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Di Santo v. City of Warrenville

OPINION FILED MAY 4, 1978.

ENRICO G. DI SANTO ET AL., PLAINTIFFS-APPELLANTS,

v.

THE CITY OF WARRENVILLE ET AL., DEFENDANTS-APPELLEES.



APPEAL from the Circuit Court of Du Page County; the Hon. GEORGE W. UNVERZAGT, Judge, presiding.

MR. PRESIDING JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:

Rehearing denied June 9, 1978.

Plaintiffs, on behalf of themselves and all users of water from the defendant city, sued to rescind a contract by which the city had acquired a waterworks and sewerage system from a private owner. They also sought refunds on behalf of the class. The trial court dismissed the complaint on grounds of laches and lack of standing; and further found that the class action was improper. Plaintiffs appeal.

The City of Warrenville and the surrounding area had been dependent upon Westview Utilities Company, a subsidiary of Utilities, Inc. (hereinafter Westview), for its water supply and sewerage services. On some unspecified date before September 10, 1974, the city engaged Keith R. Cardy, a management consultant, to appraise Westview and to study the feasibility of a purchase of the utility. John Nuveen and Company, a Delaware corporation, was hired to determine how much the city should pay in bonds to Westview. Cardy placed a value of $2,873,000 on Westview and recommended a purchase price of $2,900,000. Cardy also stated that it was feasible for the city to issue $2,700,000 worth of bonds at 6% interest.

On August 6, 1974, the city entered into an agreement with Westview in which it agreed to pay $3,600,000 for the utility and Westview agreed to save the city harmless from any misrepresentation or material omissions made by it. In a separate agreement Westview agreed to buy $3,650,000 of municipal bonds from the city, the transaction to take place simultaneously with the purchase by the city of the plant and equipment. The agreement was consummated on or about September 10, 1974. The Nuveen Company allegedly reported that the retail value of the bonds, on September 10, 1974, was $2,931,588.

On April 12, 1975, the city adopted an ordinance authorizing the issuance of new waterworks and sewerage revenue bonds, $3,650,000 of which were exchanged for the 1974 bonds. Both bond issues were of two classes, $2,000,000 Series A and $1,650,000 Series B. Westview retained the $1,650,000 Series B Bonds but transferred the $2,000,000 Series A Bonds to the underwriter, Nuveen Company. Nuveen, on March 26, 1975, transferred the Series A Bonds together with $23,000,000 of additional municipal bonds to the United States Trust Company of New York and then sold shares in the beneficial interest of the trust to the public.

In June of 1976 the city councils of Warrenville and Naperville approved an agreement whereby Naperville would purchase two-thirds of the Warrenville waterworks and sewerage system for $3,000,000. On June 25, 1976, the Illinois Environmental Protection Agency awarded Warrenville $2,837,600 for construction of a sewerage collection system, conditioned on the foregoing sale to Naperville. On July 6, 1976, the plaintiffs filed their suit in the Circuit Court of Du Page County seeking rescission of the sale of September 10, 1974, on various grounds. In count I they sought rescission on the ground of fraud; in counts II and IV they sought rescission on the grounds of inadequacy of consideration and unconscionability; in count III they sought rescission on the ground that the transaction violated plaintiffs' due process and equal protection rights; and in count V plaintiffs sought a court order compelling the City of Warrenville to institute condemnation proceedings. In counts I-IV the plaintiffs requested refunds of excess water charges in addition to the equitable rescission of the contract. Also, in each of the five counts the plaintiffs purported to represent all persons similarly situated.

On July 23, 1976, the defendants filed a motion to dismiss pursuant to section 48 of the Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 48) on the grounds of laches and lack of standing to bring the action; they also sought dismissal of the class action aspects of the suit and also dismissal of the complaint on the ground of failure to state a cause of action pursuant to section 45 of the Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 45).

On August 13, 1976, following a hearing, the trial court dismissed the complaint with prejudice on the grounds of laches and lack of standing. The court also found that apart from the affirmative defenses the class aspects of the suit could not be maintained.

I.

