dissenting:
The majority of this court now holds that the retroactivity provision of Public Act 82 — 891 does not violate the constitutional principles of separation-of-powers, due process, or impairment of private contract, as expressed in either the Constitution of the United States or that of the State of Illinois. To reach this conclusion, the majority misreads the holdings of a number of this court’s prior decisions.
The majority begins by noting that “separation of powers is a more common ground for challenging the validity of retroactive statutes [in this State] than it is in other jurisdictions” (108 Ill. 2d at 10). What the majority ignores is that the reason that separation-of-powers challenges are upheld more frequently in Illinois than in the Federal courts or in many other States is because, unlike a number of other State constitutions and also the Constitution of the United States, the Constitution of the State of Illinois contains an explicit separation-of-powers provision. It reads: “The legislative, executive and judicial branches are separate. No branch shall exercise powers properly belonging to another.” (Ill. Const. 1970, art II, sec. 1.) In the Constitution of the United States, separation of powers is expressed only by the organization of the Constitution into separate articles governing the legislative, the executive, and the judiciary. Furthermore, the relationship between the branches of government in the Federal system is affected by the fact that the Federal district courts are created by the Congress, which therefore has the power to withdraw jurisdiction over certain subject matters from them. Much of the textual material relied on by the majority pertains to the Federal system, and this explains why it is irrelevant. Also for this reason, the majority’s reliance on a Federal case, Seese v. Bethlehem Steel Co. (4th Cir. 1948), 168 F.2d 58, is inappropriate to a decision based on the Illinois Constitution (108 Ill. 2d at 17). Similarly, reliance on cases from other States is inapposite unless the majority can show that the constitutions of the other States contain a similarly worded separation-of-powers clause which has been interpreted by the highest courts of those States analogously to the interpretation which this court has placed on the separation-of-powers clause in Illinois.
It is simply untrue either that the “essence” of this court’s separation-of-powers holdings is that “[w]hat the General Assembly may not do is pass a statute in an attempt to change the result of a decision which has been finally decided as between the parties to that case” (108 Ill. 2d at 10) or that the legislature’s power to change the law retroactively “extends to decisions in which the law changed by the legislature resulted from *** a reviewing court’s interpretation of the common law” (108 Ill. 2d at 10). The majority opinion does not cite a single Illinois opinion in which this court has upheld the legislature’s power to retroactively change the law as announced by this court on a question of common law.
In contrast to what the majority would have us believe, this court has previously recognized the distinction in the legislature’s power to act retroactively when dealing with statutes as contrasted to the common law. In Moore v. Jackson Park Hospital (1983), 95 Ill. 2d 223, this court held that a repose provision in a medical malpractice action could not be applied retroactively so as to bar plaintiffs’ causes of action before they arose. This was despite the fact that in Orlicki v. McCarthy. (1954), 4 Ill. 2d 342, the court held that a statute of limitations could be retroactively amended by the legislature. In Moore this court noted: “This court held [in Orlicki] that the legislature, which created the rights under the Liquor Control Act, had the power to repeal those rights.” (95 Ill. 2d 223, 230.) Distinguishing Orlicki, the court went on to say in Moore: “[Tjhese plaintiffs’ actions are negligence actions which sound in tort and were recognized at common law; they are not statutorily created remedies.” 95 Ill. 2d 223, 231.
Treating this court’s previous separation-of-powers decisions as the majority now construes them not only ignores the doctrine of stare decisis but also limits them so severely as virtually to strip all continuing vitality from them. In particular, Roth v. Yackley (1979), 77 Ill. 2d 423, and In re Marriage of Cohn (1982), 93 Ill. 2d 190, are so eviscerated as to be meaningless. The majority tells us that Roth and Cohn applied only to final judgments and that both decisions were limited to protecting parties in whose favor final judgments had been entered in specific cases against legislative attempts to change the decisions in those cases. A review of the facts in both Roth and Cohn indicates, however, that there were no final judgments in either case, that the wording of both opinions clearly extends to other parties, and that if the majority opinion in this case is correct, this court would not have invalidated the legislation at issue either in Roth or in Cohn.
The circumstances in both Roth v. Yackley and In re Marriage of Cohn were that a legal controversy was properly before this court, the court directly addressed a particular legal issue, and the legislature, unhappy with the result, attempted to run the reel backward and retroactively change the precise result reached by this court. This court held that in doing so the legislature each time overstepped its constitutional authority.
