source: Caselaw Access Project

author: JUSTICE LINN

license: Public Domain

text:
    BOARD OF DIRECTORS OF OLDE SALEM HOMEOWNERS’ ASSOCIATION, Plaintiff-Appellant, v. SECRETARY OF VETERANS AFFAIRS et al., Defendants-Appellees.
    First District (4th Division)
    No. 1—90—2835
    Opinion filed February 27, 1992.
    Rehearing denied March 23, 1992.

      Marshall N. Dickler, Ltd., of Arlington Heights (Marshall N. Dickler, Jeffrey A. Goldberg, and Lita H. Brody, of counsel), for appellant.
    Harold I. Levine, of Chicago (Samuel H. Levine, of counsel), for appellees.
   JUSTICE LINN

delivered the opinion of the court;

Plaintiff, the board of directors of the Olde Salem Homeowners’ Association (Association or Homeowners’ Association), brought a foreclosure action in the circuit court of Cook County. The Homeowners’ Association named as defendants the Secretary of Veterans Affairs (Secretary), as the record owner of certain real estate, and unknown owners and nonrecord claimants. The Association claimed a lien on the property for unpaid assessments and sought to foreclose the lien as a mortgage.

The trial court granted the Secretary’s motion for summary judgment and subsequently denied the Homeowners’ Association’s motion for reconsideration. The Homeowners’ Association appeals, assigning error to the trial court’s reasoning and judgment.

We affirm in part, reverse in part, and remand.

Background

A

The record contains the following pertinent facts. The Homeowners’ Association was created pursuant to a declaration of covenants, conditions, and restrictions. (See generally Kratovil, The Declaration of Restrictions, Easements, Liens, and Covenants: An Overview of An Important Document, 22 J. Marshall L. Rev. 69, 78-79 (1988).) The declaration was recorded with the Cook County recorder of deeds on May 30,1972.

Article VI, section 1, of the declaration confers on the Homeowners’ Association the right to levy assessments on each lot owner. Further, the provision creates a continuing lien upon any lot that does not pay the assessments.

Article VII of the declaration contains several pertinent provisions. Section 1 allows the Homeowners’ Association to collect the assessment by either bringing an action against the owner for damages or by foreclosing the lien against the lot. Section 2 provides that, prior to any action to foreclose, a notice of the claim of lien must be recorded with the county recorder of deeds. Section 3 provides that the foreclosure shall be conducted according to Illinois mortgage foreclosure law or in any other legally permissible manner. Section 6 states as follows:

“If any lot subject to a monetary lien created by Article VI of this declaration shall be subject to the lien of a first mortgage *** (1) the foreclosure of any lien created by anything set forth in this Declaration shall not operate to affect or impair the lien of such mortgage ***, and (2) the foreclosure of the lien of such mortgage *** shall not operate to affect or impair the lien hereof, except that the lien hereof for said charges as shall have accrued up to the foreclosure *** shall be subordinate to the lien of the mortgage ***, with the foreclosure-purchaser *** taking title free of the lien hereof for all said charges that have accrued up to the time of the foreclosure ***, but subject to the lien hereof for all said charges that shall accrue subsequent to the date of the entry of the decree of foreclosure ***.”

B

On November 3, 1988, the Fleet Mortgage Corporation filed a complaint in Federal district court to foreclose a mortgage on subdivision property located at 7640 Manchester in Hanover Park. The complaint named as defendants the mortgagors (borrowers), the United States of America as a junior mortgagee (lender), and the Village of Hanover Park as a junior lienholder. The Homeowners’ Association was not named as a defendant.

On January 19, 1989, the court entered several orders in favor of Fleet Mortgage. The court entered judgment on the pleadings in favor of Fleet. The court also entered a judgment of foreclosure, which provided that the equitable right of redemption would expire on June 5, 1989, and ordered that the property be sold. The court appointed a special commissioner to conduct the sale.

The special commissioner’s sale was held on May 12, 1989. Fleet Mortgage was the successful bidder. Fleet subsequently assigned the certificate of sale to the United States Department of Veterans Affairs. On June 9, 1989, the special commissioner issued a deed to the Secretary. On June 20, 1989, the Secretary recorded the deed with the county recorder’s office, thereby becoming the record owner of the property.

C

On October 2, 1989, the Homeowners’ Association recorded with the county recorder a claim for lien. The lien purported to be for $4,587.65 in unpaid assessments and late charges, with interest, costs, and attorney fees from December 1, 1987, through October 1,1989.

On December 5, 1989, the Homeowners’ Association filed its original complaint to foreclose its lien under the Illinois Mortgage Foreclosure Law (Ill. Rev. Stat. 1989, ch. 110, par. 15—1101 et seq.). The Association named as defendants the Secretary, unknown owners, and nonrecord claimants. On April 26, 1990, the Association, with leave of court, filed an amended complaint to foreclose its lien; the Association sought the additional relief of attorney fees, costs, and expenses.

On July 27, 1990, the trial court granted the Secretary’s motion for summary judgment. The court noted that although the Secretary owned the property only since June 20, 1989, the Homeowners’ Association sought assessments from the Secretary “for the period prior to, including, and after the foreclosure.” The trial court ruled that the Secretary took the property free of assessments- prior to June 20, 1989. The court also ruled that the Association could not foreclose on the remainder of the lien under the Mortgage Foreclosure Law. Rather, the Association’s remedy was an action against the mortgagors for damages.

On August 16, 1990, the Secretary tendered to the Association $1,736 for unpaid assessments from June 20, 1989, through August 1990. The trial court allowed the Association to accept the payment without prejudice to its rights or claims.

On August 30, 1990, the trial court denied the Association’s motion for reconsideration. The Homeowners’ Association timely appeals.

Opinion

When a plaintiff appeals from a trial court’s order of summary judgment for a defendant, the only issue on appeal is whether “the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” (Ill. Rev. Stat. 1989, ch. 110, par. 2—1005(c).) Further, it is the judgment that is on appeal to a reviewing court and not what the trial court may have said. The reviewing court need not accept the reasons that the trial court gave for the judgment. The reviewing court may affirm a judgment upon any ground warranted, regardless of whether the trial court relied upon it and regardless of whether the reason that the trial court gave was correct. (Material Service Corp. v. Department of Revenue (1983), 98 Ill. 2d 382, 387, 457 N.E.2d 9, 12.) These principles apply equally to summary judgments. Mount Prospect State Bank v. Marine Midland Bank (1983), 121 Ill. App. 3d 295, 298-99, 459 N.E.2d 979, 982.

I

The trial court found that the Secretary took the property free of assessments that accrued prior to June 20, 1989, the date that the Secretary recorded the special commissioner’s deed. The trial court ruled that it need not determine whether the Association’s lien was recorded prior to the Fleet mortgage foreclosure. The court reasoned that it could base its finding solely on the plain language of the declaration. Disagreeing with only the trial court’s reasoning, we conclude, for two reasons, that the Secretary took the property free of assessments that accrued prior to June 20,1989.

A

The Secretary took the property free of assessments that accrued prior to June 20, 1989, because the Association’s lien did not exist at that time. In St. Paul Federal Bank for Savings v. Wesby (1986), 149 Ill. App. 3d 1059, 501 N.E.2d 707, this court noted that the declaration created a lien for unpaid assessments. We reasoned that such a nonpayment obviously did not occur when the declaration was recorded, but rather when the assessment actually went unpaid. Therefore, such a lien necessarily arose only when the lien itself was recorded, one which claimed an actual debt or obligation to perform an act. 149 Ill. App. 3d at 1067-68, 501 N.E.2d at 712-13.

In the case at bar, the declaration, as the declaration in Wesby, created a lien for unpaid assessments. Therefore, the Association did not have a lien on the property when it recorded the declaration in 1972. Rather, the Association had in 1972 “merely a notice that a right to perfect a lien existed.” (Wesby, 149 Ill. App. 3d at 1068, 501 N.E.2d at 713.) The Secretary recorded the special commissioner’s deed on June 20, 1989, but the Association did not record its claim of lien until October 2, 1989. Consequently, the Secretary took the property free of assessments that accrued prior to his becoming the owner.

B

We uphold the trial court’s entry of summary judgment for the Secretary for an independent and equally controlling reason. The trial court ruled that the Secretary took the property free of assessments that accrued prior to June 20, 1989, based on the express language of the declaration. Generally, a covenant should be interpreted to give effect to the actual intent of the parties at the time the covenant was made. The intent of the parties can best be determined by the covenant’s explicit provisions. (Streams Sports Club, Ltd. v. Richmond (1983), 99 Ill. 2d 182, 188, 457 N.E.2d 1226, 1230.) Where the language of a covenant is unambiguous, clear, and specific, no room is left for interpretation or construction. 21 C.J.S. Covenants §5 (1990).

After carefully reviewing the entire declaration, we agree with the trial court that the Secretary took the property free of assessments that accrued prior to June 20, 1989. We initially note, as the trial court noted, that the Homeowners’ Association recorded a claim of lien for unpaid assessments that accrued from December 1, 1987, until the filing of its initial complaint. However, in its appellate brief, the Association concedes that article VII, section 6, of the declaration “allow[s] the mortgagor purchaser [i.e., the Secretary] to take free of charges assessed prior to the decree of foreclosure,” which was January 19, 1989. Consequently, the Secretary is entitled to summary judgment on that portion of the Association’s lien for unpaid assessments that accrued from December 1, 1987, to January 19, 1989.

Further, article VII, section 6, of the declaration plainly states that the foreclosure purchaser, in this case the Secretary, takes “title free of the lien hereof for all said charges that have accrued up to the time of the foreclosure.” (Emphasis added.) The Association argues that this section did not waive or bar the charges assessed from the January 19, 1989, mortgage foreclosure judgment to the June 20, 1989, recording of the special commissioner’s deed. However, the “foreclosure” did not end with the January 19, 1989, foreclosure judgment. Rather, the foreclosure was not completed until June 9, 1989, when the special commissioner issued the deed to the Secretary, which he recorded on June 20, 1989. See Newport Condominium Association v. Talman Home Federal Savings & Loan Association (1988), 188 Ill. App. 3d 1054, 1059, 545 N.E.2d 136, 139; Ill. Rev. Stat. 1989, ch. 110, par. 15—1509(b).

True, the declaration further provides that the foreclosure purchaser, i.e., the Secretary, takes title subject to the Association’s lien for assessments “that shall accrue subsequent to the date of the entry of the decree of foreclosure.” However, the Secretary did not take title by way of the January 19, 1989, foreclosure judgment. Rather, the Secretary took title when the special commissioner issued the deed on June 9, 1989, which the Secretary recorded on June 20. The Association’s lien for unpaid assessments was not binding on the Secretary prior to his becoming the title holder. See Newport Condominium Association, 188 Ill. App. 3d at 1059-60, 545 N.E.2d at 139-40.

