Millennium Park Joint Venture, LLC v. Houlihan

Docket No. 108923.
IN THE
SUPREME COURT
OF
THE STATE OF ILLINOIS
__________________
MILLENNIUM PARK JOINT VENTURE, LLC, Appellee, v.
JAMES M. HOULIHAN, Assessor of Cook County, et al.,
Appellants.
Opinion filed December 23, 2010.
JUSTICE THOMAS delivered the judgment of the court, with
opinion.
Chief Justice Kilbride and Justices Garman and Theis concurred
in the judgment and opinion.
Justice Freeman dissented, with opinion.
Justice Burke dissented, with opinion, joined by Justices Freeman
and Karmeier.
OPINION
Plaintiff, Millennium Park Joint Venture, LLC, brought a
declaratory judgment action in the circuit court of Cook County
against defendants–Cook County Assessor James Houlihan and Cook
County Treasurer Maria Pappas–seeking a declaration that
defendants’ tax assessment of plaintiff’s contractual interest in real
property owned by the Chicago Park District was not authorized by
law. At issue in this case is (1) whether the circuit court has original
subject matter jurisdiction over the declaratory judgment action
challenging as “unauthorized by law” the assessor’s assessment of
plaintiff’s property interest; and if so, (2) whether plaintiff’s
agreement with the Park District created an untaxable license as
opposed to a taxable lease. The circuit and appellate courts answered
both questions in the affirmative. See 393 Ill. App. 3d 13. For the
reasons that follow, we affirm the judgment of the appellate court.
BACKGROUND
Millennium Park in Chicago is owned by one or more tax-exempt
entities, including the Chicago Park District, and the entire park is
considered “exempt” property under the Property Tax Code (35 ILCS
200/1–1 et seq. (West 2008)). Plaintiff entered into a “Concession
Permit Agreement” with the Park District in February 2003, which
allowed plaintiff to use certain portions of Millennium Park to
operate a food concession service. The Property Tax Code authorizes
the assessor to tax a lessee’s leasehold interest in tax-exempt property
in certain circumstances. 35 ILCS 200/9–195(a) (West 2008). The
statutory scheme, however, does not authorize a tax or an assessment
on exempt property that is merely licensed. See 35 ILCS 200/9–70
(West 2008); 35 ILCS 200/9–195 (West 2008); 35 ILCS 200/1–130
(West 2008); Jackson Park Yacht Club v. Department of Local
Government Affairs, 93 Ill. App. 3d 542, 547 (1981); see also
Kankakee County Board of Review v. Property Tax Appeal Board,
226 Ill. 2d 36, 55 (2007) (“Illinois case law is consistent in holding
that government permits, ordinances, licenses, orders, or regulatory
approvals do not create assessable entities.”).
Plaintiff’s agreement with the Park District was for a term of 20
years, with the possibility for extensions that would allow for a total
term of 30 years. The agreement divided the property to be used by
plaintiff into two portions. The first section was called the “premises”
consisting of 11,000 square feet in the “building” and 15,000 square
feet in the “tunnel.” The premises contained a sit-down, casual
restaurant known as the Park Grill, a bakery and ice cream parlor
known as the Park Café, and a seasonal retail store known as the Park
Store. Plaintiff was also provided with storage facilities located in the
tunnel.
The second section of property was designated the “concession
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area,” and it consisted of a large part of the park in which plaintiff
was allowed to operate a seasonal mobile food and beverage
concession, subject to the approval of the Park District. The
agreement contained diagrams of the park showing the locations of
the building and the tunnel, as well as the specific locations of the
restaurant, retail store, concession area, and bakery and ice cream
parlor.
The agreement required plaintiff to pay a minimum fee of
$275,000 per year, with additional percentage fees based on the
amount of sales and the number of years the agreement had run. For
instance, in the first three years, the percentage fee was 3% of any
sales between $3 million and $12 million, and 1% of any sales
exceeding $12 million. By years 16 thru 20, the percentage increased
to 5% of sales between $1 million and $14 million. Plaintiff was
required to furnish the Park District with statements of its monthly
gross sales for the calculation of the percentage fee. The Park District
was also permitted to review plaintiff’s financial records to determine
gross sales. The minimum fee was to be abated initially until the
earliest of certain specified events occurred. The Park District was to
pay for all utilities.
The agreement was over 90 pages long and contained numerous
requirements in which the Park District was to exercise control over
plaintiff’s operations. It set forth the minimum times and dates of
operation and the permitted uses of the various areas, but provided
that the Park District was not required to keep Millennium Park open
for any minimum amount of hours. Plaintiff was required to
adequately staff the facilities with well-trained personnel for efficient
first class service and to provide adequate stock. The Park District
had the right to approve all signs used by plaintiff and any name
change. It also required that certain “Key Men” or “Alternate Key
Men” continue to own or control the affairs of plaintiff’s operation to
insure its quality. Moreover, plaintiff was subject under the agreement
to the Park District’s extensive requirements regarding employee
uniforms, cleanliness, pest control, signs, repair and maintenance, ice
and snow removal and food and safety rules. Plaintiff was also
required to carry minimum amounts of insurance.
Furthermore, the agreement did not permit plaintiff to “give, sell,
license, sublet, permit, subcontract, sub-concession or otherwise
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transfer its interest” in the agreement without the prior written
consent of the Park District. Such consent was within the sole
discretion of the Park District for the first five years of the agreement,
but thereafter, the Park District was not to unreasonably withhold its
consent. Subject to certain conditions, plaintiff was allowed to enter
into license agreements for up to 50% of the concession carts in the
concession area. The agreement contained a disclaimer indicating that
plaintiff was an independent contractor and that there was no
principal-agent, partnership or joint venture relationship between the
parties to the agreement.
Finally, the Park District had the right to terminate the agreement
immediately with written notice to plaintiff upon the occurrence of
certain specified conditions or violations of the agreement. Plaintiff
successfully negotiated out of the agreement a provision that would
have allowed the Park District to terminate the agreement at will upon
written notice.
In March 2005, the assessor sent plaintiff a notice of assessment
on the property in question in the amount of $502,550 for the 2004
tax year. Although the notice referred to a “proposed increase in
valuation,” there had never before been any assessed valuation to
increase. Plaintiff challenged the assessment before the county
assessor, but that challenge was denied. The assessment became final
in April 2005. Plaintiff did not file an assessment complaint with the
Board of Review. The Board of Review has the power on written
complaint of any taxpayer that any property is “overassessed,
underassessed, or exempt” to review the assessment and “confirm,
revise, correct, alter, or modify the assessment, as appears to be just.”
35 ILCS 200/16–95, 16–115 (West 2008).
Instead, plaintiff filed a three-count complaint for declaratory and
injunctive relief in the circuit court in August 2005. Count I of the
complaint sought a declaration that plaintiff had a nontaxable license
or concession, rather than a lease of the Park District’s property, and
therefore the imposition of a tax on plaintiff’s interest would be
unauthorized by law. Count II sought a declaration that a tax on
plaintiff’s interest would violate the property tax uniformity clause of
the Illinois Constitution (Ill. Const. 1970, art. IX, §4). In count III,
plaintiff sought to enjoin the assessor from assessing plaintiff’s
interest and the treasurer from imposing or collecting any property tax
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for the tax year of 2004 and subsequent years.
