author: JUSTICE SIMON

text:
    (Nos. 56867, 56878 cons.
    KURT McKENZIE, Appellee and Cross-Appellant, v. J. THOMAS JOHNSON, Director of Revenue, et al., Appellants and Cross-Appellees (Holy Cross Roman Catholic Congregation of Champaign et al., Intervenors, Appellees, and Cross-Appellants).

      Opinion filed October 21, 1983.

      Tyrone C. Fahner, Attorney General, of Springfield (Patricia Rosen, Assistant Attorney General, of Chicago, of counsel), for appellant and cross-appellee J.. Thomas Johnson.
    Thomas J. Difanis, State’s Attorney, of Urbana (Trisha Crowley, Assistant State’s Attorney, of counsel), for appellants and cross-appellees Gerrie Parr et al.

    James Kuehl, of Merriman, Finch & Kuehl, of Urbana (Kurt McKenzie, of- counsel), for appellee and cross-appellant Kurt McKenzie.
    Jerome J. Bromiel, of Webber & Thies, P.C., of Urbana (Bartley, Fraser, Parkhurst & Hession, of Peoria, and Reuben & Proctor, of Chicago, of counsel), for interveners, appellees, and cross-appellants Holy Cross Roman Catholic Congregation et al.

   JUSTICE SIMON

delivered the opinion of the court:

Here we consider the facial constitutionality of legislation granting property tax exemptions for parsonages, fraternity and sorority houses and homestead improvements.

Plaintiff, Kurt McKenzie (McKenzie), a property taxpayer in Champaign County, filed this action in the circuit court of that county seeking a judgment declaring the tax exemptions unconstitutional and an injunction prohibiting the defendants — J. Thomas Johnson, Director of Revenue (the Director), and three members of the Champaign County board of review (the Board) — from granting or approving these exemptions in prospective tax years. In the circuit court several parties representing Roman Catholic, Presbyterian and Methodist churches (the churches) were granted leave to intervene.

McKenzie alleged that, on their face, the statutes authorizing the fraternity, parsonage and homestead-improvement exemptions (Ill. Rev. Stat. 1981, ch. 120, pars. 500.1, 500.2, 500.23 — 2, 500.23 — 3) violate the provisions of the Illinois Constitution that limit the legislature’s power to grant exemptions from general property taxation (Ill. Const. 1970, art. IX, secs. 4(a), 6). After the churches unsuccessfully argued against McKenzie’s standing to bring an action challenging the parsonage exemption, the circuit court granted the parties’ motions for summary judgment. It held that the homestead-improvement exemptions were unconstitutional while the parsonage and fraternity exemptions were not.

The Director and the Board each filed direct appeals to this court (87 Ill. 2d R. 302(a)) seeking a reversal of the circuit court’s holding with regard to the homestead-improvement exemptions. When McKenzie and the intervenors appealed the other issues to the appellate court, this court granted motions to allow a direct appeal of the other issues to this court and to consolidate these appeals. We hold that the plaintiff has standing to challenge the parsonage exemption and that the parsonage, fraternity and homestead-improvement exemptions are all valid under the Illinois Constitution.

McKenzie has standing to challenge THE PARSONAGE EXEMPTION

“This court will not determine the constitutionality of the provisions of an act *** where the party urging the invalidity of such provisions is not in any way aggrieved by their operation.” (Liberty National Bank v. Collins (1944), 388 Ill. 549, 559; Schreiber v. County Board of School Trustees (1964), 31 Ill. 2d 121, 125.) The churches contend that McKenzie, as a taxpayer, has not alleged an interest in the controversy over the constitutionality of the parsonage exemption sufficient to confer standing upon him to raise that issue. We disagree.

Article IX, section 6, of the Constitution provides:

“The General Assembly by law may exempt from taxation only the property of the State, units of local government and school districts and property used exclusively for agricultural and horticultural societies, and for school, religious, cemetery and charitable purposes. The General Assembly by law may grant homestead exemptions or rent credits. (Emphasis added.) (Ill. Const. 1970, art. IX, sec. 6.)

By establishing the principle that property taxes will be levied against all property in the State except for property exclusively used for the purposes described, article IX, section 6, guarantees every real property owner in this State that the burdens of real property taxation will be evenly distributed among all owners of such property. See also Ill. Const. 1970, art. IX, sec. 4(a) (“taxes upon real property shall be levied uniformly”).

McKenzie alleged that the granting or approval of parsonage exemptions “for property owned in Champaign County by persons other than the Plaintiff raises the amount of real property tax which Plaintiff must pay,” an allegation which is admitted by the Board in its answer to the complaint. By bringing himself within the ambit of the specific guarantee set forth, in article IX, section 6, and by claiming that his tax liability is generally affected by a statute which facially violates that guarantee, we believe that McKenzie has alleged a sufficient stake or interest in this controversy to confer standing upon him in this action. See generally Standing of One Taxpayer to Complain of Underassessment or Nonassessment of Property of Another for State and Local Taxation, Annot., 9 A.L.R.4th 428, 471-79 (1981).

The churches rely on authority holding that “there is no right in an individual taxpayer to bring a suit for the collection of taxes, but a suit having for its purpose such collection must be brought by the person or agency designated by statute for that purpose.” (People ex rel. Morse v. Chambliss (1948), 399 Ill. 151, 158; see also Hoffman v. Northwestern University (1976), 40 Ill. App. 3d 1012, 1016.) These cases, however, differ from this action, for here the plaintiff seeks to enjoin public officials from enforcing a tax-exemption statute which allegedly is unconstitutional on its face. “[A]n unconstitutional exercise of the taxing *** power is intolerable in our system of government and *** the courts should be readily available to immediately restrain such excesses of authority.” (Paul v. Blake (Fla. App. 1979), 376 So. 2d 256, 259 (holding that taxpayer has standing to challenge the constitutionality of certain property tax exemptions but denying standing to raise other allegations of unlawfulness).) We reserve, however, the question of whether a taxpayer may bring an injunction action against public officials where the taxpayer alleges that the grant of an exemption for a specific parcel of property violates article IX, section 6.

THE PARSONAGE EXEMPTION IS CONSTITUTIONAL

Section 19.2 of the Revenue Act of 1939 establishes a property tax exemption for “[a]ll property used exclusively for religious purposes *** and not leased or otherwise used with a view to profit, including all such property owned by churches or religious institutions or denominations and used in conjunction therewith as parsonages or other housing facilities provided for ministers *** their spouses, children and domestic employees, performing the duties of their vocation as ministers at such churches or religious institutions or for such religious denominations, and including the convents and monasteries where persons engaged in religious activities reside.” (Ill. Rev. Stat. 1981, ch. 120, par. 500.2.) The language referring to parsonages was added in a 1957 amendment to the statute. (1957 Ill. Laws 614.) McKenzie contends that parsonages are ineligible for property tax exemptions because they are used primarily for residential purposes, and are not used exclusively for religious purposes as required by article IX, section 6, of the Constitution. Thus, he claims that the parsonage exemption contained in section 19.2 is unconstitutional.

Cases construing article IX, section 3, of the 1870 Constitution, which permitted property tax exemptions for “property *** used exclusively for *** religious *** purposes” (Ill. Const. 1870, art. IX, sec. 3), are relevant in construing the limits of exemptions under article IX, section 6, of the present constitution. (Small v. Pangle (1975), 60 Ill. 2d 510, 514, cert. denied (1975), 423 U.S. 918, 46 L. Ed. 2d 245, 96 S. Ct. 257.) In arguing that the parsonage exemption contained in section 19.2 is unconstitutional, McKenzie relies on People ex rel. Thompson v. First Congregational Church (1907), 232 Ill. 158, where in holding that a property tax exemption for parsonages, enacted in 1905, was unconstitutional under article IX, section 3, of the 1870 Constitution the court observed:

“The parsonage in this case was used as a home for the pastor and the members of his immediate family. So far as appears from this record, it was used as a family residence and nothing more. *** [T]here seems to be no ground upon which it can be successfully contended that it was used for a religious purpose ***. No doubt the pastor, in the performance of his duties, necessarily requires a place for meditation, study and prayer; but ordinary living rooms, used in common by all members of his household, would seem not well adapted for such purposes.” 232 Ill. 158, 162-63.