Of course, the Secretary took title when the special commissioner issued the deed on June 9, 1989, and not when the Secretary recorded the deed on June 20. The Secretary’s failure to record promptly the special commissioner’s deed did not affect its operation as a conveyance. However, the deed was valid between only the Secretary and the special commissioner. (See 13 Ill. L. & Prac. Conveyances §101 (1955); 3 E. Grigsby, Illinois Real Property §§1168 through 1169 (1948).) As to the Homeowners’ Association, the special commissioner’s deed did not take effect until it was recorded on June 20, 1989. Ill. Rev. Stat. 1989, ch. 30, par. 29.

Since the declaration provided that the Secretary took title free of assessments up to the time of foreclosure, and since the foreclosure was not complete with respect to the Homeowners’ Association until June 20, 1989, the Secretary took the property free of assessments that accrued prior to that date. For both of the above reasons, we hold that the Secretary is entitled to a summary judgment on that portion of the Association’s lien for unpaid assessments that accrued prior to June 20, 1989.

II

The remaining issue concerns the Homeowners’ Association’s lien for unpaid assessments that accrued subsequent to June 20, 1989. The trial court ruled that the Association could not enforce the remaining portion of its lien as a mortgage under the Illinois Mortgage Foreclosure Law. Citing 27 Ill. L. & Prac. Mortgages §2 (1956), the court reasoned that “[i]n order for this lien to be a mortgage which could be foreclosed, there must be a conveyance of an estate to secure a debt.” Thus, because the Secretary “simply never conveyed its estate as security for the assessment liens,” the Association’s remedy was an action against the Secretary for damages.

The trial court’s reasoning and result constituted error. “In 1900, [the Illinois Supreme Court] recognized the common law precept that a mortgage was a conveyance of a legal estate vesting title to the property in the mortgagee.” (Harms v. Sprague (1984), 105 Ill. 2d 215, 222, 473 N.E.2d 930, 933, citing Lightcap v. Bradley (1900), 186 Ill. 510, 519, 58 N.E. 221, 223; see 27 Ill. L. & Prac. Mortgages §§2, 77 (1956).) However, for nearly 40 years, Illinois courts have repeatedly rejected the “title theory” of mortgages in favor of the “lien theory.” Harms, 105 Ill. 2d at 222-23, 473 N.E.2d at 933-34 (and cases cited therein).

If this principle needs repeating, we now explicitly do so. Illinois courts no longer view a mortgage as a conveyance of a legal estate to the mortgagee; rather, “ ‘the holder of the mortgage takes only a lien thereunder.’ ” (Harms, 105 Ill. 2d at 223, 473 N.E.2d at 933, quoting Kling v. Ghilarducci (1954), 3 Ill. 2d 454, 460, 121 N.E.2d 752, 756; see R. Kratovil & R. Werner, Modem Mortgage Law & Practice §§1.6, 1.8 (2d ed. 1981).) Codifying these principles, the Mortgage Foreclosure Law defines a mortgage as “any consensual lien created by a written instrument which grants or retains an interest in real estate to secure a debt or other obligation.” Ill. Rev. Stat. 1989, ch. 110, par. 15—1207.

In the case at bar, the declaration falls squarely within these precepts. By its express terms, the declaration grants to the Association an interest in real estate to secure a debt, in this case a lien on the property for unpaid assessments. In Illinois, a mortgage is a lien that grants an interest in real estate to secure a debt. Therefore, we hold that the Association can foreclose its lien under the Mortgage Foreclosure Law. Consequently, we reverse that part of the trial court’s judgment which held that a mortgage required a conveyance of an estate. We remand the cause to the trial court for further proceedings relating to the Association’s lien for unpaid assessments that accrued subsequent to June 20,1989.

For the foregoing reasons, the judgment of the circuit court of Cook County is affirmed in part, reversed in part, and remanded for further proceedings not inconsistent with this opinion.

Affirmed in part; reversed in part and remanded.

JIGANTI, P.J., and JOHNSON, J., concur.


text:
    ANGELA VERBAERE et al., Plaintiffs-Appellants and Cross-Appellees, v. LIFE INVESTORS INSURANCE COMPANY OF AMERICA, DefendantAppellee and Cross-Appellant.
    First District (4th Division)
    No. 1—91—0428
    Opinion filed February 27, 1992.

      David L. Lee Law Offices, of Chicago (David Lee and Frederic F. Brace, Jr., of counsel), for appellants.
    Peterson & Ross, of Chicago (J. Robert Geiman, David J. Novotny, and Douglas J. Varga, of counsel), for appellee.
   JUSTICE LINN

delivered the opinion of the court:

Pursuant to section 155 of the Illinois Insurance Code (Ill. Rev. Stat. 1989, ch. 73, par. 767), the trial court assessed a penalty and attorney fees against defendant, Life Investors Insurance Company of America. Plaintiffs Peter and Angela Verbaere appeal from the amount of the award, claiming that the trial court erred in awarding their attorney, a law professor working in a law school clinic, only $40 per hour despite evidence supporting a substantially higher rate. The insurance company cross-appeals, arguing that the judgment entered against it is unjustified because its denial of plaintiffs’ claim was not vexatious and unreasonable.

We affirm on the issue of the insurer’s liability for the penalty and fee award, but modify the amount of the award to conform with the evidence presented on the reasonable hourly compensation to be awarded plaintiffs’ attorney.

Background

This is the third appeal involving the Verbaeres and their attempt to recover damages arising out of the conduct of their bank and their insurance company. In April 1978, plaintiffs borrowed $15,500 from the Community Bank of Homewood-Flossmoor to buy a motor home. They were required to obtain credit-life and credit-disability insurance to secure the loan, and the premium for this insurance added another $4,391.95 to the borrowing. As collateral for the loan the bank took a second mortgage on the Verbaeres’ residence and also a purchase money security interest in the motor home. Plaintiffs obtained credit-disability and credit-life insurance from three companies, one of which was defendant. The purpose of the insurance was to cover the amount of plaintiffs’ indebtedness to the bank in the event of plaintiffs’ total disability or death. Defendant issued a certificate to the bank guaranteeing monthly payments of $125 for a maximum of 10 years in the event that death or disability rendered plaintiffs unable to make the loan payments.

In December 1978, Peter Verbaere suffered severe head injuries that left him totally and permanently disabled. The record suggests that the other two insurance companies paid disability credit benefits under their policies in lump sums, reducing the amount of the indebtedness. Life Investors elected instead to remit proceeds in the monthly payments of $125. Life Investors paid the bank $125 per month from the time of the disability until October 1982. What happened at that time triggered the lawsuit against the bank (Verbaere v. Community Bank (1986), 148 Ill. App. 3d 249, 498 N.E.2d 843, appeal denied (1987), 113 Ill. 2d 586, 505 N.E.2d 363) (Verbaere I) and the insurer (Verbaere v. Life Investors Insurance Co. (1987), 157 Ill. App. 3d 676, 510 N.E.2d 946) (Verbaere II).

In March 1982 plaintiffs contracted to sell their residence, and in order to clear title, they were required to obtain a release of the bank’s second mortgage, which the bank held as part of the security under the motor home purchase plan. To obtain the bank’s release of the second mortgage, plaintiffs agreed to substitute as collateral an amount of cash equal to the remaining balance on the motor home loan, $8,754.84. In accordance with this agreement, plaintiffs deposited the funds with the bank.

In October 1982, upon the sale of plaintiffs’ residence and attendant release of the second mortgage, the bank seized plaintiffs’ funds to satisfy the motor home indebtedness. In Verbaere I, this court explained why the bank’s justification for seizing the collateral was ill-founded and why the dismissal of the action for breach of contract against the bank would be reversed. (Verbaere I, 148 Ill. App. 3d at 254-55.) Thereafter, the bank and the plaintiffs settled the litigation between themselves.

At the time the bank converted plaintiffs’ deposited funds, the bank simultaneously notified Life Investors that the indebtedness was paid off. The insurance company immediately discontinued paying the monthly disability benefits under the policy, without further investigation.

Because Life Investors refused to continue paying the disability benefits, plaintiffs filed suit to collect the remaining proceeds. The parties presented cross-motions for summary judgment based on the policy language. Apparently ignoring the beneficiary provision in its own policy, Life Investors interposed a defense based on a cancellation provision, asserting that the bank’s discharge of the motor home loan terminated the insurance. This position was rejected by the trial court and by the appellate court, which held, as a matter of law, that plaintiffs were entitled to receive the full insurance benefits that had vested upon Peter Verbaere’s total disability. (Verbaere II, 157 Ill. App. 3d 676, 510 N.E.2d 946.) The appellate opinion explains in detail the grounds for the decision, citing case precedent.

Life Investors had declined to enter settlement negotiations with plaintiffs until after the trial court had ruled on the cross-motions for summary judgment. At that point the company indicated it would consider settlement, but only if plaintiffs waived the right to seek section 155 sanctions. After this court’s decision in Verbaere II, the parties settled the insurance claim but reserved the issue of attorney fees and penalties under section 155 of the Insurance Code. Thereafter, Judge Hoffman entered a finding of liability against the insurer and transferred the case to a different judge for an evidentiary determination of the amount of penalty and attorney fees to be awarded.

At the hearing on fees, plaintiffs presented the statement of their attorney, David L. Lee, who spent 207.13 hours on legal services to his clients. Also offered at the hearing were two other statements, one for a small amount submitted by a different lawyer and one for 214.85 hours of law student time. Plaintiffs also submitted the affidavit of Ruthanne K. DeWolfe, a supervising attorney with the Legal Assistance Foundation of Chicago. The affidavit stated that a reasonable rate of compensation for Professor Lee was $175 per hour and a reasonable rate for the law students was $40 per hour. Finally, plaintiffs submitted an order of an administrative law judge from the Illinois Human Rights Commission, in which the judge awarded Lee fees for his services at the rate of $175 per hour and his students at the rate of $40 per hour.

The insurance company did not present an expert to testify regarding reasonable hourly rates in the community but instead offered its own time statements showing that its lawyers had spent 244.6 hours on the case through August 1990. The insurer did not do a breakdown of individual hourly rates charged by its attorneys but claimed an “average” rate of $101.75 per hour.

The trial court questioned Professor Lee about the structure of the legal clinic at IIT Chicago-Kent, where Professor Lee was employed at the time. Faculty members who handle cases from the clinic are required to generate attorney fees equal to their salary, with some adjustments. To the extent a professor generates fees that fall below the salary, he or she receives a pay cut the next year. If, on the other hand, the fees generated exceed 20% over salary, the professor receives a bonus and pay raise.

