PASSALINO v. City of Zion

JUSTICE FREEMAN,

dissenting:

In holding that plaintiffs were entitled to actual notice from the City of Zion (City), today’s opinion raises more questions than it resolves. First, and perhaps foremost, what is the nature of the property interests that drive the court’s analysis? Relatedly, given this court’s precedent regarding zoning, why, on balance, does notice by publication fail to sufficiently protect plaintiffs’ interests in this case? And what exactly is the rule of today’s decision? Because the majority opinion does not adequately address these general concerns, I cannot join in it and must respectfully dissent.

Nature of the Interests Involved

It is difficult to ascertain the exact nature of plaintiffs’ property interests without a detailed recitation of the facts, many of which are not included in the majority’s decision. The dispute in this case arises from the zoning classification of certain vacant parcels of property located in the City. In December 1971, the City passed an ordinance which rezoned these parcels as multifamily residential. This rezoning was done at the behest of the owner at that time, who had requested and received from the City approval to construct 142 multiple family units on the property. Construction, however, was never undertaken. In 1972, the owner began discussions with plaintiffs about the possible sale of the property. At that time, plaintiffs believed that the only way the subject property could be developed was to have a sanitary sewer line extended to it. Plaintiffs also knew that the City had plans to extend its sanitary sewer main to serve the subject property. Plaintiffs paid $35,000 to the previous owner of the property in order to have the City provide for the extension of the City’s sanitary sewer main to the property and to have all 142 multifamily units connected to it. In November 1972, plaintiffs paid, again through the previous owner, $10,000 to the City as part of an agreement for sanitary sewer connections for all of the approved 142 multifamily units. On the same date, plaintiffs acquired the property as beneficiaries of a land trust.2

Shortly thereafter, the City extended the sanitary sewer so as to be accessible for the development of the subject property. From 1973 through 1974, plaintiffs constructed 8 single-family homes and the first 48 units of multifamily residences on a portion of the subject property. By 1978, plaintiffs had sold all the developed property. To date, plaintiffs’ remaining property that had been approved for multifamily residences remains undeveloped.

In 1996, the City undertook a comprehensive rezoning of all the property in the City, including that held by plaintiffs as land trust beneficiaries. After public hearings, the city council passed an ordinance that amended the official zoning map. That amendment affected some 85 parcels throughout the City, including the subject property, by rezoning them from a multifamily residential classification to a single-family residential classification.

These facts lead to several observations that are important to the proper resolution of this case. First, plaintiffs are the beneficiaries of a land trust. The Illinois land trust is “a unique creation of the Illinois bar,” which over the years has “served as a useful vehicle in real estate transactions for maintaining secrecy of ownership and allowing ease of transfer.” People v. Chicago Title & Trust Co., 75 Ill. 2d 479, 487 (1979). Generally, once property is placed in a land trust, the owner’s interest in the real property changes to a personal property interest in the trust. Chicago Title & Trust, 75 Ill. 2d at 488. As such, legal and equitable title of the property rests with the trustee, including the right to transfer and encumber the property. Chicago Title & Trust, 75 Ill. 2d at 488. A beneficiary does not appear as an owner of record, and the trustee must keep beneficiary names confidential. Real Property Service, Illinois, Land Trusts §31:72 (1989). Plaintiffs, as beneficiaries, retain other ownership rights such as the right of possession and the right of the use and enjoyment of the property. The trustee will forward bills for taxes or assessments to the beneficiary (Real Property Service, Illinois, Land Trusts §31:58 (1989)), who is responsible for their payment (Chicago Title & Trust, 75 Ill. 2d at 493). The majority’s statement that plaintiffs’ name and address could have been easily ascertained (237 Ill. 2d at 127) is therefore untrue — a title search would only disclose that the land was in a trust; such a search would not identify the plaintiffs as beneficiaries. Similarly, a tax records search would disclose the name and address of the trustee. Those documents would not identify the plaintiffs as beneficiaries.3

Certainly, any zoning changes to the property would affect the right to the use of the property (how and for what use the property can be improved). City of Loves Park v. Woodward Governor Co., 14 Ill. 2d 623, 625 (1958). Beneficiaries of a land trust would be “persons interested” in the hearings (65 ILCS 5/11 — 13—2 (West 1996)) and therefore entitled to notice under the Municipal Code. The question, however, is what type of notice is required.