Roth v. Yackley consisted of two separate class actions seeking the return of fines and costs paid incident to the grant of probation for violations of section 10 of the Cannabis Control Act (Ill. Rev. Stat. 1973, ch. 56^2, par. 710) and section 410 of the Illinois Controlled Substances Act (Ill. Rev. Stat. 1973, ch. 56V2, par. 1410). In People v. DuMontelle (1978), 71 Ill. 2d 157, this court had held that the imposition of fines and costs as a condition of probation was not authorized by section 10 of the Cannabis Control Act. DuMontelle arose in Kankakee County, while Roth was filed in La Salle County, and there is no indication whatsoever in the Roth opinion that the defendant in DuMontelle was included as a plaintiff in Roth. The plaintiffs in Roth, relying on DuMontelle, argued that the fines and costs they had previously paid had been improperly collected and should be returned. Three months after DuMontelle, and after Roth had been filed, the Illinois legislature passed an amendatory act which changed both section 10 and section 410. It stated that the changes are “declaratory of existing law and are therefore applicable in relation to events which occurred before the effective date of this amendatory Act” and that the terms and conditions of probation specified in the Act “were in effect before the effective date of this amendatory Act.” (Pub. Act 80— 1202, sec. 3, eff. June 30, 1978.) On the basis of the amendment, the circuit court dismissed both class action complaints. This court reversed the circuit court, observing:
“[I]t is manifest that the amendatory act changed the statutory language and prior law as determined by this court in DuMontelle from the clear import of the original statutory language. This court’s explication of the statute had become, in effect, a part of the statute until the General Assembly changed it. [Citations.]
***
The General Assembly’s declaration that the amendatory act applies to events which occurred before the effective date of the amendatory statute represents a legislative attempt to retroactively apply new statutory language and to thereby annul a prior decision of this court. This is an assumption by the General Assembly of the role of a court of last resort in contravention of the principle of separation of powers embodied in article II, section 1, of the Illinois Constitution of 1970 ***. The cases cited by the State do not recognize that the General Assembly may retroactively overrule a decision of a reviewing court. Instead they recognize only the power of the legislature to establish laws prospectively and to alter for future cases interpretations of statutes by reviewing courts. [Citations.]
In sum, we find that the General Assembly cannot constitutionally overrule a decision of this court by declaring that an amendatory act applies retroactively to cases decided before its effective date.” (Emphasis added.) Roth v. Yackley (1979), 77 Ill. 2d 423, 428-29.
Contrary to the majority’s contention, Roth could not have been limited to cases in which final judgments had been, entered because there were no final judgments in Roth. The only judgments which had been entered against the class members which the plaintiffs in Roth sought to represent were in criminal cases in which they had been defendants and in which they had been taxed fees and costs. Since the time for appealing those judgments or moving to vacate them had passed, the only vehicle for recovering fees and costs was a new and separate civil action, such as the class actions in Roth. Roth was a new case with new parties in which no final judgment had been entered, and in which this court held that applying the new statute instead of the law announced in DuMontelle would violate the separation-of-powers doctrine. Thus, this court, in referring in Roth to “cases decided before its effective date” (77 Ill. 2d 423, 429), was referring to DuMontelle and not, as the majority states, to the criminal cases in which the class plaintiffs in Roth had been previously involved. Reading the sentence in which that language appears in conjunction with the paragraph quoted above indicates that it can have no other meaning than reference to the decision in DuMontelle, and that the decision referred to in that paragraph by the words “cases decided before its effective date” (77 Ill. 2d 423, 429) was DuMontelle. This court acknowledged that it was DuMontelle, a decision of a reviewing court, and not judgments of circuit courts that Roth referred to when in Cohn it noted that in Roth the legislature invaded the province of the judiciary by retroactively overruling a decision of a reviewing court (93 Ill. 2d 190, 204).
The majority’s narrow reading of Roth here is further belied by previous interpretations of Roth by this court. In People v. Rink (1983), 97 Ill. 2d 533, 541, the court said:
“Of course, the legislature, after a final judicial interpretation of legislative intent, cannot effect a change in that construction by a later declaration of what it did intend (In re Marriage of Cohn (1982), 93 Ill. 2d 190, 203; Illinois Bell Telephone Co. v. Fair Employment Practices Com. (1980), 81 Ill. 2d 136, 142; Roth v. Yackley (1979), 77 Ill. 2d 423, 428-29).”
Thus, the majority’s contention that Roth is limited to cases in which final judgments have been entered is totally at odds with our other interpretations of Roth.
If the majority’s interpretation of Roth is untenable in view of the facts and circumstances of that case, the way it handles Cohn is even more incomprehensible in view of what actually happened in that case and of the opinion adopted by this court. Once again, the majority tells us that Cohn was limited to final judgments and to the parties in that case, but once again there were no final judgments in Cohn itself, at least until this court decided the case more than 14 months after the legislation Cohn struck down became effective.
In re Marriage of Cohn (1982), 93 Ill. 2d 190, held that the General Assembly could not enact legislation to retroactively validate judgments that were invalid as a result of an appellate court decision in that case. (93 Ill. 2d 190, 206.) Throughout the Cohn opinion, this court stated repeatedly that the legislature could not affect the decision of a “reviewing court” of this State. Yet that “reviewing court” in Cohn was the appellate court, an intermediate level court which does not definitively state the law of the State of Illinois. The Cohn case was still on direct appeal to this court when the legislature acted. In contrast to the case with which we now deal, the Supreme Court of Illinois had not yet even spoken, and there was no final judgment, even with respect to the parties to Cohn itself.
