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03/22/88 Phyllis C. Kinzer, A v. the City of Chicago Et Al.

March 22, 1988

BENEFIT OF THE CITY OF CHICAGO, PLAINTIFF-APPELLANT

v.

THE CITY OF CHICAGO ET AL., DEFENDANTS-APPELLEES



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

PHYLLIS C. KINZER, a taxpayer on behalf of and for the

523 N.E.2d 919, 169 Ill. App. 3d 447, 120 Ill. Dec. 8 1988.IL.390

Appeal from the Circuit Court of Cook County; the Hon. David J. Shields, Judge, presiding.

APPELLATE Judges:

JUSTICE SCARIANO delivered the opinion of the court. HARTMAN, P.J., and STAMOS, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SCARIANO

This taxpayer's action seeks a declaratory judgment against defendants City of Chicago and Festivals, Inc., and alleges that certain city officials acted unlawfully by entering into certain contracts and expending public funds without an appropriation being made therefor by the city council. The plaintiff, Phyllis C. Kinzer, also prays for damages against several of the officials and their sureties for losses the city allegedly sustained thereby. The circuit court entered an order granting summary judgment in favor of defendant Daniel Grim, former city comptroller, and in that same order the court also denied Kinzer's motion for a summary judgment against the City of Chicago and her motion for partial judgment against Grim on the issue of liability. Kinzer filed a timely appeal of that order.

In 1978, the City of Chicago began sponsoring festivals known as "ChicagoFests." The 1978 ChicagoFest was financed by receipts from the hotel operators tax levied by the city and deposited in the hotel operators tax fund. These monies were used for the promotion of tourism, as is required by State law. (Ill. Rev. Stat. 1985, ch. 24, par. 8-3-14.) All expenditures from the fund, designated Fund 355, which the parties agree is a special fund, were made at the discretion of the mayor, as is permitted by the same law, and the city comptroller submitted accountings for such expenditures to the city council.

The comptroller at that time, Clark Burrus, established Fund 666 as separate from Fund 355 in order to account for ChicagoFest receipts and expenditures. Fund 666 initially was financed by "seed money" transferred from Fund 355. When expenses for the 1978 ChicagoFest exceeded income, the resulting deficit was charged against Fund 355. Burrus reported all of these developments to the city council.

In April 1979, certain monies in Fund 355 were transferred into Fund 666 and used to finance the 1979 ChicagoFest, which turned out to be a profitable event. Nevertheless, the profits therefrom were not transferred into Fund 355; instead, all of the receipts from the festival remained in Fund 666. In that year, defendant Comptroller Raymond Coyne, who succeeded Burrus, designated Fund 666 as a "Special Revenue Fund."

In June of 1980 Grim became comptroller, and during his tenure expenditures for all festivals and other events sponsored by the "Mayor's Office of Special Events" (hereinafter MOSE), including the 1980 ChicagoFest, were charged to Fund 666. Meanwhile, all of the receipts from the hotel operators tax were still going into Fund 355, which was being used to pay for the expenses of the city's other tourist promotion activities. In 1981, Grim executed a contract engaging Festivals, Inc., to manage another ChicagoFest as well as "Loop Alive," "Circus Parade," "Taste of Chicago," and "Autumn Fair," all of which incurred losses that were accounted for in Fund 666, the operating fund for these events. At the end of 1981, Grim's successor, defendant Anthony Fratto, charged the deficit of Fund 666 to the City of Chicago's corporate fund. Fund 666 continued to be used to finance festivals and various MOSE-sponsored events until February 1983, and during this period the deficits increased markedly.

In August of 1982, Kinzer brought this action seeking declaratory and injunctive relief, and a return to the city of funds expended for the festivals by Festivals, Inc., against the City of Chicago, former Mayor Jane M. Byrne, the city's purchasing agent (James Arnold), Festivals, Inc., and its president, Thomas Drilias. In her initial complaint, plaintiff alleged that the city's contracts with Festivals, Inc., and the resultant expenditures were illegal because no funds had been appropriated therefor. In February of 1983, an agreed permanent injunctive order was entered in which the city stipulated that it would refrain from entering into contracts for festivals and from expending further funds for festivals in the absence of prior appropriations being made for them by the Chicago city council.

In August of 1983, Kinzer filed her second amended complaint wherein she named as additional parties Jane Byrne's chief of staff (Thomas Geary), the comptrollers of the city during the Byrne administration (Coyne, Grim, and Fratto), the surety companies that bonded these defendants (Fidelity and Deposit Company of Maryland, and United States Fidelity and Guarantee Company), and several subcontractors for the festivals. Following argument on motions to dismiss and for summary judgment (Ill. Rev. Stat. 1985, ch. 110, pars. 2-615, 2-619, 2-1005) filed by the defendants, the trial Judge dismissed the subcontractors, reasoning that they were not liable to repay money they had received for services they had already performed, and granted plaintiff leave to file a third amended complaint. Plaintiff did file a third amended complaint, but did not appeal from the order dismissing the subcontractors.

After Kinzer filed her third amended complaint, defendants filed additional motions to dismiss and for summary judgment which were based on the contention that plaintiff's action was barred by a judgment in another case involving different parties, but substantially the same issues, under the theory of collateral estoppel. Following the circuit court's denial of these motions, the public officials filed answers and counterclaims and several were granted leave to add third-party defendants. On Grim's motion former Mayor Michael A. Bilandic, Burrus, former ...


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