East Liverpool Drainage and Levy District v. State of Illinois

OPINON

On April 10, 2024, a final hearing was held before Commissioner Ramage. Appearing for Claimant was Attorney William Knuppel. Appearing for Respondent were Assistant Attorneys General Jamie Knodel and James McCarron. Pursuant to the Court’s August 23, 2023 Order, any claims in this matter accruing prior to August 3, 2016 were barred.

In Claimant’s case in chief, it called four witnesses, Jeffrey Smith, Richard Bull, Jr., James Bull and Teresa Garlisch.

Jeffrey Smith is a farmer who leases land in the East Liverpool Drainage District. He pays cash rent to the Illinois Department of Natural Resources (“IDNR”). The Drainage District protects his land from the Illinois River. He could not farm the land without the benefit of the protection provided by the Drainage District. No one has contended that he owes the assessments to the Drainage District.

Richard Bull, Jr. is a commissioner for the Drainage District, he has been a farmer in Fulton County for over forty years. The Drainage District consists of six hundred acres. The District was formed in 1916. It contains nine miles of levees and seven miles of ditches. It has purchased three pumps in recent history to assist with the levy operation. The biggest pump was purchased in 2006. Additional assessments against the landowners within the District are to pay for these pumps. See Claimant Exhibits B-1 and C-1.

[*158] In 2005 and 2006 (see Exhibits N and O), the District maintains that IDNR paid the regular assessment and an additional assessment. The purpose of the annual assessment is basically to maintain the electricity and ditches. The additional assessment pays for things such as the pumps. According to Richard Bull, Jr.’s understanding, the additional assessment is not a special assessment under Illinois law.

It was undisputed that IDNR leases the farmland within the Drainage District because it is prime farmland.

Claimant maintains IDNR did not pay any assessments in 2001, 2002 and 2003. It is the District’s position that the remaining landowners have been taking up the slack for IDNR since it has not paid assessments since 2006. The District does not have any cancelled checks showing payment, but it does have entries in its logbooks.

Commissioner James Bull testified that he is a farmer in Lewistown, Illinois. He farms within the Drainage District and pays the drainage assessments. He has been a Commissioner for over twenty-five years. Exhibits O and N, the Annual Financial Report of the East Liverpool Drainage and Levy District Commissioners, bears his signature. Exhibit N indicates that on August 20, 2004, IDNR paid an annual assessment of $1,668.23. Exhibit O indicates (see page 2 under Receipts) that IDNR paid an annual assessment of $883.54 on March 18, 2005, and a special assessment of $784.69 on March 18, 2005.

The Claimant clarified at the hearing that it is not seeking special assessments against the Respondent; it is only seeking the recoup the regular assessments.

Teresa Garlisch is the Treasurer for the Drainage District. Exhibit M shows that IDNR paid additional assessments of $784.79 on August 20, 2004 and March 18, 2005, but has not paid any additional assessments since 2005. No additional assessments have been issued to IDNR since 2021, according to Exhibit M. In addition, Exhibit M indicates that Respondent paid annual assessments of $883.44 on August 20, 2004 and March 18, 2005.

In 2023 and 2024, Ms. Garlisch sent notices of assessments to the Office of the Attorney General, the Illinois Department of Commerce and Economic Opportunity (“DCEO”), IDNR in Springfield, and the Rice Lake Office of IDNR. See Exhibits P and [*159] Q. Since 2003, Claimant did not present any evidence that it sent notices to these three organizations.

In Respondent’s case in chief, its first witness was Ellen King, Chief Fiscal Officer for IDNR. She indicates that she has examined the state budgets for her agency since 2016 and there is no appropriation that can pay for special assessments. She cannot allow something to be paid unless there is an appropriation.

She also examined the financial records of IDNR and could not locate any payments to the Drainage District for 2004 and 2005, despite the Drainage District’s records showing payments. It is her position that no such payments were made because they were not logged in by the State. She admitted, however, that she did not use the Drainage District’s employer ID to look for payments. She didn’t know how bills could have been paid in 2004 and 2005. Respondent did not offer any Exhibits in conjunction with Ms. King’s testimony.

Respondent called Robert Spencer, the Division Manager for Real Estate Services and Consultation at IDNR. Prior to that, he was a Land Acquisition Agent at IDNR. He is familiar with the Drainage District, and going back to 2016 he received delinquent assessment notices from other bodies. Typically, when such notices were received, IDNR would send out a form letter indicating that such notices could not be paid absent appropriate statutory authority. He had no specific evidence that such letter was sent to Claimant in this case. Mr. Spencer’s communications would have been directly with the General Counsel’s office at IDNR, and he did not know if it sent out any such letter. He is not aware of any statute that exempts IDNR from paying regular assessments. He received the notices for 2023 but has not received anything for 2024.

