APPELLATE COURT OF ILLINOIS, FIFTH DISTRICT
520 N.E.2d 1032, 166 Ill. App. 3d 814, 117 Ill. Dec. 681 1988.IL.260
Appeal from the Circuit Court of White County; the Hon. Leo T. Desmond, Judge, presiding.
JUSTICE WELCH delivered the opinion of the court. HARRISON, P.J., and CALVO, J., concur.
DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE WELCH
Plaintiffs, Frederick Schroeder, Raymond Schroeder, and Norma Fick, appeal from an order entered January 29, 1987, by the circuit court of White County, dismissing with prejudice their complaint against defendants City of Grayville, an Illinois municipal corporation, and Jerry Taylor, individually and as water and sewer commissioner for Grayville. The complaint alleged tortious interference with contract and discrimination by defendants in their refusal to supply water to plaintiffs' property, which was situated beyond Grayville city boundaries.
Plaintiffs' interest in having Grayville supply water to their property arose when a third party, Fred Coe, expressed interest in leasing a portion of plaintiffs' property. The leasing negotiations between plaintiffs and Coe allegedly generated an oral agreement for a 20-year lease at $2,500 per year, contingent on the property being connected to Grayville's water line. This contingency was never satisfied, and, therefore, the alleged leasing agreement between plaintiffs and Coe was not executed.
Plaintiffs filed their complaint on February 13, 1986, alleging, inter alia, that upon learning of Coe's proposed lease with the plaintiffs, Jerry Taylor, in his capacity as water and sewer commissioner of Grayville, stated that under no circumstances would the plaintiffs, or anyone leasing from plaintiffs, be allowed to tap into Grayville's water line. According to plaintiffs, Grayville's decision to deny them water was in retaliation to plaintiffs' previous refusal to grant the city of Grayville an easement for a water line across their property. Plaintiffs claim that defendants' refusal to supply water to plaintiffs' property discriminated against plaintiffs because it denied them water service which had been supplied to others similarly situated, and at the same time, defendants' refusal interfered with the contract negotiated between plaintiffs and Coe. Because Coe sought and obtained property elsewhere, plaintiffs' complaint prayed for recovery of profits diverted by defendants' alleged tortious interference with their potential contract, as well as punitive damages.
Defendants did not file an answer addressing the allegations of plaintiffs' complaint. Instead, on March 4, 1986, defendants filed a motion to dismiss the complaint for failure to state a cause of action, asserting that, under Illinois law, municipalities are under no duty to provide water to nonresidents in the absence of a contractual undertaking. Defendants asserted that, because there was no contract between the parties to this action, defendants were not obligated to provide water to plaintiffs' property and the complaint should be dismissed as a matter of law. Before ruling on defendants' motion to dismiss, the trial court granted plaintiffs leave to amend their complaint. Likewise, the court instructed that defendants would be allowed additional time after the filing of plaintiffs' first amended complaint in order to amend their motion to dismiss, or otherwise address any new matters raised by the first amended complaint.
Upon plaintiffs' filing of their first amended complaint, defendants filed a memorandum and supplemental memorandum in support of their motion to dismiss the first amended complaint. On January 16, 1987, plaintiffs filed a motion for judgment on the pleadings. In turn, on January 21, 1987, defendants filed a response to plaintiffs' motion for judgment. All matters having been considered, the court entered an order on January 29, 1987, dismissing plaintiffs' complaint with prejudice and denying plaintiffs' motion for judgment on the pleadings.
On appeal, plaintiffs contend that their complaint should not have been dismissed and that judgment should have been entered in their favor on the pleadings. In support of their complaint, plaintiffs cite cases holding that a city or municipality acts as a business when it operates a utility, and in this proprietary capacity must refrain from discriminating unreasonably among persons similarly situated. See, e.g., Village of Niles v. City of Chicago (1980), 82 Ill. App. 3d 60, 401 N.E.2d 1235; Austin View Civic Association v. City of Palos Heights (1980), 85 Ill. App. 3d 89, 405 N.E.2d 1256.
Defendants counter, arguing that under Illinois law, a municipality has no duty to provide water to nonresidents in the absence of a contractual relationship obligating it so to do. (Ill. Rev. Stat. 1985, ch. 24, par. 11-149-1; Rehm v. City of Batavia (1955), 5 Ill. App. 2d 442, 449, 125 N.E.2d 831, 834. See Gage v. Village of Wilmette (1924), 315 Ill. 328, 146 N.E. 325.) However, it is our opinion that, although not obligated to serve nonresidents in the absence of a contractual relationship, a municipality is prohibited from discriminating unreasonably in rates or manner of service when it elects to serve nonresidents.
Although we are unable to find any Illinois cases directly on point, we find support for our position in Illinois statutes and cases (Ill. Rev. Stat. 1985, ch. 111 2/3, par. 38; Baltis v. Village of Westchester (1954), 3 Ill. 2d 388, 121 N.E.2d 495; Austin View Civic Association v. City of Palos Heights (1980), 85 Ill. App. 3d 89, 405 N.E.2d 1256.), along with cases from other jurisdictions, which, although not binding, are factually similar and authoritative. City of Dover v. Delmarva Enterprises, Inc. (Del. 1973), 301 A.2d 276; Birmingham v. Rice Brothers (1947), 238 Iowa 410, 26 N.W.2d 39, cert. denied (1947), 332 U.S. 768, 92 L. Ed. 353, 68 S. Ct. 79.
In Baltis, the court stated the well-established principle that a municipal corporation owning and operating a water system and selling water to individuals, although engaged in a public service, does so in its business or proprietary capacity, not in any governmental capacity, and no distinction is to be drawn between such business whether engaged in by a municipality or by a private corporation. (Baltis, 3 Ill. 2d at 398, 121 N.E.2d at 500.) Further, in Austin View, the court, citing sections 32 and 38 of the Public Utilities Act (Ill. Rev. Stat. 1977, ch. 111 2/3, pars. 32, 38), stated that private utilities are prevented from charging exorbitant rates or from engaging in unreasonable discrimination in rates or manner of service. (Austin View Civic Association, 85 Ill. App. 3d at 95.) Although factually different, ...