| ILLINOIS-AMERICAN WATER COMPANY, Plaintiff-Appellant, v. THE CITY OF PEORIA and | ) ) ) ) ) ) ) ) ) ) | Appeal from the Circuit Court for the 10th Judicial Circuit, Peoria County, Illinois No. 00 CH 248 Honorable |
In this declaratory judgment action, plaintiff Illinois-American Water Company (company) appeals the trial court's decisionupholding the validity of a 113-year-old purchase option in anagreement between its predecessor and the City of Peoria for thesale of a water works. The company also appeals the trial court'sdecision that it lacked standing to bring an action againstdefendant Peoria Area Advancement Group, L.L.C. (PAAG), forproviding financing to the city for this litigation. Under thefacts of this case, we affirm and hold as follows: (1) the city hadthe authority to include the purchase option in the agreement; (2)the purchase option is not perpetual in duration but continuesthroughout the life of the city; (3) the option was not terminableat will; (4) the purchase option was not preempted and supercededby the Public Utilities Act (Act) (220 ILCS 5/1-101 et seq. (West2000)); (5) the purchase option is not unenforceable due to thedoctrines of commercial frustration or impossibility ofperformance; and (6) the company did not have standing to contestthe agreement between the city and PAAG.
FACTS
In 1889, the city and the company's predecessor entered intoan agreement whereby the predecessor agreed to supply water to thecitizens of the city at an agreed-upon rate. In consideration forthese services, the predecessor received from the city the existingwater treatment facilities and mains. The agreement was amendedseveral times until it reached its present form, which has been ineffect since 1906.
Section 4 of the agreement provides the company the right touse the public streets for a term of 30 years from the date of saleand delivery of the system. Section 5 states that "[t]hisOrdinance shall be in force and effect from and after its passageand publication and *** shall extend to all grantees, theirsuccessors and assigns." Section 17 states:
"At the expiration of ten years from the date of thepassage of this ordinance, or of any, except the second,five year period thereafter, the City of Peoria, as amunicipal corporation, shall have the right to purchasethe water works of the grantees, and all thingspertaining thereto, as herein provided, ***
*** [T]he said City shall then have the right toexercise the option of purchasing or refusing to purchasethe said water works at the price so fixed, excluding alldistributing pipes, hydrants, etc., used for supplyingwater to consumers outside of the City limits. PROVIDED,that nothing herein shall be so construed as to preventthe City purchasing the main pipes, reservoirs,machinery, pumping stations and supply wells and ground,etc., whether the same may be located within or withoutthe limits of said City."
Section 18 of the agreement is entitled "Water for FireProtection - Payments - How Made" and provides, in pertinent part,as follows:
"[T]he franchise and license hereby granted to and vestedin the grantees shall remain in full force and effectduring the term of thirty years from and after the saleand delivery of the present water works, but subject tothe right of purchase as herein provided and to the otherconditions herein imposed, but in the event of a failureto purchase said water works, as herein provided, on orbefore the expiration of said thirty years, saidfranchise and license shall then continue in full forceand effect until such time as said city may purchase saidworks ***."
In October of 1998, the city council of Peoria voted to adopta plan to acquire the water works. Pursuant thereto, the cityentered into a loan agreement with PAAG whereby PAAG was to loanthe city money to finance its acquisition attempts, attorney feesand costs. The company filed this action against the city and PAAGrequesting a declaration that the agreement was outmoded, obsolete,and had been superseded or implicitly repealed by the PublicUtilities Act (220 ILCS 5/1-101 et seq. (West 2000)), and that thepurchase option had expired and was repealed by the Eminent DomainAct (735 ILCS 5/7-101 et seq. (West 2000)). The company alsoclaimed that the city and PAAG conspired against it and that theagreement was illegal and against public policy.
The company and the city filed cross-motions for summaryjudgment on the declaratory judgment issues. The trial courtgranted the city's motion and denied the company's motion. Basedon its determination that the company lacked standing, the courtdismissed the conspiracy and illegal contract claims against thecity and PAAG pursuant to section 2-619 of the Code of CivilProcedure (Code) (735 ILCS 5/2-619 (West 2000)). The companyappealed.
Additional facts will be presented as they become pertinent tothe analysis.
