Ill. Ass'n of Realtors v. Stermer

• Decision Date: 07 February 2014
• Docket Number: No. 4–13–0079.,4–13–0079.
• Citation: 378 Ill.Dec. 887,2014 IL App (4th) 130079,5 N.E.3d 267
• Parties: ILLINOIS ASSOCIATION OF REALTORS, Plaintiff–Appellant, v. Jerome STERMER, Acting Director, The Governor's Office of Management and Budget; Manuel Flores, Acting Secretary, The Department of Financial and Professional Regulation; Malcolm Weems, Acting Director, The Department of Central Management Services, The State of Illinois; Dan Rutherford, Treasurer, The State of Illinois; JUDY Barr Topinka, Comptroller, The State of Illinois; and Patrick Quinn, Governor, The State of Illinois, in All Their Official Capacities, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

2014 IL App (4th) 130079

5 N.E.3d 267

378 Ill.Dec. 887

ILLINOIS ASSOCIATION OF REALTORS, Plaintiff–Appellant,

v.Jerome STERMER, Acting Director, The Governor's Office of Management and Budget; Manuel Flores, Acting Secretary, The Department of Financial and Professional Regulation; Malcolm Weems, Acting Director, The Department of Central Management Services, The State of Illinois; Dan Rutherford, Treasurer, The State of Illinois; JUDY Barr Topinka, Comptroller, The State of Illinois; and Patrick Quinn, Governor, The State of Illinois, in All Their Official Capacities, Defendants–Appellees.

No. 4–13–0079.

Appellate Court of Illinois, Fourth District.

Feb. 7, 2014.

James G. Fahey (argued), Stephen J. Bochenek, Sorling, Northrup, Springfield, for appellant.

Lisa Madigan, Attorney General, Chicago (Michael A. Scodro, Solicitor General, Brian F. Barov (argued), Assistant Attorney General, of counsel), for appellees.

OPINION

Justice KNECHT delivered the judgment of the court, with opinion.

¶ 1 In June 2006, plaintiff, Illinois Association of Realtors, filed a complaint asserting the FY2007 Budget Implementation (Finance) Act (2007 Budget Act) (Pub. Act 94–839 (eff. June 6, 2006)) was unconstitutional because it transferred monies from the Real Estate License Administration Fund (Administration Fund) into the state's General Revenue Fund. In June 2012, defendants, Jerome Stermer, Manuel Flores, Malcolm Weems, Dan Rutherford, Judy Baar Topinka, and Patrick Quinn, filed a motion to dismiss pursuant to section 2–619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2–619.1 (West 2012)). (Plaintiff originally sued the previous officeholders and the current officeholders are substituted by operation of law. 735 ILCS 5/2–1008(d) (West 2012).) In January 2013, the trial court dismissed plaintiff's second amended complaint.

¶ 2 On appeal, plaintiff argues the trial court erred by granting defendants' motion to dismiss. Plaintiff asserts it has standing, on its own behalf and the behalf of its members, because it pays regulatory fees into the Administration Fund. Additionally, plaintiff argues (1) the “excessive” regulatory fees real estate professionals are charged, combined with their use as “taxes,” violate the uniformity clause of the Illinois Constitution of 1970 (Ill. Const. 1970, art. IX, § 2); (2) the “excessive” regulatory fees, combined with their use as “taxes,” violate the due process clauses of the Illinois and United States Constitutions; and (3) it is entitled to mandamus because section 25–20 of the Real Estate License Act of 2000 (License Act) (225 ILCS 454/25–20 (West 2006)) imposes a ministerial duty upon the Department of Financial and Professional Regulation (Department) to hire a specified number of investigators and prosecutors. We conclude plaintiff lacks standing and affirm.

¶ 3 I. BACKGROUND

¶ 4 Plaintiff is a trade association for real estate professionals. It is located in Springfield, Illinois, and has approximately 40,000 members in Illinois. Its membership consists of real estate professionals who are licensed and regulated by the Department. Real estate professionals pay application and licensing fees to the Department. See 225 ILCS 454/5–65 (West 2006); 68 Ill. Adm.Code 1450.130 (2011). Plaintiff is licensed to operate a prelicense school and a continuing education school and pays fees for those licenses. See 68 Ill. Adm.Code 1450.130(g), (h) (2011).

¶ 5 In June 2006, plaintiff filed a complaint seeking declaratory judgment, injunction, and mandamus. Plaintiff originally sued John Filan, Dean Martinez, Paul J. Campbell, Judy Baar Topinka, Daniel W. Hayes, and Rod W. Blagojevich. Those parties have ceased to hold the public office they held at the time of plaintiff's complaint. The current officeholders are substituted by operation of law. 735 ILCS 5/2–1008(d) (West 2012). Plaintiff alleged the 2007 Budget Act improperly removed monies from the Administration Fund and transferred it into the General Revenue Fund and other state funds. The same month, the trial court entered a stipulated order whereby defendants agreed to not (1) transfer money from the Administration Fund and (2) use money from the fund for any purpose other than those specified in the License Act, without first providing plaintiff with written notice of defendants' intention to withdraw the money for purposes other than those specified in the License Act. In October 2006, defendants filed a motion to dismiss pursuant to sections 2–615 and 2–619 of the Code (735 ILCS 5/2–615, 2–619 (West 2006)). The case sat dormant for several years.

