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Chi. Real Estate Bd. v. City of Chicago





APPEAL from the Circuit Court of Cook County; the Hon. JOHN J. LUPE, Judge, presiding.


Rehearing denied March 27, 1967.

Plaintiffs, Chicago Real Estate Board, an association of real-estate brokers, and certain individual and corporate brokers, instituted this action against the city of Chicago, the Mayor, and the Chicago Commission on Human Relations to obtain a declaratory judgment on the constitutionality of the Chicago Fair Housing Ordinance, and to obtain an injunction prohibiting its enforcement. The circuit court of Cook County entered a declaratory decree sustaining the constitutionality of the ordinance and denying the injunction. The decree also dismissed the complaint as to the Real Estate Board on the ground that it was not a real-estate broker aggrieved by the ordinance, and therefore without standing to maintain this suit. From that decree plaintiffs have appealed to this court.

The issues presented for our determination are: whether the municipality has authority under Illinois law to adopt such an ordinance; whether the ordinance violates the due-process and equal-protection clauses of the constitution of the United States and of the State of Illinois; whether the ordinance violates the constitutional guarantees of freedom of speech and freedom from unlawful or unreasonable search and seizure; and whether the enforcement procedure of the ordinance complies with the requirements for procedural due process. The question of the standing of the Chicago Real Estate Board was not argued on this appeal.

Analysis of these issues requires review of the salient provisions of the ordinance, and also of the facts appearing in the record, inasmuch as this court cannot adjudicate rights in a vacuum, nor predicate decisions on legal concepts divorced from practical realities. Jewel Tea Co. v. Industrial Com. 6 Ill.2d 304, 316; Vissering Mercantile Co. v. Annunzio, 1 Ill.2d 108, 116.

The ordinance adopted by the city council of Chicago on September 11, 1963 declares it unlawful for real-estate brokers to discriminate on account of race, color, religion, national origin or ancestry in the sale, rental or financing of residential property in the city. The ordinance also declares, in substance, that it is unlawful for brokers to solicit sales of property from white persons on the ground that loss of value will ensue because Negroes have moved or are about to move into a neighborhood, a practice commonly referred to as "panic peddling." In this connection it prohibits the distribution by brokers of any written material or statements designed to induce the owner to sell or lease his property for such reasons.

The administrative machinery for enforcement of the ordinance empowers the Commission on Human Relations to initiate or receive complaints charging violations of the law, to investigate them, and to conduct conciliation hearings. If such conciliation fails, the commission shall, after notice to all parties, hold a hearing on the complaint, in which oaths are administered and testimony taken, and make a written report and recommendations which shall be served on the parties within a specified time. The commission is empowered to recommend to the mayor in this report the suspension or revocation of the broker's license issued by the city if he is found guilty of violating the ordinance. Any broker whose license has been suspended or revoked, or any complainant aggrieved by the decision has the right of appeal under the Administrative Review Act. The mayor may also direct the corporation counsel to file with the Illinois Department of Registration and Education a complaint against any broker found violating the ordinance, seeking suspension or revocation of his State license.

According to the facts adduced by the parties, it appears that of the 3 1/2 million population of Chicago, more than 900,000 are Negroes. An overwhelming number of them live, not entirely by choice, in blocks that are 90% to 100% Negro occupied. This pattern of segregation commenced about the time of World War I, when the expansion in Negro population in this area began. At that time discriminatory practices were openly advocated by the realtors on the assumption that property values would go down if Negroes moved into a neighborhood. It was urged that each block be filled solid with Negroes, and that further expansion of the Negro population be confined to contiguous blocks and be enforced by "Jim Crow" ordinances.

After such laws were held unconstitutional (Buchanan v. Warley, 245 U.S. 60, 62 L.Ed. 149,) the realtors recommended that white property owners be organized for every white block to prevent Negro infiltration, and that restrictive covenants be used to bar their purchase or use of residential property. This discriminatory policy was reflected in the Real Estate Board's Code of Ethics which, until 1950, provided: "A realtor should never be instrumental in introducing into a neighborhood * * * members of any race or nationality or any individual whose presence would be clearly detrimental to property values in that neighborhood."

That Code of Ethics was changed in 1950, after a series of decisions by the United States Supreme Court (Shelley v. Kraemer, 334 U.S. 1, 92 L.Ed. 1161; Hurd v. Hodge, 334 U.S. 24, 92 L.Ed. 1187; and Barrows v. Jackson, 346 U.S. 249, 97 L.ed. 1587) established that the enforcement of restrictive covenants against Negroes, either by specific performance, or by an action for damages, constituted "State action," which violated the fourteenth amendment of the United States constitution. The realtor's Code of Ethics thereafter deleted the references to "race" and "nationality." It does not appear, however, that this change was accompanied by either any widespread re-education of members, nor that it produced any change in policy among realtors with respect to Negroes, according to the testimony of the executives of two of the largest real-estate brokerage establishments in the city.

One of these brokers testified that he knew that prior to September, 1963, there was a general practice among brokers not to submit the property in certain areas if the people were "of a certain religious group, and in other areas if they were of a certain racial group, and in other areas if they were of a certain color." He admitted that this practice was not necessarily the result of a requirement in the exclusive listing contract with the owner, and that practices in 1963 before the Fair Housing Ordinance was passed were not any different than in 1948, before the Supreme Court of the United States held that restrictive covenants were unenforceable. After the enactment of the Fair Housing Ordinance in 1963, however, there was a complete change in policy.