Plaintiff alleged that its agreement with the Park District did not
constitute a lease for a number of reasons. Specifically, it noted that
the terms of the agreement did not grant plaintiff full enjoyment and
exclusive possession of the areas in which it conducted its operations.
The agreement did not use the term “lease,” and it did not provide for
the payment of rent or purport to grant plaintiff a leasehold interest.
The agreement also contained a number of provisions that allowed the
Park District to maintain control over the property and plaintiff’s
operation of its businesses. Moreover, any disputes between the
parties were to be decided by the general superintendent of the Park
District. The Park District’s remedies were also different from those
in a lease. The Park District could terminate the agreement
immediately upon the occurrence of any one of several specified
conditions, but the agreement did not contain any forcible entry and
detainer provisions or other landlord-tenant remedies or tenant
protections.
Plaintiff further alleged that during February 2005, certain
newspaper articles were published that inaccurately suggested that
plaintiff was being given special treatment in not being required to
pay real estate taxes. Plaintiff also alleged numerous other vendors
operate concessions on Park District property similar to plaintiff and
are not being assessed or taxed. Nonetheless, shortly after the
publication of the newspaper articles, the assessor issued the notice
of assessment on plaintiff’s interest in the Park District property.
Based on the assessment, plaintiff believed that the treasurer would
eventually impose a tax.
Defendants filed a motion to dismiss on the ground that the court
lacked subject matter jurisdiction because plaintiff failed to exhaust
administrative remedies. The circuit court denied the motion with
respect to count I without prejudice to raising subject matter
jurisdiction in the answer. However, the court granted defendants’
motion with respect to count II in its entirety and with respect to
count III to the extent that count III was based on the constitutional
challenge in count II.
Thereafter, the parties filed cross-motions for summary judgment
on count I. Defendants argued that the agreement entered into by
plaintiff and the Park District was a taxable lease because it contained
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basic requirements for a lease such as duration, payments and a
definite area. Defendants asserted that they were entitled to a
judgment as a matter of law on the ground that the tax was proper and
lawful as a tax on a leasehold of otherwise exempt property under
section 9–195 of the Property Tax Code (35 ILCS 200/9–195 (West
2008)). Defendants stipulated, however, that it is the responsibility of
the tax-exempt entity to notify the assessor and provide the assessor
with a copy of the contract if the tax-exempt entity believes that a
contract it has entered into creates a taxable leasehold interest under
section 9–195. Defendants further stipulated that the assessor did not
receive any such notice from the Park District about the agreement at
issue in this case, nor did the assessor receive a copy of the agreement
until the assessor requested it in February 2005.
Plaintiff argued that the agreement was a license rather than a
lease because it did not satisfy the most important criteria for creating
a lease, namely, the Park District did not relinquish possession and
control over the property to plaintiff through the agreement. Plaintiff
noted that in order for the Park District to give a private commercial
entity a leasehold estate in park property, the Park District would
have had to give up control and possession of the property. But there
is a serious question as to whether the Park District would have the
authority to enter into a lease, thereby relinquishing control and
possession, given that public parks are owned by park districts, which
are charged by statute with the responsibility of managing and
controlling all property within their jurisdictions. See 70 ILCS 1505/1
(West 2008). Against this statutory backdrop, the Park District
operated under the belief that it lacked the authority to lease property
to concession vendors. As a strict rule, it therefore refused to enter
into such leases, even going so far as to employ uniform procedures
to avoid them.
In support of its argument, plaintiff relied upon the affidavits of
Judith J. Jacobs and James Horan. Jacobs’ affidavit stated that she
became vice president of Urban Retail Properties Company in 1996
and was responsible for negotiating all Park District contracts
between 1996 and 2005 with concessioners that operated on Park
District property. At the beginning of her company’s relationship with
the Park District and at various times thereafter, Park District
personnel instructed her that the Park District did not lease park
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property to private concession vendors because the Park District did
not have the right to enter into such leases. She therefore understood
that she was negotiating a “permit” and not a “lease.” Jacobs was
principally responsible for negotiating on behalf of the Park District
with respect to the agreement it entered into with plaintiff. She used
a standard “permit agreement” in those negotiations.
Horan stated in his affidavit that he was the managing member of
plaintiff’s business operations and was authorized to negotiate
contracts on behalf of plaintiff at all relevant times. He negotiated the
agreement involved in this case with Jacobs, who was negotiating on
behalf of the Park District. During those negotiations, Jacobs
informed him that all concession businesses were required to use the
“concession permit agreement” form. She explained to him that the
permit was in lieu of a lease and that the Park District would not grant
plaintiff a lease.
Horan further stated that under the terms of the agreement,
plaintiff shared parts of the premises and concession area with other
entities. For example, during the winter months, plaintiff was not
entitled to use the retail premises or the area west of the restaurant,
which was operated as an ice rink. During that time, these areas were
managed by a different vendor, Westrec. Westrec and the Park
District also used certain areas of the tunnel for storage, and the Park
District additionally used the tunnel for access to and from
Millennium Park.
As further evidence that the parties intended a license and not a
lease, plaintiff noted that the Park District did not notify the assessor
when it entered the agreement. Plaintiff also cited internal documents
from the assessor’s office, which indicated that it was only after the
February 2005 newspaper articles raised the question of why
plaintiff’s interest was not being taxed that the assessor considered
assessing plaintiff’s interest. Those documents also indicated that
there were formidable obstacles to imposing a tax on plaintiff: several
different entities, including the Park District, the City of Chicago, and
Metra, claimed ownership of portions of the park; taxation would
require division of the property to isolate plaintiff’s contractual
interest; the assessor was more than 15 months past the deadline to
apply for a division for 2004; there was no parcel identification
number (PIN) for a substantial part of the park, including the portion
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where plaintiff operated; it would be unprecedented for the assessor
to create a PIN where none existed; plaintiff would be left with less
than the minimum 20 days required by law to appeal; and the assessor
was aware of several other private companies operating under similar
agreements with the Park District that were not being assessed.
Despite these obstacles, within one month of the February 2005
articles, the assessor had created a new PIN to identify plaintiff’s
“leasehold and improvements,” and sent plaintiff a notice of
assessment. The assessor’s office chose to issue the assessment,
according to its own documents, because it “would rather have a tax
bill that is cancelled than for the restaurant to go another year without
a bill.”
Following a hearing, the circuit court denied defendants’ motion
for summary judgment and granted plaintiff’s motion for summary
judgment on counts I and III, except as to those portions of count III
previously dismissed by the court. In so doing, the court concluded
that the terms of the permit agreement in question supported
plaintiff’s position that “the Park District’s interest in not giving up
exclusive possession and control over property in the Park is evident
and overriding.” The court further noted that the permit did not
transfer to plaintiff an exclusive possessory interest coupled with the
control necessary to create a leasehold estate in favor of plaintiff.
Moreover, the uncontradicted evidentiary submissions and inferences
demonstrated that the parties to the permit agreement did not intend
to enter a lease. The court also found that the permit lacked the
necessary specificity of the extent and bounds of the property,
particularly in referring to the concession area, to meet all the
requirements of a lease.
