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Kendler v. Rutledge

OPINION FILED NOVEMBER 13, 1979.

K. RICHARD KENDLER, PLAINTIFF-APPELLANT,

v.

RICHARD G. RUTLEDGE ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Cook County; the Hon. RICHARD CURRY, Judge, presiding.

MR. PRESIDING JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT:

Plaintiff, K. Richard Kendler, a licensed real estate broker and member of the Evanston North Shore Board of Realtors (the board), brought a declaratory judgment action in the circuit court of Cook County to challenge sanctions imposed against him by the aforementioned board. The board, acting individually and collectively as defendants, filed a motion to dismiss. The trial court granted the motion to dismiss but allowed an injunction to issue pending appeal to this court.

The Evanston North Shore Board of Realtors, a nonprofit corporation, is a voluntary association whose members engage in the buying, selling, exchanging, renting, leasing, managing, appraising, financing, building, developing or subdividing of real estate. The board has adopted bylaws and a code of ethics to govern the activities of its members. These rules and regulations are implemented by other bylaws which detail the procedures for processing and ruling on complaints. A member charged with a violation has the right to appear, present evidence, and cross-examine his accusers. Additionally, the realtor has the right to seek review of an ethics committee decision by an appeals board made up of 10 of the board's directors. Plaintiff has named as defendants both the individual directors who sat for his intra-association appeal and the board as a whole.

On August 13, 1976, Continental-Hart, Shaw & Co. filed a complaint against the Kendler Company charging violations of the board's code of ethics and code for equal opportunity. Specifically, Continental alleged that Kendler Company and more particularly, K. Richard Kendler, had rejected a full-price offer to purchase a lot in a Lake Forest subdivision because the offerors, Continental's clients, were "non-white." After Kendler Company, through its president, Robert Kendler, responded, categorically denying all charges, Continental wrote a letter to the board three months after the original allegations asking that the complaint be amended to include plaintiff, K. Richard Kendler.

The attorney for Kendler Company, Sheldon Gardner, made three formal motions during this period pertaining not only to the structure and inclusiveness of the pending ethics committee hearing, but also to possible prejudice on the part of the committee. When the chairman of the committee, Herbert Kahn, denied these motions summarily at the beginning of the hearing, instead of prior to the proceedings as the attorney had requested, Gardner moved for a continuance. Upon the motion's denial, Gardner read two substantial objections to the proceedings into the record. He first objected to the committee's jurisdiction over the company since its president, Robert Kendler, and not it, Kendler Company, was a member of the board. Secondly, although his firm had received the attempted amendment to the complaint, it did not suffice as service on or notice to K. Richard Kendler since the service was not in conformity with the board's bylaws; and since Gardner was not representing K. Richard Kendler, it did not constitute service on an agent. The attorney then left.

According to the board's rules, the meeting proceeded even though none of the parties charged was present. Continental called witnesses to detail the events which precipitated its charges. The offeror, DeLars Bracey, testified that he had made an offer to the Kendler Company of $58,500 for a lot within one of their developments. When this offer was rejected, he amended the contract to propose the full listing price ($62,500). Immediately prior to the meeting at the Kendler Company, where the new offer was to be presented, the Braceys' agent, Harnden, told them that their earlier rejection was at least in part racially motivated. When they arrived at the company, Bracey asked plaintiff, who was the only one present, if this statement was true. Plaintiff responded that he would not accept the contracts of any minority persons in that particular area. Harnden then offered plaintiff the contract, but he refused to accept it.

Townsend, an officer with Continental, testified that plaintiff had referred to the fact that he already had six nonwhite families in the subdivision and did not want any more. Further, Townsend was told that the company was in the process of putting a contingency in the listing that would require plaintiff's approval.

Harnden and Mrs. Bracey verified the above testimony. Harnden added that plaintiff had said "non-white" during their discussions. She also stated that when she submitted the first offer to a different member of the company staff, she was asked if her customer was black. The day after she delivered this first offer, the manager at Continental informed her that plaintiff had called to request an immediate meeting. At the meeting, plaintiff revealed that he was rejecting the offer for two reasons: first, it was underpriced; and second, it originated from a black family. He also made known his intent to reject even a full-price offer from this family and stated that if Bracey bought vacant property in the subdivision, plaintiff's firm could undermine completion of the homesite. Construction could be slowed by up to five years and by then, plaintiff would be out of the subdivision, and would not care who built homes there. Plaintiff then cited the case of another black who wanted property in the area and was discouraged by similar means.

Harnden also testified to plaintiff's financial explanation for his actions. Such a sale, plaintiff emphasized, could cost him millions of dollars; he advised the agent not to pursue the matter, and threatened to withdraw the property from the multiple listing service and to resign from the Evanston North Shore Board. After this meeting, Harnden related the discussion to the Braceys, and warned them that purchase of the property could leave them with a vacant lot and no way to get a home built. Harnden described the contract as addressed to Robert Kendler, who is also shown as the title holder of the property on the listing, rather than plaintiff, K. Richard Kendler.

Following the hearing, the board's ethics committee ordered various sanctions imposed on both the Kendler Company and K. Richard Kendler. This order was appealed to an appeals board composed of 10 of the board's directors, none of whom was involved in the earlier proceeding. Before the appeal began, one of the directors detailed his efforts to create a compromise prior to the original investigation. He then asked the attorney for plaintiff and the company if they wanted him to withdraw from the appeals board. The attorney, Schuman, accepted him as a member.

Gardner, the attorney who had left the ethics committee hearing, was present at the appeal. However, since he felt that his actions at the earlier hearing might somehow put him in the posture of a party, he had asked Schuman, another member of his firm, to present the case before the appeals board. Once again the company stressed that it, as an entity, was not a member of the board and therefore not subject to the board's jurisdiction. On plaintiff's behalf, Schuman explained that Gardner had to leave the hearing and declare that he was not representing Kendler; the attorney feared his presence would be construed as entering an appearance and would waive the defects in service of the complaint and notice of the hearing before it was determined whether the firm could represent both plaintiff and the Kendler Company.

The appeals board decision reversed the ethics committee recommendation as it pertained to the company for lack of jurisdiction and reversed and remanded in reference to plaintiff for failure to comply with the bylaw which required personal service of the complaint. The decision mandated further evidentiary hearings to be assigned to an ethics committee, "no member of which shall have participated in the original hearings or in this appeal." The reasoning behind the order was twofold: first, the term of the original committee had expired; and second, respondents had challenged the objectivity of the original committee. Although the appeals board felt the challenge to be groundless, to dispel any doubts as to that fact, a new committee, comprised of new members, was directed to conduct the further hearings.

All parties stipulated to the use of the original record at the second ethics committee hearing, because in the interim, Mr. Bracey had died. In addition, plaintiff presented new evidence: the testimony of both Robert Kendler and himself. The special committee still found against plaintiff, which decision was affirmed by the appeals board.

Plaintiff next filed an action for a declaratory judgment in the circuit court of Cook County, alleging that the appeals board had violated the board's bylaws by affirming a finding of failure to communicate an offer without evidence in the record to support it, by allowing a member of the ethics committee (Kahn) to sit on the appeals board in review of what was at least partially his own decision, and by hearing new testimony and evidence. The complaint alleged that these violations deprived ...


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