Rivera v. Bank of New York Mellon

2021 IL App (1st) 192188

• Court: Appellate Court of Illinois
• Decided: April 30, 2021
• Docket: 1-19-2188
• Status: Published

Opinion

2021 IL App (1st) 192188

FIFTH DIVISION APRIL 30, 2021

No. 1-19-2188

CARMEN RIVERA, ) Appeal from the ) Circuit Court of Plaintiff-Appellee and Cross-Appellant, ) Cook County. ) v. ) ) BANK OF NEW YORK MELLON and BAYVIEW ) No. 16 M1 108289 LOAN SERVICING, LLC, ) ) Defendants-Appellants and Cross-Appellees, ) ) Honorable (The City of Chicago, ) Raymond W. Mitchell & ) Jerry A. Esrig, Intervenor-Appellee). ) Judges Presiding.

JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Presiding Justice Delort and Justice Hoffman concurred in the judgment and opinion.

OPINION

¶1 Plaintiff-appellee Carmen Rivera, a tenant residing at 1711 North Albany Avenue, Unit 1,

in Chicago, filed suit against defendants-appellants Bank of New York Mellon (BONY) and

Bayview Loan Servicing, LLC (collectively, the defendants), alleging that the defendants failed to

comply with the ordinance commonly known as Keep Chicago Renting Ordinance (KCRO or

ordinance) (Chicago Municipal Code § 5-14-010 et seq. (added June 5, 2013)), after purchasing

the North Albany Avenue property at a judicial sale. Specifically, Ms. Rivera alleged that the

defendants failed to offer her either relocation assistance or an extension of her lease agreement,

as required by the ordinance. Following trial in the circuit court of Cook County, the court found

in favor of Ms. Rivera but awarded her $16,500 less in damages than she was seeking. 1-19-2188

¶2 The defendants appeal, arguing that (1) the KCRO is preempted by the Illinois Rent

Control Preemption Act (Act) (50 ILCS 825/1 et seq. (West 2016)), (2) Ms. Rivera failed to

demonstrate that she was a “qualified tenant” so as to qualify for relief under the KCRO, (3) the

KCRO is unconstitutionally vague insofar as it does not require a tenant to prove that they are

qualified before being entitled to relief, and (4) the trial court abused its discretion in awarding

Ms. Rivera attorney fees. Ms. Rivera cross-appeals, arguing that she was entitled to an additional

$16,500 in damages. For the reasons that follow, we reverse the judgment of the circuit court of

Cook County.

¶3 BACKGROUND

¶4 Ms. Rivera was a tenant residing at 1711 North Albany Avenue, Unit 1 (the property),

beginning in August 2009. Her one-year written lease agreement expired in August 2010, and she

continued her tenancy on a month-to-month basis upon expiration. Her landlord, Krysztof

Adamczyk, defaulted on his mortgage, and the property was foreclosed and purchased by BONY

at a judicial sale that was confirmed on December 7, 2015.

¶5 One month later, on January 9, 2016, Bayview, BONY’s servicing agent, served Ms.

Rivera with a notice informing her of her rights under the KCRO and also provided a tenant

information disclosure form for her to complete. Ms. Rivera did not complete the form, but on

February 5, 2016, through her attorney, she sent Bayview a settlement demand seeking payment

of $10,600 in relocation assistance within 14 days. Ms. Rivera also included information that she

was a tenant paying $850 a month in rent after her initial written lease agreement of one year had

expired on August 31, 2010.

¶6 On February 11, 2016, Bayview responded to Ms. Rivera’s settlement demand with a

request for additional information as to her qualified tenant status, including, “satisfactory

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evidence that a lease was in place.” Ms. Rivera replied to Bayview’s request for more information,

stating that she had no legal requirement to provide additional information. Thereafter, Ms. Rivera

increased her demand to $21,200 in relocation assistance.

