People ex rel. Madigan v. Wildermuth
2017 IL 120763
Supreme Court of Illinois
September 21, 2017
2017 IL 120763
Illinois Official Reports
Docket No. 120763
Filed September 21, 2017
Decision Under Review: Appeal from the Appellate Court for the First District; heard in that court on appeal from the Circuit Court of Cook County, the Hon. Diane L. Larsen, Judge, presiding.
Judgment: Appellate court judgment affirmed in part and vacated in part; cause remanded.
Counsel on Appeal: Robert E. Browne, Jr., and William P. Pipal, of Troutman Sanders LLP, of Chicago, and Michael T. Reagan, of Ottawa, for appellants.
Lisa Madigan Attorney General, of Springfield (David L. Franklin, Solicitor General, and John Schmidt, Assistant Attorney General, of Chicago, of counsel), for the People.
Elizabeth Shuman-Moore and Ryan Z. Cortazar, of Chicago Lawyers Committee for Civil Rights, and William J. McKenna, Jr., and Peter J. O‘Meara, of Foley & Lardner LLP, both of Chicago, for amici curiae Chicago Lawyers Committee for Civil Rights Under Law, Inc., et al.
OPINION
¶ 1 This appeal presents a certified question involving the requirements necessary to maintain a civil rights claim for unlawful discrimination in conneсtion with a “real estate transaction” under section 3-102 of the Illinois Human Rights Act (the Act) (
“Whether the Statе may claim a violation under the Illinois Human Rights Act pursuant to a reverse redlining theory where it did not allege that the defendant acted as a mortgage lender.”
The appellate court answered the certified question in the affirmative. 2016 IL App (1st) 143592, ¶ 38. Defendants petitioned for leave to appeal to this court, which we allowed.
BACKGROUND
¶ 2 The Attorney General filed a multicount, fourth amended complaint against defendants, alleging a course of conduct that violated several statutory and regulatory provisions. Count IV is the only count relevant to this appeal1 and alleges as follows. Defendants Wildermuth, an attorney, and Kleanthis, a veteran of the real estate business and the sole managing member of LMN, engaged in acts and practices that violated section 3-102 of the Act. Defendants’ actions constituted a pattern and practice of discrimination in the offering of loan modification services to Illinois consumers. Eventually, LMN ceased functioning, and Wildermuth and Kleanthis provided loan modification services through Wildermuth‘s law offices. According to the complaint, defendants engaged in “real estate transactions” as defined by section 3-101(B) of the Act (
¶ 4 The Attorney General further alleged that defendants advertised on radio that they would succeed where other loan modification providers had failed, help consumers save their homes
¶ 5 The complaint further alleged that despite the broad assurances given by defendants, their services consisted primarily of filling out and submitting the paperwork to apply for a traditional home loan modification program. The modifications obtained were often either inconsistent with the promised terms or not obtained within the promised time frame. When defendants were not able to obtain a loan modification, they would suggest listing the consumer‘s property as a short sale. The Attorney General also alleged that defendants intentionally discriminated in the furnishing of facilities or services in connection with real estate transactions on the basis of race and national origin by targeting the African-American and Latino communities by advertising their services through radio stations known to have a predominantly Latino and African-American audience.
¶ 6 Defendants filed a section 2-615 motion to dismiss count IV, asserting that the complaint failed to state a violation of section 3-102(B) of the Act because Wildermuth rendered legal services and was not engaging in “real estate transactions” as defined by the Act. In response, the Attorney General argued that defendants engaged in “real estate transactions” within the meaning of the Act when they negotiated loan modifications and short sales on behalf of consumers. The Attorney General relied on a “reverse redlining” theory to argue that defendants engaged in discrimination.2
¶ 7 The circuit court denied defendants’ motion to dismiss, concluding that defendants’ conduct was сovered by the Act because they acted as “mortgage brokers” in their activities. The circuit court subsequently denied defendants’ motion to reconsider, but it noted that “it would be expeditious to have the appellate court determine in the first instance—can you even state a claim.” The circuit court therefore certified for review the following question:
“Whether the State may claim a violation of the [Act] pursuant to a reverse redlining theory where it did not allege that the defendant acted as a mortgage lender.”