Professor Lee testified that he had received an award of $175 per hour in the past and that he would quote that rate for a “contract action of some complexity.” He generally charged a flat fee plus a contingency and did not have a set hourly rate, although he did have a “professional courtesy rate” of $75 per hour that he charged other faculty members for wills and estates.

The trial judge ultimately awarded Professor Lee fees at the rate of $40 per hour for 180 hours of work. The judge disallowed compensation for the law student hours and the nine hours of a different attorney. The judge noted that the law clinic would not be out any money for the law student time, since the students received class credits instead of money. Further, he stated that the documentation of the student time was inadequate. With respect to Professor Lee’s services, the court stated that the work was of high quality and the result was good. Recognizing that considerable time had been spent, the court allowed 180 out of 207.13 hours claimed. The court then ruled, however, that it would not grant an award of fees that exceeded the amount of the recovery by the clients. The court expressed concern that a private firm would not have been able to ask a client to pay $48,000 for a $10,000 recovery, stating, “That’s just not good business sense ***.”

Opinion

I

We first review the liability issue, which the insurer raises in its cross-appeal. According to Life Investors, the trial court abused its discretion in assessing statutory sanctions for “vexatious and unreasonable” refusal to pay the disability insurance claim. (Ill. Rev. Stat. 1989, ch. 73, par. 767.) The insurer’s only justification for its refusal to continue paying the insurance benefits, however, rests on its facile interpretation of one provision in the policy, which states:

“If through prepayment, renewal, refinancing, or otherwise, the indebtedness in connection with which this insurance is written is discharged prior to its scheduled maturity date, the insurance hereunder will be cancelled and a refund granted to the Insured calculated in accordance with [the Rule of 78?s] ***

This provision refers to the cancellation of insurance coverage— not termination of proceeds — and the corresponding partial refund of the premium in the event that the original loan is discharged in advance of its maturity date. Since the coverage period of credit insurance is matched to the life of the loan, an early payment or other discharge of the original loan obviates the need for continued credit insurance. Accordingly, the unearned premium must be refunded the insured, whose credit obligation has ceased at that point and whose insurance on the obligation has been cancelled because there is nothing left to insure.

Unlike the cancellation provision, the language of the beneficiary provision is specifically directed to the situation in which a disability has occurred during the coverage period:

“All proceeds payable under this policy as the result of the disability of an Insured Obligor are payable to the Creditor to the extent of its interest and the balance, if any, shall be paid to the Obligor, if living, or to the estate of any Obligor.”

In its defense, the insurer argues in its brief that it should not be penalized for relying on a “legitimate” dispute over the meaning of the policy and that, in any event, the case law is “unsettled” with respect to the precise issue under examination. Neither point is supportable.

While we agree that penalties are not to be awarded under this section if a legitimate defense or denial is asserted under an express term of the policy (see, e.g., Scudella v. Illinois Farmers Insurance Co. (1988), 174 Ill. App. 3d 245, 253, 528 N.E.2d 218, appeal denied (1989), 124 Ill. 2d 562, 535 N.E.2d 921), we are not persuaded that Life Investors relied in good faith on what it terms a “clear policy provision regarding termination of benefits.” Nothing in the cancellation provision refers to termination of existing benefits and to read in such a caveat is to nullify the beneficiary provision in favor of a disingenuous construction of a provision directed to a different situation from that which occurred in this case.

Although the record reveals that the trial court, on summary judgment, gave Life Investors every opportunity to articulate a viable theory to support its complete disregard of the beneficiary provision of the policy, the insurer was unable to do so. The court also commented during the hearing that Life Investors’ position was “in the teeth” of precedent, citing Vogelsang v. Credit Life Insurance Co. (1970), 119 Ill. App. 2d 67, 255 N.E.2d 479.

In Vogelsang, the insurance company had defended against a claim for credit disability proceeds in part because the insured had, in his pleadings, ostensibly agreed that the underlying debt had been paid before the claim was made to the company. In fact, the disabled insured had given notice before the debt was paid, but had not filed suit until after the debt was paid. The insured sought leave to amend in order to clarify the facts. On that issue, the court noted that even the insurer conceded that if the claim had been made before the loan was paid, and no other defense existed, the judgment entered on the pleadings in favor of the insurer would have to be summarily reversed. The insurer thus admitted that payment of the underlying debt did not bar the insured’s cause of action for insurance benefits. The court agreed, noting, “[I]t is the onset or commencement of the disability during the period that the policy is in effect which is the condition precedent upon which liability of the company depends.” Vogelsang, 119 Ill. App. 2d at 71, 255 N.E.2d at 482.

In Verbaere II, we found Vogelsang dispositive of the law: The occurrence of the disability during the coverage period vests the insured’s right to benefits. By extension, we found implicit in Vo gelsang “the determination that payment of the debt after disability does not affect plaintiff’s right to benefits.” (Verbaere II, 157 Ill. App. 3d at 679, 510 N.E.2d at 948.) We further noted that the wording of the beneficiary provision itself reinforces this holding because it expressly directs payment of any balance of proceeds, after the creditor’s interest has been satisfied, to the insured obligor or his estate. By operation of this language, the insured’s right to the insurance proceeds vests upon his disability and cannot then be “cancelled” at the desire of the insurance company, simply because the underlying debt is paid off by funds other than the insurance benefits.

It is noteworthy in the context of section 155 sanctions that Life Investors has never offered even a colorable explanation as to why the beneficiary provision does not govern the facts before the court. The provision is straightforward, as are the undisputed facts of record. Moreover, the beneficiary provision does not conflict in any way with the cancellation provision, which only becomes effective if the insured loan is prematurely discharged and no disability has occurred, thereby leaving the insured with only the duty to refund any unearned premium.

After Peter Verbaere’s disability, Life Investors elected to pay out the insurance benefits over time instead of in a lump sum. The record contains a number of letters and internal memoranda showing that Life Investors consistently declined to liquidate the insurance claim in accordance with the bank’s payoff figures, choosing instead to pay a higher total amount over the life of the policy. In choosing a payout through installments, however, Life Investors was not free to treat the benefits as contingent upon anything other than the continuing disability of Peter Verbaere for the full 10 years of coverage. When the bank unilaterally discharged plaintiffs’ loan in 1982, Life Investors took the position that the bank’s action had discharged its own duty to pay the remainder of the insurance benefits. In fact, in response to a letter of inquiry from Angela Verbaere in early 1984, a claims adjustor represented that the company had stopped paying benefits because the bank had can-celled the policy. Even assuming the bank had the authority to cancel an insurance policy issued by Life Investors, such a fortuity would hardly absolve the insurance company from its contractual obligation to fully indemnify the insured obligation. Under the facts, it should have paid plaintiffs directly, pursuant to the beneficiary clause.

Instead, Life Investors acted as if it were a stranger to the policy with no questions asked once the bank discharged the underlying loan. Then, in litigation, the insurance company insisted that the cancellation provision in its policy should be given an effect that would dissolve plaintiffs’ right to their remaining benefits. Even before the decision in Verbaere II affirmed the trial court’s grant of summary judgment in favor of plaintiffs and against Life Investors, this court had addressed the insurance company’s obligations in the appeal involving the bank, Verbaere I. This court was obliged to discuss the respective rights and duties of the bank and insurance company because the bank raised as a defense in that appeal the notion that if it continued to accept the insurance company’s disability credit payments after the loan’s discharge, the bank would be defrauding the insurance company. This court exposed the fallacy in the bank’s position, explaining that the bank’s dealings with the collateral for the motor home loan were separate and distinct from the insurance company’s duty to pay the disability insurance. We said, “[T]he insurance company’s obligation to make payments pursuant to the credit-life and credit-disability policy remained intact. Put differently, the exchange of collateral affected the security held by the bank for the motor-home loan, it did not affect the outstanding balance still owing for the motor home nor did it affect the insurance company’s obligations under the credit-life and credit-disability policy.” Verbaere I, 148 Ill. App. 3d at 255, 498 N.E.2d at 847.

Life Investors took advantage of the bank’s mishandling of plaintiffs’ collateral to declare its own obligations at an end. In the meantime the bank refused to admit any wrongdoing in using plaintiffs’ funds to pay off the loan that was never in default. Plaintiffs, caught in the switches, were left holding the debt. Their efforts to obtain reimbursement from the institutions responsible for the $8,700 hole in their pocket failed and they were forced to file suit.

In Kohlmeier v. Shelter Insurance Co. (1988), 170 Ill. App. 3d 643, 659, 525 N.E.2d 94, 105, appeal denied (1988), 122 Ill. 2d 576, 530 N.E.2d 247, the court noted that in deciding whether to award attorney fees pursuant to section 155, “a circuit court should consider the insurer’s attitude, whether an insured was forced to file suit to recover, and if an insured was deprived of the use of his property.” The Kohlmeier court also quoted from Mohr v. Dix Mutual County Fire Insurance Co. (1986), 143 Ill. App. 3d 989, 999, 493 N.E.2d 638, 645, “ ‘However, if there is a bona fide dispute about coverage, delay in settling a claim may not violate the statute.’ ” 170 Ill. App. 3d at 659, 525 N.E.2d at 105.

We do not find this case remotely similar to ones in which an insurance company presents a bona fide factual dispute over a coverage issue or otherwise can assert a true policy defense. In Kohlmeier, for example, the reviewing court reversed section 155 sanctions assessed against an insurer who had declined to pay benefits under a family health insurance policy. There, however, the insurer’s reason for denying the claim was that the insured allegedly had made a material misrepresentation in applying for the insurance, which would void the policy if true.

The essence of the insurance claim was to enforce the company’s agreement to indemnify Peter Verbaere for the motor home loan. As the court noted in Verbaere II, “Both sides agree that the purpose of such credit disability insurance is to indemnify a disabled debtor or obligor for payments becoming due a creditor.” (Emphasis added.) (Verbaere II, 157 Ill. App. 3d at 678, 510 N.E.2d at 948.) The plaintiffs in this case have now spent close to a decade of litigation to enforce truly basic contract rights. The insurance company paid its lawyers thousands of dollars to argue an interpretation of the policy that neither makes sense within the four corners of the insurance policy nor is consistent with the law.

We do not understand why Life Investors — which underwrote the risk of disability, fixed the premium, and provided for a partial refund of the premium in the event of early discharge of the loan— appears to have difficulty understanding the nature of credit-disability insurance and its own clearly worded beneficiary provision. Nor do we find persuasive Life Investors’ attempt to minimize the precedential value of Vogelsang as an excuse for pursuing an obtuse legal theory based on the cancellation clause in its policy. Vogelsang’s reasoning strongly discredits the position Life Investors takes here, as do the comments in Verbaere I. Moreover, case law will not always exist to aid in issues of policy construction, and an insurance company should not prop up an unreasonable interpretation with the fortuity that no court has yet squarely ruled on the precise position it takes. Lack of case precedent may be attributable to the possibility that other insurance companies faced with the same situation as exists in the pending case would not have attempted to defend on the grounds asserted by Life Investors. As the court noted in Vogelsang, the insurer in that case agreed that the insured’s payment of the underlying debt did not bar the cause of action for credit disability insurance.