¶7 Bayview’s final communication to Ms. Rivera on March 14, 2016, explained that it was

unable to determine if she was a qualified tenant based on the information she had provided, but

stated that it was prepared to offer her a lease extension if she could show that she was a qualified

tenant under the terms of the KCRO.

¶8 Ms. Rivera never responded to Bayview’s March 14, 2016, communication. On April 5,

2016, she filed a complaint in the circuit court of Cook County against BONY and Bayview

alleging violations of the KCRO. Ms. Rivera sought statutory damages of $21,200 (twice the

relocation fee), $10,600 (the relocation fee), and attorney fees.

¶9 Ms. Rivera voluntarily vacated the property in July 2016, after which the defendants filed

a motion to dismiss her pending complaint, alleging, in relevant part, that the KCRO under which

Ms. Rivera was seeking relief, was preempted by the Act. The Act prohibits the regulation of the

amount of rent charged for residential property in the state of Illinois (id. § 10), but the KCRO,

which is a Chicago ordinance, requires an owner of a foreclosed property to offer qualified tenants

either a $10,600 relocation fee or extend the tenant’s lease with an annual rental rate that does not

exceed 102% of their current rental rate. Chicago Municipal Code § 5-14-050(a)(1) (amended Apr.

15, 2015). 1 On November 8, 2016, the circuit court found that the Act preempted the KCRO and

dismissed Ms. Rivera’s complaint.

¶ 10 The trial court granted the City of Chicago (City) leave to intervene in the case. The City

1 In other words, the new owner may not raise rent more than 2% over the most recent year’s rent.

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then sought to vacate the judgment and reconsider the dismissal order. Ms. Rivera likewise moved

the trial court to reconsider its dismissal of her complaint. On April 25, 2017, the trial court, upon

reconsideration, vacated the order of dismissal, finding that the KCRO’s limitations on rent, while

preempted by the Act, could be severed from the KCRO without running afoul of city council’s

intent and the underlying reason for the ordinance.

¶ 11 The defendants moved to reconsider the April 25 order in which the trial court had vacated

its November 8, 2016, order. In a written order, the trial court denied the defendant’s motion. The

court’s written order did not specifically identify the language that should be severed from the

KCRO in order to bring it into compliance with the Act.

¶ 12 The defendants then answered Ms. Rivera’s complaint, raising four affirmative defenses:

(1) the KCRO was completely preempted by the Act, (2) Ms. Rivera waived any rights she had

under the KCRO by vacating the premises after filing suit, (3) Ms. Rivera was not a qualified

tenant, and (4) the KCRO was unconstitutionally vague. On Ms. Rivera’s motion, the court struck

the defendant’s third affirmative defense that Ms. Rivera was not a qualified tenant. The court

agreed with Ms. Rivera’s argument that it was not an appropriate affirmative defense but rather an

issue that Ms. Rivera would ultimately have to prove in order to obtain relief. The court allowed

the remaining affirmative defenses to stand over Ms. Rivera’s objection.

¶ 13 The parties then filed cross motions for summary judgment and determination of major

issues. Ms. Rivera sought a determination that the defendant was the property owner as defined

under the KCRO and that it had failed to offer her the option of renewing her lease or receiving a

relocation assistance fee. She further sought a ruling that she was a qualified tenant under the terms

of the KCRO.

¶ 14 The defendants’ motion for summary judgment argued that the KCRO was

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unconstitutionally vague and, further, that they did not need to make an offer to Ms. Rivera under

the KCRO until she met her burden of proof of being a qualified tenant.

¶ 15 In August 2018, the court held a pretrial hearing on the pending motions and found as a

matter of law that the KCRO was not unconstitutionally vague and that Ms. Rivera was a qualified

tenant. The trial court further held that the KCRO did not require Ms. Rivera to prove that she was

a qualified tenant before the defendants had to offer her the option of renewing her lease or

receiving relocation assistance.