The 1905 parsonage exemption declared unconstitutional in People ex rel. Thompson v. First Congregational Church authorized an exemption for “[a]ll church property *** exclusively used for public worship and all parsonages or residences *** used by persons devoting their entire time to church work.” (Emphasis added.) (232 Ill. 158, 161.) That parsonage exemption is fundamentally different from the exemption provided by section 19.2, the statute involved in this case. In providing an exemption for parsonages whether or not they were used exclusively for religious purposes, the 1905 exemption violated the venerable principle that a property tax exemption created by “statute cannot be made broader than the provisions of the constitution and no property except that mentioned in [the exemption] section [of the Constitution] can be exempted by any law passed by the legislature.” (Loaust Grove Cemetery Association v. Rose (1959), 16 Ill. 2d 132, 137; Consol idated Coal Co. v. Miller (1908), 236 Ill. 149, 152.) In declaring the 1905 exemption unconstitutional this court embraced that principle, observing:

“Where a building is used primarily for religious purposes and secondarily for some secular purpose *** the building would not thereby lose its character as one used for religious purposes, but where the property is used primarily for a family residence by the pastor it cannot be held that it is used exclusively for religious purposes. The legislature cannot, by its enactment, make that a religious purpose which in fact is not a religious purpose." (Emphasis added.) 232 Ill. 158, 164.

The language of the current parsonage exemption, on the other hand, refers to “all such property owned by churches or religious institutions *** and used *** as parsonages ***.” (Emphasis added.) (Ill. Rev. Stat. 1981, ch. 120, par. 500.2.) The word “such” refers to the preceding language which allows an exemption only for “property used exclusively for religious purposes.” (Ill. Rev. Stat. 1981, ch. 120, par. 500.2.) The current parsonage exemption only lists parsonages to illustrate or describe one type of property that, under appropriate circumstances, may qualify for the general religious property exemption which tracks the language of article IX, section 6, of the Constitution. Unlike the 1905 parsonage exemption the current parsonagé exemption is subject to the exclusive-religious-use requirements of the Constitution and does not unlawfully enlarge the area of allowable exemptions.

This interpretation of section 19.2 is consistent with this court’s construction of similar exemption statutes. Section 19.7 of the Revenue Act of 1939, for example, allows a property tax exemption for “[a]ll property of institutions of public charity *** and all property of old people’s homes.” (Ill. Rev. Stat. 1981, ch. 120, par. 500.7.) In Methodist Old People’s Home v. Korzen (1968), 39 Ill. 2d 149, 156, this court construed legislation defining “old people’s homes” as “including” a home with specified characteristics and held that it did not attempt to expand the charitable exemption beyond the limits of the Constitution:

“[W]e hold that the legislature did not intend to deviate from the constitutional requirement that to be exempt from taxation the property of an old peoples home must be used exclusively for charitable purposes. [The amendatory legislation] did nothing more than add language which was descriptive and illustrative of ‘old people’s homes.’ ” (39 Ill. 2d 149,156.)

See also People ex rel. Nordlund v. Association of the Winnebago Home for the Aged (1968), 40 Ill. 2d 91, 100; MacMurray College v. Wright (1967), 38 Ill. 2d 272, 277 (language describing “property used exclusively for school purposes” as including faculty housing facEties “does not seek to enlarge the area of constitutionally allowable exemption”).

McKenzie argues that the parsonage exemption is unconstitutional even if it requires that a parsonage be used exclusively for religious purposes before it is entitled to the exemption. In support of this proposition he relies on cases dating back to 1912 m which this court has denied every application that has come before it for a religious property tax exemption on specific parsonages or analogous church property, holding in each case that such property was not used exclusively for religious purposes as required by the language of the general religious exemption first enacted in 1909. See, e.g., First Congregational Church v. Board of Review (1912), 254 Ill. 220 (parsonage); Muldoon v. Board of Review (1912), 254 Ill. 336 (parsonage); People ex rel. Carson v. Muldoon (1922), 306 Ill. 234 (monastery residence, support buildings and surrounding fields); People ex rel. Pearsall v. Methodist Episcopal Church (1924), 315 Ill. 233 (parsonage); St. John Evangelical Lutheran Congregation v. Board of Appeals (1934), 357 Ill. 69 (residence of mstruetor m parochial school).

In essence McKenzie argues that our cases hold that a parsonage, by its veiy nature, can never be used exclusively for religious purposes because in every case its residential character must predominate over any other religious uses of the property. (Cf. People ex rel. Carson v. Muldoon (1922), 306 Ill. 234, 239 (“it is settled that [a parsonage] is not exempt”).) Under this view the language referring to parsonages was added by the legislature to section 19 — 2 solely to encourage public officials to approve exemptions for parsonages, which exemptions, McKenzie claims, would violate the Constitution as it is interpreted by this court.

This court has long held that property satisfies the exclusive-use requirement of the property tax exemption statutes if it is primarily used for the exempted purpose; “if property is devoted, in a primary sense, to a religious purpose, the fact that it is incidentally used for secular purposes will not destroy the exemption ***.” (First Congregational Church v. Board of Review (1912), 254 Ill. 220, 224.) In First Congregational Church v. Board of Review, however, the parsonage was denied an exemption even though it was used extensively for religious services and instruction and for the pastor’s offices. Three justices filed a lengthy dissent in that case observing:

“A church building for public worship is essential to the successful carrying out of the work of the church, and a pastor or priest is also necessary for efficient work. *** The evidence in this case is that the work of the church cannot be carried on efficiently without the constant care and attention of the pastor. The parsonage was paid for with contributions made by the church congregation. It was erected for the benefit it would be in promoting the work of the church and not for the benefit of the pastor. There is nothing in the constitution or statute which limits church property that may be exempted from taxation to that necessarily used for public worship. The limitation is to property exclusively or primarily provided and used for religious purposes.” 254 Ill. 220, 229-31 (Farmer, J., Carter, C.J., and Vickers, J., dissenting).

The extremely narrow construction of primary religious use, embraced by the cited cases, is out of step with more recent Illinois authority on tax exemptions, and these cases do not establish that parsonages may never be used exclusively — that is primarily — for religious purposes. For example, in MacMurray College v. Wright (1967), 38 Ill. 2d 272, this court held that an exemption of school property “will be sustained if it is established that the property is primarily used for purposes which are reasonably necessary for the accomplishment and fulfillment of educational objectives, or efficient administration, of the particular institution.” (38 Ill. 2d 272, 278; see also Locust Grove Cemetery Association v. Rose (1959), 16 Ill. 2d 132, 139-42.) In Mac-Murray College, this court held that faculty and staff residences were not reasonably necessary for carrying out the school’s educational purposes because it was not established that “any of the faculty or staff members *** were required, because of their educational duties, to live in these residences, or that they were required to or did perform any of their professional duties there.” 38 Ill. 2d 272, 279.

Under the MacMurray standard a parsonage qualifies for an exemption if it reasonably and substantially facilitates the aims of religious worship or religious instruction because the pastor’s religious duties require him to live in close proximity to the church or because the parsonage has unique facilities for religious worship and instruction or is primarily used for such purposes. Given that residence facilities have, on occasion, qualified for exemption from taxation under the school exemption (see People ex rel. Goodman v. University of Illinois Foundation (1944), 388 Ill. 363, 368 (student dormitories on university campus); Monticello Female Seminary v. People (1883), 106 Ill. 398, 400 (house occupied by superintendent of grounds at seminary); People ex rel. Pearsall v. Catholic Bishop (1924), 311 Ill. 11, 13-14 (gardener’s residence, archbishop’s summer home and a student dormitory at seminary); People ex rel. Hes terman v. North Central College (1929), 336 Ill. 263, 266 (student dormitories at college)), we cannot say that a parsonage could never qualify for exemption as property used exclusively for religious purposes solely because it is also used for residential purposes. (See generally Taxation: Exemption of Parsonage or Residence of Minister, Priest, Rabbi or Other Church Personnel, Annot., 55 A.L.R.3d 356, 378-79 (1974).) Whether a particular parsonage may be entitled to exemption turns on the evidence showing how the parsonage is being used, but the language exempting parsonages in section 19.2 is not unconstitutional on its face.