The appellate court, with one justice dissenting, affirmed the
judgment of the circuit court. 393 Ill. App. 3d at 30. The appellate
court held that plaintiff’s suit “challenged the assessor’s authority to
tax the concession permit and therefore raised an ‘unauthorized by
law’ challenge to the assessment.” 393 Ill. App. 3d at 24. Under those
circumstances, the appellate court concluded, plaintiff was not
required to exhaust its remedies under the Property Tax Code and the
circuit court had subject matter jurisdiction to rule on the merits. 393
Ill. App. 3d at 24. With respect to the merits, the appellate court
examined the provisions of the agreement juxtaposed with the
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relevant case law and unanimously determined that the agreement
clearly conveyed only a nontaxable license to use Park District
property and not a leasehold estate. 393 Ill. App. 3d at 26-30; see also
393 Ill. App. 3d at 30 (Wolfson, J., dissenting) (“The assessor made
a mistake. It was a whopper of a mistake. He determined the permit
was a lease, not a license. As the majority carefully establishes, it was
a license.”).
We allowed defendants’ petition for leave to appeal. 210 Ill. 2d
R. 315.
ANALYSIS
I. Jurisdiction Over “Unauthorized By Law” Claim
Before this court, defendants first argue that the circuit court
lacked subject matter jurisdiction to consider plaintiff’s declaratory
judgment action that attacked the assessment. An argument
challenging the subject matter jurisdiction of the circuit court presents
a question of law that this court will review de novo. Blount v. Stroud,
232 Ill. 2d 302, 308 (2009). Moreover, the arguments of the parties
present an issue of statutory construction, which is also a matter that
this court reviews de novo. In re Donald A.G., 221 Ill. 2d 234, 246
(2006).
Both parties acknowledge the “unauthorized by law” doctrine as
one exception to the general common law rule that in the field of
taxation and revenue cases, equity will not assume jurisdiction to
grant relief where a “complete and adequate remedy” at law exists.
Lackey v. Pulaski Drainage District, 4 Ill. 2d 72, 78 (1954); see also
Clarendon Associates v. Korzen, 56 Ill. 2d 101, 107 (1973). The
parties disagree, however, as to whether the doctrine is applicable
under the particular circumstances of the present case.
We note that public officials have no taxing power except that
which is delegated to them by the legislature. Santiago v. Kusper, 133
Ill. 2d 318, 325 (1990), citing Ill. Const. 1970, art. IX, §10. The
obligation of citizens to pay taxes is purely a statutory creation, and
taxes can be levied, assessed and collected only in the manner
expressly spelled out by statute. People ex rel. Eitel v. Lindheimer,
371 Ill. 367, 371 (1939). A tax is therefore “unauthorized” when the
taxing body has no statutory power to tax. See, e.g., Wood River
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Township v. Wood River Township Hospital, 331 Ill. App. 3d 599,
606 (2002). It has also been held that the actions of an assessor are
unauthorized by law where the assessor acts with respect to property
over which he has not been given any jurisdiction by statute. Sanitary
District of Chicago v. Young, 285 Ill. 351, 370 (1918).
To be clear, the general rule is that a taxpayer is limited to first
exhausting administrative remedies provided by statute beginning
with the Board of Review–the remedy at law for an incorrect
assessment–before seeking relief in the circuit court. Owens-Illinois
Glass Co. v. McKibbin, 385 Ill. 245, 252 (1943); Young, 285 Ill. at
368. In that regard, the Property Tax Code is a comprehensive statute
regulating the assessment and collection of taxes. In re Application
of the County Treasurer, 214 Ill. 2d 253, 262 (2005); 35 ILCS
200/1–1 et seq. (West 2008). Sections 16–95 and 16–120 together
provide that the Board of Review may revise or correct an assessment
as appears to be just on complaint by a taxpayer that “any property is
overassessed, underassessed, or exempt.” 35 ILCS 200/16–95,
16–120 (West 2008). The taxpayer then has the option of either
appealing to the Property Tax Appeal Board (35 ILCS 200/16–160
(West 2008)) or filing a tax objection complaint in circuit court
specifying “any objections *** to the taxes in question” (35 ILCS
200/23–15 (West 2008)). Thus, the adequate remedy at law is to pay
the taxes under protest and file a statutory objection. North Pier
Terminal Co. v. Tully, 62 Ill. 2d 540, 546 (1976).
It has been held, however, that the general rule requiring a
taxpayer to seek the relief provided by statute is subject to two
exceptions: a taxpayer need not look to the remedy at law but may
seek injunctive or declaratory relief in circuit court where the tax or
assessment is unauthorized by law or where it is levied upon property
exempt from taxation. Clarendon Associates, 56 Ill. 2d at 107;
Owens-Illinois, 385 Ill. at 252; see also Santiago, 133 Ill. 2d at 324;
Inolex Corp. v. Rosewell, 72 Ill. 2d 198, 201-02 (1978). These two
situations constitute independent grounds for equitable relief and in
such cases it is not necessary that the remedy at law be inadequate.
Clarendon Associates, 56 Ill. 2d at 107.
Defendants argue that the assessment was authorized in this case
based on the authority given to the assessor under section 9–70 of the
Property Tax Code to tax “all other property.” 35 ILCS 200/9–70
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(West 2008). Specifically, that section provides as follows: “The
Department [of Revenue] shall assess all pollution control facilities,
low sulfur dioxide emission coal fueled devices, and property owned
or used by railroad companies operating within this State, except non-
carrier real estate. Local assessment officers shall assess all other
property not exempted from taxation.” (Emphasis added.) 35 ILCS
200/9–70 (West 2008).
The trouble with defendants’ argument is that the land itself at
issue in this case is property “exempted from taxation,” and section
9–70 specifically precludes the assessor from assessing such exempt
property. 35 ILCS 200/9–70 (West 2008). Furthermore, defendants
misconstrue the definition of taxable “property” contained in the
Property Tax Code where it is defined as “[t]he land itself, with all
things contained therein, and also all buildings, structures and
improvements, and other permanent fixtures thereon, *** and all
rights and privileges belonging or pertaining thereto, except where
otherwise specified by this Code.” 35 ILCS 200/1–130 (West 2008).
Defendants argue for the first time in their reply brief before this
court that, because the words “rights and privileges” appear in the
definition of “property,” defendants had the authority to assess
licenses. This view is mistaken. As noted above, the Property Tax
Code has been construed as not to authorize a tax or an assessment on
exempt property that is merely licensed. See 35 ILCS 200/9–70 (West
2008); 35 ILCS 200/9–195 (West 2008); 35 ILCS 200/1–130 (West
2008); Kankakee County Board of Review, 226 Ill. 2d at 55; Jackson
Park, 93 Ill. App. 3d at 547. Moreover, the reference to “rights and
privileges” in section 9–70 is not a reference to a separate category of
taxable property. Rather, it refers to the principle that when the
assessor is assessing the value of real property in the hands of the
owner, one of the components that comprises the valuation is the
privilege possessed by the owner of having entered into a license or
a lease as a licensor or lessor. But section 9–70 gives no authority to
the assessor to tax or assess the licensee’s or lessee’s interest where
the licensee or lessee by definition is not the actual owner of the land.
Real estate taxes are only permitted against owners of land. The only
exception to this rule is found in section 9–195 of the Property Tax
Code (35 ILCS 200/9–195 (West 2008)), which allows the assessor
to tax the leasehold interest of the lessee in property leased to it by an
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owner whose property is exempt. More specifically, section 9–195
provides in relevant part as follows:
“[W]hen property which is exempt from taxation is leased
to another whose property is not exempt, and the leasing of
which does not make the property taxable, the leasehold estate
and the appurtenances shall be listed as the property of the
lessee thereof, or his or her assignee. Taxes on that property
shall be collected in the same manner as on property that is
not exempt, and the lessee shall be liable for those taxes.
