Millennium Park Joint Venture, LLC v. Houlihan

Docket No. 108923.

IN THE

SUPREME COURT

OF

THE STATE OF ILLINOIS

__________________

MILLENNIUM PARK JOINT VENTURE, LLC, Appellee, v.

JAMES M. HOULIHAN, Assessor of Cook County, et al.,

Appellants.

Opinion filed December 23, 2010.

JUSTICE THOMAS delivered the judgment of the court, with

opinion.

Chief Justice Kilbride and Justices Garman and Theis concurred

in the judgment and opinion.

Justice Freeman dissented, with opinion.

Justice Burke dissented, with opinion, joined by Justices Freeman

and Karmeier.

OPINION

Plaintiff, Millennium Park Joint Venture, LLC, brought a

declaratory judgment action in the circuit court of Cook County

against defendants–Cook County Assessor James Houlihan and Cook

County Treasurer Maria Pappas–seeking a declaration that

defendants’ tax assessment of plaintiff’s contractual interest in real

property owned by the Chicago Park District was not authorized by

law. At issue in this case is (1) whether the circuit court has original

subject matter jurisdiction over the declaratory judgment action

challenging as “unauthorized by law” the assessor’s assessment of

plaintiff’s property interest; and if so, (2) whether plaintiff’s

agreement with the Park District created an untaxable license as

opposed to a taxable lease. The circuit and appellate courts answered

both questions in the affirmative. See 393 Ill. App. 3d 13. For the

reasons that follow, we affirm the judgment of the appellate court.

BACKGROUND

Millennium Park in Chicago is owned by one or more tax-exempt

entities, including the Chicago Park District, and the entire park is

considered “exempt” property under the Property Tax Code (35 ILCS

200/1–1 et seq. (West 2008)). Plaintiff entered into a “Concession

Permit Agreement” with the Park District in February 2003, which

allowed plaintiff to use certain portions of Millennium Park to

operate a food concession service. The Property Tax Code authorizes

the assessor to tax a lessee’s leasehold interest in tax-exempt property

in certain circumstances. 35 ILCS 200/9–195(a) (West 2008). The

statutory scheme, however, does not authorize a tax or an assessment

on exempt property that is merely licensed. See 35 ILCS 200/9–70

(West 2008); 35 ILCS 200/9–195 (West 2008); 35 ILCS 200/1–130

(West 2008); Jackson Park Yacht Club v. Department of Local

Government Affairs, 93 Ill. App. 3d 542, 547 (1981); see also

Kankakee County Board of Review v. Property Tax Appeal Board,

226 Ill. 2d 36, 55 (2007) (“Illinois case law is consistent in holding

that government permits, ordinances, licenses, orders, or regulatory

approvals do not create assessable entities.”).

Plaintiff’s agreement with the Park District was for a term of 20

years, with the possibility for extensions that would allow for a total

term of 30 years. The agreement divided the property to be used by

plaintiff into two portions. The first section was called the “premises”

consisting of 11,000 square feet in the “building” and 15,000 square

feet in the “tunnel.” The premises contained a sit-down, casual

restaurant known as the Park Grill, a bakery and ice cream parlor

known as the Park Café, and a seasonal retail store known as the Park

Store. Plaintiff was also provided with storage facilities located in the

tunnel.

The second section of property was designated the “concession

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area,” and it consisted of a large part of the park in which plaintiff

was allowed to operate a seasonal mobile food and beverage

concession, subject to the approval of the Park District. The

agreement contained diagrams of the park showing the locations of

the building and the tunnel, as well as the specific locations of the

restaurant, retail store, concession area, and bakery and ice cream

parlor.

The agreement required plaintiff to pay a minimum fee of

$275,000 per year, with additional percentage fees based on the

amount of sales and the number of years the agreement had run. For

instance, in the first three years, the percentage fee was 3% of any

sales between $3 million and $12 million, and 1% of any sales

exceeding $12 million. By years 16 thru 20, the percentage increased

to 5% of sales between $1 million and $14 million. Plaintiff was

required to furnish the Park District with statements of its monthly

gross sales for the calculation of the percentage fee. The Park District

was also permitted to review plaintiff’s financial records to determine

gross sales. The minimum fee was to be abated initially until the

earliest of certain specified events occurred. The Park District was to

pay for all utilities.

The agreement was over 90 pages long and contained numerous

requirements in which the Park District was to exercise control over

plaintiff’s operations. It set forth the minimum times and dates of

operation and the permitted uses of the various areas, but provided

that the Park District was not required to keep Millennium Park open

for any minimum amount of hours. Plaintiff was required to

adequately staff the facilities with well-trained personnel for efficient

first class service and to provide adequate stock. The Park District

had the right to approve all signs used by plaintiff and any name

change. It also required that certain “Key Men” or “Alternate Key

Men” continue to own or control the affairs of plaintiff’s operation to

insure its quality. Moreover, plaintiff was subject under the agreement

to the Park District’s extensive requirements regarding employee

uniforms, cleanliness, pest control, signs, repair and maintenance, ice

and snow removal and food and safety rules. Plaintiff was also

required to carry minimum amounts of insurance.

Furthermore, the agreement did not permit plaintiff to “give, sell,

license, sublet, permit, subcontract, sub-concession or otherwise

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transfer its interest” in the agreement without the prior written

consent of the Park District. Such consent was within the sole

discretion of the Park District for the first five years of the agreement,

but thereafter, the Park District was not to unreasonably withhold its

consent. Subject to certain conditions, plaintiff was allowed to enter

into license agreements for up to 50% of the concession carts in the

concession area. The agreement contained a disclaimer indicating that

plaintiff was an independent contractor and that there was no

principal-agent, partnership or joint venture relationship between the

parties to the agreement.

Finally, the Park District had the right to terminate the agreement

immediately with written notice to plaintiff upon the occurrence of

certain specified conditions or violations of the agreement. Plaintiff

successfully negotiated out of the agreement a provision that would

have allowed the Park District to terminate the agreement at will upon

written notice.

In March 2005, the assessor sent plaintiff a notice of assessment

on the property in question in the amount of $502,550 for the 2004

tax year. Although the notice referred to a “proposed increase in

valuation,” there had never before been any assessed valuation to

increase. Plaintiff challenged the assessment before the county

assessor, but that challenge was denied. The assessment became final

in April 2005. Plaintiff did not file an assessment complaint with the

Board of Review. The Board of Review has the power on written

complaint of any taxpayer that any property is “overassessed,

underassessed, or exempt” to review the assessment and “confirm,

revise, correct, alter, or modify the assessment, as appears to be just.”

35 ILCS 200/16–95, 16–115 (West 2008).

Instead, plaintiff filed a three-count complaint for declaratory and

injunctive relief in the circuit court in August 2005. Count I of the

complaint sought a declaration that plaintiff had a nontaxable license

or concession, rather than a lease of the Park District’s property, and

therefore the imposition of a tax on plaintiff’s interest would be

unauthorized by law. Count II sought a declaration that a tax on

plaintiff’s interest would violate the property tax uniformity clause of

the Illinois Constitution (Ill. Const. 1970, art. IX, §4). In count III,

plaintiff sought to enjoin the assessor from assessing plaintiff’s

interest and the treasurer from imposing or collecting any property tax

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for the tax year of 2004 and subsequent years.

