author: MR. JUSTICE KLUCZYNSKI

text:
    (No. 50951.
    GRIFFITTS CONSTRUCTION COMPANY, INC., Appellant, v. THE DEPARTMENT OF LABOR et al., Appellees.

      Opinion filed March 20, 1979.

    Rehearing denied May 30, 1979.

      Thomas R. Wetzler and Thomas F. Sonneborn, of Springfield, for appellant.
    William J. Scott, Attorney General, of Springfield (Joseph D. Keenan III, Assistant Attorney General, of Chicago, of counsel), for appellees.
   MR. JUSTICE KLUCZYNSKI

delivered the opinion of the court:

This is an appeal from a judgment of the appellate court in an action under the Unemployment Compensation Act (Ill. Rev. Stat. 1965, ch. 48, par. 300 et seq.). The defendant Director of Labor ruled that plaintiff was an employing unit subject to the provisions of the Act insofar as the services of a certain salesman and canvassers are concerned. The circuit and appellate courts affirmed and we allowed plaintiff’s petition for leave to appeal.

Plaintiff, Griffitts Construction Company, is in the home-improvement business. Much of its business is generated through the efforts of salesmen and canvassers, whose services during the first two quarters of 1965 are the basis of this litigation.

Pursuant to the request of plaintiff’s accountant, a field agent of the Division of Unemployment Compensation conducted a review of plaintiff’s records to determine whether plaintiff was liable to pay money into the unemployment compensation fund because of services performed by a certain salesman and canvassers. As a result of his examination of the records, the agent made a determination of liability in the amount of $181.54. Plaintiff agreed to make the payment immediately to stop the accrual of interest, but indicated that it would seek a refund.

On August 4, 1965, plaintiff filed a claim for refund with the defendant Director of Labor. The claim was denied. On December 4, 1965, plaintiff filed a protest and requested a hearing. The hearing was conducted on October 8, 1969, before Helen Peckler, a representative of the Director. In her report filed December 4, 1970, Ms. Peckler recommended that the Director’s previous determination of liability be affirmed. Ms. Peckler’s recommendation was based on her findings that the salesman and canvassers in question were employed by plaintiff within the meaning of the Unemployment Compensation Act and that the services of these individuals were not exempt as being those of an independent contractor (Ill. Rev. Stat. 1965, ch. 48, par. 322). Plaintiff filed objections, but the Director adopted Ms. Peckler’s recommendation as his decision. Plaintiff filed a complaint for administrative review in the circuit court of Sangamon County. That court affirmed, and plaintiff appealed to the appellate court, which also affirmed (58 Ill. App. 3d 1114).

In this court, plaintiff asks us to rule that the services of the salesman and the canvassers are exempt from coverage under the Act. Plaintiff admits that the relationship between it and the salesman and canvassers constitutes “employment” within the meaning of the Act. That word is defined broadly as “any service *** performed by an individual for an employing unit ***.” (Ill. Rev. Stat. 1965, ch. 48, par. 316.) Plaintiff contends, however, that the services are exempt under section 212 of the Act (Ill. Rev. Stat. 1965, ch. 48, par. 322), the so-called “independent contractors” exemption. The section provides:

“Service performed by an individual for an employing unit, whether or not such individual employs others in connection with the performance of such services, shall be deemed to be employment unless and until it is proven in any proceeding where such issue is involved that—
A. Such individual has been and will continue to be free from control or direction over the performance of such services, both under his contract of service and in fact; and
B. Such service is either outside the usual course of the business for which such service is performed or that such service is performed outside of all the places of business of the enterprise for which such service is performed; and
C. Such individual is engaged in an independently established trade, occupation, profession, or business.” Ill. Rev. Stat. 1965, ch. 48, par. 322.

As prior cases have pointed out, this statutory definition supplants the common law concept of independent contractor, and because the conditions specified in section 212 are in the conjunctive, all three must be satisfied to entitle an employing unit to an exemption (A. George Miller, Inc. v. Murphy (1942), 379 Ill. 524, 527). Because the Act was passed with the public welfare in mind, construction of its provisions should favor inclusion, and there is a strict burden of proof placed upon one claiming an exemption (Grant Contracting Co. v. Murphy (1944), 387 Ill. 137, 143, 148). The inquiry should be directed at determining the actual rather than the alleged relationship of the employing unit and the person whose services are in question; designations and terminology used by the parties are not controlling (Murphy v. Daumit (1944), 387 Ill. 406, 415). Our task as a reviewing court is to determine whether the decision of the Director of Labor is against the manifest weight of the evidence or is not supported by evidence in the record. Mohler v. Department of Labor (1951), 409 Ill. 79, 85.

The report of the Director’s representative, adopted by the Director as his decision, states that plaintiff has failed to prove that it has met any of the three conditions of section 212. The representative’s findings are as follows:

“1. That the salesmen who performed services for the petitioner were not free from direction or control over the performance of such services.
2. That these salesmen performed services that were in the usual course of the business of the petitioner.
3. That these salemen were not engaged in any independently established trade, occupation, profession, or business.
4. That these salemen were in the employment of petitioner.
5. That these salesmen hired canvassers with the implied or express consent of the petitioner.
6. That the canvassers were in the employment of petitioner.”

Our review of the record convinces us that the Director’s determination of liability should be affirmed, as we believe that the evidence in the record supports the finding that the salesman and canvassers were not free from plaintiff’s control and that plaintiff therefore failed to prove that it satisfied subparagraph (A) of section 212. Because the failure to prove compliance with any one of section 212’s subparagraphs defeats an employing unit’s claim of exemption, we need not consider whether plaintiff has met the conditions for an exemption specified in subparagraphs (B) and (C).

The salesman in question is Harley Griffitts, who is also vice president and shareholder of plaintiff. Although Griffitts testified that, as a salesman, he was free to offer home-improvement contracts to any company, he also conceded that he submitted all contracts to plaintiff. It is reasonable to assume that he did so under compulsion as officer and shareholder of the company. Under the statute, this is a sufficient basis for denying the exemption, since freedom from control must be established under both “contract of service and in fact.” (Ill. Rev. Stat. 1965, ch. 48, par. 322(A).) In determining whether an employing unit is required to contribute to the unemployment compensation fund for the services of an individual in a given job classification, we must “investigate the relationship by an examination of the incidents and circumstances surrounding the classification, so that it may be determined what the relationship was in fact.” (Murphy v. Daumit (1944), 387 Ill. 406, 415.) We therefore also give little weight to Griffitts’ designation of himself as an “outside salesman.”

In summary, we find that plaintiff has not met its burden of proof in claiming an exemption, and we hold that the decision of the Director, that condition (A) of section 212 is not met, is not against the manifest weight of the evidence and is supported by the evidence. The exemption was properly denied.

We note, too, that our holding encompasses the services of the canvassers involved in this case. The canvassers worked for Griffitts in soliciting business and, once a prospect was found, Griffitts would attempt to close the deal. The work of the canvassers thus became subsumed in Griffitts’ closing efforts and execution of contracts. The canvassers were therefore indirectly under the same sort of control as that exerted over Griffitts, and plaintiff must contribute to the unemployment compensation fund on their behalf also.

Plaintiff has additionally argued that section 212 is unconstitutional in that it violates equal protection principles. Plaintiff’s argument is that its salemen are treated differently from real estate and insurance salesmen in that the latter two groups are absolutely exempted from coverage of the Act (Ill. Rev. Stat. 1965, ch. 48, pars. 327, 338) without a rational basis for this distinction in treatment. Because this argument was not timely raised, we do not address the issue. (People v. Brand (1953), 415 Ill. 329, 337.) The argument now made was not raised before the Director or his representative, and was not brought to the attention of the circuit court until newly retained counsel questioned the constitutionality of the law in a memorandum in support of a motion to vacate the circuit court’s judgment. The motion itself, which was denied, contained no discussion of the issue. The circuit court did not err in refusing to respond to such a tardy request. (Jenisek v. Riggs (1942), 381 Ill. 290, 293-94.) The first court to address the issue was the appellate court, which rejected the constitutional claim, mainly on the ground that plaintiff had produced no evidence of irrationality. Indeed, it was impossible for the court to find any such evidence because plaintiff had not properly and timely brought the issue to the attention of any body that could have received evidence, and no evidence was therefore introduced. We find it equally difficult to review evidence that was never introduced and therefore hold that the point was waived.