Another broker testified that prior to September, 1963, his firm handled many properties which were shown only to white buyers, notwithstanding the fact that neither the listing agreements nor the management agreements contained any directions to the broker as to the race of people to whom the property could be shown. In fact, he had never seen a management or sales agreement which contained a directive as to the race, religion or national origin of the person to whom the property could be rented or sold. He stated further that it has been the practice of the industry for many years not to lease to Negro families in certain areas of Chicago.

In rebuttal, one of the plaintiffs testified that brokers made decisions to exclude Negroes as tenants or purchasers only on the basis of the owner's directions. However, not a single contract limiting the broker's action in that respect was introduced or cited.

With respect to the quality and cost of Negro housing in Chicago, according to the 1960 census returns, 82% of the housing occupied by white persons and 59% of the housing occupied by Negroes was classified as being in sound condition. The same median rental of $88 was shown for both white and colored persons.

Sociologists, and civic and religious leaders testified on the basis of their experience and on field studies, concerning the discriminatory practices in the housing market in Chicago, the de facto segregation, and the serious problems created thereby for the city's educational institutions, its churches, and its law enforcement authority.

On the basis of this record, the circuit court entered a decree declaring that the city of Chicago had statutory power to pass the ordinance; that the ordinance was reasonable and violated no constitutional provision; that the injunction should be denied; and that the plaintiff Real Estate Board be dismissed since it is not a real-estate broker aggrieved by the ordinance.

The validity of this ordinance depends first upon whether it is within the purview of the powers of the city of Chicago. As a municipal corporation the city is without inherent power, and must rely upon powers expressly granted and those necessarily incident to such powers in order to adopt regulatory measures. City of Chicago v. Mandel Bros. 264 Ill. 206; City of Chicago v. Wonder Heating and Ventilating Systems, 345 Ill. 496; Barnard & Miller v. City of Chicago, 316 Ill. 519.

In support of its authority to enact the Fair Housing Ordinance the city of Chicago relies upon its expressly delegated power to regulate brokers conferred by State statute. Section 11-42-1 of the Cities and Villages Act, (Ill. Rev. Stat. 1965, chap. 24, par. 11-42-1,) originally enacted in 1871, provides: "The corporate authorities of each municipaliity may license, tax, and regulate auctioneers * * * brokers * * *". (Enumerating certain occupations.)

The power of municipalities to regulate brokers, conferred by this statute, was expressly saved by the following provision in the comprehensive State law regulating real-estate brokers and salesmen (Ill. Rev. Stat. 1965, chap. 114 1/2, par. 17): "Nothing in this Act contained shall affect the power of cities and villages to tax, license and regulate real estate brokers. The requirements hereof shall be in addition to the requirements of any existing or future ordinance of any city or village so taxing, licensing or regulating real estate brokers." (Emphasis supplied.)

The case law, both before and after the passage of the comprehensive State law, had recognized the powers of a municipality to regulate brokers. Braun v. City of Chicago, 110 Ill. 186; Village of Itasca v. Luehring, 4 Ill.2d 426, 431.

Plaintiffs argue, however, that the "power to regulate" does not encompass the power to regulate with respect to civil rights, because that was not contemplated at the time the power to regulate was conferred in 1871. In support of this contention plaintiffs rely principally on Arnold v. City of Chicago, 387 Ill. 532, and Ambassador East, Inc. v. City of Chicago, 399 Ill. 359. In the Arnold case the court refused to imply that the city's power to regulate "money changers" included the power to regulate "currency exchanges," which was a distinct business unknown when the particular law was passed. In the Ambassador East case the court refused to imply power to regulate rents or permanent residents of hotels, where "hotels" were expressly excluded from the rent-control law. Those cases involving attempts to imply municipal power over businesses not listed in or expressly excluded from a law are in no way determinative in the case at bar, which involves the application of an express power to a designated occupation.

It would be unusual to construe the power "to regulate" to mean only the kind of regulation conceivably contemplated by the legislature in 1871, as plaintiffs suggest. That exercise in conjecture would be contrary not only to the policy of this court to maintain the resiliency of the law, (Zelney v. Murphy, 387 Ill. 492, 500; Molitor v. Kaneland Com. Unit Dist. 18 Ill.2d 11; Amann v. Faidy, 415 Ill. 422), but to the plain terms of the statute preserving, without qualifications, future regulations of brokers by municipalities. Ill. Rev. Stat. 1965, chap. 114 1/2, par. 17.

The express power "to regulate" a particular business has been held to include the power to enact police regulations for that business. (City of Chicago v. Vokes, 28 Ill.2d 475, 479; Frazer v. City of Chicago, 186 Ill. 480, 490; Dean Milk Co. v. City of Chicago, 385 Ill. 565, 574.) In the Vokes case it was held that by virtue of the city's power to regulate taxicabs, it could police that business and impose restrictions on it.

Police power is also conferred on a municipality by statute. Section 11-1-1 of the Cities and Villages Act, (Ill. Rev. Stat. 1965, chap. 24, par. 11-1-1,) which provides that "The corporate authorities of each municipality may pass and enforce all necessary police ordinances," has been construed to confer power to pass and enforce all police ordinances necessary to carry out powers delegated under other provisions of the law. Consumers Co. v. City of Chicago, ...

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