In City of Austin, Texas v. Reagan National Advertising of Austin, LLC, 142 S.Ct. 1464 (2022), the U.S. Supreme Court issued its first opinion on sign regulation since Reed v. Town of Gilbert, issued in 2015. Reed held that held that a regulation of speech is content-based under the First Amendment (and, therefore, subject to strict scrutiny by the courts) if it “targets speech based on its communicative content,” in other words, if it “applies to particular speech because of the topic discussed or the idea or message expressed.”

In this case, the City of Austin regulated signs that advertised things that were not located on the same premises as the sign, as well as signs that directed people to offsite locations. These signs are known as off-premises signs. The City’s sign code at the time of this dispute prohibited construction of new off-premises signs. Grandfathered off-premises signs could remain in their existing locations as “nonconforming signs,” but could not be altered in ways that increased their nonconformity. On-premises signs were not similarly restricted.

The plaintiff sign advertising company requested permits from the City to digitize its off-premises billboards. The City denied the applications. In federal court, the billboard owner claimed the regulation violated its Constitutional first amendment right to free speech, as articulated in Reed. The District Court held that the challenged sign code provisions were content neutral under Reed, reviewed the City’s on-/off-premises distinction under the intermediate scrutiny test, and found that the distinction satisfied that standard.

The Court of Appeals reversed. It found the on-/off-premises distinction to be facially content-based because a government official had to read a sign’s message to determine whether the sign was off-premises. The court then reviewed the City’s on-/off-premises distinction under the strict scrutiny test, which provides that content-based laws are presumptively unconstitutional and may be justified only if the government proves that they are narrowly tailored to serve compelling state interests. It held that the City failed to satisfy that onerous standard. The City appealed to the U.S. Supreme Court.

The justices were divided. Five justices agreed to reverse and remand the case, but two of those justices partially dissented based on the rationale used. Three justices dissented completely, including Justice Thomas, who wrote the opinion in Reed.

Writing for the majority, Justice Sotomayor found that the Court of Appeals’ interpretation of what is content-based was too extreme. She wrote that the “Court’s precedents and doctrines have consistently recognized that restrictions on speech may require some evaluation of the speech and nonetheless remain content neutral.”  For example, the Court consistently has upheld cases regulating solicitation, noting that a sign must be read to determine whether it contains solicitating material. In addition, the Court has previously held regulatory distinctions between on- and off-premises signs to be content neutral.

The opinion found that “underlying these precedents and others is a rejection of the view that any examination of speech or expression inherently triggers heightened First Amendment concern. Rather, content-based regulations are those that discriminate based on the topic discussed or the idea or message expressed.”

The opinion also distinguished the facts of Reed, in which a town had created a comprehensive sign code based on sign content. In contrast, the City regulations applicable to off-premises signs required only determining whether a sign advertised things that were not located on the same premises as the sign or directed people to offsite locations. The opinion compared the City’s on-/off-premises distinction to ordinary time, place, or manner restrictions. Such restrictions do not require the application of strict scrutiny under First Amendment protections.

The decision of the Court of Appeals was reversed. However, the Court’s determination that the City’s on-/off-premises distinction was facially content-neutral did not end the judicial inquiry under the First Amendment. An impermissible purpose or justification can lurk beneath a facially content-neutral restriction, making the restriction nevertheless content-based and necessitating a strict scrutiny analysis by the court. In addition, even if no impermissible purpose or justification was found, the sign restriction still needed to survive intermediate scrutiny by the court, a test less onerous than strict scrutiny. That test requires a restriction on speech or expression to be “narrowly tailored to serve a significant governmental interest.”

Because the Court of Appeals did not address these issues, the Supreme Court would not opine on them and remanded the case for further proceedings.

In DeSousa v. Iowa Realty Co., No. 210679 (S.Ct. Iowa, June 10, 2022), the owners of a house in Iowa moved to another home and rented their old house. After the renters moved out, the owners listed their vacant property for sale with the defendant Iowa Realty. The defendant was required to remove snow and otherwise make the property safe for showings when one of its agents was showing the house. It did not have that responsibility when an unaffiliated agent showed the house to prospective buyers. The owners did not know when the house would be shown.

The plaintiff in this case was a prospective buyer who arranged to see the house one morning late in December. The night before the showing, a winter storm blew in and covered the driveway in snow and ice. When the plaintiff exited her vehicle on the driveway, she slipped, fell, and sustained injuries. She sued both the owners and Iowa Realty, alleging that the defendants were negligent because they failed to provide adequate warning about the icy driveway and failed to remedy a hazardous condition that they had created.

