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Court Finds Foreclosure Filing Fee Unconstitutional

Editor's note: This article initially appeared in the newsletter of Diaz Anselmo and Associates, a member of The Five Star Institute's Legal League 100 group. 

The Illinois Supreme Court accepted jurisdiction and consolidated two appeals to consider the constitutionality of section 15-1504-1 of the Illinois Code of Civil Procedure (“Code”) and sections 7.30 and 7.31 of the Illinois Housing Development Act (“Act”).i Walker v. Chasteen, 2021 IL 126086 (IL June 17, 2021). The Code created a $50 add-on filing fee to be paid by foreclosure plaintiffs upon filing a foreclosure complaint while the Act created programs to be funded by the fee.ii The $50 fee was earmarked for the Foreclosure Program Prevention Fund which funded programs aimed at preventing foreclosure through counseling and education and funded grants used to maintain and improve abandoned properties.iii

The appellants were foreclosure plaintiffs who were required to pay the $50 fee but challenged the constitutionality of the fee claiming it violated the equal protection, due process, uniformity, and ‘free access’ clauses of the Illinois Constitution of 1970.iv The plaintiffs “sought declaratory and injunctive relief and a return of all filing fees paid pursuant to section 15-1504.1.” The defendants (all Illinois circuit court clerks and the State of Illinois through the Attorney General) argued the statutes were constitutional and even if not “that the voluntary payment doctrine precluded plaintiffs’ claims because they did not pay the filing fee ‘under protest.’”

The circuit court considered the issues on cross-motions for summary judgment and found in favor of the plaintiffs. The court concluded the statutes were “facially unconstitutional” in violation of the “free access, equal protection, due process, and uniformity clauses of the Illinois Constitution…” The court also concluded the voluntary payment doctrine did not apply because the plaintiff’s paid the $50 filing fee under duress. The Attorney General and the clerks from two counties (Cook County and Will County) appealed the permanent injunction which enjoined the circuit courts from charging the filing fee and enforcing the statutes.

The Illinois Supreme Court accepted jurisdiction and first considered whether the voluntary payment doctrine applied; explaining, if it applied, then the constitutionality of the $50 fee would not be considered.v Under the voluntary payment doctrine, one who voluntarily pays money “with knowledge of the facts” cannot later recover that money “on the ground that the claim was illegal.” The Court reasoned that plaintiffs did not have a real choice not to pay “since they would have lost a substantial right” – access to the court system – if they opted not to pay the fee.vi The Court concluded “that duress necessarily and inherently exists in court-filing fee cases.”

The Court then moved on to the constitutional issue noting that “making a facial challenge to a statute’s constitutionality is extremely difficult, requiring a showing that the statute would be invalid under any imaginable set of circumstances.”vii Despite this high burden, the Court found the statute unconstitutional.viii The Court applied the “rational basis test” and concluded that the $50 fee used for preventative counseling and education and to alleviate problems associated with abandoned properties “had no direct relation to expenses of a petitioner’s litigation and no relation to the services rendered [by the court system].” Quoting the circuit court, the Court concluded the $50 fee constituted an impermissible litigation tax as opposed to a filing fee noting the fee was “tantamount to a litigation-tax funded neighborhood beautification plan.”

The Illinois Supreme Court concluded the statutes were “a revenue-raising measure designed to fund a statewide social program administered by the Illinois Housing Development Authority” that impermissibly placed the cost of “maintaining a social welfare program” exclusively on mortgage foreclosure litigants “while excluding other classes of taxpayers from the burden.” The Court reiterated the benefits of the program were “indirect at best” and had “no direct relation to the administration of the court system” so there was “no rational basis” for the fee. The Court affirmed judgment in favor of the plaintiffs finding the statutes “violate[d] the free access clause because the $50 fee unreasonably interfere[d] with foreclosure litigants’ access to the courts.”

Beyond the obvious effect of reducing the amount of the total filing fee required to initiate a foreclosure action, there are too many variables to know how this decision will affect the mortgage industry over the long term. Will other jurisdictions with similar fee structures voluntarily follow course? To what extent should the default industry push for removal of unconstitutional fees? Ostensibly, any reduction in fees will need to be offset by reductions in assistance programs or via new fees imposed elsewhere so stepping back and considering all options and ramifications is the recommended course of action for now. Stay tuned for developments.

i This legislation and the resulting programs were intended to ease the existing problems associated with a massive increase in mortgage foreclosures starting in 2007 which continued for several years and is now referred to as the mortgage foreclosure crisis of 2010. Walker, at *2-3, 11-12.

ii Walker, at *2-3.

iii Walker, at *2-3, 11-12.

iv Walker, at *2. All future references to this case are to this cite unless indicated otherwise.

v Walker, at *3. All future references to this case are to this cite unless indicated otherwise.

vi Walker, at *4. All future references to this case are to this cite unless indicated otherwise.

vii Walker, at *5 (emphasis in original) (quoting In re M.T., 221 Ill. 2d 517, 536, 304 Ill. Dec. 336, 852 N.E.2d 792 (2006)).

viii Walker, at *8-9. All future references to this case are to this cite unless indicated otherwise.

About Author: Christopher S. Iaria

Christopher S. Iaria joined Anselmo Lindberg & Associates LLC in March 2012. He is licensed to practice law in the Seventh Circuit Court of Appeals, the State of Illinois, and in the United States District Court for the Northern and Southern Districts of Illinois. Focusing on civil litigation, his practice is concentrated in the areas of mortgage foreclosure, title insurance litigation, real estate law, and mechanics lien litigation. He is a graduate of the University of California at Santa Barbara (2004) and the Thomas M. Cooley Law School (2009). Mr. Iaria is a member of the Illinois State Bar Association and the Dupage County Bar Association.

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