Plaintiff alleged that its agreement with the Park District did not

constitute a lease for a number of reasons. Specifically, it noted that

the terms of the agreement did not grant plaintiff full enjoyment and

exclusive possession of the areas in which it conducted its operations.

The agreement did not use the term “lease,” and it did not provide for

the payment of rent or purport to grant plaintiff a leasehold interest.

The agreement also contained a number of provisions that allowed the

Park District to maintain control over the property and plaintiff’s

operation of its businesses. Moreover, any disputes between the

parties were to be decided by the general superintendent of the Park

District. The Park District’s remedies were also different from those

in a lease. The Park District could terminate the agreement

immediately upon the occurrence of any one of several specified

conditions, but the agreement did not contain any forcible entry and

detainer provisions or other landlord-tenant remedies or tenant

protections.

Plaintiff further alleged that during February 2005, certain

newspaper articles were published that inaccurately suggested that

plaintiff was being given special treatment in not being required to

pay real estate taxes. Plaintiff also alleged numerous other vendors

operate concessions on Park District property similar to plaintiff and

are not being assessed or taxed. Nonetheless, shortly after the

publication of the newspaper articles, the assessor issued the notice

of assessment on plaintiff’s interest in the Park District property.

Based on the assessment, plaintiff believed that the treasurer would

eventually impose a tax.

Defendants filed a motion to dismiss on the ground that the court

lacked subject matter jurisdiction because plaintiff failed to exhaust

administrative remedies. The circuit court denied the motion with

respect to count I without prejudice to raising subject matter

jurisdiction in the answer. However, the court granted defendants’

motion with respect to count II in its entirety and with respect to

count III to the extent that count III was based on the constitutional

challenge in count II.

Thereafter, the parties filed cross-motions for summary judgment

on count I. Defendants argued that the agreement entered into by

plaintiff and the Park District was a taxable lease because it contained

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basic requirements for a lease such as duration, payments and a

definite area. Defendants asserted that they were entitled to a

judgment as a matter of law on the ground that the tax was proper and

lawful as a tax on a leasehold of otherwise exempt property under

section 9–195 of the Property Tax Code (35 ILCS 200/9–195 (West

2008)). Defendants stipulated, however, that it is the responsibility of

the tax-exempt entity to notify the assessor and provide the assessor

with a copy of the contract if the tax-exempt entity believes that a

contract it has entered into creates a taxable leasehold interest under

section 9–195. Defendants further stipulated that the assessor did not

receive any such notice from the Park District about the agreement at

issue in this case, nor did the assessor receive a copy of the agreement

until the assessor requested it in February 2005.

Plaintiff argued that the agreement was a license rather than a

lease because it did not satisfy the most important criteria for creating

a lease, namely, the Park District did not relinquish possession and

control over the property to plaintiff through the agreement. Plaintiff

noted that in order for the Park District to give a private commercial

entity a leasehold estate in park property, the Park District would

have had to give up control and possession of the property. But there

is a serious question as to whether the Park District would have the

authority to enter into a lease, thereby relinquishing control and

possession, given that public parks are owned by park districts, which

are charged by statute with the responsibility of managing and

controlling all property within their jurisdictions. See 70 ILCS 1505/1

(West 2008). Against this statutory backdrop, the Park District

operated under the belief that it lacked the authority to lease property

to concession vendors. As a strict rule, it therefore refused to enter

into such leases, even going so far as to employ uniform procedures

to avoid them.

In support of its argument, plaintiff relied upon the affidavits of

Judith J. Jacobs and James Horan. Jacobs’ affidavit stated that she

became vice president of Urban Retail Properties Company in 1996

and was responsible for negotiating all Park District contracts

between 1996 and 2005 with concessioners that operated on Park

District property. At the beginning of her company’s relationship with

the Park District and at various times thereafter, Park District

personnel instructed her that the Park District did not lease park

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property to private concession vendors because the Park District did

not have the right to enter into such leases. She therefore understood

that she was negotiating a “permit” and not a “lease.” Jacobs was

principally responsible for negotiating on behalf of the Park District

with respect to the agreement it entered into with plaintiff. She used

a standard “permit agreement” in those negotiations.

Horan stated in his affidavit that he was the managing member of

plaintiff’s business operations and was authorized to negotiate

contracts on behalf of plaintiff at all relevant times. He negotiated the

agreement involved in this case with Jacobs, who was negotiating on

behalf of the Park District. During those negotiations, Jacobs

informed him that all concession businesses were required to use the

“concession permit agreement” form. She explained to him that the

permit was in lieu of a lease and that the Park District would not grant

plaintiff a lease.

Horan further stated that under the terms of the agreement,

plaintiff shared parts of the premises and concession area with other

entities. For example, during the winter months, plaintiff was not

entitled to use the retail premises or the area west of the restaurant,

which was operated as an ice rink. During that time, these areas were

managed by a different vendor, Westrec. Westrec and the Park

District also used certain areas of the tunnel for storage, and the Park

District additionally used the tunnel for access to and from

Millennium Park.

As further evidence that the parties intended a license and not a

lease, plaintiff noted that the Park District did not notify the assessor

when it entered the agreement. Plaintiff also cited internal documents

from the assessor’s office, which indicated that it was only after the

February 2005 newspaper articles raised the question of why

plaintiff’s interest was not being taxed that the assessor considered

assessing plaintiff’s interest. Those documents also indicated that

there were formidable obstacles to imposing a tax on plaintiff: several

different entities, including the Park District, the City of Chicago, and

Metra, claimed ownership of portions of the park; taxation would

require division of the property to isolate plaintiff’s contractual

interest; the assessor was more than 15 months past the deadline to

apply for a division for 2004; there was no parcel identification

number (PIN) for a substantial part of the park, including the portion

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where plaintiff operated; it would be unprecedented for the assessor

to create a PIN where none existed; plaintiff would be left with less

than the minimum 20 days required by law to appeal; and the assessor

was aware of several other private companies operating under similar

agreements with the Park District that were not being assessed.

Despite these obstacles, within one month of the February 2005

articles, the assessor had created a new PIN to identify plaintiff’s

“leasehold and improvements,” and sent plaintiff a notice of

assessment. The assessor’s office chose to issue the assessment,

according to its own documents, because it “would rather have a tax

bill that is cancelled than for the restaurant to go another year without

a bill.”

Following a hearing, the circuit court denied defendants’ motion

for summary judgment and granted plaintiff’s motion for summary

judgment on counts I and III, except as to those portions of count III

previously dismissed by the court. In so doing, the court concluded

that the terms of the permit agreement in question supported

plaintiff’s position that “the Park District’s interest in not giving up

exclusive possession and control over property in the Park is evident

and overriding.” The court further noted that the permit did not

transfer to plaintiff an exclusive possessory interest coupled with the

control necessary to create a leasehold estate in favor of plaintiff.

Moreover, the uncontradicted evidentiary submissions and inferences

demonstrated that the parties to the permit agreement did not intend

to enter a lease. The court also found that the permit lacked the

necessary specificity of the extent and bounds of the property,

particularly in referring to the concession area, to meet all the

requirements of a lease.

