Keystone Montessori Sch. v. Vill. of River Forest
| Decision Date | 25 June 2021 |
| Docket Number | 1-19-1992 |
| Citation | 2021 IL App (1st) 191992,187 N.E.3d 1167,453 Ill.Dec. 429 |
| Parties | KEYSTONE MONTESSORI SCHOOL, Plaintiff-Appellee and Cross-Appellant, v. The VILLAGE OF RIVER FOREST, Defendant-Appellant and Cross-Appellee. |
| Court | United States Appellate Court of Illinois |
Allen Wall, Gregory T. Smith, and Caitlyn R. Culbertson, of Klein, Thorpe & Jenkins, Ltd., of Chicago, for appellant.
John W. Mauck, of Mauck & Baker, LLC, of Chicago, for appellee.
Christine L. Self, of the Illinois Municipal League, of Springfield, amicus curiae.
¶ 1 Plaintiff Keystone Montessori School (Keystone) brought suit against defendant the Village of River Forest (Village) concerning agreements between Keystone and the Village and a development permit issued by the Village that, in relevant part, required otherwise tax-exempt Keystone to waive its right to a property tax exemption. The Village brought counterclaims to enforce the agreements and permit. The circuit court issued orders granting Keystone summary judgment on its claim that the agreements were against public policy, granting summary judgment for Keystone on the Village's counterclaims, and granting the Village's motion to dismiss Keystone's unjust enrichment claim. On appeal, the Village contends that the court erred in (1) determining that there were no genuine issues of material fact regarding Keystone's property tax status, (2) failing to determine that Keystone's complaint was barred by limitations and the doctrine of laches , (3) determining that the agreements were void for being against public policy, and (4) denying the Village's counterclaims. On cross-appeal, Keystone contends that (1) the trial court erred in denying its unjust enrichment claim and (2) this court should sanction the Village for making frivolous or bad-faith arguments in its appellate brief. For the reasons stated below, we affirm the judgment of the circuit court and deny sanctions.
¶ 3 Upon Keystone's 2018 complaint (six counts as amended) and the Village's counterclaims as amended, two of Keystone's claims were dismissed in the federal district court in July 2018 while the case was removed there. Following remand to the Illinois courts, the circuit court granted summary judgment for Keystone on one of its claims in April 2019. The court granted summary judgment for Keystone and denied summary judgment for the Village on all of the Village's counterclaims in May 2019. The court granted the Village's motion to dismiss Keystone's sixth claim and dismissed Keystone's two remaining undisposed claims as moot on September 13, 2019. The Village filed its notice of appeal on October 2, 2019, and Keystone filed its notice of cross-appeal on October 11, 2019. Accordingly, this court has jurisdiction in this matter pursuant to article VI, section 6, of the Illinois Constitution ( Ill. Const. 1970, art. VI, § 6 ) and Illinois Supreme Court Rules 301 (eff. Feb. 1, 1994) and 303 (eff. July 1, 2017) governing appeals in civil cases.
¶ 5 In 1998, Keystone applied to the Village to operate a school on a parcel of land in the Village that was leased and then owned by Keystone. The parcel was zoned by the Village zoning ordinance for commercial uses, and a school was not a permitted or special use thereof. The Village and Keystone signed agreements as conditions of the Village possibly issuing a planned development permit (Permit) to Keystone to operate a school on the parcel. The Permit was issued in November 1998 by Village ordinance, and the agreements and Permit imposed various conditions on Keystone, one of which was that it would not apply for an exemption on its property taxes for the parcel. Keystone did not apply for a property tax exemption until April 2018, and it was granted in November 2018.
¶ 7 Keystone filed its complaint for declaratory judgment and damages in March 2018, alleging that it is a nonprofit corporation recognized as tax-exempt by the Internal Revenue Service in 1995. It operated in the Village in rented space from 1994 until 1997 when it agreed with a local school district to purchase a former public school. However, the Village board "favored a different plan" to have residences on that land "in order to convert a tax-exempt site into a tax-producing site." Thus, the Village allegedly pressured the school district "to renege on its agreement with Keystone." In July 1998, the Village president urged Keystone to consider the parcel instead, where the Village "had rejected other development projects" so that the parcel had been "vacant for nearly five years." Keystone took possession of the parcel in August 1998, having entered into a lease with an option to buy at the end of the lease in December 1998. Keystone remodeled the parcel and operated a school there from September 1998 onward.
