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The Carle Foundation v. Cunningham Township

Supreme Court of Illinois

March 23, 2017

THE CARLE FOUNDATION et al., Appellants,
v.
CUNNINGHAM TOWNSHIP et al., Appellees.

          JUSTICE THOMAS delivered the judgment of the court, with opinion. Chief Justice Karmeier and Justices Freeman, Kilbride, Garman, Burke, and Theis concurred in the judgment and opinion.

          OPINION

          THOMAS JUSTICE

         ¶ 1 Plaintiff, The Carle Foundation, filed a multicount action against numerous state and local taxing authorities to establish that four of its properties were exempt from real estate taxation during the assessment years 2004 through 2011. The circuit court of Champaign County granted plaintiff's motion for summary judgment on count II of the fourth amended complaint, which sought a declaration that plaintiff's exemption claims are governed by section 15-86 of the Property Tax Code (Code) (35 ILCS 200/15-86 (West 2014)). In addition, the circuit court entered a finding pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010) that there was no just reason to delay enforcement of or appeal from its decision. Defendants immediately appealed, and the appellate court addressed several issues in the course of ultimately reversing the circuit court's judgment on the grounds that section 15-86 facially violates article IX, section 6, of the Illinois Constitution (Ill. Const. 1970, art. IX, § 6). 2016 IL App (4th) 140795. Both plaintiff and the State defendants filed petitions for leave to appeal (Ill. S.Ct. R. 315 (eff. Jan. 1, 2015)), which we granted. For the reasons that follow, we vacate the appellate court's decision on the grounds that it lacked appellate jurisdiction under Rule 304(a), and we remand the cause to the circuit court for further proceedings.

         ¶ 2 BACKGROUND

         ¶ 3 Plaintiff owns four parcels of land in Urbana that are used in connection with the operation of plaintiff's affiliate, Carle Foundation Hospital. Prior to 2004, the four parcels were deemed exempt from taxation under section 15-65(a) of the Code (35 ILCS 200/15-65(a) (West 2002)) on the grounds that plaintiff's use of them was for charitable purposes. Beginning in 2004, however, the Cunningham Township assessor terminated plaintiff's charitable-use tax exemptions for the four parcels. This continued through 2011.

         ¶ 4 For tax years 2004 through 2008, plaintiff filed applications with the county board of review to exempt the four parcels from taxation. Those applications were either withdrawn or denied or both. Plaintiff filed no such applications for tax years 2009 through 2011.

         ¶ 5 In 2007, plaintiff filed an action in the circuit court to establish that, for the tax years in question, the four parcels qualified for a charitable-use exemption under section 15-65(a). The defendants in the case consist of the Illinois Department of Revenue and its director, the Champaign County board of review and its members, the Champaign County supervisor of assessments, Champaign County, Cunningham Township, the city of Urbana, and the Cunningham Township assessor. Plaintiff brought the action pursuant to section 23-25(e) of the Code (35 ILCS 200/23-25(e) (West 2010)).

         ¶ 6 In November 2011, plaintiff filed its third amended complaint. The third amended complaint consisted of 26 counts. Taken together, counts I through XXIV sought a declaration that, under the standards set forth in section 15-65(a), the four parcels were and remained exempt from taxation for tax years 2004 through 2009. Count XXV sought the same relief on the grounds that the exemption plaintiff received prior to 2004 was never lawfully terminated. Count XXVI alleged breach of a 2002 settlement agreement entered into between plaintiff and various local taxing authorities.

         ¶ 7 On June 14, 2012, Public Act 97-688 took effect. See Pub. Act 97-688 (eff. June 14, 2012). Among other things, Public Act 97-688 enacted for the first time section 15-86 of the Code, which establishes a new charitable-use exemption specifically for hospitals. This created an issue in this case, namely, whether the exemption claims set forth in counts I through XXIV of the third amended complaint would continue to be governed by section 15-65(a) or whether those claims now would be governed by section 15-86. As a result, on April 16, 2013, the circuit court invited the parties to consider this question. The result was extensive briefing, followed by the filing of cross-motions for summary determination of major issue. See 735 ILCS 5/2-1005(d) (West 2012). In their respective motions, plaintiff argued that section 15-86 applies retroactively and therefore does govern its exemption claims, whereas the several defendants argued that section 15-86 is not retroactive and therefore does not govern plaintiff's exemption claims. On October 1, 2013, the circuit court issued a 29-page memorandum of opinion and order granting plaintiff's motion and denying defendants' motions. The county defendants filed a motion to reconsider, and on January 9, 2014, the circuit court entered a modified memorandum of opinion and order upon the denial of the county defendants' motion.