The appellate court, with one justice dissenting, affirmed the

judgment of the circuit court. 393 Ill. App. 3d at 30. The appellate

court held that plaintiff’s suit “challenged the assessor’s authority to

tax the concession permit and therefore raised an ‘unauthorized by

law’ challenge to the assessment.” 393 Ill. App. 3d at 24. Under those

circumstances, the appellate court concluded, plaintiff was not

required to exhaust its remedies under the Property Tax Code and the

circuit court had subject matter jurisdiction to rule on the merits. 393

Ill. App. 3d at 24. With respect to the merits, the appellate court

examined the provisions of the agreement juxtaposed with the

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relevant case law and unanimously determined that the agreement

clearly conveyed only a nontaxable license to use Park District

property and not a leasehold estate. 393 Ill. App. 3d at 26-30; see also

393 Ill. App. 3d at 30 (Wolfson, J., dissenting) (“The assessor made

a mistake. It was a whopper of a mistake. He determined the permit

was a lease, not a license. As the majority carefully establishes, it was

a license.”).

We allowed defendants’ petition for leave to appeal. 210 Ill. 2d

R. 315.

ANALYSIS

I. Jurisdiction Over “Unauthorized By Law” Claim

Before this court, defendants first argue that the circuit court

lacked subject matter jurisdiction to consider plaintiff’s declaratory

judgment action that attacked the assessment. An argument

challenging the subject matter jurisdiction of the circuit court presents

a question of law that this court will review de novo. Blount v. Stroud,

232 Ill. 2d 302, 308 (2009). Moreover, the arguments of the parties

present an issue of statutory construction, which is also a matter that

this court reviews de novo. In re Donald A.G., 221 Ill. 2d 234, 246

(2006).

Both parties acknowledge the “unauthorized by law” doctrine as

one exception to the general common law rule that in the field of

taxation and revenue cases, equity will not assume jurisdiction to

grant relief where a “complete and adequate remedy” at law exists.

Lackey v. Pulaski Drainage District, 4 Ill. 2d 72, 78 (1954); see also

Clarendon Associates v. Korzen, 56 Ill. 2d 101, 107 (1973). The

parties disagree, however, as to whether the doctrine is applicable

under the particular circumstances of the present case.

We note that public officials have no taxing power except that

which is delegated to them by the legislature. Santiago v. Kusper, 133

Ill. 2d 318, 325 (1990), citing Ill. Const. 1970, art. IX, §10. The

obligation of citizens to pay taxes is purely a statutory creation, and

taxes can be levied, assessed and collected only in the manner

expressly spelled out by statute. People ex rel. Eitel v. Lindheimer,

371 Ill. 367, 371 (1939). A tax is therefore “unauthorized” when the

taxing body has no statutory power to tax. See, e.g., Wood River

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Township v. Wood River Township Hospital, 331 Ill. App. 3d 599,

606 (2002). It has also been held that the actions of an assessor are

unauthorized by law where the assessor acts with respect to property

over which he has not been given any jurisdiction by statute. Sanitary

District of Chicago v. Young, 285 Ill. 351, 370 (1918).

To be clear, the general rule is that a taxpayer is limited to first

exhausting administrative remedies provided by statute beginning

with the Board of Review–the remedy at law for an incorrect

assessment–before seeking relief in the circuit court. Owens-Illinois

Glass Co. v. McKibbin, 385 Ill. 245, 252 (1943); Young, 285 Ill. at

368. In that regard, the Property Tax Code is a comprehensive statute

regulating the assessment and collection of taxes. In re Application

of the County Treasurer, 214 Ill. 2d 253, 262 (2005); 35 ILCS

200/1–1 et seq. (West 2008). Sections 16–95 and 16–120 together

provide that the Board of Review may revise or correct an assessment

as appears to be just on complaint by a taxpayer that “any property is

overassessed, underassessed, or exempt.” 35 ILCS 200/16–95,

16–120 (West 2008). The taxpayer then has the option of either

appealing to the Property Tax Appeal Board (35 ILCS 200/16–160

(West 2008)) or filing a tax objection complaint in circuit court

specifying “any objections *** to the taxes in question” (35 ILCS

200/23–15 (West 2008)). Thus, the adequate remedy at law is to pay

the taxes under protest and file a statutory objection. North Pier

Terminal Co. v. Tully, 62 Ill. 2d 540, 546 (1976).

It has been held, however, that the general rule requiring a

taxpayer to seek the relief provided by statute is subject to two

exceptions: a taxpayer need not look to the remedy at law but may

seek injunctive or declaratory relief in circuit court where the tax or

assessment is unauthorized by law or where it is levied upon property

exempt from taxation. Clarendon Associates, 56 Ill. 2d at 107;

Owens-Illinois, 385 Ill. at 252; see also Santiago, 133 Ill. 2d at 324;

Inolex Corp. v. Rosewell, 72 Ill. 2d 198, 201-02 (1978). These two

situations constitute independent grounds for equitable relief and in

such cases it is not necessary that the remedy at law be inadequate.

Clarendon Associates, 56 Ill. 2d at 107.

Defendants argue that the assessment was authorized in this case

based on the authority given to the assessor under section 9–70 of the

Property Tax Code to tax “all other property.” 35 ILCS 200/9–70

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(West 2008). Specifically, that section provides as follows: “The

Department [of Revenue] shall assess all pollution control facilities,

low sulfur dioxide emission coal fueled devices, and property owned

or used by railroad companies operating within this State, except non-

carrier real estate. Local assessment officers shall assess all other

property not exempted from taxation.” (Emphasis added.) 35 ILCS

200/9–70 (West 2008).

The trouble with defendants’ argument is that the land itself at

issue in this case is property “exempted from taxation,” and section

9–70 specifically precludes the assessor from assessing such exempt

property. 35 ILCS 200/9–70 (West 2008). Furthermore, defendants

misconstrue the definition of taxable “property” contained in the

Property Tax Code where it is defined as “[t]he land itself, with all

things contained therein, and also all buildings, structures and

improvements, and other permanent fixtures thereon, *** and all

rights and privileges belonging or pertaining thereto, except where

otherwise specified by this Code.” 35 ILCS 200/1–130 (West 2008).

Defendants argue for the first time in their reply brief before this

court that, because the words “rights and privileges” appear in the

definition of “property,” defendants had the authority to assess

licenses. This view is mistaken. As noted above, the Property Tax

Code has been construed as not to authorize a tax or an assessment on

exempt property that is merely licensed. See 35 ILCS 200/9–70 (West

2008); 35 ILCS 200/9–195 (West 2008); 35 ILCS 200/1–130 (West

2008); Kankakee County Board of Review, 226 Ill. 2d at 55; Jackson

Park, 93 Ill. App. 3d at 547. Moreover, the reference to “rights and

privileges” in section 9–70 is not a reference to a separate category of

taxable property. Rather, it refers to the principle that when the

assessor is assessing the value of real property in the hands of the

owner, one of the components that comprises the valuation is the

privilege possessed by the owner of having entered into a license or

a lease as a licensor or lessor. But section 9–70 gives no authority to

the assessor to tax or assess the licensee’s or lessee’s interest where

the licensee or lessee by definition is not the actual owner of the land.

Real estate taxes are only permitted against owners of land. The only

exception to this rule is found in section 9–195 of the Property Tax

Code (35 ILCS 200/9–195 (West 2008)), which allows the assessor

to tax the leasehold interest of the lessee in property leased to it by an

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owner whose property is exempt. More specifically, section 9–195

provides in relevant part as follows:

“[W]hen property which is exempt from taxation is leased

to another whose property is not exempt, and the leasing of

which does not make the property taxable, the leasehold estate

and the appurtenances shall be listed as the property of the

lessee thereof, or his or her assignee. Taxes on that property

shall be collected in the same manner as on property that is

not exempt, and the lessee shall be liable for those taxes.