The policy provisions excerpted in this opinion are not highly technical, obscure, or conflicting. They are not ambiguous. There are no disputed factual issues involved. Life Investors has persisted in a plainly unreasonable interpretation of its policy, and we conclude that the trial court did not abuse its discretion in awarding sanctions.

II

The remaining issue relates to the amount of attorney fees that were awarded, which is the subject of plaintiffs’ appeal.

We agree with Life Investors that a trial court’s calculation of attorney fees is entitled to considerable deference. We also find that the court in this case did not abuse its discretion in reducing the number of hours for which compensation should be granted. With respect to the claimed hours for student time, the trial court found that the records pertaining to the student work were inadequate, and we accept that as a valid basis for denying fees based on student time. We do not, however, necessarily agree with the implication that fees need not ever be awarded for law student time simply because students receive course credit instead of money. Nonetheless, the burden is on the party claiming fees to provide sufficient evidence to support the claimed amount.

The trial court found that 180 hours out of the 207 claimed by Professor Lee were reasonable and justified. (Life Investors, in comparison, admitted to expending 244.6 hours.) The court declined to apply an hourly rate commensurate with a market approach, however, finding instead that the amount of the insurance claim was too small to justify a large award of fees. Consequently, the court refused to apply the requested hourly rate of $175, despite the fact that Professor Lee had presented evidence in support of that rate.

Life Investors contends that the trial court, in determining the reasonableness of a requested fee, is not bound by the opinion of the petitioning attorney or his experts but may instead rely on its own knowledge and experience. (See In re Estate of Healy (1985), 137 Ill. App. 3d 406, 411, 484 N.E.2d 890.) While we agree with this general proposition, we do not believe that competent, uncontradicted expert opinion and other evidence can be disregarded in favor of the belief that a fee award should never exceed the amount of the underlying claim. (See Keller v. State Farm Insurance Co. (1989), 180 Ill. App. 3d 539, 536 N.E.2d 194, appeal dismissed (1989), 127 Ill. 2d 617, 541 N.E.2d 1106 (awarding fees of $13,819.50 on an insurance claim recovery of $7,544.67).) Keeping fee awards in line with the amount of a recovery may be a valid ideal, particularly in purely private disputes. In cases involving section 155 of the Insurance Code, however, courts have recognized that insurance companies, with their superior financial resources, may drag out the claims process to discourage claimants. Therefore, if the insurer vexatiously delays or rejects legitimate claims, it must bear the expense resulting from the insured’s efforts to prosecute the claim. See, e.g., Hall v. Svea Mutual Insurance Co. (1986), 143 Ill. App. 3d 809, 811-12, 493 N.E.2d 1102 (increasing fee award from $8,000 to more than $15,000); Keller v. State Farm Insurance Co. (1989), 180 Ill. App. 3d 539, 557, 536 N.E.2d 194 (increasing fee award from contingent-fee computation of $2,514.89 to amount of fee reasonably incurred, $13,819.50); Calcagno v. Personalcare Health Management, Inc. (1991), 207 Ill. App. 3d 493, 505, 565 N.E.2d 1330, appeal denied (1991), 137 Ill. 2d 663, 571 N.E.2d 146 (allowing recovery of fees under section 155 even when insurance claim has been paid prior to litigation); see also City of Riverside v. Rivera (1986), 477 U.S. 561, 91 L. Ed. 2d 466, 106 S. Ct. 2686 (approving a quarter million dollar fee award on a recovery of $33,350 in a Civil Rights Act case).

In the pending case no one has challenged the validity of the finding that 180 hours is a reasonable allowance for the time Professor Lee put into the case. The sole question, then, is whether the hourly rate of $40 can be justified on this record and under the law.

The evidence of record reveals that Professor Lee was awarded $175 per hour in another matter before a Federal magistrate and that in the opinion of Ruthanne DeWolfe, supervising attorney at the Legal Assistance Foundation of Chicago, an hourly rate of $175 for the work done is reasonable. Life Investors did not directly rebut this or present evidence of rates charged by other lawyers in the community for similar work. Instead, the insurance company noted that it had paid its own lawyers an amount that averaged out to approximately $101 per hour. As Professor Lee points out, however, this hourly rate was determined by dividing the total fees paid by the number of hours incurred, without distinguishing what type of work was done by what level of professional-partner, associate, or paralegal. Certainly, a senior partner and a new associate would not be billed out at the same hourly rate. We reject the “blended rate” approach as having little relevance to what a lawyer with Professor Lee’s experience and skills would charge for comparable legal services. We conclude that the trial court’s finding of $40 per hour as a reasonable rate is against the manifest weight of the evidence.

In Kaiser v. MEPC American Properties, Inc. (1987), 164 Ill. App. 3d 978, 518 N.E.2d 424, the court listed various considerations a trial court may use in assessing reasonable attorney fees: the skill and standing of the attorney; the nature of the case and novelty or difficulty of the issues; the degree of responsibility required; the usual and customary charges for comparable services; the result or benefit to the client; and whether there is a reasonable connection between the fees and the amount of money involved in the litigation.

Life Investors does not assert that $40 is a reasonable “market” rate, but instead refers to “the numerous factors weighing against a large fee award.” It is not clear to us what specific factors Life Investors relies on, but assuming they are one or more of the ones cited above in Kaiser, we find that none of them justify such a low rate as was assessed in this case. As noted, the trial court found favorably as to Lee’s skill and standing and the benefit to the clients. It is undisputed that Lee was responsible for plaintiffs’ representation during this protracted litigation. We have found a reasonable explanation for the amount of time incurred in the case, and although the award may exceed the underlying insurance claim, the amount of time put in is attributable to Life Investors’ recalcitrant refusal to pay, not by unnecessary or wasteful acts on the part of plaintiffs. While the legal issues involved were not particularly complex, the insurance company spent at least $25,000 pursuing a policy defense that had no basis in fact, law, or logic. Regarding the reasonable and customary charges for comparable services, we find that Professor Lee’s unrebutted evidence established $175 per hour. Accordingly, we find that the fee award in this case should be adjusted upward to reflect that rate.

Finally, to the extent that the trial court may have minimized the hourly rate because a legal clinic rather than private law firm was involved, we find the distinction unsupportable. Section 155 sanctions are designed to discourage misconduct on the part of insurers and it might dilute that purpose if an insurance company is assessed fees under a reduced formula because of the fortuity that its insureds were represented by pro bono or public interest attorneys instead of private practitioners. See, e.g., Oldham v. Ehrlich (8th Cir. 1980), 617 F.2d 163, 169 (Defendant sued by plaintiff having legal aid counsel should not benefit from the fact plaintiff could not afford private counsel and whether focus is to enable suit by those unable to afford it or to deter misconduct of wrongdoer, legal aid organization merits fee fully as much as private attorney); Blanchard v. Bergeron (1989), 489 U.S. 87, 93-95, 103 L. Ed. 2d 67, 75-77, 109 S. Ct. 939, 944-45 (Under “lodestar” evaluation of reasonable attorney fees to be awarded prevailing plaintiffs, number of hours reasonably expended should be multiplied by reasonable hourly rate, and then adjustments may be made depending on circumstances).

For the foregoing reasons, we affirm the trial court’s ruling as to Life Investors’ liability for attorney fees. We also affirm the trial court’s finding that 180 hours of compensable time is reasonable. We modify the sum awarded, however, by multiplying 180 hours by the hourly rate of $175, for a total of $31,500. Finally, we remand this case for a determination of fees reasonably incurred in this appeal. Keller v. State Farm Insurance Co. (1987), 180 Ill. App. 3d 539, 557-58, 536 N.E.2d 194.

Affirmed as modified and remanded.

JIGANTI, P.J., and McMORROW, J., concur.


author: JUSTICE GORDON

text:
    VIVIAN KADALA, Plaintiff-Appellant, v. CUNARD LINES, LTD., Defendant-Appellee.
    First District (5th Division)
    No. 1—89—1565
    Opinion filed February 28, 1992.

      Lawrence H. Hyman, of Lawrence H. Hyman & Associates, of Chicago, for appellant.
    Michael A. Snyder & Associates, of Chicago (Richard A. Forster and Michael A. Snyder, of counsel), for appellee.
   JUSTICE GORDON

delivered the opinion of the court:

Plaintiff Vivian Kadala appeals from an order of the trial court granting defendant Cunard Lines, Ltd.’s motion to quash service and to dismiss plaintiff’s complaint for lack of personal jurisdiction. For the reasons set forth below, we affirm.

On December 26, 1985, plaintiff, an Illinois resident, was a passenger on defendant’s cruise ship, the M/V Queen Elizabeth II, which embarked from New York to the Caribbean. While on board defendant’s ship, plaintiff sustained personal injuries using a whirlpool bath. Plaintiff filed a complaint on December 23, 1986, alleging that defendant was careless and negligent in improperly instructing, controlling, operating and supervising whirlpool baths on the ship, and that as a result she sustained second degree burns on her legs after the use of the whirlpool.

In her complaint, plaintiff alleged that during the year 1985 defendant for promotional purposes “published and placed into the stream of commerce” various informational brochures about the Queen Elizabeth II. She further alleged that she was provided with one of these brochures through the Americana Travel Agency in Northfield, Illinois. The complaint went on to allege that plaintiff entered into a contractual agreement with defendant for a Caribbean cruise, and defendant issued a passenger contract to the plaintiff for the cruise.

Defendant is a foreign corporation, organized under the laws of the United Kingdom, with its principal place of business and corporate offices in Southhampton, England. Defendant maintains an office in New York City. Summons was served on defendant’s registered agent in New York, New York, on January 6, 1987.

Defendant filed a special and limited appearance contesting jurisdiction, and moved to quash service of process and dismiss the complaint for lack of personal jurisdiction. In support of its motion to quash and dismiss, defendant offered the affidavit of Frank V. Kelly, defendant’s administrator of legal affairs, as evidence that it did not transact business in Illinois.

In his affidavit, Kelly stated that defendant is not registered to do business in Illinois, nor does it have a registered agent in Illinois. Defendant does not own or occupy any real or personal property in Illinois. Its only telephone numbers published in Illinois are its New York office number and an 800 toll-free number. Cunard ships no goods into Illinois nor does it sell any goods or services within the State. None of defendant’s vessels ever sail into Illinois waters.