The judgment of the appellate court is affirmed.

Judgment affirmed.


source: Caselaw Access Project

author: MR. JUSTICE KLUCZYNSKI MR. JUSTICE CLARK, MR. JUSTICE CLARK,

license: Public Domain

text:
    (No. 50131.
    KAREN LOPEZ et al., Appellants, v. JOSEPH FITZGERALD, JR., et al., Appellees.

      Opinion filed Jan. 26, 1979.

    Supplemental opinion filed on denial of rehearing May 30, 1979.

      CLARK, J., GOLDENHERSH, C.J., and MORAN, J., dissenting.

      Robert Masur, Fred L. Lieb, Seymour J. Mansfield, Gordon Waldron, and Anthony J. Fusco, Jr., of Chicago, for appellants.
    William R. Quinlan, Corporation Counsel, of Chicago (Daniel Pascale, Robert L. Thompson, and Kathleen Ransford, of counsel), for appellees.
    Robert J. Vollen, Douglass W. Cassel, Jr., James A. Geocaris, and Robert L. Graham, of Chicago, for amici curiae League of Women Voters of Illinois et al.

   MR. JUSTICE KLUCZYNSKI

delivered the opinion of the court:

Plaintiffs, individuals and community groups, filed a class action complaint for injunctive and declaratory relief seeking access to building inspection reports made by the Department of Buildings of the city of Chicago (Department). The individual plaintiffs alleged they had sought and were denied access to building inspection reports of buildings in which they resided or in which they contemplated renting an apartment or store. The reports were made following inspections at plaintiffs’ or others’ requests. The complaint further alleged that the Department denied the organizational plaintiffs access to reports concerning buildings within their neighborhoods. The circuit court of Cook County struck plaintiffs’ class action allegations. It allowed plaintiffs’ motion for summary judgment and denied defendants’ motion for summary judgment. The court declared that reports of building inspections and all other records prepared and kept by the Department of Buildings are public records under the Local Records Act (Ill. Rev. Stat. 1975, ch. 116, par. 43.101 et seq.) and section 41 — 7 of the Municipal Code of Chicago. The court further ordered that plaintiffs were entitled to inspect and to copy or receive copies of those records. The appellate court reversed the declaratory judgment order on the grounds that initial investigation reports are not public records either by statute or at common law since they are not final, but rather preliminary. (53 Ill. App. 3d 164.) In its supplemental opinion on denial of rehearing, the appellate court stated that the trial court’s order was overly broad and refused to disturb the trial court’s striking of the class action allegations. This court allowed plaintiff’s petition for leave to appeal (65 Ill. 2d R. 315).

The issue presented is whether the building investigation reports to which plaintiffs seek access are public records open to public scrutiny. Count I of plaintiffs’ second amended complaint alleged that the investigation reports were public records under sections 41 — 6 and 41 — 7 of the Municipal Code of Chicago and that plaintiffs had a right of access to those records, presumably at common law. Count II alleged a right to inspect the records under the Local Records Act (Ill. Rev. Stat. 1975, ch. 116, par. 43.101 et seq.).

The reports to which plaintiffs seek access were made following inspections pursuant to provisions of the Municipal Code of Chicago. Section 13 — 1 of the Code establishes a Department of Buildings. The Code provides for the appointment of technically trained inspectors to head the bureaus of electrical inspection, building inspection, sanitary inspection, plumbing inspection, elevator inspection, ventilation inspection, housing inspection, survey inspection, housing complaints and compliance (sec. 13 — 1 et seq.). Section 41 — 6 of the Code provides that it is the duty of the commissioner of buildings to cause an investigation to be made of all complaints filed with the Department and to keep a record of such investigations on file together with the reports and findings signed by the inspector or inspectors. Section 41 — 7 provides that, when such investigation or investigations disclose violations of the Municipal Code which are likely to endanger life, safety or health, the commissioner of buildings must give notice in writing to the owner, occupant, lessee or person in possession, charge or control of the premises to remedy the problem in the time designated in the notice, which must not be more than 15 days after the service of such notice. Section 46 — 5 repeats the notice and repair requirements. The Code also makes provision for compliance hearings (sec. 13 — 27).

Where the repairs, changes, alterations or requirements ordered by the notice are not made or performed to the satisfaction of the commissioner within the time specified in the notice (sec. 41 — 7) or within the time provided in section 13 — 27 governing compliance hearings, the matter must be referred to the corporation counsel for prosecution. Section 41 — 7 provides further that such investigations, including the contents of inspections, shall be preserved as public records and shall be admitted in the trial of the cause as prima facie evidence as to the contents thereof. The Municipal Code contains no provision for disclosure of investigation reports to members of the public.

The Local Records Act is entitled “An Act in relation to the destruction and preservation of public records ***.” It establishes a program for the management of local records in order to promote economy and efficiency in the day-by-day record-keeping activities of local governments and to facilitate and expedite governmental operations (Ill. Rev. Stat. 1975, ch. 116, par. 43.102).

The Act defines a public record as “any book, paper, map, photograph, or other official documentary material, regardless of physical form or characteristics, made, produced, executed or received by any agency or officer pursuant to law or in connection with the transaction of public business and preserved or appropriate for preservation by such agency or officer, or any successor thereof, as evidence of the organization, function, policies, decisions, procedures, or other activities thereof, or because of the informational data contained therein. Library and museum material made or acquired and preserved solely for reference or exhibition purposes, extra copies of documents preserved only for convenience of reference, and stocks of publications and of processed documents are not included within the definition of public record.” (Ill. Rev. Stat. 1975, ch. 116, par. 43.103.) As originally enacted, and currently in force, the Act contained a general provision that any person shall be supplied with copies of public records reproduced in accordance with the provisions of the Act:

“In any case where public records have been reproduced by photography, microphotography or other reproductions on film, in accordance with the provisions of this Act, any person or organization shall be supplied with copies of such photographs, microphotographs, or other reproductions on film upon payment of the required fee to the officer having custody thereof. The fee required to be paid shall be the actual cost of such copies, plus a service charge of 15% of such cost.” (Ill. Rev. Stat. 1975, ch. 116, par. 43.113.)

Despite the presence of this general provision, the Act was amended, effective October 1972, to include an express provision that reports and records of the obligation, receipt and use of public funds of units of local government and school districts are public records available for inspection by the public under specified limitations as to time, place and circumstances (Ill. Rev. Stat. 1975, ch. 116, par. 43.103a). This brought the Act into express conformity with article VIII, section 1(c), of the Illinois Constitution of 1970, which mandates public access to such records.

We find insufficient basis in the Local Records Act to justify access by plaintiffs to reports by building inspectors. In reaching this conclusion we have examined the statutory language and its context, as well as the statutory purpose (see Village of Lombard v. Pollution Control Board (1977), 66 Ill. 2d 503, 507). The title and declaration of purpose for the Local Records Act manifest a statutory concern for determining which local governmental records should or should not be preserved on film. The definition of public records is broad and serves to ensure that no important records will be destroyed. Because the Local Records Act is concerned with the preservation of records, a cursory provision referring to public access to preserved records found toward the end of the Act cannot be construed to establish a basis for disclosure of specific records preserved. Different considerations are involved in determining which records are available for public disclosure than are raised in determining whether records should be preserved by a unit of government. The basis for determining which records are open to disclosure must be found outside the Local Records Act. Section 13 of the Act (Ill. Rev. Stat. 1975, ch. 116, par. 43.113) merely provides for the disclosure of preserved records to which the public is otherwise entitled to access.

An examination of an amendment to the Local Records Act and comparison with disclosure statutes from other jurisdictions further indicate that section 13 (Ill. Rev. Stat. 1975, ch. 116, par. 43.113) is not a general disclosure-authorization provision. Section 3a of the Local Records Act (Ill. Rev. Stat. 1975, ch. 116, par. 43.103a) provides expressly for access to local financial records. The amendment assists in determining the legislative intent as to provisions of the unamended statute (see People ex rel. Gibson v. Cannon (1976), 65 Ill. 2d 366, 373) and indicates that section 13 is not an access statute. The General Assembly found it necessary to provide expressly for the disclosure of financial records to bring the Local Records Act into conformity with article VIII, section 1(c), of the Illinois Constitution of 1970. Were section 13 a general access statute, the amendment would have been superfluous, and this court will not assume the legislature engaged in a useless act (Pinkstaff v. Pennsylvania R.R. Co. (1964), 31 Ill. 2d 518, 524).

