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FOURTH DIVISION

December 5, 2002

JUSTICE KARNEZIS delivered the opinion of the court: Plaintiff, ChiCorp, Inc. (ChiCorp), appeals from an order of the circuit courtgranting a motion to dismiss filed by defendants, the Illinois Department of Revenue;Glen L. Bower, as Director of the Illinois Department of Revenue; and Judith BaarTopinka, as Treasurer of the State of Illinois (collectively, the Department). TheDepartment's motion was brought pursuant to section 2-619(a)(9) of the Code of CivilProcedure (735 ILCS 5/2-619(a)(9) (West 2000)) and alleged ChiCorp's complaint wasmoot. On appeal, ChiCorp argues the circuit court erred in granting the Department'smotion to dismiss because its complaint was not moot and, in the alternative, the circuitcourt should have applied the public interest exception. We affirm.

The following pertinent facts were set forth in ChiCorp's complaint. ChiCorp is aregistered securities broker that buys and sells various types of securities, includingbills, bonds and notes issued by the United States Treasury (U.S. obligations). Prior to1996, several Illinois statutes provided the gain realized from the sale of certain statebonds was exempt from state income tax, whereas the gain from the sale of theirfederal counterparts was not. Seeking to remedy this disparity, the Illinois legislatureenacted Public Act 89-460, effective May 24, 1996. The introduction to the Actprovided, in part:

"Any statutory provision purporting to exempt fromtaxation any gain realized on the sale or exchange of anybond or note issued under the laws of this Statediscriminates against those holders of obligations of theUnited States who are subject to Illinois income tax on gainrealized on the sale or exchange of the obligations, and thestatutory provision is therefore in violation of the Constitutionof the United States and invalid;

* * *

It is therefore the intent of the General Assembly thatthe amendments contained in * * * this Act do not merelyrepeal those statutory provisions that purport to exempt gainon the sale or exchange of an obligation and that are heldinvalid in this Act, but these amendments are declaratory ofexisting law [.]" Pub. Act 89-460, eff. May 24, 1996.

Prior to the enactment of Public Act 89-460, ChiCorp excluded from its stateincome tax the gain on the sale of U.S. obligations for the tax years ending March 31,1996, and December 31, 1996. ChiCorp believed that if the gain on the sale of variousstate bonds was exempt from state taxation, then the gain on the sale of U.S.obligations was also exempt. During the tax year that ended March 31, 1996, ChiCorpsold U.S. obligations at a total gain of $73,934,473. During the tax year that endedDecember 31, 1996, ChiCorp sold U.S. obligations at a total gain of $48,069,692.

The Department audited ChiCorp's state income tax returns for the above taxyears and determined ChiCorp owed an additional $1,019,656, plus $233,133 instatutory interest. Still believing it did not owe the money, ChiCorp paid the amount intothe Department's "protest fund," as provided in section 2a of the State Officers andEmployees Money Disposition Act (30 ILCS 230/2a (West 2000)), also known as theProtest Act. Pursuant to the Act, ChiCorp filed a complaint in the circuit court againstthe Department, seeking the return of the money. The complaint alleged that becauseIllinois had exempted from taxation the gain on the sale of certain state bonds, ChiCorpwas entitled to subtract the gains from the sale of U.S. obligations in computing its baseincome for the tax years ending March 31, 1996, and December 31, 1996. Thecomplaint further alleged the provisions in Public Act 89-460 that purported to eliminatethe Illinois income tax exemptions for gains on the sale of exempt Illinois obligationswere unconstitutional and void.

Specifically, the complaint sought: an order finding ChiCorp was entitled tosubtract gains from the sale of U.S. obligations in computing its base income for the taxyears ending March 31, 1996, and December 31, 1996; an order directing theDepartment to return the tax and interest paid under protest; an order finding theprovisions of Public Act 89-460 that eliminated the exemption for certain state bondsunconstitutional, and as such, void and unenforceable; and an order finding theDepartment had not legally remedied and could not legally remedy the discriminationagainst holders of U.S. obligations prior to 1996 by collecting additional tax fromtaxpayers who sold exempt Illinois obligations at a gain.

The Department moved to dismiss the complaint pursuant to section 2-619 of theCode of Civil Procedure. The Department filed a brief in support of the motion, whichmaintained that it would return the money paid into the protest fund, plus interest, andwould not attempt to recover those funds in the future from ChiCorp. The Department,however, refused to concede the merits of the case. The brief concluded there was nolonger a justiciable issue and the matter was moot. An affidavit from Michael Scaduto,manager of the audit bureau of the Department, was attached. Scaduto averred theassessment issued to ChiCorp was only a "proposed" assessment and was not a finalnotice such as a notice of deficiency. He further averred the Department was underinstructions not to issue any notices of deficiency on the question of gain on the sale ofU.S. obligations and ultimately the Department would not have assessed the tax.