¶ 8 The appellate court answered the question in the аffirmative, holding that “the concept of reverse redlining is not strictly limited to situations involving mortgage lending and section 3-102(B) of the Act broadly encompasses conduct other than mortgage lending, including the loan modification services that defendant offered.” 2016 IL App (1st) 143592, ¶ 38. The appellate court did not directly address the circuit court‘s ruling that defendants’ alleged activities suggested they were mortgage brokers.3 In reaching its holding, the appellate court made three findings relative to the parties’ arguments on the certified question. First, the appellate court found that the plain language of section 3-102 does not require a defendant alleged to have violated the statute to be a mortgage lender. To the contrary, the plain language merely requires that the entity engage in a “real estate transaction,” which is defined in pertinent part to include ” ‘providing other financial assistance *** for maintaining a dwelling.’ ” Id. ¶ 25 (quoting
¶ 9 Defendants filed a petition for leave to appeal, which this court allowed.
ANALYSIS
¶ 11 Before this court, defendants argue that the lower courts misinterpreted the applicable statutory language to determine that defendants either engaged in “real estate transactions” or were acting as “mortgage brokers.” We note that the full scope of the issues presented in this
¶ 12 Section 3-102 of the Act is titled “Civil Rights Violations; Real Estate Transactions” and provides in relevant part as follows:
“It is a civil rights violation for an owner or any other person engaging in a real estate transaction, or for a real estate broker or salesman, because of unlawful discrimination or familial status, to
(A) Transaction. Refuse to engage in a real estate transaction with a person or to discriminate in making available such a transaction;
(B) Terms. Alter the terms, conditions or privileges of a real estate transaction or in the furnishing of facilities or services in connection therewith[.]”
775 ILCS 5/3-102 (West 2010) .
¶ 13 Section 3-101 of the Act provides the following definitions for the terms “real estate transaction” and “real estate broker or salesman“:
“(B) *** ‘Real estate transaction’ includes the sale, exchange, rental or lease of real property. ‘Real estate transaction’ also includes the brokering or appraising of residential real property and the making or purchasing of loans or providing other financial assistance:
(1) for purchasing, constructing, improving, repairing or maintaining a dwelling; or
(2) secured by residential real estate.
***
(D) *** ‘Real estate broker or salesman’ means a person, whether licensed or not, who, for or with the expectation of receiving a consideration, lists, sells, purchases, exchanges, rents, or leases real property, or who negotiates or attempts to negotiate any of these activities, or who holds himself or herself out as engaged in these.” (Emphases added.)
775 ILCS 5/3-101(B) ,(D) (West 2010) .
I. Financial Assistance
¶ 15 The Attorney General first argues that defendants were engaged in real estate transactions because they provided “other finanсial assistance” to distressed homeowners for purposes of “maintaining a dwelling” as set forth in section 3-101(B) of the Act. The Attorney General contends that the phrase “other financial assistance” in that section should be construed liberally to include defendants’ business model of assisting consumers with applying for loan modifications.
¶ 16 In response, defendants argue that they did not provide any “financial assistance” that could be considered to fall within the plain meaning of the Act. They point out that section
¶ 17 When construing a statute, this court‘s fundamental objective is to ascertain and give effect to the intent of the legislature. Beggs v. Board of Education of Murphysboro Community Unit School District No. 186, 2016 IL 120236, ¶ 52. The most reliable indicator of legislative intent is the statutory language itself, giving it its plain and ordinary meaning. People v. Perry, 224 Ill. 2d 312, 323 (2007). In determining the plain meaning of statutory terms, we consider the statute in its entirety, keeping in mind the subject it addresses and the apparent intent of the legislature in enacting it. Id. Words and phrases should not be construed in isolation but must be interpreted in light of other relevant provisions of the statute. Michigan Avenue National Bank v. County of Cook, 191 Ill. 2d 493, 504 (2000). Similarly, the meaning of questionable words or phrases in a statute should be ascertained by reference to the meaning of the surrounding words and phrases. Hayes v. Mercy Hospital & Medical Center, 136 Ill. 2d 450, 477 (1990) (Calvo, J., dissenting, joined by Ward and Clark, JJ.). When addressing the meaning of an undefined statutory term, it is the responsibility of the court to choose a dictionary definition that most effectively conveys the intent of the legislature. Gaffney v. Orland Fire Protection District, 2012 IL 110012, ¶ 95 (Garman, J., concurring in part and dissenting in part, joined by Thomas and Karmeier, JJ.).