The limitations as to the circumstances under which financial records are open to the public under section 3a also support the conclusion that section 13 is not an access statute. Financial records are available only at certain times, in certain places, and as expressly limited by the right to privacy. General disclosure statutes from other jurisdictions contain both grants of rights of access and express exemptions and limitations on disclosure. (See e.g., 5 U.S.C. sec. 552 (1976); Cal. Gov’t Code sec. 6254 (West 1978 Supp.); Md. Ann. Code art. 76A, sec. 3 (1978 Supp.); Mass. Ann. Laws ch. 4, sec. 7, cl. 26 (Michie/Law. Co-op 1978 Supp.) By contrast section 13 of the Local Records Act contains no limitations at all on the asserted right of access, an indication that the General Assembly was not addressing disclosure questions.

Plaintiffs argue that the investigation reports are public records under the definition contained in the Local Records Act and the Municipal Code of Chicago. However, the definition in the Local Records Act, as already noted, is concerned with the decision of whether a document should be preserved on film, not whether it should be open to public access. Therefore, even if the investigation reports fall within the definition of public records under the Local Records Act, it does not follow that they are subject to public disclosure. “Whether a record is to be regarded as a public record in a particular instance will depend upon the purposes of the law which will be served by so classifying it. A record may be a public record for one purpose and not for another.” MacEwan v. Holm (1961), 226 Or. 27, 36, 359 P.2d 413, 417.

The term “public record,” as used in the Municipal Code, is also directed to a circumstance other than public access to records. Section 41 — 7 directs that investigation reports be preserved as public records and be admitted at trial as prima facie evidence of code violations. Thus the Code is concerned with the preservation of the reports for use against the landlords in prosecutions for code violations. Direct access by members of the public is not contemplated.

The issue now before the court is whether inspection reports are public records available to the public at common law, since neither the Local Records Act nor the Municipal Code provide for public access.

The plaintiffs point to a general public policy favoring open government in support of their contention that building inspection reports are open to public access (Weinstein v. Rosenbloom (1974), 59 Ill. 2d 475, 482; People ex rel. Gibson v. Peller (1962), 34 Ill. App. 2d 372, 374; Nowack v. Auditor General (1928), 243 Mich. 200, 203, 219 N.W. 749, 750). However, countervailing factors may dictate nondisclosure. Although it recognized a broad statutory right of access, even to preliminary data collected for a report on radiation, the court in MacEwan v. Holm (1961), 226 Or. 27, 44-45, 359 P.2d 413, 420-21, stated:

“The public’s right of inspection is not without qualification. There may be circumstances under which the information contained in a record can be justifiably withheld from the person seeking it. *** Even where the request is made for a lawful purpose the public interest may require that the information be withheld. Thus where the information is received in confidence, it may be proper to refuse access to it. *** There .are other circumstances which will justify nondisclosure. Thus it has been suggested that inspection may be denied where a citizen seeks documentary evidence in the hands of a district attorney, minutes of a grand jury, or evidence in a divorce action ordered sealed by the court.”

The MacEwan court proposed a balancing test to determine whether specific documents should be open to the public. The interest of citizens in knowing what the government is doing and their proprietary interest in public property should be weighed against the interest of the public in having the business of government carried on efficiently and without undue interference.

Additional elements must be included in the equation in determining whether building investigation reports should be open to public access. The investigatory reports to which plaintiffs seek access are only the first stage in the process of finding building violations and ensuring that they will be corrected. The investigation report must be evaluated, and an administrative decision must be made whether violations are present. If violations are found to be present, the Municipal Code then provides for notice, compliance hearings and, ultimately, prosecution if violations are not corrected. Considerations of privacy and due process militate against public access to initial investigation reports without notice to the building owner and without an opportunity for him to respond.

This court has recognized a right to privacy, a right to be left alone (Leopold v. Levin (1970), 45 Ill. 2d 434, 440-41). Article I, section 6, of the Constitution of 1970 also recognizes privacy rights against at least some intrusions (see Illinois State Employees Association v. Walker (1974), 57 Ill. 2d 512, 522-24). Article I, section 12, expressly recognizes a right to a remedy against all injuries to privacy or reputation. The United States Supreme Court in Marshall v. Barlow’s, Inc. (1978), 436 U.S. 307, 314-15, 56 L. Ed. 2d 305, 313, 98 S. Ct. 1816, 1821-22, has recognized an employer’s privacy right against warrantless intrusions by government safety inspectors into work areas not open to the public. The context is distinguishable, but the recognition of privacy interests indicates the existence of privacy considerations weighing against disclosure of initial investigation reports concerning rental properties.

As the appellate court noted in People ex rel. Better Broadcasting Council, Inc. v. Keane (1973), 17 Ill. App. 3d 1090, 1092-93: “The people’s right to know, however, must be balanced by the practical necessities of governing. Public officials must be able to gather a maximum of information and discharge their official duties without infringing on rights of privacy. *** Therefore, it is important to consider whether disclosure would constitute an invasion of privacy; whether there could be prejudice to private rights or give an unfair competitive advantage; *** whether it would discourage frankness; and whether it could cut off sources of information upon which a government relies.” (See also Craemer v. Superior Court (1968), 265 Cal. App. 2d 216, 222, 71 Cal. Rptr. 193, 199, noting that the public good is not served by disclosures which undermine the sense of security for individual rights.) Even the plaintiffs recognize, in citing United States v. Mitchell (D.C. Cir. 1976), 551 F.2d 1252, 1260, rev’d sub nom. Nixon v. Warner Communications, Inc. (1978), 435 U.S. 589, 55 L. Ed. 2d 570, 98 S. Ct. 1306, that the policy favoring disclosure must concede when justice requires.

Detailed public disclosure statutes from other States contain express exemptions from disclosure for investigative reports compiled for law-enforcement purposes. (See, e.g., Cal. Gov’t Code sec. 6254 (West 1978 Supp.); Md. Ann. Code art. 76A, sec. 3(i) (1978 Supp.); Mass. Ann. Laws ch. 4, sec. 7, cl. 26(f) (Michie/Law. Co-op 1978 Supp.).) The Federal Freedom of Information Act (5 U.S.C. secs. 552(b)(7)(A), (B), (C) (1976)) expressly exempts from disclosure investigatory records compiled for law-enforcement purposes to the extent that production of such records would, among other things, interfere with enforcement proceedings, deprive a person of a right to a fair trial, or constitute an unwarranted invasion of privacy. The Federal Freedom of Information Act protects investigatory records compiled for enforcement of all laws, not only criminal laws. Moore-McCormack Lines, Inc. v. I.T.O. Corp. (4th Cir. 1974), 508 F.2d 945, 949 (citing the legislative history); Luzaich v. United States (D. Minn. 1977), 435 F. Supp. 31, 34, aff’d without opinion (8th Cir. 1977), 564 F.2d 101.

In Wisconsin v. Constantineau (1971), 400 U.S. 433, 27 L. Ed. 2d 515, 91 S. Ct. 507, the United States Supreme Court held that where a person’s reputation is threatened by governmental action, due process requires that he be given notice and an opportunity to be heard before the government may proceed. There the police caused a notice to be posted in all retail liquor stores that sales or gifts of liquor to the plaintiff were forbidden for one year. Constantineau was explained in the subsequent case of Paul v. Davis (1976), 424 U.S. 693, 47 L. Ed. 2d 405, 96 S. Ct. 1155, which held that due process rights are triggered only where governmental action deprives the defendant of a right under law, such as the right to purchase liquor. The public release of initial investigation reports indicating building code violations, without notice and a hearing, threatens the property owner’s ability and right to lease his property, and otherwise reap financial benefit from his property, thus calling for due process safeguards under both the Federal and Illinois constitutions.

To release investigative reports without notice to the owner and an opportunity to be heard would impinge upon the owner’s due process rights. To release initial and unevaluated investigation reports threatens privacy interests. Public disclosure of such reports would also tend to impair the efficiency of day-to-day activities of and investigations by the Department of Buildings. In the absence of factors supporting disclosure other than a general policy of openness in government and the plaintiffs’ interest in the condition of buildings, and in the face of strong countervailing factors, investigative reports are not open to public access. If the investigative reports become part of a court record, rules governing public access to such records would govern.