However, no tax lien shall attach to the exempt real estate.”

35 ILCS 200/9–195 (West 2008).

From the foregoing, it is apparent that if plaintiff possessed a

mere license rather than a leasehold interest in this case, then the

assessor would not have been authorized by law to assess the

property. Thus, plaintiff’s claim that the assessment was not

authorized because plaintiff did not possess a leasehold interest, but

rather merely a license, fits squarely within the unauthorized-by-law

exception, which allows challenges to be brought directly in circuit

court without resort to any statutory remedy that might be applicable.

We further note that the outcome of the challenge does not govern the

jurisdiction of the circuit court to hear the merits. Rather, it is the

nature of the challenge that governs the court’s jurisdiction.

In reaching this conclusion, we find County of Knox ex rel.

Masterson v. The Highlands, L.L.C., 188 Ill. 2d 546 (1999),

analogous and supportive, even if not directly on point. There, the

plaintiff filed a complaint for declaratory and injunctive relief in the

circuit court, seeking a declaration that it could proceed to construct

and operate a hog confinement facility on its property. The county

had been preventing the plaintiff from building and operating such a

facility through enforcement of its zoning rules. The circuit court

granted the plaintiff’s motion for summary judgment, ruling that the

county board lacked jurisdiction to proceed because the plaintiff was

engaged in an “agricultural” purpose, which was exempt from zoning

regulations under the Counties Code. See 55 ILCS 5/5–12001 (West

1998). The appellate court, with one justice dissenting, affirmed the

judgment of the circuit court. County of Knox ex rel. Masterson v.

The Highlands, L.L.C., 302 Ill. App. 3d 342 (1998).

Before this court, Knox County argued that it had the power to

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regulate the location and use of buildings on unincorporated land. See

55 ILCS 5/5–12001 (West 1998). It also relied on the doctrine of

exhaustion of administrative remedies. This court began its analysis

of the county’s argument by noting that one of the exceptions to the

exhaustion doctrine is where an agency’s jurisdiction is attacked

because it is not authorized by statute. Knox, 188 Ill. 2d at 552. This

court further noted that the county relied heavily upon the appellate

court dissent, which had maintained that the exception to the

exhaustion doctrine did not apply because the agency had the

authority to make the wrong decision:

“ ‘[J]urisdiction’ is a limited concept, which refers only to the

authority to hear and decide the case and does not depend on

the correctness of the decision made. Thus, a body has

‘jurisdiction’ to make a wrong as well as a right decision.”

Knox, 188 Ill. 2d at 553, citing Knox, 302 Ill. App. 3d at 349

(McLaren, J., dissenting).

This court emphatically rejected that reasoning, noting that the

“jurisdiction” of an administrative agency is different from that of a

court because an administrative agency only has the authorization

given to it by the legislature through statutes. Knox, 188 Ill. 2d at 553.

The county board thus had no jurisdiction over zoning where the

board’s enabling legislation expressly denied the board zoning

authority over land used for agricultural purposes. Knox, 188 Ill. 2d

at 554.

This court also rejected the notion that the plaintiff’s attack went

to the correctness of the county board’s decision rather than to the

authority or jurisdiction of the board. Knox, 188 Ill. 2d at 554. It

observed that the determination of the scope of the agency’s power

and authority is a judicial function and is not a question to be finally

determined by the agency itself. Knox, 188 Ill. 2d at 554.

Accordingly, before reaching the merits of whether the plaintiff’s hog

confinement facility constituted an “agricultural” purpose under the

statute, this court found that the appellate court had correctly upheld

the circuit court’s power to hear the plaintiff’s claim for declaratory

and injunctive relief. Knox, 188 Ill. 2d at 555.

The same reasoning employed in Knox is applicable in the present

case. Here, defendants argue that section 9–70 of the Property Tax

Code places the duty of determining whether a property interest is

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assessable directly with the assessor, and so it could never be said that

any decision the assessor made was unauthorized by law. But this

argument is essentially the same as the one made by the county in

Knox that section 5–12001 of the Counties Code gave the county the

power to regulate the location and use of buildings on unincorporated

land. Moreover, the county in Knox had to decide whether or not the

plaintiff’s facility would be considered an “agricultural” purpose just

as the assessor here had to decide whether or not plaintiff’s agreement

with the Park District constituted a “lease.” Defendants argue that

Knox is distinguishable because the enabling legislation in that case

expressly forbade the regulation of agricultural property. But we see

no legally significant difference between the two cases, as the

enabling legislation in the present case does essentially prohibit

taxing exempt property in any manner unless it is leased (35 ILCS

200/9–70, 9–195 (West 2008)) or used for a nonexempt purpose (35

ILCS 200/9–185 (West 2008)).

There is one way, however, that Knox and the present case are

different. Knox did not involve the assessment or collection of taxes

or the general common law rule that in tax cases, “equity will not

assume jurisdiction to grant relief where an adequate remedy at law

exists.” See Clarendon Associates, 56 Ill. 2d at 107. Again, the

unauthorized-by-law doctrine in the area of taxation is an exception

to the general common law rule that equity will not assume

jurisdiction. In other words, the exception allows the taxpayer to

pursue a suit for declaratory and injunctive relief even where the

statutory remedy at law would be complete and adequate. Owens-

Illinois, 385 Ill. at 255-56; Lackey, 4 Ill. 2d at 74-75, 78. It has also

been held that the only limitation in such cases is that when a

taxpayer elects to pursue the remedy before the Board of Review, he

will not be allowed to abandon it and then go into equity, but he may

go into equity in the first instance and have relief. Young, 285 Ill. at

370.

The “unauthorized by law” exception to the common law rule is

one that has been applied in the field of taxation for over 150 years in

Illinois. See, e.g., Santiago v. Kusper, 133 Ill. 2d 318, 324 (1990);

North Pier, 62 Ill. 2d at 545-46; Clarendon Associates, 56 Ill. 2d at

107; Owens-Illinois, 385 Ill. at 252 (it is the general rule that courts

of equity will not take jurisdiction in a proceeding at law and the

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exception to the rule is a suit requesting relief from the collection of

unauthorized taxes); Chicago, Burlington & Quincy R.R. Co. v.

Frary, 22 Ill. 38, 41 (1859); see also Board of Education of Park

Forest–Chicago Heights School District No. 163 v. Houlihan, 382 Ill.

App. 3d 604, 610 (2008); Wood River Township, 331 Ill. App. 3d at

605-06. However, this exception to the common law rule, otherwise

known as the Owens-Illinois exception, was modified by this court in

Illinois Bell Telephone Co. v. Allphin, 60 Ill. 2d 350, 359 (1975),

which held that the Owens-Illinois exception would no longer be

applicable to situations covered by the Administrative Review Law.

See also Christian Action Ministry v. Department of Local

Government Affairs, 74 Ill. 2d 51, 60 (1978) (followed Allphin).

