second case in the call the docket today's agenda number twelve case number one one two zero five two innovative modular solutions appellant versus hazel crest school district one fifty two point five  and please the court my name is donald krieger i'm with the firm shift pardon opie and together i have my colleague ruth crudely we represent the innovative and the issue comes up first in my mind whether or not the order of the cancellation is valid and effective because if it was of and the statute provides that they have the permission the word unilaterally is never found in it to make cancel modify and execute contracts which is really interesting because to modify a contract is another kind fact to cancel a contract outside the provisions of the contract would necessarily require the other party do agree to it that is also a contract so when you say can they make cancel modify and execute contracts if you insert the word unilateral which he should not i suspect it would come in to unilaterally make cancel modify and execute contracts because all these words may cancel modify and execute really attached to the word contracts or another way of saying modify the term contracts if you can unilaterally cancel a contract in these words and you could unilaterally make one that's kind of like one hand clapping make one with whom if you can modify are you saying they can say well we'll keep the lease going we just won't pay when that's the modification we can do unilaterally no if we can cancel the we can do that unilaterally another words we can unilaterally enter into another contract with you whether you like it or not to cancel the contract because we're not canceling it according to the terms of the contract which is the longer which we act which is the district  authority was doing well one of the things they could have done is going to the attorney general that was up to them i don't think necessarily do they know you don't have to do anything but once a court is involved in it could you abroad suit against the authority we did but for them for the money damages it's not their contract any more than it would be the contract or the board of education itself it's the contract of the school district with x i'm sorry what would that suit have been brought in the  claims you don't see authority if we were asking for money from the authority yes and you did not do that no of course not and so the obligation fell on the district  these bills i mean this is no different than the venue the authority saying don't pay your bills don't pay this teacher don't pay whatever this is no different than that they're alive to pay it and if a court can enter an order that isn't in violation of the law requiring them to pay damages that's not in possibility the possibility is if this court ruled that eight that you have to sell  statutory both constitutional and otherwise prohibition for selling alcohol the police wasn't released that they could operate a business and it was not they had to operate a business as a saloon business  not sure why that happened at the time but i think i can guess and that is it was there was talk about prohibition and so the lease itself said you have to sell it and about the law is the statute here which gives them whatever authority they have and certainly if this statute were interpreted to say that a community really can't survive a contract it seems to me tha to interpret it that way that it would be unconstitutional because there was no standards no standards to say and so they could pick one which they did they can pick one creditor and say i'm not paying you and another creditor and say they're not the other case or the only other case which would which would rule that country would flip this is if they went through some kind of bankruptcy push each or where all creditors were taking and we don't have backups of the stories for them and this statu wasn't the type of statute that had gave them bankruptcy powers and in fact they chose instead of paying the bills instead of issuing obligations which the authority could have done to help pay the bills they chose to violate what their own or can you can you cancel out your obligations because you can't pay them that's never been the case ever and because you may be able to pay him later this was a situation where the parties got together and said what you're asking us to do are you asking us to interpret the statute is that is that your your concern are you asking us to find it somehow unconstitutional when you ask us to do well let's start with the statute because if the statute didn't exist if the statute allowed this to happen which tried another way the possibility doesn't come up until you determine that there is some law prevents them from doing something and possibly doesn't come up so they are relying on the well that says they can cancel the contract because the law says they can but they said to make can there isn't any standards that apply and that would be how they would the court would have held it unconstitutional the appellate court ruled that issue moot and still ruled out any possibility never should happen because a contract is not invalid because somebody says it is a contract isn't valid because of its terms a contract isn't invalid because because another words the contract was valid in other words the to have to continue listening to the authority once the court rules that the contract was valid there was no valid cancellation there's no impossibilities applying to performance because there's no law preventing  wrongful act by a board acting on behalf in other words it's just another governing board of that hack doesn't protect  usual first of all you have to get by both questions i would assume before you would determine whether the authority had to cancel is if you if you determined that the act didn't about lateral cancellation there is no constitutional issue but if we determine that the act allows unilateral cancellation when the constitutional issue arises krieger you also saying from your earlier argument that we don't need to get to those questions and just describing the constitutionality or the legal and possibility issue if we first address the issue of the interpretation of the statute what on the declaratory but that the statute didn't allow the cancellation as being moved and still said that in possibility applie saying as a matter of law in the history of this court and possibility has never been used in the us there is some statutory law that prevents something from occurring makes it illegal to occur  leases were never