Kelly’s affidavit also stated that defendant has no agents, employees, officers or directors who reside in Illinois. Kelly further stated that Illinois travel agents who receive fares and book passage on Cunard vessels are acting as agents for the passenger and that Cunard has not authorized any travel agent to hold itself out as an agent of Cunard. All contracts for cruises are “made” in New York, and all tickets are issued from New York. Plaintiff’s ticket was issued in New York.

In response to defendant’s motion to quash and dismiss, plaintiff submitted the deposition of Mark T. Carlesimo, assistant vice-president of legal affairs for Cunard, which plaintiff contended showed that defendant spent hundreds of thousands of dollars per year in advertising in the State and derived millions of dollars of revenue from Illinois residents as a result.

In his deposition, Carlesimo stated that he knew that Cunard had one employee in Illinois, a sales representative, who may also have been employed 18 months earlier when Kelly prepared his affidavit denying the presence of any Cunard employees in Illinois. Carlesimo explained that the Cunard sales representatives generally cover a multistate territory. Their duties are to service travel agents in their area by answering questions or distributing materials to them, including brochures and special offers on particular cruises. They do not, however, have the authority to write passenger contract tickets and have no contact with potential passengers.

The sales representatives do not advertise in the yellow or white pages of the telephone directory as representatives of Cunard, nor is any travel agency authorized to advertise Cunard cruises in their telephone listings. When shown a copy of the Chicago yellow pages for 1986/87 listing Cunard cruises with two travel agencies, Carlesimo said that he had no knowledge of the two agencies, and assumed the listings were an unauthorized use of Cunard’s marks.

According to Carlesimo, 95% to 99% of defendant’s business is done through travel agents. Carlesimo outlined the procedure which a customer dealing with a travel agent would be required to follow to purchase a ticket for one of defendant’s cruises. According to Carlesimo, the prospective customer would never enter into direct dealings with Cunard. All contact was with the travel agent. If a customer wished to travel on a Cunard cruise, he would advise his travel agent, who in turn would call defendant’s New York office to reserve the cruise and would be told the price of the cruise. The passenger would then pay the travel agent, who after deducting its commission would remit the balance to Cunard. Upon Cunard’s receipt of the balance due, Cunard would issue a ticket out of its New York office and send it to the agent.

Regarding revenue, Carlesimo stated that for the fiscal year 1986/87, Cunard derived $167 million in “total sea revenue,” 95% attributable to passenger fares from the United States, of which $5.8 million, or almost 3.5% of defendant’s U.S. revenue, came from Illinois. (Carlesimo did not have readily available figures for 1985, the year in question, due to a new computer system acquired by defendant in 1986.) In 1987/88, national revenues were $182 million, while Illinois revenues were $6.4 million (3.5%).

Carlesimo also reviewed advertising expenditures by Cunard. For the 1987/88 fiscal year, total print advertising nationally was $5.5 million, with $562,000 being spent in Illinois, primarily in the Chicago area. According to invoices from its advertising agency, in calendar year 1985, Cunard placed 82 advertisements in the Chicago Tribune, at a cost of slightly over $500,000. In 1986, Cunard spent $233,000 for 48 advertisements in the Chicago Tribune, and in 1987, $470,000 for 51 advertisements.

As a result of these expenditures and the revenue derived from Illinois, plaintiff contended that defendant had performed sufficient acts to constitute the “transaction of business” in the State, so as to make defendant subject to jurisdiction pursuant to the Illinois long-arm statute. Ill. Rev. Stat. 1987, ch. 110, par. 2—209.

The trial court rejected plaintiff’s arguments and granted defendant’s motion to quash service and dismiss the complaint. Plaintiff now appeals.

Opinion

It is the plaintiff’s contention that defendant’s “extensive and voluntary commercial activities within the State of Illinois” are sufficient to constitute “transaction of business” under the Illinois long-arm statute. (Ill. Rev. Stat. 1987, ch. 110, par. 2—209.) That statute provides, in relevant part:

“(a) Any person, whether or not a citizen or resident of this State, who in person or through an agent does any of the acts hereinafter enumerated, thereby submits such person, and, if an individual, his or her personal representative, to the jurisdiction of the courts of this State as to any cause of action arising from the doing of any such acts:
(1) The transaction of any business within this State;
* * *
(d) Only causes of action arising from acts enumerated herein may be asserted against a defendant in action in which jurisdiction over him or her is based upon [subsection (a)].” Ill. Rev. Stat. 1987, ch. 110, par. 2—209.

Defendant contends, as it did in the trial court, that Cunard’s jurisdictional status was previously decided adversely to the plaintiff in the case of Wiedemann v. Cunard Line Ltd. (1978), 63 Ill. App. 3d 1023, 380 N.E.2d 932, and should not be altered on present reconsideration. We agree. There, on facts which defendant argues are virtually identical to those here, we found that defendant’s activities in this State did not amount to the “transaction of business” in the State.

In Wiedemann, the plaintiff sought damages for injuries suffered while on a beach in the West Indies, which he alleged was controlled by the defendant. There, as here, defendant filed a special and limited appearance contesting in personam jurisdiction. In support of his claim that the defendant had transacted business in Illinois, the plaintiff pointed to the following facts: (1) defendant employed two Illinois residents whose job it was to promote, in Illinois, travel on defendant’s ships; (2) defendant paid for telephones for those two employees; (3) defendant permitted an Illinois travel agency to list itself in the telephone directory as agent for defendant; (4) plaintiff received his “passage contract ticket” in Illinois; (5) defendant advertised in Illinois newspapers and national publications which were circulated to Illinois residents; and (6) defendant mailed questionnaires and newsletters to Illinois promoting fly/cruise/resort tour packages. Wiedemann, 63 Ill. App. 3d at 1030.

In Wiedemann, the defendant by affidavit admitted to having two employees in Illinois. The primary duty of those employees was to promote travel on defendant’s ships by providing information and brochures to independent travel bureaus. As in this case, they did not sell tickets to or have any contact with travelling passengers. All tickets were issued from defendant’s New York office. No employee of the defendant ever made contact with the plaintiff to solicit the sale of the cruise plaintiff purchased.

The court found that defendant had not “transacted business” in Illinois within the meaning of the long-arm statute. “Here, the activities of Cunard in advertising and in having Illinois employees promote travel on Cunard through contacts with Illinois travel agents does not amount to the ‘transaction of business,’ because the Cunard employees were not authorized to, and did not, contract with anyone in Illinois.” Wiedemann v. Cunard Line Ltd., 63 Ill. App. 3d at 1032.

The facts in this case upon which plaintiff attempts to assert jurisdiction are identical to those in Wiedemann, except that defendant now has only one employee in Illinois, compared to two employees in Wiedemann. Here, as in Wiedemann, defendant’s Illinois employee did not have any contact with the plaintiff to solicit the sale of the cruise to plaintiff and plaintiff’s ticket was issued by defendant in New York.

Plaintiff, however, urges that Wiedemann is distinguishable from the instant case. The plaintiff in Wiedemann was injured at a hotel and beach facility which was owned and operated by La Toe Holdings, Ltd. (hereinafter La Toe), a corporate sibling owned by the same parent company as defendant Cunard. The plaintiff contends Wiedemann merely reflects an unwillingness to hold a defendant liable for the tort actions of another subsidiary of its parent.

In finding that Cunard did not transact business in Illinois under section 2 — 209(a)(1), the Wiedemann court did not include in its consideration the nature of the relationship between Cunard and La Toe. In determining Cunard’s jurisdictional status under section 2— 209(a)(1), the Wiedemann court correctly focused upon the business contacts with the State, stating: “Here, the activities of Cunard in advertising and in having Illinois employees promote travel on Cunard through contacts with Illinois travel agents does not amount to the ‘transaction of business,’ because the Cunard employees were not authorized to, and did not contract with anyone in Illinois.” (63 Ill. App. 3d at 1032.) The question of the interrelationship between La Toe and Cunard was invoked in regard to whether Cunard should be susceptible to jurisdiction under section 2— 209(a)(2) for the commission of a tortious act in Illinois. This was asserted as an independent jurisdictional ground in Wiedemann predicated upon plaintiff’s allegation that Cunard was substantively liable for negligent misrepresentations contained in brochures prepared by the hotel which were disseminated in Illinois. Thus it was relevant to determine whether the hotel’s negligent misrepresentations in its brochures could be attributed to Cunard so as to constitute an independent jurisdictional act by Cunard in Illinois.

We therefore fully concur with Wiedemann’s analysis of Cunard’s jurisdictional status under section 2 — 209(a)(1) (transaction of business) with respect to causes of action brought by its passengers in Illinois. In determining whether a nonresident’s contacts with this State amount to the “transaction of business within this State” as required by section 2 — 209(a)(1), several factors must be considered:

“who initiated the transaction (Chicago Film Enterprises v. Jablanow (1977), 55 Ill. App. 3d 739, 371 N.E.2d 161); where the contract was entered into (Servo Instruments, Inc. v. Fenway Machine Co. (1980), 92 Ill. App. 3d 509, 415 N.E.2d 34); and where the performance of the contract was to take place (Woodfield Ford, Inc. v. Atkins Ford Corp. (1979), 77 Ill. App. 3d 343, 395 N.E.2d 1131).” (Gordon v. Tow (1986), 148 Ill. App. 3d 275, 280, 498 N.E.2d 718.)

(See also General Electric Railcar Services Corp. v. Wilmington Trust Co. (1990), 208 Ill. App. 3d 459, 567 N.E.2d 400.) Although no single one of these factors is controlling, each is significant. (Arthur Young & Co. v. Bremer (1990), 197 Ill. App. 3d 30, 554 N.E.2d 671.) Only the acts of the defendant can be considered in making this determination. Unarco Industries, Inc. v. Frederick Manufacturing Co. (1982), 109 Ill. App. 3d 189, 440 N.E.2d 360; see also Braasch v. Vail Associates Inc. (N.D. Ill. 1973), 370 F. Supp. 809, 814 (“it is the acts of defendant which are relevant”).

None of these factors are present in the instant case. Consequently, no basis has been established to invest Illinois with jurisdiction under the transaction of business prong of the long-arm statute. (Ill. Rev. Stat. 1987, ch. 110, par. 2—209(a)(1).) Here, it was the plaintiff who initiated the transaction with defendant. She, through her travel agent, contacted defendant. The contract was entered into in New York when defendant issued the passenger ticket to plaintiff’s travel agent. Performance was to take place out of State and on the high seas. See Gordon v. Tow (1986), 148 Ill. App. 3d 275, 498 N.E.2d 718 (defendant’s activities did not amount to “transaction of any business” where plaintiff initiated the transaction outside Illinois, the agreement was entered into outside Illinois and the contract was to be performed outside Illinois).