¶ 16 Trial commenced on August 20, 2018, on the issue of whether Ms. Rivera had been

properly served with notice as required under the KCRO. Several months later, on March 5, 2019,

the trial court issued its ruling and found that Ms. Rivera had been properly served with the notice

under the KCRO and the tenant information disclosure form. The court further found that the

defendants had the burden to determine whether Ms. Rivera was a qualified tenant under the

ordinance. Finally, in terms of damages, the court found Ms. Rivera was entitled to two times the

relocation fee under the ordinance in addition to the relocation fee itself. The court continued the

matter for a hearing on Ms. Rivera’s petition for $106,805 in attorney fees.

¶ 17 On September 17, 2019, after an evidentiary hearing, the court entered judgment in favor

of Ms. Rivera for $98,420 in attorney fees, $21,200 in statutory damages, and $801.75 in related

costs. The court did not include the additional $16,500 relocation fee sought by Ms. Rivera,

prompting her to file a motion to modify the judgment and award her the additional $16,500. On

October 22, 2019, the trial court denied Ms. Rivera’s motion to award her an additional $16,500.

Thereafter, this appeal and Ms. Rivera’s cross-appeal followed.

¶ 18 ANALYSIS

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¶ 19 We note that we have jurisdiction to review this matter, as the defendants filed a timely

notice of appeal following the entry of judgment and Ms. Rivera’s cross-appeal was also timely.

Ill. S. Ct. R. 301 (eff. Feb. 1, 1994); R. 303 (eff. July 1, 2017).

¶ 20 The dispositive issue on appeal is whether the City’s ordinance known as the KCRO is

preempted by the Illinois statute known as the Act. Resolution of this issue turns on the language

of the ordinance which we set forth here. The KCRO provides that an owner of a foreclosed rental

property in the city of Chicago:

“shall pay a one-time relocation assistance fee of $10,600 to a qualified tenant

unless the owner offers such tenant the option to renew or extend the tenant’s

current rental agreement with an annual rental rate that: (1) for the first 12 months

of the renewed or extended rental agreement, does not exceed 102 percent of the

qualified tenant’s current annual rental rate; and (2) for any 12-month period

thereafter, does not exceed 102 percent of the immediate prior year’s annual rental

rate.” Chicago Municipal Code § 5-14-050(a)(1) (amended Apr. 15, 2015).

On the other hand, the Act provides: “A home rule unit may not regulate or control the amount of

rent charged for leasing private residential or commercial property. This Section is a denial and

limitation of home rule powers and functions under subsection (g) of Section 6 of Article VII of

the Illinois Constitution.” 50 ILCS 825/10 (West 2016).

¶ 21 The Act also applies to non-home rule units, providing: “A unit of local government ***

shall not enact, maintain, or enforce an ordinance or resolution that would have the effect of

controlling the amount of rent charged for leasing private residential or commercial property.” Id.

§ 5(a).

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¶ 22 The trial court, upon reconsideration of the defendants’ motion to dismiss pursuant to

section 2-619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619.1 (West 2016)),

ultimately concluded that, while the KCRO was preempted by the Act, the offending language

could be severed from the KCRO without running afoul of the legislative intent underlying the

Act. The trial court therefore denied the defendants’ motion to dismiss Ms. Rivera’s lawsuit based

on section 2-619 of the Code. A motion to dismiss pursuant to section 2-619 admits the sufficiency

of all well-pleaded facts but argues for the dismissal of the complaint based on an affirmative

matter defeating the claim or avoiding its legal effect. Janda v. United States Cellular Corp., 2011

IL App (1st) 103552, ¶ 83. Our standard of review of the court’s decision on a section 2-619 motion

is de novo. Solaia Technology, LLC v. Specialty Publishing Co., 221 Ill. 2d 558, 579 (2006).

¶ 23 On appeal, the parties initially dispute whether the KCRO imposes “rent control” as barred

by the Act. Ms. Rivera and the City argue that “rent control,” as traditionally understood, means

setting rents below fair market rates. See Richard A. Epstein, Rent Control and the Theory of

Efficient Regulation, 54 Brook. L. Rev. 741, 743-45 (1988). They further argue that the legislative

history of the Act suggests that it was traditional rent control that the legislature sought to prohibit.