illegal so my answer to your question is if you ruled against me god forbid the issue of whether there was a valid cancellation of a i think if that's where it is thank you time's expired now for the record before the time starts i understand you've agreed to split and your where the time division all right there you see me please the court counsel good morning my name is ken florian and i mean the attorney on behalf of the hayes across cool district as you stated time twenty minutes will be split i would take an eight minutes and you let's on behalf of the state agency will be taking twelve minutes i'm here with nancy rogers co counsel on the case on behalf of the school district this case presents polar opposites in extremes we have on one into the spectrum we have an ordinary rental agreement between has across school district and innovative modular solutions on the other hand of the spectrum that at the other extreme we're faced with an extraordinary series of events and an extraordinary defense that applies to these events first the contract as stated in the school district an modular entered into contracts for mobile classrooms or classrooms that move from location to location when one school district is done with those they're given to another school district and released or result which is occurred after the mobile classrooms left his across school district and that's a critical point very critical because when the authority cancelled the leases and that is the most critical point here the authority took the action they authority is the state agency that took action to cancel and the relationship between the authority in the school district is also critical the school district is subordinate to the authority once the general assembly approved the school finance authority act in the authority took over complete control absolute control over the school district finances the school district was powerless to take any action whether that action by the authorities was legal whether the action by the authority was constitutional the school district could just it would not yet understand the facts coming into the actions that the authority had to take the school district it was over six million dollars and that with a fourteen million dollars budget the school district had seven hundred thousand dollars of unpaid bills the school district cannot make payroll they were in the midst of a financial collapse a financial crisis when the authority came and the authority came in with large amounts of money of state funds to rescue the school district and keep the schools open in the fall  now because they are in debt obligation to continue the performance of an executor contract is excused under the impossibilities defense the terminate the lease is to cancel the lease as is authorized by the statute it becomes impossible for the school district to do anything other than comply with that it was impossible for the school district to do anything that obeyed the order of the school fees authority the school finding its authority control the school district the school district is a secondary act or a subordinate body to the school fin authority of a firm really independent elected board of education became advisory became secondary became subordinate to the school  is the statute the mystery which will go into the justification of the statute for the authorities action on behalf of the authority but the the statute does set forth criteria by which the authority must determine whether it is going to cancel  contract or not but the important perspective from the school district is that an order was given and the school district could do nothing they could not maintain it could cover for a judge or an action they had no funds to hire counsel they had no funds the school the she was paying me with the approval of the authority not no dollar gets spent without the authorities approval again again getting to the issue of the justification whether the action by the authorities legal or not will be covered by mr alerts however the again the school district one is faced with a direction has no choice but to follow that the in this case it's critical understand that the impossibilities defense only can apply to exactly contracts where performance is not yet complete in this case the narrow facts were the units were returned to the mobile classroom company they resold them and really something recovered the monies that would have otherwise been lost despite that recovery the money they're looking to double dip by recover the least remain of the lease payments while they have sold and release the units they want interest they want private or public entity that's where the facts of this case are unique i'm likely to be repeated where we have a good one governmental authority taken action that prevents another governmental authority to perform under a contract how under the g to say that the school district caused this action this is just it's not a correct statement the school district and not cause the school district took all steps educated students and took steps to provide classroom space under the this ear financial decisions led to the financial collapse then the state of illinois stepped in and the state took control absolute control over the school district and cut the costs they cut thirty they fired thirty five percent of the staff they shut five of the ten buildings they had to cut costs reduce warning or honors may please the court system attorney general carl l it's for the hazel chris cooley district school finance thora t m your honor's this really let me ask you some questions the school district still exists despite the authorities intervention yes it exists without a checkbook essentially her who has the taxing tax levy authority here i believe the authority is its own taxing district has the school district still have tax levy authority you know yes my co counsel tells me it does and is there not a provision for multiple units of government if there were a judgment against a unit of government there's a separate tax levy to pay judgments i don't know if there's an i don't know the answer to that question or there is a statute that provides that judgments against school districts can be paid and i can tell you so that would be true despite the intervention of the school authorities yes sure thank you your honor sir in deciding this case you're going to have to come to the first question as to where to begin you can begin where the circuit court in the court did with count three or you can do is the plaintiff urges you to