Mid-Continental Realty Corp. v. Korzen

• Decision Date: 04 May 1976
• Docket Number: MID-CONTINENTAL,No. 59092,59092
• Citation: 351 N.E.2d 376,40 Ill.App.3d 133
• Parties: REALTY CORPORATION, Plaintiff-Appellee, v. Bernard J. KORZEN, County Treasurer and Ex-Officio County Collector of Cook County, Illinois, et al., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 376

351 N.E.2d 376

40 Ill.App.3d 133

MID-CONTINENTAL REALTY CORPORATION, Plaintiff-Appellee, v. Bernard J. KORZEN, County Treasurer and Ex-Officio County Collector of Cook County, Illinois, et al Defendants-Appellants.

No. 59092.

Appellate Court of Illinois, First District, Second Division.

May 4, 1976.

Supplemental Opinion On Denial of Plaintiff-Appellee's Rehearing

July 20, 1976.

Bernard Carey, State's Atty., Chicago (Sheldon Gardner, Henry A. Hauser, Alan L. Fulkerson, Chicago, of counsel), for defendants-appellants.

William J. Harte, Ltd., Greenburger, Krauss & Jacobs, Chartered, Chicago (William J. Harte, David Glickstein, Terry M. Gordon, Chicago, of counsel), for plaintiff-appellee.

DOWNING, Justice:

The circuit court of Cook County granted Mid-Continental Realty Corporation (hereinafter plaintiff) injunctive relief restraining certain county officials (hereinafter defendants) from collecting 1971 real estate taxes on plaintiff's properties based on increased assessments made by the County Assessor (Assessor) which the court determined to be unauthorized by law and constructively fraudulent. The decree found the 1971 assessments illegal and void and ordered the 1968 assessments reinstated. Defendants challenge this decision arguing: (i) equitable relief was improper since plaintiff's proper remedy was at law; and (ii) the trial court erred in finding that the 1971 assessments were constructively fraudulent.

Count I of plaintiff's three-count amended complaint alleged ownership of 12 parcels of real estate located in the City of Chicago; that these properties were assessed at $15,496,537 in 1969 based on the 1968 quadrennial assessment; that in 1970, a non-quadrennial year, the Assessor increased the assessed value of these properties to $21,237,950, an increase of $5,741,413 or 37% Over the 1969 assessment; that plaintiff challenged the legality of the 1970 increase before the Board of Appeals of Cook County and the circuit court of Cook County, and the court permanently enjoined the collection of any taxes based on the 1970 increased assessments. ¹ Plaintiff further alleged that in 1971 the Assessor again assessed plaintiff's properties at $21,237,950.

In challenging the 1971 assessments, plaintiff raised no issue as to the failure to give notice and a hearing on the increased non-quadrennial assessments. Rather, plaintiff alleges in its amended complaint that plaintiff submitted evidence of a financial nature of the Assessor reflecting a change in the financial circumstances of the properties between 1970 and 1971--showing little or no increase in gross income and increased expenses in operating and maintaining the properties. Nevertheless, the Assessor increased the property assessments as aforesaid, resulting in a 1971 tax increase of over $700,000. Plaintiff alleged this increase was not based on any rationale whatsoever and was arbitrary, erroneous, void, illegal, invalid, and unconstitutional. Plaintiff presented its objections to the Board of Appeals, but the Board refused to alter the assessments. Alleging irreparable harm because of these invalid and discriminatory assessments and the unavailability of an adequate remedy at law, plaintiff prayed for a temporary injunction restraining the collection of any tax based on these assessments, and that such temporary injunction be made permanent after a full hearing on the merits. Two other counts in the amended complaint, not pertinent to the issues raised in this appeal, will not be discussed.

The circuit court ordered plaintiff to pay the first installment of the property taxes allegedly due June 1, 1972. However, plaintiff did not pay any of the taxes based on the increased 1971 assessments. On August 16, 1972 plaintiff was granted a preliminary injunction to enjoin the collection of this tax. In its written order allowing the preliminary injunction, the trial court noted that plaintiff's remedies at law were not adequate in that (1) the legal remedies did not provide for payment of interest to the taxpayer who pays under protest, and (2) the amount in dispute was so substantial as to support the contention that plaintiff was financially unable to pay the higher tax at this time. Furthermore, the court found defendants would suffer no harm by the allowance of the injunction since, if defendants prevailed, they would be paid the entire amount of the tax plus interest.

No appeal was taken from the preliminary injunction. Instead defendants filed their answer to plaintiff's amended complaint. Both parties made motions for summary judgment which were denied.

