PML Dev. v. Vill. of Hawthorn Woods

226 N.E.3d 1163

2023 IL 128770

PML DEVELOPMENT LLC, Appellant,

v.The VILLAGE OF HAWTHORN WOODS, Appellee.

(Docket No. 128770)

Supreme Court of Illinois.

Filed June 15, 2023

Melinda Kollross and Don R. Sampen, of Clausen Miller P.C., of Chicago, for appellant.

Timothy D. Elliott, Daniel J. Szczesny, and Paris L. Smith, of Rathje Woodward LLC, of Wheaton, and Patrick T. Brankin, Michael E. Kujawa, and Nicholas D. Standiford, of Schain Banks Kenny & Schwartz Ltd., of Chicago, for appellee.

OPINION

JUSTICE O’BRIEN delivered the judgment of the court, with opinion.

¶ 1 Plaintiff, PML Development LLC (PML), brought an action against the Village of Hawthorn Woods (Village). PML alleged the Village breached a development agreement (Agreement) between the parties. The complaint sought damages resulting from the Village’s breach, as well as an order compelling the Village to comply with the Agreement. The Village denied breaching the Agreement and filed counterclaims alleging that PML breached the Agreement. Following a bench trial, the circuit court of Lake County found that both parties materially breached the Agreement. However, the circuit court concluded the Village’s first material breach excused PML from performing its obligations under the Agreement. Therefore, the circuit court entered judgment in favor of PML on both its breach of contract claim and the Village’s counterclaim.

¶ 2 The Village appealed, and PML cross-appealed. The appellate court reversed, finding that neither party could recover damages because each party materially breached the Agreement. The court reasoned that, because PML continued to perform under the contract despite the Village’s breach, PML remained bound by the terms of the Agreement. When PML subsequently materially breached those terms, it could not recover damages. 2022 IL App (2d) 200779, 463 Ill.Dec. 598, 210 N.E.3d 242 (Ill. App. 2022). This court granted PML’s petition for leave to appeal. Ill. S. Ct. R. 315 (eff. Oct. 1, 2021). For the following reasons, we reverse the appellate court’s judgment. We affirm the circuit court’s judgment in favor of PML on its breach of contract claims. We reverse the circuit court’s judgment in favor of PML on the Village’s breach of contract counterclaims. We remand the matter to the circuit court for further proceedings.

¶ 3 BACKGROUND

¶ 4 In June and July 2012, PML prepared a set of grading plans for a 62-acre property within the Village and submitted those plans to the Village for preapproval before it purchased the property. The Village’s chief administration officer and Village clerk informed PML that they had no objection to the plans, and on September 7, 2012, PML purchased the property.

¶ 5 On October 11, 2012, PML and the Village entered into the Agreement regarding the use of the property. The Agreement included the following relevant terms. Recital B limited PML to adding 1.2 million cubic yards of fill. Recital F required a drawdown deposit to be executed before commencing work.

¶ 6 The parties agreed that, upon completion of the grading project but no later than December 31, 2015, PML would donate the entire parcel of land to the Village for a total sum of $1 by warranty deed free and clear of all liens, encumbrances, and special service area (SSA) assessments as of the date of conveyance. PML would pay all taxes while the property was in its possession, and the Village would assume responsibility for the taxes once PML conveyed the property to the Village.

¶ 7 The Agreement also allowed the property to be accessed by Kruger¹ Road.

PML agreed to bring Kruger Road back up to current Village standards at the end of the project. PML would perform the reconstruction with an anticipated donation toward that reconstruction of $200,000.

¶ 8 The Agreement provided that, before work could commence, PML would present the Village engineer with all plans, studies, reports, surveys, and other materials that might be necessary under the applicable Village codes and ordinances or that might be reasonably be requested by the Village engineer. The Village engineer would then approve the final plans if those plans satisfied the applicable codes and ordinances. The parties also agreed that the grading permit would be valid for two years from the date of issuance and that, if work was not completed within two years, a permit extension would be granted for an additional two years. The Agreement required PML to establish a drawdown account, and the funds from that account would be used to pay for inspections related to the grading, filling, sedimentation and soil erosion control measures, stormwater management, perimeter landscaping, and seeding operations.