However, no tax lien shall attach to the exempt real estate.”
35 ILCS 200/9–195 (West 2008).
From the foregoing, it is apparent that if plaintiff possessed a
mere license rather than a leasehold interest in this case, then the
assessor would not have been authorized by law to assess the
property. Thus, plaintiff’s claim that the assessment was not
authorized because plaintiff did not possess a leasehold interest, but
rather merely a license, fits squarely within the unauthorized-by-law
exception, which allows challenges to be brought directly in circuit
court without resort to any statutory remedy that might be applicable.
We further note that the outcome of the challenge does not govern the
jurisdiction of the circuit court to hear the merits. Rather, it is the
nature of the challenge that governs the court’s jurisdiction.
In reaching this conclusion, we find County of Knox ex rel.
Masterson v. The Highlands, L.L.C., 188 Ill. 2d 546 (1999),
analogous and supportive, even if not directly on point. There, the
plaintiff filed a complaint for declaratory and injunctive relief in the
circuit court, seeking a declaration that it could proceed to construct
and operate a hog confinement facility on its property. The county
had been preventing the plaintiff from building and operating such a
facility through enforcement of its zoning rules. The circuit court
granted the plaintiff’s motion for summary judgment, ruling that the
county board lacked jurisdiction to proceed because the plaintiff was
engaged in an “agricultural” purpose, which was exempt from zoning
regulations under the Counties Code. See 55 ILCS 5/5–12001 (West
1998). The appellate court, with one justice dissenting, affirmed the
judgment of the circuit court. County of Knox ex rel. Masterson v.
The Highlands, L.L.C., 302 Ill. App. 3d 342 (1998).
Before this court, Knox County argued that it had the power to
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regulate the location and use of buildings on unincorporated land. See
55 ILCS 5/5–12001 (West 1998). It also relied on the doctrine of
exhaustion of administrative remedies. This court began its analysis
of the county’s argument by noting that one of the exceptions to the
exhaustion doctrine is where an agency’s jurisdiction is attacked
because it is not authorized by statute. Knox, 188 Ill. 2d at 552. This
court further noted that the county relied heavily upon the appellate
court dissent, which had maintained that the exception to the
exhaustion doctrine did not apply because the agency had the
authority to make the wrong decision:
“ ‘[J]urisdiction’ is a limited concept, which refers only to the
authority to hear and decide the case and does not depend on
the correctness of the decision made. Thus, a body has
‘jurisdiction’ to make a wrong as well as a right decision.”
Knox, 188 Ill. 2d at 553, citing Knox, 302 Ill. App. 3d at 349
(McLaren, J., dissenting).
This court emphatically rejected that reasoning, noting that the
“jurisdiction” of an administrative agency is different from that of a
court because an administrative agency only has the authorization
given to it by the legislature through statutes. Knox, 188 Ill. 2d at 553.
The county board thus had no jurisdiction over zoning where the
board’s enabling legislation expressly denied the board zoning
authority over land used for agricultural purposes. Knox, 188 Ill. 2d
at 554.
This court also rejected the notion that the plaintiff’s attack went
to the correctness of the county board’s decision rather than to the
authority or jurisdiction of the board. Knox, 188 Ill. 2d at 554. It
observed that the determination of the scope of the agency’s power
and authority is a judicial function and is not a question to be finally
determined by the agency itself. Knox, 188 Ill. 2d at 554.
Accordingly, before reaching the merits of whether the plaintiff’s hog
confinement facility constituted an “agricultural” purpose under the
statute, this court found that the appellate court had correctly upheld
the circuit court’s power to hear the plaintiff’s claim for declaratory
and injunctive relief. Knox, 188 Ill. 2d at 555.
The same reasoning employed in Knox is applicable in the present
case. Here, defendants argue that section 9–70 of the Property Tax
Code places the duty of determining whether a property interest is
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assessable directly with the assessor, and so it could never be said that
any decision the assessor made was unauthorized by law. But this
argument is essentially the same as the one made by the county in
Knox that section 5–12001 of the Counties Code gave the county the
power to regulate the location and use of buildings on unincorporated
land. Moreover, the county in Knox had to decide whether or not the
plaintiff’s facility would be considered an “agricultural” purpose just
as the assessor here had to decide whether or not plaintiff’s agreement
with the Park District constituted a “lease.” Defendants argue that
Knox is distinguishable because the enabling legislation in that case
expressly forbade the regulation of agricultural property. But we see
no legally significant difference between the two cases, as the
enabling legislation in the present case does essentially prohibit
taxing exempt property in any manner unless it is leased (35 ILCS
200/9–70, 9–195 (West 2008)) or used for a nonexempt purpose (35
ILCS 200/9–185 (West 2008)).
There is one way, however, that Knox and the present case are
different. Knox did not involve the assessment or collection of taxes
or the general common law rule that in tax cases, “equity will not
assume jurisdiction to grant relief where an adequate remedy at law
exists.” See Clarendon Associates, 56 Ill. 2d at 107. Again, the
unauthorized-by-law doctrine in the area of taxation is an exception
to the general common law rule that equity will not assume
jurisdiction. In other words, the exception allows the taxpayer to
pursue a suit for declaratory and injunctive relief even where the
statutory remedy at law would be complete and adequate. Owens-
Illinois, 385 Ill. at 255-56; Lackey, 4 Ill. 2d at 74-75, 78. It has also
been held that the only limitation in such cases is that when a
taxpayer elects to pursue the remedy before the Board of Review, he
will not be allowed to abandon it and then go into equity, but he may
go into equity in the first instance and have relief. Young, 285 Ill. at
370.
The “unauthorized by law” exception to the common law rule is
one that has been applied in the field of taxation for over 150 years in
Illinois. See, e.g., Santiago v. Kusper, 133 Ill. 2d 318, 324 (1990);
North Pier, 62 Ill. 2d at 545-46; Clarendon Associates, 56 Ill. 2d at
107; Owens-Illinois, 385 Ill. at 252 (it is the general rule that courts
of equity will not take jurisdiction in a proceeding at law and the
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exception to the rule is a suit requesting relief from the collection of
unauthorized taxes); Chicago, Burlington & Quincy R.R. Co. v.
Frary, 22 Ill. 38, 41 (1859); see also Board of Education of Park
Forest–Chicago Heights School District No. 163 v. Houlihan, 382 Ill.
App. 3d 604, 610 (2008); Wood River Township, 331 Ill. App. 3d at
605-06. However, this exception to the common law rule, otherwise
known as the Owens-Illinois exception, was modified by this court in
Illinois Bell Telephone Co. v. Allphin, 60 Ill. 2d 350, 359 (1975),
which held that the Owens-Illinois exception would no longer be
applicable to situations covered by the Administrative Review Law.
See also Christian Action Ministry v. Department of Local
Government Affairs, 74 Ill. 2d 51, 60 (1978) (followed Allphin).