Plaintiff also argues that defendant’s extensive advertising in Illinois newspapers, $500,000 in 1985, is sufficient to constitute the transaction of business in this State. In addition to the advertising, plaintiff points to the substantial revenues defendant derives from Illinois residents to support her position that defendant has transacted business in Illinois. Initially, we note that her complaint does not mention newspaper advertising or allege that she ever saw any newspaper advertising prior to taking defendant’s cruise. Nor does the complaint allege that Illinois was a source of substantial revenue to defendant. (See Bobka v. Cook County Hospital (1983), 117 Ill. App. 3d 359, 360, 453 N.E.2d 828 (“[w]here a plaintiff seeks to hold a non-resident defendant liable, the complaint must allege facts upon which jurisdiction under the long-arm statute is based”).) In any event, advertising and revenue alone would not be a sufficient basis for the exercise of long-arm jurisdiction. This argument “destroy[s] the distinction between the transaction of business in Illinois and the transaction of business with an Illinois [resident]. (Emphasis added.)” (Gordon v. Tow, 148 Ill. App. 3d at 283, quoting Wessel Co. v. Yoffee & Beitman Management Corp. (N.D. Ill. 1978), 457 F. Supp. 939, 941.) Only the former is a proper basis for jurisdiction.

“[I]f the mere payment of money, shipment of goods into, or advertisement in Illinois were sufficient to confer long arm jurisdiction it would follow that the very existence of a business relationship with an Illinois resident would automatically sustain Illinois jurisdiction. It is clear that no federal or state court would confer such a broad grant of personal jurisdiction. [Citations.] It is offensive to the concept of due process and reasonableness to conclude that an Illinois resident can compel a foreign corporation, which has virtually no contact with Illinois, to stand trial in Illinois as a result of a personal injury occurring in another state.” Braasch v. Vail Associates Inc., 370 F. Supp. at 814.

The case of Wimmer v. Koenigseder (1984), 128 Ill. App. 3d 157, 470 N.E.2d 326, rev’d on other grounds (1985), 108 Ill. 2d 435, 484 N.E.2d 1088, cited by plaintiff, appears to lend some support to her position that regular advertising and extensive revenue may amount to the transaction of business. In that case, Wisconsin tavern owners who regularly advertised in Illinois and derived the vast majority of their revenue from Illinois residents were found to have transacted business in the State so as to be amenable to long-arm jurisdiction in a wrongful death and dramshop action. Plaintiff’s 17-year-old decedent was killed in an automobile accident in Illinois while returning from defendants’ tavern.

Initially, the court noted that regularly advertising in the State alone would be an insufficient basis for jurisdiction. However, when coupled with other more substantial contacts, the court concluded that defendants had “transacted business” in Illinois. In Wimmer, unlike the instant case, the majority of defendants’ business consisted of sales to Illinois residents. One check of defendants’ parking lot revealed that 90% of the cars bore Illinois license plates, and thus inferentially as many as 90% of its customers were from Illinois as opposed to the fractional percentage of customers of Cunard from Illinois (3.5% of Cunard revenue from Illinois). Moreover, in Wimmer, defendants directed their predominant marketing effort to attract Illinois residents who were unable to drink in Illinois due to its higher legal drinking age. One of their ads stated “ROUTE 83 JUST NORTH OF THE ILLINOIS STATE LINE” and “YOU NEED ONLY BE 18 TO BLAST OFF AT ROCK-IT NORTH.” In addition, defendants were fully aware that the Illinois teenagers to whom it sold alcohol would return by car to Illinois after consuming defendant’s alcoholic beverages. One of the defendants had even come into Illinois to discuss the problem of increased drunken driving arrests of underage Illinois residents returning from defendants’ establishments. In addition, in Wimmer, defendants made available to Illinois patrons maps which directed them to back roads of Illinois which were not heavily patrolled by the police. Defendants also used an Illinois telephone number in their advertising. Thus the commercial contacts in this case are not comparable to those in Wimmer, either in degree, quality or intensity. See Hanson v. Denckla (1958), 357 U.S. 235, 253, 2 L. Ed. 2d 1283, 1298, 78 S. Ct. 1228, 1240 (whether defendant’s contacts with State are sufficient “will vary with the quality and nature of defendant’s activity”).

Moreover, in Wimmer, Illinois was the place where the accident occurred and the injury was sustained. Thus jurisdiction could be predicated on the basis that Illinois was the place where the tort was committed, pursuant to section 2 — -209(a)(2). The court found it reasonable for the defendants to foresee that serving alcoholic beverages to Illinois residents might lead to automobile accidents in Illinois, and therefore, it was reasonable to subject the defendants to suit in Illinois.

In its analysis, the Wimmer court relied on Gray v. American Radiator & Standard Sanitary Corp. (1961), 22 Ill. 2d 432, 176 N.E.2d 761, where our supreme court found a foreign manufacturer to be subject to long-arm jurisdiction in a tort action for injuries suffered in Illinois as a result of defendant’s defective product even though the product was manufactured and marketed in foreign jurisdictions, since it was foreseeable that it would arrive in Illinois and inflict its injuries in Illinois if defectively made. The Wimmer court reasoned that there too under the facts presented it was foreseeable to defendants that as a result of their conduct the injury, the last act necessary to complete defendant’s tort, would occur in Illinois. In the instant case, the injury to plaintiff did not occur in Illinois. Nor can we say it would be reasonable for Cunard to foresee being sued in Illinois for acts of negligence occurring on its ships at sea.

Other cases cited by plaintiff are also distinguishable. In Morton v. Environmental Land Systems, Ltd. (1977), 55 Ill. App. 3d 369, 370 N.E.2d 1106, the defendant personally met with one of the plaintiffs in Illinois to solicit the sale of partnership units. Defendant also called plaintiff in Illinois and sent literature directly to plaintiff’s Illinois office. In Clements v. Barney’s Sporting Goods Store (1980), 84 Ill. App. 3d 600, 406 N.E.2d 43, defendant directly solicited business in Illinois by displaying its boats and distributing literature at the Chicago Boat Show, as well as by magazine advertisements to Illinois subscribers. It was at the Chicago Boat Show that plaintiff saw defendant’s boat. Defendant also sold his boats to Illinois retailers and Illinois was the ultimate destination of defendant’s product. In both Morton and Clements, the defendants’ contacts with Illinois were quantitatively and qualitatively greater than those of defendant here.

Furthermore, both cases purported to extend the limits of jurisdiction under our long-arm statute to the extent permitted by the due process clause, a position from which our courts have since retreated. In Green v. Advance Ross Electronics Corp. (1981), 86 Ill. 2d 431, 427 N.E.2d 1023, our supreme court clarified the position it had taken earlier in Nelson v. Miller (1957), 11 Ill. 2d 378, 143 N.E.2d 673, relied on in Morton and Clements. “We do not, however, regard this observation [that the purpose of our long-arm statute is to assert jurisdiction to the extent permitted by the due process clause] as the equivalent of declaring that the construction of section 17(l)(b) [the predecessor of section 2 — 209] depends entirely upon decisions determining in what circumstances due process requirements would permit long-arm jurisdiction.” (Green v. Advance Ross Electronics Corp., 86 Ill. 2d at 436.) “[T]he boundaries or limits under our statute are not to be equated with the ‘minimum contacts’ test under the due process clause.” Cook Associates, Inc. v. Lexington United Corp. (1981), 87 Ill. 2d 190, 197, 429 N.E.2d 847.

Assertion of personal jurisdiction under our long-arm statute involves a two-step analysis. First, the statutory requirements of section 2 — 209 must be satisfied. And only if those requirements are met, the analysis then proceeds to the second step, the satisfaction of the constitutional requirements of due process. (R.W. Sawant & Co. v. Allied Programs Corp. (1986), 111 Ill. 2d 304, 489 N.E.2d 1360; Cook Associates, Inc. v. Lexington United Corp, 87 Ill. 2d 190, 429 N.E.2d 847; Green v. Advance Ross Electronics Corp., 86 Ill. 2d 431, 427 N.E.2d 1023; Gordon v. Tow, 148 Ill. App. 3d 275, 498 N.E.2d 718.) As a result, it may occur that the statutory requirements have not been met, even though due process requirements have been satisfied. (General Electric Railcar Services Corp. v. Wilmington Trust Co. (1990), 208 Ill. App. 3d 459, 567 N.E.2d 400.) Consequently, to the extent that Morton and Clements considered only whether due process minimum contact standards had been met, they have little bearing on our statutory analysis here.

Plaintiff also directs our attention to two cases from other jurisdictions which plaintiff urges are part of a “national trend” to follow the “Illinois rule” and find jurisdiction in cases similar to the one before us. (Shute v. Carnival Cruise Lines (9th Cir. 1988), 863 F.2d 1437, opinion withdrawn & question certified (9th Cir. 1989), 872 F.2d 930, certified question answered (1989), 113 Wash. 2d 763, 783 P.2d 78, opinion replaced (9th Cir. 1990), 897 F.2d 377, rev’d on other grounds (1991), 499 U.S. 585, 113 L. Ed. 2d 622, 111 S. Ct. 1522; Hollingsworth v. Cunard Line Limited (1979), 152 Ga. App. 509, 263 S.E.2d 190.) However, those cases interpreted the “Illinois rule” to be that set forth in Nelson v. Miller. As noted above, this is no longer the rule, and as with Morton and Clements, these cases are inapplicable to the extent they considered only minimum contact standards.

In her memorandum to the trial court and in her brief before this court, plaintiff predicates her jurisdictional argument on the long-arm statute, a predicate which, as discussed above, we reject. However, the substance of her arguments relates to the alternate “doing business” basis of jurisdiction as well as the statutory-standard. As a result, we shall briefly consider that basis as well.

“ ‘ “The distinction between the ‘present and doing business theory’ and the ‘transaction of business’ theory is that under the former a corporation that engages in a continuous and systematic course of business in the State becomes subject to the State’s jurisdiction even though the subject lawsuit may have no relationship to the business that the corporation does within the State. Under the latter theory, if the corporation transacts any business within the State and a cause of action arises from that transaction then the State has jurisdiction.” ’ ” (Finnegan v. Les Pourvoiries Fortier, Inc. (1990), 205 Ill. App. 3d 17, 26, 562 N.E.2d 989, quoting Chandler Leasing Co. v. Trus Joist Corp. (1980), 90 Ill. App. 3d 875, 878, 414 N.E.2d 15, quoting Braband v. Beech Aircraft Corp. (1977), 51 Ill. App. 3d 296, 298, 367 N.E.2d 118.)

A nonresident corporation which is “doing business” in the State will be deemed to have consented to being sued in the State. Cook Associates, Inc. v. Lexington United Corp., 87 Ill. 2d at 199.

