Yellow Cab Co. v. City of Chicago, 10225.

• Decision Date: 30 January 1951
• Docket Number: No. 10225.,10225.
• Parties: YELLOW CAB CO. v. CITY OF CHICAGO.
• Court: U.S. Court of Appeals — Seventh Circuit

186 F.2d 946 (1951)

YELLOW CAB CO. v. CITY OF CHICAGO.

No. 10225.

United States Court of Appeals Seventh Circuit.

January 30, 1951.

Weymouth Kirkland, Howard Ellis (of Kirkland, Fleming, Green, Martin & Ellis), and John M. O'Connor, Jr., all of Chicago, Ill., for appellant.

Joseph F. Grossman, Chicago Ill., John J. Mortimer, Corporation Counsel of City of Chicago, Chicago, Ill., Harry H. Pollack, Asst. Corporation Counsel, of counsel, Chicago, Ill., for appellee.

Before DUFFY, FINNEGAN and LINDLEY, Circuit Judges.

LINDLEY, Circuit Judge.

Plaintiff appeals from a judgment of the District Court dismissing its suit for damages for alleged breach of contract by the City of Chicago on the ground that the complaint did not state a cause of action. Briefly the essential averments of the complaint were that a valid binding contract existed between plaintiff and the city by virtue of three certain ordinances of May 16, 1934, December 27, 1937, and June 21, 1945, duly accepted by plaintiff, providing that the number of licensed taxicabs in Chicago should not exceed 3000 unless the License Commission of the city should, after hearing duly called and had, find that public convenience and necessity required additional cabs, and that defendant had broken this contract by enactment of two ordinances on February 6 and March 1, 1948, wherein the city had directed that the number of licensed taxicabs be increased by 950. These ordinances, said plaintiff, violated its contract under the ordinances first mentioned in that they were not preceded by any finding that public necessity and convenience necessitated additional cabs. Therefore, plaintiff averred, it had been damaged in various respects in an amount exceeding $3 million.

A more detailed statement of certain pertinent facts appears in Yellow Cab Co. v. City of Chicago, 396 Ill. 388, 71 N.E.2d 652, where the Supreme Court of Illinois declared that the ordinances of 1934, 1937 and 1945 constituted a valid binding contract between defendant and the operating cab companies, including plaintiff, whereby the city agreed not to issue any additional cab licenses in excess of 3000 without holding the prescribed hearing and making the necessary finding on public convenience and necessity. It likewise held invalid any attempt by defendant to increase the number without conforming to the terms of the contract ordinances. Plaintiff insists that despite this authoritative holding, the city enacted the ordinances of 1948 in violation of the terms and provisions of the contract ordinances, thus causing the damages claimed.

By the cited decision it is established in Illinois that the contract ordinances of 1934, 1937 and 1945 were breached by defendant's enactment of an ordinance of 1946, which increased the number of licensed cabs substantially without complying with the terms and provisions of the ordinance contracts, similarly to those of 1948. Thus the question before the District Court and before us on appeal is whether, for such breach of contract, the city, a municipal corporation organized under the statutes of the state of Illinois, is legally liable to plaintiff in an action ex contractu for the damages accruing from such breach, a question which, under Erie R. R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, and subsequent decisions of the Supreme Court, must be decided in accord with the law of Illinois, if we can ascertain what that is.

