Beling v. City of East Moline , 14 Ill. App. 2d 263 ( 1957 )

Additional Opinion on Rehearing

JUSTICE WRIGHT

delivered opinion on rehearing.

On petition for rehearing plaintiff contends that the opinion rendered herein on February 27, 1957, affirming the trial court and holding that the Beling contract is null and void for want of a prior appropriation having been made by the defendant city to pay for services to be rendered under the alleged agreement, overlooks the distinction to be made when the agreement provides that payment for services rendered thereunder are to be made out of a special fund and not out of the general corporate fund of the city.

Plaintiff’s theory is that the agreement here in question provides that the plaintiff is to he paid for his engineering services rendered under the agreement out of a special fund to he derived from the sale of water revenue bonds, and further that it was intended and contemplated by the parties to said agreement that the plaintiff was to be paid for his services out of said special fund and not out of the general fund.

Furthermore, plaintiff contends that the foregoing-facts were alleged in the complaint and admitted by the answer of the defendant.

It is settled law in our state that where payment for engineering services under a contract such as we have here under consideration is to come from the general fund of the city, an appropriation for the payment of said services must be made prior to the execution of the contract, otherwise the contract is void. DeKam v. City of Streator, 316 Ill. 123; Gabon Iron Works & Mfg. Co. v. City of Georgetown, 322 Ill. App. 498, 54 N.E.2d 601.

The law is well settled that where a city enters into a contract for the construction of a public works including engineering services, that provides for the payment of said services out of a special fund such agreement is valid. Simpson v. City of Highwood, 372 Ill. 212, 23 N.E.2d 62; DeLeuw, Cather & Co. v. City of Joliet, 327 Ill. App. 453, 64 N.E.2d 779.

Since the validity of a contract for the payment of engineering fees depends upon whether or not the fees are to be paid out of the general corporate fund or out of a special fund, it is now necessary that we examine the contract in this case which was entered into by plaintiff and defendant for the performances of certain engineering services in connection with the designing of a proposed water works for the defendant, in an effort to determine out of what fund payment for the services was to be made.

The provisions of the contract which are pertinent to the issues in question are found in Paragraphs 3 and 4 of said contract. Paragraph 3 provides in part: “The owner agrees to pay the engineers for the above professional services on a percentage basis. For the above complete services, the percentage paid the engineers shall be based on the total cost of the entire completed project. . . .”

Paragraph 4 provides in part as follows: “Payment shall become due as the work progresses on the basis that steps (a), (b), and (c) represent 20 per cent of the total fee; steps (d) and (e) represent 40 per cent; steps (f), (g), and (h) represent 15 per cent; and the balance of the steps represent 25 per cent of the total fee.

“When bonds are issued to finance this project, payments for steps (a), (b), (c), (d) and (e) shall become due and payable, based on the contracts as awarded.

“If bonds are not issued, it is agreed that payment for steps (a), (b), (c), (d), and (e), based on the engineer’s current estimate, will be calculated, reduced by 50 per cent, and deferred, without interest. At this point, drawings will be approximately 65% complete, and ten sets of prints shall be delivered to the owner and shall become the property of the owner. Within three years after approved plans have been presented for bond ordinance purposes, this deferred payment, as previously calculated, shall become due and payable.

“This contract may be terminated by the owner, after the completion of step (e), or after the completion of step (h), upon payment of all fees due the engineers, if requested by two-thirds vote of all members of the city council.”

After carefully reading and considering the above provisions of the contract which deal with the manner in which the plaintiff was to be paid and from what funds, we conclude that the contract on its face discloses that the engineer was to be paid ont of a special fund created by the sale of bonds, if such bonds were sold, but the contract further provides that in case bonds were not sold, the plaintiff was to be paid a part of his fee out of the general fund.

Paragraph 3 of the contract states in substance that the plaintiff is to be paid for his professional services on a percentage basis, but does not specify that he is to be paid from any particular fund.

Paragraph 4 provides in substance that when bonds are issued to finance the project, payment for certain work done by the plaintiff shall become due and payable but it is not stated out of what funds payment shall be made. Paragraph 4 further provides that if bonds are not issued, payment for certain steps will be calculated, reduced by 50 per cent and deferred without interest, and provides further that within three years after approved plans have been presented, this deferred payment as previously calculated shall become due and payable, which indicates that the defendant agreed to pay for part of the services rendered by the engineer out of the general fund if a special fund was not made available from the sale of bonds.

