Innovative Modular Solutions v. Hazel Crest School District 152.5
2012 IL 112052
Ill.2012Background
- IMS leased four modular buildings to the District under 60‑month leases with early‑cancellation penalties.
- The District, suffering financial crisis, prompted creation of the Hazel Crest School District Finance Authority under the Downstate School Finance Authority for Elementary Districts Law (the Act).
- The Authority canceled the IMS leases before term expiration but did not authorize payment of early termination fees.
- The trial court held the Authority acted outside the Act and the District was excused from paying penalties; the appellate court reversed."
- This Court held that the Authority’s power to cancel contracts must be exercised consistent with contract terms and the Act’s purpose to aid districts in meeting obligations to creditors.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of Authority power to cancel contracts | IMS: cancelations must follow contract terms | District/Authority: power to cancel unilaterally if funds insufficient | Cancellation must align with contract terms; unilateral voiding not allowed. |
| Effect of cancellation on contract penalties | IMS: penalties must be paid under contract terms | Authority: penalties may be avoided by cancellation | Contractual penalties must be paid; no implied bankruptcy relief. |
| Doctrine of legal impossibility | IMS: not applicable because Act doesn’t render performance impossible | District/Authority: legal impossibility excuses performance | Inapplicable; performance not objectively impossible. |
Key Cases Cited
- State Bldg. Venture v. O'Donnell, 239 Ill. 2d 151 (Ill. 2010) (statutory construction standard; legislative intent)
- Weather-Tite, Inc. v. University of St. Francis, 233 Ill. 2d 385 (Ill. 2009) (interpretation of statutes; avoid surplus language)
- People v. Alcozer, 241 Ill. 2d 248 (Ill. 2011) (avoid constitutional questions when possible)
- Copley v. Pekin Insurance Co., 111 Ill. 2d 76 (Ill. 1986) (contract cancellation by terms or mutual agreement)
- YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 403 Ill. App. 3d 1 (1st Dist. 2010) (impossibility doctrine; objective impossibility)