Bd. of Library Trs. of Midlothian v. Bd. of Library Trs. of the Posen Pub. Library Dist.

• Decision Date: 03 June 2015
• Docket Number: No. 1–13–0672.,1–13–0672.
• Citation: 34 N.E.3d 602
• Parties: The BOARD OF LIBRARY TRUSTEES OF the VILLAGE OF MIDLOTHIAN, Plaintiff–Appellee and Cross–Appellant, v. The BOARD OF LIBRARY TRUSTEES OF the POSEN PUBLIC LIBRARY DISTRICT, Defendant–Appellant and Cross–Appellee.
• Court: United States Appellate Court of Illinois

34 N.E.3d 602

The BOARD OF LIBRARY TRUSTEES OF the VILLAGE OF MIDLOTHIAN, Plaintiff–Appellee and Cross–Appellant

v.The BOARD OF LIBRARY TRUSTEES OF the POSEN PUBLIC LIBRARY DISTRICT, Defendant–Appellant and Cross–Appellee.

No. 1–13–0672.

Appellate Court of Illinois, First District, Third Division.

June 3, 2015.

Peter M. Murphy, Palos Heights, for appellant.

Leahy, Eisenberg & Fraenkel, Ltd., Chicago (Howard B. Randell, Roland S. Keske, and Peter T. Cahill, of counsel), for appellee.

OPINION

Justice MASON delivered the judgment of the court, with opinion.

¶ 1 Plaintiff-appellee Board of Library Trustees of the Village of Midlothian (Midlothian) filed a breach of contract suit against defendant-appellant Board of Library Trustees of the Posen Public Library District (Posen). The trial court granted Midlothian's motion for summary judgment on liability and amounts due under the contracts and, after a hearing on prejudgment interest, entered a judgment against Posen for a total of $173,297 in damages, $121,294.33 in prejudgment interest from August 2007 through December 2012, and $14,996.49 in unpaid late fees. On appeal, Posen contends the trial court erred in granting summary judgment because (1) the performance of the parties modified the terms of the written contracts; (2) the trial court incorrectly rejected Posen's affirmative defenses of equitable estoppel, laches, and accord and satisfaction; (3) the damages evidence was insufficient to sustain a judgment; and (4) Midlothian is not entitled to prejudgment interest. On cross-appeal, Midlothian contends that the trial court erred in awarding prejudgment interest only from 2007 rather than from 2001. Finding that summary judgment for Midlothian was improperly granted, we reverse the judgment of the circuit court of Cook County and remand with directions.

¶ 2 BACKGROUND

¶ 3 Midlothian and Posen are neighboring villages in Cook County. Because the village of Posen does not have a public library, Posen entered into a series of agreements with Midlothian to allow Posen residents to use Midlothian's public library. There are four agreements at issue in this dispute spanning the period July 1, 1998 through June 30, 2009, with one agreement covering a two-year period and each of the remaining three covering three-year periods.

¶ 4 Under the terms of the agreements, in exchange for the use of Midlothian's services and facilities, Posen agreed to pay “an amount equal to the greater of $40,000.00 or 87.00% of Posen's annual general corporate fund levy extended at the rate of .17% times the annual equalized assessed valuation [ (EAV) ] of all taxable property located within the [library district].” The payments were to be made biannually, with $25,000 due by July 1 of each year and the remaining balance due by December 31.

¶ 5 The first agreement, which covered the three-year period from July 1, 1998 through June 30, 2001, did not contain a penalty provision for unpaid amounts and payments were based on data from tax years 1997, 1998 and 1999. The remaining three agreements contained a clause providing that in the event the payments were not timely made, a penalty for the unpaid amounts would be assessed monthly “in the identical percentage of interest paid by Illinois Funds.” The second agreement, the only two-year agreement, covered the period from July 1, 2001 through June 30, 2003, and was based on data from tax years 2000 and 2001. The remaining agreements were each for three-year periods (July 1, 2003 through June 30, 2006 and July 1, 2006 through June 30, 2009) and were based on tax data from 2002 through 2007.

¶ 6 In May 2009, Posen rejected a renewal contract proposed by Midlothian that would have required a higher payment and instead contracted with another village for library services. Midlothian then filed a complaint alleging breach of contract and unjust enrichment in which it claimed that Posen historically underpaid under the contracts. During discovery, both Mary Beth Sharples, the director of the Midlothian board, and Susan Quirk, the president of the Posen board until 2008, were deposed and we summarize their testimony as relevant to the issues on appeal.