THE FRATERNITY AND SORORITY EXEMPTION IS CONSTITUTIONAL

Section 19.1 of the Revenue Act of 1939 provides an exemption for property used exclusively for school purposes:

“All *** property of schools *** used by such schools exclusively for school purposes, *** including, but not limited to, student residence halls, dormitories and other housing facilities for students and their spouses and children, and staff housing facilities ***. The Occupancy, in whole or in part, of a school-owned and operated dormitory or residence hall by students who belong to one or more fraternities, sororities, or other campus organizations shall not defeat the exemption for such property under the terms of this Section." (Emphasis added.) (Ill. Rev. Stat. 1981, ch. 120, par. 500.1.)

The last sentence was added by a 1967 amendment to section 19.1. (1967 Ill. Laws 1977.) McKenzie contends that the language referring to fraternities in section 19.1 is unconstitutional under article IX, section 6, of the Constitution because it authorizes an exemption for property that is not used exclusively for school purposes.

This court rejected a similar argument in MacMurray College v. Wright (1967), 38 Ill. 2d 272, 276-77. That case required consideration of an amendment which added the language in section 19.1 describing property used exclusively for school purposes as “including, but not limited to, student residence halls, dormitories and other housing facilities for students and their spouses and children, and staff housing facilities ***.” (Ill. Rev. Stat. 1965, ch. 120, par. 500.1.) The court held that this amendment did not attempt to expand the availability of the exemption for school property beyond the limits of article EX, section 3, of the 1870 Constitution:

“We deem that the legislature did not intend to alter the requirement that school property, including staff housing facilities, in order to be exempted from tax must in fact be used exclusively for school purposes. The legislature when it said ‘including, but not limited to, student residence halls, dormitories and other housing facilities for students and their spouses and children, and staff housing facilities’ was speaking descriptively and illustratively and not with a declaratory intendment. The statute does not seek to enlarge the area of constitutionally allowable exemption.” 38 Ill. 2d 272, 277.

Although this is, perhaps, a closer case than MacMurray College, we believe that the legislature’s addition of the sentence referring to fraternities was merely a description or illustration of another type of property that might qualify, under appropriate circumstances, as property used exclusively for school purposes. Like the statute in MacMurray College this statute is not unconstitutional on its face.

McKenzie relies on Knox College v. Board of Review (1923), 308 Ill. 160, for the proposition that fraternities and sororities are exclusive social organizations which can never be used “exclusively for school purposes.” In that case, however, a property tax exemption was denied only for a specific fraternity house:

“The fraternity houses here in question, however, are not shown by the evidence to be buildings created for the indiscriminate use of all the students, but are, as we understand the record, open only to the members of the respective fraternities, not by virtue of their college attendance but only upon election to membership in such fraternities under rules established by the societies themselves.” (Emphasis added.) (308 Ill. 160,166.)

Given that in appropriate circumstances this court has upheld property tax exemptions for a campus union (see, e.g.; People ex rel. Goodman v. University of Illinois Foundation (1944), 388 Ill. 363, 373; cf. City of Chicago v. University of Chicago (1907), 228 Ill. 605, 608-09 (remission of water rates allowed where held that union used for educational purposes)) and for campus dormitories (see, e.g., People ex rel. Hesterman v. North Central College (1929), 336 Ill. 263, 266), we cannot say that school-owned fraternity houses per se may never qualify for a property tax exemption as property used exclusively for school purposes. The availability of the exemption depends on questions of fact such as how students become eligible to use the facility, and no such evidence has been presented in this facial challenge to the statute. For that reason, we hold that the language in section 19.1 referring to fraternities and sororities is not unconstitutional on its face.

THE HOMESTEAD IMPROVEMENT EXEMPTIONS ARE CONSTITUTIONAL

Section 19.23 — 2 of the Revenue Act of 1939 establishes a homestead-improvement exemption in counties with less than one million inhabitants:

“In counties with less than 1,000,000 inhabitants, a homestead improvement exemption pursuant to Article IX, Section 6 of the 1970 Constitution limited to an annual maximum of $25,000 in actual value when that property is owned and used exclusively for a residential purpose upon demonstration that a proposed increase in assessed value is attributable solely to a new improvement of an existing structure. The amount of the exemption shall be limited to the actual value added by the new improvement up to an annual maximum of $25,000 and shall continue for 4 years from the date the improvement is completed and occupied, or until the next following quadrennial assessment of such property, whichever is later.” (Ill. Rev. Stat. 1981, ch. 120, par. 500.23 — 2.)

In essentially identical language, section 19.23 — 3 establishes the same exemption in counties with one million or more inhabitants. (Ill. Rev. Stat. 1981, ch. 120, par. 500.23 — 3.) The legislature added these sections to the Revenue Act in two 1975 acts. (Pub. Act 79 — 630 and Pub. Act 79 — 913, 1975 Ill. Laws 2000, 2785.) The circuit court in this case held that these homestead-improvement exemptions are unconstitutional because they do not qualify as “homestead exemptions” authorized by the language of article IX, section 6, which states: “The General Assembly by law may grant homestead exemptions or rent credits.” Ill. Const. (1970), art. IX, sec. 6.

The circuit court relied in part on Proviso Township High School District No. 209 v. Hynes (1980), 84 Ill. 2d 229, which dealt with a homestead-improvement exemption that permitted an exemption of up to $15,000 in actual value of improvements per dwelling unit on real property containing less than 55 units “and which is owned and used primarily for a residential purpose by either the owner or other persons who rent or lease such property or portions thereof.” (Emphasis added.) (Ill. Rev. Stat. 1979, ch. 120, par. 500.23 — 4.) The exemption in that case was held unconstitutional because it did “not require that the owner be a natural person who resides in the building” to be eligible for the homestead-improvement exemption. 84 Ill. 2d 229, 243.

It has often been said that “it is our duty to construe acts of the legislature so as to uphold their constitutionality and validity if it can reasonably be done, and, further, that if their construction is doubtful, the doubt will be resolved in favor of the validity of the law attacked.” (Illinois Crime Investigating Com. v. Buccieri (1967), 36 Ill. 2d 556, 561, cert. denied (1967), 389 U.S. 848, 19 L. Ed. 2d 117, 88 S. Ct. 75; see also Follett’s Illinois Book & Supply Store, Inc. v. Isaacs (1963), 27 Ill. 2d 600, 604; MacMurray College v. Wright (1967), 38 Ill. 2d 272, 277.) The circuit court held, on the authority of Proviso Township, that no reasonable interpretation of sections 19.23 — 2 and 19.23 — 3 could supply the necessary ingredient for a valid homestead exemption — that the owner be a natural person who resides in the improved dwelling. We disagree.

The statute declared unconstitutional in Proviso Township could not possibly have been construed as complying with the limits of article IX, section 6, because it specifically authorized a home-improvement exemption for improved property which was occupied by lessors or renters of the owner. The present statute, on the other hand, only authorizes the homestead-improvement exemption if the property “is owned and used exclusively for a residential purpose.” (Emphasis added.) Ill. Rev. Stat. 1981, ch. 120, pars. 500.23-2, 500.23-3.

In opinion No. S — 1045 the Attorney General has interpreted this language to limit the homestead-improvement exemption to property that is occupied by the owner and used exclusively by him for residential purposes: “Since all property is, in fact, owned by someone, any other construction would render the word ‘owned’ meaningless.” (1976 Ill. Att’y Gen. Op. 85.) In this opinion the Attorney General also observed that the homestead-improvement exemption is unavailable on an apartment building where the owner leases some units to lessees who use the units only for residential purposes. The exemption does not apply in such cases because the building is not owned exclusively for residential purposes as required by the statute; although the lessees may use their units for residential purposes, they do not own them, and even though the owner resides in the building, he also uses it for commercial purposes. (1976 Ill. Att’y Gen. Op. 85.) Although not controlling, this interpretation of the statute is entitled to deference (City of Springfield v. Allphin (1978), 74 Ill. 2d 117, 130-31), and we choose to adopt it here where it reasonably interprets the statutory language and thereby gives it a construction which is consistent with the Constitution. This interpretation is also consistent with the construction that the Board has placed on the statute as related in the affidavits of the defendant Board members which were submitted with their motion for summary judgment.