The plaintiffs place great reliance on trial and intermediate appellate court cases from other jurisdictions which have permitted the release of investigatory reports. However, the statutory and factual circumstances for each of the cases render them inapplicable in other jurisdictions and other contexts. (See, e.g., Citizens For Better Care v. Department of Public Health (1974), 51 Mich. App. 454, 215 N.W.2d 576 (information compiled for investigations relative to the licensing of nursing homes was available, since it had already been disclosed to the parties regulated); Young v. Town of Huntington (1976), 88 Misc. 2d 632, 388 N.Y.S.2d 978 (holding that disclosure exemptions are not applicable to noncriminal investigations under a New York statute, but noting that a different rule prevails under the Federal Freedom of Information Act); Martinez v. Libous (1975), 85 Misc. 2d 186, 378 N.Y.S.2d 917 (the statute expressly provided for disclosure of all records of the department in question).) Those cases can be countered by cases from other jurisdictions which have found investigatory records unavailable for public disclosure under the applicable factual and legal circumstances. See, e.g., Atchinson, Topeka & Santa Fe Ry. Co. v. Kansas Com. on Civil Rights (1974), 215 Kan. 911, 529 P.2d 666 (civil-rights-investigation file); Superintendent, Maryland State Police v. Henschen (1977), 279 Md. 468, 369 A.2d 558 (reports gathered in investigating whether gun permit should be revoked); Kottschade v. Lundberg (1968), 280 Minn. 501, 160 N.W.2d 135 (tax-valuation appraisal cards); Wiley v. Woods (1958), 393 Pa. 341, 141 A.2d 844 (data pertaining to petition for re zoning).

Linder v. Eckard (1967), 261 Iowa 216, 152 N.W.2d 833, citing the weight of authority, held that written appraisals of property in a proposed urban renewal area were preliminary matters of investigation which were not public records open to public access. Our appellate courts have adhered to this preliminary-records exception. (People ex rel. Better Broadcasting Council, Inc. v. Keane (1973), 17 Ill. App. 3d 1090; People ex rel. Hamer v. Board of Education (1970), 130 Ill. App. 2d 592.) Privacy, due-process and governmental-efficiency interests are served by this rule. However, because of technical, definitional problems raised in determining whether a particular record is a “preliminary” record, we do not base our conclusion that the investigative reports at issue here are not open to public access on the preliminary-records exception.

Plaintiffs’ final contention is that the trial court erred in striking the class action allegations. Because we have determined that there is no public right of access to initial building investigation reports, we need not address this issue.

For the reasons stated, the judgment of the appellate court is affirmed.

Judgment affirmed.

MR. JUSTICE CLARK,

dissenting:

Disclosure of government records is a two-edged sword. While one edge cuts through layers of bureaucracy to expose corruption, incompetence and waste, the other edge inadvertently can cut through innocent private citizens’ legitimate expectations of privacy, exposing the most intimate details of their lives, or, perhaps, exposing them to public scorn due to the recorded, but unfounded, suspicions of one misguided, minor government official. Nonetheless, the importance of an informed citizenry to the assumptions which underlie our constitution and statutes demands that, even in the absence of an express statutory mandate, we undertake the admittedly difficult task of providing the maximum amount of public access to government records which is consistent both with the deference due our coordinate branches of government and with citizens’ legitimate expectations of privacy. Where there is an express statutory mandate, we ought not subvert its intent through unduly restrictive construction of its unambiguous and constitutionally sound language. I find today’s decision wanting in these regards.

The plaintiffs in this case, certain individuals and community organizations, filed a two-count amended complaint in the circuit court of Cook County seeking declaratory and injunctive relief granting them access to inspect and copy reports of building inspections prepared by employees of the Department of Buildings of the city of Chicago pursuant to sections 41 — 6 and 41 — 7 of the Municipal Code of Chicago. Count I was based on an alleged common law right of access to the records of public agencies and count II was based upon section 13 of the Local Records Act (Ill. Rev. Stat. 1975, ch. 116, par. 43.113). The circuit court apparently granted plaintiffs’ motion for summary judgment as to count II, but made no express ruling as to count I. The Appellate Court, First District reversed (53 Ill. App. 3d 164; see also 53 Ill. App. 3d 164, 169 (supplemental opinion on denial of rehearing)), reasoning as follows: (1) Plaintiffs had no right to inspect any reports, under either common law or the Local Records Act, until “final action” has been taken by the Department. (See 53 Ill. App. 3d 164, 167-68.) (Significantly, perhaps, the appellate court did not give as an example of “final action” the decision not to prosecute.) (2) After “final action” either “final reports” or “official reports” are to be made available pursuant to the Local Records Act. (See 53 Ill. App. 3d 164, 171 (supplemental opinion on denial of rehearing).) (It is not clear, however, whether, under the appellate court’s reasoning, all reports are “final” or “official” after “final action”). (3) There was no need for a modified injunction providing access to those reports which are available pursuant to the Local Records Act.

The majority of this court now affirms the judgment of the appellate court, reasoning: (1) Section 13 of the Local Records Act creates no independent right of access to any records under any circumstances, but rather, “merely provides for the disclosure of preserved records to which the public is otherwise entitled to access” (76 Ill. 2d at 116); and (2) “[A]t common law” (76 Ill. 2d at 118), the public apparently never is entitled to inspect and copy “investigative reports” except that “[i] f the investigative reports become part of a court record, rules governing public access to such records would govern” (76 Ill. 2d at 122). I disagree on both points.

A brief review of certain provisions of the Local Records Act is in order. Section 2 of the Act provides:

“This Act declares that a program for the efficient and economical management of local records will promote economy and efficiency in the day-by-day record-keeping activities of local governments and will facilitate and expedite governmental operations.” (Ill. Rev. Stat. 1975, ch. 116, par. 43.102.)

I would not exclude private suits to enforce statutory requirements (Ill. Rev. Stat. 1977, ch. 24, par. 11 — 13—15 (authorizes private actions by owners or tenants within 1,200 feet against violations of building code)) or citizen monitoring of government from the category of functions which “facilitate and expedite government operations.” Section 3 of the Act provides:

“Except where the context indicates otherwise, the terms used in this Act are defined as follows:
* * *
‘Public record’ means any book, paper, map, photograph, or other official documentary material, regardless of physical form or characteristics, made, produced, executed or received by any agency or officer pursuant to law or in connection with the transaction of public business and preserved or appropriate for preservation by such agency or officer, or any successor thereof, as evidence of the organization, function, policies, decisions, procedures, or other activities thereof, or because of the informational data contained therein.” (Ill. Rev. Stat. 1975, ch. 116, par. 43.103.)

Section 13 of the Act provides:

“In any case where public records have been reproduced by photography or microphotography, or other reproductions on film, in accordance with the provisions of this Act, any person or organization shall be supplied with copies *** upon payment of the required fee.” (Emphasis added.) (Ill. Rev. Stat. 1975, ch. 116, par. 43.113.)

It is undisputed that the reports at issue in count II of plaintiffs’ amended complaint fall within the definition of public records contained in section 3 of the Act, that these reports have been reproduced on microfilm, and that section 13 provides that copies of microfilmed public records “shall be supplied” to the public upon payment of a fee. The court, however, today holds, in effect, that the words “shall be supplied” really mean shall not be supplied unless the public “is otherwise entitled to access” to them.

In reaching this conclusion, the court relies upon the following arguments, none of which persuade me to abandon the strong presumption that the legislature meant precisely what it said (see generally, e.g., Illinois Telephone Association v. Illinois Commerce Com. (1977), 67 Ill. 2d 15, 20-21; Bovinette v. City of Mascoutah (1973), 55 Ill. 2d 129, 133; Droste v. Kerner (1966), 34 Ill. 2d 495, 503, cert. denied and appeal dismissed (1967), 385 U.S. 456, 17 L. Ed. 2d 509, 87 S. Ct. 612; Nordine v. Illinois Power Co. (1965), 32 Ill. 2d 421, 428):

(1) “Because the Local Records Act is concerned with the preservation of records, a cursory provision referring to public access to preserved records found toward the end of the Act cannot be construed to establish a basis for disclosure of specific records preserved.” 76 Ill. 2d at 116.
(2) Because the legislature found it necessary to amend the Act (by adding section 3a (Ill. Rev. Stat. 1973, ch. 116, par. 43.103a)) to provide expressly for public inspection of certain financial records, section 13 must be presumed not previously to have provided for public access to microfilmed documents.
(3) Unlike section 3a of the Act and unlike disclosure statutes from other jurisdictions, “section 13 of the *** Act contains no limitations at all on the asserted right of access, an indication that the General Assembly was not addressing disclosure questions” (76 Ill. 2d at 117).

