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Kruse v. Streamwood Utilities Corp.

FEBRUARY 21, 1962.




Appeal from the Circuit Court of Cook County; the Hon. THOMAS J. COURTNEY, Judge, presiding. Affirmed in part; reversed in part and cause remanded.


Rehearing denied March 21, 1962.

This is an appeal taken from a summary judgment entered in the Circuit Court of Cook County dismissing the complaint for want of equity.

The complaint was filed as a representative or class suit on behalf of all the homeowners in the Village of Streamwood. It was in three counts. Count I prayed that the franchise of Streamwood Utilities Corporation (hereinafter referred to as "Utilities") be declared void because of the interest of the village board of trustees in the franchise. Count II prayed that the defendants be held to be constructive trustees, for the plaintiffs and the class of persons whom they represent, of the distribution system of Utilities used in the rendering of sewer and water service, or in the alternative that the plaintiffs and the class which they represent be awarded damages representing the payments made by them for the said distribution system. Count III alleges that the plaintiffs and the class represented by them suffered damages due to the unsanitary character of the water, and they pray for an accounting for all damages suffered because of the wrongful and unlawful acts committed by all of the defendants either collectively or individually. There is also a prayer for general relief applicable to all counts.

The complaint was originally filed against Utilities, Streamwood Home Builders, Inc. (hereinafter referred to as "Builders"), Streamwood Development Corporation (hereinafter referred to as "Development"), Edward McCabe and John Petrie, trustees of the Village of Streamwood, and Howard Haft, its attorney. Subsequently Morris Dreyfus, president of Utilities, and Sidney Robbins, its secretary, were also added as defendants.

A joint answer to the complaint was filed by Utilities and Development, and a separate answer was filed by Builders. An answer was filed by Haft, and the answer of Builders was adopted by Dreyfus and Robbins.

Defendants Utilities, Builders and Development made a motion for summary judgment, and in support of that motion filed affidavits of Howard S. Haft, the village attorney for the Village of Streamwood, Sidney Robbins, secretary of Builders, Brimson Grow, secretary of Development and of Utilities, and Charles D. Tower, secretary and a member of the board of directors of McCabe Engineering Company, which prior to March 1, 1960 did business as a partnership under the name of DeSoto B. McCabe and Associates. Defendants Dreyfus and Robbins later joined in the aforesaid motion.

The admitted facts were that commencing with 1956 one Maxon organized Development for the purpose of acquiring an option to purchase approximately 300 acres of land now included in the Village of Streamwood and developing said land for homesites. Thereafter Dreyfus and Robbins organized Builders, which acquired more than 2,200 acres of land in Streamwood. The Village of Streamwood was organized on February 1, 1956 and has approximately 800 homes and 4,000 residents. Builders and Development hired DeSoto B. McCabe and Associates (hereinafter referred to as "DeSoto") as engineers to render engineering services in connection with the water and sewer plant and distribution system, and with respect to the grading of streets, sidewalks, storm sewers, etc. After March 1, 1960 the DeSoto firm was incorporated as the McCabe Engineering Company (hereinafter referred to as "McCabe"). McCabe has received and is receiving for its engineering services the sum of $80 per lot, which amounts to a fraction of one percent of the sale price of homes built and sold by Builders, and less than four percent of the sale price of improved lots sold by Development. At the time the suit was filed the cost of the water and sewer mains in the Village of Streamwood was in excess of $600,000. The cost of such water and sewer mains has been paid for by Builders in certain sections of the village and by Development in other sections of the village. It is not clear from the pleadings as to whether all of this amount had been paid McCabe at the time of filing of the suit.

A charter was granted to Utilities by the State of Illinois on March 14, 1957, and Morris Dreyfus, Sidney Robbins, Nathan Robbins, Don Maxon, Morris Haft and David Malkov became the nominal owners of substantially all of the stock of said corporation. All of these shares, except those standing in the name of Maxon and Haft, were transferred and assigned to Builders. Maxon's shares were transferred and assigned to Development, and Haft's shares were transferred to Maxon as a voting trustee.

At the time of the formation of the Village of Streamwood, Edward McCabe, John Petrie and four other employees of the then DeSoto firm were elected as the first board of trustees of the village. Howard Haft was employed as the Streamwood village attorney. Haft's father at one time was a stockholder and official of Utilities.

Subsequently Utilities made application to the Village of Streamwood for a 30-year license or franchise for water and sewer services. The 30-year license was granted by a unanimous vote of the trustees of the village, and at that time all of the trustees of the village were employees of or partners in the DeSoto firm. Utilities acquired from Builders and Development sewers, water mains, etc., for which it became obligated to pay the reasonable value, which amounted to more than $600,000. Later Utilities sought to have a determination made by the Illinois Commerce Commission as to the original cost of such property, and in this connection figures were prepared and submitted to the commission using the sum of $600,000 paid by Utilities to Builders and Development apparently as an element upon which the commission could approve charges for sewer and water services.

In their complaint the plaintiffs allege that Utilities was organized with the intent to make a "large windfall profit" for the defendants; that at the time the lots were sold to the plaintiffs and the class of persons whom they represent the defendants concealed from them the fact that they intended to have the rates and charges for water and sewer services predicated upon the total water plant including the water and sewer distribution system which had been paid for by the plaintiffs or was being paid for through the mortgages which they had assumed on the lots which they purchased; that the defendants represented through their agents that the water and sewer services would be rendered to the lot purchasers at a nominal cost and that it would not include as an element in the determination of the rates the cost of the original water and sewer distribution system. All of these allegations are denied by the defendants.

In support of the motion for summary judgment made by Utilities, Development and Builders, as to Count I reliance is placed upon the fact that neither McCabe nor its partnership predecessor had made any contract with Utilities nor had received any compensation or payments from it, and upon the fact that neither the trustees of the Village of Streamwood nor Haft, its village attorney, at the time the franchise was granted had any financial interest in Utilities, Development or Builders. They asked that Count II be dismissed because it does not state a cause of action, and they further assert that Count III is improperly brought as a representative suit because it appears from the complaint that there is no single, common undivided interest held collectively by all members of the class of persons whom the plaintiffs purport to represent. The defendants filed an amendment to the motion, in which they alleged that Counts I, II and III are improperly brought as a representative suit and should be dismissed for want of equity since they are, as stated in the motion, based upon "alleged false representations made by defendants and relied upon by plaintiffs and the class of persons whom they purport to represent." After Dreyfus and Robbins were made additional parties defendant they were given leave to join in the motion for summary judgment filed by Utilities, et al.

The plaintiffs filed a motion to strike the affidavits of the defendants on the theory that they were immaterial and irrelevant. No action was taken on that motion, but the trial court on September 19, 1960 entered a summary judgment dismissing for want of equity the complaint in its entirety, including Counts I, II and III, as to the defendants Utilities, Development, Builders, Dreyfus and Robbins. Two other defendants in the suit, Edward McCabe and John Petrie, had not been served. Howard Haft had been served and he filed an answer but did not join in the motion for summary judgment, nor does the summary judgment affect him. However, the court in the judgment order complies ...

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