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People Ex Rel. Hamer v. Bd. of Education

SEPTEMBER 24, 1974.




APPEAL from the Circuit Court of Lake County; the Hon. FRED H. GEIGER, Judge, presiding.


Rehearing denied October 15, 1974.

We review the order of the trial court dismissing plaintiffs' second amended complaint and denying leave to file a proposed amendment. The second amended complaint alleged in substance that the plaintiffs were taxpayers and property owners in the defendant school district who were damaged by the wrongful investment of public funds by the district authorities. Count I sought a declaratory judgment; Counts II and IV sought a writ of mandamus and Count III sought a writ of injunction. *fn1

In the challenged ruling, the trial court specifically found as to Count I that plaintiffs failed to allege any facts upon which a claim to relief could be predicated and that plaintiffs had no standing to sue for the declaratory relief requested. As to the mandamus Counts II and IV, the court held that they were filed in direct violation of its previous order regarding the first amended complaint which excepted from the leave to amend all allegations concerning mandamus. The court also found that plaintiffs failed to state a cause of action for mandamus. As to Count III, the court found that plaintiffs had no standing to sue for the injunctive relief requested; and that insufficient facts were alleged to state a cause of action.

On appeal plaintiffs contend that they have standing to institute the litigation; that the second amended complaint states a cause of action; that the trial court deprived them of a right to a remedy guaranteed by the Illinois Constitution; and that the court erred in refusing further amendments and otherwise erred in ruling on the pleadings.

By its motion to dismiss defendant admitted all well pleaded facts. (Zanbetiz v. Trans World Airlines, Inc. (1966), 72 Ill. App.2d 192, 199.) With this overriding principle in mind, we consider the questions raised in relation to the separate counts of the complaint.


In Count I the plaintiffs allege in substance that they are citizens of the state and residents of the defendant district as well as the owners of property situated in the district and taxpayers therein; that during the period from July 2, 1968, to January 1, 1969, the district, disregarding the Local Government Act (Ill. Rev. Stat. 1969, ch. 85, par. 902), invested all of their public funds in various securities which matured or were redeemable on dates long after the dates when the district knew they would be required for expenditure, arbitrarily assigning the investments to certain funds, i.e., education, building, etc., without regard to the funds for which the tax monies were collected; and diverting the funds from one account to another, and comingling funds; that the district issued tax-anticipation warrants at a time when it had money in the treasury in the form of these securities; that the manipulation of the public funds by investing all of the tax monies in notes and securities when the funds should have been used to defray the necessary expenses of the district is a wrongful diversion of public funds and

"15. That there is on deposit in the Tranportation Fund FNMA note with a maturity value of $50,000.00, Exhibit `C' that since the filing of this suit, the DISTRICT has levied a tax for the Transportation Fund in excess of its actual financial needs, since sufficient funds were on hand in the fund in the form of notes, bills and other securities to defray the necessary expenses accruing to the Transportation Fund; that this matter was called to the attention of the DISTRICT and that thereafter, the DISTRICT did reduce the tax levy for the Transportation Fund by $90,000.00, resulting in a savings to the taxpayers of the DISTRICT."

The plaintiffs state the purpose of the litigation is to assure that tax-anticipation warrants are issued only when needed in the amount needed. They pray that the court declare that funds not required to be expended within a period of 90 days from and after the date of the investment be used to purchase securities which shall mature or be redeemable prior to the time when the public funds so invested will be required for expenditure by the district.

• 1 On defendant's motion to dismiss the trial court agreed with defendant's contentions and held that plaintiffs did not have standing to sue for declaratory relief. In our view the trial court erred and plaintiffs do have standing to litigate in the public interest. A citizen and taxpayer, as beneficiary, has the right and therefore "standing" to force public bodies to comply with their public trust, without alleging and proving special damage to his property or interest different in degree and kind from that suffered by the public at large. Paepcke v. Public Building Commission (1970), 46 Ill.2d 330, 341. See also People ex rel. Naughton v. Department of Public Aid (1973), 12 Ill. App.3d 43, 49-50.

It does not necessarily follow, however, that the trial court erred in dismissing the declaratory judgment. To state a cause of action the plaintiffs were required to allege facts which would entitle them to the relief sought. While it was not necessary to state facts to show that they suffered a special damage different in degree or kind from that suffered by taxpayers generally, it was necessary to state facts which demonstrated an injury to the legal interests which comprise the public trust.

The complaint in Count I falls far short of alleging such injury and it was properly dismissed for failure to state a cause of action in declaratory judgment. The gist of plaintiffs' complaint is found in the conclusionary charge that tax-anticipation warrants are issued and funds manipulated in a manner which results in additional tax burden on the plaintiffs. The facts pleaded, however, do not support this conclusion. Paragraph 15 of Count I which we have quoted in full above contains the only factual allegations which we have found in the count regarding the levy of taxes. And the allegations merely show that the tax levy in the transportation fund, there referred to, was in fact reduced, thus resulting in a tax saving.

• 2 In other allegations in Count I (paragraph 11), plaintiffs state a conclusion that the issuance of tax-anticipation warrants for a longer period than is actually required results in the unnecessary expenditure of public funds due to the interest being paid on said warrants for a longer period of time than is actually required. But there are other allegations in Count I that the district, in fact, profited by the issuance of tax-anticipation warrants to the extent that it invested in securities which yielded a higher interest than the district paid on the warrants issued. Additionally, in oral argument counsel for the plaintiffs conceded that no injury could be shown by the issuance of the tax-anticipation warrants. This is, of course, true since tax-anticipation ...

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