Appeal from the Appellate Court for the Fourth District; heard
in that court on appeal from the Circuit Court of Sangamon
County, the Hon. Byron E. Koch, Judge, presiding.
MR. JUSTICE CLARK DELIVERED THE OPINION OF THE COURT:
Rehearing denied January 25, 1979.
This case involves several aspects of the relationship between Illinois municipalities, which may impose certain taxes, and the State of Illinois, whose agents collect those taxes and distribute to the municipalities the revenue therefrom. Because of the complex nature both of that relationship itself, and of the role of the courts vis-a-vis that relationship, we deem it necessary to set forth the facts of the dispute in some detail.
Plaintiff city of Springfield is an Illinois municipality which has, pursuant to sections 8-11-1 and 8-11-5 of the Illinois Municipal Code (Ill. Rev. Stat. 1973, ch. 24, pars. 8-11-1, 8-11-5), enacted a municipal retailers' occupation tax and a municipal service occupation tax (Municipal Code of Springfield, secs. 41.33 through 41.39). Plaintiff Illinois Municipal League is an unincorporated association of Illinois municipalities. (See Ill. Rev. Stat. 1973, ch. 24, par. 1-8-1.) It apparently is conceded that some or all of the league's member municipalities also have enacted such taxes. (For convenience, the city and the league's member municipalities hereinafter will be referred to collectively as "plaintiffs" or "plaintiff municipalities.")
Defendant Robert Allphin was the Director of Revenue at the institution of this cause and, as such, was the officer in charge of the Illinois Department of Revenue. (See Ill. Rev. Stat. 1973, ch. 127, par. 4.) The Department is empowered to collect the municipal retailers' occupation tax and the municipal service occupation tax on behalf of plaintiffs. (Ill. Rev. Stat. 1973, ch. 24, pars. 8-11-1, 8-11-5.) In doing so, the Director was empowered to enforce plaintiffs' ordinances. (Ill. Rev. Stat. 1973, ch. 127, par. 39b1.) After collecting the tax, the Department was required to "forthwith pay over to the State Treasurer, ex officio, as trustee, all taxes and penalties collected." (Ill. Rev. Stat. 1973, ch. 24, pars. 8-11-1, 8-11-5.) On or before the 25th day of each calendar month, the Department was required to certify to the State Comptroller the amount of money payable to plaintiffs, as determined according to a statutory formula. The formula calls for the State's retention of a specified percentage of the amount otherwise payable to plaintiffs, to compensate the State for the cost of collecting and administering the tax. Within 10 days of the receipt of the Director's disbursement certification, the State Comptroller must draw orders for the disbursement of plaintiffs' share and for the deposit of the State's share into the General Revenue Fund. Ill. Rev. Stat. 1973, ch. 24, pars. 8-11-1, 8-11-5.
Public Act 78-1255 reduced the State's share from 4% to 2%. The central issue in this case is whether the Act became effective on December 5, 1974, or on July 1, 1975. The Director claims that the Act did not become effective until the latter date. Accordingly (with an exception not relevant here), during the period December 5, 1974, through June 30, 1975, he followed the old formula and certified that the larger amount be withheld by the State, and a correspondingly smaller amount be disbursed to plaintiffs.
Plaintiffs, however, claim that the Act became effective on the earlier date, and that in the interim (between December 5 and June 30) the Director wrongfully certified that the higher amount be withheld, resulting in the State's wrongfully withholding about $3 million from the plaintiff municipalities. In count I of their first amended complaint, plaintiffs sought a declaratory judgment (see Ill. Rev. Stat. 1973, ch. 110, par. 57.1) that the Act became effective on the earlier date. In counts II through IV plaintiffs seek reimbursement from funds currently being collected by the State. (The pleadings, however, do not precisely describe the funds to be placed into the protest fund. E.g., count II, paragraph 11, refers to "tax revenues presently being collected," and count III, paragraph 10, refers to "sales tax receipts presently being collected.")
Defendants moved to dismiss the amended complaint, arguing (1) that the Act did not become effective until the later date, and, alternatively, (2) even if the Act became effective on the earlier date, the circuit court was without power to grant the relief requested. The circuit court granted judgment for defendants as to count I and dismissed counts II through IV.
