Leviton v. Bd. of Educ. of Chicago

• Citation: 30 N.E.2d 497,374 Ill. 594
• Decision Date: 10 December 1940
• Docket Number: No. 25632.,25632.
• Parties: LEVITON v. BOARD OF EDUCATION OF CITY OF CHICAGO et al.
• Court: Supreme Court of Illinois

374 Ill. 594

30 N.E.2d 497

LEVITON

v.BOARD OF EDUCATION OF CITY OF CHICAGO et al.

No. 25632.

Supreme Court of Illinois.

June 14, 1940.

As Modified on Denial of Rehearing Dec. 10, 1940.

Suit by Frank C. Leviton against the Board of Education of the City of Chicago and others, for an injunction restraining the issuance, certification, or sale of bonds for the purpose of satisfying judgments against the Board of Education. From a decree dismissing the petition for want of equity, Frank C. Leviton appeals.

Decree reversed and cause remanded with directions.

SHAW, J., dissenting.Appeal from Circuit Court, Cook County; Philip J. Finnegan, judge.

Ross & Watts, of Chicago (Wadsworth Watts and Keith I. Parsons, both of Chicago, of counsel), for appellant.

Barnet Hodes, Corp. Counsel, and Richard S. Folsom, both of Chicago (Relph W. Condee and James W. Coffey, both of Chicago, of counsel), for appellees.

GUNN, Justice.

Appellant, Frank C. Leviton, on behalf of himself and other taxpayers, brought suit against the board of education and certain officials of the city of Chicago, in the circuit court of Cook county, seeking an injunction restraining them from issuing, certifying or selling any bonds for the purpose of satisfying certain judgments against the board of education of the city of Chicago, as purported to be authorized by the act of July 12, 1937. Laws of 1937, p. 1083. Ill.Rev.Stat.1939, c. 122, § 327.62 et seq. A motion to dismiss was sustained and the petition dismissed for want of equity.

Appellant, among other things, contends that the act in question violates the constitution of the State of Illinois, which contention gives this court jurisdiction on direct appeal. In the year 1929, school tax levies as extended in the city of Chicago for all school purposes amounted to slightly in excess of $66,000,000, after deducting a reserve for loss and cost of collection. Tax anticipation warrants were issued against this fund in excess of $63,000,000. The total amount of the levy was considerably larger, but, by the time the rate was extended by the county clerk, the valuation of the real estate in the school district had been reduced by a new assessment of real estate so that the amount anticipated exceeded seventy-five per cent of the tax which could be collected.

The legislature enacted a law in 1933 authorizing the issuance of $10,000,000 in bonds for the purpose of raising funds to pay the unpaid warrants of the 1929 levy, Smith-Hurd Stats. c. 122, §§ 327i to 327p, but this law was held unconstitutional in Berman v. Board of Education, 360 Ill, 535, 196 N.E. 464, 99 A.L.R. 1029. At the time of filing this suit, warrants to the amount of about $53,000,000 had been paid, leaving unpaid tax warrants aggregating more than $10,000,000 and there were no funds to pay them. In 1936, the United States District Court rendered a judgment against the board of education of the city of Chicago for the principal sum of $1,090,591.37, in favor of the holder of 1929 school anticipation warrants. This judgment was affirmed by the United States Circuit Court of Appeals. Board of Education of City of Chicago et al. v. Norfolk & Western Ry. Co., 7 Cir., 88 F.2d 462. Prior to the filing of the complaint in this case, numerous suits were brought by holders of such anticipation warrants, and judgments obtained against the board of education in the circuit and superior courts of Cook county, from which no appeal was taken. In 1937, the legislature enacted a law which authorized any school district having a population exceeding 500,000 inhabitants to issue bonds to pay judgment indebtedness based upon the order or decree of any court of record, but provided such bonds should not be issued to pay any judgments rendered for money due upon unpaid claims for services, supplies or materials. The bonds could be issued when authorized by an ordinance adopted by the city council, and could bear interest at the rate of not to exceed five per cent, payable within twenty years and callable at par, plus accrued interest.

On September 15, 1939, steps were taken for the issuance and sale of $80,000 of such bonds purporting to be issued under authority of this statute, to discharge a judgment obtained in the circuit court of Cook county by F. J. Lewis, in the principal sum of $73,371. The record discloses judgments have been obtained against the board of education in excess of $2,000,000, all based upon the nonpayment of the 1929 anticipation warrants, and that it is the intention of the board of education to discharge said judgments by money derived from the sale of the bonds authorized under the act of 1937.