Finally, we also hold that sections 19.23 — 2 and 19— 23 — 3 require that the owner of the property be a natural person, for only such persons can own and occupy the property for a residential purpose. (See Proviso Township High School District 209 v. Hynes (1980), 84 Ill. 2d 229, 240-41.) Corporations or other entities which rent housing units or which conduct business or professional affairs from them would be using the properties for business and commercial purposes and not for residential purposes. Cf. N.H. Engle & Sons, Inc. v. Laurich (1968), 98 Ill. App. 2d 18, 26-27 (use of property as doctor’s office violates covenant restricting use to residential purposes).

The circuit court, however, relied upon an additional and independent ground in declaring sections 19.23 — 2 and 19.23 — 3 unconstitutional. It held that while article IX, section 6, of the Constitution authorizes “homestead exemptions” it does not authorize homestead-improvement exemptions.

The language in article IX, section 6, of the 1970 Constitution that permits homestead exemptions was adopted by the constitutional convention essentially in the form that was recommended by the Committee on Revenue and Finance. In its report the committee described the provision in some detail:

“The final sentence permitting the granting of homestead exemptions or rent credits represents a major change. The Committee is acutely aware of the hardships which the payment of property taxes on residential property can cause — especially when the homeowner, by reason of retirement or a change in family circumstance, has a greatly reduced income.
Many States have moved to meet this problem by providing for the exemption from taxation of the assessed value of owner-occupied homes. In some cases, the exemptions are available to all those who occupy a homestead. In other cases, benefits are limited to those who are elderly or in need. Unfortunately, this kind of exemption provides no relief to renters who directly pay no real estate taxes but whose rent payments are higher by reason of property taxes paid by the owners of property which they occupy. The Committee proposal will permit the General Assembly to develop a system whereby credits for real estate tax payments are passed through to the renter so that he may receive a benefit comparable to the homeowner.
The Committee considered adding language which would limit the homestead exemptions to those who are elderly and/or needy. Although many members of the Committee felt that benefits should be limited in this way, it was deemed wiser not to write the limitations into the constitution.” (Emphasis added.) 7 Proceedings of the Sixth Constitutional Convention 2158-59 (hereafter referred to as Proceedings).

A dissent to the report argued that homestead exemptions should be limited to property owned and occupied by elderly persons with limited means. (7 Proceedings 2160-63 (“Under the Committee proposal the entire assessed value of all homesteads in Illinois could be exempted”).)

An amendment to the committee’s proposal was offered on the floor of the convention which would have limited homestead exemptions “to the elderly on limited means,” and some delegates expressed a preference for this more limited type of homestead preference. (3 Proceedings 2080-81.) Delegate Kams opposed the limiting amendment stating:

“I think in 1870 when our present constitution was adopted and did not provide for a homestead exemption, it was not contemplated that the — the heavy burden of taxation on residential real estate. The language does not require or mandate any particular form of exemption but is a rather broad grant of power to the General Assembly to devise an equitable system of exemptions [and] rent credits.
I would point out to the Convention that when you limit the credit to the elderly needy, there are many, many people in our society today that are not elderly but are needy. I submit that the General Assembly might want to provide some relief to widows, regardless of age, with families.
This provision is a flexible one, and I think in a day and age where the burden of taxation is so great on residential real estate, it should be in the constitution granting this power to the General Assembly.
There are disabled people. We heard much testimony from various groups — blinded veterans and so forth. They are not necessarily elderly, but many are needy.
I suggest that this is an area where we should make a broad grant of authority to the General Assembly to deal with this problem.” (Emphasis added.) (3 Proceedings 2080-81; see also 3 Proceedings 1919-20 (remarks of Delegate Scott).)

The convention rejected the limiting amendment, leaving the legislature with the broad powers provided in the Committee’s draft. 3 Proceedings 2082.

We believe that the homeowner’s improvement exemptions provided in sections 19.23 — 2 and 19.23 — 3 are valid homestead exemptions under article IX, section 6, of the 1970 Constitution. At the very least article IX, section 6, authorizes the legislature to grant exemptions to specific classes of needy homeowners who are “threatened with the loss of their residence through high property taxes.” (Proviso Township High School District 209 v. Hynes (1980), 84 Ill. 2d 229, 240.) The homestead-improvement exemption authorizes an exemption of a portion of the assessed value of a homestead, specifically the value up to $25,000 per year which is added to the home by an improvement. The legislature may have concluded that homeowners who add a substantial improvement to their homes may often incur debt to do so, and that such homeowners should be granted an exemption for the value added by the improvement for the limited period of four years in order to give them an opportunity to make a substantial beginning toward paying off their improvement loans.

The debates of the convention, however, also indicate that it was the intention of the delegates by adopting article IX, section 6, to grant the legislature broad powers to fashion homestead exemptions that would promote other legitimate social policies as well, such as rewarding the patriotic service of veterans “who have been obliged to drop their own affairs to take up the burdens of the nation.” (Boone v. Lightner (1943), 319 U.S. 561, 575, 87 L. Ed. 1587, 1596, 63 S. Ct. 1223, 1231.) The legislature might have assumed that by encouraging the improvement of existing housing units, the homestead-improvement exemption would advance conservation, promote jobs, and add to the value of the local property tax base. Thus, we hold that homestead improvement exemptions are permissible “homestead exemptions” authorized by article IX, section 6, of the Constitution.

CONCLUSION

The judgment of the circuit court is affirmed to the extent that it held the parsonage and fraternity exemptions constitutional and reversed to the extent that it held the homestead-improvement exemption unconstitutional.

Affirmed in part and reversed in part.


source: Caselaw Access Project

author: JUSTICE GOLDENHERSH JUSTICE SIMON,

license: Public Domain

text:
    (No. 57145.
    THE BOARD OF TRADE OF THE CITY OF CHICAGO, Appellant, v. DOW JONES & COMPANY, INC., Appellee.

      Opinion filed October 21, 1983.

      SIMON, WARD and MORAN, JJ., dissenting.
    Kirkland & Ellis, of Chicago (James M. Amend, Robert G. Krupka, G. Christian Kronberg and Michael S. Walsh, of counsel), for appellant.
    Lawrence Gunnels, of Reuben & Proctor, of Chicago, and Patterson, Belknap, Webb & Tyler, of New York (Robert D. Sack, Thomas C. Morrison, Robert P. LoBue and Donald A. Baer, of counsel), for appellee.
   JUSTICE GOLDENHERSH

delivered the opinion of the court:

Defendant, Dow Jones & Company, Inc., appealed from the judgment of the circuit court of Cook County entered in favor of plaintiff, the Board of Trade of the city of Chicago, in its action for declaratory judgment. Plaintiff sought a declaration that its offering of a commodity futures contract utilizing the Dow Jones Industrial Average as the underlying commodity would not vioíate defendant’s legal or proprietary rights. The appellate court reversed (108 Ill. App. 3d 681), and we allowed plaintiff’s petition for leave to appeal (87 Ill. 2d R. 315).

The opinion of the appellate court adequately sets forth the facts, and they will be restated here only to the extent necessary to discuss the issues. Defendant, a Delaware corporation with its principal office in New York City, publishes the Wall Street Journal, Barrens, a weekly business magazine, and the Asian Wall Street Journal. It also maintains the Dow Jones News Service, through which it distributes financial news to subscribers. It produces several stock market indexes,- the Dow Jones Industrial Average, Transportation Average, and Utilities Average, which are computed on the basis of the current prices of stocks of certain companies selected by defendant’s editorial board.

The financial news furnished by defendant is disseminated in a variety of ways. It is distributed to brokerage houses, banks, financial institutions, individual investors, and others who are interested in stock market news. This information is transmitted to teleprinters, cathode-ray-tube receivers, and other devices, such as wall displays in brokerage houses. Subscribers desiring the averages can extract them from the news service or arrange with defendant to deliver the averages directly to them by teleprinter. Through special contracts, others receive the averages through entities which are licensed by defendant to sublicense the distribution of the averages. Plaintiff has a “Subscription Agreement” under which it pays defendant for its News Service and is allowed to compute and display the Dow Jones Averages on plaintiff’s trading floor on a continuous, “real time” basis.

