residents for their lifetimes somewhere at the Glen, orif need be, off site at an alternate care facility. Capableresidents may chose to live in any of the available on-siteindependent living units within their financial means, and mayrelocate from unit to available unit as frequently as they wish. Conceivably, a married couple could start their residence at thelife care facility in one of the 2-bedroom/2 1/2-bath villas thatincludes a den and attached garage, later sell the car anddownsize to one of the 2-bedroom apartments, opt for a differentapartment if they tired of the unit's floor plan, view, orneighbors, and if deteriorating health forced one of the partnersinto one of the three types of care settings established in theGlen's on-site care-center, the other partner could relocate toan even smaller independent living unit. CC-Lake's obligation toaccommodate the fluctuating residential preferences and healthcare needs of the Glen's residents (with the exception ofhospital care) far exceeds the duty undertaken by a "lessor" of aspecific dwelling unit. However, CC-Lake does not provide just arange of residential and health-care options; it also"participate[s] in decisions regarding [the residents'] care andtransfer" and employs a "Care Team" of administrative and healthcare professionals for that purpose. CC-Lake is also obligatedto provide the Glen's residents with meals, transportation,housekeeping, clean linen service, social, cultural andrecreational programs, and, possibly, skilled nursing care, anddaily assistance with bathing, dressing, personal grooming, andmedication, and must employ a staff capable of meeting all ofthese obligations. In short, CC-Lake's duties as a providerunder the Life Care Facilities Act are very different in scopeand character from the duties of a "lessor" of "residential realproperty." We cannot construe "lessor" (765 ILCS 715/1 (West2002)) as a synonym of a life care "provider." 210 ILCS 40/2(d)(West 2002).

Furthermore, the parties' life care agreement cannot beconstrued as a lease because it does not convey the right toexclusive possession of specific premises. In Leonardi, thecourt indicated that exclusive possession of the premises is acharacteristic of a lease arrangement and that "'there must beagreement as to the extent and bounds of the property, the rentalprice and time and manner of payment, and the term of thelease.'" Leonardi v. Chicago Transit Authority, 341 Ill. App. 3d1038, 1043, 793 N.E.2d 880, 884 (2003), quoting Ceres Illinois,Inc. v. Illinois Scrap Processing, Inc., 114 Ill. 2d 133, 145,500 N.E.2d 1 (1986). If we focused exclusively on theplaintiffs' current living arrangements at the Glen, in privateunits that in many ways resemble apartments offered to thegeneral public, we might find their argument convincing. As justnoted above, however, the plaintiffs are contractually entitledto move from one independent living unit to another availableindependent living unit at the Glen, and the units are notidentical in size and price, and when deteriorating health makesit impractical or impossible for the plaintiffs to continueliving independently, they may be sheltered in the Glen's carecenter or at an alternate care facility. The agreement does notprovide for the exclusive possession of a specific unit; itprovides for a range of residential settings over the remainingcourse of a contracting individual's lifetime, and, therefore, itis not a lease.

In effect, the plaintiff residents are asking us to isolatea few of the characteristics of the parties' relationship and afew of the terms of their contract in order to find that there isa "security deposit" for rent and property damage which issubject to the interest statute. 765 ILCS 715/1 (West 2002). The residents, however, have not cited any authority or rule ofcontract construction which would allow us to disregardbargained-for terms of their contract. We will not remake acontract in order to give a litigant "a better bargain than hehimself was satisfied to make; and when the terms of a contractare clear and unambiguous, they must be enforced." NewcastleProperties, Inc. v. Shalowitz, 221 Ill. App. 3d 716, 722, 582N.E.2d 1165, 1168 (1991). Moreover, the implicit proposal thatwe isolate some relationship characteristics or some contractterms in order to apply the interest statute to the plaintiffresidents' facility entrance fees is not supported by any wordingin the interest statute. "There is no rule of construction whichauthorizes a court to declare that the legislature did not meanwhat the plain language of the statute imports, and a court isnot at liberty to depart from the plain language of a statute byreading into it exceptions, limitations or conditions that thelegislature did not express." Kunkel, 179 Ill. 2d at 534, 689N.E.2d at 1054.

We also point out that the legislature has expressly defineda life care facility entrance fee as "an initial or deferredtransfer *** of a sum of money or property *** which assures aresident of services pursuant to a life care contract." (Emphasis added.) 210 ILCS 40/3(h) (West 2002). We would haveto disregard the legislature's express definition of the funds atissue in order to grant the residents what they are seeking,which would be improper. Kunkel, 179 Ill. 2d at 534, 689 N.E.2dat 1054 (a court may not depart from the plain meaning of astatute). The soundness of this conclusion is confirmed by thefact that the Security Deposit Interest Act was in effect foralmost a decade before the Life Care Facilities Act was firstenacted and yet none of the terminology in the older statute isrepeated in the more recent statute. See Pub. Act 77-705