To understand the bearing of Cohn on this case, it is essential to examine the course of events in that case. The trial judge had entered a bifurcated judgment of dissolution of marriage nunc pro tunc, reserving matters of custody and disposition of property for a later date. Some time later, the wife petitioner moved to have the order vacated on the ground that the court had no authority either to enter the judgment of dissolution before maintenance, child support, and other property rights were determined or to enter the order nunc pro tunc. The appellate court held in an opinion filed on April 20, 1981, that section 401(3) of the Illinois Marriage and Dissolution of Marriage Act (Ill. Rev. Stat. 1977, ch. 40, par. 401(3)) allows reservation of child custody, support, maintenance or property disposition only under “ ‘appropriate circumstances,’ ” and vacated the judgment. (In re Marriage of Cohn (1981), 94 Ill. App. 3d 732, 739-40.) The husband filed a timely petition for leave to appeal which this court allowed.
After the appellate court decision and while the case was on appeal to this court, the Illinois legislature amended section 401(3), effective August 14, 1981, to retroactively validate the issuance of a bifurcated judgment. The amendment specifically stated that such judgments entered prior to the amendatory act were valid as of the date of entry. As in Roth, this court held that “the legislature invaded the province of the judiciary by retroactively overruling a decision of a reviewing court.” (93 Ill. 2d 190, 204.) In Cohn, this court extensively quoted portions of Roth which indicated that the legislature cannot retroactively overrule the decision of a reviewing court. 93 Ill. 2d 190, 203-04.
The majority now attempts to tell us that the reason the legislation in Cohn was invalid was because the legislature attempted to validate all judgments that were entered prior to the effective date of the amendment (emphasis in original) (108 Ill. 2d at 16). So far as judgments in other cases were concerned, if no objection was made and no appeal was taken, those judgments were final and did not need the assistance of the legislature to validate them. This court acknowledged as much in Cohn when it stated that the decision would “not affect the validity of bifurcated judgments that were entered under the statute prior to its amendment by Public Act 82— 197, where no objection on this basis was made and where no appeal was taken. In such cases, the mandatory provisions of section 401(3) (Ill. Rev. Stat. 1977, ch. 40, par. 401(3)) are deemed to have been waived.” (In re Marriage of Cohn (1982), 93 Ill. 2d 190, 207.) What Cohn really stands for is set forth in the following portions of the opinion:
“In this case, as in Roth, the legislature invaded the province of the judiciary by retroactively overruling a decision of a reviewing court. This constitutes a violation of article II, section 1, of the Illinois Constitution, which embodies the principle of separation of powers.” (93 Ill. 2d 190, 204.)
“[T]he portion of Public Act 82 — 197 attempting to validate prior judgments of dissolution was an unconstitutional attempt to retroactively invalidate the action of a reviewing court.” 93 Ill. 2d 190, 207.
The essential point about Cohn, however, is how this court’s decision and the legislation impacted upon the husband and wife in that case. This court did not dispose of Cohn until October 22, 1982. Thus, Cohn was a pending case when the legislation became effective more than a year earlier.
Any doubt that the case was pending when the legislation amending section 401(3) became effective (August 14, 1981) is eliminated by the following significant dates in Cohn:
1/27/81 Appellate court opinion filed.
4/20/81 Appellate court opinion
filed on rehearing.
5/26/81 Petition for leave to appeal filed in Supreme Court.
Leave to appeal allowed. 10/19/81
Submitted as agenda 53. 6/22/82
10/22/82 Supreme court opinion filed.
11/19/82 Mandate issued.
If the majority is right in this case, why did the statutory amendment not govern this court’s decision in Cohn? Inasmuch as the legislation did not govern this court’s decision in Cohn, how can the legislation at issue in this case defeat Sanelli’s claim when it also was pending before the legislation was enacted? This question is especially appropriate because the legislation in Cohn upset only an appellate court opinion while the legislation here upsets a supreme court opinion.
Cohn is actually more like the long line of curative-act cases in which this court has allowed the legislature to correct an inadvertent mistake in a statute, ordinance, or legal instrument than it is like Roth. Even so, this court in Cohn went to great lengths to rely on Roth and to distinguish the most recent curative-act case, Schlenz v. Castle (1981), 84 Ill. 2d 196., (In re Marriage of Cohn (1982), 93 Ill. 2d 190, 204-05.) In addition, the court in Cohn also distinguished Kujawinski v. Kujawinski (1978), 71 Ill. 2d 563, on which the majority now relies in an attempt to escape the holding in Cohn (108 Ill. 2d at 11-12). The only plausible construction of the Cohn holding is that despite the availability of the curative-act doctrine in Illinois, this court believed that by attempting to retroactively overrule the decision of even an intermediate-level reviewing court, the legislature had violated the Illinois constitutional principle of separation of powers. Thus, the conclusion in this case that, “[i]n summary, the General Assembly may enact retroactive legislation which changes the effect of a prior decision of a reviewing court with respect to cases which have not been finally decided” (108 Ill. 2d at 19) must mean that Cohn is sub silentio overruled. The two cannot stand together, for the majority here cloaks the legislature with a supremacy over judicial decisions which it was clearly denied by Cohn, as well as by Roth.