Plaintiff is the oldest and largest commodities exchange market in the United States. It was organized in 1848, and in 1859 the General Assembly granted plaintiff a special charter which incorporated it as a not-for-pecuniary-profit organization. Over the years plaintiff has added different types of futures contracts and now offers these contracts in a variety of fields, including agricultural products, precious metals and financial instruments. All commodities exchanges in the United States are regulated by the Commodities Futures Trading Commission (CFTC), and no exchange may trade a futures contract until the CFTC approves the futures contract and designates the exchange as a contract market for that contract.

A futures contract is a contract traded on a commodities exchange which binds the parties to a particular transaction at a specified future date. A stock index futures contract is a futures contract based upon the value of a particular stock market index. Dr. James H. Lorie, stipulated by the parties to be an expert, called by plaintiff, testified that these contracts have been traded since February 1982. At the time of trial they were traded on the Kansas City Board of Trade based on the Value Line Average, on the Chicago Mercantile Exchange based on the Standard & Poor’s 500 Stock Index and on the New York Futures Exchange based on the New York Stock Exchange Composite Index. He stated that their “overriding purpose is the management of risk.” Unlike other futures contracts, no underlying commodity exists to be delivered at the future date, but rather the transaction is settled by the delivery of a certified promissory note in lieu of cash. He explained that the total risks of investing in the stock market are divided into two parts. One part is the “nonsystematic risk,” which occurs when an individual company encounters problems such as strikes, changing consumer attitudes or other problems which would devalue that company’s stock. “Nonsystematic risk” can be controlled by an investor through the use of a diversified portfolio. The other type of risk is “systematic risk,” which is the risk associated with the broad general movements of the stock market as a whole. Diversification of one’s stock portfolio will not provide protection against sharp declines in the stock market. He explained that there are only two ways to protect against systematic risk. The most direct way is for an investor to sell his stocks. This method is rather costly because of the transactional costs in selling and buying stocks, such as brokerage fees. Additionally, if capital gains are realized, the transaction becomes even more costly. The second method of protecting against systematic risk is to deal in stock market futures contracts. This method is more efficient, Professor Lorie explained, since an investor holding a hypothetical $100,000 portfolio could purchase two futures contracts in the Chicago Mercantile Exchange for one-fifteenth the cost of selling his stocks.

An investor who holds a diversified stock portfolio may “hedge” against systematic risk by entering into a stock index futures contract predicting that the market index would decline. Dr. Lorie testified that this was the most effective method of “hedging” of which he was aware.

Plaintiff, desiring to be designated as a contract market for stock index futures contracts, devoted more than two years to developing its own index to be used as the basis for its stock index futures contract. During the greater part of this period, the Securities and Exchange Commission (SEC) and the CFTC were in a dispute concerning which agency had jurisdiction to regulate stock index futures contracts. In December 1981, the two Federal agencies agreed on the scope of their respective jurisdiction and on recommendations to Congress for regulatory legislation. They agreed that the CFTC would regulate trading in stock market index contracts and that such trading would be permitted only if the contracts were based on widely known and well-established stock market indexes. This jurisdictional agreement effectively precluded CFTC approval of a contract based on the index developed by plaintiff.

On February 26, 1982, plaintiff submitted an application to the CFTC asking that it be designated as a contract market for Chicago Board of Trade Portfolio Futures Contracts. The application proposed the use of three indexes, the stock market index, transport index, and the electric index portfolio contracts. It was explained:

“Each index covers a significant portion of the overall stock market. The stock market index covers industrial firms, the Transport Index covers air, rail, and trucking firms, and the Gas and Electric Index covers utility companies. This division is similar to the way other major market indices divide the stock market.”

No mention of the Dow Jones name appeared in the application, but the stocks used in each of the indexes were identical to those used in the Dow Jones averages. In a draft proposal to the CFTC for trading “CBT indexes,” the Dow Jones averages stock lists were cut out of the Wall Street Journal and pasted into the proposals. The CFTC advised plaintiff that the CBT indexes were not just similar to, but were identical to the Dow Jones averages and that this should be explicitly stated in its application. On May 7, 1982, plaintiff amended its application to state that the CBT indexes were identical to Dow Jones averages and that when Dow Jones changed a component stock or revised the divisor, plaintiff would make the same change so that the CBT indexes would remain identical to the Dow Jones averages. Plaintiff also added a disclaimer to the application disclaiming any association with Dow Jones. On May 13, the CFTC approved plaintiff’s use of the stock market index portfolio contract, but did not rule concerning the use of the transportation or utility index portfolio contracts.

The circuit court held that the burden of producing evidence and the burden of persuading the trier of fact fell upon defendant, and found that defendant had a “property right and valuable interest in the Dow Jones averages” but that plaintiff’s use of the averages in the manner proposed did not violate those rights. The order, however, required that there be imprinted upon the CBT index contract a disclaimer disavowing any association with or sponsorship by defendant, Dow Jones. The appellate court reversed, holding that plaintiff had the burden of production and persuasion, and that plaintiff’s use of the averages constituted commercial misappropriation “of the Dow Jones index and averages.”

Prior to review of the substantive issues we consider a matter of procedure. Plaintiff contends that the appellate court erred in holding that plaintiff bore the burden of proof of the allegation in its complaint that “by offering the commodity futures contract described in paragraph 4, the Board of Trade will not violate any legal or proprietary right of Dow Jones.” Citing In re Estate of Sandusky (1943), 321 Ill. App. 1, Hecht v. Hecht (1977), 49 Ill. App. 3d 334, Shumak v. Shumak (1975), 30 Ill. App. 3d 188, and Levine v. Pascal (1968), 94 Ill. App. 2d 43, it argues:

“Settled law states the proper rule — the party asserting rights has the burden of proof, and the party alleged to violate those rights who files a declaratory judgment action, is not required to prove a negative.”

We do not agree with plaintiff’s contention.

The factual situations in those cases are clearly distinguishable. In Sandusky the negative averment was that a decedent had never been married; in Levine the negative averment concerned an unperfected security interest; Hecht and Shumak involved allegations in divorce complaints that mental cruelty was without provocation. San-dusky holds only that one alleging the negative need not make plenary proof; he need only introduce such evidence as will, in the absence of counter testimony, afford reasonable ground for presuming the allegation is true and the burden shifts to his adversary. Hecht and Shumak involve issues unique to the type of action involved; Levine follows a general statement in Sandusky and is not authority for plaintiff’s position.

Although this court has not considered the specific question, the rule is well stated in International Hotel Co. v. Libbey (7th Cir. 1946), 158 F.2d 717, 721:

“When an issue of fact is tendered by the complaint and denied by the answer, the plaintiff must prove its complaint, even though it is a complaint for a declaratory judgment.”

Plaintiff argues that the appellate court’s holding erroneously expands the tort of misappropriation and that its decision contravenes public policy. Citing Capitol Records, Inc. v. Spies (1970), 130 Ill. App. 2d 429, Metropolitan Opera Association v. Wagner-Nichols Recorder Corp. (199 Misc. 786, 101 N.Y.S.2d 483, affd (1951), 279 A.D. 632, 107 N.Y.S.2d 795, Standard & Poor’s Corp. v. Commodity Exchange, Inc. (2d Cir. 1982), 683 F.2d 704, and International News Service v. Associated Press (1918), 248 U.S. 215, 63 L. Ed. 211, 39 S. Ct. 68, plaintiff argues that competitive injury is a fundamental prerequisite essential to a finding of misappropriation. It argues that the facts of this case are analogous to National Football League v. Governor of Delaware (D. Del. 1977), 435 F. Supp. 1372, and Loeb v. Turner (Tex. Civ. App. 1953), 257 S.W.2d 800, in which the courts refused to find misappropriation because, inter alia, the parties were not in competition with each other. It argues that it has done nothing immoral or unethical but has merely created a “new product” which is “outside the primary market which the producer of the original product originally set out to satisfy ***.” (See J. Rahl, The Right to “Appropriate” Trade Values, 23 Ohio. St. L.J. 56, 62-63 (1962).) Finally, plaintiff argues that the appellate court’s decision is against public policy in that it grants what amounts to a common law patent monopoly to defendant which permits it to exclude others from using its product for any purpose “regardless of whether the producer is being injured or intends to exploit the product itself.”