Garrett Carter, General Counsel for DCEO, testified that he is not aware of any statutory authority wherein DCEO could pay any such assessments. Before payments can be made, there must be an obligation document. No such document exists for these payments. However, DCEO has never been requested to make payments to the levy district. Mr. Carter was familiar with 35 ILCS 200/29-10 and 15, cited in Respondent’s affirmative defenses. He acknowledged that the term special assessment is used in the statute, but it’s not defined. He also acknowledged that the notices received by DCEO did not use the term special assessments.

[*160] Parties’ Written Closing Arguments

Claimant’s Closing Argument

Claimant argued at the hearing that the burden of proof is on the Respondent. Claimant cites no authorities regarding this proposition. Therefore, the Court rejects this argument.

Claimant frames the issues as follows: (1) whether Respondent is required to pay Drainage Assessments duly levied by a unit of local government, with regard to lands owned by the State of Illinois, located within the boundaries of that Drainage District, and which were leased for profit by the State for agricultural purposes; (2) if Respondent owed the Drainage Assessments to Claimant, how much is now due and owing. Claimant’s Closing Argument, dated 5-20-24, p. 1.

As to Count I of the Complaint, Claimant argues that Respondent offered no evidence or authorities showing that the Respondent was exempt from paying the Drainage District’s Annual Maintenance Assessments or Additional Assessments. Id., p. 5. Claimant references Section 200/29-5 of the Property Tax Code which provides:

State policy. It is the policy of this State that when any unit of local government

makes a local improvement by special assessment or special tax which benefits

abutting State property, the State should pay for the benefit so conferred on the

same basis as other property owners benefitted by that improvement, subject to the

same rights as are afforded to those property owners.

35 ILCS 200/29-5.

Claimant argues that its citation to 35 ILCS 200/29-5 was not to claim that the Annual Maintenance assessments were “Special Assessments.” Rather, it was to show the lack of an Illinois law exempting Respondent from “paying Annual Maintenance Assessments or Additional Assessments levied by a Drainage District” and what State policy “was when the [Respondent] received benefits.” Claimant’s Closing Argument, p.9. Claimant further argues that Drainage Assessments are not “taxes” under Illinois law. Id., [*161] p. 10. Claimant argues that Respondent leases its land for profit and that without the work performed by Claimant, the land would not be able to be farmed so that Respondent can generate a profit. Id., p. 11.

As to Count II, Claimant argues it mailed Annual Maintenance Assessments in the amount of $883.44 to IDNR each year, beginning late 2016. Id., p. 12. Claimant agrees to waive any possible interest and will accept eight (8) payments of $883.44 each, for a total of $7,067.52, in full settlement of any and all drainage obligations owed by the Respondent to the Claimant through the year 2024. Id.

As to the Respondent’s affirmative defenses, Claimant acknowledges that the claims have lapsed but since there was $55,000,000.00 appropriated for operational expenses in Fiscal year 2023, these assessments could be paid out of that appropriation as an operational expense. Id., p. 14. Further, Claimant argues that Respondent’s affirmative defense regarding the failure to send appropriate notices is inapplicable because 35 ILCS 200/29-10 only applies to “Special Assessments which are levied by Special Districts such as Sewer Districts, Paving Districts, etc., and does not include Drainage Districts.” Id. Finally, Claimant maintains that its exhibits, which were not contradicted by Respondent, demonstrate that it did file the Certificates of Levy each year to collect the Annual Maintenance Assessments as required by 70 ILCS 605/5-20. Id., pp. 14-15.

Respondent’s Closing Argument

Respondent asserts that Claimant has failed to establish a prima facie case because the State is only obligated to pay annual maintenance assessments if the money has been appropriated. 70 ILCS 605/4-27. Neither IDNR or DCEO has appropriated funds to pay annual maintenance assessments to Claimant. Respondent’s Closing Argument dated June 7, 2024, p. 2. In addition, Respondent argues that Claimant has failed to establish the amount owed for annual maintenance assessments even if money had been appropriated to pay Claimant’s assessments because the assessments levied are not specific and because there were inconsistent estimates of how much of the State’s acreage lies within the Claimant’s drainage, Claimant has not established damages. Id. Respondent does not address special and additional assessments because Claimant is not seeking same.

[*162] Respondent also argues that additionally, Claimant referenced evidence not introduced during the trial at multiple points in its closing argument, including a reference to an assessment rate that was increased for 2024 (citing Claimant’s Closing Argument at pg. 8-9) and reference to a “catch-all appropriation” for IDNR and a House Bill (citing Claimant’s closing argument at p. 10). Id., pp. 2-3.