First, I do not find the reference to pub he access in section 13 “cursory.” The legislature need not use exclamation points and exhaustive statements of legislative purpose to make its will known. I find the phrase “any person or organization shall be supplied with copies” (Ill. Rev. St at. 1975, ch. 116, par. 43.113) more than adequate. Nor, as indicated above, is disclosure to the public foreign to the stated purposes of the Act.

Second, as originally enacted, the Local Records Act only provided a right to copies of those public records which had been reproduced on microfilm, etc. Section 3a, however, provides for public inspection of all “reports and records of the obligation, receipt and use of public funds” (Ill. Rev. Stat. 1975, ch. 116, par. 43.103a), regardless of whether such reports and records otherwise fall within the definition of “public records” and regardless of whether they have been reproduced photographically, as our constitution now requires (Ill. Const. 1970, art. VIII, sec. 1(c)).

Third, the absence of internal limitations upon the right of access created by section 13 is no excuse for ignoring the unambiguous language of the statute. That such limitations would have been salutary does not render the statute unconstitutional in their absence, as applied to the facts of this case. (See Paul v. Davis (1976), 424 U.S. 693, 708-09, 47 L. Ed. 2d 405, 418, 96 S. Ct. 1155, 1164.) I therefore cannot concur in the court’s evisceration of the plain language of section 13.

Even if I were to accept the court’s interpretation of the statute, I would find some support in the common law for the right of access claimed here. (See, e.g., People ex rel. Gibson v. Peller (1962), 34 Ill. App. 2d 372, 374.) Although the parties have not directed our attention to a single case in which this court expressly recognized a common law right to public inspection of the records of local government, the facts of this case, including, in particular, the private right of action created by section 11 — 13—15 of the Illinois Municipal Code (Ill. Rev. Stat. 1975, ch. 24, par. 11 — 13—15), give rise to such a right, in my opinion. Accordingly, once the city has, expressly or by default, determined whether to prosecute a given alleged violation, I would allow public inspection of the investigator’s report. (If the matter is litigated, our courts are sophisticated enough in their understanding of government to be able to determine when inaction by the city represents a decision not to prosecute.) I would, however, in the interests of fairness, require the plaintiffs to give adequate notice to the owner of the premises inspected, including a reasonable opportunity to supplement the record with evidence of compliance before statements as to alleged noncompliance are made publicly available, as well as an opportunity to object to the release of trade secrets or other intensely personal information.

The problems of fashioning a fair but effective means of assuring the public’s access to the information necessary to control their government are undeniably enormous, but not unworthy of the effort necessary. In the words of Mr. Justice Brandéis:

“Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.” (L. Brandéis, Other People’s Money 62 (1933), quoted in Buckley v. Valeo (1976), 424 U.S. 1, 67, 46 L. Ed. 2d 659, 715, 96 S. Ct. 612, 658.)

If there is a silver lining to the pall cast by the court’s decision, it is that the legislature’s attention almost certainly now will be redirected to these problems.

GOLDENHERSH, C.J., and MORAN, J., join in this dissent.

Supplemental Opinion on Denial of Rehearing

Plaintiffs have filed a timely petition for rehearing which seeks a modification of the disposition in this cause but acquiesces in the basic conclusions reached in the opinion. Plaintiffs’ petition accurately sets forth our holding that once a notice of violation has been sent to a building owner and he has been given an opportunity to respond at a compliance hearing, building inspection reports on which the notice and hearing were based may be open to public access. Plaintiffs argue that our holding entitles plaintiff Central Lakeview Neighbors to records it sought for a building it alleged had been the subject of court proceedings for approximately two years, that plaintiff Lloyd Parker is entitled to records for a building he alleged had been the subject of a compliance hearing, and that the remaining plaintiffs should be provided a hearing on their requests for reports even though they did not allege that the owners of the buildings which were the subject of those reports had received notice and a compliance hearing.

Plaintiffs’ petition for rehearing is denied. However, we modify our disposition as to plaintiffs Central Lake-view 'Neighbors and Lloyd Parker. Central Lakeview Neighbors is entitled to the inspection report it seeks because the defendants admitted it had been at issue in court proceedings. We remand for a hearing to determine whether the owner of the building to whose inspection reports Lloyd Parker sought access had received notice and a compliance hearing concerning those reports. If the owner had received the requisite notice and opportunity to be heard, then, consistent with our opinion, Parker is entitled to examine those inspection reports. The remaining plaintiffs did not allege that the building owners had received a notice and hearing concerning any of the reports to which they sought access. We therefore find no reason to remand for a hearing on their requests for records.

On April 12, 1979, approximately eight weeks after their petition for rehearing was due and filed, plaintiffs filed a motion for leave to file a brief in support of their petition for rehearing. The motion was entered and continued for consideration with plaintiffs’ petition for rehearing. The motion and brief call the court’s attention to an additional authority, not previously cited by either party. The plaintiffs seek to file the supplemental brief for the express dual purpose of supporting the petition for rehearing and attacking the bases of the opinion.

Although plaintiffs’ motion- was filed after their petition for rehearing was due, we shall, in the interest of justice, take judicial notice of the additional authority plaintiffs cite in their motion and supplemental brief. The cited statute provides that “[w]hen the building code department of a municipality *** determines a building code violation exists it shall cause a notice of such violation to be posted in a conspicuous place near the main entrance of such building.” (Emphasis added.) (Ill. Rev. Stat. 1977, ch. IlllA, par. 3402.) The notice is to be removed by the department as soon as the cause of the violation has been corrected. Ill. Rev. Stat. 1977, ch. lllW, par. 3402.

We read the statute in light of the important constitutional safeguards with which our opinion was concerned and therefore do not consider it inconsistent with our opinion. The statute, although it became effective in 1963, has never been interpreted, and there are no committee comments explaining it. Therefore, plaintiffs concede, it is an unresolved question as to what the statute means by a determination by the building code department that a violation exists. We read the statutory phrase, “determines a building code violation exists” (emphasis added) (Ill. Rev. Stat. 1977, ch. lllW, par. 3402), which is the prerequisite for the posting of a notice of violation, to mean a finding following a notice to the building owner and an opportunity to be heard. That reading takes into account building owners’ due process rights and effects the principle of statutory construction which mandates that, where reasonable, statutes will be construed to avoid an unconstitutional result (Anderson v. Schneider (1977), 67 Ill. 2d 165, 176). Our opinion likewise takes into consideration the important constitutional rights implicated in this case, and we therefore see no need to modify our holding that a building owner must be provided a notice and an opportunity to be heard before a building investigation report may be open to public scrutiny.

MR. JUSTICE CLARK,

dissenting:

I dissent from the denial of plaintiffs’ petition for rehearing. First — I do not agree that the plaintiffs have “acquiesce [d] in the basic conclusions reached in the [original] opinion.” (76 Ill. 2d at 130.) Second, although the court’s supplemental opinion on denial of rehearing takes a step in the right direction, it fails to come to grips with the problem posed by cases in which the Department, for whatever reason, has not issued a notice of violation and held a compliance hearing. The records compiled in such cases could be vital to the revelation of institutional corruption and incompetence, and the logic of the majority’s position compels the release of such records, with appropriate safeguards.