Defendants, however, have not raised any arguments in this entire

litigation based on the holdings of Allphin and Christian Action, nor

have they attempted to argue that the present situation is covered by

the Administrative Review Law. Exhaustion of administrative

remedies is an affirmative defense, and arguments pertaining thereto

are waived if not raised. See Hawthorne v. Village of Olympia Fields,

204 Ill. 2d 243, 254 (2003). Accordingly, we find that defendants

waived any reliance upon Allphin and Christian Action. But we

further note that any such argument would have failed in the case

before us because the situation is not covered by the Administrative

Review Law. First, we note that plaintiff’s claim that the assessor’s

assessment was not authorized by law did not fit within the list of

taxpayer grievances that the Board of Review was authorized to hear,

as it has only been given the power to hear claims on written

complaint of a taxpayer that any property is “overassessed,

underassessed, or exempt.” 35 ILCS 200/16–95 (West 2008). Here,

plaintiff’s claim does not fall under that rubric; plaintiff is claiming

that its interest in the contract with the Park District should not have

been assessed at all, not that it was assessed too high or low or that it

is exempt. See Stevens v. Rosewell, 170 Ill. App. 3d 58 (1988) (circuit

court decided plaintiff’s declaratory-judgment action to enjoin

assessor and treasurer from collecting back taxes based on claim that

the assessed property was a license not a lease; but the question of

subject matter jurisdiction was not broached in that case); but cf.

Jackson Park, 93 Ill. App. 3d 542 (the parties and court treated the

plaintiff’s claim that its contractual interest in land owned by the park

-15-

district constituted a lease as a claim that property was “exempt”).

Second, we note that the Administrative Review Law applies only to

an “action to review judicially a final decision of an administrative

agency where the Act creating or conferring power on such agency,

by express reference, adopts the provisions of [the Administrative

Review Law].” 735 ILCS 5/3–102 (West 2008). Here, the Property

Tax Code only adopts the Administrative Review Law with respect

to final decisions of the Department of Revenue (35 ILCS 200/8–40

(West 2008)) and the Property Tax Appeal Board (35 ILCS

200/16–195 (West 2008)). The Property Tax Code has not expressly

adopted the Administrative Review Law with respect to decisions of

the Board of Review, and a taxpayer not satisfied with the decision

of the Board of Review is not required to appeal to the Property Tax

Appeal Board “before seeking relief in the courts.” 35 ILCS

200/16–160 (West 2008). Thus, the common law “unauthorized by

law” exception noted in Owens-Illinois and other cases is still

applicable in the case before us. See Carle Foundation v. Department

of Revenue, 396 Ill. App. 3d 329, 340 (2009); Silver Fox Limousine

v. City of Chicago, 306 Ill. App. 3d 103, 108-09 (1999);

Communications & Cable of Chicago, Inc. v. Department of Revenue

of the City of Chicago, 275 Ill. App. 3d 680, 684 (1995).

Defendants argue that the common law “unauthorized by law”

exception is no longer applicable in the aftermath of amendments

made to the Property Tax Code in 1994 thru 1996 contained in

section 23–15 (see 35 ILCS Ann. 200/23–15, Historical & Statutory

Notes, at 188 (Smith-Hurd 2006)), which allows a taxpayer to file a

tax objection complaint in circuit court and states that this “[s]ection

shall be construed to provide a complete remedy for any claims with

respect to those taxes, assessments, or levies.” 35 ILCS

200/23–15(b)(1) (West 2008). Defendants also rely upon a provision

in the same section which states that the “court shall grant relief in the

cases in which the objector *** shows an assessment to be incorrect

or illegal.” 35 ILCS 200/23–15(b)(3) (West 2008).

We find defendants’ arguments unpersuasive for a number of

reasons. Initially, we note that the statutory remedy begins with a

taxpayer filing a complaint with the Board of Review alleging that the

property is “overassessed, underassessed, or exempt.” As we have

explained above, the Board of Review was not authorized to hear

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plaintiff’s particular contention, i.e., that its contractual interest

should not have been assessed at all.1

While it is certainly true that the 1994-96 amendments to section

23–15 give the circuit court, as part of a statutory remedy, broad

authority to hear and determine “all objections specified to the taxes,

assessments, or levies in question” and provides that this section is to

be “construed to provide a complete remedy for any claims with

respect to those taxes, assessments, or levies” (35 ILCS

200/23–15(b)(1) (West 2008)), we do not believe that this section

negates the common law exception of Owens-Illinois with respect to

“unauthorized by law” challenges.2 As previously noted, the rule that

equity will not assume jurisdiction where there is a “complete and

adequate remedy at law” is the general common law rule. Lackey, 4

Ill. 2d at 74-75, 78. Section 23–15 simply and essentially codifies this

rule. If a statute merely codifies a common law rule, however, it does

not thereby eliminate any common law exceptions to the rule that

might exist in the absence of any clear expression of an intent to

abrogate the exception. Adams v. Northern Illinois Gas Co., 211 Ill.

2d 32, 63, 70 (2004).

Here, the common law exception to the general rule is the

1

The statutory scheme, however, provides that “[a]n objection to an

assessment for any year shall not be allowed by the court *** if an

administrative remedy was available by complaint to the *** board of

review under *** [s]ection 16–115, unless that remedy was exhausted prior

to the filing of the tax objection complaint.” 35 ILCS 200/23–10 (West

1998). Thus, in this case there was no need for exhaustion of

administrative remedies where an administrative remedy by complaint to

the Board of Review was not available.

2

Clarendon Associates, 56 Ill. 2d at 107, noted two exceptions to the

general common law rule: the first was for “unauthorized by law”

challenges, and the second was for challenges claiming that a tax was

levied on property that was exempt. Under the current statutory scheme,

however, there is an opportunity for exhaustion of remedies and review

under the Administrative Review Law for challenges claiming that property

is “exempt.” See 35 ILCS 200/16–115, 16–130, 8–35, 8–40 (West 2008).

Furthermore, the parties agree that we are not presented with a claim that

plaintiff’s property is “exempt” from taxation.

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unauthorized-by-law doctrine. Legislation intended to abrogate such

a common law exception would have had to have been clearly and

plainly expressed. Board of Trustees of Community College District

No. 508 v. Coopers & Lybrand, 208 Ill. 2d 259, 269 (2003);

Maksimovic v. Tsogalis, 177 Ill. 2d 511, 518 (1997). Common law

rights and remedies remain in full force in this state unless expressly

repealed by the legislature or modified by court decision. Coopers &

Lybrand, 208 Ill. 2d at 269; People v. Gersch, 135 Ill. 2d 384, 395-97

(1990). “Common law” is simply the body of law derived from

judicial decisions rather than from statutes or constitutions. Black’s

Law Dictionary 270 (7th ed. 1999); see also Coopers & Lybrand, 208

Ill. 2d at 269 (applied the rule requiring express abrogation in the

context of common law created by Illinois judicial decisions).

Section 23–15 of the Property Tax Code–the statute at issue

here–provides that the statutory remedy is “complete,” but it makes

no mention of the unauthorized-by-law exception. When statutes are

enacted after judicial opinions are published, it must be presumed that

the legislature acted with knowledge of the governing case law.

Burrell v. Southern Truss, 176 Ill. 2d 171, 176 (1997), quoting People

v. Hickman, 163 Ill. 2d 250, 262 (1994); see also Carle Foundation,

396 Ill. App. 3d at 342. Here, we believe that if the legislature had

intended to abrogate the “unauthorized by law” exception to the

general rule that the statutory-tax-objection procedure is the complete

remedy in tax cases, it could have easily stated as much when it

enacted the amendments of 1994-96; but it did not, and therefore we

presume that it had no such intention. See Carle Foundation, 396 Ill.

App. 3d at 342 (If the legislature had intended to make an exception

to the doctrine of election of remedies in section 23–25 of the

Property Tax Code, it could easily have done so. But it did not;

therefore, the court presumed that it had no such intention.).