Although there is no precise test for determining when a foreign corporation is “doing business” in the State, the term has been described as conducting business “ ‘of such a character and extent as to warrant the inference that the corporation has subjected itself to the jurisdiction and laws of the district in which it is served.’ ” (Cook Associates, Inc. v. Lexington United Corp., 87 Ill. 2d at 201, quoting Pembleton v. Illinois Commercial Men’s Association (1919), 289 Ill. 99, 104, 124 N.E. 355. See also Loggans v. Jewish Community Center (1983), 113 Ill. App. 3d 549, 447 N.E.2d 919.) “Doing business” is a high standard and requires more than mere solicitation. (Finnegan v. Les Pourvoiries Fortier, Inc., 205 Ill. App. 3d at 27.) “That rule has consistently been held as requiring activities greater than solicitation by employees who have only authority to solicit business in this State.” Cook Associates, Inc. v. Lexington United Corp., 87 Ill. 2d at 201. See also Berks v. Rib Mountain Ski Corp. (N.D. Ill. 1983), 571 F. Supp. 500, 502 (“Illinois ‘doing business’ criteria do not reach nonresident corporations that merely solicit business in Illinois”); Finnegan v. Les Pourvoiries Fortier, Inc., 205 Ill. App. 3d 17, 562 N.E.2d 989.

Plaintiff here emphasizes the extensive nature of defendant’s advertising activity in Illinois and revenues derived from Illinois in support of her contention that defendant has conducted business on a “continuing and systematic basis.” We do not, however, believe that these activities satisfy the “doing business” test. It would follow that activities which in the context of a single business transaction would not suffice to constitute a “transaction of business” under the long-arm statute will not rise to the level of “doing business” simply because these activities are “continuing and systematic.” At best, advertising amounts only to solicitation, which, as discussed above, is insufficient to submit a defendant to jurisdiction under the “doing business” test, as it is insufficient under the “transaction of business” test postulated under section 2 — 209 of the long-arm statute. (Ill. Rev. Stat. 1987, ch. 110, par. 2—209. See Radosta v. Devil’s Head Ski Lodge (1988), 172 Ill. App. 3d 289, 526 N.E.2d 561 (advertising plus maintaining an Illinois phone number, contracting for placement of sign advertising, and participation in local ski show insufficient to find defendant “doing business”).) The fact that a defendant who solicits business in the State derives revenue from the State would seem to be implicit, even though not expressly discussed in the cases, as a natural result of successful solicitation, and not an independent factor upon which to determine that a nonresident corporation is “doing business” in the State. Moreover, defendant here did not receive any revenues in this State; all payments were received in its New York office. Accordingly, we hold that defendant is not “doing business” in Illinois so as to be amenable to in personam jurisdiction.

For all the above reasons, we affirm the order of the circuit court of Cook County granting defendant’s motion to quash service and dismiss the complaint for lack of personal jurisdiction.

Affirmed.

McNULTY, P.J., and MURRAY, J., concur.


author: PRESIDING JUSTICE McNULTY

text:
    FRED COLLINS et al., Indiv. and as Representatives of a Group of Individuals Similarly Situated, Plaintiffs-Appellants, v. BOARD OF TRUSTEES OF THE FIREMEN’S ANNUITY AND BENEFIT FUND OF CHICAGO, Defendant-Appellee.
    First District (5th Division)
    No. 1—90—2082
    Opinion filed February 28, 1992.
    Terrance A. Hilliard, of Chicago, for appellants.
    Fagel & Haber, of Chicago (Steven J. Teplinsky, James A. Roth, and Maynard B. Russel, of counsel), for appellee.
   PRESIDING JUSTICE McNULTY

delivered the opinion of the court:

This is an appeal from the trial court’s order granting the Board of Trustees of the Firemen’s Annuity Benefit of Chicago’s (Board’s) motion to dismiss plaintiffs’ complaint for declaratory judgment seeking to declare section 6 — 210.1 of the Illinois Pension Code (Ill. Rev. Stat. 1989, ch. 108½, par. 6—210.1) unconstitutional under article XIII, section 5, of the Illinois Constitution.

Prior to July 1983, paramedics of the Emergency Medical Services Bureau of the Chicago Fire Department were members of the Municipal Employees’, Officers’ and Officials’ Annuity and Benefit Fund of Chicago (Municipal Fund). On July 1, 1983, the fire department paramedics were eligible to become members of the Firemen’s Annuity and Benefit Fund of Chicago (Firemen’s Fund). Their acceptance into the Firemen’s Fund was in anticipation of a statutory amendment to the definition of “firemen.” The amendment, effective September 24, 1983, added fire department paramedics to the definition of firemen and therefore made paramedics eligible for membership in the Firemen’s Fund. Ill. Rev. Stat. 1989, ch. 108½, par. 6—106(a).

According to the workings of the 1983 amendment, paramedics were no longer, after September 24, 1983, permitted to make additional contributions from their salary to the Municipal Fund nor were they provided reciprocity of membership whereby paramedics could transfer benefits from the Municipal Fund to the Firemen’s Fund. Rather, plaintiffs were given the option to either (1) withdraw as a refund their contributions from the Municipal Fund, or (2) leave contributions in the Municipal Fund until retirement.

On September 1, 1989, the legislature again amended the Pension Code, by adding section 6 — 210.1, which provides:

“Any fire paramedic who (1) was transferred from the pension fund established under Article 8 [the Municipal Fund] of this Code to this Fund by operation of Public Act 83 — 780, and (2) had accumulated service credit in the Article 8 fund for service as a paramedic, and (3) has terminated such Article 8 service credit and received a refund of contributions therefor, may establish service credit in this Fund for such period of service as a fire paramedic under the Article 8 fund by making written application to the Board by January 1, 1992, and paying to this Fund (i) employee contributions based upon the actual salary received and the rates in effect for members of this Fund at the time of such service as a paramedic, plus (ii) interest thereon at 4% per annum, compounded annually, from the date of termination of such service to the date of payment. The employer shall not be responsible for making any employer contributions for any credit established under this Section.” (Ill. Rev. Stat. 1989, ch. 108½, par. 6—210.1.)

Plaintiffs Fred Collins and Michael Spencer, representatives of a group of firemen previously classified as paramedics, challenge the constitutionality of section 6 — 210.1, alleging that the enactment unconstitutionality diminished certain vested rights protected by article XIII, section 5, of the Illinois Constitution.

On July 11, 1990, the trial court granted the Firemen’s Fund’s motion to dismiss the complaint, holding that section 6 — 210.1 did not diminish any vested rights but, rather, created an opportunity for paramedics to participate in greater pension benefits. It is from this order of dismissal that the plaintiffs appeal.

Section 5 of the Illinois Constitution provides that membership in a local government’s pension or retirement system is an enforceable contractual relationship, the benefits of which may not be diminished or impaired. (Ill. Const. 1970, art. XIII, §5.) An employee’s contractual right in his pension plan vests at the time he becomes a member of the system. (Kraus v. Board of Trustees of the Police Pension Fund (1979), 72 Ill. App. 3d 833, 390 N.E.2d 1281.) The terms of this contractual relationship are governed by the version of the Pension Code in effect at the time the employee became a member of the system. Di Falco v. Board of Trustees of the Firemen’s Pension Fund of the Wood Dale Fire Protection District No. One (1988), 122 Ill. 2d 22, 521 N.E.2d 923.

Plaintiffs claim that their vested rights to receive pension benefits were diminished by section 6 — 210.1. Defendant, in contrast, contends that section 6 — 210.1 did not diminish but, rather, enhanced plaintiffs’ rights, because before the enactment of section 6 — 210.1, a paramedic could not transfer his refund to the Firemen’s Fund or reinstate his pension credit in the Firemen’s Fund by repayment of his Municipal Fund refund. Defendant maintains that the legislature remedied this situation when it enacted section 6 — 210.1, which now provides paramedics with the opportunity to reinstate the pension credits earned in the Municipal Fund as pension credits in the Firemen’s Fund. For the following reasons, we agree with plaintiffs that section 6 — 210.1 diminished their vested pension rights.

Section 6 — 209 provides:

“In computing the service rendered by a fireman on and after the effective date, the following periods shall be counted, in addition to all periods during which he performed the duties of his position, as periods of service for annuity purposes only: All periods of (a) vacation, (b) leave of absence with whole or part pay, *** (d) leave of absence during which he was engaged in the military or naval service of the United States of America.” (Emphasis added.) (Ill. Rev. Stat. 1987, ch. 108½, par. 6—209.)

This provision was construed by our supreme court in Herhold v. Retirement Board of the Firemen’s Annuity & Benefit Fund (1987), 118 Ill. 2d 436, 515 N.E.2d 1240, in considering whether the amendment to the Firemen’s Fund adding “fire paramedic” to the definition of “fireman” provided that the entire time a paramedic had been employed in that capacity be recognized in determining his status for the purpose of disability benefits or only the time the paramedic began making contributions into the Firemen’s Fund. The court stated that once the words “fire paramedic” were incorporated in the definition of “fireman” paramedics were entitled to be recognized as firemen from the beginning of their service as paramedics. The words “the service rendered by a fireman” and “periods during which he performed the duties of his position” appearing in section 6 — 209 refer to a person’s service and performance of his duties both before and after the amendment to the definition of “fireman” which made paramedics eligible to become members of the Firemen’s Fund. In determining that the paramedic should receive benefits computed on the length of his entire time served as a paramedic, the court stated:

“The Board argues that this interpretation of the statutes gives Herhold a windfall because he received a refund of his contributions to the Municipal Fund while at the same time he was not required to compensate the Firemen’s Fund for the period he was a participant in the former fund. The Firemen’s Fund refused, however, to accept a transfer of Herhold’s contribution to the Municipal Fund because the Firemen’s Fund had not accepted the Retirement Systems Reciprocal Act [citation]. *** [T]here was no procedure trader which Herhold, had he wished to do so, could have transferred to the Firemen’s Fund his contributions previously made to the Municipal Fund. At the same time, the Municipal Fund refunded the contributions Herhold had previously made to it based on its position that an employee could not simultaneously participate in that fund and the Firemen’s Fund. There is no justification for penalizing Herhold for the manner in which these two pension funds operated because he had no control over their procedures. Moreover, we find incredible the suggestion that it was the intention of the legislature in conferring upon paramedics the advantage of joining the Firemen’s Fund to leave them at the same time without benefits for the service they accrued as paramedics before the legislature offered them the opportunity to join that fund.” (Herhold, 118 Ill. 2d at 440, 515 N.E.2d at 1243.)

Accordingly, the Herhold court held that the disabled paramedic in computing service time was entitled to credit for all time employed as a paramedic, including the time when payments were made to the Municipal Fund.

