Sanelli v. Glenview State Bank, No. 57935

CourtSupreme Court of Illinois
Writing for the CourtRYAN; SIMON; CLARK, C.J., and WARD
Citation108 Ill.2d 1,483 N.E.2d 226,90 Ill.Dec. 908
Parties, 90 Ill.Dec. 908 Alfred M. SANELLI, Appellant, v. GLENVIEW STATE BANK, Appellee.
Docket NumberNo. 57935
Decision Date17 July 1985

Page 226

483 N.E.2d 226
108 Ill.2d 1, 90 Ill.Dec. 908
Alfred M. SANELLI, Appellant,
v.
GLENVIEW STATE BANK, Appellee.
No. 57935.
Supreme Court of Illinois.
July 17, 1985.
Rehearing Denied Sept. 27, 1985.

Page 227

[108 Ill.2d 5] [90 Ill.Dec. 909] Samuel Weisbard, William P. Schuman, Chicago, for defendant-appellee.

Robert E. Senechalle, Jr., Arlington Heights, William J. Harte, Chicago, Richard J. Prendergast, Chicago, for plaintiff-appellant.

RYAN, Justice:

In April 1982, the plaintiff, Alfred M. Sanelli (Sanelli), filed a class action in the circuit court of Cook County against the defendant, Glenview State Bank. The bank had served as land trustee for the Sanellis and had also loaned them money. The loan was secured by an assignment to the bank of the beneficial interest in the land trust. The complaint alleged that the bank breached its fiduciary duty to Sanelli and his wife, the land-trust beneficiaries, by purchasing the trust property for its own benefit at a public sale, after the Sanellis defaulted on their loan. The plaintiff's theory of recovery is based on this court's decision in Home Federal Savings & Loan Association v. Zarkin (1982), 89 Ill.2d 232, 59 Ill.Dec. 897, 432 N.E.2d 841. The bank filed an amended motion to dismiss which alleged that the class action was improper and that the action was barred by Public Act 82-891, "An Act in relation to land trusts * * *," which was approved and became effective on August 6, 1982 (Ill.Rev.Stat.1983, ch. 148, pars. 81 to 84). Section 4 of the Act (Ill.Rev.Stat.1983, ch. 148, par. 84) provides that the Act applies to all security interests in a beneficial interest in land trusts whether arising before or after the effective date of the Act. On December 22, 1982, the trial court granted the [108 Ill.2d 6] bank's motion based solely on Public Act 82-891. It did not consider the propriety of the class-action claim. Pursuant to Supreme Court Rule 302(b) (87 Ill.2d R. 302(b)), we allowed Sanelli to appeal directly to this court.

On April 27, 1984, an opinion was filed in this case which held the retroactivity provision of Public Act 82-891, section 4, invalid. Thereafter, the bank filed a petition for rehearing. The bank's petition was granted, and the parties were instructed to address the issues of whether the retroactivity provision of Public Act 82-891 violates

Page 228

[90 Ill.Dec. 910] the principle of separation of powers, the prohibition against laws which impair the obligations of contracts, or the due process clause.

The following facts are pertinent to this appeal. In July 1968, Sanelli and his wife entered into an Illinois land-trust agreement with the bank, as trustee. The parties also executed a trust deed. The trust was known as trust No. 658 and covered the Sanellis' property at 805 and 809 Becker Road, in Glenview. Under the agreement the bank held both the legal and equitable title to the property in trust for the benefit of the Sanellis, as land-trust beneficiaries. In April 1978, the Sanellis executed an assignment of their beneficial interest in the land trust as security for a loan from the bank. Thus, the bank was then serving as land trustee for the Sanellis and was also their secured creditor. The Sanellis subsequently defaulted on their loan, and their beneficial interest in the trust property was sold at a public sale on December 30, 1981. The bank purchased the beneficial interest in the property for its own account for $100,000, which Sanelli alleged was below the fair market value of the property. The bank evicted the Sanellis from the property.

On January 21, 1982, this court decided Home Federal Savings & Loan Association v. Zarkin (1982), 89 [108 Ill.2d 7] Ill.2d 232, 59 Ill.Dec. 897, 432 N.E.2d 841. In that case, the Zarkins entered into a land-trust agreement with the Devon National Bank. They directed Devon, as trustee, to execute a first mortgage of the trust property in favor of Home Federal. The Zarkins later borrowed $14,000 from Devon. When they were unable to repay the loan they assigned their beneficial interest in the land trust to Devon, as security for the loan. Home Federal sued both Devon and the Zarkins to foreclose its first mortgage and obtained a decree of foreclosure. The property was ordered sold and was purchased by Home Federal. Eight days before the redemption period expired, Devon purchased the certificate of sale from Home Federal. The Zarkins then sued Devon. They asserted that Devon breached its fiduciary duty as trustee, and asked the trial court to either set aside the sale to Devon and extend the redemption period to enable them to redeem, or to decree that Devon had redeemed as trustee for the Zarkins' benefit and enjoin Devon from taking any further action with respect to the property.

