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Chicago Heights v. Public Service Co.





Appeal by plaintiff from the Superior Court of Cook county; the Hon. JOHN F. BOLTON, Judge, presiding. Heard in the first division of this court for the first district at the April term, 1951. Reversed and remanded with directions. Opinion filed January 21, 1952. Released for publication February 5, 1952.


Plaintiff appeals from an order striking its second amended complaint and dismissing its suit, commenced March 24, 1949, to vacate, set aside and enjoin the enforcement of a judgment by default for want of a plea and affidavit of merits entered November 1, 1933 in defendant's action (Case No. 585593 in the superior court of Cook county, Illinois) to recover the agreed price of electric energy ($27,845.01) and merchandise ($392.15) furnished plaintiff between December 19, 1930 and August 10, 1933. On appeal to the Supreme Court the case was transferred to this court. 408 Ill. 310.)

Plaintiff alleges that during the time of the transactions involved herein the constitutional debt limitation of plaintiff was 5 per centum of the value of the taxable property within the city (Constitution of 1870, art. 9, sec. 12), and the statutory limit of indebtedness was 2 1/2 per cent of the taxable property therein (Ill. Rev. Stat. 1951, Cities and Villages Act, chap. 24, sec. 18-1) [Jones Ill. Stats. Ann. 21.1431]; that plaintiff could not validly make any contract or incur any expense "unless an appropriation has been previously made concerning that contract or expense. Any contract made or any expense otherwise incurred, in violation of the provisions of this section shall be null and void as to the municipality, and no money belonging thereto shall be paid on account thereof." (Ill. Rev. Stat. 1951, Cities and Villages Act, chap. 24, sec. 15-3) [Jones Ill. Stats. Ann. 21.1386]; that purported contracts under which the electric energy and merchandise, the subject matter of defendant's suit, were furnished, were entered into between October 18, 1930 and April 17, 1933; that the assessed value of property within the city as equalized by the state tax commission for the years 1928 through 1932, and the maximum statutory debt limitation of plaintiff on selected dates in the years 1930 through 1933 were the amounts stated in the complaint; that on said selected dates, namely October 31, 1930, May 1, 1931, January 31, 1932 and August 1, 1933, the indebtedness of plaintiff exceeded its statutory debt limitation from $117,756.13 to $420,801.62, the percentage of the debt to the assessed value of property on said dates being, respectively: 3.25%, 3.59%, 3.58% and 5.43%; that said purported contracts and defendant's claim for electric energy and merchandise furnished thereunder were void and unenforcible because they created an indebtedness against plaintiff in excess of its debt limitations and because there had been no appropriation concerning the contracts or the expenses incurred thereunder; that defendant's action was commenced on or about August 20, 1933, summons was served on the mayor of plaintiff on September 14, 1933, the corporation counsel of plaintiff entered its appearance and his own as its attorney on September 19, 1933 but defaulted in filing a plea or affidavit of merits to plaintiff's verified statement of claim; judgment by default for $28,237.36 and costs was entered November 1, 1933, after timely notice to the corporation counsel of the intended application for judgment; that no attempt has been made to enforce the judgment or revive the same; that at the time of the commencement of the action and the entry of judgment therein plaintiff and defendant knew that the alleged indebtedness set forth in the complaint therein was unenforcible for the reasons aforesaid; that plaintiff's failure to defend the action, and the entry of the judgment, were due to "collusion and constructive fraud in the nature of an agreement that a `friendly' suit be brought." Plaintiff prayed that the judgment be vacated and set aside, that defendant be enjoined from attempting to enforce the judgment, and that plaintiff have such other and further relief as may be just and equitable. Defendant's motion to strike the complaint and dismiss the action was allowed.

Defendant does not attempt to sustain the judgment in its action as one based on a valid claim. The sufficiency of the allegations in respect to the excessive indebtedness of plaintiff and the lack of an appropriation when the contracts on which defendant's claim was predicated were entered into, is not questioned. These matters being well pleaded they must be taken as true on this appeal. The law is clear. In speaking of a municipality whose indebtedness was in excess of the constitutional limitation, the court in Prince v. City of Quincy, 105 Ill. 138, said (142-3):

". . . it is seriously contended by counsel for appellant that a municipality thus circumstanced may become indebted for supplies to meet its ordinary wants and necessities. To so construe the constitution would be to add a provision, in the nature of an exception, to the constitution, which the framers of that instrument did not see proper to insert. This, as is well settled by an unbroken current of authority, is not permissible where the language of the law is clear and unambiguous, as is the case here, . . . ."