It may be true that the plaintiff under the terms of the contract was to be paid out of a special fund to be derived from the sale of water revenue bonds, if and when such bonds were issued, but the contract also obligates the defendant to pay for part of the services rendered by the plaintiff if no special fund was made available from the sale of water revenue bonds, and since the contract obligates the defendant to pay for engineering services under certain contingencies out of the general fund, the contract is in violation of Chapter 24, Sec. 15 — 3, Ill. Rev. Stats., Cities and Villages Act [Ill. Rev. Stats. 1955, ch. 24, § 15 — 3] which provides as follows:

“No contract shall be made by the corporate authorities, or by any committee or member thereof, and no expense shall he incurred by any of the officers or departments of any municipality, whether the object of the expenditure has been ordered by the corporate authorities or not, unless an appropriation has been previously made concerning that contract or expense. Any contract made, or any expense otherwise incurred, in violation of the provisions of this section shall be null and void as to the municipality, and no money belonging thereto shall be paid on account thereof. ??

The plaintiff contends that it was contemplated and intended at the time the contract was entered into that the plaintiff was to be paid from a special fund to be created by the sale of water revenue bonds. We do not think this contention tenable. In determining what was the intention of the parties, it is necessary that we examine the terms of the contract. We are of the opinion that the contract by its terms obligated the defendant to pay certain engineering fees out of the general fund, in the event that a special fund was not available.

The plaintiff in his petition for rehearing contends that this court in its original opinion overlooked the holding in certain cases, among them being Brown v. City of Evanston, 4 Ill.App.2d 124, 123 N.E.2d 850; People v. Village of Bradley, 367 Ill. 301, 11 N.E.2d 415; and People v. City of Rock Island, 271 Ill. 412, Ill N. E. 291.

We do not believe that these cases are analogous with the case at bar.

In Brown v. City of Evanston, supra, the court at pages 127 and 128 of 4 Ill.App.2d said:

“Plaintiffs’ main contention is that the contract for the purchase of the Doetsch Pit by the city in 1948 is void for lack of a prior appropriation therefor as required by section 15 — 3, chapter 24 of the revised Cities and Villages Act, Illinois Revised Statutes 1947 (Jones Ill. Stats. Ann. 21.1386).

“We cannot agree with plaintiffs’ contention because, as already pointed out, there being no obligation of any kind incurred by the city for the year 1948, when the contract was executed, no appropriation was legally required. This is the factual distinction to be made in considering the cases relied upon by plaintiffs. The facts alleged in the pleadings show that the city had ample funds available to meet its obligations when it accepted the deed and that proper appropriations were made by the city for the year 1949 and thereafter.”

In Brown v. City of Evanston, supra, no obligation to pay was incurred by the city at the time of the execution of the contract. The obligation to pay was incurred at the time the city accepted the deed and sufficient appropriation had been made by the city at that time, whereas in the instant case the liability to pay was created and the obligation was incurred at the time the contract was entered into and no appropriation had been made at that time by the defendant.

In People v. Village of Bradley, supra, the contract as originally entered into obligated the city to pay the contractor out of funds collected out of special assessments levied. In that case the court at page 306 of 367 111. said:

“As the situation existed at the inception of the contracts between the contractor, sub-contractor and the village, the liability was limited to the funds collected from the special assessment levied.”

Here again the factual situation is different for the reason that the contract provided that payment for the services rendered was to be made from a special fund and not from the general fund.

In People v. City of Rock Island, supra, at page 428 and 429, of 271 Ill. the Supreme Court said:

“Both of the improvements are still to be made, and until the time comes for carrying into effect this plan of public improvements no money is or need be appropriated for that purpose. Until that time comes no liability is incurred by the city to anyone by this ordinance. The fact that the ordinance contains provisions which will require the city at some future time to incur an indebtedness does not create a present liability within the provisions of that section of the statute for which an appropriation must be made before such ordinance is adopted.”

Here again no obligation to pay was incurred at the time the ordinance was adopted. Whereas in the instant case, the obligation was incurred at the time the contract was entered into.

We have examined the other authorities cited by the appellant and are of the opinion that they are not controlling since we find that the plaintiff was to be paid out of the general fund, if a special fund was not made available from the sale of revenue bonds. It is our opinion that the contract was void at the time of its execution because such contract is expressly prohibited by Sec. 15 — 3, Chapter 24, of the Bevised Cities and Villages Act and a contract expressly prohibited by a valid statute cannot be enforced.

In DeKam v. City of Streator, 316 Ill. 123, at page 129, the Supreme Court said:

“A contract expressly prohibited by a valid statute is void. This proposition has no exception, for the law cannot at the same time prohibit a contract and enforce it. The prohibition of the legislature cannot be disregarded by the courts.”

Since we take the view that the contract here in question was null and void at the time of its execution, we do not deem it necessary that we consider the other question presented by this record. Except as modified herein, our original opinion and this additional opinion on rehearing will stand as the opinion of the court.

The judgment of the Circuit Court is affirmed.

CROW, P. J. and SOLFISBURG, J., concur.