As to the lack of an appropriate defense, Respondent quotes the following from the Illinois Drainage Code:

The Commissioners, subject to the approval of the court, shall have the power and

authority:

(a) To levy and collect assessments as provided in this Act, when such assessments

become necessary to avail the district of financial assistance from any appropriation

made by the Government of the United Stated, the State of Illinois, or any of their

agencies. (emphasis added).

70 ILCS 605/4-27.

Respondent Closing Argument, p. 3.

Respondent argues that the Drainage Act is clear that an appropriation must be made for that purpose (an assessment) for Respondent to be liable for same. Id., citing Commissioners of Drainage District No. 2 in Pleasant View Tp., Macon County and State of Ill. v. State, 26 Ill. Ct. C1. 122, 127, 1967 WL 6176 (1967)(“Commissioners of Drainage District No. 2”).

Respondent maintains that the undisputed evidence is that no money has ever been appropriated by the Illinois legislature to pay any type of drainage assessments, by East Liverpool or any other drainage district, as testified to by Ellen King, the Chief Fiscal Officer for IDNR, and Robert Spencer, the Division Manager for Real Estate Services and Consultation of IDNR. Respondent Closing Argument, p. 4, citing Trial Transcript at 68, 70, 71, 83 and 87. Ms. King testified that she investigated whether IDNR had ever made any such payments and could not find any evidence that it had, and Claimant was unable to provide any documentation such as a bank statement or wire transfer supporting this claim. Respondent’s Closing Argument, p. 5, citing Trial Transcript at p. 72-74.

[*163] Respondent additionally argues that even if the Court could order an award of less than $50,000 under 705 ILCS 505/24(e), that cannot be done because 70 ILCS 605/4-27 requires an appropriation which is lacking here. Thus, Claimant has not met its burden of proof. Finally, Respondent argues that Claimant has not presented clear evidence as to how much of Respondent’s acreage is subject to assessment.

Claimant’s Rebuttal Closing Argument

Claimant first argues that 70 ILCS 605/4-27 (requiring an appropriation) does not apply as that is found in Article IV of the Drainage Code which deals with the powers and duties of Commissioners. Instead, Claimant is relying on Article V, specifically 70 ILCS 605/5-1. That statute gives Commissioners the power to levy annual maintenance assessments. Claimant asserts (with citation to authority) that 70 ILCS 605/4-27 only applies in situations where the Drainage District is seeking matching funds from the State, which it is not doing here. Claimant’s Rebuttal dated June 12, 2024, p. 2. Moreover, Claimant maintains that Exhibit G establishes that the $883.44 yearly assessment covers 49.08 acres owned by Respondent. Id. Claimant states that its resubmitted brief does not include a quantum meruit argument or reference to a 2024 assessment. Finally, Claimant asks the Court to take judicial notice of the State’s appropriations to IDNR.

ANALYSIS

Resolution of the issues presented to the Court is complicated. It is undisputed that: Respondent owns land within the Drainage District, is leasing its land for profit, is deriving a benefit from the services of the Claimant (such as not having its land exposed to flooding), and the Respondent has the statutory authority to make assessments against landowners. As the assessments are not a tax, they are something that, in theory, could be paid for by the State. It is the application of this last point that is at the heart of the parties’ dispute.

Respondent argues that it is without legal authority to pay the assessments due to the lack of an appropriation. Claimant argues that a specific appropriation is not required [*164] to pay the assessments. Even if there is such a requirement, Claimant argues that there was such an appropriation, at least in Fiscal Year 2023, as evidenced by the Respondent’s operational appropriation.

The balance of equities favors Claimant as it seems inequitable and unjust that Respondent could escape the assessment simply because it made no appropriation. Respondent could, in theory, always escape paying the assessments at issue by simply choosing not to make an appropriation. Yet, it is blackletter constitutional law in Illinois that the State is not allowed to expend money without an appropriation. Also, quantum meruit claims cannot be brought in the Court of Claims. Hofer v. State, 32 Ill. Ct. C1. 745, 749 (1978). The issues above will be examined immediately below.

Surprisingly, in its rebuttal, Claimant does not address our decision in Commissioners of Drainage District No. 2 in Pleasant View Tp., Macon County and State of Ill. v. State, 26 Ill. Ct. C1. 122, 127 (1967), which was cited by Respondent in its written Closing Argument (see page 4) and is directly on point. There, Drainage Commissioners sought “to collect an assessment of $200.00, which was levied in 1961 against the right-of-way of Illinois State Bond Issue Route No. 48 located within the boundaries of the Drainage District. Commissioners of Drainage District No. 2. 26 Ill. Ct. C1. at 122-123. The question presented was whether state highways were exempt from drainage assessments. Id. at 123. Respondent argued that such assessments were an unauthorized tax. Id. We cited Section 4-27 of the Drainage Code, which Respondent contends applies here. Id. at 125. We also observed, the “general rule in the interpretation of statutes limiting rights and interests is to construe them so as not to embrace the sovereign power or government unless the same is expressly named therein. The intent that the property of the State shall be subject to assessment must be clearly expressed. (Sec. 87, 48 Am. Jur., Special and Local Assessments.)” Id. We concluded, after citing the appropriation language in Section 4-27, “[i]t is our opinion that an appropriation must be made before an assessment may be levied against the State of Illinois.” Commissioners of Drainage District No. 2, 26 Ill. Ct. C1. at 127.

