Opinion
Appeal No. 3-14-0931
09-18-2015
TOWNSHIP OF LOCKPORT UTILITY BOARD and TOWNSHIP OF LOCKPORT, Plaintiffs/Counter-Defendants/Appellants, v. AQUA SERVICE MANAGEMENT CO., an Illinois Corporation, Defendant/Counter-Plaintiff/Appellee.
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1). Appeal from the Circuit Court of the 12th Judicial Circuit, Will County, Illinois, Circuit No. 00 MR 357 The Honorable John Anderson, Judge, Presiding. PRESIDING JUSTICE McDADE delivered the judgment of the court.
Justices Carter and Lytton concurred in the judgment.
ORDER
¶ 1 Held: Where issues presented on appeal were argued in denied motions for summary judgment but were not included in the pleadings submitted for the subsequent binding arbitration, the issues were waived and thus are not properly before this court. Additionally, even though such issues are still deemed waived in subsequent motions for modification of arbitration decisions, the trial court did not err in finding no distinction between the entities in the context of the contract as such a finding is line with the Illinois Township Code and public policy. Affirm. ¶ 2 This case involves a contract entered into between Aqua Services Management Co. (Aqua), defendant/counter-plaintiff, and the Township of Lockport Utility Board (TLUB), plaintiff/counter-defendant, for the management of the Township of Lockport's (the Township) water and sewer system. On June 6, 2000, TLUB filed for declaratory judgment seeking a determination that Aqua had abandoned the contract. The Township, brought in later as a counter-defendant in Aqua's counterclaim and then joined as a plaintiff by TLUB, asserts that the trial court erred in denying it and TLUB's motions for summary judgment filed prior to the agreed binding arbitration. It also appeals the denial of its motion to modify the order confirming the arbitration award. We affirm.
¶ 3 FACTS
¶ 4 On December 1, 1995, Aqua entered a contract with TLUB to manage the water and sewer system of the Township. The contract stated that the water and sewer system was owned by TLUB. It had an initial term of ten years, which could be terminated by either party in the event such other party failed to pay any amount owed under the agreement within 15 days of written notice or upon written notice of a material breach and a contractually agreed 60-day opportunity to cure such material breach. The TLUB members who agreed to enter into this contract were serving a term that began in May 1993 and was set to expire in May 1997. None of those board members had a term of office that extended beyond May 1997. Both TLUB and Aqua represented and warranted that they had full authority to execute the contract. ¶ 5 On June 6, 2000, TLUB filed a complaint for declaratory judgment against Aqua. Naming itself plaintiff and Aqua as defendant, it sought a finding that Aqua had abandoned its duties under the contract and had stated that "the Board now has 'a whole different manager'" and that "'management is going to [another entity].'" TLUB also alleged that Aqua had refused to perform emergency repairs and had announced that it lacked the resources to send bills out in a timely fashion. On July 7, Aqua answered TLUB's complaint listing the Township as the plaintiff and denying several of TLUB's assertions. ¶ 6 On July 27, TLUB moved to file an amended complaint again naming itself as plaintiff and requesting a declaration that the contract was void as well as properly terminated as the contract failed to comply with Illinois law. TLUB alleged that ordinances with respect to Aqua being appointed as a collector for the water and sewer management pursuant to section 205-115 of the Illinois Township Code (60 ILCS 1/205-115 (West 2014)) had not been passed and a term in the contract allowed for the water and sewer management to be transferred to Aqua in violation of section 205-120 of the Illinois Township Code (60 ILCS 1/205-120 (West 2014)). The trial court granted the motion for leave to file the amended complaint listing TLUB as the plaintiff. ¶ 7 On August 25, 2000, Aqua filed an answer to the first amended complaint against the Township and a counterclaim seeking damages against TLUB for breach of contract. Both TLUB and the trial court listed TLUB as plaintiff in their answer to Aqua's counter-claim and order for status hearing, respectively, filed in September 2000. ¶ 8 Aqua claims, nevertheless, that it continued to perform its duties as ascribed under the contract between the date of TLUB's original complaint and October 31, 2000. It notes that through its president it sent TLUB at least nine letters detailing ongoing issues with the water and sewer management maintenance that were the responsibility of TLUB. Aqua claimed then and