JOHN TILLMAN, Appellee, v. J.B. PRITZKER, in His Official Capacity as Governor of the State of Illinois, et al., Appellants
Docket No. 126387
SUPREME COURT OF THE STATE OF ILLINOIS
May 20, 2021
2021 IL 126387
CHIEF JUSTICE ANNE M. BURKE
CHIEF JUSTICE ANNE M. BURKE delivered the judgment of the court, with opinion.
Justices Garman, Theis, Neville, Michael J. Burke, Overstreet, and Carter concurred in the judgment and opinion.
OPINION
¶ 1 Petitioner John Tillman filed a petition for leave to file a taxpayer action
¶ 2 BACKGROUND
¶ 3 On July 1, 2019, petitioner filed a petition in the circuit court pursuant to
Ҥ 11-303. Action by private citizen. Such action, when prosecuted by a citizen and taxpayer of the State, shall be commenced by petition for leave to file an action to restrain and enjoin the defendant or defendants from disbursing the public funds of the State. Such petition shall have attached thereto a copy of the complaint, leave to file which is petitioned for. Upon the filing of such petition, it shall be presented to the court, and the court shall enter an order stating the date of the presentation of the petition and fixing a day, which shall not be less than 5 nor more than 10 days thereafter, when such petition for leave to file the action will be heard. The court shall also order the petitioner to give notice in writing to each defendant named therein and to the Attorney General, specifying in such notice the fact of the presentation of such petition and the date and time when the same will be heard. Such notice shall be served upon the defendants and upon the Attorney General, as the case may be, at least 5 days before the hearing of such petition.
Upon such hearing, if the court is satisfied that there is reasonable ground for the filing of such action, the court may grant the petition and order the complaint to be filed and process to issue. The court may, in its discretion, grant leave to file the complaint as to certain items, parts or portions of any appropriation Act sought to be enjoined and mentioned in such complaint, and may deny leave as to the rest.” (Emphasis added.)
735 ILCS 5/11-303 (West 2018) .
¶ 4 In the proposed complaint attached to his petition, petitioner alleged, in relevant part, that certain general obligation bonds issued by the State in 2003 and 2017 violated
¶ 5
“State debt for specific purposes may be incurred or the payment of State or other debt guaranteed in such amounts as may be provided either in a law passed by the vote of three-fifths of the members elected to each house of the General Assembly or in a law approved by a majority of the electors voting on
the question at the next general election following passage. Any law providing for the incurring or guaranteeing of debt shall set forth the specific purposes and the manner of repayment.” Ill. Const. 1970, art. IX, § 9(b) .
¶ 6 The 2003 bonds challenged by petitioner were issued pursuant to a statute enacted into law on April 7, 2003, after being passed by the vote of at least three-fifths of the members elected to each house of the General Assembly.
¶ 7 The 2017 bonds challenged by petitioner were issued pursuant to a statute enacted into law on July 6, 2017, after being passed by the vote of at least three-fifths of the members elected to each house of the General Assembly.
¶ 8 Petitioner alleged that the 2003 bonds failed to comply with the “specific purposes” requirement in the Illinois Constitution, for two reasons. First, petitioner alleged that the State used part of the bond proceeds to reimburse the general revenue fund for a portion of the State‘s required contributions to its retirement systems for fiscal years 2003 and 2004. The complaint characterized these actions as “deficit financing.” Petitioner alleged that the remainder of the 2003 bond proceeds were used to reduce the State‘s annual pension contributions by the amount of the debt service on the bonds. The complaint characterized this transaction as a “loan” to the pension systems that amounted to “financial speculation.” Petitioner
¶ 9 According to the complaint, approximately $14.35 billion of the 2003 and 2017 bonds remained outstanding as of the date petitioner filed his petition. Petitioner alleged that “the burden of servicing this unconstitutional debt falls on the taxpayers of Illinois,” a group that includes petitioner. In his prayer for relief, he requested (1) a judicial declaration that the 2003 and 2017 bond debts were unconstitutional and unenforceable and (2) an injunction prohibiting respondents from making any further disbursements of public funds in service of the unconstitutional debts.
¶ 10 Respondents filed a written objection to the petition. They argued that petitioner failed to establish reasonable grounds for filing his taxpayer complaint because his constitutional claims were invalid on the face of the complaint. Alternatively, respondents contended petitioner‘s complaint was barred by laches because he waited to file his action until years after the authorizing statutes were enacted and the bonds issued and, by that time, the State had already made substantial payments on the bonds. Respondents also argued that petitioner‘s claims with respect to the 2003 bonds were barred by the statute of limitations and that the complaint failed to join bondholders as necessary parties to the action.
