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Clayton v. Village of Oak Park





Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.


The intended purpose of the ordinance challenged here is "to insure the single-family residences in the village of Oak Park against the possibility of economic loss, and thereby help to eliminate irrational fears of racial change," and to assure owners that their properties will not deteriorate in value as a result of projected racial changes in the community. A declaratory judgment action was brought by certain owners of non-qualifying properties within the village attacking the validity of the ordinance. The respective parties filed cross-motions for judgment on the pleadings. Judgment was entered for the village from which plaintiffs appeal.

The principal issues presented for review include whether: the ordinance places the village of Oak Park in the business of insurance, in violation of the Illinois Insurance Code; and, the ordinance is invalid for violating one or more of several constitutional provisions identified by plaintiffs.

We affirm for the reasons which follow.

The village notes in its brief, without contradiction, that "racial change is not an academic problem in Oak Park" and that it is surrounded by areas which are totally segregated, involving both wholly white and wholly black populations. Since its adoption of a fair housing ordinance 14 years ago, the village has endeavored to be a racially integrated community and has utilized its home rule powers since 1970 to combat "steering, blockbusting, segregation, and the attendant evil of blighted housing."

The ordinance before us in this appeal is entitled "Ordinance Providing for an Equity Assurance Plan for Single Family Residences in the Village of Oak Park." It creates an Equity Assurance Program (Program) administered by a nine-member commission appointed by the village president. Generally, the Program allows each owner who occupies his single-family residence in the village to apply by submitting a fee, now set at $90, *fn1 upon receipt of which the residence is appraised by a commission-approved appraiser. When the appraisal is completed, the commission issues a certificate of participation to the homeowner showing, among other things, his membership in the Program and the home's appraised valuation.

Through the Program, after a five-year waiting period, the village will reimburse a participating owner 80% of the difference between the appraised value of the home at time of certification and the value at the time of sale if there has been a diminution in value. The Program is not intended to "insure against a regional or national decline in values" of homes. Accordingly, in the event of general economic decline in the value of homes in the Cook County metropolitan area, the "President and Board of Trustees of the Village of Oak Park reserve the right to review, revise and suspend payments" under the Program.


• 1 Plaintiffs first contend that the ordinance is void because it places Oak Park in the insurance business without proper registration, in violation of section 121(1) of the Illinois Insurance Code (Code) (Ill. Rev. Stat. 1981, ch. 73, par. 733(1)), which provides: "It shall be unlawful for any company to enter into a contract of insurance as an insurer or to transact insurance business in this State, without a certificate of authority from the Director." (Emphasis added.) Plaintiffs insist that the word "company" embraces municipal entities such as Oak Park. In section 2 of the Code, "company" is defined to include "* * * [an] individual or aggregation of individuals engaging in or proposing or attempting to engage in any kind of insurance or surety business * * *." (Ill. Rev. Stat. 1981, ch. 73, par. 614(e).) Plaintiffs maintain further that absent a certificate of authority, the activities stemming from the Program constitute the unauthorized transaction of insurance business.

The term "company" under the regulatory provisions of the Code contemplates an entity engaged or attempting to engage in an "insurance or surety business." (Ill. Rev. Stat. 1981, ch. 73, par. 614(e); see Ill. Rev. Stat. 1981, ch. 73, pars. 733(1), 733-3.) The phrase "insurance business" is not defined in the Code, but it cannot be construed as identical to "insurance"; otherwise, the word "business" would be without effect. (See People v. Lutz (1978), 73 Ill.2d 204, 212, 383 N.E.2d 171.) The legislature must be presumed to have deliberately added the word "business" (State ex rel. Farmer v. Monsanto Co. (Mo. 1974), 517 S.W.2d 129, 132), and that the term is to be used in its ordinary sense. (City of East Peoria v. Group Five Development Co. (1981), 87 Ill.2d 42, 46, 429 N.E.2d 492.) The word "business" has been defined as "`any particular occupation or employment, habitually engaged in, especially for livelihood or gain.'" (Svithiod Singing Club v. McKibbin (1942), 381 Ill. 194, 199, 44 N.E.2d 904.) An insurance company is an ordinary business corporation whose policies are obtained for ordinary business purposes. (Peterson v. Manhattan Life Insurance Co. (1910), 244 Ill. 329, 91 N.E. 466.) An insurance business transaction anticipates payment by the assured of a consideration proportionate to the insurer's risk of having to pay the potential loss. Vredenburgh v. Physicians Defense Co. (1906), 126 Ill. App. 509, 511.