The bank argues, and the majority agrees, that this case is more like General Telephone Co. v. Johnson (1984), 103 Ill. 2d 363, or Schlenz v. Castle than it is like Roth or Cohn. A brief review of the cases exposes the fallacy of this claim.
The General Telephone case emphasizes the very feature which distinguishes it from this case. In General Telephone, this court upheld the retroactive application of a tax statute. The court quoted Roth v. Yackley, stating “ ‘the General Assembly cannot constitutionally overrule a decision of this court by declaring that an amendatory act applies retroactively to cases decided before its effective date.’ ” (General Telephone Co. v. Johnson (1984), 103 Ill. 2d 363, 383, quoting Roth v. Yackley (1979), 77 Ill. 2d 423, 429.) The court then went on to explain that in General Telephone there was no separation-of-powers violation because there had been no prior circuit court decision on the question resolved by the statute. (103 Ill. 2d 363, 383-84.) The majority now attempts to represent that there had been a prior Illinois Supreme Court case dealing with the issue, but that the legislature could overrule that case without violating the separation-of-powers clause (108 Ill. 2d at 16). That is not what General Telephone Co. held. The facts reveal that there had been no prior relevant judicial decision at any level. Caterpillar Tractor Co. v. Lenckos (1981), 84 Ill. 2d 102, to which the majority refers, did not control because it was irrelevant. Caterpillar involved an income tax question, while General Telephone and the disputed statute involved the invested capital tax. In fact, this court pointed out in General Telephone that the legislation in question did not affect the holding in Caterpillar or the income tax liability of the parties to that suit. (103 Ill. 2d 363, 384.) It is incongruous that this court, a scant seven months after the.General Telephone decision, now attempts to use it as controlling authority in this separation-of-powers case.
Schlenz is the latest in a line of cases in which this court approved the legislature’s authority to enact a curative statute to correct a defect in earlier legislation. Schlenz is not a case like this one in which the legislature attempted to vitiate retroactively the common law decision of a reviewing court. Because Schlenz is so clearly distinguishable from this case, the continuing vitality of the Schlenz rationale would not be affected by a holding in this case that the legislature violated the Illinois constitutional principle of separation of powers by retroactively overruling a decision of this court with respect to the common law, just as the vitality of the Roth case was not affected by the clearly distinguishable decision in Schlenz.
Schlenz upheld a statute validating taxes on real and personal property despite the failure of the assessor to publish the assessments within the time provided by a prior statute. Previously in Andrews v. Foxworthy (1978), 71 Ill. 2d 13, the court held that the publication dates under the prior statute were mandatory and that therefore the taxes were invalid. This court clearly viewed the legislation in Schlenz as a curative or validating statute which corrected a defect in earlier legislation in an area within the legislature’s control. Roth was distinguished in the following manner:
“The General Assembly did not amend section 103 of the Revenue Act, and section 818.1 [of the Revenue Act] does not attempt to attribute to section 108, at the time of our opinion in Andrews, a meaning different from that dedared in that opinion.” (Emphasis added.) (Schlenz v. Castle (1981), 84 Ill. 2d 196, 206-07.)
In this case, by contrast, no statute was originally involved and the legislature’s aim was to attribute to existing legal relationships a legal significance different from that which this court in Home Federal Savings & Loan Association v. Zarkin (1982), 89 Ill. 2d 232, declared to exist. It is significant that this court in Cohn distinguished Roth and Cohn from Schlenz in the same manner in which this court distinguished Roth in Schlenz (93 Ill. 2d 190, 204) and in the same manner as I now maintain Schlenz is distinguishable from this case. In Cohn the court concluded:
“In Schlenz, then, the legislature did not attempt to retroactively interpret the statute. In the instant case like Roth and unlike Schlenz the legislature by amendment attempted to attribute to the original statute, at the time of the reviewing court’s opinion, a meaning different than that declared in the opinion.” 93 Ill. 2d 190, 205.
As noted in the majority opinion, People v. Holmstrom (1956), 8 Ill. 2d 401, is an earlier case which is indistinguishable from Schlenz. On similar facts involving the levy of taxes, this court upheld legislation validating assessments which had not been published according to the procedure mandated by the earlier statute. The majority’s opinion is undermined by its reliance upon the very language which identifies the legislation in issue in Holmstrom as permissible curative legislation, prevents it from being a separation-of-powers violation, and distinguishes it from Roth, Cohn, and the case at bar: “ ‘[Ijnasmuch as the legislature had the power to permit the levy of the taxes without requiring the assessments to be published, it was likewise within its power to cure irregularities in publication by the validating act.’ ” (Emphasis added.) (108 Ill. 2d at 12, quoting People v. Holmstrom (1956), 8 Ill. 2d 401, 405-06.) The statute in issue in this case is obviously not curative, for there was no existing statute for it to cure.
