951 N.E.2d 1256
Ill. App. Ct.2011Background
- HWG water system in Hawthorne Woods served 224 homes with 20 shallow wells and was classified as a non-community water supply not subject to public water standards.
- County of Lake assumed operation/ownership of the Village-controlled portion in 1973 and, via 1975 contract, agreed to pursue IEPA-required improvements and to fund improvements by revenue bonds to be retired from the local system.
- IEPA cited violations; County installed interim chlorination facilities in 2006 and proposed a new code-compliant public water system, seeking Village approval in 2007 for design and rights-of-way.
- Village conditioned construction on linking to Aqua Illinois and purchasing bulk water; 2009 Water Supply and Sales Agreement supplemented the 1975 contract, acknowledging bonds would be funded by a surcharge on HWG customers for a new system.
- Cost estimates for the new system initially ranged high but bids reduced projected costs to about $11,600 per parcel; 144 of 227 parcels prepaid a lump sum, leaving 83 customers to fund the balance via subordinate revenue bonds.
- Plaintiffs, residents and purported class members, filed suit challenging authority to issue bonds payable solely by HWG customers and alleging negligence and breach of contract under the 1975 contract, later amended to consider the 2009 contract.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Moorman doctrine applicability to damages | Moorman bars only economic loss; damages are caused by County's operation, not a defective water system. | Damages are economic losses resulting from alleged negligent operation of the water system within a contract framework. | Moorman doctrine bars count I damages. |
| Tort Immunity Act applicability to count I | County failed to prove discretionary decisions; duties to provide safe water were mandatory. | County actions involved discretionary policy choices in replacing/upkeeping the system; immunity applies. | Section 2-201 bars count I. |
| Survivability of count II after 2009 contract | Third-party beneficiaries under 1975 contract can enforce duties to operate/improve; damages defined. | Modified contract (2009) governs; count II should be under the 2009 contract, and plaintiffs forfeited by not repleading. | Count II dismissed with prejudice; forfeited and/or barred under modified contract. |
| Counts III and IV – statutory authority to issue bonds payable by HWG customers | County lacks authority to fund solely by HWG customers; bonds not supported by statute/contract. | Counites Code 5-15017 authorizes bonds payable solely from income of waterworks properties; 2009 contract/1975 contract implied sharing authority under 11-139-8. | Counts III and IV granted summary judgment for County. |
Key Cases Cited
- Moorman Mfg. Co. v. National Tank Co., 435 N.E.2d 443 (Ill. 1982) (economic-loss rule bars purely economic negligence damages)
- Anderson Elec., Inc. v. Ledbetter Erection Corp., 503 N.E.2d 246 (Ill. 1986) (defeated commercial expectations bar tort recovery for economic loss)
- In re Chicago Flood Litig., 680 N.E.2d 265 (Ill. 1997) (requires harm beyond disappointed expectations for tort recovery)
- Muirfield Village-Vernon Hills, LLC v. K. Reinke, Jr., & Co., 810 N.E.2d 235 (Ill. App. 2004) (sudden and calamitous event may carve out Moorman exception)
- Village of Deerfield v. Commonwealth Edison Co., 929 N.E.2d 1 (Ill. App. 2009) (not controlling where claimed damages are not 'property' held by plaintiff)
- Oakbrook Terrace v. Hinsdale Sanitary District, 527 N.E.2d 70 (Ill. App. 1988) (damages to streets not purely economic losses; distinguishes from water system case)