still claims now that such issues hindered its ability to perform its own duties. ¶ 9 On October 31, however, the acting supervisor of TLUB sent Aqua a letter in response to all of Aqua's aforementioned letters. The response stated that TLUB had addressed the issues alleged and it accused Aqua of having abandoned its duties under the contract and complained that Aqua's president was not attending TLUB's board meetings. In a letter dated November 2, Aqua responded stating that the issues it raised regarding the water and sewer management had not been adequately resolved and were the responsibilities of TLUB. ¶ 10 On November 8, TLUB notified Aqua in a letter that it was putting Aqua's past due payment into an escrow account due to the "continuation of estimated meter readings, [Aqua's] lack of attending monthly [board] meetings, and the lack of revenue that the water department is receiving." Aqua filed a motion to compel discovery on November 29. The trial court, listing the Township as plaintiff, granted the motion on December 4 and extended discover to February 9, 2001. ¶ 11 On December 12, TLUB passed resolution 2000-01, in which it declared its contract with Aqua was void and discharged Aqua. This left a remainder of about five years of Aqua's management service due to TLUB pursuant to the contract's initial terms. ¶ 12 On January 10, 2001, listing the Township as plaintiff, Aqua moved to voluntarily dismiss its counterclaim, for a continuance, and for leave to file affirmative defenses. The court granted the motions on January 17 also listing the Township as plaintiff. Discovery was conducted. On January 19, TLUB filed its answer in response to Aqua's affirmative defenses, listing itself as plaintiff. ¶ 13 On March 21, Aqua motioned for leave to file its first amended counterclaim and first amended affirmative defenses now listing TLUB as plaintiff. It named the Township as an additional counter-defendant and asserted even more defenses to TLUB's declaratory judgment cause of action. Aqua then amended its counterclaim on May 10 to bring claims for fraud in the inducement, breach of contract, and conversion against both TLUB and the Township. TLUB subsequently sought, and was granted, leave to amend its first amended complaint to add the Township as a named plaintiff. ¶ 14 TLUB and the Township filed two motions for summary judgment. On June 4, 2001, they moved for summary judgment arguing that the contract was void ab initio and ultra vires because the length of the contract term exceeded the term of the then TLUB board members. That motion was denied on August 5, 2002. After years of granted continuances and complaint amendments, TLUB and the Township motioned again for summary judgment on December 16, 2009. They argued that the Township had no liability under the contract and that TLUB gave proper notice to terminate the contract. Regarding liability, it pointed to paragraph 17 of the contract that states:
"No obligation of the Township of Lockport. The parties hereby agree that any and all obligations of TLUB shall be those of TLUB only and the Township of Lockport shall have no liability or obligation under this agreement."¶ 15 On the following day, December 17, Aqua filed a cross-motion for summary judgment arguing summary judgment in its favor was proper as it did not receive the contractually-required notice of material breach or an opportunity to cure said breach prior to contract termination. Both motions were denied on June 17. ¶ 16 On March 12, 2012, the parties filed a joint motion and agreement to refer the case to alternative dispute resolution. The court granted the motion and referred the matter for binding arbitration. On November 22, 2013, the matter along with various pleadings, documents, and exhibits were presented in a hearing format that included opening and closing statements and the testimony of witnesses to a panel of three arbitrators. On December 5, 2013, the majority found in favor of Aqua and awarded it damages. ¶ 17 On April 7, 2014, Aqua filed a motion to confirm the arbitration award and on May 2, 2014, the court issued a final judgment order so confirming. On May 6, TLUB, individually, brought a motion to modify the court's order to conform to the terms of the contract as the Township was to have no liability or obligation under the contract. After a hearing on October 28, the trial court denied the motion on November 14, 2014. It found that (1) the decision of the arbitrators was against both TLUB and the Township; (2) the trial court lacked authority to act pursuant to the Illinois Uniform Arbitration Act; and (3) the Township and TLUB lacked a meaningful distinction within the context of the proceedings. ¶ 18 TLUB and the Township timely appealed.