In Green v. Hutsonville School Dist., 356 Ill. 216, tax payers sought an injunction restraining the extension and collection of taxes for the payment of bonds issued for the payment of certain judgments entered by consent on obligations incurred in building a school in excess of the constitutional limitation of the district. Demurrers to the bill were sustained and the suit dismissed for want of equity. On appeal the judgment of the trial court was reversed and the cause remanded, the Supreme Court holding that "Upon the facts admitted by the demurrer to this bill, the original indebtedness, which was later merged in the judgments, was void and the judgments permitted to be entered thereon were also void." In speaking of the constitutional limitation of indebtedness, the court said (p. 220):

"In discussing this constitutional prohibition this court has made itself very clear and there can be no reason for doubting our position in the matter. We have held that it makes no difference under what guise or by what sort of trick the attempt is made, an indebtedness in excess of the constitutional limit cannot be voluntarily created. It was the intention of the framers of our constitution that the property of citizens should not be burdened beyond the five per cent limitation and that no plan or scheme can be permitted to create an indebtedness in excess of that amount. (People v. Chicago and Alton Railroad Co., 253 Ill. 191; Wade v. East Side Levee District, 320 id. 396, and cases there cited.)"

No case passing on the statutory limitation of indebtedness to 2 1/2 per cent of the value of the taxable property within the municipality has been brought to our attention. However, the language of this limitation is substantially identical with the constitutional limitation. The purposes of the limitations are the same. Whatever is said in reference to the constitutional limitations is applicable to the statutory limitations and the same principles of law should and do govern. In DeKam v. City of Streator, 316 Ill. 123, the Supreme Court affirmed a decree restraining the city and its officers from paying any further sums of money to an engineer who had prepared plans, drawings and specifications for a sewer system under a contract entered into in violation of the statutory debt limitation, before an appropriation had been made concerning the expense created by the contract. The court said (p. 129):

"A contract expressly prohibited by a valid statute is void. This proposition has no exception, for the law can not at the same time prohibit a contract and enforce it. The prohibition of the legislature cannot be disregarded by the courts. (Botkin v. Osborne, 39 Ill. 101; Wells v. People, 71 id. 532; Board of Education v. Arnold, 112 id. 11; Penn v. Bornman, 102 id. 523; Cincinnati Mutual Health Assurance Co. v. Rosenthal, 55 id. 85; Borough of Milford v. Milford Water Co., 124 Pa. 610; Berka v. Woodward, 125 Cal. 119; Levison v. Boaz, 150 id. 185.)"

Thus it appears from the allegations of the complaint that plaintiff had a good and sufficient defense to defendant's action and that not only the contracts on which that action was based, but the judgment by default into which the contracts were merged, were void. Defendant concedes the jurisdiction of a court of equity to hold for naught and restrain the enforcement of a judgment at law procured by fraud. It asks affirmance of the order dismissing plaintiff's action because, as stated in its brief, "plaintiff has failed to meet the prerequisites for equitable relief from such a judgment at law. It has wholly failed (a) to allege facts showing the judgment against it was obtained by actual fraud or collusion, (b) to show that it was diligent in presenting its defenses in the original action and diligent in seeking relief thereafter and (c) to explain why, if it had a case, it did not avail itself of its adequate legal remedies."

[3-5] In respect to the allegations of fraud and collusion, the mere charge that the entry of the judgment was "accomplished by virtue of collusion and constructive fraud in the nature of an agreement that a `friendly' suit be brought," is not enough. As said in Owens v. Green, 400 Ill. 380, p. 393:

"An allegation of conspiracy, collusion and fraud must show the facts upon which the allegation is based, and a general charge that a party acted fraudulently or was guilty of fraud is a statement of a conclusion and is not good pleading. These general words, unsupported by facts, are, at best, mere vituperation. (People ex rel. Parker v. Board of Appeals, 367 Ill. 559; Tribune Co. v. Thompson, 342 Ill. 503; Doose v. Doose, 300 Ill. 134.)"

The pertinent inquiry is whether, independent of the language quoted, the facts alleged in respect to the indebtedness of plaintiff being in excess of its constitutional and statutory limitations, the want of an appropriation when the contracts on which defendant's claim was based were entered into, and the conduct of the parties in the suit in which the judgment by default was entered, show collusion and fraud in the entry of the judgment. The complaint shows by apt allegation that plaintiff had a good and valid defense to defendant's action and that the judgment entered therein was void. Plaintiff, pleading its evidence, attaches to the complaint a letter from the defendant's attorney asking the mayor of plaintiff to "advise whether it is satisfactory if we go ahead and have a friendly suit brought and a judgment entered for the amount shown?" It further appears by proper allegation that the suit was thereafter brought, that service was had upon plaintiff and its appearance entered by its corporation counsel, that plaintiff defaulted in filing a plea and affidavit of merits to defendant's verified statement of claim, and that after timely notice a judgment by default was entered. Defendant's suit was an adversary proceeding only in form. The judgment was not entered on a hearing on the merits, but by the default, acquiescence and tacit consent of plaintiff. The officials of plaintiff and the officers and agents of defendant were charged with notice of the limited powers of plaintiff, the indebtedness of plaintiff and the law in respect to any indebtedness in excess of the constitutional and statutory limitations. They therefore knew that the judgment was a nullity. It is a necessary inference from these facts that the action of the defendant in procuring, and of the officials of plaintiff in permitting the judgment to be entered by default, was collusive and ...

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