Iowa Realty argued that it owed no duty to the plaintiff because it did not own or possess the property, it had not invited her to the property, and none of Iowa Realty’s agents were present when the slip-and-fall occurred.

A claim of negligence requires the defendant to have a duty to conform to a standard of conduct to protect others, a failure to conform to that standard, proximate cause, and damages. In this case, the court found it must first determine whether Iowa Realty owed a duty to protect DeSousa from the wintry hazards present on the owners’ driveway. It determined that no duty was owed.

Land possessors have an affirmative duty of reasonable care to those who come upon their land with regard to, among other things, natural conditions on the land that pose risks to entrants.

The court concluded that a natural condition—accumulated snow and ice—caused the plaintiff to fall on the owners’ driveway. Therefore, the land possessor had a duty to exercise reasonable care to prevent her fall. There was no dispute about that. The question in this case was whether Iowa Realty was a “land possessor.”

The court defined a possessor of land under the Restatement (Third) of Torts as:

(a) a person who occupies the land and controls it;

(b) a person entitled to immediate occupation and control of the land, if no other person is a possessor of the land under Subsection (a); or

(c) a person who had occupied the land and controlled it, if no other person subsequently became a possessor under Subsection (a) or (b).

In this case, the owners’ house was left vacant while it was for sale; thus, the land did not have an occupant as contemplated in subsection (a). Under Subsection (b), the court asked, who was entitled to immediate occupation and control of the land?

Looking at the facts of the case, which were in accord with a typical broker/seller listing arrangement, the court concluded that Iowa Realty’s role in selling the owners’ home did not entitle the brokerage company or its agents to occupy or control the property. Only the owners were entitled to immediate occupation and control of their house. They could at any time deny Iowa Realty access to it.

Further, the court looked at the practical effect of deciding that a listing brokerage could be liable for torts committed on listed property even when no agent was present. Such a decision would drastically alter how properties are shown and likely make the process more expensive. For example, a brokerage might hesitate to use lock box arrangements allowing other agents to access the property for showing the property without the listing agent being present, require pre-inspections, or need to make frequent personal inspections.

The court did not see the sense in this drastic change. “The property owner normally owes a duty anyway to maintain the property in a safe condition. And the property owner carries homeowners’ insurance to cover incidents such as the one alleged to have occurred here.”

The court held that a listing agent who is not present and whose role is limited to granting access does not normally owe a duty of due care to persons viewing the property.

In Illinois Road & Transportation Builders Association v. County of Cook, 2022 IL 127126, a transportation association sued Cook County for violating a 2018 Constitutional Amendment requiring all taxes and fees associated with vehicles and transportation be devoted to uses that improve transportation infrastructure. The plaintiff asserted that the County illegally diverted such funds into its Public Safety Funds, resulting in a loss of jobs in the road construction industry.

The County countered that the Amendment impinged on its home rule authority, was ambiguous, and did not apply to home rule ordinances. The County pointed to legislative debates and information given to the citizens of Illinois voting on the amendment that clearly did not contemplate any infringement of home rule unit powers to raise revenue and use that revenue as it saw fit.

The Illinois Supreme Court explained that it must first construe the plain language of the Amendment to determine if it was ambiguous, just as is required when called upon to construe any statute or ordinance.

Despite the many efforts of the County to persuade the Court that the Amendment was ambiguous within its several sections, the Court found the Amendment completely unambiguous. It saw nothing in the plain language excepting home rule units from the reach of the Amendment. According to the Court’s interpretation, all local ordinances, whether enacted by home rule units or non-home rule units, fell under the Amendment’s demand that all revenue raised by transportation-related taxes and fees must be used as delineated in the Amendment.

The Court reversed the decision of the appellate court dismissing the case and remanded it back for additional proceedings.

Justice Theis wrote a dissent, arguing Article VII of the Illinois Constitution granted every home rule unit all the power of the State to legislate matters pertaining to its own government and affairs unless the Legislature specifically restricts that power in accordance with the various provisions of Article VII. By failing to state whether the Amendment did restrict such wide powers, the Amendment was indeed ambiguous. Given this ambiguity, the Court should have considered the legislative history and information given to the Illinois citizens who voted on the Amendment indicating that home rule powers to determine uses for all revenue would not be curtailed. The argument has merit but the majority “closed its eyes to this evidence” and looked only on the face of the Amendment.