¶ 9 The Village originally approved the plans PML submitted, and PML began operations on the property in February 2013. However, the Village attempted to transform the Agreement by placing additional requirements on PML so that PML could fill and develop the land to conform with the Village’s concept plan for future development of a municipal campus on the property. From March 2013 through September 2014, the Village repeatedly required PML to revise its plans without citing any Village code or ordinance violations. Instead, the Village made its demands to accommodate the Village’s ever-changing concept plans. Despite this, PML sent revised plans to accommodate the Village’s demands.

¶ 10 On May 4, 2015, PML filed a three-count complaint against the Village alleging the Village interfered with PML’s work on the property. Count I of PML’s complaint sought declaratory relief so that PML could complete its work in substantial compliance with the Agreement. Count II sought mandamus relief directing the Village to comply with its obligations under the Agreement. Count III alleged a breach of contract claim and sought monetary damages for the Village’s breach along with a determination that PML should be excused from its obligation to convey the property to the Village. The complaint did not specifically allege that the Agreement should be terminated based on the Village’s alleged material breaches.

¶ 11 The Village filed an answer, affirmative defenses, and counterclaims. The Village denied breaching the Agreement. The counterclaims alleged PML materially breached the Agreement for several reasons. Relevant to this appeal are the Village’s claims that PML failed to (1) pay the property taxes on the property (count IV) and (2) fund the drawdown account, which had a $58,103.25 deficit (count V).

¶ 12 On November 17, 2015, PML filed a mandamus petition. PML alleged that its incentive to enter into the Agreement was the potential income to be derived from charging its customers by volume for accepting fill for deposit on the property and then using that fill to grade the property. PML asserted that the Village’s misconduct had impaired any potential profit PML may have derived from the project. Specifically, the Village refused to issue the grading permit allowed under the Agreement. Instead, the Village interfered with PML’s operations and attempted to force PML to comply with the Village’s demands to conform the property to the Village’s conceptual plan, which differed substantially from the approved grading plans. PML requested a mandamus order directing the Village to issue the permit as required by the Agreement.

¶ 13 In response, the Village argued that PML breached the Agreement and should not be granted mandamus relief. The Village alleged that PML failed to pay the taxes for the property in violation of the Agreement. Consequently, PML could no longer convey the property free and clear of liens and encumbrances due to the tax delinquencies.

¶ 14 On January 15, 2016, the circuit court granted PML’s mandamus petition and ordered the Village to issue a permit to PML with a December 31, 2016, expiration.

¶ 15 In October 2016, the Village filed a motion to enforce the circuit court’s prior mandamus order and compel PML to complete its work by December 31, 2016. The Village argued that the Agreement did not contemplate PML operating on the property beyond the four-year period (2012-16). PML also continued to be in breach of the Agreement by failing to pay taxes on the property. The Village claimed that PML should not be allowed to reap the benefits of the project while avoiding the court’s orders and PML’s obligations under the Agreement.

¶ 16 PML filed a response to the motion to enforce the court’s mandamus order and included a cross-motion for mandamus relief. PML noted that the Agreement included a provision that allowed an automatic two-year extension if it had not completed the project. PML asserted that it had a right under the Agreement to continue to perform its operations and asked the court to deny the Village’s request to compel PML to finish the project by December 2016. As to its cross-motion for mandamus relief, PML asked the court to compel the Village to issue a permit extending the expiration by two years as required by the Agreement.

¶ 17 The Village also filed a motion for summary judgment. In this motion, the Village argued that PML materially breached the Agreement by failing to pay the property taxes and, as a result, PML could no longer convey the property to the Village free and clear of all liens and encumbrances as provided by the Agreement. Therefore, the Village requested summary judgment in its favor as to count IV of its counterclaims.

¶ 18 In response to the motion for summary judgment, PML argued that the failure to pay taxes was not a breach because the project had not yet been completed and PML could still redeem the taxes.

¶ 19 The Village also filed a motion to appoint a receiver. The Village contended that PML failed to pay the property taxes and caused the taxes to be sold at a tax auction. Consequently, it would be impossible for PML to convey the property to the Village, unless PML redeemed the taxes. The Village asked the court to compel specific performance by...