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November 20, 1995


Appeal from the Circuit Court of Lake County. No. 93-L-1099. Honorable William D. Block, Judge, Presiding.

The Honorable Justice Thomas delivered the opinion of the court: McLAREN, P.j., and Geiger, J., concur.

The opinion of the court was delivered by: Thomas

JUSTICE THOMAS delivered the opinion of the court:

The plaintiff, Nielsen-Massey Vanillas, Inc., filed this lawsuit against the defendant, the City of Waukegan (the City), alleging that the City breached an agreement to loan the plaintiff $175,000. The City filed a motion to dismiss the plaintiff's second amended complaint arguing that any agreement to loan money to the plaintiff was null and void in the absence of an ordinance passed by the City council specifically appropriating the funds for the loan. In that regard, the City maintained that an ordinance authorizing the loan was a condition precedent to liability according to sections 8-1-7 and 3.1-40-40 of the Illinois Municipal Code (the Code) (65 ILCS 5/8-1-7, 3.1-40-40 (West 1994)). The trial court granted the City's motion and dismissed the plaintiff's second amended complaint with prejudice. The plaintiff appeals.

The record shows that the plaintiff was engaged in the business of manufacturing and distributing pure vanilla products. Initially, the plaintiff's manufacturing facilities were located in Lake Forest, Illinois. As a result of advertising by the City of Waukegan to attract new business into the community and relieve unemployment, the plaintiff met with City officials to discuss various economic incentives which the City was offering to induce business to relocate to Waukegan. In order to relocate, the plaintiff needed to acquire land, construct a manufacturing facility, and buy equipment. At that time, the City had in effect an ordinance creating an economic development plan and an economic development commission. The ordinance provided that the commission shall have the following powers:

(1) To adopt and amend bylaws and regulations necessary for the commission to implement the plan.

(2) To solicit applications for participation in authorized plan financing programs.

(3) To review and evaluate applications for funds available under the plan and make recommendations to the mayor and the city council regarding their disposition.

(4) To adopt the necessary application forms for implementation of the plan.

The City's programs included offering financial assistance through industrial revenue bonds, assisting businesses with obtaining bonds through the Illinois Development Finance Authority, offering community development block grants through the United States Department of Housing and Urban Development (HUD), and issuing direct loans through the Waukegan Economic Development Commission.

On September 16, 1991, the City council passed resolution 91-R-93 which authorized the City to execute and deliver an agreement with the plaintiff to issue and sell revenue bonds in an amount not to exceed $3.5 million. The agreement provided that the bond proceeds would be used to finance a portion of the plaintiff's new manufacturing project. The agreement was eventually signed by both the plaintiff and the City. Resolution 91-R-93 further provided that the officers, employees, and designated agents of the City were authorized to take any further action necessary to carry out the intent and purposes of the agreement.

On November 1, 1991, Wes Dunski, the director of economic development for the City, sent the plaintiff a letter stating the following:

"This will confirm that the City of Waukegan will lend [the plaintiff] $175,000 at 3% to be amortized over a period of 10 years upon completion of the necessary applications."

Three days later, the City council passed resolution 91-R-119 which transferred the City's interest in the agreement to issue bonds to the Illinois Development Finance Authority (IDFA). The resolution noted that at the time it passed resolution 91-R-93 it was the intention of the City to issue revenue bonds to finance the plaintiff's project. However, the City was unable to obtain sufficient bond allocation to allow the City to issue the bonds, but since the IDFA hadsome bond allocation available it would transfer its interest to the IDFA. The resolution concluded by stating that ...

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