The circuit court granted the Department's motion, finding the complaint moot. The court's order provided the funds paid into the protest fund, plus statutory interest,were to be returned to ChiCorp, but stayed the order pending this appeal.

I. Mootness

ChiCorp contends its complaint is not moot because the Protest Act provides fora judicial determination of the correctness of tax claims, independent of theDepartment's decision not to assess the tax. ChiCorp further argues the circuit courtmisunderstood the Protest Act when it determined ChiCorp's remedy was limited to theproper disposition of the money in the protest fund. ChiCorp maintains that returningthe money without conceding the merits of the case has not decided the question ofwhether ChiCorp was "properly" entitled to the money.

The Department maintains ChiCorp's relief under the Protest Act is limited to adetermination of the proper disposition of the money in the protest fund, and becausethe Department has agreed to return the money, ChiCorp's complaint is moot.

Initially we note the Department maintains ChiCorp has raised the abovearguments for the first time on appeal and they are waived. The Department allegesChiCorp's arguments in the circuit court were based on the exception to the mootnessdoctrine, whereas on appeal ChiCorp argues for the first time its complaint is not moot. ChiCorp disagrees and argues it has consistently maintained the Protest Act gives thecourt the power to decide the case on its merits.

In ChiCorp's response to the Department's motion to dismiss, ChiCorpmaintained it was entitled to an order deciding the merits of the case. Therefore, weagree ChiCorp has not waived its right to make such an argument on appeal.

Section 2-619(a)(9) allows for dismissal of a cause of action when "the claimasserted against defendant is barred by other affirmative matter avoiding the legaleffect of or defeating the claim." 735 ILCS 5/2-619(a)(9) (West 2000). The term"affirmative matter" as used in section 2-619(a)(9) has been defined as "a type ofdefense that either negates an alleged cause of action completely or refutes crucialconclusions of law or conclusions of material fact unsupported by allegations of specificfact contained in or inferred from the complaint." Consumer Electric Co. v.Cobelcomex, Inc., 149 Ill. App. 3d 699, 703 (1986). On appeal, the question that mustbe determined is "'whether the existence of a genuine issue of material fact shouldhave precluded the dismissal or, absent such an issue of fact, whether dismissal isproper as a matter of law.'" Zedella v. Gibson, 165 Ill. 2d 181, 185-86 (1995), quotingKedzie & 103rd Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116 (1993). Theappropriate standard of review to be applied is de novo review. In re Chicago FloodLitigation, 176 Ill. 2d 179, 189 (1997).

An issue is moot where there remains no live controversy between the parties. In re E.G., 133 Ill. 2d 98, 105 (1989). "An issue is moot when its resolution could nothave any practical effect on the existing controversy." LaSalle National Bank, N.A., v.City of Lake Forest, 297 Ill. App. 3d 36, 43 (1998). In other words, "if an actualcontroversy no longer exists between the parties and the interests and rights of theparties are no longer in controversy," the issue is moot. LaSalle National Bank, 297 Ill.App. 3d at 43.

Section 2a of the Protest Act provides "[t]he judicial remedy herein provided,however, relates only to questions which must be decided by the court in determiningthe proper disposition of the moneys paid under protest." 30 ILCS 230/2a (West 2000).

We conclude the circuit court properly dismissed ChiCorp's complaint as mootbecause there was no longer an actual case or controversy existing between theparties. It is evident from the pleadings and the facts in this case that the partiesagreed on the disposition of the money. ChiCorp's complaint sought an order returningthe money, and the Department agreed. The relief afforded to the taxpayer as providedby the Protest Act is limited to the proper disposition of the money. Therefore, there isno question or controversy to be decided by this court. Although ChiCorp argues itscomplaint sought additional relief, such as a declaration that ChiCorp was entitled toexclude the gains from the sale of U.S. obligations from its base income, deciding theseadditional issues when there is no controversy before the court would be improper;doing so would constitute an advisory opinion. Because there is no longer a genuineissue of material fact, we find the trial court's order dismissing ChiCorp's complaint asmoot proper.

