DCBA - Recent Case Law

Recent Case Law

By Steven R. Merican

Here are a few recent cases of importance and note - June 2002.

The Southwestern Illinois Development Authority v. National City Environmental, L.L.C., 2002 Ill. Lexis 299, Docket No. 87809 (4/4/02). Taking a business’s property, then selling it to an auto race track to use as a parking lot for the track, is an unconstitutional use of the power of eminent domain. In this case, the present court on rehearing reversed a holding of the court as it was constituted before the November 2001 election. This case represents the most important development in property rights case law in Illinois in some years.

The Southwestern Illinois De-velopment Authority is a municipal corporation. SWIDA is charged with promoting economic development in Madison and St. Clair counties. To that end, SWIDA is empowered to acquire property through the use of eminent domain. In 1996, SWIDA issued $21.5 million in bonds, and loaned the proceeds to Gateway International Motorsports Corporation. Gateway built an auto racetrack, which has had great success. Gateway soon found that it needed more parking capacity for its customers.

Two parking alternatives were considered: an adjacent site owned by National City Environmental; building a parking garage on the track’s existing property. Building the garage would require much greater expense. Gateway tried to buy National City’s land, which NCE used for its own business purposes. But NCE did not want to sell, at least not at the offered price. Apparently Gateway was unwilling to pay the expense of building a garage, so the company asked SWIDA to take the property. SWIDA completed a quick-take, which was approved by the county board. A circuit court made a finding of just compensation and entered an order vesting title to SWIDA. On the same day, SWIDA conveyed title to Gateway by way of quit-claim deed.

The court of appeals held that SWIDA exceeded its constitutional authority, and reversed the circuit court. In its initial review, the supreme court reversed the appellate court, and let the taking and the conveyance stand. However, on rehearing, the present court reversed and held that "SWIDA exceeded its constitutional authority in taking NCE’s land by eminent domain."

On rehearing, the supreme court defined the issue as: "whether SWIDA exceeded the boundaries of constitutional principles and its authority by transferring the property to a private party for a profit when the property is not put to a public use." Because the parking facility would be used by Gateway customers in exchange for payment, it was not open to the public "by right." Thus, the court rejected the argument that this was a public use at all.

The court saw through the arguments that the taking was for the economic benefit of the public, and placed greater significance on NCE’s ownership rights. "[T]his action was undertaken solely in response to Gateway’s expansion goals and its failure to accomplish those goals through purchasing NCE’s land at an acceptable price. It appears SWIDA’s true intentions were to act as a default broker of land for Gateway’s proposed parking plan." The court ruled that eminent domain could not be used to beat the marketplace: "Using the power of the government for purely private purposes to allow Gateway to avoid the open real estate market and expand its facilities in a more cost-efficient manner, and thus maximizing corporate profits, is a misuse of the power entrusted by the public."

Wickham v. Byrne, 2002 Ill. Lexis 313, Docket Nos. 92048, 92135 (4/18/02). Grandparent visitation statute violates parent’s due process rights and therefore is unconstitutional.

Sections 607(b)(1) and (b)(3) of the Illinois Marriage and Dissolution of Marriage Act, 750 ILCS 5/607(b)(1), (b)(3) permit a court to grant visitation to a grandparent, when one parent is deceased, if doing so is in the best interest of the child. Wickam involved consolidated cases in which the surviving parent was at odds with grandparents of the deceased parent over visitation.

The supreme court ruled that the statute violated the parent’s due process rights because it "places the parent on equal footing with the party seeking visitation rights" and "contravenes the traditional presumption that parents are fit and act in the best interests of their children." The court ruled that a parent’s due process rights were violated by the statute because, "Section 607(b)(1) exposes the decision of a fit parent to the unfettered value judgment of a judge and the intrusive micromanagement of the state." The court recognized that parents and grandparents can both have the best interests of the child at heart, but also that "a fit parent’s constitutionally protected liberty interest to direct the care, custody, and control of his or her children mandates that parents — not judges — should be the ones to decide with whom their children will and will not associate."

Lauer v. American Family Life Insurance Co., 2002 Ill. Lexis 300, Docket No. 91804 (4/4/02). Contestability of life insurance policy runs from date of issue, not from the time of first premium payment. Albert Lauer was diagnosed with terminal cancer in May 1996. He applied for life insurance on March 23, 1997, but he did not disclose the cancer diagnosis in the insurance application. He paid the first premium on March 26, 1997, and American Family issued a conditional receipt on that date. The conditional receipt provided temporary life insurance that would terminate within 120 days or the effective date of the policy, whichever came first. The policy was issued on April 12, 1997. Mr. Lauer died on March 28, 1999.

The beneficiary made a claim under the policy, but American Family refused to pay on the basis that Lauer did not disclose the cancer diagnosis and the policy was still within the two-year contestability period. The policy stated that the insurer would not contest the validity of the policy after it was in force for two years from the issue date. The policyholder relied on section 224 of the Insurance Code, 215 ILCS 5/224, and argued that the contestability period began to run at the time of payment of the premium – i.e., when American Family began to provide the temporary insurance. The supreme court disagreed, and held that both the policy and the statute were clear that "issue date" did not mean "the first date at which the parties entered into any part of the contract." Because Mr. Lauer passed away within two years of the actual issue date, American Family had the contractual right to contest the truthfulness of the application and to deny coverage.

Steve Merican is a sole practitioner in Oak Brook, Illinois. Steve’s practice is concentrated in appeals in state and federal courts. His URL is http://www.illinoislocalcounsel.com.