¶ 7 Carolyn Peterson, who is now deceased, was the director of Midlothian at the time of the first agreement. In February 2002, during the period covered by the second agreement, Sharples became the director. After familiarizing herself with the Posen agreement, Sharples sent a memo to the Posen board dated October 1, 2002, in which she detailed the calculation she was using to determine the amount of the second installment. The formula used by Sharples was EAV x .0017 x .87. There was no mention of the corporate fund levy in the memo. The memo showed that the EAV for tax year 2001 was $38,558,251. Sharples multiplied that total by .0017 to obtain a total of $65,549, which she then multiplied by .87 for a total due to Midlothian of $57,027. After subtracting the $25,000 payment made by Posen in June 2002, Sharples informed Posen that the second installment due by December 31, 2002, was $32,027. Posen made a payment in that amount. There is no record of Sharples sending a similar memo in any other year for the duration of the agreements. Moreover, the record shows that Sharples mistakenly used the incorrect EAV in her calculation, resulting in an alleged underpayment of $1,428 for 2002.

¶ 8 In 2001, Posen paid a total of $50,000 under the contract. In 2002, after receipt of the memo from Sharples, Posen paid a total of $57,027. In 2003 and 2004, Posen paid a total of $50,000 each year. From 2005 through 2008, Posen paid a total of $58,246 each year. Quirk testified that every year Midlothian would tell her the amount of the second installment due under the contract and she would pay the specified amount. During the time Peterson was the director, she would call or send a fax to let Quirk know the amount of the second installment. No documents in the record evidence these communications. Quirk stated she did not know where the numbers came from and did not know how Midlothian performed the calculation but just always assumed she was being given the correct amount Posen needed to pay. When Sharples became the director, Quirk received the memo from her in 2002 with the amount of the second installment, but could not remember who from Midlothian told her the amount of the second installment for the remaining years after 2002.

¶ 9 In 2000, Posen's general corporate fund levy was $60,851. Posen's levy increased slightly each year for tax years 2001 through 2003. It then remained at the 2003 level of $66,950 through 2007. Over that same time period, the EAV of real property within Posen's library district increased dramatically from $38,295,719 in 2000 to $65,341,453 in 2007.

¶ 10 There is no record of any dispute over payment amounts prior to 2007. Posen made payments in two installments every year, and Midlothian continued to provide library services to Posen residents and renew the contracts as they expired. In 2007, Midlothian residents passed a referendum increasing their levy for library services from 21 cents to 42 cents per $100 of assessed value. Sharples testified that Midlothian was frustrated that Midlothian residents were paying 42 cents while Posen residents were effectively paying 11 cents. Sharples then looked at Posen's EAV for the 2005 tax year and, using the formula EAV x .87 x .0017 (the same formula she used in 2002), determined that Posen underpaid in 2006 in the amount of $29,886.

¶ 11 Sharples attended a Posen board meeting in 2007 and advised the board of the underpayment for 2006. The Posen board informed Sharples that it could not make up the underpayment and she suggested that the board increase Posen's tax levy in order to obtain the additional money. Sharples testified that she informed Posen at the meeting that Midlothian had noticed Posen was not “up to the terms of the contract” and should be looking at and trying to increase its levy. Sharples further explained: “At that point we knew there was a problem with the 17 cents and that we wanted them to at least attempt under the tax cap to start to raise their levy, the legal number under the tax cap to try and get back up.”

¶ 12 Sharples testified that in 2007 and 2008, she “started to ask Posen to look at raising their levy 5 percent or the cost of living, whichever is less which we can do under the PTELL [Property Tax Extension Limitation Law] tax cap legislation.” At the 2007 meeting, Posen also discussed increasing its budget by 5%. Sharples suggested that instead of spreading the 5% increase out over all the budget lines, it should all be put into the new contract with Midlothian. When the tax levy for Posen was published in late 2007/early 2008, Sharples noticed it had not increased and contacted Quirk to ask why Posen had not followed her suggestion. Quirk told Sharples that Posen's attorney would not let the library board increase its levy.

¶ 13 In June 2008, Sharples sent a memo to Posen, again requesting that the tax levy be raised because she knew the contract would expire in 2009. In the memo, Sharples stated that she believed the entire 5% increase that had been discussed at the previous meeting should go to the Midlothian contract line to bring it up to $54,250, which would bring Posen closer to the terms of the contract and show good faith to the Midlothian board. At her deposition, Sharples explained that she wanted Posen to increase its tax levy, and if Posen increased the levy, it should put the total amount of the increase into the budget line for Midlothian rather than spreading it over all of the budget lines. She was not asked to explain the $54,250 figure and how that related to the levy at that time of $66,950 or Posen's annual payment at that time of $58,246, which was 87% of the levy.

¶ 14 In 2008, auditors for Midlothian discovered that in 2007, Posen's second installment was only $25,000 rather than the $33,246...