Worley v. Idleman (1918), 285 Ill. 2d 214, on which Schlenz is based, is another case in which the legislature enacted a statute to cure a defect in an earlier instrument in an area which was within the authority of the General Assembly. The curative act was held valid.
In addition to the distinguishing features pointed out above in the cases on which the bank relies, the controlling consideration is that in each of those cases the court applied a statute which amended an existing statute and not, as in this case, a statute which retroactively overruled the common law as declared by this court.
The out-of-jurisdiction cases on which the majority relies, Chevron Chemical Co. v. Superior Court (1982), 131 Ariz. 431, 641 P.2d 1275, and Peterson v. City of Minneapolis (1969), 285 Minn. 282, 173 N.W.2d 353 (108 Ill. 2d at 17-19), not only are not controlling, but also are clearly inapposite.
Peterson concerned legislation adopting comparative negligence in the place of contributory negligence. The legislation did not seek to nullify any court decision or to establish that contributory negligence had never been the law of Minnesota. On that basis alone, it is distinguishable from Public Act 82 — 891. Moreover, the Minnesota court was not confronted, as we are, with an explicit constitutional provision establishing separation of powers. Chevron was concerned with the amendment of a statute changing an interpretation the Arizona Supreme Court had previously given it. It is similar in scope to Roth v. Yackley but reaches a different conclusion than this court did in Roth v. Yackley. In any event Chevron did not involve the distinguishing feature of this case, an attempt by the legislature to erase retroactively a decision of the reviewing court based on the common law rather than a statute.
Because of its reliance on inapposite cases and misreading of Roth and Cohn, the majority has ignored what were, until now, basic constitutional principles. The judicial branch declares the law as it is, until the legislature changes the law for the future. Even if the legislature is dissatisfied with a decision which this court has reached, the Illinois Constitution provides no mechanism by which the legislature can rewrite history and retroactively undo the effect of that decision. The legislature can no more abrogate a court decision which it finds troublesome than this court can refuse to uphold a properly enacted and constitutional statute with which it disagrees.
The legislature was free to enact Public Act 82 — 891 to operate from the effective date of the Act forward. It is within the General Assembly’s prerogative to decide that a particular practice is not in the best interests of the public and to enact legislation to correct that practice for the future. However, when the General Assembly attempts to change the law retroactively by purporting to overrule a decision of a reviewing court, the statute violates the principle of separation of powers, and the purported retroactive legislation is unconstitutional.
After its attempt to dispose of the separation-of-powers challenge, the majority is equally cavalier in disregarding the plaintiff’s claims that the due process and contract clauses of both the Illinois and United States constitutions have been violated. Whatever analysis is used, the traditional Illinois vested-rights approach, or the balancing test preferred by the majority, the majority indulges in two major mischaracterizations in order to reach its desired result.
First, there is the size of the hurdle which the challenged legislation must clear (108 Ill. 2d at 21), i.e., the degree of impairment of the contract involved. The majority, in describing this as minimal, ignores the fact that the Zarkin opinion dealt with the duties defining the relationship between a land trustee and the holder of the beneficial interest in the land trust. By retroactively removing the protection offered by Zarkin, Public Act 82 — 891 cut the heart out of the land-trust contract; there was virtually nothing left of any value. What remains is nothing more than what the bank argued unsuccessfully in Zarkin the land trust was — a shell.
Second, the majority must ascribe an important public benefit to the legislation. Yet, there is no public purpose here at all, only a private benefit to banks, one of the parties to a private contract. The majority opinion goes to great lengths to establish the legislature’s interest in regulating the banking industry, yet nothing the majority advances demonstrates any public purpose that will be served by applying the legislation retroactively.
The majority’s assertion that any impairment of Sanelli’s rights “was a reasonable exercise of the legislature’s authority to provide for the public welfare and to safeguard the interests of the people” is unsupportable (108 Ill. 2d at 24). The factors it relies on to justify this conclusion consist entirely of elements of the private relationship between Sanelli and the bank, his trustee. How the elements of strictly private negotiations and contractual arrangements between Sanelli and the bank can be regarded as enhancing “the public welfare” and safeguarding “the interests of the people” the majority never explains. All this opinion accomplishes is to safeguard banks from litigation over their past conduct. So far as their future conduct is concerned, no one is contesting the right of the legislature to declare that land trustees are no longer required to act in the manner this court prescribed in Zarkin. But there is no valid explanation in terms of “the public welfare” and “the interests of the people” as to why the legislature can retroactively interfere with the existing rights of private parties to a private agreement. Whatever need there is for the legislation to operate prospectively, the only purpose of its retroactive feature is to free banks from liability based on their past transgressions.
