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Smith v. Jones





Appeal from the Appellate Court for the Third District; heard in that court on appeal from the Circuit JUSTICE WARD DELIVERED THE OPINION OF THE COURT:

Rehearing denied September 26, 1986.

The plaintiffs, John Smith and Dale Livingood, filed a complaint in the circuit court of Peoria County against Michael Jones, the Director of the Illinois State Lottery, and the "Illinois State Lottery" alleging breach of contract. The complaint, which the plaintiff amended to ask also for declaratory and injunctive relief, was dismissed on the ground of failure to exhaust administrative remedies. The appellate court reversed (130 Ill. App.3d 390), and we granted the defendants' petition for leave to appeal (94 Ill.2d R. 315).

On June 18, 1983, Smith and Livingood each purchased a ticket to participate in "Lotto," the weekly Illinois State Lottery drawing. The drawing held that evening disclosed that the plaintiffs were among those who had picked the winning numbers. The plaintiffs subsequently learned that there had been 78 holders of the winning numbers and that the grand prize amounted to $744,471. Their complaint alleged that the Lottery had advertised the grand prize pool to be $1,750,000 for the week concerned. It stated that the claimed announcement of a prize of $1,750,000 was an offer by the Lottery, which the plaintiffs accepted by purchasing the tickets "for good consideration." The plaintiffs claimed that the Lottery "acted * * * in violation of contract law" by refusing to pay the advertised prize, and in doing so went "beyond the authority" in the Illinois Lottery Law (Ill. Rev. Stat. 1981, ch. 120, par. 1151 et seq.). They asked that the Lottery produce proof to verify the other 76 winning tickets and that a temporary restraining order issue to prevent the defendants from making any distribution of prizes for subsequent Lotto drawings. The plaintiffs further asked the court to declare that Michael Jones had acted beyond his authority as Director and that the defendants were liable for "at least" one seventy-eighth of $1,750,000.

As has been stated, the circuit court held that the plaintiffs had failed to exhaust their administrative remedy, namely, a hearing under section 7.3 of the Illinois Lottery Law for "complaints charging violations" of the Illinois Lottery Law (Ill. Rev. Stat. 1981, ch. 120, par. 1157.3). The defendants also had contented in their motion to dismiss that the action was in effect a suit against the State of Illinois and was barred because of sovereign immunity. The appellate court reversed on the ground that the complaint was "generally grounded in fraud," which, the court said, excepted it from the operation of the doctrine of exhaustion of administrative remedies.

The defendants argue here that the complaint was properly dismissed not only because of failure to exhaust the administrative remedy, but because of sovereign immunity.

We will first address the question of sovereign immunity to determine whether the circuit court had subject matter jurisdiction. The plaintiffs argue that this issue was waived because it was not raised in the appellate court, but it is axiomatic that subject matter jurisdiction cannot be waived. (People ex rel. Compagnie Nationale Air France v. Giliberto (1978), 74 Ill.2d 90, 105.) "`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.'" (City of Springfield v. Allphin (1978), 74 Ill.2d 117, 123, quoting Department of Revenue v. Appellate Court (1977), 67 Ill.2d 392, 394; see also Sass v. Kramer (1978), 72 Ill.2d 485, 489-90.) That enactment of the General Assembly provides that "[e]xcept as provided in [an act] to create the Court of Claims * * * the State of Illinois shall not be made a defendant or party in any court." (Ill. Rev. Stat. 1981, ch. 127, par. 801.) The Court of Claims Act provides:

The court shall have exclusive jurisdiction to hear and determine the following matters:

(a) All claims against the state founded upon any law of the State of Illinois, or upon any regulation thereunder by an executive or administrative officer or agency * * *.

(b) All claims against the state founded upon any contract entered into with the State of Illinois." (Ill. Rev. Stat. 1981, ch. 37, pars. 439.8(a),(b).)