As proof of our conclusion, we note that the legislature did

expressly abrogate another common law doctrine with the 1994-96

amendments in section 23–15 when it specifically stated that “[t]he

doctrine known as constructive fraud is hereby abolished for purposes

of all challenges to taxes, assessments, or levies.” 35 ILCS

200/23–15(b)(3) (West 2008). This shows that the legislature knew

how to abrogate a specific common law principle when it desired that

result. Thus, we find that the appellate court correctly concluded that

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the abolishment of the constructive-fraud doctrine did not eliminate

the “unauthorized by law” doctrine and that cases decided after the

1994-96 amendments continue to recognize the existence of the

“unauthorized by law” doctrine. 393 Ill. App. 3d at 22, citing Board

of Education of Park Forest, 382 Ill. App. 3d at 610, Wood River, 331

Ill. App. 3d at 605-06, Givot v. Orr, 321 Ill. App. 3d 78, 85 (2001).

Having determined that section 23–15 did not abrogate the

“unauthorized by law” exception, we further find that the “incorrect

or illegal” language in that same section does not change our

conclusion. The appellate court correctly noted that plaintiff did not

challenge the assessment on the basis that it was incorrect or illegal,

but instead on the ground that it was “unauthorized.” Black’s Law

Dictionary defines “unauthorized” as “[d]one without authority.”

Black’s Law Dictionary 1525 (7th ed. 1999). “Illegal,” on the other

hand, is defined as “[f]orbidden by law.” Black’s Law Dictionary 750

(7th ed. 1999). The difference between the two terms is reflected in

the rule that a true “unauthorized by law” challenge arises where the

taxing body has no statutory power to tax in a certain area or has been

given no jurisdiction to tax a certain subject, as opposed to a

complaint that merely alleges procedural errors or irregularities in the

taxing process, in which case equity relief would not be available. See

Lackey, 4 Ill. 2d at 78; Wood River, 331 Ill. App. 3d at 606.

The primary rule of statutory construction is to ascertain and give

effect to the intent of the legislature, and when possible a court should

interpret a statute according to its plain and ordinary meaning. Donald

A.G., 221 Ill. 2d at 246. However, when the literal reading of a statute

produces an unjust or absurd result “not contemplated by the

legislature” as that intent is shown by the rest of the statute, a court

need not accept the literal reading. Donald A.G., 221 Ill. 2d at 246.

We find that our conclusion is in keeping with the plain and

ordinary meaning of the statutory language. We further note,

however, that if defendants’ interpretation were adopted, it would

work an unjust, if not an absurd, result. Section 23–15 of the Code

does not seem to be an adequate remedy to challenge an assessment

based on the ground that it is unauthorized by law, particularly when

compared with the administrative remedy contained in section

16–115 of the Code for other kinds of challenges to an assessment.

This is because sections 23–5 and 23–10 require that a taxpayer filing

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a tax objection complaint in circuit court under section 23–15 wait

until “after the first penalty date of the final installment of taxes for

the year in question” before filing the complaint, and then the

taxpayer must pay “all of the tax due within 60 days from the first

penalty date of the final installment of taxes for that year.” 35 ILCS

200/23–5, 23–10 (West 2008). In contrast, a taxpayer can

immediately mount a challenge with the Board of Review before any

taxes are due and payable if the challenge is that the property was

overassessed, underassessed, or is exempt under section 16–115. As

we have already explained, plaintiff’s “unauthorized by law” claim

falls through the cracks of the administrative remedy of section

16–115. It seems unlikely that the legislature would intend to thwart

a taypayer in such a manner from raising an “unauthorized by law”

challenge. Based on all of the circumstances noted above, then, we do

not believe that the legislature intended to remove an “unauthorized

by law” challenge to a tax assessment from the circuit court’s equity

jurisdiction..

We therefore conclude that the circuit court had subject matter

jurisdiction to rule on the merits of plaintiff’s suit for declaratory and

injunctive relief.

II. License or Lease

Turning to the merits, we now consider whether summary

judgment was properly entered on behalf of plaintiff on the basis that

its agreement with the Park District constituted a license as opposed

to a lease.

Summary judgment is proper where the “pleadings, depositions,

and admissions on file, together with the affidavits, if any, show that

there is no genuine issue as to any material fact and that the moving

party is entitled to a judgment as a matter of law.” 735 ILCS

5/2–1005(c) (West 2008). Furthermore, it is well settled that when the

parties file cross-motions for summary judgment, they agree that only

a question of law is involved and invite the court to decide the issues

based on the record. Allen v. Meyer, 14 Ill. 2d 284, 292 (1958);

Falcon Funding, LLC v. City of Elgin, 399 Ill. App. 3d 142, 147

(2010); Andrews v. Cramer, 256 Ill. App. 3d 766, 769 (1993). This

court conducts a de novo review of an order granting summary

-20-

judgment. Kajima Construction Services, Inc. v. St. Paul Fire &

Marine Insurance Co., 227 Ill. 2d 102, 106 (2007).

Whether a contractual agreement is a lease or a license depends

on the intention of the parties determined from the legal effect of the

terms of the agreement. See Jackson Park, 93 Ill. App. 3d at 546. A

license in real property has been distinguished from a lease as

follows:

“[A] license generally provides the licensee with less rights in

real estate than a lease. If the contract gives exclusive

possession of the premises against all the world, including the

owner, it is a lease, but if it merely confers a privilege to

occupy the premises under the owner, it is a license.” 53

C.J.S. Licenses §133, at 608 (2005).

In a similar mode, this court has held that a “license” in real property

is essentially permission to do an act or a series of acts upon the land

of another without possessing any estate or interest in such land.

Mueller v. Keller, 18 Ill. 2d 334, 340 (1960). Thus, the principal

difference between a lease and a license is that a lease confers the

right to exclusively possess and control property, whereas a license

merely confers a right to use property for a specific purpose, subject

to the licensor’s control. See In re Application of Rosewell, 69 Ill.

App. 3d 996, 1001-02 (1979). Although some divestiture of control

is inherent in any granting of a license, it is the degree of possession

and control that must be considered to determine whether a lease

rather than a license has been granted. See Charlton v. Champaign

Park District, 110 Ill. App. 3d 554, 560 (1982).

Additionally, the essential elements of a lease include: (1) the

extent and bounds of the property; (2) the term of the lease; (3) the

amount of rent; and (4) the time and manner of payment. See Lannon

v. Lamps, 53 Ill. App. 3d 145, 150 (1977), citing Miller v. Gordon,

296 Ill. 346, 350 (1921). If any of these elements are missing, a lease

has not been created; but the fact that an agreement may contain all

of these essential requirements for a lease does not necessarily make

it a lease. See Feeley v. Michigan Avenue National Bank, 141 Ill.

App. 3d 187, 192 (1986). Additionally, licenses are ordinarily

revocable at the will of the grantor (see Jackson Park, 93 Ill. App. 3d

at 547), and are generally not assignable (see Stevens v. Rosewell, 170

Ill. App. 3d 58, 62 (1988)). But again the crucial distinguishing

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characteristic of a lease is the surrender of possession and control of

the property to the tenant for the agreed upon term. J. Ely & J. Bruce,

The Law of Easements and Licenses in Land §11:1 (2010); 1 R.

Dolan, New York Landlord & Tenant, Including Summary

Proceedings §4:11 (4th ed. 2010).

