Appeal from the Circuit Court of Will County, Twelfth Judicial
Circuit; the Hon. MICHAEL A. ORENIC, Judge, presiding. Affirmed.
This is an appeal from a judgment of the Circuit Court of Will County in favor of plaintiff, the M.A. Felman Co., as against defendant, WJOL, Inc., in the sum of $51,962.19. The judgment followed a finding (pursuant to a motion for summary judgment) by the Circuit Court of Will County that plaintiff was entitled to such damages as a result of defendant's breach of contract. The record discloses that plaintiff M.A. Felman Co. operated the Boston Store in Joliet, Illinois. Mr. A.J. Felman was the principal owner and chief executive of the plaintiff corporation prior to June, 1932. He was also the sole owner of all stock of WCLS, Inc., which then operated a Joliet radio station. On June 21, 1932, Felman sold all the stock in the radio station corporation to R.W. Hoffman, for a stated consideration of $10 and the promise of certain free broadcasting time "so long as said station WCLS is operated as a radio broadcasting station." The free broadcasting time was to consist of 120 minutes each weekday and 90 minutes on Sunday. This original agreement also was conditioned so that no more than three announcements would be made in each 15-minute period. An amendment was made of this agreement on August 9, 1937, pursuant to which $5,000 was paid to Felman. The free broadcasting time was reduced from 13 1/2 hours a week to 5 1/2 hours a week with such free time to continue "so long as station WCLS is operated." The corporate name of WCLS was later changed to Joliet Broadcasting Co., with the station letters WJOL. The shareholders of Joliet Broadcasting Co. conveyed all interest in their stock to WJOL, Inc., which continued to operate station WJOL. Felman assigned his contract rights to the plaintiff corporation (the M.A. Felman Co.) in 1945 for a period of ten years, and subsequently renewed this assignment by two succeeding instruments, the last of which conveyed to the plaintiff corporation all right, title and interest under the contract.
In 1945 the radio station sought to renew its license but was given only a temporary permit due to the fact that the Federal Communications Commission (hereinafter referred to as FCC) was then in the process of working on regulations with regard to types of contracts which allowed for free broadcasting time. On April 1, 1949, the FCC adopted Rule 3.109, which provided in substance as follows:
"Special rules relating to contracts providing for reservation of time upon sale of a station. (a) No . . . renewal of license . . . shall be granted . . . to a . . . broadcast station which has a contract . . . (under) which . . . transferor retains any right . . . to use the facilities of the station for any period whatsoever.
"(b) In the case of . . . transfer . . . before February 15, 1949 . . . the Commission . . . (may issue) a license despite . . . such contract . . . if . . . within 6 months from . . . this rule. (The contract is modified to contain at least the following provisions:)
"3. A prohibition against the resale or reassignment of any of the broadcast time reserved by such modified contract.
"4. An express negation of any right with respect to reversion or assignment of license.
"5. An express provision setting forth a definite expiration date of the contract . . . Such expiration date shall not extend beyond February 15, 1964 . . .
"6. An express provision giving to the licensee the right to terminate the contract . . . for substantial cause . . . upon the payment of a lump sum. . . ."
Prior to this time, in 1949, plaintiff sought to enjoin enforcement of the FCC rule on the ground that it deprived plaintiff of property without due process of law. This litigation terminated in the United States Supreme Court. The only issue there was apparently whether the FCC had the power to issue its rules. There was no determination of the effect of the rules as between plaintiff and defendant.
The plaintiff contended at FCC hearings that it would be clearly unjust if in the course of determining standards which would govern the station's broadcasts, the FCC would attempt to invalidate the Felman contract which had been entered into in good faith and had been fully disclosed to the FCC and had been fully performed by Felman. The FCC Chairman indicated that the question of contract liability was not involved. It was likewise clearly indicated that the Commission did not in any manner attempt to determine whether or not there would be a liability to Felman in the event the Commission regulation and decision became final. The FCC Chairman stated that this was a wholly separate issue which should be dealt with as a civil matter. When the station license was up for renewal in 1950, the defendant radio station representatives told the FCC that they had not yet reached an agreement with plaintiff, but they stated to the FCC that they would not recognize any obligation under this contract of August 9, 1937, which was not consistent with the provisions of said Section 3.109. The FCC renewed the license of WJOL and such license was continued from that time on by the FCC. The radio station continued to furnish plaintiff program and advertising time (as it had done for years) until February 15, 1964. The station advised the plaintiff in writing on February 10, 1964, that it would not operate under the contract after February 15, 1964, and that after such date it would refuse to give broadcasting announcements delivered to the station by plaintiff under the terms of the contract.
Action for breach of contract was filed by plaintiff on April 23, 1964, seeking damages of $14,741 for each year subsequent to the time of the breach of the contract. The facts were undisputed and the trial judge granted a motion for summary judgment in favor of the plaintiff. Judgment was entered for the plaintiff as against defendant with damages set at $51,962.19. The judgment covered damages from February 15, 1964, through August 24, 1967. In the process of determination of this cause, the trial court stated "The action of the FCC under its rule-making power does not affect the validity of the contract between licensee and third party. This is basic. The rights of the parties under the contract are to be determined by the law of Illinois. I cannot see how the doctrine of impossibility of performance or commercial frustration can be applied here. Felman has performed completely and nothing more by him needs to be done. Performance by defendant is not rendered illegal or contrary to public policy. Clearly, the payment of damages, or the money equivalent of the thing to be delivered, is possible, is legal, and does not offend the regulatory agency." The present owners of WJOL purchased their stock in November of 1954. The damages referred to were predicated upon damages of $14,741 for each year subsequent to the breach based upon the value of the broadcasting time during each of such years.
On appeal in this Court, defendant radio station corporation asserts (1) impossibility of performance of the contract resulted solely from legal action of the governmental agency and presented an effective defense to an action based upon its breach; (2) the obligations alleged to have been assumed under the Felman contract contemplate possible termination by the very contract terms, and are subject to the regulations of the FCC; (3) the suit based upon an alleged breach of the contract of August 9, 1937, is barred by the Statute of Limitations; (4) that there was no proper legal basis for the suit being brought by the plaintiff, M.A. Felman Co., or against defendant, WJOL, Inc.; (5) that the conduct of the parties before and after the order of the FCC renewing the broadcasting license coupled with the combination of attending circumstances brought into being a new contract implied in law or implied in fact; and (6) that the damages awarded below were improper and illegal.
On the question of the doctrine of impossibility or commercial frustration as being a basis for absolving defendant completely from any liability to pay damages, it would be well to analyze the doctrine generally. In Illinois and other states, when performance of a contract becomes impossible because governmental laws or regulations make such performance illegal, nonperformance may be excused. This rule assumes that the possibility of such illegality was not provided for in the contract or contemplated by the parties when they entered into an agreement. Also, such illegality must not have come about because of any action or non-action on part of either of the parties to the contract. Some early cases on this issue involved prohibition cases where property was leased for tax purposes only and it became illegal to operate a tavern. In such situations, nonperformance by the lessee of the lease was excused (Levy v. Johnston & Hunt, 224 Ill. App. 300). Similarly, where a contract contemplated the continued existence of a particular person, thing or condition, and later the person died or the thing ...