¶ 19 ANALYSIS
¶ 20 On appeal, TLUB and the Township first argue that the trial court erred in denying both of their motions for summary judgment filed prior to its joint motion with Aqua for alternative dispute resolution. Aqua contends that TLUB and the Township waived this argument by completely neglecting to raise it during the arbitration or in a timely statutory motion. It further asserts that TLUB and the Township never asserted the issues addressed in the summary judgment motions in the initial complaint or any other amendments thereto. ¶ 21 Issues not raised at trial and in a timely post-trial motion are waived and not appropriate for review on appeal. See Calabrese v. Benitez, 2015 IL App 3d 130827, ¶¶ 15-17. Moreover, "denial of a motion for summary judgment is not subject to review on appeal after a trial has been held, as any error in the denial merges into the subsequent judgment." Wade v. Rich, 249 Ill. App. 3d 581, 592 (1993). These rules have been extended to arbitration hearings. See First Health Group Corp. v. Ruddick, 393 Ill. App. 3d 40, 49 (2009); see also Tri-City Jewish Center v. Blass Riddick Chilcote, 159 Ill. App. 3d 436, 439 (1987). Parties can waive issues by failing to raise them at arbitration, even if that issue would otherwise subject the arbitration award to an attack on those grounds. Ruddick, 393 Ill. App. 3d at 49. ¶ 22 Here, after TLUB and the Township's motions for summary judgment were denied, they did not at that time appeal those denials. Instead it filed a joint motion with Aqua for the matter to be referred to binding arbitration. Both parties submitted documents including pleadings and exhibits to the arbitrators and presented their cases during a hearing that included opening and closing statements as well as witnesses who were subject to cross-examination. ¶ 23 TLUB and the Township have failed to provide this court with a record of the arbitration proceedings. Therefore, resolving all doubts we may have against TLUB and the Township (see Foutch v. O'Bryant, 99 Ill.2d 389, 391-92 (1984)), we do not find the issues addressed in TLUB and the Township's motions for summary judgment were presented during the arbitration. TLUB and the Township's argument that the dissenting arbitrator's sua sponte assertion of the issue that the contract was void ab initio preserved this issue for appeal is without merit. The arbitrator's majority decision clearly notes that the issue argued by the dissenting arbitrator:
"(1) was not plead in any of the pleadings presented to the arbitrators, (2) no proof was offered at the hearing as to the boards term or its makeup, (3) this issue was not argues at any time during the hearing of this case, (4) no case law or brief was submitted advancing this proposition, and (4) [sic] to raise this issue sua sponte when it was never addressed at the hearing would be unfair to Aqua."Therefore, TLUB and the Township waived the arguments included in the denied summary judgment motions. ¶ 24 TLUB and the Township's second main argument on appeal is that the trial court erred in denying the motion to modify the order imposing liability upon the Township. TLUB and the Township assert that the trial court did have authority to decide the issue of liability because that issue had not been presented to the arbitrators. Moreover, the issue of whether the Township was liable was not in dispute as the contract clearly stated that it would not be held liable. Additionally, because the issue had not been presented, the rule under the Illinois Uniform Arbitration Act (Arbitration Act) requiring any request for modification or correction of an error apparent on the face of the arbitrator's decision to be submitted within 90-days of the decision's issuance did not apply. ¶ 25 Aqua contends the trial court's denial of the Township's motion was proper as the motion sought relief based upon substantive issues that were never presented to the arbitrators, the motion was untimely asserted and thus waived, the decision was not ambiguous, and the Township did not timely seek clarification of the alleged ambiguity but is attempting to collaterally attack the arbitrator's decision. ¶ 26 Our review of an arbitrator's award is extremely limited. American Federation of State, County & Municipal Employees v. Department of Central Management Services, 173 Ill. 2d 299, 304 (1996). "Whenever possible a court must construe an award to uphold its validity * * *." Garver v. Ferguson, 76 Ill. 2d 1, 10, (1979). ¶ 27 Under the Arbitration Act, "upon application made within 90-days after delivery of a copy of the award to the applicant," only gross errors as identified in section 13 that are apparent upon the face of an arbitrator's award can be modified or corrected by a reviewing court. Id. at 11; 710 ILCS 5/13 (West 2014). Sweet v. Steve's Cartage Co., 51 Ill. App. 3d 913 (1977). Such errors must be so extreme that if the arbitrators were informed of the error they would have ruled differently. Sloan Electric. v. Professional Realty & Development Corp., 353 Ill. App. 3d 614, 620 (2004). However, when a party fails to adhere to the Arbitration Act and challenge an award within 90 days of the decision, relief is foregone and the party is bound to the award even if the award contains an error on its face. See Schroud v. Van C. Argiris & Co., 78 Ill. App. 3d 1092, 1095 (1979). The Arbitration Act, however, does not bar relief of issues regarding arbitration decisions sought after the 90 day time limit when the issue was not submitted to arbitration. See Kenny v. Kenny Industries, Inc., 406 Ill. App. 3d 56 (2010). This rule does not negate the status of issues that have been waived when denied in a motion for summary judgment and then not argued during a later hearing. See Ruddick, 393 Ill. App. 3d at 49. ¶ 28 Here the arbitrator's decision was issued on December 5, 2013. On April 7, 2014, more than 120 days later, Aqua filed its motion to confirm the arbitrator's decision. At no time was a motion in opposition to the arbitrator's decision or Aqua's motion for confirmation filed by either TLUB or the Township. We have previously found that the issue of the Township's liability was not submitted for arbitration. However, again that issue was asserted in TLUB and the Township's motion for summary judgment prior to arbitration. The motion was denied and the issue was then not submitted to arbitration. It was waived. ¶ 29 Nevertheless, we briefly address TLUB and the Township's contentions that the arbitration finding is not against both entities and that the entities are meaningfully distinct per the terms of the contract. Under section 205-100 of the Illinois Township Code, a township board can "create a township utility board for the purpose of exercising all the powers conferred [to it] by [the statute]." 60 ILCS 1/205-100 (West 2014). The statute provides a township board with the ability to exercise authority in the name of and for and on behalf of the township. 60 ILCS 1/205-110 (West 2014). Thus all actions taken by the utility board are done in the name of and for the township. See Godfrey Township Utility Board v. Hand, 79 Ill. App. 2d 192 (1967) (noting that such an entity does not even have the ability to sue or file any type of complaint on its own behalf). ¶ 30 Acknowledging specifically in its motion to amend its first amended complaint for declaratory judgment that TLUB "does not have authority to sue in its own name, but instead, in the name of and for [and] on behalf of" the Township, TLUB added the Township as a party to the proceedings. Moreover, the joint motion TLUB and the Township filed with Aqua listed both entities as plaintiffs and stated that "the parties wished to refer the matter to binding arbitration." It did not parse out that the arbitration would involve only TLUB and Aqua. ¶ 31 Nevertheless, TLUB and the Township point to paragraph 17 of the contract in support of their contention that the Township is not liable. That paragraph specifically states that the Township shall have no liability or obligation under the agreement. This part of the contract is in conflict with the aforementioned statute outlining the limited authority conferred on a township's utility board. However, the contract notes further in paragraph 21 that "[t]his agreement and the rights of the parties hereunder shall be governed by and interpreted in accordance with the laws of the State of Illinois." ¶ 32 Moreover, Illinois courts have determined that when a statute is silent regarding the enforceability of a contractual term which violates that statute, public policy is balanced "against the countervailing policy in enforcing contractual agreements." K. Miller Construction Co., Inc. v. McGinnis, 238 Ill. 2d 284, 293-94 (2010). A contract term is deemed unenforceable if its implementation would prove to be "seriously injurious to the public order." Id. at 295. ¶ 33 It has been continuously upheld as public policy that the Illinois Township Code governs all limited authority imparted upon the township. Diversified Computer Services, Inc. v. Town of York, 104 Ill. App. 3d 852, 857 (1982). Such limitation includes what type of contracts may be entered into as well as the creation of entities like a township utility board for the sole purpose of managing the township utilities. Id. Yet, those entities, as already discussed, have been found to be merely drones charged with specific tasks to be exercised "in the name of and for and on behalf of the township." 60 ILCS 1/205-110 (West 2014). Godfrey Township Utility Board, 79 Ill. App. 2d at 192. It would fly in the face of logic and public order to enforce a legal decision against an entity that is not only simply a figurehead but also has no legal standing to pursue a claim for itself. ¶ 34 Thus the arbitration decision and the proceedings in general were always against the Township.
The Illinois Township Code also discusses who can and when they can be a part of township boards such as a utility board. In violation of the statute, the members of the utility board, at one time, were also simultaneously members of the township government. (60 ILCS 1/205-100 (West 2014)) However, this potential argument has been waived because this violation was not raised as an argument during arbitration and it was not contested in a subsequent trial court hearing within 90 days of the arbitration decision issuance. See Ruddick, 393 Ill. App. 3d at 49; see also Kress Corp. v. Edward C. Levy Co., 102 Ill. App. 3d 264, 269 (1981). --------
¶ 35 CONCLUSION
¶ 36 For the forgoing reasons, the judgment of the circuit court of Will County is affirmed. ¶ 37 Affirmed.