Defendant responds that the tort of misappropriation should be flexible so that, by carefully tailoring their misappropriation to avoid the strict rules of the tort, “enterprising pirates” cannot avoid the application of the doctrine. Citing Sims v. Mack Truck Corp. (3d Cir. 1979), 608 F.2d 87, 95, cert. denied (1980), 445 U.S. 930, 63 L. Ed. 2d 764, 100 S. Ct. 1319, defendant argues that under the doctrine of misappropriation direct competition is not essential to tort liability. Defendant argues that plaintiff seeks to exploit defendant’s reputation for accuracy and impartiality without compensating it for its good will. Finally, in response to plaintiff’s argument that the appellate court’s opinion is against public policy, defendant argues that the appellate court’s opinion is consistent with public policy in that it maintains the incentive for the creation of intellectual property. Defendant argues that if its rights in the averages are not protected, there will be a diminished incentive for it to continue to provide the averages. Defendant points out that it does not seek to monopolize the production of stock indexes and that plaintiff is free to develop its own, but that it desires to protect its rights in the averages which it created and continues to produce.

None of the many eases cited by the parties presents facts sufficiently similar to serve as definitive authority for the decision of the issue presented here. The rationales applied in developing a basis for the tort of misappropriation appear to be as diverse as the factual situations out of which the issues in those cases arose.

The doctrine of misappropriation as a form of unfair competition was first enunciated by the Supreme Court in International News Service v. Associated Press (1918), 248 U.S. 215, 63 L. Ed. 211, 39 S. Ct. 68. In that case, INS was copying news stories from bulletin boards of members of AP and transmitting the fresh news contained on those bulletin boards to its own members. Thus, INS could obtain information collected by AP at great expense and transmit this information to its midwestern and west coast members, who could then print the news at the same time as the competing AP members or, in some instances, earlier. In affirming the decree enjoining the practice the majority opinion suggested that without the revenues derived from this exclusive, timely presentation of the news, AP or other news services would not have sufficient incentive to continue performing their services. 248 U.S. 215, 235, 63 L. Ed. 211, 219, 39 S. Ct. 68, 71; see Developments In The Law: Competitive Torts, 77 Harv. L. Rev. 888, 934 (1964).

The tort of misappropriation was recognized in Illinois for the first time in Capitol Records, Inc. v. Spies (1970), 130 Ill. App. 2d 429. There the defendant purchased records and magnetic tapes sold by the plaintiff and recorded them on magnetic tapes. He then sold these re-recordings to his customers. A disclaimer was placed on the cassette tapes disclaiming any relationship between the defendant and plaintiff or the recorded artists. Defendant was able to sell his product at a lesser price than plaintiff since he avoided the costs of contracting with the performers, producing the master recordings, paying royalty fees, and advertising. Relying on the rationale of Schulenburg v. Signatrol, Inc. (1964), 50 Ill. App. 2d 402, 411-12, affirmed in part and reversed in part (1965), 33 Ill. 2d 379, the court reasoned that the manner of competition was “unfair” since the defendant was able to compete on equal terms by avoiding those costs normally associated with producing such recordings. (130 Ill. App. 2d 429, 434-35.) Underlying the court’s reasoning is the premise that the plaintiff’s pecuniary reward for producing its intangible product would be severely reduced if other competitors could avoid production costs by merely waiting until a record became popular and then recording the work for resale.

Competing with the policy that protection should be afforded one who expends labor and money to develop products is the concept that freedom to imitate and duplicate is vital to our free market economy. (Kellogg Co. v. National Biscuit Co. (1938), 305 U.S. 111, 83 L. Ed. 73, 59 S. Ct. 109; Intermountain Broadcasting & Television Corp. v. Idaho Microwave, Inc. (D. Idaho 1961), 196 F. Supp. 315, 322; J. Rahl, The Right to “Appropriate” Trade Values, 23 Ohio St. L.J. 56, 72 (1962); Developments In the Law: Competitive Torts, 77 Harv. L. Rev. 888, 937 (1964).) Indeed, when the doctrine of misappropriation was first enunciated, Justice Brandéis recognized this competing policy:

“He who follows the pioneer into a new market, or who engages in the manufacture of an article newly introduced by another, seeks profits due largely to the labor and expense of the first adventurer; but the law sanctions, indeed encourages, the pursuit.” (International News Service v. Associated Press (1918), 248 U.S. 215, 259, 63 L. Ed. 211, 229, 39 S. Ct. 68, 79 (Brandeis, J., dissenting).)

Similarly, Professor Rahl reasons:

“Substantial similarity of alternatives can come about in only one of two ways — by independent development or by imitation. While there are many instances of simultaneous independent innovation, our economy would still be in the Dark Ages if this were the only circumstance under which competing alternatives could be offered. Imitation is inherent in any system of competition and it is imperative for an economy in which there is rapid technological advance.” Rahl, The Right to “Appropriate” Trade Values, 23 Ohio St. L.J. 56, 72 (1962).

In balancing the factors that should determine which of the competing concepts should prevail, it appears unlikely that an adverse decision will cause defendant to cease to produce its averages or that the revenue it currently receives for the distribution of those averages will be materially affected. Defendant correctly asserts that it will lose its right to prospective licensing revenues in the event that in the future it elects to have its name associated with stock index futures contracts, but . reliance upon the existence of a property right based upon the ability to license the product to prospective markets which were not originally contemplated by the creator of the product is somewhat “circular.” Williams & Wilkins Co. v. United States (Ct. Cl. 1973), 487 F.2d 1345, 1357 n.19; see Metropolitan Opera Association, Inc. v. Wagner-Nichols Recorder Corp. (N.Y. S. Ct. 1950), 101 N.Y.S.2d 483, 493; Developments In the Law: Competitive Torts, 77 Harv. L. Rev. 888, 935 (1964).

Alternatively, holding that plaintiff’s use of defendant’s indexes in the manner proposed is a misappropriation may stimulate the creation of new indexes perhaps better suited to the purpose of “hedging” against the “systematic” risk present in the stock market.

Whether protection against appropriation is necessary to foster creativity depends in part upon the expectations of that sector of the business community which deals with the particular intangible. If the creator of an intangible product expects to be able to control the licensing or distribution of the intangible in order to profit from his effort, and similarly those who would purchase the product expect and are willing to pay for the use of the intangible, a better argument can be made in favor of granting protection. (See generally Rahl, The Right to “Appropriate” Trade Values, 23 Ohio St. L.J. 56, 61-69 (1962).) The record shows that the plaintiff sought to develop its own index prior to the CFTC’s requirement that the contracts be based on well-known, well-established indexes. It then offered defendant 10 cents per transaction, which it estimated would be somewhere between $1 million and $2 million per year, for the use of its name and averages. While there appears to be some dispute as to whether this offer of payment was primarily for the use of defendant’s name or for the use of the averages, the offer of money is relevant to the extent that it acknowledges the value of the association of defendant’s name and good will with the averages it produces.

To hold that defendant has a proprietary interest in its indexes and averages which vests it with the exclusive right to license their use for trading in stock index futures contracts would not preclude plaintiff and others from marketing stock index futures contracts. The extent of defendant’s monopoly would be limited, for as defendant points out, there are an infinite number of stock market indexes which could be devised. As one commentator notes, the effect of granting a “monopoly” at the base of the production pyramid is much less objectionable than granting a monopoly at the top of the pyramid:

“Social cost assumes more manageable size and so less significance near the base of the pyramid. Exclusive rights in a special kind of typewriter key are far less objectionable than a monopoly in the lever, because far less is swept into the monopolist’s control.” Developments In the Law: Competitive Torts, 77 Harv. L. Rev. 888, 938 (1964).

We conclude that the possibility of any detriment to the public which might result from our holding that defendant’s indexes and averages may not be used without its consent in the manner proposed by plaintiff are outweighed by the resultant encouragement to develop new indexes specifically designed for the purpose of hedging against the “systematic” risk present in the stock market.

We have considered plaintiff’s contention that defendant has failed to prove that the proposed use of the averages would cause it injury. The publication of the indexes involves valuable assets of defendant, its good will and its reputation for integrity and accuracy. Despite the fact that plaintiff’s proposed use is not in competition with the use defendant presently makes of them, defendant is entitled to protection against their misappropriation.