Defendants, however, have not raised any arguments in this entire
litigation based on the holdings of Allphin and Christian Action, nor
have they attempted to argue that the present situation is covered by
the Administrative Review Law. Exhaustion of administrative
remedies is an affirmative defense, and arguments pertaining thereto
are waived if not raised. See Hawthorne v. Village of Olympia Fields,
204 Ill. 2d 243, 254 (2003). Accordingly, we find that defendants
waived any reliance upon Allphin and Christian Action. But we
further note that any such argument would have failed in the case
before us because the situation is not covered by the Administrative
Review Law. First, we note that plaintiff’s claim that the assessor’s
assessment was not authorized by law did not fit within the list of
taxpayer grievances that the Board of Review was authorized to hear,
as it has only been given the power to hear claims on written
complaint of a taxpayer that any property is “overassessed,
underassessed, or exempt.” 35 ILCS 200/16–95 (West 2008). Here,
plaintiff’s claim does not fall under that rubric; plaintiff is claiming
that its interest in the contract with the Park District should not have
been assessed at all, not that it was assessed too high or low or that it
is exempt. See Stevens v. Rosewell, 170 Ill. App. 3d 58 (1988) (circuit
court decided plaintiff’s declaratory-judgment action to enjoin
assessor and treasurer from collecting back taxes based on claim that
the assessed property was a license not a lease; but the question of
subject matter jurisdiction was not broached in that case); but cf.
Jackson Park, 93 Ill. App. 3d 542 (the parties and court treated the
plaintiff’s claim that its contractual interest in land owned by the park
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district constituted a lease as a claim that property was “exempt”).
Second, we note that the Administrative Review Law applies only to
an “action to review judicially a final decision of an administrative
agency where the Act creating or conferring power on such agency,
by express reference, adopts the provisions of [the Administrative
Review Law].” 735 ILCS 5/3–102 (West 2008). Here, the Property
Tax Code only adopts the Administrative Review Law with respect
to final decisions of the Department of Revenue (35 ILCS 200/8–40
(West 2008)) and the Property Tax Appeal Board (35 ILCS
200/16–195 (West 2008)). The Property Tax Code has not expressly
adopted the Administrative Review Law with respect to decisions of
the Board of Review, and a taxpayer not satisfied with the decision
of the Board of Review is not required to appeal to the Property Tax
Appeal Board “before seeking relief in the courts.” 35 ILCS
200/16–160 (West 2008). Thus, the common law “unauthorized by
law” exception noted in Owens-Illinois and other cases is still
applicable in the case before us. See Carle Foundation v. Department
of Revenue, 396 Ill. App. 3d 329, 340 (2009); Silver Fox Limousine
v. City of Chicago, 306 Ill. App. 3d 103, 108-09 (1999);
Communications & Cable of Chicago, Inc. v. Department of Revenue
of the City of Chicago, 275 Ill. App. 3d 680, 684 (1995).
Defendants argue that the common law “unauthorized by law”
exception is no longer applicable in the aftermath of amendments
made to the Property Tax Code in 1994 thru 1996 contained in
section 23–15 (see 35 ILCS Ann. 200/23–15, Historical & Statutory
Notes, at 188 (Smith-Hurd 2006)), which allows a taxpayer to file a
tax objection complaint in circuit court and states that this “[s]ection
shall be construed to provide a complete remedy for any claims with
respect to those taxes, assessments, or levies.” 35 ILCS
200/23–15(b)(1) (West 2008). Defendants also rely upon a provision
in the same section which states that the “court shall grant relief in the
cases in which the objector *** shows an assessment to be incorrect
or illegal.” 35 ILCS 200/23–15(b)(3) (West 2008).
We find defendants’ arguments unpersuasive for a number of
reasons. Initially, we note that the statutory remedy begins with a
taxpayer filing a complaint with the Board of Review alleging that the
property is “overassessed, underassessed, or exempt.” As we have
explained above, the Board of Review was not authorized to hear
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plaintiff’s particular contention, i.e., that its contractual interest
should not have been assessed at all.1
While it is certainly true that the 1994-96 amendments to section
23–15 give the circuit court, as part of a statutory remedy, broad
authority to hear and determine “all objections specified to the taxes,
assessments, or levies in question” and provides that this section is to
be “construed to provide a complete remedy for any claims with
respect to those taxes, assessments, or levies” (35 ILCS
200/23–15(b)(1) (West 2008)), we do not believe that this section
negates the common law exception of Owens-Illinois with respect to
“unauthorized by law” challenges.2 As previously noted, the rule that
equity will not assume jurisdiction where there is a “complete and
adequate remedy at law” is the general common law rule. Lackey, 4
Ill. 2d at 74-75, 78. Section 23–15 simply and essentially codifies this
rule. If a statute merely codifies a common law rule, however, it does
not thereby eliminate any common law exceptions to the rule that
might exist in the absence of any clear expression of an intent to
abrogate the exception. Adams v. Northern Illinois Gas Co., 211 Ill.
2d 32, 63, 70 (2004).
Here, the common law exception to the general rule is the
1
The statutory scheme, however, provides that “[a]n objection to an
assessment for any year shall not be allowed by the court *** if an
administrative remedy was available by complaint to the *** board of
review under *** [s]ection 16–115, unless that remedy was exhausted prior
to the filing of the tax objection complaint.” 35 ILCS 200/23–10 (West
1998). Thus, in this case there was no need for exhaustion of
administrative remedies where an administrative remedy by complaint to
the Board of Review was not available.
2
Clarendon Associates, 56 Ill. 2d at 107, noted two exceptions to the
general common law rule: the first was for “unauthorized by law”
challenges, and the second was for challenges claiming that a tax was
levied on property that was exempt. Under the current statutory scheme,
however, there is an opportunity for exhaustion of remedies and review
under the Administrative Review Law for challenges claiming that property
is “exempt.” See 35 ILCS 200/16–115, 16–130, 8–35, 8–40 (West 2008).
Furthermore, the parties agree that we are not presented with a claim that
plaintiff’s property is “exempt” from taxation.
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unauthorized-by-law doctrine. Legislation intended to abrogate such
a common law exception would have had to have been clearly and
plainly expressed. Board of Trustees of Community College District
No. 508 v. Coopers & Lybrand, 208 Ill. 2d 259, 269 (2003);
Maksimovic v. Tsogalis, 177 Ill. 2d 511, 518 (1997). Common law
rights and remedies remain in full force in this state unless expressly
repealed by the legislature or modified by court decision. Coopers &
Lybrand, 208 Ill. 2d at 269; People v. Gersch, 135 Ill. 2d 384, 395-97
(1990). “Common law” is simply the body of law derived from
judicial decisions rather than from statutes or constitutions. Black’s
Law Dictionary 270 (7th ed. 1999); see also Coopers & Lybrand, 208
Ill. 2d at 269 (applied the rule requiring express abrogation in the
context of common law created by Illinois judicial decisions).
Section 23–15 of the Property Tax Code–the statute at issue
here–provides that the statutory remedy is “complete,” but it makes
no mention of the unauthorized-by-law exception. When statutes are
enacted after judicial opinions are published, it must be presumed that
the legislature acted with knowledge of the governing case law.
Burrell v. Southern Truss, 176 Ill. 2d 171, 176 (1997), quoting People
v. Hickman, 163 Ill. 2d 250, 262 (1994); see also Carle Foundation,
396 Ill. App. 3d at 342. Here, we believe that if the legislature had
intended to abrogate the “unauthorized by law” exception to the
general rule that the statutory-tax-objection procedure is the complete
remedy in tax cases, it could have easily stated as much when it
enacted the amendments of 1994-96; but it did not, and therefore we
presume that it had no such intention. See Carle Foundation, 396 Ill.