Our conclusion that the relief provided in the Protest Act is limited to the properdisposition of the money in the protest fund is in line with existing case law. Forexample, in Caterpillar Financial Services Corp. v. Whitley, 288 Ill. App. 3d 389 (1997),this court found on appeal that because the parties agreed an undisclosed amount ofmoney still remained in the protest fund over which the court's judgment would effect,the plaintiff's complaint was not moot and the court could reach the underlyingconstitutional issues raised in the plaintiff's complaint. The court reasoned thatbecause "funds still remain in the protest fund over which the circuit court retainsjurisdiction and this court's ruling would effect those funds," "our decision would effectan actual controversy and would not be an advisory opinion." Caterpillar, 288 Ill. App.3d at 396.

In the case at bar, because there is no money in the protest fund this court'sjudgment would effect, a ruling on ChiCorp's additional arguments would constitute anadvisory opinion.

ChiCorp relies heavily on Chicago & Illinois Midland Ry. Co. v. Department ofRevenue, 63 Ill. 2d 474 (1976). In Chicago & Illinois Midland Ry, the taxpayer paid thetax under protest pursuant to the Protest Act before it had received a formal notice oftax liability from the Department. The Department petitioned the court to enter an orderrefusing to decide the merits of the complaint and directing the railway to first pursue itsadministrative remedies. The Illinois Supreme Court summarized the issue on appealas "whether, where a system of agency or departmental hearings is available and thefinal decision of the department or agency is reviewable under the AdministrativeReview Act, a taxpayer may seek a judicial determination under the Protest Act of thepropriety of a disputed tax without exhausting the administrative remedies." Chicago &Illinois Midland Ry., 63 Ill. 2d at 478. The court answered the question in theaffirmative. In doing so, the court reasoned the Protest Act gave courts the authority "tohear the merits of those cases in which the taxpayer was willing to pay the tax underprotest and proceed under the Protest Act." Chicago & Illinois Midland Ry., 63 Ill. 2d at483.

We do not believe the holding in Chicago & Illinois Midland Ry. can be extendedto the situation presented by the case at bar. Chicago & Illinois Midland Ry. addressedneither the question of mootness nor whether a court had the authority to hear themerits of those cases in which the Department agreed to return the money paid into theprotest fund. The court addressed the narrow issue of whether a taxpayer first had toexhaust its administrative remedies before pursuing an action in court under the ProtestAct. To extend the court's reasoning to hold that a court has the authority to hear themerits of a moot case would be taking the court's words out of context and extendingthem to a situation never contemplated by the court. Therefore, we are not persuadedby ChiCorp's reliance on Chicago & Illinois Midland Ry.

II. Public Interest Exception

Having determined ChiCorp's complaint was properly dismissed as moot, wemust also determine whether the circuit court properly declined to apply the publicinterest exception.

In determining whether this exception applies, courts consider whether (1) thequestion is of a public nature; (2) an authoritative resolution of the question is desirablefor the purpose of guiding public officers in the performance of their duties; and (3) thequestion is likely to recur. Lucas v. Lakin, 175 Ill. 2d 166, 170 (1997). A clear showingof each factor is required to bring a case within this exception. Mount Carmel HighSchool v. Illinois High School Ass'n., 279 Ill. App. 3d 122, 125-26 (1996). "Only on rareoccasions do we invoke the public interest exception." People ex rel. Partee v. Murphy,133 Ill. 2d 402, 410 (1990). We review the circuit court's determination under an abuseof discretion standard. See Sharma v. Zollar, 265 Ill. App. 3d 1022, 1026 (1994).

ChiCorp argues the public interest exception applies because (1) U.S. Treasuryobligations are widely held; (2) the issue will recur because many taxpayers have viableclaims for periods prior to the effective date of Public Act 89-460; and (3) public interestdemands a clear determination of the issue because the public is entitled to be fullyinformed of the Department's policies regarding the proper application of Illinois tax law. Plaintiff cites to McLean v. Department of Revenue, 184 Ill. 2d 341 (1998), for thegeneral proposition of law regarding the exception; however, it does not analogize toany cases in support of its argument.

We agree with the circuit court's order and find no compelling reason to apply theexception. In reaching our conclusion, we are mindful of our supreme court's guidancethat the exception should only be invoked on "rare" occasions. Most persuasive indeclining to apply the exception is our determination that in light of the enactment ofPublic Act 89-460, the question will not likely recur. Further, we are neither aware ofany cases similar to the case at bar where the exception has been applied nor doesChiCorp cite to any.

Accordingly, we affirm the judgment of the circuit court.

Affirmed.

THEIS, P.J., and GREIMAN,J., concur.