In support of this argument, the City points to the difference in language between section 5

(applying to local government) and section 10 (applying to home rule units) of the Act.

Specifically, section 5 prohibits any ordinance that has the effect of controlling rent (50 ILCS

825/5(a) (West 2016)), while section 10 prohibits any ordinance that regulates or controls rent (id.

§ 10). The City maintains that the “broader” language of section 5 may preempt the KCRO, but

section 10 (applicable here) preempts only traditional rent control. We disagree. The distinction

which the City attempts to make is pure sophistry. The difference in language between the sections

does not lend support to the City’s position.

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¶ 24 In any event, only when there is ambiguity in statutory language does a court need to

consider the legislative history of the statute or ordinance to discern its meaning. See People v.

Maggette, 195 Ill. 2d 336, 348 (2001) (“Where the statutory language is clear, it will be given

effect without resort to other interpretative aids.”). The statute in question in this case provides

that a home rule unit “may not regulate or control the amount of rent charged” for leasing

residential property. Contrary to Ms. Rivera’s contention, neither “regulate” nor “control” are

ambiguous terms. “Regulate” is defined as “[t]o control (an activity or process) esp. through the

implementation of rules.” Black’s Law Dictionary (11th ed. 2019). And “control” is defined as

“[t]o regulate or govern.” Id. It is evident that the KCRO clearly regulates and controls the amount

of rent a landlord may charge for residential property—no more than 102% of a qualified tenants’

current annual rent. As such, it clearly runs afoul of the Act, which prohibits such control or

regulation by “home rule” bodies such as the City.

¶ 25 Ms. Rivera suggests that a landlord may avoid the effect of this control by declining to rent

the property to a qualified tenant altogether and instead offer the relocation assistance fee.

However, this reasoning strains logic because under that analysis, no rent control measure would

ever be contrary to the Act because rent control, even as traditionally understood, does not require

a property owner to rent the property. An owner is always free to decline to rent his property and,

as such, avoid any restrictions on the amount of rent that can be charged.

¶ 26 Having found that the Act preempts the KCRO, we must next consider whether the

offending portion of the KCRO—setting the amount of rent a landlord may charge—can be

severed from the remainder of the ordinance. The issue of severability is a question of statutory

construction. People v. Mosley, 2015 IL 115872, ¶ 29. Where, as here, the statute or ordinance in

question has a general severability clause, we must presume that the legislature intended the invalid

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provision of the ordinance or statute to be severable. Best v. Taylor Machine Works, 179 Ill. 2d

367, 460 (1997). In this case, while the KCRO does not include a severability clause, the Chicago

Municipal Code provides:

“If any part, section, sentence, clause or application of this Code shall be adjudged

invalid, void and of no effect for any reason, such decision shall not affect the validity of

the remaining portions of the titles, chapters, sections or other provisions of this Code, or

their application to other circumstances.” Chicago Municipal Code § 1-4-200 (added June

27, 1990).

¶ 27 But the existence of a severability clause is not conclusive as to whether the provision can

survive severance. Rather, the presumption of severability may be overcome “if the legislature

would not have passed the statute without the provision deemed invalid.” Best, 179 Ill. 2d at 461.

“To determine whether the legislature would have passed the statute without the provision declared

invalid, the courts consider whether the legislative purpose or object in passing the act is

significantly undercut or altered by the elimination of the invalid provisions.” Id. In other words,

if the valid and invalid provisions of an ordinance are so connected and dependent on each other

such that “ ‘if all could not be carried into effect the [city council] would not pass the residue

independently,’ ” then the act is not severable. Waicekauskas v. Burke, 336 Ill. App. 3d 436, 441

(2002) (quoting Fiorito v. Jones, 39 Ill. 2d 531, 540 (1968)).