Appellant makes the following contentions: First, that the plaintiff, and those in behalf of whom he sues, are not bound by the decrees and judgments of the severalcourts above mentioned because tax warrants constituting the basis of liability do not constitute valid obligations of the board; second, the judgments in the circuit and superior courts are constructively fraudulent and not binding on the taxpayers; third, that the act of July 12, 1937, violates section 22 of article 4 of the constitution, Smith-Hurd Stats., as being special legislation, and also section 9 of article 9, which prohibits the board of education from levying taxes which will be used for purposes other than corporate purposes.

The school warrants were all issued before the passage of the act of 1935, requiring the warrants to be numbered consecutively and paid in the order of their issuance, beginning with the one having the lowest number. The United States Circuit Court of Appeals held, in substance, that the holders of warrants were entitled to be paid pro rata out of the taxes collected, and that the board of education was obligated, as a trustee, to see that each holder of warrants received his share of the funds collected, and directed that the taxes collected from the 1929 levy be distributed, from time to time, and an accounting was ordered to determine the amount due plaintiff in that case. This decision is based on a breach of trust on the part of the board of education in not prorating the 1929 taxes collected, to the holders of warrants, proportionately.

As we read this decision, no accounting is required from anything except the 1929 school taxes, as collected. The ultimate relief depends on the accounting. In so deciding the Circuit Court of Appeals relied on the cases holding a city is under obligation to account when it collects assessments for local improvement bonds. In the case of these bonds the holders are entitled to the entire assessment collected and the city merely acts as a collector to distribute all the money pro rata on the bonds, to discharge a debt owed. Rothschild v. Village of Calumet Park, 350 Ill. 330, 183 N.E. 337. A tax anticipation warrant is simply an assignment of tax money which directs the treasurer to pay the holder. In the alternative, it can be presented to the tax collector in full discharge of taxes. We have repeatedly held no debt is created by an anticipation warrant, (Berman v. Board of Education, supra,) and after delivery there is no future obligation upon it, either absolute or contingent, to pay out of anything except the levy anticipated, when collected. Dimond v. Com'r of Highways, 366 Ill. 503, 9 N.E.2d 197.

In City of Springfield v. Edwards, 84 Ill. 626, speaking with reference to the application of taxes to the payment of anticipation warrants, this court said: ‘The duty remains for the proper officers to collect and pay over the tax in accordance with the appropriation-but, obviously, for any failure in that regard, the remedy must be against the officers and not against the corporation, for, otherwise, a contingent debt would, in this way, be incurred by the corporation.’ This principle is followed in Booth v. Opel, 244 Ill. 317, 91 N.E. 458.

A school district is a quasi municipal corporation. Roumbos v. City of Chicago, 332 Ill. 70, 163 N.E. 361, 60 A.L.R. 87;Melin v. School District, 312 Ill. 376, 144 N.E. 13;Kinnare v. City of Chicago. 171 Ill. 332, 49 N.E. 536. Such quasi municipal corporation is not liable for a breach of duty by its officers. Elmore v. Drainage Com'rs, 135 Ill. 369, 25 N.E. 1010,25 Am.St.Rep. 363;Kinnare v. City of Chicago, 171 Ill. 332, 49 N.E. 536.Bradbury v. Vandalia Drainage District, 236 Ill. 36, 86 N.E. 163, 19 L.R.A., N.S., 991, 15 Ann.Cas. 904; Roumbos v. City of Chicago, supra. In the Elmore case [135 Ill. 269, 25 N.E. 1011,25 Am.St.Rep. 363], with respect to the liability of a quasi corporation, this court said: ‘So, also, it is admitted law that municipal corporations proper, such as villages, towns, and cities, which are incorporated by special charters, or voluntarily organized under general laws, are liable to individuals injured by their negligent or tortious conduct, or that of their agents or servants, in respect to corporate duties. In regard to public involuntary quasi corporations, the rule is otherwise, and there is no such implied liability imposed upon them. These latter, such as counties, townships, school-districts, roaddistricts, and other similar quasi corporations, exist under general laws of the state which apportion its territory into local subdivisions for the purposes of civil and governmental administration, and impose upon the people residing in said several subdivisions precise and limited public duties, and clothe them with restricted corporate functions, co-extensive with the duties devolved upon them. In such organizations the duties and their correlative powers, are assumed in invitum, and there is no responsibility to respond in damages in a civil action,for neglect in the performance of duties, unless such action is given by statute. [Citations.] * * * The non-liability of the public quasi corporation, unless liability is expressly declared, is usually placed upon these grounds: That the corporators are made such nolens...