do and begin with counts one into i would suggest that you should follow the lead of the lower courts and begin with count three for the reason that you'll get to the same questions that you would get to if you started with count one anyway assuming you reject the a possibility defense so i would begin with the possibility of defense in count three if it applies apply it if it doesn't apply then get to the questions that my opponent has urged you to get to which is how should the statute be interpreted and if it's  the way i urge you to interpret it whether that interpretation would violate the contract clause lastly my point ask you to get to the question of whether there's been an improper delegation of state authority that's the structure i think that logically makes sense here i have arguments which brief i don't want to get bogged down in them i don't think that counts one and two are properly stated here because this is the declaratory judgment act requires there to be an actual controversy and by the time this case went to judgment there was no relationship between my client the authority and the pla no one to do anything different than the way it was before the judgment  and that's his and possibility defense which i agree with and that's where we think this case goes and  with regard to taking over school districts vendors that do business with the state are at risk that the state could say the police powers here don't allow for us to fill this contract and we're going to set aside that doesn't mean that all plaintiffs are without remedies there is the taking  take over companies when there was perceived to be such an important public purpose that the company needed to be continued and this court is called that an administrative receivership typically or i suppose in my mind a typical situation is the business owner fle stable come in run the business for the good of the public the liability for the business owner who fled is in place but that common law authorities wasn't necessarily limited to that that was a rule that the courts imposed that allowed for that they would have always talked about this power as one that was subject to the general assembly's authority and the general assembly in this case has not provided for liability for the school district so although i this is a common law power talking about i think the general assembly has picked it up and has has formed it and has said that this particular power with regard to school districts is without limitation and i certainly agree with my co counsel when he says that his client is unable to pay a judgment because the checkbook is actually held by my client  vendors i would take that position yes your honor as i said that there are constitutional protections for people who believe the state has taken their property but that's not the claim that this particular plaintiff is making this particular plaintiff is claiming a contract right and we know from  supreme court cases beginning of the one nine hundred forty s and finishing up in the one hundred seventy s and early eighty's that the contractor rights will not trump the exercise of the state's police power in certain cases that's the second part of my argument i'd like to talk briefly about the first part though if i could the statute has to be interpreted first but if impossibilities reject it your honor step to decide what that word cancel means woodley start with that anyway within the statute itself before we even get can't get what it's seeking from the defendant regardless then what's the what's the whole point of going through the analysis the school district simply cannot pay this judgment the general assembly has done that and so why would the court enter a judgment that  paid my poet said he wants the papers walls with it i just don't think that's something he's entitled to do well i'm perplexed how you can assert that if i understood your answer previously that the school district would have the authority to to execute provision in the law and i didn't see anything in there i don't believe it would nullify it but they have to come to the authority and get leave to do whatever it they want to do with regard to their finances as the authority cancel all the contracts for the school district paint some i'm excluding collective bargaining i don't believe so you're i don't i haven't seen anything like that this is the only contract i know of this contract was entered into with the timing really important to your analysis the contract was done in the summer of two thousand and two and in october the school district was under a financial oversight panel looking at their finances and trying to see what to do that statute wasn't sufficient to pull them out of their financial trouble and by december the general assembly had created my client the authority to take over so this this this contract was just before the school district was stripped of all its financial power when my client came in and looked at this financial situation they kept the buildings running for a period of years while they increased class size and downscaled school district and when the school district became functioning without the buildings they returned them to the plaintiff so that's what happened here and that happened in two thousand and four and two thousand and five in two thousand and six you know they actually paid for the property while it was being  it was when the property stopped being essential to the operation of the school district that my client sent notices out to the plaintiff and told them that their contracts were cancelled my partner urges the court to consider whether the word unilateral is in the contract that's silly in my talking between four and five hundred thousand dollars as is the claim that the plaintiff has they've got says that include the attorney's fees and i don't believe so but i'm not sure maybe my opponent can answer that question i apologize for not knowing when you said the they would return used in that they would not be paying on the lease any longer and that if they wanted to pick them up they should do that and they did and they have an expense in doing that they may have and i have often wondered why they didn't seek compensation for that into the taking squash crime raps between the return x return physical return and releasing i can't imagine they didn't curse some costs in removing the school district i don't know what they are or whether they actually did encourage them but removing the classrooms rather not the school district but there's nothing here in the record that i know