We find no reason to rule otherwise here. When the Municipal Fund refunded the money in 1983, the Firemen’s Fund refused to take it. Once plaintiffs received refunds from the Municipal Fund and became members of the Firemen’s Fund, their contract with the Municipal Fund ceased to exist and they entered into a new contractual relationship with the Firemen’s Fund in 1983. According to the terms of this new contractual relationship, plaintiffs received the rights to have their annuities computed on the basis of their years of completed service. They also received vested rights to the computation of service credits based upon the language of section 6 — 209. As the Herhold court observed, according to the plain language of section 6 — 209, service credits are to be computed on the basis of the entire time served, including years performing as a paramedic.

Now the rule has changed, and according to the terms of section 6 — 210.1, plaintiffs must tender to the Firemen’s Fund their previously unwanted contributions with up to nine years’ compounded interest before January 1, 1992, or they will lose service credits for their years serving as paramedics and contributing to the Municipal Fund. We recognize the principles that in construing a statute, there is a presumption that the legislature did not intend to create an unconstitutional statute (Wiseman v. Elward (1972), 5 Ill. App. 3d 249, 283 N.E.2d 282), and that where a statute is subject to two constructions, one which would render it unconstitutional, it should be construed so as to uphold its constitutionality if it can reasonably be done. (Laffoon v. Bell & Zoller Coal Co. (1976), 65 Ill. 2d 437, 359 N.E.2d 125.) However, while section 6 — 210.1 enhances the rights of some by allowing them to now deposit their refunds from the Municipal Fund into the Firemen’s Fund, we cannot ignore the fact for others this is an impossibility. For those who cannot come up with their refund money plus interest by January 1, 1992, the statute diminishes their vested rights to service credits based on their years of service including time served as a paramedic. To divest them of that right by the amendatory language of section 6 — 210.1 is contrary to Illinois law and article XIII, section 5, of the Illinois Constitution.

While defendant relies on section 20 — 118 of the Retirement Systems Reciprocal Act (Reciprocal Act) to support the constitutionality of section 6 — 210.1, we find the Reciprocal Act inapplicable. Section 20 — 118 provides:

“Any employee who shall have waived, by the acceptance of a refund, his pension credit in any participating system, may have his pension credit reinstated by repayment of the refund, including interest from the date of refund to the date of repayment, provided (1) the system is authorized by law to receive the repayment, and (2) the employee has completed at least 2 years of service under a participating system subsequent to the date of the last refund.” (Emphasis added.) (Ill. Rev. Stat. 1989, ch. 108½, par. 20-118.)

In order to assert the statutory protections of the Reciprocal Act, a fund must become a “participating” fund by specifically adopting the Retirement Systems Reciprocal Act. (Ill. Rev. Stat. 1989, ch. 108½, par. 20 — 129.) Although the Municipal Fund is a participating system, the Firemen’s Fund is not. When plaintiffs became contributors to the Firemen’s Fund, they became vested in that fund and gave up vested rights in the Municipal Fund. Because the Firemen’s Fund has not accepted the provisions of the Reciprocal Act, it cannot claim that its members are bound by section 20 — 118.

Accordingly, for the reasons set forth above, we reverse the decision of the trial court and remand this cause for further proceedings.

Reversed and remanded.

LORENZ and MURRAY, JJ., concur.


author: JUSTICE MURRAY

text:
    FAITH CHRISTIAN FELLOWSHIP OF CHICAGO, ILLINOIS, INC., et al., Plaintiffs-Appellants and Cross-Appellees, v. THE DEPARTMENT OF REVENUE, Defendant-Appellee and Cross-Appellant.
    First District (5th Division)
    Nos. 1—91—1287, 1—91—1288 cons.
    Opinion filed February 28, 1992.
    Michael E. Papierski, of Michael H. Lurie, Ltd., of Chicago, for appellants.
    Roland W. Burris, Attorney General, of Springfield (Rosalyn B. Kaplan, Solicitor General, and Jan E. Hughes, Assistant Attorney General, of Chicago, of counsel), for appellee.
   JUSTICE MURRAY

delivered the opinion of the court:

This is an administrative review action in which plaintiffs, the Faith Christian Fellowship of Chicago, Illinois, Inc. (FCF), and the Colonial Bank and Trust Company, as trustee of trust number 872 (Colonial), appeal the circuit court’s affirmance of a decision by the Illinois Department of Revenue (Department), which denied plaintiffs a property tax exemption for certain vacant lots used for parking by FCF’s congregation. The Department also appealed a portion of the circuit court’s decision and the appeals were consolidated.

The facts are not in dispute. FCF is a religious organization, incorporated in Illinois in January 1983 under the General Not For Profit Corporation Act (Ill. Rev. Stat. 1983, ch. 32, par. 163a et seq.). Commencing in June 1987 FCF leased from Colonial certain improved property, namely a two-story building located at 750 North Clark Street in Chicago, and three adjacent vacant lots, commonly known as 744-48 North Clark Street. According to the lease, FCF agreed to pay various amounts of rent over the life of the lease, as well as any property taxes which might be assessed against the four parcels.

In March 1988 FCF applied for a 1987 property tax exemption for the four parcels. Although the Board of Appeals of Cook County recommended that all four parcels be exempt from property taxes for the tax year of 1987, the Department granted FCF a property tax exemption only with respect to the building property and not with respect to the three vacant lots. FCF appealed the decision and a hearing was held before an administrative law judge.

The administrative law judge (ALJ) found that (1) the four parcels in question were owned by Colonial, for the use and benefit of George Apostolou, and that neither Colonial nor Apostolou was an exempt owner, (2) Colonial leased the parcels for profit to FCF, a religious organization, (3) FCF used the building property for religious purposes from June 1, 1987, through December 31, 1987, and (4) the vacant lots were used by FCF during that same period of time for parking in connection with FCF’s religious use of the building property. Based upon these findings and relying upon sections 19.2 and 19.16 of the Revenue Act of 1939 (Ill. Rev. Stat. 1987, ch. 120, pars. 500.2, 500.16) and the case Springfield Marine Bank v. Property Tax Appeal Board (1970), 44 Ill. 2d 428, 256 N.E.2d 334, the ALJ concluded that none of the four parcels should be exempted from real estate taxes. The ALJ recommended that the Department deny FCF a tax exemption for the vacant lots and that the building property be returned to the tax rolls for 1990. Following the decision of the ALJ, the Department notified FCF on August 29, 1989, that its application for a tax exemption for 1987 on the three vacant lots was disapproved.

FCF and Colonial then sought administrative review of the Department’s decision pursuant to the Administrative Review Law (Ill. Rev. Stat. 1987, ch. 110, par. 3—101 et seq.). The circuit court, in a memorandum decision issued March 1991, affirmed the Department’s decision as to the vacant lots, but went on to find that the decision with respect to the tax status of the building property was erroneous. It reversed and remanded the matter for an “accurate calculation of tax exemption for the time period of June 1, 1987 to December 31,1987.”

Plaintiffs appeal that portion of the order of the circuit court upholding the Department’s determination as to the tax status of the vacant lots. The Department cross-appeals from that portion of the circuit court’s order which deals with the tax status of the building property.

Section 19 of the Revenue Act (Ill. Rev. Stat. 1987, ch. 120, par. 500) states that “[a]ll property described in Sections 19.1 through 19.23 — 1, to the extent therein limited, is exempt from taxation.” By virtue of section 19.2, the tax exempt status extends to “[a]ll property used exclusively for religious purposes, or used exclusively for school and religious purposes.” (Ill. Rev. Stat. 1987, ch. 120, par. 500.2.) It is undisputed by the Department that under section 19.2, the taxable status of property is determined by its use, not by its ownership. Therefore, the Department admits that the building property, having been used by FCF for religious purposes, was tax exempt.

However, section 19.16 specifically addresses parking lots, stating that the tax exemption only applies to:

“Parking areas, not leased or used for profit, when used as a part of a use for which an exemption is provided hereinbefore and owned by any school district, non-profit hospital or school, or religious or charitable institution which meets the qualifications for exemption.” (Emphasis added.) Ill. Rev. Stat. 1987, ch. 120, par. 500.16.

In reaching its decision that the vacant lots were not tax exempt, the Department followed the strict wording of the statutes cited above and determined that because the vacant lots were used by FCF as a parking lot but not owned by FCF, the property was not exempt from taxation. Although we feel that the result is unfair, we must agree with the Department that imposition of taxes on the vacant lots is in accordance with the law.

As stated in Northwestern Memorial Foundation v. Johnson (1986), 141 Ill. App. 3d 309, 490 N.E.2d 161, “statutes allowing tax exemptions are to be strictly construed, and the burden is on the party claiming the exemption to show that the property falls within the statutory exemption.” In this case FCF has not carried its burden of proving entitlement to the tax exemption. FCF does not dispute the fact that the vacant lots are not owned by them, but rather merely leased by them to be used for parking in connection with the adjacent church and school. Thus, the Northwestern Memorial Foundation case, cited to above and relied upon by FCF, does not support FCF’s position. In fact, it supports the Department’s position since it interprets section 19.16 as requiring that property used as a parking lot must not only be used by a tax exempt entity, but also owned by a tax exempt entity in order to qualify for a tax exemption.

As stated earlier, we sympathize with FCF. However, the imposition of taxes is not necessarily fair and a court must follow the voice of the law, which sometimes does not agree with the voice of reason. Therefore, regrettably, we must exhort FCF to follow the teachings of its biblical leaders and “render unto Caesar the things that are Caesar’s.”

We now turn our attention to the cross-appeal in which the Department argues that the portion of the trial court’s decision pertaining to the tax status of the building property should be vacated because the trial court had no jurisdiction to review that issue. We agree.

The Department correctly points out that its final decision issued to FCF on August 29, 1989, pertained only to the tax status of the three vacant lots for the tax year 1987. It did not adopt or make any reference to the ALJ’s recommendation concerning the tax status of the building property. The final decision of the Department did not alter the tax status of the building property for the tax year 1987, nor did it address the recommendation that the property be returned to the tax rolls for the tax year 1990.

The Illinois Code of Civil Procedure provides that circuit courts have jurisdiction to review final decisions of an administrative agency. (Ill. Rev. Stat. 1989, ch. 110, par. 3—104.) A decision of a hearing officer is not final until affirmed in its totality by the agency. Bi-State Development Agency v. Department of Revenue (1990), 205 Ill. App. 3d 668, 563 N.E.2d 1154.

For the reasons stated above, this court affirms the portion of the circuit court’s judgment relating to the tax status of the vacant lots for the tax year 1987. The portion of the circuit court’s judgment relating to the tax status of the building property is stricken.

Affirmed in part; vacated in part.

McNULTY, P.J., and GORDON, J., concur.