On appeal, the Appellate Court, Fourth District, reversed as to count I (agreeing with plaintiffs' position on the effective date of the Act). As to counts II through IV, the appellate court in effect vacated the circuit court's judgment, and remanded the cause to permit plaintiffs to amend their pleadings to pray for an alternative remedy suggested by the appellate court. (50 Ill. App.3d 44, 50-51.) We granted defendant Allphin's petition for leave to appeal. We affirm the judgment of the appellate court as to count I, modify the judgment as to the remaining counts, and remand the cause to the circuit court. (For convenience, we will continue to refer to "defendants" even though the defendant Treasurer and the defendant Comptroller no longer are parties and have taken no position on the merits, promising instead that they will perform whatever ministerial acts are necessary to enforce the decree.)
We postpone discussion of the effective date of the Act until we have addressed defendants' other arguments. Defendants first contend that the circuit court was without power to grant the requested relief because this action was, in effect, a suit against the State, and as such only could have been brought in the Court of Claims. (See Ill. Rev. Stat. 1973, ch. 127, par. 801.) We disagree. The drafters of our 1970 constitution considered the question of sovereign immunity to suits against the State in some detail. (See generally 2 Record of Proceedings, Sixth Illinois Constitutional Convention 871 (hereinafter cited as Proceedings); 3 Proceedings 1829-45.) In the end, the drafters adopted language permitting the General Assembly to re-enact sovereign immunity. "Though our constitution of 1970 abolished sovereign immunity (Ill. Const. 1970, art. XIII, sec. 4) it was restored by the General Assembly, as the Constitution permitted." (Department of Revenue v. Appellate Court (1977), 67 Ill.2d 392, 394.) Thus, the net effect of the legislature's response to the "sovereign immunity" provisions of the 1970 Constitution must be viewed as an adoption of the law as it existed under the 1870 Constitution. Yet even under the 1870 Constitution, the instant action would not be considered a suit against the State.
"Whether or not a particular action falls within the prohibition of the constitution has not been determined solely by an identification of the formal parties to the record. The determination has rather depended upon the particular issues involved and the relief sought." (Moline Tool Co. v. Department of Revenue (1951), 410 Ill. 35, 37.) Where the issue is whether a State officer has refused to disburse appropriated funds according to law, and the relief sought is an injunction directing that those funds be released in accordance with the appropriation, the action is not one against the State. (County of Cook v. Ogilvie (1972), 50 Ill.2d 379, 383.) This is because "[t]he presumption obtains that the State, or a department thereof, will not, and does not, violate the constitution and laws of the State, but that such violation, if it occurs, is by a State officer or the head of a department of the State, and such officer or head may be restrained by a proper action instituted by a citizen." (Schwing v. Miles (1937), 367 Ill. 436, 441-42.) On the other hand, where the action is, in effect, one to quiet title in realty, adverse to the interest of the State (where there is no issue as to the lawfulness of a State officer's actions in obtaining title), the action is against the State. Schwing v. Miles (1937), 367 Ill. 436. See also Georgeoff v. State (1965), 32 Ill.2d 534, 538.
More difficult are some of the cases involving suits by taxpayers seeking refunds of disputed taxes. In Montgomery Ward & Co. v. Stratton (1930), 342 Ill. 472, 477, the taxpayer availed itself of a statutory remedy of paying a disputed tax under protest (which temporarily prohibited the deposit of the disputed amount into the State treasury), but then failed to pursue the case in the manner provided by the statute. Instead the taxpayer sought to reduce its future taxes by the disputed amount. This court held that the taxpayer was barred from "obtain[ing] indirectly what it could not obtain directly" (a refund from the State treasury). 342 Ill. 472, 477.) However, there is some ambiguity in the opinion, as to whether its holding was based upon constitutional grounds, or merely an equitable one, i.e., waiver. Our research has revealed no subsequent decision of this court relying upon Montgomery Ward in support of the broad proposition for which it is advanced by defendants that the Constitution bars one from obtaining indirectly what one could not obtain directly.
Adams v. Nudelman (1940), 375 Ill. 217, is of limited applicability here, because its applicability has been narrowed substantially in subsequent decisions of this court. In Adams, taxpayers filed suit for a refund of taxes which had not been paid under protest and, consequently, already had been paid to the State treasury. Plaintiffs sought relief either out of the State treasury, or out of funds currently being collected by the State and not yet deposited in the treasury. This court held (1) that the suit was against the State, and, alternatively, (2) that no relief could be had without a legislative appropriation. 375 Ill. 217, 219.) However, almost immediately, in People ex rel. Swartchild & Co. v. Carter (1941), 376 Ill. 590, 594, and People ex rel. Adams v. McKibben (1941), 377 Ill. 22, 24, the court narrowed Adams second alternative holding, limiting it to the prevention of payments directly from the State treasury, and refusing to apply it to court or administrative orders which had the effect of withholding funds from the State treasury. A decade later, in Moline Tool Co. v. Department of ...