In Zarkin, we stated that Illinois land trustees are subject to the same fiduciary duties imposed on all trustees. (89 Ill.2d 232, 239, 59 Ill.Dec. 897, 432 N.E.2d 841.) Thus, Devon owed the Zarkins a fiduciary's duty of loyalty. We held that since this fiduciary duty would have precluded Devon from purchasing the trust property for its own account at the sheriff's sale, it likewise prohibited Devon from later purchasing the certificate of sale from Home Federal. (89 Ill.2d 232, 244, 59 Ill.Dec. 897, 432 N.E.2d 841.) By purchasing the trust property Devon breached its duty of loyalty. Following this court's decision in Zarkin in January 1982, the Sanellis, as noted above, filed this class action in April 1982.

On August 6, 1982, Public Act 82-891 became effective. Both parties agree, and the language of the Act itself indicates, that the legislation was passed in response to our decision in Zarkin. The Act provides in part:

[108 Ill.2d 8] "Sec. 1.

(a) The General Assembly finds:

* * *

* * *

(4) * * * [B]eneficiaries will frequently select a financial institution as trustee simply because that institution will be asked by the beneficiaries to extend credit to the trust or to the beneficiaries secured by their interest in the trust.

(5) Recently, this accepted practice of a creditor lending money to itself as trustee or to the beneficiaries upon the security of an interest in the land trust of which it is trustee, has been scrutinized by the Illinois Supreme Court.

(b) It is the purpose of this Act to codify the accepted practice of a creditor lending to the trustee of a land trust or the beneficiaries thereof upon the security of trust property or their interest in

Page 229

[90 Ill.Dec. 911] the trust, even though the creditor and the trustee are the same, and to foster and encourage the availability of financing for owners and developers of real estate.

Sec. 2. If a debt is secured by a security interest in a beneficial interest in a land trust or by a mortgage on land trust property, neither the validity or enforceability of the debt, security interest or mortgage nor the rights, remedies, powers and duties of the creditor with respect to the debt or the security shall be affected by the fact that the creditor and the trustee are the same person, and the creditor may extend credit, obtain such security interest or mortgage, and acquire and deal with the property comprising the security as though the creditor were not the trustee. * * *

* * *

* * *

Sec. 3. The fact that a trustee of a land trust is or becomes a secured or unsecured creditor of the land trust, the beneficiaries of the land trust, or a third party whose debt to such creditor is guaranteed by a beneficiary of the land trust, shall not be a breach of, and shall not be deemed evidence of a breach of, any fiduciary duty owed by said trustee to the beneficiaries.

Sec. 4. This Act applies to all security interests in a [108 Ill.2d 9] beneficial interest in land trusts and all mortgages on land trust property and to all debts secured thereby, whether arising before, on, or after the effective date of this Act." (Emphasis added.) Pub.Act 82-891, eff. Aug. 6, 1982, Ill.Rev.Stat.1983, ch. 148, pars. 81 to 84.

We first consider the issue of whether the retroactivity provision of Public Act 82-891 violates the principle of separation of powers. The Illinois Constitution provides: "The legislative, executive and judicial branches are separate. No branch shall exercise powers properly belonging to another." (Ill.Const.1970, art. II, sec. 1.) Sanelli contends that the General Assembly violated this principle because it attempted to nullify our decision in Zarkin by enacting Public Act 82-891, which applies to conduct occurring prior to its enactment and prior to Zarkin and which expressly forbids the result announced in Zarkin. We disagree.

The general rule is that legislation is not per se unconstitutional merely because it is retroactive. 2 Sutherland, Statutory Construction sec. 41.03, at 249 (4th ed. 1973); DeMars, Retrospectivity and Retroactivity of Civil Legislation Reconsidered, 10 Ohio N.U.L.Rev. 253, 267 (1983); Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv.L.Rev. 692, 694 (1960); see Greenblatt, Judicial Limitations on Retroactive Civil Legislation, 51 Nw.U.L.Rev. 540, 550 (1956).