ANALYSIS
The issues on appeal are whether the trial court's decisionsto grant summary judgment on the declaratory judgment claims and todismiss the illegal contract and conspiracy claims (735 ILCS 5/2-619 (West 2000)) were proper. This court uses a de novo standardwhen reviewing a trial court's grant of summary judgment anddismissal pursuant to section 2-619. Grot v. First Bank ofSchaumburg, 292 Ill. App. 3d 88, 684 N.E.2d 1016 (1997); Denault v.Cote, 319 Ill. App. 3d 886, 746 N.E.2d 765 (2001).
The company's first argument is that the city did not have theauthority to include the option provision in the agreement when theagreement was entered into in 1889. Because no statute expresslygranted the city the authority to include the option, the companyclaims that the option is ultra vires, void, and unenforceable.
When interpreting a statute, the court's primary objective isto ascertain and give effect to the intent of the legislature. Inre Marriage of Burgess, 189 Ill. 2d 270, 725 N.E.2d 1266 (2000). When determining legislative intent, the court must construe thelanguage of the statute according to its plain and ordinarymeaning. In re C.M., 282 Ill. App. 3d 990, 669 N.E.2d 707 (1996). If the statutory language is clear and unambiguous, the statute'splain meaning will be given effect. People v. Whitney, 188 Ill. 2d91, 720 N.E.2d 225 (1999).
Section 3 of "An Act authorizing cities, *** to construct andmaintain water works" provides that "[f]or the purpose of erecting,constructing, locating, maintaining or supplying such water works,any such city *** may go beyond its territorial limits, and maytake, hold and acquire property and real estate, by purchase orotherwise ***." Ill. Rev. Stat. 1889, ch. 24, par. 256.
Based on a plain reading of this language, we conclude thatthe city had broad powers to acquire a water works system bypurchase or otherwise. In our view, the language of section 3 isbroad enough to include a purchase option agreement. Because anordinary construction of the language of section 3 allows for theinclusion of the purchase option in the agreement, we affirm. SeeWest v. Kirkham, 147 Ill. 2d 1, 588 N.E.2d 1104 (1992) (findingthat where the language of a statutory provision is clear, thestatute must be given effect).
The company's second argument is that the agreement andpurchase option were limited to 30 years. In the alternative, itargues that the option was terminated at will by the company whenit resisted the city's past attempts to exercise the option, thatthe option was not exercised within a reasonable period after the30-year term had expired, and/or that the option expired in 1988 atthe end of the 99-year corporate life of the original grantee (thecompany's predecessor). The city responds that the agreement wasnot limited to 30 or 99 years and that the company cannot nowcomplain that the option was terminable at will or had to beexercised within a reasonable period because it failed to makethose arguments in the trial court.
Provisions as to the duration of a contract are to beconstrued to effectuate the intention of the parties as evidencedby the language employed. Rooks v. Plavec, 40 Ill. App. 2d 298, 188N.E.2d 251 (1963). If a contract is unambiguous in its expressionof duration, the contract is not subject to judicial construction.Donahue v. Rockford Showcase & Fixture Co., 87 Ill. App. 2d 47, 230N.E.2d 278 (1967). A contract that fails to provide anyrecognizable basis for termination is ordinarily perpetual induration and terminable at will by the parties. See Jespersen v.Minnesota Mining & Manufacturing Co., 288 Ill. App. 3d 889, 681N.E.2d 67 (1997). Nevertheless, when a municipality grants apublic service corporation the right to use its streets and no timeis fixed as to when such rights should cease, the rights to use thestreets do not exist in perpetuity but end when the municipalitygranting the right ceases to exist. See Venner v. Chicago City Ry.Co., 236 Ill. 349, 86 N.E.266 (1908).
We conclude that the trial court did not err when itdetermined that the option to purchase was not limited to a 30-yearperiod. Section 18 provides that, after the expiration of 30years, the agreement "shall continue in full force and effect untilsuch time that the city may purchase the [water] works." Thislanguage is clear, unambiguous and provides the city with theopportunity to purchase the water works beyond the 30-year period. As the language does not fix a time in which the city must exercisethe option, the option continues so long as the city remains inexistence. Therefore, the option provision is not perpetual induration and is not terminable at will by the parties. See Peopleex rel. City of Chicago v. Chicago Telephone Co., 220 Ill. 238, 77N.E. 245 (1906) (providing that a municipal grant to a corporationto use its streets in order to supply telephone service to itcitizens was not perpetual and continued throughout the life of themunicipality).