Plaintiff, in support of its case, called employees of the Assessor who testified that the Assessor's office attempted to assess income-producing property at one-third of its fair market value, and that there was no increase or decrease in the assessed valuations for 1970 and 1971. Three real estate appraisers testified on behalf of the plaintiff that the fair market value of plaintiff's properties ranged from $33,945,000 to $41,357,251. Plaintiff's testimony further indicated that the assessed values placed upon each of the plaintiff's property by the Assessor exceeded one-third of the fair market value. As a part of the plaintiff's case, the parties stipulated 'that the Assessor attempted to assess all income producing properties at one-third the fair market value.'

The defendants' testimony established that in 1969 the Assessor set the total fair market value of the properties at $46,490,691 and in 1971 at $63,492,150. The chief deputy assessor testified that in 1971 no ratios were employed in Cook County between assessed valuation and fair market value. Two witnesses, employees of the Assessor who had been called as witnesses for the plaintiff, recanted their testimony that the Assessor applied a formula of one-third of the fair market value.

The trial court granted plaintiff a temporary injunction enjoining a tax sale of plaintiff's properties which had been threatened by defendants. Thereafter the court issued a memorandum opinion and ruling finding the 1971 assessments to be in violation of the law and constructively fraudulent. Thereupon the decree and judgment order enjoining the collection of any tax based on the 1971 assessments was entered. This appeal followed.

I.

Under the Revenue Act of 1939 a taxpayer may object to an assessment of his property by paying the property tax under protest and filing a written objection in the circuit court of the County Collector's application for judgment and order of sale. (Ill.Rev.Stat.1969, ch. 120, pars. 675, 716; See Gore and Emmerman, Real Estate Tax Assessments--A Study of Illinois Taxpayers' Judicial Remedies, 24 DePaul L.Rev. 465 (1975).) The taxpayer then can present evidence at a hearing before the circuit court. If the taxpayer prevails on his objection, a tax refund is ordered; but if the objection is overruled, the taxes are unaffected and the objection or protest is stricken.

Our supreme court has recently held:

'(T)hat where a taxpayer has an adequate remedy at law equity will not assume jurisdiction unless the tax is unauthorized by law or is levied upon exempt property. (Clarendon Associates v. Korzen, 56 Ill.2d 101, 306 N.E.2d 299; LaSalle National Bank v. County of Cook, 57 Ill.2d 318, 312 N.E.2d 252.) The remedy provided by law is the statutory remedy of paying the tax under protest and filing an objection to the application for judgment. (Ill.Rev.Stat.1973, ch. 120, pars. 675, 716.)' North Pier Terminal Company v. Tully (1976), 62 Ill.2d 540, 545-46, 343 N.E.2d 507, 510, rehearing denied March 25, 1976.

In addition to the cited situations where equity will assume jurisdiction, our supreme court has fashioned a third, that is where the tax is constructively fraudulent and the taxpayer has no adequate remedy at law. Hoyne Savings & Loan Assn. v. Hare (1974), 60 Ill.2d 84, 322 N.E.2d 833; LaSalle National Bank v. County of Cook (1974), 57 Ill.2d 318, 312 N.E.2d 252; Clarendon Associates v. Korzen (1973), 56 Ill.2d 101, 306 N.E.2d 299.

The threshold question is whether the chancery division of the circuit court properly had jurisdiction of plaintiff's objection to the property assessments. The properties in this case were not exempt properties. Therefore, initially we must determine whether the revision of the 1968 assessments was unauthorized by law and whether the remedy at law was inadequate in view of the allegation of constructive fraud.

A.

First we consider whether the revised assessments were unauthorized by law. In its judgment order, the trial court found there was no complaint initiated by the taxpayer for a revision of the 1968 quadrennial assessments, and that there was no rational basis for any upward revision in 1971 of the 1968 assessments. The court concluded that the 1971 assessments were rendered in violation of chapter 120, sections 501, 511, and 578 of the 1969 Illinois Revised Statutes. While not mentioned in the judgment order, the trial court noted in its memorandum opinion and ruling that there was no evidence submitted to prove that the Assessor appended an affidavit to the assessment books as required by law.

The Revenue Act (hereinafter Act), section 30 (Ill.Rev.Stat.1969, ch. 120, par. 511) provides that the Assessor determine the assessments for certain properties and that those assessments continue for a 'quadrennial,' that is, for a four-year period. The Assessor may revise the quadrennial assessments if he does so in compliance with section 97 of the Act. (Ill.Rev.Stat.1969, ch. 120, par. 578.) That section provides in part:

'(T)he county assessor shall have authority annually to revise the assessment and correct the same as shall appear to him to be just, and on complaint in writing in proper form by any taxpayer, and after affording such taxpayer an opportunity to be heard thereon, he shall do so at any time before the assessment is completed and verified. On...