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Hoffman v. Nustra

OPINION FILED MAY 5, 1986.

ROBERT HOFFMAN ET AL., PLAINTIFFS-APPELLANTS,

v.

FRANK J. NUSTRA, RECORDER OF DEEDS, ET AL., DEFENDANTS-APPELLEES (PORTIA KERN, PETITIONER-APPELLANT; THE DEPARTMENT OF REVENUE, INTERVENOR-PLAINTIFFS-APPELLEES).



Appeal from the Circuit Court of Lake County; the Hon. Laurence Inglis, Judge, presiding.

JUSTICE UNVERZAGT DELIVERED THE OPINION OF THE COURT:

This class action was filed by Lake County taxpayers to challenge the Real Estate Transfer Tax Act collections by Lake County officials from August 7, 1978, through May 16, 1979, as provided in section 3 of that statute, as amended by Public Act 80-1334 (Ill. Rev. Stat., 1978 Supp., ch. 120, par. 1003). Plaintiffs, Robert Hoffman and Barbara Hoffman, beneficiaries under trust agreement No. 7718, and Michael W. Gantar, as trustee under trust No. 7718, acting individually and on behalf of taxpayers who had paid the real estate transfer tax (Hoffmans), brought this suit against defendants Frank J. Nustra as the recorder of deeds of Lake County, Jack Anderson as the treasurer of Lake County, and the County of Lake as a body politic (county). Portia Kern later sought leave to intervene as a class representative of all Illinois taxpayers (Kern), and Attorney General Neil Hartigan sought leave to intervene on behalf of the State of Illinois and the Department of Revenue (State).

The circuit court initially denied the county's motion to dismiss and for summary judgment, and ruled for the Hoffmans, granting summary judgment on the primary issue of the constitutionality of the Real Estate Transfer Tax Act, insofar as it allowed counties to retain 25 cents of the 50 cents per each $500 of value which was taxed upon transfer of real estate. The court also agreed to certify as members of the plaintiff class all persons who paid the real estate transfer tax in Lake County between August 7, 1978, and May 17, 1979, but the proposed written order which was prepared by the Hoffmans was never entered. The county filed a direct appeal to the Illinois Supreme Court from the court's orders denying their motion for summary judgment and granting the Hoffmans' motion for summary judgment and for class certification.

The county's appeal to the Illinois Supreme Court was consolidated there with a Cook County case, Schlessinger v. Olsen (circuit court of Cook County (April 6, 1983), No. 78 CH 8524, memorandum op.), since each case involved the disposition of tax moneys collected under the Real Estate Transfer Tax Act during that same time period. In its memorandum opinion in the Cook County case, the circuit court declared that section 3 of the Real Estate Transfer Tax Act was unconstitutional in its entirety, and concluded that the individuals who paid the transfer tax were entitled to the moneys unlawfully retained by the county. The Illinois Supreme Court reversed and remanded the Cook County case, finding that the State, rather than the individuals who had paid the transfer tax, was entitled to the tax revenues unlawfully retained. (Schlessinger v. Olsen (1984), 102 Ill.2d 497 (Schlessinger IV).) Noting, however, that the legislature had passed a statute, Public Act 83-57, effective August 15, 1983 (Ill. Ann. Stat., ch. 120, par. 1001 (Smith-Hurd Supp. 1985) (the "forgiveness statute"), allowing the counties to retain the unconstitutional collections for the reasons set forth in the statute, the supreme court directed the funds in controversy be delivered to the appropriate Cook County officers. (Schlessinger v. Olsen (1984), 102 Ill.2d 497, 503.) The appeal of the instant cause in that court was dismissed as premature since the court's judgment disposed of fewer than all the claims presented, and no finding pursuant to Supreme Court Rule 304(a) had been made. 87 Ill.2d R. 304(a).

In light of the supreme court's modification of its opinion on denial of the petition for rehearing on September 28, 1984, which directed the funds be delivered to the appropriate Cook County officials, the county here moved on October 2, 1984, that the court reconsider and vacate its prior partial summary judgment order in the Hoffmans' favor, and reconsider its denial of the county's motions for summary judgment and for dismissal. The basis for the county's motion to dismiss the cause with prejudice was the Schlessinger IV holding that the funds collected by Cook County and in controversy in that case were to be delivered to Cook County. On October 22, the court allowed the State's petition to intervene and denied Kern's petition to intervene. The Hoffmans were allowed time to respond to the county's motion to reconsider, and the county was allowed time to reply to same. The Hoffmans' response was comprised of their motion for leave to amend their complaint, for summary judgment on the amended complaint, and for appointment of a trustee. In essence, Hoffmans' motion sought to change the relief requested from tax payer repayment to a declaratory judgment, an accounting, and a disgorgement to the State. They also sought summary judgment on their amended complaint on the basis the forgiveness statute was unconstitutional as violative of article VII, section 9 and article I, section 16 of the Illinois Constitution. (Ill. Const. 1970, art. VII, sec. 9; art. I, sec. 16.) Thereafter, Portia Kern filed her motion to reconsider denial of her petition to intervene and to amend her complaint to include the allegation that the forgiveness statute was violative of article I, section 16, article VII, section 9, and article VIII, section 2 of the Illinois Constitution. (Ill. Const. 1970, art. I, sec. 16, art. VII, sec. 9, art. VIII, sec. 2.) The county filed its objections to the Hoffmans' motions.

