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UNION PAC. R.R. CO. v. VILLAGE OF SOUTH BARRINGTON

December 31, 1996

UNION PACIFIC RAILROAD COMPANY, a Utah corporation, Plaintiff,
v.
THE VILLAGE OF SOUTH BARRINGTON, WARREN FULLER, in his individual capacity and as President of the Village of South Barrington; SHEILA FORTNEY, in her individual capacity and as Village Clerk of the Village of South Barrington, and ANTHONY ARIOLA, THOMAS SIOK, KENNETH TAFEL, BERNADINE ROSENTHAL, GREGORY SCURTO, and PATRICIA GRAFT, in their individual capacities and as the members of the Board of Trustees of the Village of South Barrington, Defendants.



The opinion of the court was delivered by: GETTLEMAN

 Plaintiff, Union Pacific Railroad Company ("Union Pacific"), brings this nine-count amended complaint pursuant to 42 U.S.C. § 1983 and state law against the Village of South Barrington ("Village"); Warren Fuller ("Fuller"), in his individual capacity and as President of the Village; Sheila Fortney ("Fortney"), in her individual capacity and as Village Clerk of the Village; and Anthony Ariola ("Ariola"), Thomas Siok ("Siok"), Kenneth Tafel ("Tafel"), Bernadine Rosenthal ("Rosenthal"), Gregory Scurto ("Scurto"), and Patricia Graft ("Graft"), in their individual capacities and as the members of the Board of Trustees of the Village. Plaintiff alleges constitutional violations based upon due process, equal protection, impairment of contracts, as well as state law claims of fraud, conversion, money had and received, breach of warranty, and defamation. Defendants bring the instant motion to dismiss all counts. For the reasons set forth below, defendants' motion is granted in part and denied in part.

 FACTS

 A. Development of the Midlands Property

 In 1987, the Midlands Property was located in the Village. Shortly after acquiring the Midlands Property, plaintiff sought subdivision and development approvals from the Village. On August 18, 1988, the Village passed a resolution approving plaintiff's final plat of subdivision. At or about that time, the Village also approved the installation of various improvements to the Midlands Property, including a private road, a private wastewater treatment system, and a private well and water system. The approval was conditioned upon: (1) plaintiff's submission of an appropriate subdivision bond to guarantee installation of the improvements as required by Village ordinance; and (2) the execution of a development agreement to install the public improvements as provided in the final engineering plans submitted to the Village.

 Plaintiff asserts that the Village's general subdivision ordinance ("Subdivision Ordinance") required it to post two bonds: (1) a performance bond, either in the form of a cash bond or an irrevocable letter of credit, to secure the completion of the improvements; and (2) a guarantee bond, "as a condition of acceptance of all improvements upon their completion," to "guarantee the continued acceptability of the improvements." The guarantee bond was required to be in an amount equal to at least 20% of the cost of the improvements, approved by the Village attorney, and remain in effect for a minimum of two years.

 On November 23, 1988, FirsTier Bank, N.A. ("Bank"), in satisfaction of the Village's performance bond requirement, issued a irrevocable standby letter of credit ("Letter of Credit") in favor of the Village for $ 5,590,000. The express terms of the Letter of Credit set forth the conditions upon which the Village may draw on it: The Village must present a signed statement from the Village Clerk, Sheila Fortney, certifying that plaintiff "has failed to perform one or more of the provisions of the Ordinance for the Subdivision and Platting of Land and Providing for Installation of Subdivision Improvement, No. 0-77-57A and the agreements executed pursuant to this Ordinance."

 On several occasions, the Bank extended the expiration date of the Letter of Credit beyond the original date of November 17, 1989, with the final expiration date being December 31, 1995. Also, as improvements were completed on the Midlands Property, the face amount of the Letter of Credit was reduced. On or around August 29, 1991, plaintiff, claiming that all the improvements on the Midlands Property had been completed, requested the Village to decrease the face amount of the Letter of Credit to approximately $ 250,000 and to treat it as a guarantee or maintenance bond. At the October 10, 1991 Board of Trustees meeting, the Village agreed to reduce the Letter of Credit to $ 250,000 and to treat it as a two-year maintenance bond.

 B. The Disconnection Litigation in State Court

 On June 7, 1993, plaintiff filed a petition the Circuit Court of Cook County to disconnect eighty-nine acres of the Midlands Property ("disconnection property") from the corporate limits of the Village ("disconnection litigation"), pursuant to the Illinois Municipal Code, 65 ILCS 5/7-3-6. The Village asserted an affirmative defense, alleging that the Village and plaintiff had an implied contract that plaintiff would never disconnect any part of the Midlands Property from the corporate limits of the Village. The litigation lasted from June through December, 1995. The Circuit Court rejected the Village's defense and, on December 6, 1995, ordered that the disconnection property be disconnected from the corporate limits of the Village. During the course of the disconnection litigation, an attempt, albeit unsuccessful in the end, was made to settle the case. Plaintiff entered into a settlement agreement with the Village ("Settlement Agreement"), whereby plaintiff agreed to dismiss the disconnection litigation, and the Village agreed to purchase the Midlands Property for $ 14.25 million. Pursuant to the agreement, the Village paid plaintiff $ 250,000 as a non-refundable earnest money deposit.