The majority notes that although “the courts” often analyze due process and contract clause issues in terms of “vested rights,” the term vested rights is “conclusory” (108 Ill. 2d at 20). It is true that some courts have spoken in conclusory fashion of vested rights. What is also true, however, is that the entire jurisprudence of Illinois in these areas has developed using the vested-rights terminology. Rejecting that terminology offhand, the majority is conveniently able to ignore cases which conflict with the conclusion the majority wishes to reach. By relying on these precedent cases, it is possible to identify just what right is involved in this case and exactly when that right vested. Sanelli’s accrued cause of action against the bank is a vested right, and the retro-activity section of Public Act 82 — 891 impermissibly interfered with that right, thereby violating both the due process and contract clauses of the Illinois and United States constitutions.
The general rule in Illinois is that retroactive operation of legislation is not per se unconstitutional, but becomes unconstitutional when it interferes with due process or contract rights. Hogan v. Bleeker (1963), 29 Ill. 2d 181, 187; Peoples Store v. McKibbin (1942), 379 Ill. 148; People ex rel. Eitel v. Lindheimer (1939), 371 Ill. 367; Board of Education v. Blodgett (1895), 155 Ill. 441.
The relationship between Sanelli and the bank was established by the creation of the land-trust agreement. In Home Federal Savings & Loan Association v. Zarkin (1982), 89 Ill. 2d 232, this court established that, as in any other trust agreement, the crux of that relationship is the fiduciary duty which is owed by the trustee to the holder of the beneficial interest. Under Zarkin and before the enactment of Public Act 82 — 891, a conflict of interest was created when the trustee also became a secured creditor, loaning money on the security of the trust property. This raises the possibility that, when the interests of the holder of the beneficial interest and the interests of the creditor conflict, the trustee will act to protect its own interest as creditor rather than abiding by its fiduciary duty as trustee. A trustee cannot deal with trust property for its own benefit (Central Standard Life Insurance Co. v. Gardner (1959), 17 Ill. 2d 220, 235), cannot place himself in a position where it is difficult to be honest (Bennett v. Weber (1926), 323 Ill. 283, 293-94), and cannot purchase the trust property in its own behalf (Victor v. Hillebrecht (1950), 405 Ill. 2d 264, 268; Bennett v. Weber (1926), 323 Ill. 283, 293-94). The trustee who is also the mortgagee of land cannot purchase tax titles and hold the property for its individual benefit. O’Halloran v. Fitzgerald (1873), 71 Ill. 53.
There can be no doubt that Illinois views an accrued cause of action as a vested right. (Board of Education v. Blodgett (1895), 155 Ill. 441; Wilson v. All-Steel, Inc. (1981), 87 Ill. 2d 28.) Sanelli’s right vested when the bank foreclosed the loan and purchased the beneficial interest in the trust property for its own account at a price below the fair market value. In addition, since the land trust is a contract, a breach of fiduciary duty is also a breach of contract. This cause of action for breach of contract also vested when the bank took action inconsistent with its obligations as a fiduciary.
In his complaint, Sanelli alleges that the bank purchased the property at a price below its market value. According to Zarkin, the burden of proving that the transaction was fair, i.e., that the purchase price was not below market, and that therefore no breach of fiduciary duty occurred, is on the fiduciary bank. Of course, if the bank meets that duty, then the bank will prevail in the lawsuit, but that is irrelevant. It is the right to attempt to prove his claim, i.e., to survive a motion to dismiss, with which the legislature cannot interfere.
This analysis is consistent with Federal law regarding impairment of contract. As the majority notes, the contract clause does not guarantee against all governmental interference with private contracts. States can invoke their police power to safeguard the welfare of their citizens for legitimate public purposes. As a result, the value of some private contracts may be reduced, or even eliminated entirely. (Exxon Corp. v. Eagerton (1983), 462 U.S. 176, 190, 76 L. Ed. 2d 497, 510, 103 S. Ct. 2296, 2305, quoting United States Trust Co. v. New Jersey (1977), 431 U.S. 1, 22, 52 L. Ed. 2d 92, 109-10, 97 S. Ct. 1505, 1517-18.) The means chosen to safeguard the public interest must be reasonable and appropriate. United States Trust Co. v. New Jersey (1977), 431 U.S. 1, 22, 52 L. Ed. 2d 92, 109-10, 97 S. Ct. 1505, 1518.