The court denied Kern's motion to reconsider on November 28, 1984, and granted the county's motion to dismiss with prejudice and denied the Hoffmans' motion to amend their complaint and for summary judgment on December 12. On December 13, the county filed its answer to the State's complaint, and moved for summary judgment. On December 19, the court denied with prejudice the State's claim that the transfer-tax funds retained by the county should be paid into the general revenue fund of the State treasury. Kern filed her appeal from the court's October 22 and November 28 orders denying her leave to intervene and motion to reconsider that denial. Kern also appealed the court's December 19 order, except insofar as it found section 3 of the Real Estate Transfer Tax Act as amended by Public Act 80-1334 unconstitutional. The Hoffmans filed their notice of appeal from the court's December 12 order and from its December 19 order, except insofar as it found section 3 of the Real Estate Transfer Tax Act as amended by Public Act 80-1334 unconstitutional.

The parties present these issues for review: (1) whether Public Act No. 83-57, the forgiveness statute, is unconstitutional; (2) whether Hoffmans' and Kern's proposed constitutional challenges and prayers for disgorgment are barred by the holding of Schlessinger IV, res judicata, equitable considerations, or mitigating factors; (3) whether the court abused its discretion in denying the Hoffmans' motions for leave to amend their complaint to challenge the constitutionality of the forgiveness statute and for summary judgment; and (4) whether the court abused its discretion in denying Kern's petition to intervene.

Prior to oral argument, Kern and the Hoffmans jointly moved to strike the State's brief, and the motion was ordered taken with the case. They argue, with no citation of authority, that the State has waived its right to address the constitutionality of the forgiveness statute, since it failed to respond, plead, or object to various aspects of the proceedings below in which the constitutionality of the statute was placed at issue, or to appeal the court's granting of the county's motion for summary judgment against it.

The State was allowed to intervene in the cause and, as such, is a party of record. In Rosenthal v. First National Bank (1970), 127 Ill. App.2d 371, 375-76, the term "appellee" was defined to include in its meaning a party "who has an interest adverse to setting aside or reversing the judgment." The Attorney General is the legal officer of the State, and has not only those duties and powers prescribed by law but also common law authority traditionally held by the Attorney General. (Newberg-Krug-Brighton v. Illinois State Toll Highway Authority (1978), 63 Ill. App.3d 780.) The Attorney General was concerned, by common law and statute, with impairment of State revenues, diminution of public charities, and misconduct of public officers. People ex rel. Scott v. Illinois Racing Board (1973), 54 Ill.2d 569.

In the original slip opinion of the Illinois Supreme Court in Schlessinger IV, the supreme court held that the tax revenues unlawfully retained by Cook County should be deposited in the general revenue fund of the State treasury. (Schlessinger v. Olsen (May 25, 1984), Nos. 58581, 59169, slip op. at 4.) After issuance of the slip opinion, the State filed its petition to intervene here. The supreme court's opinion was later modified, however, on denial of Schlessinger's petition for rehearing, to reflect the existence of the forgiveness statute and to order the funds in controversy be delivered to Cook County. As noted, the county here then sought to have the court reconsider its earlier grant of partial summary judgment relief to the Hoffmans, and to reconsider its denial of the county's motion to dismiss and for summary judgment. The court's subsequent order directed the Hoffmans to respond to the county's motion and the county to reply; the court's order did not similarly include any direction to the State. Ostensibly in recognition of the fact the State, as a party to Schlessinger IV, would be collaterally estopped from challenging the validity of that decision.

• 1 Within the provisions of the forgiveness statute itself, the legislature specifically noted that the public would benefit by the State's avoidance of the expense involved in liquidating and collecting this debt of the several counties and that the public would further benefit by being spared the imposition and collection of additional property taxes by counties to pay such debts. Thus, the State here has an interest which is adverse to a setting aside of the court's judgment below. Further, it is well established that an appellee may advance any argument supported by the record which will sustain the judgment of the trial court. (State Farm Mutual Automobile Insurance Co. v. Stuckey (1983), 112 Ill. App.3d 647.) Accordingly, the motion to strike the State's brief is denied.