Applying the above-mentioned principles, we find that the lower

courts correctly concluded that plaintiff’s agreement with the Park

District created a license rather than a lease, and therefore plaintiff’s

interest was nonassessable and nontaxable. Initially, we note that the

agreement did not give plaintiff exclusive possession and control, but

rather the right to use areas in the “concession area” and “the

premises.” The preamble to the agreement states that the Park District

is the owner of the property and that plaintiff sought the “use” of the

areas described in the agreement for the particular purposes described

in the agreement. While commercial leases routinely restrict the type

of business the lessee may operate (see Metropolitan Airport

Authority v. Property Tax Appeal Board, 307 Ill. App. 3d 52, 56

(1999)), the agreement here went much further. The agreement does

not permit the exclusive use of the concession area by plaintiff, and

plaintiff shares the concession area with other users. Similarly,

plaintiff does not have exclusive possession of the premises or the

tunnel. For example, in the five-month span beginning on November

1 each year, another vendor operates a retail business in the retail

premises, during which time plaintiff has no rights, let alone

possession rights. Furthermore, even during plaintiff’s operating

season, another vendor uses the tunnel area to store ice skates and

other items. All year, the Park District’s janitorial and security

contractors use the Tunnel for access to the park and for storage. As

with the concession area, plaintiff has no authority to exclude the

public, or restrict the public’s use of the premises; all such authority

remains in the hands of the Park District.

A comprehensive reading of the agreement also demonstrates that

it is not a lease, as it gives the Park District extensive control over all

aspects of the plaintiff’s business. Consistent with the Park District’s

statutory function to “exercise control over and supervise the

operation of all parks *** and other public property” under its

jurisdiction (70 ILCS 1505/1 (West 2008)), the agreement between

the plaintiff and Park District contains a plethora of provisions

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regulating and controlling plaintiff’s operations, including 34 pages

of rules in the attached riders alone. Many critical areas of plaintiff’s

day-to-day operations are regulated, including: days and hours of

operation; mandatory products and suppliers; employee uniforms;

signs; tips; employee conduct; minimum participation during

construction of businesses owned by minorities; rules for designing

and building carts and trailers; trash placement and pickup; use,

content and location of product price boards; and repair and

maintenance activities. Additionally, numerous actions of plaintiff

require the Park District’s prior consent: selection of menu prices and

merchandise; a change in trade name; use of products that conflict

with the Park District’s preapproved list; the location of mobile and

temporary concessions; variation from required hours or days of

operation; changes in prices of product sold; any temporary closings;

certain increases in the number of temporary or mobile concessions;

any new signage or change in design or location; design and

distribution of advertising materials; changes in concession or

premises area; and any action that would result in either of the “Key

Men” losing his ownership interest in, or leadership of, plaintiff.

In assessing the control issue, the appellate court correctly relied

upon Charlton, 110 Ill. App. 3d 554, and In re Application of

Rosewell, 69 Ill. App. 3d 996, and properly distinguished the cases

relied upon by defendants. In Charlton, the park district awarded a

concession permit to a company to build, own and operate a water

slide and related concessions on park property. Taxpayers filed a

lawsuit alleging that the park district lacked authority to enter into the

contract and sought to have it declared void. The appellate court

concluded, however, that it was unnecessary to decide whether the

park district had the power to lease its real estate because the court

found that the contract was a license, not a lease. Charlton, 110 Ill.

App. 3d at 557. Based on facts very similar to the present case,

Charlton held that the park district “has maintained sufficient control

over the waterslide operation to protect its property at the site and to

protect the public use of the waterslide and the rest of the park.”

Charlton, 110 Ill. App. 3d at 560. We find Charlton to be

indistinguishable and strong support for the appellate court’s

conclusion in the instant case that a license rather than a lease was

created.

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In re Application of Rosewell is also on point and instructive.

There, the court found that contracts between the City of Chicago and

various parking garage operators were licenses and not leases. In re

Application of Rosewell, 69 Ill. App. 3d at 1003. Under the contracts,

the following items were within the city’s control: hours of operation;

the color and design of the uniforms, badges and caps of employees;

the posting of signs; the setting of parking rates; the types of vehicles

to be parked; the operator’s ability to subcontract for work done on

the premises; the operator’s ability to make alterations and additions

to the premises; the marking of pavement lanes, and the types of cash

registers and forms to be used; the operator’s budget, and major

maintenance responsibilities. Additionally the rent provisions were

based almost entirely on the gross revenues with a small percentage

as a fee for operating the garages. Under the circumstances, the court

found that the agreements were not intended to transfer a possessory

interest coupled with the control necessary to create a leasehold

estate. In re Application of Rosewell, 69 Ill. App. 3d at 1002-03. Just

like in Rosewell, plaintiff’s business operation in the present case was

subject to the extensive control of the public entity with which it

entered into the agreement.

Stevens, 170 Ill. App. 3d 58, which is the main case relied upon

by defendants, is clearly distinguishable. There, McDonald’s

Corporation and a community college entered into a service

agreement to provide food service for the college. McDonald’s then

assigned the agreement to Stevens. The parties to the food service

agreement wanted to avoid real estate taxes so they stated in the

agreement that it was a license and not a lease. The agreement

provided a fixed term and a fixed location. The appellate court in

Stevens construed the agreement as a lease based on the fact that the

college had little control over the operation of the McDonald’s

restaurant. Stevens, 170 Ill. App. 3d at 63. The restaurant’s operation

was totally independent of the terms of the service agreement.

Further, the rent paid was for a fixed amount over a term of years and

not merely for a service. Additionally, the agreement was for a

specific, fixed location where the lessee had exclusive possession of

the kitchen, even though the college reserved certain rights of access.

Stevens, 170 Ill. App. 3d at 63-64.

We find that the appellate court below correctly concluded that

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the agreement between plaintiff and the Park District here resembled

the agreements in Rosewell rather than the service agreement in

Stevens:

“In Stevens, McDonald’s had the exclusive right to run the

restaurant as it saw fit. However, as was the case in Rosewell,

under the terms of the Agreement, the Park District controlled

many facets of the plaintiff’s operation on park property.

Also, in Stevens, the rent was a fixed amount of $30,000 per

year with an additional 6% of gross sales in excess of

$500,000. In the Agreement, the ‘minimum fee’ in this case

was subject to abatement under the terms of the Agreement,

and the percentage of gross profits paid to the Park District

escalated based on the year of operation.” 393 Ill. App. 3d at

29.

Under the circumstances, we also conclude that the agreement in the

present case did not relinquish the necessary control and possessory

interest to constitute a lease.

We further question whether plaintiff’s agreement with the Park

District meets even the minimum requirements essential to create a

lease because of the lack of specificity in describing the extent and

bounds of plaintiff’s interest in the property. Although specificity as

to the extent and bounds of the property is optional for a license, it is

mandatory for a lease. See Feeley, 141 Ill. App. 3d at 191. Here, the

agreement described the premises as consisting of approximately

11,000 square feet in the building and approximately 15,000 square

feet in the tunnel. The assessor’s records showed that the assessor was

unable to specifically describe plaintiff’s interest, as it listed the

location of the property as “unknown,” and left the entry for square

feet blank. The assessment further set forth that 100% of the

valuation was allocated to “improvements,” and 0% was allocated to

“land.” We agree with plaintiff and the appellate court that the

vagueness of the description in this case is also a matter weighing in

favor of a finding that the agreement created a license rather than a

lease.