What is considered reasonable notice depends on the outcome of the balance between the state’s interest and the individual interest sought to be protected by the fourteenth amendment. Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 314, 94 L. Ed. 865, 873, 70 S. Ct. 652, 657 (1950). Generally, a landowner’s right to use of the property does not include the right to the continuation of an existing zoning classification. Pioneer Trust & Savings Bank v. County of Cook, 71 Ill. 2d 510, 517 (1978). An exception to the rule will be made “ ‘[wjhere there has been a substantial change of position, expenditures or incurrence of obligations made in good faith by an innocent party under a building permit or in reliance upon the probability of its issuance.’ ” 1350 Lake Shore Associates v. Healey, 223 Ill. 2d 607, 615 (2006), quoting People ex rel. Skokie Town House Builders, Inc. v. Village of Morton Grove, 16 Ill. 2d 183, 191 (1959), citing Fifteen Fifty North State Building Corp. v. City of Chicago, 15 Ill. 2d 408, 416 (1958). In such cases, the landowner has a vested right in the former zoning classification and will be allowed to complete the construction and use the property for the purpose originally authorized irrespective of the subsequent reclassification.

Since plaintiffs’ initial development of multiple-family residences in 1974, the subject property has remained unimproved. Plaintiffs have not alleged that they have received building permits or had even applied for them such that the vested-rights exception to the general rule would have application to this case. I do not understand what it is about plaintiffs’ interest in the property that would entitle them to actual notice of the pending zoning changes. Plaintiffs’ right to the use of the property does not entitle them to a continuation of a particular zoning classification, in this case the multifamily residential classification. This fact is critical in determining whether constitutionally sufficient notice was given since the answer depends on a balancing of the State’s interest and the individual interests sought to be protected.

The majority summarily concludes that plaintiffs’ entitlement to due process “arises out of plaintiffs’ property interest, which is affected by the zoning change” (237 Ill. 2d at 124), but this conclusion does not rest on any analysis of the nature of the interest plaintiffs seek to protect in this case. The majority cites a number of cases for this proposition, but even a cursory reading of each provides little help in addressing the question at hand. For example, Chicago Title & Trust Co. v. Village of Palatine, 22 Ill. App. 2d 264 (1959), stands for the unremarkable proposition that the public must be given notice of proposed comprehensive zoning plans and that persons interested be given the opportunity to be heard. The public was given notice in this case and interested persons were given the opportunity to be heard. Both Nasierowski Brothers Investment Co. v. City of Sterling Heights, 949 F.2d 890 (6th Cir. 1991), and Harris v. County of Riverside, 904 F.2d 497 (9th Cir. 1990), simply hold that once published notice is given of a zoning change, new notice must be given if the property is rezoned to a different classification than that published in the notice, a situation that did not occur in this case.

Only one case, American Oil Corp. v. City of Chicago, 29 Ill. App. 3d 988 (1975), seems helpful. There, the appellate court held that, because an owner of property had “legally protected interests,” actual notice of a proposed zoning change from commercial to residential was constitutionally required. But this was because the City had, prior to the zoning change, issued to the owner building permits for buildings to be erected on the property. American Oil, 29 Ill. App. 3d at 990. According to the court, the zoning change rendered the resulting gas station a nonconforming use of the property and had diminished the value of the property. American Oil, 29 Ill. App. 3d at 990-91. American Oil simply reinforces the notion that courts will protect the interests of property owners in zoning disputes when vested rights in a particular classification are at play. I take no issue with that. As explained above, however, plaintiffs have not asserted any vested right in the prior classification, a fact which the majority itself notes in its opinion. 237 Ill. 2d at 123 n.l.

Application of Mullane

The majority asserts that the outcome in this case is a “textbook application” of the analysis in Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 94 L. Ed. 865, 70 S. Ct. 652 (1950). See 237 Ill. 2d at 126. In Mullane, the United States Supreme Court held that a state must provide “notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them opportunity to present their objections.” Mullane, 339 U.S. at 314, 94 L. Ed. at 873, 70 S. Ct. at 657. The proceeding which triggered the requirement for notice was a judicial action to settle the accounts of a common trust fund conclusively as to all members. The Court held that the known beneficiaries of the trust were entitled to actual notice of the pending proceeding as opposed to notice by publication. The Court emphasized that notice will pass due process muster when “the practicalities and peculiarities of the case *** are reasonably met.” Mullane, 339 U.S. at 314-15, 94 L. Ed. at 873, 70 S. Ct. at 657. The focus is on the “reasonableness” of the means chosen by the state. Mullane, 339 U.S. at 315, 94 L. Ed. at 874, 70 S. Ct. at 657. Reasonableness is measured on the outcome of the balance between the “interest of the State” and the “individual interest sought to be protected by the Fourteenth Amendment.” Mullane, 339 U.S. at 314, 94 L. Ed. at 873, 70 S. Ct. at 657.