¶ 11 On August 29, 2019, the circuit court denied petitioner‘s
¶ 12 The appellate court reversed the circuit court‘s order and remanded the case for further proceedings. 2020 IL App (4th) 190611. Citing this court‘s decision in Strat-O-Seal Manufacturing Co. v. Scott, 27 Ill. 2d 563 (1963), the court held that the “reasonable ground” analysis under
¶ 13 This court allowed respondents’ petition for leave to appeal. Ill. S. Ct. R. 315 (eff. Oct. 1, 2019).
¶ 15 “An action to restrain and enjoin the disbursement of public funds by any officer or officers of the State government may be maintained either by the Attorney General or by any citizen and taxpayer of the State.”
¶ 16
¶ 17 Before addressing whether the circuit court abused its discretion in finding that no reasonable ground existed for filing petitioner‘s action, we must define the phrase “reasonable ground.” See
¶ 18 Petitioner argues, and the appellate court held, that “reasonable ground,” within the meaning of
¶ 19 Petitioner‘s narrow interpretation of the statute stems from a misreading of this court‘s decision in Strat-O-Seal. In that case, an Illinois corporation and an individual citizen of the state filed a petition for leave to file a taxpayer action under the statutory predecessor to
¶ 20 The Strat-O-Seal court then held as follows:
“After a careful examination of the proposed complaint and the facts alleged in the petition we are satisfied that reasonable grounds exist for filing suit. As we have indicated, the statute governing these proceedings provides that when suit to restrain the disbursement of public moneys is brought by a citizen taxpayer, it must be commenced by petition for leave to file. The purpose of this requirement was to establish a procedure which would serve as a check upon the indiscriminate filing of such suits. (Barco Manufacturing Co. v. Wright, 10 Ill. 2d 157 [(1956)].) Prior to its enactment a taxpayer could file suit as a matter of right, and when such a suit was brought for an ulterior or malicious purpose it could seriously embarrass the proper administration of public affairs. As we pointed out in Hill v. County of La Salle, 326 Ill. 508, 515 [(1927)], ‘When the right of a public officer charged with the duty and responsibility of the proper application of public funds to disburse such funds is challenged by a lawsuit, it is obvious that for his own protection he will refuse to pay out the money in his custody until the suit is finally adjudicated.’
While it is important, therefore, that unjustified interferences be prevented, it is equally important that suits which do not appear unjustified are not barred or foreclosed. We find nothing in the present record to indicate that the purpose is frivolous or malicious, or that a filing of the complaint is otherwise unjustified.
In this proceeding we are not concerned, of course, with whether the allegations of the proposed complaint can, on hearing, be sustained, and we express no opinion thereon. All we decide is that for the purpose of this inquiry the petition states reasonable grounds for filing suit.” Id. at 565-66.
¶ 21 Contrary to petitioner‘s argument, Strat-O-Seal did not hold that the exclusive grounds for denying a
¶ 22 This interpretation of
¶ 23 In addition to addressing the legal merits, courts have also considered other arguments in determining whether there are reasonable grounds for filing a taxpayer action, including that the proposed complaint was barred by the statute of limitations. See, e.g., Busenhart, 29 Ill. 2d at 165 (res judicata and vagueness); Hamer, 61 Ill. App. 3d at 33-34 (collateral attack on a prior Illinois Supreme Court judgment); Flynn v. Stevenson, 4 Ill. App. 3d 458, 461-62 (1972) (statute of limitations and collateral attack on ordinances). Accordingly, petitioner‘s argument and the appellate court‘s holding that the trial court is limited to addressing whether a proposed complaint is frivolous or malicious when deciding whether to allow a
¶ 24 We now turn to reviewing whether the circuit court abused its discretion in denying the
¶ 25 Respondents first argue that the petition lacks reasonable grounds for filing the taxpayer action because the proposed complaint is barred by laches. Laches is an equitable defense asserted against a party “who has knowingly slept upon his rights and acquiesced for a great length of time, [citation] and its existence depends on whether, under all circumstances of a particular case, a plaintiff is chargeable with want of due diligence in failing to institute proceedings before he did.” Pyle v. Ferrell, 12 Ill. 2d 547, 552 (1958). In contrast to a statute of limitations, which forecloses an action based on a simple lapse of time, laches turns on “the inequity of permitting the claim to be enforced, an inequity founded upon some change in the condition or relation of the property and parties.” Id. “The doctrine is grounded in the equitable notion
¶ 26 In this case, the relevant facts to determine laches are readily apparent from the record. The first element, lack of diligence by the party asserting the claim, encompasses the plaintiff‘s delay in bringing the action while having notice or knowledge of defendant‘s conduct and the opportunity to file suit. Pyle, 12 Ill. 2d at 553. It is undisputed that petitioner waited to file his taxpayer action until 16 years had elapsed following enactment of the 2003 bond authorization statute and 2 years had elapsed following enactment of the 2017 bond authorization statute. We find that this delay is unreasonable and supports the application of laches to petitioner‘s complaint. In other taxpayer actions involving similar delays, courts have applied laches. See Kampmann v. Hillsboro Community School District No. 3 Board of Education, 2019 IL App (5th) 180043, ¶ 22 (holding taxpayer‘s suit challenging board‘s authority to enter into construction contract was barred by laches where it was filed four years after the contract, three years after bonds were issued, and more than a year after construction was completed and payments made); Di Santo v. City of Warrenville, 59 Ill. App. 3d 931, 941 (1978) (holding that water users’ suit to rescind city contract was barred by laches where suit was filed two years after the contract and one year after bonds were transferred to a trust and shares in the trust were sold to the public); Solomon v. North Shore Sanitary District, 48 Ill. 2d 309, 322 (1971) (holding that a delay of over two years before bringing suit, coupled with the issuance and sale of $8 million in bonds and the expenditure of part of these funds in furtherance of a construction project, resulted in the public interest requiring that plaintiffs’ claim be barred by laches).