Plaintiff contends that the subscription agreement into which the parties had entered allows it to use the Dow Jones Averages in its stock market index futures. The subscription agreement provides:

“We hereby subscribe to the Dow Jones NEWS SERVICE *** and agree to make advance payment each month of your monthly charges, as follows:
- A NEWS SERVICE Charge for use of the NEWS SERVICE by exchange personnel only at the above address, or
- A NEWS SERVICE Charge for use of the NEWS SERVICE by exchange personnel at the above address and for a display of the NEWS SERVICE at a location accessible to the trading floor members, and ***.”

Plaintiff argues that the appellate court’s limitation of the term “use” modifies the contract in that it adds the phrase “informational use only.” It contends that the term “use” is not ambiguous and thus reference to extrinsic evidence was improper. Alternatively, it argues that because the stock index futures contracts use only the averages as a reference point, its use of the averages constitutes “informational use.” Defendant responds, citing Martindell v. Lake Shore National Bank (1958), 15 Ill. 2d 272, and other authorities, that the language contained in the contract must be interpreted in light of the entire contract. Defendant argues that when the term “use” is viewed in the context of a news wire subscription agreement, it cannot be interpreted to include plaintiff’s proposed use.

We agree with the appellate court that the terms of the subscription agreement do not grant plaintiff the right to use the averages as the basis of its stock index futures contract. Words derive their meaning from the context in which they are used, and the contract must be viewed as a whole “by viewing each part in light of the others.” (La Throp v. Bell Federal Savings & Loan Association (1977), 68 Ill. 2d 375, 381.) We are of the opinion that the granting of the right to use the information contained in the news service does not include the right to use the Dow Jones Industrial Average as a basis of stock index futures contracts but assuming, arguendo, that the contract is in this sense ambiguous, we agree with the appellate court’s analysis of this issue.

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

Judgment affirmed.

JUSTICE SIMON,

dissenting:

The majority opinion fairly identifies the general approach to the common law tort of misappropriation. In order to determine whether that tort will lie we must balance Dow Jones’ interest in preventing the use of its average by the Board of Trade against society’s interest in the widest use and dissemination of intellectual properly. Obviously, both interests are important and require fair consideration in the balancing process. Unless the creators of intellectual property have some protection against the appropriation of their ideas by others they will be discouraged from producing them; on the other hand, unless society can demand that the owners of intellectual property allow it to be appropriated by people who have developed novel and productive uses for it, the pace of innovation will slow.

I would allow the Board of Trade to use the Dow Jones Averages for its stock market futures contracts. The majority errs, in part, because it has failed to place enough emphasis on the unfettered access to ideas in the public domain, a privilege which is essential to our free market economy. The majority also fails to take heed of the warning of Justice Brandéis:

“Courts are ill-equipped to make the investigations which should precede a determination of the limitations which should be set upon any property right ***. Courts would be powerless to prescribe the detailed regulations essential to full enjoyment of the rights conferred, or to introduce the machinery required for enforcement of such regulations. Considerations such as these should lead us to decline to establish a new rule of law in the effort to redress a newly-disclosed wrong, although the propriety of some remedy appears to be clear.” International News Service v. Associated Press (1918), 248 U.S. 215, 267, 63 L. Ed. 211, 232-33, 39 S. Ct. 68, 82 (Brandeis, J., dissenting).

In deciding this case, the majority has broadly expanded the tort of misappropriation in Illinois. I believe that to the extent that intellectual property rights are to be expanded beyond their common law limits, it would be better to leave the matter to Congress, with which direction over the development of intellectual property rights is lodged under the Constitution (U.S. Const, art. I, sec. 8, cls. 3, 8), and to the State legislature. Both legislative bodies are well equipped to conduct the investigations necessary to determine what conditions and limitations should be put on such rights. I fear that the majority opinion offers little guidance to the courts and bar in Illinois on how to apply this greatly expanded tort in other circumstances.

The common law tort of misappropriation has been limited to cases where intellectual property, lawfully obtained, is used in direct competition with the person who created it. This requirement was implicitly adopted by a majority of the United States Supreme Court in International News Service v. Associated Press (1918), 248 U.S. 215, 63 L. Ed. 211, 39 S. Ct. 68. In that case the Associated Press sought to prevent INS from taking, and retransmitting by wire, information previously transmitted over the AP wire service and published in the early editions of newspapers subscribing to the AP service. In holding that INS was unlawfully misappropriating AP’s intellectual property the Supreme Court carefully stated that the evil of INS’s practice was that it enriched itself by using information acquired from the AP wire services in direct competition with AP:

“The right of the purchaser of a single newspaper to spread knowledge of its contents gratuitously, for any legitimate purpose not unreasonably interfering with [AP’s] right to make merchandise of it, may be admitted; but to transmit that news for commercial use, in competition with [AP] — which is what [the INS] has done and seeks to justify — is a very different matter. In doing this [the INS], by its very act, admits that it is taking material that has been acquired by [AP] as the result of organization and the expenditure of labor, skill, and money, and which is salable by [AP] for money, and that [INS] in appropriating it and selling it as its own is endeavoring to reap where it has not sown, and by disposing of it to newspapers that are competitors of [AP’s] members is appropriating to itself the harvest of those who have sown. Stripped of all disguises, the process amounts to an unauthorized interference with the normal operation of [AP’s] legitimate business precisely at the point where the profit is to be reaped, in order to divert a material portion of the profit from those who have earned it to those who have not; with special advantage to [INS] in the competition because of the fact that it is not burdened with any part of the expense of gathering the news. (Emphasis added.) (248 U.S. 215, 239-40, 63 L. Ed. 211, 221, 39 S. Ct. 68, 72-73.)

In keeping with this requirement of a demonstration of competitive injury, the decree entered in the INS case prohibited INS only from using the information in AP wire service reports “ ‘until its commercial value as news to the [AP] and all of its members has passed away.’ ” See 248 U.S. 215, 245, 63 L. Ed. 211, 223, 39 S. Ct. 68, 75.

The competitive-injury requirement adopted by the Supreme Court in INS has been followed and applied in many of the cases discussing the tort of misappropriation. (See, e.g., Standard & Poor’s Corp. v. Commodity Exchange, Inc. (2d Cir. 1982), 683 F.2d 704, 711; National Football League v. Governor of Delaware (D. Del. 1977), 435 F. Supp. 1372, 1377; Time, Inc. v. Bernard Geis Associates (S.D.N.Y. 1968), 293 F. Supp. 130, 146; Metropolitan Opera Association v. Wagner-Nichols Recorder Corp. (1950), 199 Misc. 786, 101 N.Y.S.2d 483, 498-99, aff’d (1951), 279 A.D. 632, 107 N.Y.S.2d 795; Loeb v. Turner (Tex. Civ. App. 1953), 257 S.W.2d 800.) This requirement was accepted as a part of Illinois law in Capitol Records, Inc. v. Spies (1970), 130 Ill. App. 2d 429, where the appellate court held that Spies could not tape record Capitol’s musical recordings and sell them in direct competition with Capitol’s records and tapes. The competitive-injury requirement has a sound basis in policy, for it allows the tort of misappropriation to protect the creators of intellectual property against actual injury to their business, but at the same time it allows for suitable reward for people who develop novel uses for information and ideas that are freely obtained from the public domain.

In this case the circuit court found that Dow Jones would not suffer any competitive injury if the Board of Trade used the Dow Jones index for its futures contracts. Its finding was set forth in the following language: “The Board of Trade will not compete with Dow Jones and will not interfere with Dow Jones’ ability to make a profit. Dow Jones is essentially in the News Publication business. The Chicago Board of Trade is in the Commodities Futures Trading Business.” Moreover, the circuit court decree ensured that Dow Jones’ good will would not be diminished through the Board of Trade’s use of the index. The circuit court’s decree required that all contracts, advertising, and promotional activity relating to the Board of Trade’s stock market futures index contain express disclaimers of any sponsorship or association with Dow Jones.

Dow Jones claims that it will suffer the loss of future licensing revenues if we hold that the Board of Trade may freely use the Dow Jones’ index in its futures contracts. At trial, however, Dow Jones pleaded and presented testimony claiming that it had no interest or éxpectation in licensing its name or index for use in stock market futures.