I fail to see how Mullane dictates that actual notice is required in this case. The City’s interest in this case is a strong one. This court has recognized that the purpose of zoning, as expressed in the Municipal Code, is to limit the rights of citizens to use their property in order to promote and protect the public health, safety, comfort, morals and welfare of the people. See Napleton v. Village of Hinsdale, 229 Ill. 2d 296 (2008). It is against these vital interests that we must weigh the interest possessed by the plaintiffs. Given the nature of plaintiffs’ interest, constructive notice is reasonable. For some 20 years, the property in this case remained unimproved, with no building permits issued or pending. On balance there is no reason for the City to have to go through the extra time and expense of providing actual notice to property holders under these circumstances.

The majority, however, holds that the City could have made reasonable efforts to contact plaintiffs and the other owners of record of the affected parcels by “perus[ing] the records of the Lake County collector and then mail notice to the [owners] of the 85 properties affected.” What the majority means by “perus[ing]” the records is unclear to me. I take the majority to mean that the City had, by virtue of the county property tax rolls, the names and addresses of all the owners of the affected parcels. Again, for the subject property, those records would only indicate the name of the trustee, who holds title to the property under the trust. In this case, notice would be mailed to the trustee who would then forward it to the beneficiaries. Thus, what the majority views as a mere perusal is, in fact, a title search or a property tax search on each of the affected parcels. In my view, this burden is unreasonable in light of the fact that the right to the use of property does not include the right to a continued zoning classification.

Practical Effects of the Majority Opinion

The majority expends some effort in trying to limit its holding to the facts of this case. 237 Ill. 2d at 128-29. I am concerned that, despite the majority’s insistence that its holding is limited to the facts of this case, constructive notice in zoning cases will, after today, never be deemed reasonable for purposes of procedural due process. There is nothing about these plaintiffs that would be any different from any other landowner interested in zoning proceedings, particularly when those landowners, like plaintiffs here, do not reside within the municipality.4 Moreover, in this case, the zoning change was comprehensive and involved the entire city. The majority makes no effort to explain what the guideposts are for decisionmaking regarding reasonable notice in such situations. Is it a matter of how easy it is to locate those who are affected by the zoning change? Where will this information come from and what is the scope of a reasonable investigation in these circumstances? Does the majority have in mind a title search for all affected parcels? Or perhaps a search of the county’s tax rolls for each affected parcel? Such a broad, sweeping investigation appears better suited to a facial challenge than an as-applied challenge, as the majority purports to be ruling on in this case. I note that the majority also states that 85 parcels were affected in this case, implying that the number of affected parcels is also relevant. 237 Ill. 2d at 128. At what number of affected parcels would actual notice become unreasonable? Would 100 parcels be too burdensome for the City? The majority further alludes to the cost of the mailing to the City. 237 Ill. 2d at 128. At what price point would the cost become unreasonable? These questions need to be answered or else municipalities will never be certain when constructive notice, as the statute permits, will be sufficient to satisfy due process. While procedural due process cases are unsuitable by their nature for precise formulae to balance interests (see Mullane, 339 U.S. at 314, 94 L. Ed. at 873, 70 S. Ct. at 657), in light of the imprecise nature of the property interest deemed by the majority to require due process protection, the number of parcels affected and the cost, in my view, would seem irrelevant to the balancing of interests under the majority’s analysis. For these reasons, I believe that the majority opinion will cause more findings of procedural due process violations than not.

Accordingly, while I agree with the majority that plaintiffs were entitled to notice and the opportunity to be heard on the issue of the City’s comprehensive zoning plan, I do not agree that the constructive notice given by the City was constitutionally deficient.

JUSTICE BURKE joins in this dissent.

Dissent Upon Denial of Rehearing

According to documents submitted in support of plaintiffs’ motion for summary judgment, at the time of the sale, the Zion State Bank and Trust Company served as trustee for the land trust, which was known as Trust Number 498. '

The tax documents included in the record reveal this to be the case. Plaintiffs’ names and address do not appear on those records. The documents indicate the name of the trustee, Chicago Title and Trust Company, and the company’s Chicago address.

Section 11 — 13—2 requires that the notice be published within a newspaper “published in the municipality.” 65 ILCS 5/11 — 13—2 (West 1996). The municipality in question here is Zion and thus the papers used were Zion newspapers. Plaintiffs reside in Lake Forest.