In its original opinion in this cause, the court made the following statement: “To release investigative reports without notice to the owner and an opportunity to be heard would impinge upon the owner’s due process rights. To release initial and unevaluated investigation reports threatens privacy interests. Public disclosure of such reports would also tend to impair the efficiency of day-to-day activities of and investigations by the Department of Buildings. In the absence of factors supporting disclosure other than a general policy of openness in government and the plaintiffs’ interest in the condition of the buildings, and in the face of strong countervailing factors, investigative reports are not open to public access. If the investigative reports become part of a court record, rules governing public access to such records should govern.” (76 Ill. 2d at 121-22.) In its supplemental opinion, however, the court states that “[p] laintiffs’ petition accurately sets forth our holding that once a notice of violation has been sent to a building owner and he has been given an opportunity to respond at a compliance hearing, building inspection reports on which the notice and hearing were based may be open to public access.” (76 Ill. 2d at 130.) The court then goes on to hold that “Central Lakeview Neighbors is entitled to the inspection report it seeks because the defendants admitted it had been at issue in court proceedings,” and that if “the owner of the building to whose inspection reports Lloyd Parker sought access *** had received the requisite notice and opportunity to be heard, then, consistent with our opinion, Parker is entitled to examine those inspections reports.” 76 Ill. 2d at 130.

Since the supplemental opinion does not purport to modify the original opinion, the two opinions must be intended to be reconcilable. Such reconciliation leads to the following conclusions: (1) The “strong countervailing factors” which weigh against public disclosure of “investigative reports” all disappear once the owner of the building has “received the requisite notice and opportunity to be heard,” and a compliance hearing before the Department of Buildings satisfies the hearing requirement. (2) “The rules governing public access to [court] records” always mandate release of inspection reports of the Department of Buildings which have been “at issue” in court proceedings, and the circuit court does not have discretion to seal such records.

The question remains however, what about situations in which the city does not issue a notice of violation and hold a compliance hearing, such as, for example, where a building inspector has accepted a bribe in return for not reporting a violation, or where another official of the Department has accepted a bribe in return for squelching an investigation of a reported violation? The majority’s answer apparently is that the records in such cases may go undisclosed, because a hearing before the Department of Buildings is an absolute prerequisite to disclosure, in order to protect the property and privacy interests of building owners. The owners’ rights of privacy and property can be adequately safeguarded, however, without covering up evidence of incompetence and corruption on the part of public officials. All that is necessary is that the owner of the property in question be given notice of the disclosure sought by a given individual or group, and an opportunity to supplement the record before its disclosure. Under the law of defamation, an individual or group which obtained disclosure of such a supplemented record would, at its peril, ignore the owner’s side of the story. See Troman v. Wood (1975), 62 Ill. 2d 184.

Accordingly, I would allow the petition for rehearing, and grant judgment for plaintiffs in accordance with the views expressed in my dissent from the court’s original opinion in this cause.

GOLDENHERSH, C.J., and MORAN, J., join in this dissent.

       The precise language of the circuit court’s order is in part as follows:
      “1. Reports of Building inspections and other records prepared and kept by the Department of Buildings of the City of Chicago pursuant to section 41 — 6 and section 41 — 7 of the Municipal Code of Chicago are declared to be public records under the Illinois Local Records Act, Ill. Rev. Stat. 1974, Chap. 116, sec. 43.101 et seq. and sec. 41 — 7 of the Municipal Code of Chicago.” (Lopez v. Fitzgerald (circuit court of Cook County, Feb. 10, 1976), No. 75 CH 675 (order granting plaintiffs partial summary judgment).)
      The court later indicated, in a colloquy with counsel, that the intent of the above order was to grant injunctive, as well as declaratory relief to plaintiffs, and counsel for defendants so stipulated.


author: MR. JUSTICE WARD

text:
    (No. 41144.

      In re HAROLD C. NESSELSON, Attorney, Petitioner.

      Opinion filed May 24, 1979.

      Paul E. Thompson, of Thompson & Thompson, of Long Grove, for petitioner.
    Mary M. Conrad, of Chicago, for the Administrator of the Attorney Registration and Disciplinary Commission.
   MR. JUSTICE WARD

delivered the opinion of the court:

The petitioner, who is 56 years old and was admitted to the bar of this State in 1955, was suspended from the practice of law in 1966 for 3 years for the solicitation of personal injury cases and for payments made to informants. (35 Ill. 2d 454.) In November 1969, he was disbarred by this court. (43 Ill. 2d 262.) The disbarment resulted from his solicitation of personal injury cases, the solicitation having occurred while the first disciplinary proceeding was pending before this court. In July 1973 he petitioned for reinstatement and the Hearing Board of the Attorney Registration and Disciplinary Commission recommended that the petition be denied, which recommendation was affirmed by the Review Board of the Commission. This court in November 1974 approved the report of the Review Board and denied the petition for reinstatement. In February 1977 he filed a second petition for reinstatement, and in March 1978 the Hearing Board recommended his reinstatement. The Review Board, however, reversed the findings of the Hearing Board and recommended to us that the petition should be denied.

The petitioner and 12 witnesses in his behalf testified before the Hearing Board. The transcript shows that seven witnesses, including businessmen and an attorney, who had known the petitioner prior to his disciplinary difficulties, testified as to his competence in legal and business affairs and to his integrity and favorable reputation in the community. Five other witnesses, including a judge in the circuit court of Cook County, an attorney and two physicians, testified that they became acquainted with the petitioner after he had been barred from the practice of law and that they had formed a high regard for his integrity and business judgment, especially with regard to the business of trading in gold coins. (The petitioner had been active in the coin market in the early part of this decade and had apparently been quite successful in it.) The petitioner has undergone surgery twice because of malignancies, which apparently resulted in legal blindness in one eye. He now has an inoperable malignancy, which is being treated by irradiation. The petitioner testified that if readmitted to the bar he would seek to practice in the field of probate law. He testified that his role in practice most likely would be a sedentary one. The Hearing Board concluded that the petitioner had demonstrated consciousness of the professionally wrongful character of the conduct for which he had been disciplined and that he had shown remorse for the misconduct and for the disrepute it had brought on the profession. The Hearing Board noted that he had had ample time to reflect on the matter in the 12-year period of his suspension and disbarment. The Hearing Board concluded that reinstatement was appropriate, though it did state the question was a close one.

The Review Board, in rejecting the findings and recommendations of the Hearing Board, took the view that the petitioner had failed to show that he was rehabilitated and fit to return to the practice of law. It stated, too, that the petitioner had submitted materials concerning his financial status and activities that were, at best, inconsistent and incomplete. It judged that he had not shown a recognition of his professional misconduct and contrition for it.

This court has the exclusive authority to regulate the practice of law in this State. (In re Day (1899), 181 Ill. 73.) It has the power to impose sanctions for unprofessional conduct so as to protect the public interest and guard the legal profession against reproach. It has, too, the authority to reinstate those who have been barred from the practice of law. An attorney who petitions for reinstatement has the burden of showing that he had been rehabilitated and that he is a fit person to resume practice. (In re Starr (1976), 64 Ill. 2d 407, 415; 65 Ill. 2d R. 767; see generally Annot., 70 A.L.R.2d 268 (1960).) We consider that the Hearing Board did not err in concluding that the petitioner had met this burden and that recommendation for reinstatement was appropriate.

The record shows that before the Hearing Board the petitioner did express recognition that the conduct for which he was disciplined had been improper. He stated several times that he was sorry for his conduct. We cannot adopt the Review Board’s view that the petitioner did not acknowledge that his conduct had been improper. At one point, to illustrate, the petitioner said: “I am sorry for what I did. I did wrong. I come to you with a spirit of regret, contrite, apologetic. *** I brought the reputation of the law down. I did it with a selfish motive. I’m sorry. *** I would not do it again.” At another point: “I’ve done wrong and I know it. I have admitted it and I’ll not make the same mistake twice.”

The Review Board considered there were inconsistencies in the petitioner’s response to requests for financial records and other data by the Administrator. The Hearing Board, however, while it did find that there were some questions arising from the evidence as to the petitioner’s financial matters, apparently found the petitioner’s explanations satisfactory. The Administrator had argued before the Hearing Board that the petitioner had not complied with Commission Rule 11.1(17), which requires a petition for reinstatement to contain “[a] full statement of the facts upon which the petitioner relies to show that he is fit to resume the practice of law and that his resumption of the practice would not be adverse to the public interest.” (Ill. Rev. Stat. 1975, ch. 110A, following par. 770.) The Hearing Board rejected the Administrator’s contention and concluded, too, that the Administrator’s other objections were insubstantial.