¶ 18 We begin our analysis with an examination of the statutory language itself. The Act does not define the term “other financial assistance,” and it must be read in context with the surrounding statutory language. We note that the term is preceded by the words “the making or purchasing of loans” and is succeeded by the phrase “for purchasing, constructing, improving, repairing or maintaining a dwelling.” See
¶ 20 There is also no reason to believe, based on the allegations of the complaint, that the purpose of any assistance rendered by defendants was for “maintaining a dwelling,” as is required by section
¶ 21 Our holding is consistent with federal case law interpreting the cognate provisions contained in section
¶ 22 To reach its contrary conclusion that defendant‘s conduct—in filling out paperwork for the loan modification process and recommending short sales—amounted to “financial assistance” for maintaining a dwelling, the appellate court relied upon Eva, 143 F. Supp. 2d 862, American Family Mutual, 978 F.2d at 297, and Massachusetts Industrial, 910 F. Supp. at 28-29. We find these cases to be easily distinguishable.
¶ 23 In Eva, defendant U.S. Mortgage Reduction, Inc. (USMR), was an affiliate of the lender. USMR managed and advertised a loan acceleration program, under which USMR collected one additional payment a year from plaintiffs and USMR profited directly from the loan by pocketing the fees charged in connection with the acceleration program. The Eva court found the allegation that USMR manages the acceleration program to be sufficient alone to satisfy the statutory language of providing financial assistance to maintain a dwelling. The court also found it significant that USMR‘s acceleration agreement misrepresented the terms of the loan. The court concluded that “USMR is not too far removed from transactions in the commercial residential market, nor is it lacking in any connection to the financing of residential real estate, as to warrant dismissal of [p]laintiffs’ § 3605 claim.” Eva, 143 F. Supp. 2d at 889.
¶ 24 In contrast to Eva, the Attorney General in the present case did not allege that defendants were affiliated with any lender or bank. Nor was it alleged that defendants misrepresented the terms of a loan they managed. Instead, defendants were outside the actual pipeline of the loan process as far as the decision-making on the terms and conditions of any loan or loan modifiсation. In fact, defendants in the present case actually represented their clients against the lenders in the process of dealing with their arrears on their mortgages, albeit in such a way as to allegedly deceive and defraud their clients. But this does not amount to a violation of sections 3-101 and 3-102 of the Act.
¶ 25 Another federal case relied upon by the appellate court, American Family Mutual, 978 F.2d 287, also does not help the Attorney General‘s position. There, the Court of Appeals, Seventh Circuit, held that it would strain the “language [of section 3605] past the breaking point to treat [the sale of] property or casualty insurance as ‘financial assistance‘—let alone as assistance ‘for purchasing *** a dwelling.’ ” Id. at 297. In reaching this holding, the court reasoned as follows:
“Insurers do not subsidize their customers or act as channels through which public agencies extend subsidies. They do not ‘assist’ customers even in the colloquial sense that loans are ‘assistance’ (a lender advances cash, with repayment deferred). Payment runs from the customer to the insurer. Insurance is no more ‘financial assistance’ than a loaf of bread purchased at retail price in a supermarket is ‘food assistance’ or a bottle of aspirin brought from a druggist is ‘medical аssistance.’ ” (Emphasis added.) Id.
¶ 26 In the case before us, the appellate court seized upon the language from American Family Mutual, which states that ” ‘[i]nsurers do not subsidize their customers or act as channels through which public agencies extend subsidies.’ ” 2016 IL App (1st) 143592, ¶ 28 (quoting American Family Mutual, 978 F.2d at 297). The appellate court believed that defendants “hold themselves out as a channel through which relief flows in the form of residential loan modifications via government programs designed to help delinquent *** homeowners avoid foreclosures.” Id.
¶ 28 The appellate court also found it significant that defendants’ alleged conduct indicated that they “interfered with consumers’ ability to obtain a particular type of financial assistance—residential loan modifications.” Id. ¶ 27. But it is hard to fathom how “interfering” with someone‘s ability to obtain financial assistance is the same thing as “providing” financial assistance. Defendants were no more a necessary channel through which funds flow (i.e., financial assistance) than a druggist is a channel through which drugs flow (i.e., medical assistance), and therefore accepting the appellate court‘s interpretation would be, in the words of American Family Mutual, to “strain [the] language [of the statute] past the breaking point.” American Family Mutual, 978 F.2d at 297.