In most cases the constitutionality of the retroactive application of statutes is judged against the limitations of due process clauses or the constitutional limitation on impairing the obligation of contracts. The discussion in most of the literature on the subject, including that cited above, centers on these two constitutional limitations. As one author noted, "[o]ccasionally the Court will hold a retroactive statute unconstitutional on the ground that it violates the constitutional principle of separation of [108 Ill.2d 10] powers." (Hochman, The Supreme Court and the Constitutionality of Retroactive Legislation, 73 Harv.L.Rev. 692, 694 n. 13 (1960).) In this State, however, it is apparent from the cases discussed below that separation of powers is a more common ground for challenging the...

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50 practice notes
  • Nieves v. Hess Oil Virgin Islands Corp., Nos. 86-3049
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • May 22, 1987
    ...was cured prospectively by Congress), cert. denied, --- U.S. ----, 107 S.Ct. 1262, 94 L.Ed.2d 124 (1987); Sanelli v. Glenview State Bank, 108 Ill.2d 1, 90 Ill.Dec. 908, 483 N.E.2d 226 (1985) (upholding against due process and contract clause challenge an Illinois legislature's retroactive c......
  • People v. Walker, No. 63966
    • United States
    • Supreme Court of Illinois
    • February 11, 1988
    ...burden rests upon the State's Attorney, as the challenging party, to demonstrate its invalidity. (Sanelli v. Glenview State Bank (1985), 108 Ill.2d 1, 20, 90 Ill.Dec. 908, 483 N.E.2d 226; Chicago National League Ball Club, Inc. v. Thompson (1985), 108 Ill.2d 357, 368, 91 Ill.Dec. 610, 483 N......
  • Consiglio v. Dep't of Fin. & Prof'l Regulation, Docket Nos. 1–12–1142
    • United States
    • United States Appellate Court of Illinois
    • May 3, 2013
    ...cases arising from facts existing prior to the effective date of the legislation which made the change.” Sanelli v. Glenview State Bank, 108 Ill.2d 1, 10, 90 Ill.Dec. 908, 483 N.E.2d 226 (1985). That is exactly the situation in this case. As we stated earlier, although the Act may draw upon......
  • Bhalerao v. Ill. Dep't of Fin. & Prof'l Regulations, Case No. 11–CV–7558.
    • United States
    • U.S. District Court — Northern District of Illinois
    • November 29, 2011
    ...1065, 1086–88 (2009). The state always retains the authority to safeguard the interests of its citizens. Sanelli v. Glenview State Bank, 108 Ill.2d 1, 90 Ill.Dec. 908, 483 N.E.2d 226 (1985). Put differently, “[o]ne whose rights, such as they are, are subject to state restriction, cannot rem......
  • Request a trial to view additional results
50 cases
  • Nieves v. Hess Oil Virgin Islands Corp., Nos. 86-3049
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • May 22, 1987
    ...was cured prospectively by Congress), cert. denied, --- U.S. ----, 107 S.Ct. 1262, 94 L.Ed.2d 124 (1987); Sanelli v. Glenview State Bank, 108 Ill.2d 1, 90 Ill.Dec. 908, 483 N.E.2d 226 (1985) (upholding against due process and contract clause challenge an Illinois legislature's retroactive c......
  • People v. Walker, No. 63966
    • United States
    • Supreme Court of Illinois
    • February 11, 1988
    ...burden rests upon the State's Attorney, as the challenging party, to demonstrate its invalidity. (Sanelli v. Glenview State Bank (1985), 108 Ill.2d 1, 20, 90 Ill.Dec. 908, 483 N.E.2d 226; Chicago National League Ball Club, Inc. v. Thompson (1985), 108 Ill.2d 357, 368, 91 Ill.Dec. 610, 483 N......
  • Consiglio v. Dep't of Fin. & Prof'l Regulation, Docket Nos. 1–12–1142
    • United States
    • United States Appellate Court of Illinois
    • May 3, 2013
    ...cases arising from facts existing prior to the effective date of the legislation which made the change.” Sanelli v. Glenview State Bank, 108 Ill.2d 1, 10, 90 Ill.Dec. 908, 483 N.E.2d 226 (1985). That is exactly the situation in this case. As we stated earlier, although the Act may draw upon......
  • Bhalerao v. Ill. Dep't of Fin. & Prof'l Regulations, Case No. 11–CV–7558.
    • United States
    • U.S. District Court — Northern District of Illinois
    • November 29, 2011
    ...1065, 1086–88 (2009). The state always retains the authority to safeguard the interests of its citizens. Sanelli v. Glenview State Bank, 108 Ill.2d 1, 90 Ill.Dec. 908, 483 N.E.2d 226 (1985). Put differently, “[o]ne whose rights, such as they are, are subject to state restriction, cannot rem......
  • Request a trial to view additional results

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