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Thursday, October 3, 2013

Agreement Not Enforceable Without Prior Appropriation

In 2002, a municipality and owners of 145 acres of undeveloped agricultural land entered into an annexation agreement to provide for the annexation and development of the property as a residential subdivision within the municipality.  Pursuant to the annexation agreement, the Village agreed to install a sewer main with sufficient capacity to serve 450 homes, including a lift station if necessary.  The agreement provided that the sewer line would be constructed within 12 months of the completion of a road widening project of nearby Illinois Highway 15.  The agreement provided a penalty provision requiring the Village to pay a late fee in the amount of $300 per day. 
In 2011, the Village filed a complaint for declaratory judgment with the circuit court seeking a determination of its obligations under the annexation agreement.  The Village acknowledged that the road widening project had been completed in 2009, and that the property owners had sent several requests to the Village for payment of the $300/day penalty fee.  Shortly thereafter, the owners filed a counterclaim based on breach of contract. 
The Village argued that the owners' counterclaim should be dismissed because the Village had not made a "prior appropriation" of the funds necessary to construct the sewer project. The Village's argument was based on a provision of state law, 65 ILCS 5/8-1-7(a), that prohibits the Village from making any contract for the expenditure of Village funds unless a prior appropriation for that expense has been made.  That statute also provides that any contract made without a prior appropriation is null and void.   The trial court agreed with the Village, and dismissed the case.
On appeal, the court reviewed the Village's appropriation ordinances and determined that no prior appropriation had been made for the sewer project.  Village of Freeburg v. Helms, 2013 IL App (5th 120288-U (Rule 23 Order).  Pursuant to state law, therefore, the annexation agreement obligation to construct the sewer line could not be enforced against the Village because the Village lacked authority to approve the annexation agreement without the prior appropriation.  The court rejected the owners' argument that declaring the annexation agreement obligation void was "unconscionable," finding that the promise made by the Village was expressly forbidden by Illinois law. 

1 comment:

  1. Even though this is a Rule 23 decision, it cites to well established cases that can be relied upon by local governments when presented with a similar set of facts.