In the most recent contract-clause case, the court upheld an Alabama statute which increased the severance tax on oil and gas, exempted royalty owners from the increase, and prohibited producers from passing the increase on to purchasers. (Exxon Corp. v. Eagerton (1983), 462 U.S. 176, 76 L. Ed. 2d 497, 103 S. Ct. 2296.) The court held that the royalty provision did not affect any contractual obligation of which the producers were beneficiaries (462 U.S. 176, 187-88, 76 L. Ed. 497, 508, 103 S. Ct. 2296, 2304) and that the pass-through provision was permissible even if it impaired existing contracts to some extent because it was a general regulatory measure designed to safeguard the interests of the public during a period of severe inflation. The incidental effect on contracts did not invalidate it. (462 U.S. 176, 194, 76 L. Ed. 2d 497, 512, 103 S. Ct. 2296, 2307.) Under the criteria announced in Exxon Corp. v. Eagerton the retroactivity provision of Public Act 82 — 891 which is at issue in this case is an unconstitutional impairment of contract; contractual rights are affected, and that effect is the main purpose of, not an incident to, the legislation.
The situation here is distinguishable from instances of permissible State regulation which either affect private contracts only incidentally (e.g., Exxon Corf. v. Eagerton (1983), 462 U.S. 176, 76 L. Ed. 2d 497, 103 S. Ct. 2296) or are necessary in a national emergency (e.g., Home Building & Loan Association v. Blaisdell (1934), 290 U.S. 398, 78 L. Ed. 413, 54 S. Ct. 231). Public Act 82 — 891 did not concern a general regulation of rates or safety conditions which incidentally affected private contracts. The sole purpose of the retroactivity provision of the Act was to change the rights and duties of the parties to existing contracts. While the legislature is authorized to regulate such contracts prospectively, interference with existing contracts of the type involved here so extensively changes the nature of the relationship between beneficiary and trustee and so reduces the value of the land-trust agreement to the beneficiary that the retroactive application of the statute is an impermissible impairment under the contract clause.
Despite protestations to the contrary by the bank and by the Illinois Bankers Association, the record contains no evidence that a fiscal or banking emergency in Illinois either has occurred as a result of Zarlcin or will occur if Public Act 82 — 891 is not given retroactive effect. This legislation was not an attempt to protect the public at large, or as the majority phrases it “to provide for the public welfare and to safeguard the interests of the people” (108 Ill. 2d at 24), but rather an effort to enhance the value of the creditor-trustees’ contracts at the expense of the beneficiaries. This is impermissible under the contract clause.
This analysis is consistent with United States Trust Co. v. New Jersey (1977), 431 U.S. 1, 52 L. Ed. 2d 92, 97 S. Ct. 1505, in which the Supreme Court invalidated New Jersey legislation which retrospectively impaired the rights of bondholders. The Port of New York Authority issued bonds during the 1920’s to finance the building of bridges. In 1962, New York and New Jersey enacted a statutory covenant providing that as long as any of the bonds remained outstanding, the revenues pledged in whole or in part as security for the bonds would not be used for any purposes other than those set out in the statute. In 1972, both States enacted a prospective repeal of the covenant, and in 1974, both States made the repeal retroactive. The retroactive repeal by the New Jersey legislature was challenged in United States Trust Co. At the time, there was a shortage of imported oil and a nationwide energy crisis. The New York and New Jersey legislation was allegedly designed to divert resources from encouraging private automobile use to developing mass-transportation facilities which would serve legitimate public needs by providing transportation while at the same time conserving resources.
Notwithstanding the legitimate public purpose, which is not present in this case, the Supreme Court in United States Trust Co. concluded that the contract clause prohibited this retroactive interference with contractual rights. (431 U.S. 1, 22, 52 L. Ed. 2d 92, 109-10, 97 S. Ct. 1505, 1518.) Here, where there is no public purpose, the impairment of contract rights is even more blatantly violative of the Constitution.
This analysis is also consistent with Allied Structural Steel Co. v. Spannaus (1978), 438 U.S. 234, 57 L. Ed. 2d 727, 98 S. Ct. 2716. In that case, the Supreme Court invalidated a Minnesota statute requiring certain private employers to pay a pension-funding charge upon termination of the plan or closing of an office within the State. Pursuant to a plan it adopted before the statute was enacted, Allied closed its Minnesota plant, as a result of which several employees who had not qualified under its pension plan were nonetheless owed money under the new statute, and the company was assessed a substantial charge. The statute was held to be an invalid impairment of contract because it did not address a broad societal interest such as a national, social or economic emergency, imposed new regulation in a previously unregulated area, worked a permanent and severe change in contractual relationships, and was not aimed at all employers. (438 U.S. 234, 249-50, 57 L. Ed. 2d 727, 739-40, 98 S. Ct. 2716, 2725.) This case fits the Allied Structural Steel criteria. There was no pressing social or economic problem in Illinois which required correction by the legislature, there had been no previous State regulation of the nature of the relationship between trustees and beneficiaries, and obviously, the statute worked a severe and permanent change in that contractual relationship.