App. 3d at 342 (If the legislature had intended to make an exception
to the doctrine of election of remedies in section 23–25 of the
Property Tax Code, it could easily have done so. But it did not;
therefore, the court presumed that it had no such intention.).
As proof of our conclusion, we note that the legislature did
expressly abrogate another common law doctrine with the 1994-96
amendments in section 23–15 when it specifically stated that “[t]he
doctrine known as constructive fraud is hereby abolished for purposes
of all challenges to taxes, assessments, or levies.” 35 ILCS
200/23–15(b)(3) (West 2008). This shows that the legislature knew
how to abrogate a specific common law principle when it desired that
result. Thus, we find that the appellate court correctly concluded that
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the abolishment of the constructive-fraud doctrine did not eliminate
the “unauthorized by law” doctrine and that cases decided after the
1994-96 amendments continue to recognize the existence of the
“unauthorized by law” doctrine. 393 Ill. App. 3d at 22, citing Board
of Education of Park Forest, 382 Ill. App. 3d at 610, Wood River, 331
Ill. App. 3d at 605-06, Givot v. Orr, 321 Ill. App. 3d 78, 85 (2001).
Having determined that section 23–15 did not abrogate the
“unauthorized by law” exception, we further find that the “incorrect
or illegal” language in that same section does not change our
conclusion. The appellate court correctly noted that plaintiff did not
challenge the assessment on the basis that it was incorrect or illegal,
but instead on the ground that it was “unauthorized.” Black’s Law
Dictionary defines “unauthorized” as “[d]one without authority.”
Black’s Law Dictionary 1525 (7th ed. 1999). “Illegal,” on the other
hand, is defined as “[f]orbidden by law.” Black’s Law Dictionary 750
(7th ed. 1999). The difference between the two terms is reflected in
the rule that a true “unauthorized by law” challenge arises where the
taxing body has no statutory power to tax in a certain area or has been
given no jurisdiction to tax a certain subject, as opposed to a
complaint that merely alleges procedural errors or irregularities in the
taxing process, in which case equity relief would not be available. See
Lackey, 4 Ill. 2d at 78; Wood River, 331 Ill. App. 3d at 606.
The primary rule of statutory construction is to ascertain and give
effect to the intent of the legislature, and when possible a court should
interpret a statute according to its plain and ordinary meaning. Donald
A.G., 221 Ill. 2d at 246. However, when the literal reading of a statute
produces an unjust or absurd result “not contemplated by the
legislature” as that intent is shown by the rest of the statute, a court
need not accept the literal reading. Donald A.G., 221 Ill. 2d at 246.
We find that our conclusion is in keeping with the plain and
ordinary meaning of the statutory language. We further note,
however, that if defendants’ interpretation were adopted, it would
work an unjust, if not an absurd, result. Section 23–15 of the Code
does not seem to be an adequate remedy to challenge an assessment
based on the ground that it is unauthorized by law, particularly when
compared with the administrative remedy contained in section
16–115 of the Code for other kinds of challenges to an assessment.
This is because sections 23–5 and 23–10 require that a taxpayer filing
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a tax objection complaint in circuit court under section 23–15 wait
until “after the first penalty date of the final installment of taxes for
the year in question” before filing the complaint, and then the
taxpayer must pay “all of the tax due within 60 days from the first
penalty date of the final installment of taxes for that year.” 35 ILCS
200/23–5, 23–10 (West 2008). In contrast, a taxpayer can
immediately mount a challenge with the Board of Review before any
taxes are due and payable if the challenge is that the property was
overassessed, underassessed, or is exempt under section 16–115. As
we have already explained, plaintiff’s “unauthorized by law” claim
falls through the cracks of the administrative remedy of section
16–115. It seems unlikely that the legislature would intend to thwart
a taypayer in such a manner from raising an “unauthorized by law”
challenge. Based on all of the circumstances noted above, then, we do
not believe that the legislature intended to remove an “unauthorized
by law” challenge to a tax assessment from the circuit court’s equity
jurisdiction..
We therefore conclude that the circuit court had subject matter
jurisdiction to rule on the merits of plaintiff’s suit for declaratory and
injunctive relief.
II. License or Lease
Turning to the merits, we now consider whether summary
judgment was properly entered on behalf of plaintiff on the basis that
its agreement with the Park District constituted a license as opposed
to a lease.
Summary judgment is proper where the “pleadings, depositions,
and admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.” 735 ILCS
5/2–1005(c) (West 2008). Furthermore, it is well settled that when the
parties file cross-motions for summary judgment, they agree that only
a question of law is involved and invite the court to decide the issues
based on the record. Allen v. Meyer, 14 Ill. 2d 284, 292 (1958);
Falcon Funding, LLC v. City of Elgin, 399 Ill. App. 3d 142, 147
(2010); Andrews v. Cramer, 256 Ill. App. 3d 766, 769 (1993). This
court conducts a de novo review of an order granting summary
-20-
judgment. Kajima Construction Services, Inc. v. St. Paul Fire &
Marine Insurance Co., 227 Ill. 2d 102, 106 (2007).
Whether a contractual agreement is a lease or a license depends
on the intention of the parties determined from the legal effect of the
terms of the agreement. See Jackson Park, 93 Ill. App. 3d at 546. A
license in real property has been distinguished from a lease as
follows:
“[A] license generally provides the licensee with less rights in
real estate than a lease. If the contract gives exclusive
possession of the premises against all the world, including the
owner, it is a lease, but if it merely confers a privilege to
occupy the premises under the owner, it is a license.” 53
C.J.S. Licenses §133, at 608 (2005).
In a similar mode, this court has held that a “license” in real property
is essentially permission to do an act or a series of acts upon the land
of another without possessing any estate or interest in such land.
Mueller v. Keller, 18 Ill. 2d 334, 340 (1960). Thus, the principal
difference between a lease and a license is that a lease confers the
right to exclusively possess and control property, whereas a license
merely confers a right to use property for a specific purpose, subject
to the licensor’s control. See In re Application of Rosewell, 69 Ill.
App. 3d 996, 1001-02 (1979). Although some divestiture of control
is inherent in any granting of a license, it is the degree of possession
and control that must be considered to determine whether a lease
rather than a license has been granted. See Charlton v. Champaign
Park District, 110 Ill. App. 3d 554, 560 (1982).
Additionally, the essential elements of a lease include: (1) the
extent and bounds of the property; (2) the term of the lease; (3) the
amount of rent; and (4) the time and manner of payment. See Lannon
v. Lamps, 53 Ill. App. 3d 145, 150 (1977), citing Miller v. Gordon,
296 Ill. 346, 350 (1921). If any of these elements are missing, a lease
has not been created; but the fact that an agreement may contain all
of these essential requirements for a lease does not necessarily make
it a lease. See Feeley v. Michigan Avenue National Bank, 141 Ill.
App. 3d 187, 192 (1986). Additionally, licenses are ordinarily
revocable at the will of the grantor (see Jackson Park, 93 Ill. App. 3d
at 547), and are generally not assignable (see Stevens v. Rosewell, 170
Ill. App. 3d 58, 62 (1988)). But again the crucial distinguishing
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characteristic of a lease is the surrender of possession and control of
the property to the tenant for the agreed upon term. J. Ely & J. Bruce,
The Law of Easements and Licenses in Land §11:1 (2010); 1 R.
Dolan, New York Landlord & Tenant, Including Summary
Proceedings §4:11 (4th ed. 2010).