of and i suppose that's because there has been a trial on what the damages actually are just to clarify in my mind because the contract did have a an early terminations feature which i think provided for some penalty to be paid is that really what we're talking about yes or are we talking about penalties in the end your honor i think the interesting question here the most interesting question is what the contract was analysis should be  there has to be and i think knowledge meant that the contract clause anticipates that police powers sometimes will trump contracts and i would suggest that this is one of those cases the situation that the his crystal district was was facing everyone c in a financial emergency the school children were about to be thrown under their schools because there wasn't funds to even pay salaries so it was only the creation of the authority that allowed the school district to continue when weighing  the contract rights issue in this case with the police powered rights that the general assembly felt were important to be exercised i would urge the court to find that this was a valid case in which although the contract was impaired it was impaired within the limits of the constitution i'll stand on my brief with regard to the improper delegation arguments i'll just say here that the stouffer test this court's test about whether the statute is sufficiently specific to allow it to withstand constitutional challenges are met anyone reading the statute would know who it was that was being regulated what it was the subject matter of what was being regulated and what was supposed to happen also want to make the point that it's that the authority my client did make the but i do know that if the plaintiff wants to seek money from the state my client the court of claims is where it has to go so your position is that contract action is against the district nappie authority but there is no money in the district  and released the school district thank as i miss when you mention the catch twenty two i was sure that by going over the head of somebody and all that scene in a movie that's kind of the way i feel here i the argument is that the other side is decided that neither one of them are liable let me get a couple of corrections forward for myself it was levy the levy case not the lewis case which involved the prohibition it auto sales i don't like what they're saying decided that they didn't want going to apply in possibility they ruled in our favor and said even though the property was partially condemned for not partially it was condemned for a period period of time not for the whole property he got to use it the government used it and of course all that case tonight amounted to was they paid the lessee for that period because that was the lessee had the interest in the property that compensable but the lessee was still required to pay under the lease so the requirements the pay under the lease still existed impassibility wasn't implied the other thing is entering into an was that school decided to use the proceeds of the bonds to build something and they did and what have you and those fines are a contract and they have a police power of course if you want to call it that to operate the schools and to pay and to have teachers and what have you you didn't seem they didn't cancel those bars they didn't cancel any other contract we were picked out where he's saying it was four hundred thousand dollars and they were six million dollars in  s and they said and somehow they're paying that other those other debts somehow they're not defaulting on other debts and what you have here is they've decided to pick and choose what they want to pay under an act which says their job isn't to cancel contracts their job is to enter into contracts and do what they have to do including cancelling contracts if they can negotiate cancellations with people they have which they never tried it in an effort to break sure they don't default on their debt and their obligations that's what the statute was for and it was put into place because the previous entity that monitored their sure they made no effort with respect to these contracts and you know what that really doesn't matter because it's debt these leases when you list the debt of the district to see if they get sued exceeded the debt limit will be included in that under some instances leases are considered bonds as an example in the bond authorization act long term leases are bonds that's why we said we  the interest level under the lease they're not liable for at that interest rate because there's another statute which defines it binds it limits the interest rate to less so even with this less interest position it's not an argument for now the question is are they are we entitled to damages whatever they might be including damages the removal or whatever it costs and whatever it costs because these things were designed for them and and so on that hasn't been decided because it was not reached at the trial court and i don't know how we can do that here and i suspect that court would be fair and do what's required to be done but that isn't an issue here i'm saying is when you get right down to it it goes back about fifty years i can't forget my my first contract teacher you spoon feed us what you always need to have an offer and acceptance and you always need to have consideration the way they're interpreted in that statute they can't enter into a contract because if it can't be a contract if they have a right to cancel it any time then if there's anything the only way you could have a contract is a fight if you stood across the table here's the money here's the project and in the in the contract is no longer executor but the truth of the matter is that if you enter into a contract where one side can cancel it it will with no cost with no no no penalty nothing that isn't a contract so you're saying they can't make contracts they can't even say in a contract we're going to waive my right to cancel the contract so that this contract will be binding because the process of law what they've done is cancel the contract none other picked our person first for two three years for whatever it was these so called receiver if they want to call it that accepted that contract it's been accepted those leases were in full force in effect and they still are and they cancelled the lease but they never said in the cancellation they're not liable for damages they never did in fact what they said in leases we can't pay you which provides  leach lease once you make a finding that we can't pay you