The company contends that the agreement is limited to 30 yearsbased on section 1 of "An Act to enable cities, *** to contract fora water supply for public use ***" (Ill. Rev. Stat. 1889, ch. 24,par. 266), which provides that cities, incorporated towns andvillages may make contracts "for a supply of water for public usefor a period not exceeding thirty years" (Ill. Rev. Stat. 1889, ch.24, par. 266). We do not agree with this contention. Section 1does not apply to this case because the city was not purchasing asupply of water but instead was selling its water works to thecompany with the agreement that the company would be supplyingwater directly to the citizens at an agreed-upon rate.
We also disagree with the company's assertion that theagreement and option expired in 1988 at the end of the 99-yearcorporate life of the original grantee. In Village of West City v.Illinois Commercial Telephone Co., 372 Ill. 493, 24 N.E. 2d 352(1939), our supreme court stated that "[a] grant to a corporationof a right to use public streets which fixes no definite time forthe continuation of the right is construed, in the absence ofanything to show a contrary intention, as a license for the life ofthe grantee corporation." (Emphasis added.) 372 Ill. at 496, 24N.E.2d at 353.
As stated previously, when read together, sections 17 and 18indicate a clear intention that the option will continue until thecity purchases the water works. Therefore, we hold that the optionis not restricted to the corporate life of the original grantee. See St. Clair County Turnpike Co. v. Illinois, 96 U.S. 63, 24 L. Ed651 (1878) (providing that a grant of a franchise to a corporationis not limited to the legal duration of the corporation if there isa clear expression to the contrary).
Based on our decision that the option provision is notperpetual or terminable at will by the parties and that the optiondid not expire at the end of the 99-year corporate life of theoriginal grantee, we need not address the company's claim that theoption was not exercised within a reasonable time period.
The company's third argument is that the agreement andpurchase option were preempted and superceded by the PublicUtilities Act (Act) (220 ILCS 5/1-101 et seq. (West 2000)) and werethus ineffective. The city responds that the Act did not affectthe contractual provisions of the agreement but only the regulatorypowers which were given to the state.
The Act was passed by the General Assembly in its exercise ofits police power. Illinois Commerce Comm'n ex rel. IllinoisTraction, Inc. v. Omphghent Township, 326 Ill. 65, 156 N.E. 766(1927). The purpose of the Act was to give the public control overproperty used by the public for a common good. City of Chicago v.Alton R.R. Co., 355 Ill. 65, 188 N.E. 831 (1933). When the Actgrants to the state a specific right or power that conflicts witha similar right or power held by a municipality, the Act willprevail as a repeal by implication of the rights vested in themunicipality. City of Geneseo v. Illinois Northern Utilities Co.,378 Ill. 506, 39 N.E.2d 26 (1941). Although the Act is inderogation of the common law and is to be strictly construed infavor of those sought to be subjected to its operation, the Actwill not be extended any further than what the language of thestatute absolutely requires by its express terms or by clearimplication. Tucker v. Illinois Power Co., 232 Ill. App. 3d 15, 597N.E.2d 220 (1992).
We hold that the trial court correctly determined that the Actdoes not preempt or supercede the purchase option in the agreementin this case. The purchase option grants to the city the right torepurchase the water works, and we find no language in the Act,express or implied, giving the state the power or authority toprohibit the inclusion of the option provision. Although theregulatory powers granted to the state by the Act may preempt theregulatory provisions of the agreement (Omphghent, 326 Ill. at 70,156 N.E.2 at 768), we determine that the purchase option in no wayconflicts with the Act. See, e.g., Geneseo v. Illinois NorthernUtilities Co., 378 Ill. at 523, 39 N.E.2d at 35 (providing that thepower vested in cities to permit or refuse a license or franchiseto a public utility has not been repealed by the provisions of theAct).
The company's fourth argument is that the purchase option isunenforceable due to commercial frustration and impossibility ofperformance. The company asserts that unforeseen changes in thelaw, such as the enactment of the Public Utilities Act (220 ILCS5/1-101 et seq. (West 2000)), and subsequent case law have renderedthe substantive provisions of the agreement null. As a result, itclaims that the city's authority over public utilities as providedin the agreement has been significantly reduced and eliminated. The company also asserts that the city is permitted to purchasethose portions of the distribution system that are used to supplywater to city residents only, and not those that supply water tononresidents. Because the water system is now an integrated,regional system, it claims the purchase option is impossible toenforce as the parties intended.
