Innovative Modular Solutions v. Hazel Crest School District 152.5
943 N.E.2d 283
Ill. App. Ct.2011Background
- In 2002 Hazel Crest School District leased portable classrooms from Innovative Modular Solutions and agreed to cancellation fees if terminated early.
- Due to financial distress, the State created the School Finance Authority with power to control the District's finances and to cancel contracts and leases.
- The Authority cancelled IMS leases for Lincoln/Palm (Feb 2004), Frost (July 2005), and Bunche (Aug 2006) but did not reimburse cancellation fees or direct payment by the District.
- IMS sued the District and the Authority (2006) seeking a declaration that cancellation could occur only under contract terms and, alternatively, challenges to the Authority’s power; the District sought relief under doctrine of impossibility/frustration.
- The trial court granted summary judgment to the District on counts asserting the Authority could cancel only under contract terms and held performance excused; IMS was granted relief on other counts.
- On appeal, the court ultimately held that once the Authority controlled the District’s finances, performance by the District became legally impossible, rendering moot the scope of the Authority’s cancellation power.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the School Finance Law authorizes the Authority to nullify IMS's lease rights | IMS contends the Authority cannot nullify rights beyond contract terms. | Authority asserts broad power to cancel or modify contracts under the Law. | Issue moot; performance impossibility renders moot the Authority's cancellation power. |
| Whether performance was legally impossible for the District due to State control | IMS argues the District could still perform cancellation obligations under contracts. | District asserts its duties were blocked by the Authority's orders. | Performance was legally impossible once the Authority controlled the District's finances. |
| Whether the declaratory judgment on the Authority's power was moot | IMS seeks a ruling on the Authority's power notwithstanding mootness. | Authority argues the mootness issue should be decided. | Declaratory judgment vacated as moot; the later judgment disposed of all issues. |
Key Cases Cited
- Faitoute Iron & Steel Co. v. City of Asbury Park, 316 U.S. 502 (U.S. 1942) (constitutional limits on state power to affect contractual obligations)
- People v. Deatherage, 401 Ill. 25 (Ill. 1948) (state may divest district of powers; facilities are state property under legislative will)
- Underground Contractors Ass'n v. City of Chicago, 66 Ill.2d 371 (Ill. 1977) (actual controversy requires more than abstract propositions; avoid advisory opinions)
- 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 403 Ill.App.3d 1 (Ill. App. 1st Dist. 2010) (doctrine of legal impossibility and contract performance under statutory control)
- Northern Trust Co. v. County of Lake, 353 Ill.App.3d 268 (Ill. App. 2d Dist. 2004) (actual controversy and mootness considerations in declaratory judgments)
- State Farm Mut. Auto. Ins. Co. v. City of Chicago, 398 Ill.App.3d 832 (Ill. App. 1st Dist. 2010) (de novo review of mootness and actual controversy standard)