Applying the above-mentioned principles, we find that the lower
courts correctly concluded that plaintiff’s agreement with the Park
District created a license rather than a lease, and therefore plaintiff’s
interest was nonassessable and nontaxable. Initially, we note that the
agreement did not give plaintiff exclusive possession and control, but
rather the right to use areas in the “concession area” and “the
premises.” The preamble to the agreement states that the Park District
is the owner of the property and that plaintiff sought the “use” of the
areas described in the agreement for the particular purposes described
in the agreement. While commercial leases routinely restrict the type
of business the lessee may operate (see Metropolitan Airport
Authority v. Property Tax Appeal Board, 307 Ill. App. 3d 52, 56
(1999)), the agreement here went much further. The agreement does
not permit the exclusive use of the concession area by plaintiff, and
plaintiff shares the concession area with other users. Similarly,
plaintiff does not have exclusive possession of the premises or the
tunnel. For example, in the five-month span beginning on November
1 each year, another vendor operates a retail business in the retail
premises, during which time plaintiff has no rights, let alone
possession rights. Furthermore, even during plaintiff’s operating
season, another vendor uses the tunnel area to store ice skates and
other items. All year, the Park District’s janitorial and security
contractors use the Tunnel for access to the park and for storage. As
with the concession area, plaintiff has no authority to exclude the
public, or restrict the public’s use of the premises; all such authority
remains in the hands of the Park District.
A comprehensive reading of the agreement also demonstrates that
it is not a lease, as it gives the Park District extensive control over all
aspects of the plaintiff’s business. Consistent with the Park District’s
statutory function to “exercise control over and supervise the
operation of all parks *** and other public property” under its
jurisdiction (70 ILCS 1505/1 (West 2008)), the agreement between
the plaintiff and Park District contains a plethora of provisions
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regulating and controlling plaintiff’s operations, including 34 pages
of rules in the attached riders alone. Many critical areas of plaintiff’s
day-to-day operations are regulated, including: days and hours of
operation; mandatory products and suppliers; employee uniforms;
signs; tips; employee conduct; minimum participation during
construction of businesses owned by minorities; rules for designing
and building carts and trailers; trash placement and pickup; use,
content and location of product price boards; and repair and
maintenance activities. Additionally, numerous actions of plaintiff
require the Park District’s prior consent: selection of menu prices and
merchandise; a change in trade name; use of products that conflict
with the Park District’s preapproved list; the location of mobile and
temporary concessions; variation from required hours or days of
operation; changes in prices of product sold; any temporary closings;
certain increases in the number of temporary or mobile concessions;
any new signage or change in design or location; design and
distribution of advertising materials; changes in concession or
premises area; and any action that would result in either of the “Key
Men” losing his ownership interest in, or leadership of, plaintiff.
In assessing the control issue, the appellate court correctly relied
upon Charlton, 110 Ill. App. 3d 554, and In re Application of
Rosewell, 69 Ill. App. 3d 996, and properly distinguished the cases
relied upon by defendants. In Charlton, the park district awarded a
concession permit to a company to build, own and operate a water
slide and related concessions on park property. Taxpayers filed a
lawsuit alleging that the park district lacked authority to enter into the
contract and sought to have it declared void. The appellate court
concluded, however, that it was unnecessary to decide whether the
park district had the power to lease its real estate because the court
found that the contract was a license, not a lease. Charlton, 110 Ill.
App. 3d at 557. Based on facts very similar to the present case,
Charlton held that the park district “has maintained sufficient control
over the waterslide operation to protect its property at the site and to
protect the public use of the waterslide and the rest of the park.”
Charlton, 110 Ill. App. 3d at 560. We find Charlton to be
indistinguishable and strong support for the appellate court’s
conclusion in the instant case that a license rather than a lease was
created.
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In re Application of Rosewell is also on point and instructive.
There, the court found that contracts between the City of Chicago and
various parking garage operators were licenses and not leases. In re
Application of Rosewell, 69 Ill. App. 3d at 1003. Under the contracts,
the following items were within the city’s control: hours of operation;
the color and design of the uniforms, badges and caps of employees;
the posting of signs; the setting of parking rates; the types of vehicles
to be parked; the operator’s ability to subcontract for work done on
the premises; the operator’s ability to make alterations and additions
to the premises; the marking of pavement lanes, and the types of cash
registers and forms to be used; the operator’s budget, and major
maintenance responsibilities. Additionally the rent provisions were
based almost entirely on the gross revenues with a small percentage
as a fee for operating the garages. Under the circumstances, the court
found that the agreements were not intended to transfer a possessory
interest coupled with the control necessary to create a leasehold
estate. In re Application of Rosewell, 69 Ill. App. 3d at 1002-03. Just
like in Rosewell, plaintiff’s business operation in the present case was
subject to the extensive control of the public entity with which it
entered into the agreement.
Stevens, 170 Ill. App. 3d 58, which is the main case relied upon
by defendants, is clearly distinguishable. There, McDonald’s
Corporation and a community college entered into a service
agreement to provide food service for the college. McDonald’s then
assigned the agreement to Stevens. The parties to the food service
agreement wanted to avoid real estate taxes so they stated in the
agreement that it was a license and not a lease. The agreement
provided a fixed term and a fixed location. The appellate court in
Stevens construed the agreement as a lease based on the fact that the
college had little control over the operation of the McDonald’s
restaurant. Stevens, 170 Ill. App. 3d at 63. The restaurant’s operation
was totally independent of the terms of the service agreement.
Further, the rent paid was for a fixed amount over a term of years and
not merely for a service. Additionally, the agreement was for a
specific, fixed location where the lessee had exclusive possession of
the kitchen, even though the college reserved certain rights of access.
Stevens, 170 Ill. App. 3d at 63-64.
We find that the appellate court below correctly concluded that
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the agreement between plaintiff and the Park District here resembled
the agreements in Rosewell rather than the service agreement in
Stevens:
“In Stevens, McDonald’s had the exclusive right to run the
restaurant as it saw fit. However, as was the case in Rosewell,
under the terms of the Agreement, the Park District controlled
many facets of the plaintiff’s operation on park property.
Also, in Stevens, the rent was a fixed amount of $30,000 per
year with an additional 6% of gross sales in excess of
$500,000. In the Agreement, the ‘minimum fee’ in this case
was subject to abatement under the terms of the Agreement,
and the percentage of gross profits paid to the Park District
escalated based on the year of operation.” 393 Ill. App. 3d at
29.
Under the circumstances, we also conclude that the agreement in the
present case did not relinquish the necessary control and possessory
interest to constitute a lease.
We further question whether plaintiff’s agreement with the Park
District meets even the minimum requirements essential to create a
lease because of the lack of specificity in describing the extent and
bounds of plaintiff’s interest in the property. Although specificity as
to the extent and bounds of the property is optional for a license, it is
mandatory for a lease. See Feeley, 141 Ill. App. 3d at 191. Here, the
agreement described the premises as consisting of approximately
11,000 square feet in the building and approximately 15,000 square
feet in the tunnel. The assessor’s records showed that the assessor was
unable to specifically describe plaintiff’s interest, as it listed the
location of the property as “unknown,” and left the entry for square
feet blank. The assessment further set forth that 100% of the
valuation was allocated to “improvements,” and 0% was allocated to
“land.” We agree with plaintiff and the appellate court that the
vagueness of the description in this case is also a matter weighing in
favor of a finding that the agreement created a license rather than a
lease.