The Hearing Board heard the testimony and concluded that the petitioner should be reinstated. Considering all of the circumstances here, including the character of the professional offense involved, the length of time — 12 years — the petitioner has been excluded from the practice of law, and the evidence of reformation, we judge that the Hearing Board’s recommendation for reinstatement was proper, and we accordingly adopt it.

It is the order of this court that the petitioner is reinstated to the roll of attorneys admitted to practice law in this State.

Petitioner reinstated.


author: MR. JUSTICE RYAN

text:
    (No. 50492.
    LOUIS PASTOR, Appellant, v. NATIONAL REPUBLIC BANK OF CHICAGO, Appellee. (Thomas A. Harnett, Appellee).

      Opinion filed June 1, 1979.

      Barbara B. Hirsch, of Chicago, for appellant.
    James G. McConnell and Stephen J. Friedman, of Chicago (Rooks, Pitts, Fullagar & Poust, of counsel), for appellee Thomas A. Harnett.
   MR. JUSTICE RYAN

delivered the opinion of the court:

Plaintiff, Louis Pastor, procured the issuance of an irrevocable letter of credit by defendant, National Republic Bank of Chicago, in favor of Summit Insurance Company of New York (Summit). Pastor is affiliated with Associated Surety Agents, Inc. (Associated), which 'is in the business of acting as insurance agent, and in that capacity sought to represent Summit. Pastor procured the issuance of the letter of credit as stated therein “to facilitate authorization of Associated Surety Agents, Inc. to act as agent for Summit ***.” The credit authorizes Summit to draw on the defendant bank by sight draft from time to time, up to an aggregate amount of $25,000, for the recovery of any deficit balance existing between Summit and Associated. On May 25, 1975, Summit was placed in liquidation by a court order in New York. The Superintendent of Insurance of the State of New York was appointed liquidator and vested with title to all property, contracts and rights of action of Summit. Thereafter, the liquidator drew a sight draft for $25,000 on the defendant bank under the irrevocable credit it issued to Summit. Pastor filed a suit against the bank in the circuit court of Cook County seeking to enjoin payment of the sight draft. A temporary restraining order and later a preliminary injunction were issued enjoining the payment of the draft drawn against the credit. Thomas A. Harnett, Superintendent of Insurance for the State of New York, petitioned the court for leave to intervene. On March 2, 1976, the circuit court of Cook County denied Harnett’s petition, ordered the circuit court orders to remain in full force, and found that the denial of the motion to intervene was a final order and that there was no just reason to delay enforcement or appeal. The appellate court reversed and remanded. (56 Ill. App. 3d 421.) We granted Pastor’s petition for leave to appeal. The terms used with relation to letters of credit are those defined in section 5 — 103 of the Uniform Commercial Code (Ill. Rev. Stat. 1975, ch. 26, par. 5 — 103).

The credit which the bank issued did not expressly state that it was transferable or assignable. Concerning the required documentary support for the sight drafts drawn against the credit it provided:

“All drafts drawn under this Letter of Credit must be accompanied by your official statement setting forth the amount of the loss, our agreement description and the amount of deficit, and your calculation *** of the loss or deficit.”

The sight draft for $25,000 was drawn in favor of “Summit Insurance Company of New York in Liquidation” and was accompanied by a letter signed by the Associate Special Deputy Superintendent of Insurance for the State of New York which stated that a deficit balance existed between Associated Surety Agents, Inc., and Summit in the amount of $612,655.98 as indicated on the enclosed calculation. The calculations enclosed covered a period of time “from inception to 6/30/75,” and the calculation simply stated a “summary of income and outgo” for the period.

Section 5 — 116(1) of the Uniform Commercial Code (Ill. Rev. Stat. 1975, ch. 26, par. 5 — 116(1)) provides:

“The right to draw under a credit can be transferred or assigned only when the credit is expressly designated as transferable or assignable.”

Pastor contends that since the credit did not expressly provide that it was transferable or assignable, Summit alone was entitled to its benefits and to draw drafts against it and that this right could not be exercised by the liquidator, who, Pastor contends, is a transferee or assignee of the credit. Pastor also contends that the order of the New York court terminated the contractual relationship existing between Summit and Associated and thereafter the credit issued by the bank could not be drawn against it. Pastor also contends that the liquidator failed to comply with a condition of the credit in that he failed to furnish a proper accounting which reflected the amount of Summit’s loss, but instead furnished only its own statement and calculation of the loss.

The law governing letters of credit was developed “when those devices were used primarily as a financial adjunct to a contract for the sale of goods. Today letters of credit are being used as a financial adjunct to a range of contracts that is as wide as the requirements of a sophisticated and developing economy.” (Harfield, Code, Customs and Conscience In Letter-of-Credit Law, 4 U.C.C. L.J. 7, 9 (1971).) The traditional letter of credit used in connection with a contract for the sale of goods customarily was issued by a bank or other financially responsible entity (issuer) at the request of a buyer (customer) addressed to the seller of the goods (beneficiary) stating that the beneficiary could draw on the issuer for a specified amount upon compliance with conditions set forth in the body of the letter. The conditions usually were the presentation of a sight draft accompanied by certain documentation, usually including a bill of lading. The issuer, upon payment of the draft, then had a claim against the buyer (customer), who, upon payment to the issuer, received the documents which enabled him to procure the goods. The function of the traditional or commercial letter of credit was to finance the movement of goods in commerce and to insure the seller that he would be paid. See generally 2 W. Hawkland, A Transactional Guide to the Uniform Commercial Code sec. 2.37 et seq. (1964); Harfield, Code Treatment of Letters of Credit, 48 Cornell L.O. 92 (1962); Mentschicoff, How to Handle Letters of Credit, 19 Bus. Law. 107 (1963); Annot., 35 A.L.R.3d 1404 (1971).

In recent years, another distinct use of the letter of credit has emerged, accomplishing results previously obtained by the use of such devices as performance bonds, escrow agreements, and various forms of guaranty arrangements. (Verkuil, Bank Solvency and Guaranty Letters of Credit, 25 Stan. L. Rev. 716, 721 (1973).) The use of the letter of credit in this capacity is referred to as a “guaranty” or “stand-by” letter of credit. Unlike the sales or traditional letter of credit, which obligates the issuer to pay in the ordinary course of a business transaction, the guaranty or stand-by letter of credit obligates the issuer to pay in the event of a default by one who procured its issuance. (Jarvis, Standby Letters of Credit — Issuers’ Subrogation and Assignment of Rights — Part 1, 9 U.C.C. L.J. 356, 359 (1977); Joseph, Letters of Credit: The Developing Concepts and Financing Functions, 94 Banking L.J. 816 (1977); see generally Campbell, Guaranties and the Suretyship Phases of Letters of Credit, 85 U. Pa. L. Rev. 175 (1936).) Although the use of letters of credit is often referred to as being in the nature of a guaranty or a suretyship arrangement, it does not assume the legal significance of either. Under the letter of credit the issuer is bound in the first instance to pay the beneficiary. It is an individual undertaking of the issuer to pay the beneficiary, and the obligation is not subject to the various defenses available to a guaranty or a surety undertaking. J. White & R. Summers, Uniform Commercial Code sec. 18-2 (1972).

Article 5 of the Uniform Commercial Code (Ill. Rev. Stat. 1975, ch. 26, par. 5 — 101 et seq.) is not limited in its applicability to any specific type or use of a letter of credit. The language used clearly indicates the intention of the drafters that its terms apply to “guaranty” or “stand-by” credits, as well as to traditional or sales credits. Whatever the nature of the credit, section 5 — 114(1) of the Code (Ill. Rev. Stat. 1975, ch. 26, par. 5 — 114(1)) makes it clear that the issuer of the credit has no right to refuse to honor a complying draft or demand. The obligation of the credit is without reference to the compliance of the buyer (customer) or the seller (beneficiary) with the underlying contract. The issuer deals only with documents which must comply with the terms of the credit. Once compliance is determined, the issuer is not concerned with the quality of the goods shipped or the accuracy of the documents if they are regular on their face. It is therefore apparent that the buyer (customer), the one who has procured the issuance of the credit, places substantial reliance upon the integrity or character of the seller (beneficiary). “Any procedure which extends the risk which the buyer incurs by opening the credit — for example, an assignment of the credit by the seller — should not be permitted without adequate safeguards for the buyer.” (Ufford, Transfer and Assignment of Letters of Credit Under the Uniform Commercial Code, 7 Wayne L. Rev. 263, 264-65 (I960).) Another author states:

“If the letter of credit is in such form that no one except the person upon whose honesty the buyer is depending can give such performance as the credit requires, the buyer has an excellent chance of receiving what the credit is intended to pay for. If the credit were assignable to such an extent that performance could be delegated to another, the seller-beneficiary might unwittingly assign it to someone who might, because he is placed in a position enabling him to do so, misuse the credit or ship trash instead of merchandise. ***
***
We see here perhaps the best reason there is for the present rule of non-assignability of credits which do not contain express words of assignability. The buyer is willing to be responsible for the acts of a named seller, and he should not be placed in a position such that someone else’s acts may cause him loss or trouble.” McGowan, Assignability of Documentary Credits, 13 Law & Contemp. Prob. 666, 681-82 (1948).