The Program here cannot be said to have been established as an "occupation" for "livelihood or gain" for the village. The nominal, one-time $90 fee charged to participating homeowners principally covers the expense of appraising the premises; it bears no proportionality to the extent of the risk covered. The cost of the Program is mainly borne by the village as a whole rather than by the applicants. These features of the Program thus are significantly distinguishable from the business venture of selling repurchase contracts involved in Commonwealth ex rel. Schnader v. Fidelity Land Value Assurance Co. (1933), 312 Pa. 425, 167 A. 300. The ordinance and its Program here focus upon a governmental purpose and do not place the village in the insurance business.

In 1971, article VIII 1/2 (Ill. Rev. Stat. 1981, ch. 73, pars. 743.1 et seq.) was added to the Code, which relates to insurance holding company systems. It includes a special definition of "company" under section 131.1(d), which has "the same meaning as `company' as defined in section 2 of this Code, except that it does not include agencies, authorities or instrumentalities of * * * a State or political subdivision of a State." (Ill. Rev. Stat. 1981, ch. 73, par. 743.1(d).) The express exclusion from this special definition of political subdivisions of a State and the absence of such an exclusion in section 2 of the Code lead plaintiffs to conclude that the general definition contained in section 2 must be read to include political subdivisions within its terms. Plaintiffs overlook the broad home rule powers enjoyed by municipal entities, such as Oak Park, under article VII, section 6(a) of the 1970 Illinois Constitution, to "* * * exercise any power and perform any function pertaining to its government and affairs * * *." The omission of such an exclusion from the general definition in section 2 of the Code, written in 1937, cannot be construed to deny this fundamental grant of power by the 1970 Illinois Constitution. Involvement by home rule units in various forms of insurance programs pertaining to their government and affairs has been upheld in other jurisdictions as well. See, e.g., Butterworth v. Boyd (1938), 12 Cal.2d 140, 82 P.2d 434; City of Wichita v. Wyman (1944), 158 Kan. 709, 150 P.2d 154.

Further, the intergovernmental cooperation provisions of the constitution authorize home rule entities to contract and otherwise associate with other public agencies or private corporations in any manner not prohibited by law. (Ill. Const. 1970, art. VII, sec. 10(a).) Section 6 of the Intergovernmental Cooperation Act (Ill. Rev. Stat. 1981, ch. 127, par. 746) allows governmental units to contract for joint self insurance and further liability or loss protection in such areas as may need insurance protection. When the foregoing provisions are read together with the definition of an insurance holding company system (Ill. Rev. Stat. 1981, ch. 73, par. 743.1(c)), "two or more affiliated persons, one or more of which is an insurance company as defined * * *" in section 2, section 131.1(d) simply makes clear that even if a home rule entity is associated with other agencies or corporations in an insurance holding company system, it is nevertheless exempted from Code regulations. The absence of an express exclusion of political subdivisions from the section 2 definition, therefore, is further explained and is of no consequence to the issues here presented.

• 2 Finally, the rights of the sovereign are not impaired by a general legislative enactment governing private rights unless the enactment expressly makes the sovereign accountable. (Department of Revenue v. Appellate Court (1977), 67 Ill.2d 392, 396, 367 N.E.2d 1302; Division of Old Age Assistance v. Lyman (1939), 373 Ill. 27, 30, 25 N.E.2d 49.) Since neither the State nor its municipalities or ...

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