On June 17, 2021, the Illinois Supreme Court in Walker v. Chasteen, 2021 IL 126086 (June 17, 2021) struck down on constitutional grounds a section of Illinois’ foreclosure rules imposing a $50 filing fee for each residential mortgage foreclosure case filed, and up to an additional $500 fee for institutions that file many foreclosures, which fees were used to fund programs for credit counseling and remediating blight associated with abandoned property. Because the funds were collected in violation of the law, the state’s county clerks will presumably have to refund all the funds they collected since 2010 which doubtless are in the millions of dollars.
At issue in the case is the constitutionality of sections 15-1504.1 of the Illinois Code of Civil Procedure (735 ILCS 5/15-1504.1), as well as sections 7.30 and 7.31 of the Illinois Housing Development Act (20 ILCS 3805/7.30, 7.31). These sections were enacted as part of the “Save Our Neighborhoods Act,” (“Act”) in response to the mortgage foreclosure crisis of 2010. The legislative goal was to “create[ ] additional programs for people in foreclosure problems” and to “help people who needed help with their mortgage situations and in our foreclosure-plagued society.”
The Act required mortgage foreclosure plaintiffs to pay the clerk of the circuit court additional fees to fund a Foreclosure Program Prevention Fund and an Abandoned Residential Property Fund. The Illinois Housing Development Authority was directed to grant the money collected in the Foreclosure Prevention Program Fund to housing counseling agencies and approved non-profit community-based organizations throughout the state for foreclosure prevention outreach. The minimum fee was $50 but it could increase to over $500 depending on how many foreclosures the plaintiff filed each year. The funds collected in the Abandoned Residential Property Fund were to be distributed by grants to Chicago and other municipalities throughout the state to fund such things as cutting grass at abandoned properties, trimming trees and bushes, extermination of pests, removing garbage and graffiti, installing fencing, demolition, and the general repair or rehabilitation of abandoned residential property.
The plaintiff-mortgagees challenged the Act on the basis that it violated the free access, due process, equal protection, and uniformity clauses of the Illinois Constitution. The circuit court agreed and entered a permanent injunction enjoining the Illinois circuit courts from enforcing and following the statutes as they are currently enacted. The matter was appealed directly to the Supreme Court which affirmed.
The Court examined whether the Act violated the “free access” clause of the constitution which provides that “every person shall find a certain remedy in the laws for all injuries and wrongs which he receives.” A filing fee violates the free access clause if it is imposed on a limited group of plaintiffs and the funds go to the state treasury to fund a general welfare program. But court charges imposed on a litigant do not violate the free access clause if they are assessed to defray the expenses of a party’s litigation.
Using the rational basis test the Court determined the Act violated the “free access” clause. Although the charge is called a “fee,” it was, in fact, a litigation tax. The charge has no direct relation to a plaintiff’s litigation expenses and no relation to the services rendered. The charge is assessed solely to raise revenue for the funds. So, it is a tax on litigation.
The court rejected the argument that the fee was reasonably related to court operations and maintenance because they were designed to reduce foreclosures, and their attendant social problems, and reasonably related to reducing the courts’ caseloads because its grant program could mitigate the many ill effects of property abandonment that give rise to litigation. The Court said the relationship was too remote. The fees were a revenue-raising measure designed to fund a statewide social program and to finance such things as cutting grass, tree trimming, and rehabilitating abandoned residential property. “The benefits for foreclosure prevention programs are indirect at best and have no direct relation to the administration of the court system. Any relation of the filing fee to maintenance and operation of the courts is too attenuated and represents the type of social welfare program tax that [was] prohibited by the free access clause. The grants for repair and rehabilitation of abandoned properties, cutting grass, picking up trash, etc., were even further removed than the counseling services from the operation and maintenance of the courts.”
There was no rational basis for imposing this filing fee on mortgage foreclosure litigants, requiring them to bear the cost of maintaining a social welfare program, while excluding other classes of taxpayers from the burden. The statutes therefore violate the free access clause. Because it concluded the Act is facially unconstitutional, the Court did not address the other constitutional arguments.
Author
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Jim is a founding partner of Noonan & Lieberman. Jim has more than 25 years of experience in civil litigation on behalf of creditors, servicers, business and real estate owners.