• 1 We first address the issue of plaintiffs' standing to bring the suit as a preliminary question and conclude that contrary to the finding of the trial court the plaintiffs do have a sufficient interest in the controversy to bring suit. "The fundamental aspect of standing is that it focuses on the party seeking to get his complaint before a * * * court and not on the issues he wishes to have adjudicated. The `gist of the question of standing' is whether the party seeking relief has `alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult * * * questions.' Baker v. Carr, 369 U.S. 186, 204, 7 L.Ed.2d 663, 82 S.Ct. 691, 703 (1962)." (Flast v. Cohen, 392 U.S. 83, 99, 20 L.Ed.2d 947, 962, 88 S.Ct. 1942, 1952 (1968). See also Village of Arlington Heights v. Metropolitan Housing Development Corp., 429 U.S. 252, 262, 50 L.Ed.2d 450, 461-63, 97 S.Ct. 555, 561-62 (1977); Murphy v. Collins, 20 Ill. App.3d 181, 186 (1974).) We have recently stated that the "purpose of the doctrine of standing is merely to preclude persons having no interest in the controversy from bringing suit" and that "it is not meant to preclude a valid controversy from being litigated." Commonwealth Edison Co. v. Community Unit School District No. 200, 44 Ill. App.3d 665, 670 (1976). Compare People ex rel. Gordon v. City of Naperville, 30 Ill. App.3d 521, 524-25 (1975).

• 2 The defendants, at least by implication, suggest that the named plaintiffs cannot maintain this action because they suffer in common with all other water users. However, the fact that the plaintiffs' "interests are shared by the many rather than the few does not make them less deserving of legal protection through the judicial process." (Sierra Club v. Morton, 405 U.S. 727, 734, 31 L.Ed.2d 636, 643, 92 S.Ct. 1361, 1366 (1972). See also United States v. Students Challenging Regulatory Agency Procedures, 412 U.S. 669, 686, 37 L.Ed.2d 254, 269, 93 S.Ct. 2405, 2415 (1973). In the instant case, the plaintiffs are not merely asserting "the common interest of all citizens in procuring obedience to the law" (Wm. Penn Parking Garage, Inc. v. City of Pittsburgh, 464 Pa. 168, 192, 346 A.2d 269, 281 (1975); see also Schlesinger v. Reservists Committee to Stop the War, 418 U.S. 208, 217, 41 L.Ed.2d 706, 716, 94 S.Ct. 2925, 2930 (1974)); rather, the plaintiffs complain of a sharp rise in water rates and liability as water users resulting from the city's $3,650,000 indebtedness, as a direct consequence of the defendants' illegal conduct; this allegation is sufficient to confer standing on the plaintiffs as to counts I-IV. And obviously they have standing to challenge, in count V, the city's alleged taking of their property without just compensation.

This case is thus quite different from Bowes v. City of Chicago, 3 Ill.2d 175 (1954), upon which the defendants rely. In Bowes, the plaintiffs sought to enjoin the City of Chicago, the Chicago Park District and a private corporation from constructing a water filtration plant in the Chicago Harbor; the plaintiffs "sought to have a determination of the many questions concerning the legality of the construction of the proposed filtration plant." (3 Ill.2d 175, 185.) The supreme court held that those plaintiffs who had brought action solely as water users had no standing to sue. The water users in Bowes, however, had not been required to pay higher water fees as a consequence of the defendants' allegedly illegal conduct; rather, they were merely asserting the general, public interest in "procuring obedience to the law." In the instant case, the plaintiffs allege a direct, substantial economic injury and are not acting merely, in a sense, as a private attorney general.

In Price v. City of Mattoon, 364 Ill. 512 (1936), also cited by the defendants, water users and taxpayers in Mattoon, Illinois, sought a court order enjoining the City of Mattoon and others from "the financing and construction of a waterworks purchase-and-improvement program instituted by the municipality." 364 Ill. 512, 513.) The supreme court held that the taxpayers had no standing to sue since the complained-of bond issue was chargeable solely to water revenues; the water users, for their part, had failed to allege any immediate harm; their complaint was devoid of "any allegations of water rates determined by the city." 364 Ill. 512, 515.) Thus, the water users' complained of injury was both future and speculative; however, the court pointed out that the water users "can avail themselves of adequate remedies at law if and when their conjectured injuries materialize." 364 Ill. 512, 515.) In the instant case, ...


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