During its September term, the Illinois Supreme Court heard oral arguments in Marks v. Vanderventer, a direct appeal from the Circuit Court after the court’s order finding the fee collection provisions of a “Rental Housing Support Program” unconstitutional.

Plaintiff sued the Recorder of Deeds in Lake County, seeking a declaratory judgment holding that the 55 ILCS 5/3-5018 was unconstitutional. The statute imposes a $10 fee on every recording of a real estate document – $9 goes to the Rental Housing Support Program, and $1 is retained by the county Recorder of Deeds. The plaintiffs argued that the statute established a “Fee Office” within the meaning of Article VII, Section 9 of the Illinois Constitution. When the Circuit Court held that the statute was unconstitutional, the case went straight to the Supreme Court.

Counsel for the Attorney General began the argument. He argued that the Housing Support Program itself predated the challenged amendments; what the plaintiffs were really arguing was that allowing the counties to retain $1 of each fee amounted to an improper skimming. Not so, he argued – skimming only arises when parties take money intended for another purpose. In fact, the statute creates two surcharges under a single name. Until the statute was amended, $9 went to the State (specifically the housing development authority), and $1 was retained at the county level for general revenue. Justice Burke asked whether there was a rational basis for imposing a charge for recording real estate documents to fund a housing program. Counsel responded that the legislature had found a lack of affordable quality rental housing in the state as a result of vacancies and turnover. Chief Justice Garman asked about the fact that the surcharge isn’t paid by all real estate owners, but only by those who record documents from a sale. Counsel answered that the legislature doesn’t have to be perfect in drawing the class. The rational link between recording documents – thereby showing that the party has benefited from increasing real estate values – and the fee. Justice Burke asked whether there was any proof the legislature relied on such evidence. Counsel answered that the legislature had made findings, even though it wasn’t required to. Justice Freeman pointed out that Supreme Court Rule 40 authorizes imposing a fee for each civil ceremony performed. Justice Freeman has twice opined in dissents that Rule 40 is unconstitutional. How did counsel distinguish this program? Counsel answered a legislative act is subjected to a different analysis. Marriage license fees implicate distinct constitutional concerns, and the Court has recognized that in its decisions.

Counsel for the Cook County Recorder of Deeds was next. Counsel agreed with the Attorney General’s arguments on constitutionality. Counsel wanted to talk about the lower court’s failure to dismiss pursuant to the Tort Immunity Act and the voluntary payment doctrine. In addition, the court had disregarded Illinois law on class certification, certifying a class action without notice. Justice Thomas asked whether the Recorder was endorsing the view that the Court should reach the constitutional issues. Counsel responded that in fact, the lower court never should have reached the constitutional issues; the procedural issues are dispositive. But if the Court does reach the constitutional issues, the statute is constitutional. Justice Thomas pointed out that the Court has the doctrine of constitutional avoidance, pursuant to which constitutional issues aren’t decided unless absolutely necessary – so what was the Recorder asking the Court to do? Counsel said that the Court should vacate class certification, since none of the Recorders outside Cook County had a meaningful opportunity to participate in the case. Justice Thomas asked whether counsel was asking the Court to vacate the Circuit Court’s finding that the statute was unconstitutional and remand for consideration of the non-constitutional arguments. Counsel answered that the Court should vacate and remand with instructions to dismiss pursuant to the voluntary payment doctrine. Justice Thomas suggested that it seemed somewhat contradictory to resolve the constitutional issues and remand for consideration of the non-constitutional ones. Counsel answered that the Court should dismiss on non-constitutional grounds, but if the Court reached the constitutional challenge, the statute easily passed muster. The class certification order ignored the requirements of the statute – for example, there was no notice or allowance for opt out, nor was there any discussion of the prerequisites for a class. The court failed to discuss venue, or whether the counties were similarly situated. Moreover, the voluntary payment doctrine, pursuant to which the only taxes or fees which can be challenged are those paid under compulsion, barred the whole claim. Finally, given that the plaintiffs chose to plead their action in tort, the Tort Immunity Act bars the claim. Justice Kilbride asked whether there was a single fee, or whether it’s itemized so that the party can see where the money is going? Counsel answered that the plaintiffs pled no facts on that issue. The deed involved in the case, which was first entered in the record when it was attached to the plaintiff’s opening brief, showed that the $10 fee was itemized, with $9 listed as going to the Illinois Rental Housing Fund.

Counsel for the plaintiff followed. He argued that 101 of the 102 counties in Illinois had intervened and participated – only Cook County’s Recorder of Deeds had remained on the sidelines. Everybody had been given notice and an opportunity to participate. Furthermore, the Recorder’s objection based on the voluntary payment doctrine could have been ironed out below if the Cook County Recorder had participated. Justice Thomas asked what the legislature’s rationale was for placing the burden only on persons recording real estate documents, as opposed to all real estate owners. Counsel responded that in the 2010 version of the statute, the legislature made no findings at all. But for the 2013 version, the lawyers passed along to the legislature the arguments they had made, and the legislature incorporated those findings. Chief Justice Garman asked whether the plaintiff was challenging the 2010 or 2013 version of the statute. Counsel answered that the 2013 amendments had only been effective going forward. The amendments just changed the nature of the surcharge, removing the statement that the $1 retained by the county was a fee for administering the program. But the question remained, what should be done about the people who paid that fee for three years? Counsel argued that the defendants were saying the Court was bound by the legislature’s findings, but such a rule, applied here, would leave the uniformity clause with no teeth. Counsel argued that there was no rational basis for taxing a limited group for the benefit of a different and larger one. There was no basis for putting this burden not on landowners in general, but on those choosing to register a real estate document in any given year.

The Attorney General’s rebuttal was next. Counsel argued that while there was no need for findings to survive the rational basis test, now that the legislature had made findings, they were entitled to deference. Counsel argued that the $1 was intended for the counties all along, but if the Court concludes that it amounts to improperly skimming, then the fee has to be forwarded to the State. Counsel argued that given that the $1 surcharge has been eliminated, that part of the case is moot. Justice Thomas asked counsel to comment on how the Court should handle the constitutional versus the nonconstitutional issues. The Attorney General answered that the State agrees with the Cook County Recorder. One way to avoid the constitutional issues entirely is to throw out the case based on the voluntary payment doctrine. Justice Thomas pointed out that the constitutional issue was actually raised by the intervenor, not any of the original parties, even though the case was accepted for resolution of the constitutional issue, and counsel agreed.

Counsel for the Cook County Recorder of Deeds concluded the argument. Counsel argued that the Court was free to review any issue or order before the final judgment of unconstitutionality. Yes, Cook County had notice of the suit, counsel argued, but it’s the timing that’s important. The Cook County Recorder first received notice of the suit after the class had been certified and the statute struck down – there was no opportunity to meaningfully participate. Further, even if the plaintiff now wants to recast the claim as one for restitution, not tort, counsel argued that the voluntary payment doctrine still applies. Counsel concluded by asking the Court to vacate both the class certification order and the finding of unconstitutionality.

We expect Marks to be decided in three to six months.

Image courtesy of Flickr by Michael D. Beckwith (no changes).