In Village of Kirkland v. Kirkland Properties, 2022 IL App (2d) 200780, the original owner of a 118-acre tract of land contiguous to the Village of Kirkland entered into an annexation agreement with the Village for a residential development. The agreement provided that it would be binding on the owner’s successors and assigns. In 2003, the original owner sold two tracts to two related development companies (the Developer), who refused to acquire sufficient letters of credit to secure the completion of streets, sanitation, and water as required in the annexation agreement.

The Village sued the Developer for breach of contract, arguing that the infrastructure responsibilities ran with the land under the annexation agreement and the Developer was bound to comply with its requirements. The Developer asserted that it was not bound by the annexation agreement under an appellate court case called Doyle v. Village of Tinley Park (reported in the September 2019 issue of Legal Case Studies).

In Doyle, an individual homeowner attempted to sue a developer under an annexation agreement for installing a defective sewer system. The appellate court in that case held that a purchaser of less than all of a development subject to an annexation agreement was not subject to its requirements unless the agreement specifically so stated that it would run with the land and bind all subsequent owners, including buyers of just part of the land.

In this case, the Developer argued that it was a subsequent purchaser of only a part of the land to be developed under an annexation agreement that did not specifically bind buyers of only a portion of the property. The Developer concluded that, pursuant to Doyle, it did not have to furnish a letter of credit in favor of the Village. The appellate court disagreed.

The court first explained that an annexation agreement is a covenant that runs with the land if three requirements are met:  (1) the grantor and grantee intended it to run with the land, (2) it touches and concerns the land, and (3) there is privity of estate between the party claiming the benefit of the covenants and the party resting under the burden of the covenant.

The first requirement is typically satisfied by using language to demonstrate intent to create a servitude, including statements that the interests created “run with the land” or that they “bind” to the benefit of “heirs,” “assigns,” or “successors” of the drafting parties. The annexation agreement in this case used that language, indicating an intention by both parties to create a servitude running with the land. However, it did not specifically refer to subsequent buyers of only a portion of the land originally subject to the agreement.

Under the second requirement, a covenant touches and concerns the land if it “affects the use, value and enjoyment of the property.”  The annexation agreement clearly satisfied this requirement. Its very purpose was to annex the property to the Village so that it could be developed. The agreement addressed platting, stormwater drains, wastewater treatment, well and water supply and distribution, and construction of roadways, all on the subject property.

The court defined the third requirement for privity as “the connection or relationship between two parties, each having a legally recognized interest in the same subject matter (such as a transaction, proceeding, or piece of property).”  Privity of estate, in particular, was defined as “a mutual or successive relationship to the same right in property.”  The annexation agreement in this case clearly provided that it was binding on successors, and thus, the Village and a successor owner each had a legally recognized interest in the same subject matter—the development of the subject property.

With all three requirements for the annexation agreement to run with the land satisfied, the only question remaining was whether the lack of a specific provision extending the servitude to buyers of only a portion of the original tract of land defeated its application. The Doyle court decided that extending the annexation agreement covenants to subsequent buyers unless they were specifically described as bound by the agreement would lead to the absurd result of ordinary homeowners buying lots in a development being burdened with the responsibility for municipal improvements. Consequently, it refused to reach that conclusion.

The appellate court in this case, however, disagreed with the Doyle reasoning and found the opposite to be true. For example, under the Developer’s argument, even if the original landowner had sold every lot but one to a new developer, the new developer would not be a ‘successor’ and would not be bound by the terms of the annexation agreement. According to the court, this absurd result “would certainly undermine the public policy of ensuring that annexation agreements are adhered to so that municipal development may proceed in an orderly and predictable manner.”

Moreover, given that the Annexation Agreement contemplated the possibility that the subject property might be subdivided and developed in stages, it would make little sense to interpret the agreement as no longer applying where a successor developer takes on the development of a subsequent stage of the development. Indeed, this is an absurdity that would potentially lead to stalled development, as the successor developer and the Village would have to commence new annexation negotiations.

The court recognized that the annexation agreement did not explicitly provide nor expressly preclude the application of its terms to a buyer of only a portion of the original property subject to the agreement. “However, we determine that its terms clearly contemplate the possibility that the subject property would be subdivided and developed in stages and phases, which is entirely consistent with proportionally burdening successor owners with obligations under the Annexation Agreement.”

The Village would also continue to be bound by its covenants to successor developers. Nevertheless, “it of course does not follow that individual homeowners are similarly obligated under the Annexation Agreement.”  In this case, as is typical, the agreement provided that the Village would accept required improvements upon completion and thereafter be responsible for maintaining them. Thus, the Developer’s covenants would terminate and the homeowners would have no responsibilities for them.

The court reversed the trial court’s dismissal in favor of the Developer and sent the case back for further proceedings.