It is settled law in Illinois that enforcement of illegal ordinances may be enjoined. City of Quincy v. Bull, 106 Ill. 337; Yellow Cab Co. v. City of Chicago, 396 Ill. 388, 71 N.E.2d 652. It is equally well established that municipalities, organized under the state statute, being arms of the state, are, in so far as their actions or omissions flow from the exercise of their governmental functions, immune from liability for resulting torts. Thus, in Roumbos v. City of Chicago, 332 Ill. 70, 163 N.E. 361, 363, 60 A.L.R. 87, the court adopted this language: "So far as municipal corporations of any class, and however incorporated, exercise powers conferred on them for purposes essentially public — purposes pertaining to the administration of general laws made to enforce the general policy of the state — they should be deemed agencies of the state, and not subject to be sued for any act or omission occurring while in the exercise of such power, unless, by statute, the action be given; that, in reference to such matters, they should stand as does sovereignty, whose agents they are, subject to be sued only when the state, by statute, declares they may be." The court added: "The nonliability of the public quasi corporation, unless liability is expressly declared, is usually placed upon these grounds: That the corporators are made such nolens volens, that their powers are limited and specific, and that no corporate funds are provided which can, without express provision of law, be appropriated to private indemnification. Consequently, in such case, the liability is one of imperfect obligation, and no civil action lies at the suit of an individual for non-performance of the duty imposed." Other illustrative decisions in Illinois expressing this doctrine are Gebhardt v. Village of LaGrange Park, 354 Ill. 234, 188 N.E. 372; Gravander v. City of Chicago, 399 Ill. 381, 78 N.E.2d 304; Miralago Corp. v. Village of Kenilworth, 290 Ill.App. 230, 7 N.E.2d 602; Vossler v. DeSmet, 204 Ill.App. 292.

Thus it is apparent that the Supreme Court of Illinois adheres to the well-nigh traditional distinction between acts done in a governmental as distinguished from a proprietary capacity, and between those done in a public as distinguished from a private or corporate capacity. The reason for such adherence, notwithstanding the difficulty of stating a definite rule which may be generally applied, is the public danger that in this class of cases liability of the municipality would impose upon the taxpayers damages which might prove so onerous as to destroy the municipality itself. In other words, the real basis of the rule in Illinois grows out of a public policy which forbids that the municipality, an arm of the sovereign government, be subjected to liability in damages of this sort. Miralago Corp. v. Village of Kenilworth, 290 Ill.App. 230 at page 242, 7 N.E.2d 602.

However, though this rule clearly denies liability for tortuous acts or omissions in the exercise of governmental powers, we find no decision in the state which has considered in any degree the precise question involved in the case presented here, namely: whether the immunity of a municipality from liability for tortuous act growing out of its governmental functions applies likewise to an action brought to recover damages for breach of contract arising also out of the exercise of the municipality's governmental functions, as do the ordinances in question. Respective counsel have directed our attention to no Illinois case and our own research has disclosed none answering this specific inquiry.

Plaintiff has cited the case of Chalstran v. Board of Education, 244 Ill. 470, 91 N.E. 712, which involved repudiation and breach of a contract for construction of a high school upon the part of a school district and its resulting liability to the contractor. True, building a school house is part of the official duties of a school board, but the contract there involved related to property and property rights and the case is not to us a satisfactory authoritative statement upon the part of the Supreme Court of Illinois settling the question before us. Plaintiff relies upon certain other Illinois cases, none of which, we think, touches the issue, and also upon some from other jurisdictions. Winklebleck v. City of Portland, 147 Or. 226, 31 P.2d 637; Block v. Mayor, etc. of City of Meridian, 5 Cir., 169 F. 516. Defendant in turn cites two cases from foreign jurisdictions, Stevens v. Muskegon, 111 Mich. 72, 69 N.W. 227, 36 L.R.A. 777; Edson v. City of Olathe, 81 Kan. 328, 105 P. 521, 36 L.R.A.,N.S., 861, in which, apparently, the courts of those two states have extended the immunity from liability for torts committed in performance of governmental functions to actions for breach of contract growing out of governmental activities. Each party cites McQuillin, Municipal Corporations (1950) (3rd Ed.). But, beyond any vain prognostication we might make as to what the Supreme Court of Illinois would decide in contract cases, in view of its stated reasons for extending immunity to liability for tortuous acts, we are unable to say what the law of Illinois is.

It is not our role to attempt to make the substantive law for Illinois. It is, rather, our limited function to ascertain, what that law is and to give it effect in our decisions. In Railroad Commission of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971, and City of Chicago v. Fieldcrest Dairies, Inc., 316 U.S. 168, 62 S.Ct. 986, 988, 86 L.Ed. 1355, the Supreme Court has hewn out the route for us to follow. In the last mentioned case, the court said: "The determination which the District...