¶ 27 Furthermore, because the bond authorization statutes are matters of public record, we presume that petitioner had constructive notice of the facts supporting his claims at the time the statutes were enacted. Constructive notice is defined as “‘[n]otice arising by presumption of law from the existence of facts and circumstances that a party had a duty to take notice of ***; notice presumed by law to have been acquired by a person and thus imputed to that person.’” La Salle National Bank, 337 Ill. App. 3d at 352 (quoting Black‘s Law Dictionary 1088 (7th ed. 1999)). It is well established that matters of public record constitute constructive notice to a plaintiff for purposes of applying laches. See Id. at 354 (collecting cases); Di Santo, 59 Ill. App. 3d at 940-41 (plaintiffs were deemed to be aware of city‘s purchase of water works and sewer system as a matter of public record); Bowman v. County of Lake, 29 Ill. 2d 268, 280 (1963) (cash and land transfers made by the county were matters of public record, and plaintiff
¶ 28 The second fundamental element of laches is whether respondents suffered prejudice as a result of petitioner‘s delay in filing the action. In cases involving taxpayer suits filed against public officers, courts have held that the prejudice element is satisfied where the plaintiff waits to file until after the defendant has expended large sums of money (Solomon, 48 Ill. 2d at 322; Bowman, 29 Ill. 2d at 280) or where the defendant has made irrevocable transactions rendering it impossible to return circumstances to the status quo (Solomon, 48 Ill. 2d at 322; Di Santo, 59 Ill. App. 3d at 941). Both aspects of prejudice are present in this case.
¶ 29 The State issued and sold the 2003 bonds, applied the proceeds as specified in the law, and made payments on the bonds for years while petitioner did nothing. More than 16 years later, petitioner requested that the court declare the bonds invalid and enjoin the State from making future payments on them. The same is true for the 2017 bonds, which were authorized by the General Assembly and issued and sold by the State. The proceeds from the sale were then used to pay billions of dollars in unpaid state vouchers, all while petitioner did nothing to stop any of these actions. It is patently obvious that the State will suffer some prejudice if relief is granted at this extremely late stage. Respondents maintain that granting relief to petitioner would amount to a de facto default on outstanding bonds that are backed by the full faith and credit of the State. We agree. Enjoining the State from meeting its obligation to make payments on general obligation bonds will, at the very least, have a detrimental effect on the State‘s credit rating.
¶ 30 Nevertheless, petitioner argues that the State has not suffered prejudice from his delay because his complaint does not seek to undo past payments made by the State on the bonds but, rather, seeks to enjoin only future payments. Thus, according to petitioner, an individual can wait years, or even decades, after bonds are authorized and issued by the State to challenge the issuance of the bonds in court. We reject this argument. The fact that a petitioner requests only prospective relief does not preclude the application of laches where he had constructive notice of his legal claims years before filing his action. See, e.g., Solomon, 48 Ill. 2d at 322 (holding that laches barred a taxpayer action to enjoin the future issuance of bonds and expenditure of bond proceeds); Schnell v. City of Rock Island, 232 Ill. 89, 93, 96 (1907) (holding that laches barred an action to enjoin future municipal bond payments).
¶ 31 We hold that the necessary elements for laches have been met in this case. There is no reasonable ground under
¶ 33 For the foregoing reasons, we hold that the circuit court did not abuse its discretion in denying the petition for leave to file a taxpayer action. Accordingly, we reverse the judgment of the appellate court and affirm the judgment of the circuit court.
¶ 34 Appellate court judgment reversed.
¶ 35 Circuit court judgment affirmed.