CONCLUSION

For the foregoing reasons, we hold that (1) circuit court had

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subject matter jurisdiction over the challenge to the assessment of

plaintiff’s property interest and (2) plaintiff’s agreement with the Park

District created an untaxable license as opposed to a taxable lease.

Accordingly, we affirm the judgment of the appellate court, which

affirmed the circuit court’s ruling that granted summary judgment for

plaintiff and denied summary judgment for defendants.

Appellate court judgment affirmed.

JUSTICE FREEMAN, dissenting:

I agree with Justice Burke that, prior to filing a complaint in the

circuit court, a tax objector must first exhaust administrative

remedies. I further agree that the narrow exception to this rule for

instances where the tax is “unauthorized by law” does not apply under

the facts of this case. I am not persuaded by the majority that there is

“no legally significant difference” between this case and County of

Knox ex rel. Masterson v. The Highlands, L.L.C., 188 Ill. 2d 546

(1999), in light of the substantial dissimilarities in the enabling

legislation in both cases. Accordingly, I join Justice Burke’s dissent.

I write separately, however, to underscore my continued

adherence to the significant policy considerations which support the

doctrine of the exhaustion of administrative remedies, as set forth in

my dissenting opinion in Morr-Fitz, Inc. v. Blagojevich, 231 Ill. 2d

474, 514-15 (2008) (Freeman, J., dissenting, joined by Burke, J.):

“[I]mportant policy considerations under[lie] the exhaustion

doctrine, which include: (1) allowing the agency to fully

develop and consider the facts of the cause and to utilize its

expertise; (2) protecting agency processes from impairment

by avoidable interruptions; (3) giving the aggrieved party the

opportunity to succeed before the agency; and (4) allowing

the agency to correct its own errors, thus conserving valuable

judicial resources.” Morr-Fitz, 231 Ill. 2d at 514 (Freeman, J.,

dissenting, joined by Burke, J.).

These policy considerations further underscore the error of the

majority in allowing plaintiff to circumvent established administrative

procedure.

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JUSTICE BURKE, dissenting:

The plaintiff entered into an agreement with the Chicago Park

District to operate a business on property owned by the Park District.

The Cook County assessor determined that the agreement was a lease,

and, because leases are subject to taxation, sent a notice of assessment

to the plaintiff. Plaintiff disagreed with the assessor. According to

plaintiff, its agreement with the Park District was merely a license to

use the property and, therefore, not subject to assessment and

taxation. However, instead of contesting the assessment by

exhausting its administrative remedies pursuant to the Property Tax

Code (35 ILCS 200/23–15 (West 2008)), plaintiff filed a complaint

for declaratory judgment directly in the circuit court. Plaintiff

maintained that it did not have to follow the statutory tax objection

procedures set forth in the Code because the assessment and tax were

“unauthorized by law,” and, therefore, plaintiff was subject to an

exception that permitted it to proceed in the circuit court.

The majority agrees with plaintiff and holds that, under the

“unauthorized by law” exception, the circuit court had the authority

to decide plaintiff’s complaint. Because I disagree with the

conclusion reached by the majority, I respectfully dissent.

The general rule in taxation cases is that a tax objector must first

exhaust its administrative remedies before filing a complaint directly

in the circuit court. Clarendon Associates v. Korzen, 56 Ill. 2d 101,

105 (1973). This general rule is subject to two exceptions: (1) where

the tax is “unauthorized by law”; and (2) where it is levied upon

property exempt from taxation.3 Clarendon Associates, 56 Ill. 2d at

105. Where one of the exceptions applies, the taxpayer may elect to

either pursue the administrative remedy or proceed directly to the

circuit court. Clarendon Associates, 56 Ill. 2d at 105.

The plaintiff contends that it was not required to exhaust its

administrative remedies because the assessment and tax were

“unauthorized by law.” I disagree. The action of a public official is

“unauthorized by law” where the agency acts outside the scope of its

statutory authority. Public officials have no taxing power except that

which is delegated to them by the legislature. Santiago v. Kusper, 133

3

Plaintiff does not invoke the second exception.

-27-

Ill. 2d 318, 325 (1990). A tax is unauthorized where the taxing body

has no statutory power to tax. Wood River Township v. Wood River

Township Hospital, 331 Ill. App. 3d 599, 606 (2002).

The “unauthorized by law” exception does not apply to this case

because the plaintiff is not attacking the statutory authority of the

assessor and treasurer to assess property and collect taxes. Rather, it

is challenging only the assessor’s decision to characterize its property

as a lease. There is no dispute that the assessor has the statutory

authority to assess a lease. See 35 ILCS 200/9–70 (West 2008)

(“Local Assessment officers shall assess all other property not

exempted from taxation”); 35 ILCS 200/9–195 (West 2008) (where

the lessee obtains a leasehold interest in property owned by a tax-

exempt entity, the lease is taxable, and the lessee is liable for those

taxes). Necessarily, then, the assessor has the authority to determine

what is, and what is not, a lease. When the assessor erroneously

determines that something is a lease, he has merely made a mistake.

He has not exceeded his authority.

The majority concludes that, because the assessor has no statutory

authority to assess licenses, the plaintiff’s challenge of the assessment

is an attack on the assessor’s authority. This is not the case. Even if

the assessor incorrectly deemed plaintiff’s property interest a taxable

leasehold, the assessor’s authority does not flow from the correctness

of his decisions. See, e.g., Newkirk v. Bigard, 109 Ill. 2d 28, 37-38

(1985) (“An agency’s jurisdiction or authority is not lost merely

because its order may be erroneous”). Plaintiff’s complaint

challenged the correctness of the assessor’s decision, which should

only be challenged by exhausting administrative remedies under the

Code. Therefore, it is improper for this court to consider this case on

its merits.

I recognize that, as a result of this position, the plaintiff would

have difficulty obtaining relief. However, I agree with the dissenting

justice in the appellate court that “[b]y finding the circuit court had

jurisdiction in this case the majority opens most incorrect

classifications by the assessor to trial court review without adhering

to statutory procedure.” 393 Ill. App. 3d at 31 (Wolfson, J.,

dissenting). This is a serious concern. The majority opinion

undermines a well-established statutory scheme.

Pursuant to the Property Tax Code, plaintiff should have

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challenged the assessment by filing a complaint with the Cook

County board of review. 35 ILCS 200/16–95 (West 2008). It then

could have filed an appeal before the Illinois Property Tax Appeal

Board (35 ILCS 200/16–160 (West 2008)) or paid the tax under

protest and filed a tax objection complaint in the circuit court (35

ILCS 200/23–5, 23–10, 23–15 (West 2008)). If it had filed a tax

objection complaint pursuant to section 23–15, the circuit court could

have determined whether it was shown by clear and convincing

evidence that the tax, assessment, or levy was “incorrect or illegal.”

35 ILCS 200/23–15 (West 2008). Section 23–15 “shall be construed

to provide a complete remedy for any claims with respect to those

taxes, assessments, or levies, excepting only matters for which an

exclusive remedy is provided elsewhere in this Code.” (Emphasis

added.) 35 ILCS 200/23–15(b)(1) (West 2008). Because plaintiff

failed to exhaust its administrative remedies under the Code, this

court may not grant plaintiff a remedy in equity.

JUSTICES FREEMAN and KARMEIER join in this dissent.

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