Even if Dow Jones changed this position in the future, . nothing in the circuit court decree would prevent it from licensing its name to sponsor a stock market futures index in competition with the one to be offered by the Board of Trade. Moreover, as the majority opinion admits, it is somewhat circular to base a finding of competitive injury on the ability to license the index to prospective markets when those licenses have no value unless we find in this action that Dow Jones has a property right in its index under the tort of misappropriation. See 98 Ill. 2d at 120.

Dow Jones has no more than an inchoate interest in the Board of Trade’s use of its index, but the majority’s opinion converts that interest into a property right. The majority is swayed by what it sees as “unjust” enrichment — the Board of Trade’s plan to earn a profit by the free use of an idea developed by Dow Jones at considerable cost. I do not regard this use as “unjust” in the least. The Board of Trade proposed to use information that Dow Jones had freely allowed the public to acquire in a business that Dow Jones has not shown the slightest interest in pursuing. If “unjust enrichment” has become the only element for the tort of misappropriation in Illinois, I fear that there will be few commercial ideas and little information left in the public domain. I view the proper elements of the tort of misappropriation to be a combination of unjust enrichment and competitive injury. Although the former feature may be present in this case, neither the majority opinion nor Dow Jones reveals where to find the latter feature.

WARD and MORAN, JJ., join in this dissent.


text:
    (Nos. 57352, 57365 cons.
    FRANCES E. WILLIAMS, Appellant, v. WILLIAM A. WILLIAMS, Appellant (United Security Insurance Company, Appellee).

      Opinion filed October 21, 1983.

    SIMON, J., dissenting.
    Klockau, McCarthy, Ellison, Rinden & Hartsock, of Rock Island (Raymond J. Conklin, of counsel), for appellant.
    Winstein, Kavensky, Wallace & Doughty, of Rock Island (Stewart R. Winstein, of counsel), for appellee William A. Williams.
    Califf, Harper, Fox, Dailey & Slover, of Moline (Dennis R Fox, of counsel), for appellee United Security Insurance Company.
   JUSTICE GOLDENHERSH

delivered the opinion of the court:

Plaintiff, Frances E. Williams, filed an action in the circuit court of Rock Island County alleging that while riding as a passenger in an automobile being driven by defendant, William A. Williams, in Lowndes County, Mississippi, she suffered personal injuries as the result of defendant’s negligently causing his automobile to strike an oncoming automobile. Defendant filed a motion to dismiss on the ground that at the time of the occurrence plaintiff and defendant were husband and wife and that under the provisions of section 1 of “An Act to revise the law in relation to husband and wife” (Ill. Rev. Stat. 1979, ch. 40, par. 1001), “plaintiff may not sue defendant and defendant is entitled to judgment as a matter of law.” Attached to the motion was defendant’s affidavit stating that the parties were married in 1968, were married on the date of the occurrence, and had at all times during their marriage resided in the State of Illinois. The circuit court allowed the motion to dismiss and plaintiff appealed.

Contained in the record is the affidavit of plaintiff filed in the circuit court after the entry of the order of dismissal in which she states that at the time of the occurrence there was in force and effect a policy of liability insurance applicable to defendant’s automobile; that she is informed and believes that the attorneys representing defendant were selected by the insurance company; that when her husband was requested to sign the affidavit attached to the motion to dismiss there was no explanation made to him of either the effect of the affidavit or of exceptions to the policy, nor was there any explanation of “the so-called immunity from suit by a spouse”; that he was not advised that he had a choice of whether to raise a defense of immunity from suit for tortious conduct between spouses; and that he had a right to consult counsel of his own because of a possible coverage issue.

In the appellate court defendant, represented by new counsel, was given leave to “intervene” and file a brief. United Security Insurance Company was also given leave to appear as a party and file a brief.

The appellate court affirmed the order dismissing the action (108 Ill. App. 3d 936), and we allowed the separate petitions for leave to appeal of plaintiff and defendant (87 Ill. 2d R. 315).

At the time of the entry of the judgment from which the appeal was taken the record in the circuit court presented the single issue whether plaintiff’s cause of action was correctly dismissed. The affidavit filed in fhe circuit court subsequent to the entry of the order of dismissal and the so-called “interventions” in the appellate court appear to have greatly expanded the issues. In its opinion the appellate court held that the judgment should be affirmed because “An Act to revise the law in relation to husband and wife” barred a personal injury action between spouses for torts occurring during their marriage. It goes on, however, to discuss other issues and decides that “[t]he defendant’s insurer can invoke Mr. Williams’ statutory immunity from suit for plaintiff’s claim for damages” (108 Ill. App. 3d 936, 942).

We are not aware of any authority which would confer standing on plaintiff prior to recovery of judgment against defendant to raise the question whether defendant had been advised concerning certain matters by his insurance carrier. There is nothing in the record to show that in the circuit court defendant raised the question of a conflict of interest between insurance counsel and himself. There was no motion for leave to withdraw the motion to dismiss or to amend it, nor did defendant in any manner indicate to the circuit court that his position was other than stated in the motion, i.e., that the statute precluded the action being brought against him. The fact that the parties, by “intervening” in the appellate court, and by raising additional questions in their briefs, have expanded the issues does not broaden the scope of what was decided by the circuit court and may appropriately be reviewed on appeal.

On this record we hold that the circuit court judgment was correct and the appellate court did not err in affirming it. To the extent that the appellate court opinion decides tíie questions whether the immunity conferred by section 1 of “An Act to revise the law in relation to husband and wife” is personal and may be waived, and whether the insurance carrier can invoke the defendant’s immunity in defense of plaintiff’s action, the judgment of the appellate court is vacated without comment as to its merits. (Madison Park Bank v. Zagel (1982), 91 Ill. 2d 231.) As so modified, the judgment is affirmed.

Judgment affirmed as modified.

JUSTICE SIMON,

dissenting:

I feel, as did the dissenting justice in the appellate court, that Mrs. Williams by her affidavit raised material and genuine disputed questions of fact. (See 108 Ill. App. 3d 936, 941 (Barry, J., dissenting).) The questions were whether counsel for Mr. Williams suffered from a conflict of interest he did not disclose to Mr. Williams; whether in this case Mr. Williams had the personal right to waive interspousal immunity; whether he was informed of that right by his counsel or the court; and whether the insurance carrier had the right to rely on interspousal immunity as a defense in the absence of a specific provision to that effect in the insurance policy in addition to the clause requiring the insured’s cooperation.

It is clear that the defendant was not hostile to his wife or her claim. It is also clear that the defendant was in a position adverse to his insurer. Under these circumstances it is not reasonable to assume that the attorney-chosen and provided for Mr. Williams by the insurer would raise the issues presented by Mrs. Williams. Nor is it reasonable to put Mr. Williams to the expense of employing additional counsel to raise issues his own attorney would not raise because of his divided loyalty to Mr. Williams and to the insurance company which employed him.

I believe that Mrs. Williams’ affidavit, timely filed in the circuit court after the entry of the order of dismissal, put the insurer fully on notice of the dissatisfaction she and her husband had with the insurance company’s representation in the case and the issues it raised. I find the majority’s basis for disposition, which would, in effect, have required Mr. Williams to retain separate counsel to present the same motion, entirely too technical. Besides, such a motion would not have informed the insurance carrier of anything of which it had not already been made aware by Mrs. Williams’ affidavit.

Moreover, I believe that Mrs. Williams, herself, as the spouse who was the object of the immunity claim and at the same time the plaintiff in this case, had standing to question at least whether her husband had waived his attorney’s apparent conflict of interest after full and frank disclosure, whether it had been his personal desire to assert a defense which was based on their marriage relationship, and whether the defense belonged to the insurance company or to her husband. Thus, her affidavit setting forth that issue raised a material and genuine disputed question of fact which should have been disposed of as directed by section 2 — 619(c) of the Code of Civil Procedure (Ill. Rev. Stat. 1981, ch, 110, par. 2 — 619(c)).

I would therefore decide the appeal on the merits instead of relying on the technical grounds adopted by the majority to avoid decision on the merits. My view on the merits would be to reverse the appellate court for the reasons set forth in Justice Barry’s dissenting opinion. I reach this conclusion also because I believe that, notwithstanding the cooperation requirement, if it was the intention of the insurer and insured to reserve the right to assert the defense of inter-spousal immunity in actions under the policy this should have been expressly stated as part of the bargain in the insurance policy which the insurer drafted.