¶ 6 In June 2012, plaintiff filed a four-count second amended complaint. Generally, plaintiff asserted the 2007 Budget Act was unconstitutional because it transferred monies from the Administration Fund into the General Revenue Fund. Plaintiff sought to prohibit all future removal of money from the Administration Fund to the General Revenue Fund, or other state funds, and “to pay only their respective share of the general administrative costs attributable to the regulation of their profession.” Plaintiff alleged, beginning in the 2003 fiscal year, the State of Illinois, under defendants' direction, began a policy of transferring special funds into the General Revenue Fund “in an attempt to decrease the annual budget deficit.” Plaintiff contended defendants (1) conducted “fund sweeps” from the Administration Fund and removed (a) $250,000 pursuant to the 2003 fiscal year budget, (b) $750,000 pursuant to the 2004 fiscal year budget, and (c) $1.5 million pursuant to the 2006 fiscal year budget; (2) intended to remove $5 million pursuant to the 2007 Budget Act; (3) conducted “dedicated fund removals” and removed (a) $424,000 in the 2004 fiscal year, and (b) at least $696,172 in the 2005 fiscal year; and (4) performed “director transfers” removing (a) $3,825 in the 2004 fiscal year, and (b) $242,118 in the 2005 fiscal year. Plaintiff alleged defendants made a total of 16 transfers from the Administration Fund after June 2006. These were transfers to the Real Estate Research and Education Fund, the Professions Indirect Cost Fund, the Audit Expense Fund, and the Real Estate Recovery Fund. Transfers “beyond these legitimate indirect costs” were unconstitutional. Plaintiff also alleged the Illinois Senate “publically declared its plan” in 2012 to sweep approximately $24 million from the Administration Fund. This “ equat[es] to an additional tax of $500 or more assessed against every member of the [Illinois Association of Realtors] for the sole purpose of paying general revenue expenses.”

¶ 7 Plaintiff alleged (1) fees paid into the Administration Fund “are dedicated to be used to pay for any ordinary administrative and operational expenses” of the Department, and (2) “[r]egulatory fees are compensation for services rendered by the State and should be based on the amount needed or required to regulate the industry consistent with the [License Act].” Plaintiff alleged all licensing fees were raised effective January 22, 2014, “immediately before the proposed [f]und [s]weeps.” Plaintiff provided the percentage of the increases but not the amount of the increased fees. Plaintiff asserted “[d]espite the[ ] increasing transfers, the Defendants have systematically refused to hire a sufficient number of investigators, prosecutors and related staff to carry out the purposes of the Real Estate License Act as required under [section] 25–20 of the [License] Act [ (225 ILCS 454/25–20 (West 2012)) ].”

¶ 8 In count I, plaintiff asserted the 2007 Budget Act violated the uniformity clause of the Illinois Constitution because the regulatory fees imposed on licensees constitute a tax. According to plaintiff, the regulatory fees constitute a tax because they are “deliberately set in excess of the amount needed to compensate the State for the cost of providing the regulation or rendering of the service for which the [r]egulatory [f]ees were purportedly charged.” Plaintiff asserted the imposition of the regulatory fee with the “deliberate intent of raising revenue in excess of the costs of providing regulation” and depositing “excess revenue” into the General Revenue Fund “for the purpose of balancing the State's budget” creates a disparity between those who must pay the regulatory fees and those who do not have to pay the excess fees. In count II, plaintiff asserted the 2007 Budget Act violated the due process clause of the Illinois Constitution. In count III, plaintiff asserted the 2007 Budget Act violated the due process clause of the United States Constitution. In count IV, plaintiff requested an order of mandamus to compel defendants to comply with the License Act and “[p]rovide an accounting of the amount required to sufficiently regulate the profession and meet its statutory obligations under the Real Estate License Act.”

¶ 9 In June 2012, defendants filed a motion to dismiss pursuant to section 2–619.1 of the Code (735 ILCS 5/2–619.1 (West 2012)). Defendants asserted plaintiff lacked standing and plaintiff's claims were insufficient in law. In July 2012, plaintiff filed a response to defendants' motion to dismiss. Plaintiff asserted “[u]pon information and belief, there has been a surplus of money at the end of each fiscal year in the [Administration] Fund since at least 2003,” and “[a]fter collecting the newly-increased regulatory fees, the State had even a greater surplus of money in the [Administration] Fund.” Plaintiff did not seek leave to amend its complaint.

¶ 10 At the October 2012 hearing on defendants' motion to dismiss, plaintiff's counsel framed the claim as asking “can the State, through the guise of charging the regulatory fee, charge substantially in excess of it with the purpose and intent to pay off general revenue debt?” During the hearing, the following exchanged occurred:

“THE COURT: Okay. Here's a question: What—if they have the right to use—to sweep the funds and put it in the...