¶ 28 Under ordinary circumstances, Illinois law permits foreclosure purchasers to evict tenants

from the foreclosed property following a 90-day notice period. 735 ILCS 5/9-207.5(a) (West

2016). Against this backdrop, the purpose of the KCRO enacted by the Chicago City Council is:

“to protect and promote the health, safety and welfare of its residents and mitigate

the damaging effects on our communities of foreclosures, which individually are

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catastrophic for the families and tenants who lose their homes, and collectively can

economically destabilize an otherwise healthy neighborhood, by causing building

abandonment, excessive vacancy, declines in property values, and a perception of

a neighborhood as being unworthy of investment, it is the purpose of this chapter

and the policy of the city to preserve, protect, maintain and improve rental property

and prevent occupied buildings from becoming vacant after foreclosures.” Chicago

Municipal Code § 5-14-010 (added June 5, 2013).

In order to effectuate this purpose, the KCRO incentivizes purchasers of foreclosed property to

retain tenants by excusing purchasers from paying a $10,600 relocation fee if they extend the

qualified tenant’s lease and raise rent by no more than 102% of the previous year’s rent. Chicago

Municipal Code § 5-14-050(a)(1) (amended Apr. 15, 2015).

¶ 29 As mentioned, the trial court declined to specify which portion of the KCRO it found

inconsistent with the Act. However, our review of the KCRO reveals that removing all references

to rental rates would cause the relevant remaining portion of the ordinance to read as follows:

“[T]he owner of a foreclosed rental property shall pay a one-time relocation assistance fee of

$10,600 to a qualified tenant unless the owner offers such tenant the option to renew or extend the

tenant’s rental agreement.” Read as such, the ordinance removes the incentive for property owners

to retain tenants. Thus, an owner after obtaining property as a result of foreclosure can avoid paying

a relocation fee and still remove tenants by offering to extend a qualified tenant’s lease at a

prohibitive rental rate, knowing that the tenant is likely to refuse. This has the practical effect of

displacing tenants and leaving buildings vacant and in disrepair, which is precisely what the KCRO

was enacted to avoid. Thus, the (valid) relocation fee is inseparable from the (invalid) rent

limitations. Therefore, it is reasonable to assume that the Chicago City Council would not have

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passed the KCRO without the rent limitation. In other words, rent control is an integral

underpinning of the ordinance. For this reason, we conclude that the invalid portion of the KCRO

is not severable from the remainder of the ordinance. Therefore, the KCRO is wholly preempted

by the Act, and the trial court erred in denying the defendants’ motion to dismiss on that basis.

¶ 30 Finally, because we conclude that that the KCRO is preempted by the Act, we need not

address the remaining arguments on appeal or cross-appeal.

¶ 31 CONCLUSION

¶ 32 For the foregoing reasons, we reverse the judgment of the circuit court of Cook County.

¶ 33 Reversed.

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Decision Under Review: Appeal from the Circuit Court of Cook County, No. 16-M1- 108289; the Hon. Raymond W. Mitchell and the Hon. Jerry A. Esrig, Judges, presiding.

Attorneys James V. Noonan and Ruth B. Sosniak, of Noonan & for Lieberman, Ltd., of Chicago, and Stephen G. Daday and Julie A. Appellant: Repple, of Klein, Daday, Aretos & O’Donoghue, LLC, of Schaumburg, for appellants.

Attorneys Colin Cameron and Scott Kane Stukel, of Cameron & Kane for LLC, Christopher Tompkins, of Jenner & Block LLP, and Frank Appellee: G. Avellone and Jon Raffensperger, of Lawyers’ Committee for Better Housing, all of Chicago, for appellee.

Mark A. Flessner, Corporation Counsel, of Chicago (Benna Ruth Solomon, Myriam Zreczny Kasper, Stephen G. Collins, and Jonathon D. Byrer, Assistant Corporation Counsel, of counsel), for intervenor-appellee.

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