Corcoran as Trustee of Second Amended Filip Rotheimer Revocable Trust Dated Sept. 12, 2012 v. Rotheimer, 2022 IL App (1st) 201374, involved a dispute between the adult children (Philip, Silvia, and Florence) of Filip Rotheimer, who was 94 when he died in 2015. The various real estate holdings Filip acquired during his life were sold after his death. Competing claims to the proceeds of a parcel called the “Sheridan Property” created this dispute.

Filip put the Sheridan Property into a land trust in 1962 with himself as the beneficiary. The land trust agreement as amended provided that, in the event of Filip’s death, Philip and Silvia (not Florence) would receive the beneficial interest to the Sheridan Property as tenants in common. Filip retained the ability to assign the beneficial interest in the trust. However, the agreement further provided that no assignment of the beneficial interest in the land trust would be binding on the trustee until it was “lodged” with the trustee and it would be void as to all subsequent assignees or purchasers without notice.

In 1998, Filip established a Revocable Trust. He named himself as the grantor and trustee and named all the children, Silvia, Philip, and Florence, as his beneficiaries. Florence was designated a successor trustee.

In 2006, Filip created an LLC. The sole member of the LLC was the Revocable Trust. Later that year, Filip assigned his beneficial interest in the Sheridan Property land trust to the LLC. However, he did not lodge the assignment with the land trustee.

When Filip died, Florence, as successor trustee to the Revocable Trust, claimed that Filip’s beneficial interest in the land trust had been successfully transferred to the LLC through his purported assignment in 2006. Florence contended that Filip’s Revocable Trust, as sole member of the LLC, now owned the beneficial interest in the Sheridan Property land trust.

Silvia and Philip, however, claimed they alone were entitled to the beneficial interest in the Sheridan Property because Filip’s interest passed to them under the land trust survivorship provisions. They contended that Filip’s attempts at assigning his beneficial interest in the land trust to the LLC were ineffective because he failed to lodge the assignment document with the land trustee.

The question before the court was whether Filip’s assignment of his beneficial interest in the Sheridan Property land trust to the LLC was effective and negated Philip and Silvia’s interests.

The court first stated that it would construe the language of a trust using the same rules of construction as those used for interpreting wills and other contracts. Its primary objective would be to ascertain and give effect to the intent of the settlor, provided that intent did not conflict with the law or public policy of the state. The court would construe language according to its plain and ordinary meaning and find the settlor’s intent by analyzing the specific words used in conjunction with the circumstances under which they were drafted.

The court then defined the differences between a conventional trust and an Illinois land trust. A conventional trust creates “a fiduciary relationship with respect to property, arising from a manifestation of intention to create that relationship and subjecting the person who holds title to the property to duties to deal with it for the benefit of one or more persons, at least one of whom is not the sole trustee.”  Every trust must have a settlor, a corpus, a trustee, and a beneficiary.

Unlike a conventional trust, in which the trustee holds legal title to the property and the beneficiary holds equitable title—in an Illinois land trust, the trustee holds both the legal and equitable title to the property. In an Illinois land trust arrangement,

the real estate owner creates a trust into which real property is conveyed, becomes the trust beneficiary, and owns only a beneficial interest in the trust res. The legal title to the real estate is held by the land trustee, such as a bank or other financial institution. This results in the equitable conversion of the owner’s interest in the real estate from a real property interest to a personal property interest.

As a result, a beneficiary of an Illinois land trust can assign the beneficial interest in the trust as personal property, not real property.

In this case, the Sheridan Property land trust provided that no assignment of any beneficial interest would be binding on the trustee until the original or a duplicate of the assignment was lodged with the trustee, and any assignment of any beneficial interest not lodged with the trustee would be void as to all subsequent assignees or purchasers without notice.

Consequently, “under the trust’s plain language, the failure to lodge an assignment with the land trustee did not invalidate the assignment, but instead voided it as to subsequent assignees or purchasers without notice.”  Its purpose was to protect the trustee if it had to determine the priority of various assignments, not infringe on a beneficiary’s power to assign his beneficial interests. Because Silvia and Philip were neither subsequent assignees nor purchasers without notice, they could not rely on the fact that the assignment was not lodged with the land trustee to avoid its effect on them.

The court concluded that, under the particular facts of this case, Filip’s assignment to the LLC removed any beneficial interest Philip and Silvia had in the Sheridan Property land trust upon Filip’s death, despite trust language requiring that the assignment be lodged with the land trustee. It awarded the nearly $1.8 million proceeds from the sale of the Sheridan Property to the LLC, whose sole member was Filip’s Revocable Trust.