CONCLUSION
For the foregoing reasons, we hold that (1) circuit court had
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subject matter jurisdiction over the challenge to the assessment of
plaintiff’s property interest and (2) plaintiff’s agreement with the Park
District created an untaxable license as opposed to a taxable lease.
Accordingly, we affirm the judgment of the appellate court, which
affirmed the circuit court’s ruling that granted summary judgment for
plaintiff and denied summary judgment for defendants.
Appellate court judgment affirmed.
JUSTICE FREEMAN, dissenting:
I agree with Justice Burke that, prior to filing a complaint in the
circuit court, a tax objector must first exhaust administrative
remedies. I further agree that the narrow exception to this rule for
instances where the tax is “unauthorized by law” does not apply under
the facts of this case. I am not persuaded by the majority that there is
“no legally significant difference” between this case and County of
Knox ex rel. Masterson v. The Highlands, L.L.C., 188 Ill. 2d 546(1999), in light of the substantial dissimilarities in the enabling
legislation in both cases. Accordingly, I join Justice Burke’s dissent.
I write separately, however, to underscore my continued
adherence to the significant policy considerations which support the
doctrine of the exhaustion of administrative remedies, as set forth in
my dissenting opinion in Morr-Fitz, Inc. v. Blagojevich, 231 Ill. 2d
474, 514-15 (2008) (Freeman, J., dissenting, joined by Burke, J.):
“[I]mportant policy considerations under[lie] the exhaustion
doctrine, which include: (1) allowing the agency to fully
develop and consider the facts of the cause and to utilize its
expertise; (2) protecting agency processes from impairment
by avoidable interruptions; (3) giving the aggrieved party the
opportunity to succeed before the agency; and (4) allowing
the agency to correct its own errors, thus conserving valuable
judicial resources.” Morr-Fitz, 231 Ill. 2d at 514 (Freeman, J.,
dissenting, joined by Burke, J.).
These policy considerations further underscore the error of the
majority in allowing plaintiff to circumvent established administrative
procedure.
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JUSTICE BURKE, dissenting:
The plaintiff entered into an agreement with the Chicago Park
District to operate a business on property owned by the Park District.
The Cook County assessor determined that the agreement was a lease,
and, because leases are subject to taxation, sent a notice of assessment
to the plaintiff. Plaintiff disagreed with the assessor. According to
plaintiff, its agreement with the Park District was merely a license to
use the property and, therefore, not subject to assessment and
taxation. However, instead of contesting the assessment by
exhausting its administrative remedies pursuant to the Property Tax
Code (35 ILCS 200/23–15 (West 2008)), plaintiff filed a complaint
for declaratory judgment directly in the circuit court. Plaintiff
maintained that it did not have to follow the statutory tax objection
procedures set forth in the Code because the assessment and tax were
“unauthorized by law,” and, therefore, plaintiff was subject to an
exception that permitted it to proceed in the circuit court.
The majority agrees with plaintiff and holds that, under the
“unauthorized by law” exception, the circuit court had the authority
to decide plaintiff’s complaint. Because I disagree with the
conclusion reached by the majority, I respectfully dissent.
The general rule in taxation cases is that a tax objector must first
exhaust its administrative remedies before filing a complaint directly
in the circuit court. Clarendon Associates v. Korzen, 56 Ill. 2d 101,
105 (1973). This general rule is subject to two exceptions: (1) where
the tax is “unauthorized by law”; and (2) where it is levied upon
property exempt from taxation.3 Clarendon Associates, 56 Ill. 2d at
105. Where one of the exceptions applies, the taxpayer may elect to
either pursue the administrative remedy or proceed directly to the
circuit court. Clarendon Associates, 56 Ill. 2d at 105.
The plaintiff contends that it was not required to exhaust its
administrative remedies because the assessment and tax were
“unauthorized by law.” I disagree. The action of a public official is
“unauthorized by law” where the agency acts outside the scope of its
statutory authority. Public officials have no taxing power except that
which is delegated to them by the legislature. Santiago v. Kusper, 133
3
Plaintiff does not invoke the second exception.
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Ill. 2d 318, 325 (1990). A tax is unauthorized where the taxing body
has no statutory power to tax. Wood River Township v. Wood River
Township Hospital, 331 Ill. App. 3d 599, 606 (2002).
The “unauthorized by law” exception does not apply to this case
because the plaintiff is not attacking the statutory authority of the
assessor and treasurer to assess property and collect taxes. Rather, it
is challenging only the assessor’s decision to characterize its property
as a lease. There is no dispute that the assessor has the statutory
authority to assess a lease. See 35 ILCS 200/9–70 (West 2008)
(“Local Assessment officers shall assess all other property not
exempted from taxation”); 35 ILCS 200/9–195 (West 2008) (where
the lessee obtains a leasehold interest in property owned by a tax-
exempt entity, the lease is taxable, and the lessee is liable for those
taxes). Necessarily, then, the assessor has the authority to determine
what is, and what is not, a lease. When the assessor erroneously
determines that something is a lease, he has merely made a mistake.
He has not exceeded his authority.
The majority concludes that, because the assessor has no statutory
authority to assess licenses, the plaintiff’s challenge of the assessment
is an attack on the assessor’s authority. This is not the case. Even if
the assessor incorrectly deemed plaintiff’s property interest a taxable
leasehold, the assessor’s authority does not flow from the correctness
of his decisions. See, e.g., Newkirk v. Bigard, 109 Ill. 2d 28, 37-38
(1985) (“An agency’s jurisdiction or authority is not lost merely
because its order may be erroneous”). Plaintiff’s complaint
challenged the correctness of the assessor’s decision, which should
only be challenged by exhausting administrative remedies under the
Code. Therefore, it is improper for this court to consider this case on
its merits.
I recognize that, as a result of this position, the plaintiff would
have difficulty obtaining relief. However, I agree with the dissenting
justice in the appellate court that “[b]y finding the circuit court had
jurisdiction in this case the majority opens most incorrect
classifications by the assessor to trial court review without adhering
to statutory procedure.” 393 Ill. App. 3d at 31 (Wolfson, J.,
dissenting). This is a serious concern. The majority opinion
undermines a well-established statutory scheme.
Pursuant to the Property Tax Code, plaintiff should have
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challenged the assessment by filing a complaint with the Cook
County board of review. 35 ILCS 200/16–95 (West 2008). It then
could have filed an appeal before the Illinois Property Tax Appeal
Board (35 ILCS 200/16–160 (West 2008)) or paid the tax under
protest and filed a tax objection complaint in the circuit court (35
ILCS 200/23–5, 23–10, 23–15 (West 2008)). If it had filed a tax
objection complaint pursuant to section 23–15, the circuit court could
have determined whether it was shown by clear and convincing
evidence that the tax, assessment, or levy was “incorrect or illegal.”
35 ILCS 200/23–15 (West 2008). Section 23–15 “shall be construed
to provide a complete remedy for any claims with respect to those
taxes, assessments, or levies, excepting only matters for which an
exclusive remedy is provided elsewhere in this Code.” (Emphasis
added.) 35 ILCS 200/23–15(b)(1) (West 2008). Because plaintiff
failed to exhaust its administrative remedies under the Code, this
court may not grant plaintiff a remedy in equity.
JUSTICES FREEMAN and KARMEIER join in this dissent.
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