The immunity of the State is not determined by the formal designation of the parties, but rather by the issues involved and the relief sought. (Herget National Bank v. Kenney (1985), 105 Ill.2d 405, 408; Sass v. Kramer (1978), 72 Ill.2d 485, 490-91.) Thus, the State's immunity cannot be evaded by naming an official or agent of the State as the nominal party defendant. The "official acts of State officers are in effect acts of the State itself." (Sass v. Kramer (1978), 72 Ill.2d 485, 492.) There are, however, exceptions to this. An action against a State official for conduct in his official capacity will withstand a motion to dismiss the complaint on sovereign immunity grounds if the complaint alleges that the official is enforcing an unconstitutional law or violating a law of Illinois and thus acting beyond his authority. (Herget National Bank v. Kenney (1985), 105 Ill.2d 405, 411; Senn Park Nursing Center v. Miller (1984), 104 Ill.2d 169, 187-89; Sass v. Kramer (1978), 72 Ill.2d 485, 492.) In these cases it is said that the action "strips a State officer of his official status * * * [and] his conduct is not then regarded as the conduct of the State, nor is the action against him considered an action against the State." Moline Tool Co. v. Department of Revenue (1951), 410 Ill. 35, 37.

The plaintiffs named as defendants Michael Jones, in his official capacity as Director, and the "Illinois State Lottery," which is a division of the Department of Revenue. Of course, because of sovereign immunity the State or a department of the State can never be a proper party defendant in an action brought directly in the circuit court. (Moline Tool Co. v. Department of Revenue (1951), 410 Ill. 35, 37.) We must examine the plaintiffs' complaint to determine whether their suit against the Director falls within one of the above-mentioned exceptions to the bar of sovereign immunity. The one-count complaint alleges the elements of a breach-of-contract cause of action: offer, acceptance, consideration and failure to perform. The plaintiffs do not allege that the Director was applying an unconstitutional statute, nor do they allege that the Director violated a law of Illinois. They state only that the defendant "acted outside his authority as Director * * * in violation of contract law." Further, in their response to the defendants' motion to dismiss, the plaintiffs concede that the actions of the Lottery "may have been done pursuant to the letter of the [Lottery] Act and the rules and regulations thereunder, but are in violation of principles of contract law * * *. [T]he complaint * * * seeks a declaration of rights and duties pursuant to a contract." (Emphasis in original.) The plaintiffs complaint, thus, alleges only that the Director exceeded his authority by breaching a contract. Such an allegation does not deprive the defendants of the protection of the bar of sovereign immunity. As shown above, breach-of-contract actions against the State are specifically directed to the Court of Claims (see Ill. Rev. Stat. 1985, ch. 37, par. 439.8(b)), though, alternatively, a complainant can pursue the administrative remedy provided under section 7.3 of the Illinois Lottery Law (Ill. Rev. Stat. 1981, ch. 120, par. 1157.3).

The circumstances here are unlike those in Senn Park Nursing Center v. Miller (1984), 104 Ill.2d 169. In Senn Park, the plaintiff sued the Director of the Illinois Department of Public Aid to compel the disbursement of Medicaid funds in accordance with the federally approved Illinois State Medicaid plan. The Director had reduced benefits through the adoption of a rule which failed to comply with statutory notice requirements. The court in Senn Park adopted the reasoning of the appellate court that "`an action to compel a public official to perform a clear and mandatory duty is not a suit against the State.'" (104 Ill.2d 169, 189.) The "clear and mandatory duty," of course, was the duty to disburse Medicaid benefits in the manner specified by the State plan. Here the plaintiffs do not point to any clear statutory duty or statutory right to benefits. What is involved is simply a drawing in which the amount of prize money due the plaintiffs is in dispute.

The plaintiffs further argue that the Director exceeded his authority because he committed a fraud, a deceptive practice, and a criminal act as well. The plaintiffs' complaint, however, does not contain allegations of fraud and deceptive practices. "A complaint in fraud must allege that a false statement of material fact was made, that the party making the statement knew or believed it to be untrue, that the party to whom the statement was made had a right to rely on it and did so, that the statement was made for the purpose of inducing the other party to act, and that reliance by the person to whom the statement was made led to his injury." (Redarowicz v. Ohlendorf (1982), 92 Ill.2d 171, 185-86.) The plaintiffs mention "misrepresenting" once, and in passing, in their complaint, but it is clear that the one-count complaint alleged only the elements of a breach of contract action. Too, the plaintiffs have no ground to attempt to rely now on a claim of a violation of "[an act] to protect consumers * * * against fraud, * * * and unfair or deceptive acts or practices" (Ill. Rev. Stat. 1981, ch. 121 1/2, par. 261 et seq.), because that statute was not mentioned or referred to in the complaint. And there was no violation of the Criminal Code of 1961 alleged in the complaint. The plaintiffs' suit ...

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