¶ 8 Because a school was not a permitted use of the parcel under the Village zoning ordinance, Keystone and Village agreed that Keystone would apply for a planned development permit and the Village would waive strict compliance with the ordinance in the interim (the Forbearance Agreement). The Village communicated to Keystone for the first time in October 1998 that its use of the parcel would be permitted only if it agreed never to seek a property tax exemption, and Village officials said that the parcel's zoning would not be changed to allow a school unless the parcel continued to generate property tax revenue. As Keystone had remodeled and was running a school on the parcel that it did not want to close, "Keystone yielded to the demands" of the Village. In 1998, the Village's development review board approved Keystone's application with various conditions "and the major demand that" Keystone pay property taxes.
¶ 9 The "Village's demands are detailed in the ‘Agreement Regarding Property Taxes’ executed on November 23, 1998," (Tax Agreement), providing in relevant part that, as long as Keystone owns or occupies the parcel, it "shall be and remain fully subject to real estate taxes and Keystone shall not seek or accept any exemption from such taxes" and that, if the parcel became tax-exempt, the Permit may be declared void and Keystone would pay the Village $100,000 annually. Once the Tax Agreement was executed, the Village board adopted an ordinance granting the Permit.
¶ 10 Keystone purchased the parcel in December 1998 with tax-exempt bond financing, which it was still paying at the time of its complaint. Beginning in 2002, Keystone sought to amend the Tax Agreement, noting that it significantly redeveloped the previously vacant parcel and arguing that Keystone saved more money for taxpayers by educating Village children not at school board expense than it paid the Village in property taxes. "Accordingly, Keystone made formal requests to the Village in 2003, 2004, 2007, 2009, and 2011 to reduce its tax burden." Keystone had also argued changed circumstances since the Tax Agreement: its property taxes had been reassessed and increased substantially, and it faced "fluctuating tuition, decreased fundraising in a tough economic market, and greater restriction on lending by banks." Keystone suggested that it be allowed to apply for an exemption in exchange for "negotiated payments in lieu of the taxes," but the Village repeatedly rejected proposals to amend the Tax Agreement.
¶ 11 At the time of the complaint, property taxes on the parcel were "the largest single item" in Keystone's budget, with an annual tax bill of about $96,000 and a total of $1.1 million paid, and it was paying each month $7958 in bond payments and $1244 on a loan to pay property taxes and remodeling costs. "The majority of the funds to pay the property taxes come from donations." Because of these expenses, Keystone had a reduced budget for learning materials, classroom supplies, field trips, teacher pay, and building maintenance. Three other private nonprofit schools operate in the Village, all with property tax exemptions.
¶ 12 Count I of the complaint alleged that the Tax Agreement prohibiting Keystone from applying for a property tax exemption was contrary to public policy, as expressed in the Property Tax Code (Tax Code) provision for tax exemption for school property. 35 ILCS 200/15-35 (West 2018). Count II alleged that Keystone had a constitutional right to seek a tax exemption and the Village was imposing an unconstitutional condition on that right. Count III alleged that the Village conditioning its zoning approval on Keystone waiving its right to an exemption was illegal contract zoning under Illinois law. Count IV alleged that the Tax Agreement was unenforceable as a perpetual contract, which Illinois law looks upon with disfavor. Count V (mistakenly labeled count IV) alleged a violation of Keystone's right to equal protection of the law by creating a "class of one" or intentionally treating Keystone differently that others similarly situated because Keystone is the only nonprofit the Village required to waive its right to a property tax exemption and the Village had no rational basis for so requiring. Keystone sought a declaratory judgment that the Tax Agreement was void as contrary to public policy, illegal contract zoning, void as an unconstitutional condition, voidable as a perpetual contract, and a violation of Keystone's right to equal protection. Keystone sought attorney fees under the Illinois Civil Rights Act of 2003 (Civil Rights Act) ( 740 ILCS 23/5(c) (West 2018)) and damages of $1.1 million for property taxes paid.
¶ 13 Attached to the complaint were copies of the Forbearance Agreement, Tax Agreement, and the Village ordinance issuing the Permit. The Forbearance Agreement recited that Keystone wanted to operate a school on the parcel, recognizing it would violate the Village's zoning ordinance, and thus wanted the Village to refrain from strictly...
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Baro v. Lake Cnty. Fed'n of Teachers Local 504
...and coercion are common defenses which can void contracts in the first place. See, e.g., Keystone Montessori Sch. v. Vill. of River Forest , 453 Ill.Dec. 429, 187 N.E.3d 1167, 1178 (Ill. App. 2021), reh'g denied , (July 20, 2021), appeal denied , 451 Ill.Dec. 452, 183 N.E.3d 909 (Ill. ...