 According to plaintiff, the Village planned to sell the Midlands Property to a residential developer ("developer") that intended to build three hundred (300) single-family homes on the property. Plaintiff alleges that the Village received $ 250,000 in earnest money from the developer, refundable in the event that the Village did not approve the zoning to allow construction of the 300 homes. After various public hearings on the developer's proposed plan, the Village failed to approve the residential zoning. Consequently, plaintiff asserts, the Village refunded the developer's $ 250,000 earnest money.

 After the public hearings, the Settlement Agreement broke down. Pursuant to the terms of the agreement, plaintiff retained the $ 250,000 earnest money deposit as liquidated damages.

 C. The Drawing of the Letter of Credit

 On November 8, 1995, the Village Clerk, Sheila Fortney, sent a letter to plaintiff requesting that plaintiff renew the Letter of Credit, which was set to expire on December 31, 1995. The Village also requested plaintiff to notify the Village by December 3, 1995, that plaintiff would renew the Letter. Plaintiff did not comply with these requests.

 On December 14, 1995, the Village enacted an ordinance ("Amending Ordinance") amending the Village's subdivision ordinance. The Amending Ordinance provides, in part:

 
In the event a letter of credit is due to expire, and the Village has not received a replacement letter of credit 14 days prior to the expiration date thereof, the Village Clerk [Fortney] or the Village President [Fuller] is authorized to draw on the letter of credit in accordance with the terms of the letter of credit.

 The Amending Ordinance also sets forth various purposes pursuant to which the Village may draw on a letter of credit.

 On or about December 27, 1995, the Village tendered a sight draft and a certificate ("Certificate") to the Bank calling the entire $ 250,000 balance of the Letter of Credit. The Certificate stated that plaintiff "has failed to perform one or more of the provisions of the Ordinance for the Subdivision and Platting of Land Providing for Installation of Subdivision Improvements, No. 0-77-57A and the agreements executed pursuant to this Ordinance." The Village asserts that it took this action because of plaintiff's failure to renew the Letter of Credit and plaintiff's alleged violation of the development agreement with the Village pertaining to the Midlands Property. The Bank subsequently paid the Village $ 250,000 pursuant to the Letter of Credit.

 On March 25, 1996, plaintiff filed a complaint against: the Village; Fuller, in his individual and official capacity as President of the Village; Fortney, in her individual and official capacity as the Village Clerk; and Ariola, Siok, Tafel, Rosenthal, Scurto, and Graft, in both their individual and official capacities as members of the Village Board of Trustees ("Board members"). On May 1, 1996, plaintiff filed its amended complaint. Counts I through IV allege Section 1983 violations of plaintiffs' constitutional rights based upon procedural due process, substantive due process, equal protection, and impairment of contract claims regarding the drawing on the Letter of Credit. Counts V through IX allege state law claims of fraud, conversion, money had and received, breach of warranty, and defamation.

 DISCUSSION

 I. STANDARD

 Under Rule 12(b)(6), a court may dismiss a case "for failure to state a claim upon which relief may be granted." Fed.R.Civ.P. 12(b)(6). The motion is based on the sufficiency of the complaint, not the merits of the case. Triad Assocs., Inc. v. Chicago Housing Authority, 892 F.2d 583, 586 (7th Cir. 1989), cert. denied, 498 U.S. 845, 112 L. Ed. 2d 97, 111 S. Ct. 129 (1990). All well-pleaded facts will be taken as true, and all inferences are made in favor of the plaintiff. Montgomery Ward v. Warehouse Mail Order, Office, Technical and Professional Employees Union, 911 F. Supp. 1094, 1099 (N.D. Ill. 1995). Dismissal is proper only if it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957).

 A Rule 12(b)(6) motion should be read in the context of Rule 8(a)'s liberal pleading requirements. EEOC v. Home by Hemphill, Inc., 1995 U.S. Dist. LEXIS 17217, 1995 WL 683502, at *1 (N.D. Ill. Nov. 16, 1995). Because the Rules mandate only notice pleading, they do not require that a complaint state facts sufficient to constitute a cause of action. Fed.R.Civ.P. 8(a)(2). Rather, a complaint need only make a short and plain statement of the claim showing that the pleader is entitled to relief. Id. Accordingly, in ruling on a motion to dismiss, the court must determine "'whether relief is possible under any set of facts that could be established consistent with the allegations' in the complaint." First Nat'l Bank of Chicago v. ACCO USA, Inc., 842 F. Supp. 311, 316 (N.D. Ill. 1994) (quoting Bartholet v. Reishauer A.G., 953 F.2d 1073, 1078 (7th Cir. 1992). The court, nevertheless, is not obliged to accept mere conclusory allegations, without any supporting facts, as true. See Tamari v. Bache & Co. (Lebanon) S.A.L., 565 F.2d 1194, 1199 (7th Cir. 1977), cert. denied, 435 U.S. 905, 55 L. Ed. 2d 495, 98 S. Ct. 1450 (1978).

 II. CLAIMS AGAINST DEFENDANTS IN THEIR OFFICIAL CAPACITIES

 It is well-settled law that claims against municipal officials in their official capacities are really claims against the municipality and, thus, are redundant when the municipality is also named as a defendant. Kohn v. Mucia, 776 F. Supp. 348 (N.D. Ill. 1991). Here, plaintiff names the Village in all counts of its complaint. Accordingly, all counts ...


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