[*165] Claimant argues that Section 4-27 of the Drainage Code (70 ILCS 605/4-27) does not apply to inform the analysis here. Claimant argues that Section 4-27 applies only in situations where the Drainage District is seeking matching funds from the state or federal government. Claimant’s rebuttal, p. 2. However, Claimant cites no legal authorities for this proposition. The statute says nothing about matching funds. Though such an interpretation is plausible, the Court cannot leap to such a conclusion without appropriate authorities, especially when we made no such distinction in Commissioners of Drainage District No. 2 in citing Section 4-27. Therefore, Claimant has not persuaded the Court that Section 4-27 is inapplicable.

Here, Claimant presents no evidence that there was an appropriation made by the General Assembly for the purposes of IDNR paying the assessments at issue. Section 4-27 is also consistent with the Illinois Constitution which also requires that, “[t]he General Assembly by law shall make appropriations for all expenditures of public funds by the State. Appropriations for a fiscal year shall not exceed funds estimated by the General Assembly to be available during that year.” Illinois 1970 Constitution, Article VII, Section 2.

Claimant has conceded that it is not seeking to recoup a “special assessment.” Claimant’s Rebuttal, pp. 2, 4. However, the Court notes that for special assessments, the Property Tax Code provides, “It is the policy of this State that when any unit of local government makes a local improvement by special assessment or special tax which benefits abutting State property, the State should pay for the benefit so conferred on the same basis as other property owners benefited by that improvement, subject to the same rights as afforded to those property owners.” 35 ILCS 200/29-5. Further, 35 ILCS 200/29- 15, delineates the circumstances by which special assessments can be paid by the State (e.g., Attorney General certification and vouchering and mandatory and vouchering requirements). The Property Tax Code provides a mechanism where special assessments must be paid. There does not appear to be any analogous provision for the annual drainage assessments.

[*166] Claimant argues that this provision of the Property Tax Code supports its authority to recoup drainage assessments without a specific appropriation. The Court disagrees.

That Section 29-15 of the Property Tax Code mentions vouchering and appropriations supports Respondent’s argument that monies cannot be paid absent an appropriation. It does not support the inference suggested by Claimant that the absence of an analogous provision for drainage assessments means that there is no restriction of the Claimant’s ability to make and collect such assessments against Respondent. Claimant’s position is at odds with established law which disfavors assessments against the State and fails to consider our holding in Commissioners of Drainage District No. 2. There, we held that the, “intent that the property of the State shall be subject to assessments must be clearly expressed.” Commissioners of Drainage District No. 2, 26 Ill. Ct. C1. at 125.

We also cited the following Illinois Supreme Court authority:

A municipal corporation has no power to assess or exact from the State or the general government any sum for benefits conferred. The power to levy taxes or impose assessments for benefits can only be exercised on the governed and not on the governing power, whether State or Federal… it is a familiar rule of interpretation that a law, which refers to inferiors, is never applied to superiors. Again, all grants are taken most favorably to the government or the public. Hence, when the power was granted to these municipal governments to make such assessments, it would not be a favorable construction to the government to hold that the assessment might be imposed on government property. Commissioners of Drainage District No. 2, 26 Ill. Ct. C1. at 126, quoting Fagen, et al. vs. City of Chicago, 84 Ill. 227 (1876).

Thus, the presumption under Illinois Law is that the State is not subject to such assessments, absent specific statutory authority. Respondent does not have to show it is not subject to such assessments. It is the opposite: Claimant must show that there is authority to both levy and collect assessments against the State.

Additionally, to the extent that Claimant contends that there was a general appropriation made for maintenance in Fiscal Year 2023 (Claimant’s Closing Argument, p. 14), there was no evidence admitted at trial to support this claim, and it will be ignored. Even if we did not ignore the evidence, there was insufficient evidence provided that would allow the Court to take judicial notice. No other references are provided for [*167] appropriations for multiple other years being claimed. Thus, there is simply no basis for the Court to conclude that appropriations were, in fact, made to pay for these assessments.

While the State does appear to be enjoying a benefit from Claimant’s services, as stated above no quantum merit theories may be pursued in this Court. Hofer, 32 Ill. Ct. C1. At 749. Claimant’s remedy appears to be a legislative one.

WHEREFORE, Claimant’s claim is denied in its entirety.