• 2 We agree with the county that the primary issue in this appeal is whether the court erred in denying the Hoffmans leave to amend their complaint and in dismissing their initial complaint. It is true, as the Hoffmans argue, that the Civil Practice Law provisions allowing amendments to pleadings are to be liberally construed. (Ill. Rev. Stat. 1983, ch. 110, pars. 2-616, 2-617; Frankenthal v. Grand Trunk Western R.R. Co. (1983), 120 Ill. App.3d 409, 417; Goshey v. Dunlap (1973), 16 Ill. App.3d 29.) A trial court's power to allow amendments should be freely exercised in order that litigants may fully present their causes of action. (Giannini v. First National Bank (1985), 136 Ill. App.3d 971, 988.) Factors to be considered in determining whether the trial court's discretion in permitting or denying amendments was properly exercised is whether the proposed amendment would cure a defective pleading, whether other parties would sustain prejudice or surprise by virtue of the proposed amendment, and whether previous opportunities to amend pleadings could be identified. (Kupianen v. Graham (1982), 107 Ill. App.3d 373.) A trial court may consider the ultimate efficacy of a claim in passing on a motion to amend a pleading and may deny leave if the proposed amendment does not cure the defect. Schenker v. Chicago Title & Trust Co. (1984), 128 Ill. App.3d 488.

• 3, 4 Whether to allow an amendment to a pleading rests in the sound discretion of the trial judge (Richardson v. Economy Fire & Casualty Co. (1984), 126 Ill. App.3d 520), and the paramount consideration is whether the amendment furthers the interests of justice. (United Air Lines, Inc. v. Conductron Corp. (1979), 69 Ill. App.3d 847.) Generally, amendments should not be permitted if such amendments concern matters which the pleader knew at the time the original pleading was filed, and the pleader offers no good reason for not having included such matters in the original pleading. (Morris v. City of Chicago (1985), 130 Ill. App.3d 740, 745.) A trial court may allow amendments in any matter which may enable the plaintiff to sustain the claim intended to be brought. (Mooney v. Underwriters at Lloyd's, London (1965), 33 Ill.2d 566; Ill. Rev. Stat. 1983, ch. 110, par. 2-616.) An amended pleading does not supersede a prior pleading unless it is complete in itself and does not refer to or adopt the prior pleading. (Robins v. Lasky (1984), 123 Ill. App.3d 194.) Under section 2-616 of the Civil Practice Law, the cause of action to be added by amendment must have been timely when the original complaint was filed. (Frankenthal v. Grand Trunk Western R.R. Co. (1983), 120 Ill. App.3d 409, 417.) A trial court's denial of a motion to amend will not be regarded as prejudicial error unless there has been a manifest abuse of discretion. Dick v. Gursoy (1984), 124 Ill. App.3d 185.

• 5 The amendment proposed by the Hoffmans sought to change the relief requested from that of repayment to those who paid the tax to that of a declaratory judgment to the effect that Public Act No. 83-57 was unconstitutional, and for an accounting and disgorgement to the State. They also asked for a modified summary judgment order declaring that the tax revenues were unlawfully retained by the defendants, that the State of Illinois is entitled to the tax revenues which were unlawfully retained, and that the legislature's attempt to "cancel" the indebtedness by means of Public Act No. 83-57 violates article VII, section 9 article I, section 16 of the Illinois Constitution. In effect, the Hoffmans were seeking to change both their class representation from that of individuals who actually paid the real estate transfer tax to that of State taxpayers in general, and the relief sought from repayment to them as persons who had paid the real estate transfer tax to a disgorgement to the State treasury. We note here that the statute authorizing proceedings for declaratory judgment is not designed to aid the disposition of pending cases (Bathe v. Stamper (1966), 75 Ill. App.2d 265), and a trial court does not abuse its discretion when it refuses to grant a declaratory judgment which would have the effect of determining the issues or validity of the defenses in a pending case (Krebs v. Mini (1977), 53 Ill. App.3d 787).

In determining whether the court abused its discretion in denying the Hoffmans' motion to amend and granting the county's motion to dismiss, a necessary, albeit rather detailed, chronology of the litigation and legislation relating to the Real Estate Transfer Tax Act lends needed perspective.

The Real Estate Transfer tax Act became effective January 1, 1968. (Ill. Rev. Stat. 1967, ch. 120, par. 1001 et seq.) (statute I). Section 3 of the Real Estate Transfer Tax Act provided for a tax on the privilege of transferring title to real estate at the rate of 50 cents for each $500 value or fraction thereof. The tax was to be collected by the recorder of deeds or registrar of titles of the several counties through the sale of revenue stamps which would be sold to the counties by the Department of Revenue for 25 cents (the first 25 cents). The second 25 cents was to be retained by the county; to-wit:

"The net proceeds from such sale by the Recorder of Deeds or Registrar of Titles shall be treated as a fee of his office." (Emphasis added.) ...


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