Modular Solutions v. Hazel Crest School
358 Ill. Dec. 343
Ill.2012Background
- IMS leased four modular classrooms to the District under 60-month leases (2002–2007) with early cancellation penalties.
- The District faced severe financial trouble; the State created the Downstate School Finance Authority to manage finances (Dec 2002).
- The Authority was empowered to make, cancel, modify, and execute contracts for the District’s finances (1F-25(2)).
- The Authority canceled all four IMS leases before term expiration but did not authorize payment of cancellation fees.
- IMS sued for declaratory relief on contract terms; District and Authority sought dismissal/summary judgment; trial court ruled in District's favor on penalties.
- Appellate court affirmed on penalties and held the declaratory judgment moot; Illinois Supreme Court reversed and remanded with instructions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of Authority to cancel contracts | IMS argues 1F-25(2) allows cancellation only if consistent with contract terms. | District/Authority argue 1F-25(2) authorizes unilateral cancellation regardless of contract terms. | Cancellation must be consistent with contract terms. |
| Application of legal impossibility | IMS contends legal impossibility does not apply because contracts can be honored, despite cancellations. | District/Authority argue legal impossibility excuses performance when the Authority controls finances. | Doctrine does not apply; not objectively impossible to perform under contracts. |
| Constitutional impairment | IMS asserts potential impairment of contracts under the Act. | District/Authority claim no impairment because Act authorizes cancellation. | Court avoids constitutional ruling; not necessary to decide impairment. |
| Contractual enforcement vs. bankruptcy-like relief | IMS seeks enforcement of contract terms including penalties. | Authority argues financial control justifies cancellation without penalties. | Act must be construed to honor contractual terms; no debt discharge. |
Key Cases Cited
- People v. Garcia, 241 Ill. 2d 416 (Ill. 2011) (legislative intent governs statutory construction; avoid invalid implications)
- YPI 180 N. LaSalle Owner, LLC v. 180 N. LaSalle II, LLC, 403 Ill.App.3d 1 (Ill. App. Ct. 2010) (impossibility/force majeure concepts in contract performance)
- Copley v. Pekin Insurance Co., 111 Ill.2d 76 (Ill. 1986) (cancellation only under contract terms or mutual agreement)
- Leonard v. Autocar Sales & Service Co., 392 Ill. 182 (Ill. 1945) (implied limits on performance/obligations in contract context)
- Vancura v. Katris, 238 Ill.2d 352 (Ill. 2010) (legislative intent governs when interpreting statutes)