Thus, section 5 — 116(1) above quoted authorizes the transfer or assignment of credits only when the credit is expressly designated as transferable or assignable. The limitation, however, does not prevent the beneficiary from assigning the proceeds of the credit, and as section 5 — 116(2) specifically provides, even though the credit specifically states that it is nontransferable or nonassignable, the beneficiary may, before performance of the conditions of the credit, assign his right to the proceeds. Ill. Rev. Stat. 1975, ch. 26, par. 5-116(2).

We do not view the restrictions on transferability or assignability contained in section 5 — 116(1) of the Code as preventing the liquidator in our case from drawing against the credit issued to Summit. First, we note that from the pleadings and the documents presented with the draft it appears that Summit has performed by extending the credit to Associated, which the letter of credit was issued to induce. We further note that a deficit balance exists in favor of Summit in excess of the amount specified in the letter of credit. Also, we consider significant the fact that the transfer of the rights of Summit under this credit was not a voluntary transfer or assignment but was accomplished by operation of law. This is not, therefore, an attempted assignment of Summit’s obligation to perform, but is only a transfer to the liquidator by order of the court of Summit’s right to recover under the credit. The liquidator is not a stranger to the letter of credit, but is, in effect, the representative of Summit and is acting for the benefit of its estate, pursuant to order of court in marshaling the assets of the insurance company. It has generally been held that transfers to bankruptcy or insolvency trustees, or to receivers, resulting from statutory provisions or order of court, are transfers by operation of law and are therefore not within the prohibition of certain anti-assignment statutes. See Annot., 12 A.L.R. 2d 460, 479 (1950); 2 R. Clark, The Law and Practice of Receivers sec. 447 (3d ed. 1959). See also McIlvaine v. City National Bank & Trust Co. (1942), 314 Ill. App. 496, 521.

In this case we need not decide the broad question of whether there can be a complete transfer of all incidents of a letter of credit by operation of law. The nonassignability rule developed as a result of a concern that the transfer or assignment of a credit would place the performance which the credit sought to induce and the right to recover on the credit in a person other than the one in whom the one who procured the issuance of the letter (the customer) placed his trust and confidence. (McGowan, Assignability of Documentary Credits, 13 Law. & Contemp. Prob. 666, 682 (1948).) Here, the original beneficiary of the credit had performed according to its terms and only the right of recovery under it has been transfered by operation of law to the liquidator. The beneficiary chosen by the customer has performed and the customer has received the protection which the nonassignability rule was designed to effect.

At the time of the entry of the order by the court in New York transfering Summit’s property and right to the liquidator, Summit had a right to demand and receive payment under the credit upon the presentation of certain complying documents. There is no reason why this right should not pass to the liquidator as a claim belonging to the company’s estate to be collected by the liquidator for distribution according to law. The New York statute provides that the assets of an insolvent insurance company vest in the liquidator by operation of law. (New York Ins. Law art. XVI, sec. 514, par. 2 (McKinney).) A similar provision is found in our statute (Ill. Rev. Stat. 1975, ch. 73, par. 803), which provides for the liquidation of the assets and the distribution of the company’s estate. Ill. Rev. Stat. 1975, ch. 73, pars. 803, 805.

We noted above the similarity between the function served by a “stand-by” or “guaranty” letter of credit and an ordinary guaranty undertaking. In Essex International, Inc. v. damage (7th Cir. 1971), 440 F.2d 547, the court, in applying Illinois law, noted that the Illinois courts have refused to apply mechanically the nonassignability rule as to guaranties, noting that the factual setting of each case is examined to determine whether the policy underlying the rule is applicable. Because of the narrow scope of the holding in our case, it is not necessary to adopt the broader holding of damage; however, the part of that holding which we have noted is helpful for the limited purpose of this opinion. In our case, as in damage, there is no need to mechanically apply the nonassignability rule in a fact situation such as that now before this court where the primary object which the rule seeks to insure, performance by one in whom trust has been placed, has been accomplished and only the right to recover under the letter of credit is passed to the liquidator by operation of law under the provision of the applicable statute and the order of the court.

Pastor also contends that, pursuant to an order of the New York court in the liquidation proceedings, the agency contract between Summit and Associated had been terminated prior to the time the draft was presented for payment under the letter of credit. Pastor contends that the credit was enforceable only so long as the agency contract with Associated remained in full force and effect. We do not agree. Although reference is made in the letter of credit to an agency contract between Summit and Associated, as a basis for calculating the amount to be drawn, payment under the credit is not conditioned on the contract being in full force and effect. A letter of credit is an undertaking independent of any underlying contract. As such, the obligation to pay does not depend upon the underlying contract or its performance unless it is so provided in the letter of credit. The terms and conditions of the letter of credit determine and govern the bank’s obligation to pay. The conditions of the letter of credit with which we are concerned are set out above and require only that the draft drawn “must be accompanied by your official statement setting forth the amount of the loss, our agreement description and amount of deficit, and your calculation *** of the loss or deficit.” The documents which are presented by the beneficiary of a credit must comply with those stipulated in its terms. The bank is dealing in documents and not in contract performance. When the documents presented comply with the conditions specified in the letter of credit, the bank is authorized and obligated to pay pursuant to the terms of the credit. Ill. Rev. Stat. 1975, ch. 26, par. 5 — 114; Ill. Ann. Stat., ch. 26, par. 5 — 114, Uniform Commercial Code Comment; Joseph, Letters of Credit: The Developing Concepts and Financing Functions, 94 Banking L.J. 816, 818 (1977); Ufford, Transfer and Assignment of Letters of Credit Under the Uniform Commercial Code, 7 Wayne L. Rev. 263, 265 (1960); Verkuil, Bank Solvency and Guaranty Letters of Credit, 25 Stan. L. Rev. 716, 719-20 (1973).

Related to this contention is Pastor’s further argument that inasmuch as the liquidator failed to furnish an accounting setting forth the amount of Summit’s loss, which made drawing against the letter necessary, the requirements of the letter had not been complied with. There is no requirement contained in the letter of credit that the beneficiary of the letter furnish an account of Summit’s loss. As noted above, the letter only required that the draft be accompanied by “your official statement setting forth the amount of the loss.” The statement which accompanied the draft set forth the amount of the loss. No accounting was furnished and no accounting was required.

Pastor makes the further argument that since he was not a party to the New York proceedings, permitting the liquidator to draw against the letter of credit would be a denial of Pastor’s right to due process. We do not agree. The New York proceedings did not render an in personam judgment against Pastor. The proceeding was an in rem proceeding. The bare allegation that Pastor was denied due process because he was not made a party to or “given an opportunity to be heard” in the New York case is not sufficient cause to question an order entered in that proceeding.

We hold that the transfer to the liquidator by operation of law of Summit’s right to recover under the letter of credit is not prohibited by section 5 — 116(1) of the Uniform Commercial Code; that the objections to the complying documents are not well taken; and that Pastor has not shown that he has been deprived of due process of law. We agree with the appellate court that the trial court improperly denied the liquidator’s petition for leave to intervene. The liquidator has an interest in the letter of credit that could be adversely affected without adequate representation being afforded, if his petition for leave to intervene were denied. Under section 26.1(l)(b) of the Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 26.1(l)(b)) the liquidator had a right to intervene.

The judgment of the appellate court is affirmed, and the cause is remanded to the circuit court of Cook County with directions to proceed in accordance with this opinion.

Affirmed and remanded, with directions.