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Coldwell Banker Res. Real Est. v. Clayton





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


Plaintiff, Coldwell Banker Residential Real Estate Services of Illinois, Inc., d/b/a Coldwell Banker-Thorsen Company, filed a four-count verified complaint for declaratory judgment in the circuit court of Cook County. At issue is the interpretation and constitutionality of section 15(e)(20) (the section) of the Real Estate Brokers and Salesmen License Act (Act) (Ill. Rev. Stat. 1981, ch. 111, par. 5732(e)(20).) Count I alleges that two marketing plans devised by the plaintiff do not violate the section. Count II alleges that the section violates the due process clause of the Illinois Constitution. Count III alleges that the section violates the equal protection clause of the Illinois Constitution. Count IV alleges that the section violates plaintiff's right to free speech under the Illinois Constitution and the first amendment of the United States Constitution. Ill. Const. 1970, art. I, secs. 2, 4; U.S. Const., amend. I.

Plaintiff and defendant, Gary L. Clayton, Director of the Department of Registration and Education, filed cross-motions for summary judgment. Following oral arguments, the circuit court held that plaintiff's two marketing plans were in violation of the section. Nevertheless, the court granted plaintiff's motion for summary judgment, finding that the section was invalid as violative of the due process clause of article I, section 2, of the 1970 Illinois Constitution. Defendant directly appeals the decision to this court, pursuant to Supreme Court Rule 302(a)(1) (94 Ill.2d R. 302(a)(1)). Plaintiff has cross-appealed from the circuit court's finding that its marketing plans violate the section, as well as reasserted its due process, equal protection and free speech claims. The Federal Trade Commission (FTC), as amicus curiae, has been allowed to file a brief on behalf of the plaintiff.

Four issues are raised on appeal: (1) Do plaintiff's marketing plans violate the section in question? (2) Does the section violate the due process clause of the Illinois Constitution? (3) Does the section violate the equal protection clause of the Illinois Constitution? and (4) Does the section undermine plaintiff's constitutional right to free speech?

The factual background giving rise to this declaratory action is not in dispute and has been fully disclosed in the parties' pleadings, briefs and discovery materials. Plaintiff is a residential real estate broker with over 750 brokers and sales associates. All are licensed by the Department of Registration and Education (the Department). Pursuant to the Act, the Department licenses and regulates all real estate brokers and salesmen providing real estate services in Illinois. Ill. Rev. Stat. 1981, ch. 111, par. 5701 et seq., amended and recodified at Ill. Rev. Stat. 1983, ch. 111, par. 5801 et seq., eff. Jan. 1, 1984.

Plaintiff became a subsidiary of Sears, Roebuck and Company (Sears) in 1981 when Sears acquired Coldwell, Banker & Company, plaintiff's parent corporation. At that time, plaintiff formulated the two marketing plans which gave rise to this action. Under the "Home Buyer's Savings Program" (coupon program), an "Idea Book," which describes merchandise the home buyer may purchase from Sears at a discounted price, is given to the potential purchaser when the sales contract is signed. Receipt of the actual coupon booklet, however, is dependent upon the closing of the sale.

Plaintiff's "Commission Discount Plan" is an extension of its long-standing policy of giving commission discounts to its own employees and sales associates when purchasing or selling their homes. This policy was extended to employees of Sears and all of its wholly owned subsidiaries, except those of Dean Witter Reynolds, Inc., when plaintiff became a member of the Sears corporate family. The percentage of discount realized by the employee varies according to the position held. Thus, an employee of Sears and its subsidiaries would generally receive a discount of 10%, whereas plaintiff's employees generally receive a 20% discount. Plaintiff's sales associates receive a discount of 80% of gross profits in excess of $900. The actual discount is issued to the employee by the plaintiff subsequent to the time plaintiff receives its full commission from the seller. Notification of eligibility for commission discounts is given to the employees at the time they are hired as well as through internal company notices and publications.

Prior to implementation of the coupon plan and the commission discount plan, plaintiff sought an advisory ruling from the Department on the legality of extending the commission discount plan to other Sears "family" employees. The precise issue before the Department was whether the commission discount plan violated the section. Under the section, the Department may revoke or refuse to issue or renew a registrant's certificate of registration or may censure a registrant for the following cause:

"Using prizes, money, free gifts or other valuable consideration as inducements to (1) secure customers to purchase, rent or lease property when the awarding of such prizes, money, free gifts or other valuable consideration is conditioned upon the purchase, rental or lease, or (2) secure clients to list properties with registrant; * * *." Ill. Rev. Stat. 1981, ch. 111, par. 5732(e)(20).

In two memorandums, the Department interpreted the section to be a "blanket prohibition against any type of inducement to secure either party to a real estate transaction." As such it found that plaintiff's commission discount plan was a prohibited "inducement" rather than an employee benefit program. Further, the Department stated that the section "prohibit[s] any scheme by which a salesman or broker communicates his fees other than through a simple statement of the commission or flat fee to be charged to his client for the service rendered." Based on this construction of the provision, the Department formulated a legal opinion which it sent, in memorandum form, to all Illinois real estate brokers and salesmen.

Subsequent to the issuance of the Department's opinion, plaintiff filed its verified complaint for declaratory judgment. In addition, plaintiff filed a motion for a preliminary injunction. No hearing was held regarding this motion, as the parties entered into an agreed order wherein the Department agreed to refrain from taking any administrative action against plaintiff for alleged violations of the section, in relation to the two plans.

The express language of the section prohibits the use of "prizes, money, free gifts or other valuable consideration" in the solicitation of customers, when receipt of such a benefit is conditioned upon entering into a real estate transaction with the covered registrant. In its judgment order, the circuit court found that both the coupon program and the commission discount plan were "within the terms and prohibitions of [the section]." The plaintiff maintains that a proper construction of the section prohibits neither plan.

It is a basic tenet of statutory construction that the language of a statute should be given its plain and ordinary meaning. (People v. Pettit (1984), 101 Ill.2d 309, 313; People v. Brown (1982), 92 Ill.2d 248, 256; City of East Peoria v. Group Five Development Co. (1981), 87 Ill.2d 42, 46.) While prizes, money and free gifts have distinct definitional characteristics, each is clearly a thing of value. Further, under the doctrine of ejusdem generis, when a statutory clause specifically describes several classes of persons or things and then includes "other persons or things," the word "other" is interpreted as meaning "other such like." (Farley v. Marion Power Shovel Co. (1975), 60 Ill.2d 432, 436.) Thus, by applying the doctrine of ejusdem generis to the phrase "or other valuable consideration," which follows the specifically enumerated items, the phrase must be construed as "other things of value." A literal reading of the statutory provision would indicate, therefore, that registrants are ...

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