¶ 29 The appellate court also relied upon Massachusetts Industrial, 910 F. Supp. 21, to support its conclusion. There, the defendant was a quasi-public agency that issued tax-exempt bonds for qualifying organizations after application. After the bonds were sold, it issued the proceeds to the qualifying organizations. Id. at 29. The defendant was a “necessary conduit” through which money to others flowed and was a direct participant in the financial transaction. Massachusetts Industrial distinguished American Family Mutual by stating, “[a]n insurer does not provide a necessary conduit thrоugh which funds flow; the defendant here does.” Id. at 28.
¶ 30 We have already determined that defendants’ services here cannot be considered necessary, and defendants are not “necessary conduits” through which funds flow. Nor are they a quasi-public agency. Massachusetts Industrial is thus readily distinguishable from the present case.
¶ 31 Of the cases cited by the parties before this court, the one that comes closest to the facts of this case is Davis v. Fenton, 26 F. Supp. 3d 727. There, the defendant provided legal services to the plaintiff client who was being foreclosed upon by a mortgage company. The parties’ retainer agreement outlined the scope of representatiоn and included such matters as reviewing loan documents and negotiating with the mortgagee. Id. at 734. The main issue in the case had to do with the enforceability of an arbitration clause in the retainer agreement. In deciding that issue, however, the court considered whether defendant‘s conduct included “real-estate related transactions” within the meaning of section 3605 of the FHA. The court concluded that it did not. It found that the “[d]efendants are not lenders, brokers, or appraisers, and so [p]laintiffs attempt to bring a claim against them under section 3605 is misguided.” Id. at 741. In reaching its conclusion, the Fenton court quoted the holding of Jones, 2010 WL 551418, at *7, with approval as follows: “section 3605 did not apply to defendant because defendant ‘was neither the lender, nor the broker, nor the appraiser of [plaintiffs] mortgage loan, nor did it provide any other financial assistance in the transaction.’ ” Davis v. Fenton, 26 F. Supp. 3d at 741.
¶ 32 We agree with the appellate court that, under the Act, it is not necessary to allege that one is a mortgage lender to sustain a claim for a violation of the statute. We find, however, that the grounds relied upon here with respect to the “other financial assistance” language were lacking. There is also no support for the circuit court‘s decision to deny defendants’ motiоn to dismiss on the basis that defendants’ alleged activities indicated that they were in violation of the Act because they were “mortgage brokers,” and the Attorney General does not argue
II. Real Estate Broker
¶ 34 As an alternative argument, the Attorney General claims that there is a second way that liability may attach under the Act to defendants’ conduct. According to the Attorney General, because defendants held themselves out as negotiating short sales, they are considered “real estate brokers” under section 3-101(D) of the Act (
¶ 35 The problem with the Attorney General‘s argument is that even if we accept that dеfendants were “real estate brokers” for purposes of the statute, they would still have to engage in a “real estate transaction” as defined by section
¶ 36 Here, there is no allegation in the comрlaint that defendants actually brokered any short sales. The complaint merely alleges that defendants “recommended” or “suggested” short sales and claimed to be able to negotiate them. Nor is there any allegation in the complaint that defendant altered any terms or services in connection with a short sale because of unlawful discrimination. Under these circumstances, we reject the Attorney General‘s argument that the ruling on the motion to dismiss can be sustained on the basis that defendants were “real estate brokers.”
¶ 37 Our resolution of the foregoing issues renders it unnecessary to address the remaining arguments of the parties.
CONCLUSION
¶ 39 For the foregoing reasons, we conclude that the appellate court was correct in answering the certified question in the affirmative. We further conclude, however, that the appellate court erred in its analysis and that count IV of plaintiff‘s complaint should have been dismissed without prejudice. Accordingly, we vacate the appellate court‘s discussion, which found that defendants engaged in a “real estate transaction” by providing “other financial assistance,” and we remand the cause to the circuit court for further prоceedings consistent with this opinion.
¶ 40 Appellate court judgment affirmed in part and vacated in part; cause remanded.
JUSTICE THOMAS
SUPREME COURT OF ILLINOIS