This court recently invalidated under the contract clause an Illinois statute which allowed a municipal treasurer to cancel municipal bonds secured by revenues which had been delinquent for more than 30 years. (George D. Hardin, Inc. v. Village of Mount Prospect (1983), 99 Ill. 2d 96.) Plaintiffs were holders of municipal bonds issued in the years 1926-30. Their suit, alleging that funds collected had been commingled or improperly transferred, and that bondholders had not been paid all sums collected, was dismissed on the basis of a 1981 statute. Reasoning that George D. Hardin, Inc. was controlled by United States Trust Co., this court reversed. The court noted that the blanket cancellation of the bonds permitted by the statute offered no protection whatever to the bondholders, and that the justifications offered for the legislation were not as compelling as those held insufficient in United States Trust Co. George D. Hardin, Inc. v. Village of Mount Prospect (1983), 99 Ill. 2d 96, 105-06.
The conclusion that the contract clause was violated in this case follows from the holding in George D. Hardin, Inc. Public Act 82-891, as retroactively applied, offers no protection whatever to the holders of beneficial interests in land trusts. The justification offered here is even less compelling than that offered in George D. Hardin, Inc., the elimination of municipal record keeping and possible municipal liability. Here, the burden of the fiduciary duty falls on private parties, not on any government agency. The justification proposed by the majority under the guise of furthering a “broad societal interest” (108 Ill. 2d at 26) is the need for “the continued availability of financing for owners and developers of real estate.” This need, however, even if furthered by the legislation in question, speaks only to the future. Undoing the past will not and does not contribute in any measure to the future availability of financing for real estate acquisition or development. While the majority’s rationale might be sufficient basis for prospective litigation, even though financing for real estate acquisition and development is obtained in the great majority of States without the use of land trusts, it is nevertheless insufficient to justify the impairment of existing contracts.
Turning now to the balancing test which the majority chooses as an alternative to the traditional Illinois analysis, it is clear that the same two flaws exist. The majority fails to specify a public purpose sufficient to justify the legislature’s retroactive, rather than prospective, interference with a private contractual relationship, and it dramatically minimizes the devastating effect which the retroactivity provision of Public Act 82 — 891 had on the value of the land-trust contract to holders of the beneficial interests in land trusts.
The majority stresses that prior to Zarkin it had been a long-standing practice for banks to act as both land trustee and secured creditor of the same trust (108 Ill. 2d at 21). What the majority overlooks is that because a practice has existed for many years does not make it legal. Before 1954, segregated schools had existed in the United States as long as the country had existed. However, the Supreme Court made it plain that longevity of a practice does not make it the law. Brown v. Board of Education (1955), 349 U.S. 294, 99 L. Ed. 1083, 75 S. Ct. 753.
The majority also characterizes this court’s decision in Zarkin as a surprise which had not been “foreshadowed” either in this court or the appellate court. (108 Ill. 2d at 21.) The fact is that Zarkin was a unanimous decision of this court which was completely consistent with prior Illinois trust law, as Zarkin itself explains. Bank of Illinois in Mt. Vernon v. Bank of Illinois in Mt. Vernon (1973), 13 Ill. App. 3d 711, relied on by the majority, was an appellate level decision which did not address the issue here or in Zarkin. Bank of Illinois held that a beneficiary of a land trust who directed a land trustee to execute a mortgage was bound by that direction and then followed the traditional rule that a beneficiary whose title was subject to a mortgage could not escape that mortgage by itself conveying title to a third party. There is nothing in Zarkin or in Sanelli’s claim inconsistent with that holding; unlike the beneficiary in Bank of Illinois, neither the Zarkins nor Sanelli challenged the validity of the mortgages they directed their land trustees to execute. Their complaints relate to the conduct of the banks in seeking to enforce the mortgages. The majority states that Sanelli could not have relied on the Zarkin decision when he established his trust. That is true. However, Sanelli had a right to rely on this court’s ability to correctly state and to follow the law.
In support of its repeated claim that the interference with contract involved here is minimal, the majority states that the bank, as trustee, could only do as the beneficiary instructed. That is a hard position to maintain where, as here, the beneficiary certainly did not instruct the bank to sell the beneficial interest to itself at a price allegedly below market value. Further, what appears to the majority to be a minimal interference with contract does not, I am sure, appear so minimal to the beneficiary who has lost his home.
Finally, the majority suggests that the contract-clause and due-process aspects of this case are controlled by General Telephone Co. v. Johnson (1984), 103 Ill. 2d 363, rather than by George B. Hardin. (108 Ill. 2d at 24-25.) I cannot understand how the majority can now propose that the balancing test used in General Telephone Co. controls here, when that case relied on a test specifically tailored to the evaluation of retroactive tax legislation. (See 103 Ill. 2d 363, 379, and sources cited therein.) Assuming, arguendo, that this irrelevant test controlled, still, it is clear that retroactive application of this statute is indeed “harsh and oppressive” (103 Ill. 2d 363, 379) as far as land-trust beneficiaries are concerned.
For these reasons, I conclude that the retroactive application of Public Act 82 — 891 violates the separation-of-powers clause of the Illinois Constitution, as well as the due process and contract clauses of both the Illinois Constitution and the Constitution of the United States. Therefore, I dissent.
CLARK, C.J., and WARD, J., join in this dissent.