The doctrine of commercial frustration will render a contractunenforceable if a party's performance under the contract isrendered meaningless due to an unforeseen change in circumstances.Smith v. Roberts, 54 Ill. App. 3d 910, 370 N.E.2d 271 (1977). Inorder to apply the doctrine of commercial frustration, there mustbe a frustrating event not reasonably foreseeable and the value ofthe parties' performance must be totally or almost totallydestroyed by the frustrating cause. Smith, 54 Ill. App. 3d at 913,370 N.E.2d at 273. Similarly, the doctrine of impossibility ofperformance will be applied if there is an unanticipatedcircumstance that has made the performance of the promise vitallydifferent from what should reasonably have been within thecontemplation of the parties when the contract was entered. Fisherv. United States Fidelity & Guaranty Co., 313 Ill. App. 66, 39N.E.2d 67 (1942). The doctrine of impossibility of performancerequires that the circumstances creating the impossibility were notand could not have been anticipated by the parties, that the partyasserting the doctrine did not contribute to the circumstances, andthat the party demonstrate that it has tried all practicalalternatives available to permit performance. Farm Credit Bank ofSt. Louis v. Dorr, 250 Ill. App. 3d 1, 620 N.E.2d 549 (1993).
We disagree with the company's assertion that either of thedoctrines should be applied in this case. Regarding the commercialfrustration claim, the company failed to present any evidence thatthe enactment of the Public Utilities Act was not foreseeable bythe parties when the contract was entered into in 1889. Thecompany also failed to present sufficient evidence that there wasa frustrating event that destroyed the value of the parties'performance. Although the company asserts that the value of thecity's performance under the agreement was destroyed by subsequentchanges in the law, we have previously determined that the PublicUtilities Act did not render the purchase option void. SeeAmerican National Bank in DeKalb v. Richoz, 189 Ill. App. 3d 775,545 N.E.2d 550 (1989) (finding that the doctrine of commercialfrustration is not to be applied liberally).
We also do not agree with the company's claim that thedoctrine of impossibility of performance should apply. The companyfailed to present sufficient evidence to show that performance,even if difficult, is impossible. In addition, although thecompany asserts that the current regional water system was not thesystem contemplated by the parties, section 17 of the agreementstates that "nothing herein shall be so construed as to prevent theCity purchasing the main pipes, reservoirs, machinery, pumpingstations and supply wells and grounds, etc., whether the same maybe located within or without the limits of said City." (Emphasisadded.) Because this language seems to recognize that nonresidentswould be using the water system, both the company and the city hadnotice that the option could apply even if the system suppliedwater to nonresidents. See Felbinger & Co. v. Traiforos, 76 Ill.App. 3d 725, 394 N.E.2d 1283 (1979) (finding that if a party hasknowledge that subsequent circumstances could render a contractimpossible to perform, the doctrine of impossibility is notavailable).
Finally, the company argues that the trial court improperlydetermined that it did not have standing to contest the agreementbetween the city and PAAG regarding the financing for thislitigation. The company contends that the agreement was illegaland that the city and PAAG conspired against it to facilitate theillegal acquisition of the water works without the necessity of areferendum or compliance with the Eminent Domain Act (735 ILCS 5/7-101 et seq. (West 2000)).
The purpose of the standing requirement is to preclude aperson having no interest in a controversy from bringing suit.Brockett v. Davis, 325 Ill. App. 3d 727, 762 N.E.2d 513 (2001). Inorder for a party to have standing, the party must suffer someinjury in fact to a legally cognizable interest and must havesustained, or be in immediate danger of sustaining, a direct injuryas a result of the complained-of conduct. Brockett, 325 Ill. App.3d at 730, 762 N.E.2d at 516. That a party may suffer in someabstract way will not suffice; there must be a direct injury to hisproperty or rights. Brockett, 325 Ill. App. 3d at 730-31, 762N.E.2d at 516.
Based on our review of the complaint, we hold that the trialcourt did not err when it dismissed the company's claims againstPAAG based on lack of standing. The company failed to pleadsufficient facts in the complaint to show that it suffered a directinjury to a legally cognizable interest as a result of the contractbetween the city and PAAG. The contract attached to the complaintstated that PAAG will provide funding to the city for its effortsto purchase the water system. The company failed to allege,however, that it was either a party to that contract or a third-party beneficiary of it. Although the company did allege that itwill be harmed financially if the city succeeds in purchasing thewater system, it did not allege facts which demonstrate that theharm is a direct result of the city's contract with PAAG. Accordingly, we affirm the decision of the trial court dismissingthe action against PAAG.
For the foregoing reasons, the judgment of the circuit courtof Peoria County is affirmed.
Affirmed.
HOMER and SLATER, JJ., concur.