         ¶ 8 The very next day, on January 10, 2014, plaintiff filed its fourth amended complaint. In addition to bringing plaintiff's existing exemption claims forward through tax year 2011, the fourth amended complaint contained new allegations relating to the recent enactment of section 15-86. Thus, counts III through XXXIV of the fourth amended complaint sought declarations that, for tax years 2004 through 2011, the four parcels qualified for an exemption under section 15-86. In the alternative, these same counts sought a declaration that the parcels likewise qualified for an exemption under section 15-65(a). In count II, plaintiff sought a declaratory judgment that "[s]ection 15-86 applies to any determination of [plaintiff's] entitlement to exemptions for the Four Parcels for tax assessment years 2004 through 2011." Rounding out the fourth amended complaint were counts I and XXXV, which mirrored counts XXV and XXVI of the third amended complaint, respectively.

         ¶ 9 Five weeks later, on February 4, 2014, plaintiff filed a motion for summary judgment on count II of the fourth amended complaint. According to plaintiff, that motion was brought "to facilitate interlocutory appellate review of the Court's determination, in connection with the parties' cross-motions for summary determination of major issue, that [plaintiff's] claims for property tax exemption are governed by section 15-86 of the Property Tax Code." The problem, according to plaintiff's motion, was that "[b]ecause the cross-motions for summary judgment did not dispose of an entire cause of action, it is questionable whether the ruling on those motions would have been immediately appealable without a petition for leave to appeal pursuant to Supreme Court Rule 308." Adding to this problem, plaintiff explained, was the fact that defendants "did not wish to pursue a Rule 308 appeal thereby effectively block[ing] immediate review of the Court's ruling." Accordingly, and "[b]elieving that a determination by the Appellate Court that [plaintiff's] exemption claims are governed by Section 15-86 would expedite and simplify the ultimate resolution of this litigation, " plaintiff added count II to the fourth amended complaint for the purpose of obtaining a summary judgment on that count and, with it, a Rule 304(a) finding that would make that judgment immediately appealable as a matter of right. Indeed, according to plaintiff's motion, "[t]he issue on which [plaintiff] seeks summary judgment-i.e., the applicability of section 15-86 to its exemption claims-is identical to the issue decided by the Court in connection with the parties' cross-motions for summary determination of a major issue." Plaintiff's motion then explained that, as a result, "[r]ather than submit additional briefs in support of its motion for summary judgment, [plaintiff] relies on, and incorporates by reference, the briefs *** and exhibits filed by [plaintiff] in connection with the cross-motions for summary determination of major issue."

         ¶ 10 On August 28, 2014, the circuit court entered its modified memorandum of opinion and order granting plaintiff's motion for summary judgment on count II. In that order, the circuit court explained that "count II presents that very basic question[, ] *** the question of what law is to be applied to this case-and no other question." According to the circuit court, "this most basic question must always be resolved as a threshold matter" because "if the applicable substantive law is not first ascertained then the very rights and obligations of the parties cannot be determined." Moreover, the circuit court noted that "not even the sufficiency of the pleadings in a case can be determined without first identifying the substantive law to be applied." For these reasons, the circuit court stressed that it was "obvious that resolution of the question of whether the standard established by section 15-86(c) applies to plaintiff's claims will not resolve the merits of those claims." Rather, "[r]esolution of that pure question of law will instead only mark an analytical point of departure for that ultimate inquiry." The circuit court's order concluded with a Rule 304(a) finding, and defendants immediately appealed.

         ¶ 11 The appellate court reversed. 2016 IL App (4th) 140795. In the course of doing so, the appellate court addressed several issues, including whether it had appellate jurisdiction pursuant to Rule 304(a), whether a section 15-86 exemption can be sought in a section 23-25(e) judicial proceeding, and whether the General Assembly intended for section 15-86 to apply retroactively. The appellate court answered each of these questions in the affirmative. In the end, however, the appellate court concluded that section 15-86 facially violates article IX, section 6, of the Illinois Constitution, which in relevant part states that "[t]he General Assembly by law may exempt from taxation *** property used exclusively for *** charitable purposes." (Ill. Const. 1970, art. IX, § 6). 2016 IL App (4th) 140795, ¶¶ 163-64. Accordingly, the appellate court reversed the circuit court's granting of summary judgment on count II and remanded the cause for further proceedings. Id. ¶ 166.

         ¶ 12 Both plaintiff and the State defendants filed petitions for leave to appeal (Ill. S.Ct. R. 315 ...


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