Forest Pres. Dist. of Cook Cnty. v. Royalty Props., LLC

2018 IL App (1st) 181323

138 N.E.3d 766

435 Ill.Dec. 152

The FOREST PRESERVE DISTRICT OF COOK COUNTY, Plaintiff-Appellee,

v.ROYALTY PROPERTIES, LLC; Cannon Squires Properties, LLC ; Richard Kirk Cannon; and Meryl Squires Cannon, Defendants-Appellants.

No. 1-18-1323

Appellate Court of Illinois, First District, Fourth Division.

December 20, 2018

Robert J. Slobig, of Torshen, Slobig & Axel, Ltd., of Chicago, for appellants.

Victor P. Henderson and Christopher W. Carmichael, of Henderson Parks, LLC, of Chicago, for appellee.

JUSTICE GORDON delivered the judgment of the court, with opinion.

¶ 1 The instant appeal arises from the trial court's entry of an order appointing a receiver during the pendency of a foreclosure action. The trial court initially granted summary judgment in the foreclosure action in favor of plaintiff Forest Preserve District of Cook County (Forest Preserve), but we reversed that judgment on appeal, finding that there were questions of fact concerning the validity of defendants' affirmative defenses. BMO Harris Bank, N.A. v. Royalty Properties, LLC , 2016 IL App (1st) 151338-U, 2016 WL 6269967. On remand, the trial court entered an order finding the Forest Preserve mortgagee in possession pursuant to the Illinois Mortgage Foreclosure Law (Foreclosure Law) ( 735 ILCS 5/15-1101 et seq. (West 2008) ). On appeal, we again vacated that order, finding that, without an evidentiary hearing, the trial court did not have an adequate basis for finding the Forest Preserve as mortgagee in possession. Forest Preserve District v. Royalty Properties, LLC , 2017 IL App (1st) 171564-U, 2017 WL 3758758. After remand, the trial court held an evidentiary hearing, after which it granted the appointment of a receiver. For the reasons that follow, we affirm.

¶ 2 BACKGROUND¹

¶ 3 The underlying real estate transaction involved in the instant appeal has been the subject of extensive litigation, both before this court and in federal court.² In the instant appeal, we are asked to consider the limited question of whether the trial court properly found the Forest Preserve as mortgagee in possession during the pendency of foreclosure proceedings and the trial court's appointment of a receiver. Accordingly, we are primarily concerned with the litigation directly affecting that question and consider the ancillary lawsuits only where necessary to provide context.

¶ 4 As noted in our prior decisions, on June 8, 2009, Amcore Bank³ (Amcore) filed a complaint for foreclosure against defendants Richard Cannon and Meryl Squires Cannon (collectively, the Cannons), Royalty Properties, LLC (Royalty Properties), and Cannon Squires Properties, LLC (Cannon Squires Properties), seeking possession of a 400-acre property in Barrington Hills that was used as a horse farm. Defendants filed an answer to the complaint and several affirmative defenses, including (1) that Amcore had acted in bad faith by failing to send the loan documents to defendants until the night before the closing, (2) that the loan violated the Truth in Lending Act (TILA) ( 15 U.S.C. § 1601 et seq. (2012) ), (3) that Amcore's unclean hands barred it from foreclosing, (4) that Amcore's promises estopped it from foreclosing, and (5) that Amcore miscalculated the amount due. The trial court dismissed the affirmative defenses but gave defendants leave to replead them. On May 18, 2010, the trial court appointed a receiver for the property.

¶ 5 In 2010, during the pendency of the lawsuit, the federal Office of the Comptroller of the Currency determined that Amcore was engaging in unsafe business practices that were likely to cause insolvency and appointed the FDIC as receiver for Amcore's assets. As receiver, the FDIC sold Amcore's interest in the loan to BMO Harris Bank (BMO Harris), which took over the foreclosure action. BMO Harris filed a motion for summary judgment on the complaint, but before the trial court heard the motion, BMO Harris sold its interest in the loan to the Forest Preserve, which was granted leave to substitute as plaintiff. After the Forest Preserve was substituted as plaintiff, defendants filed a motion requesting leave to file amended affirmative defenses, including the previous defenses as well as additional defenses specific to the Forest Preserve. In August 2013, the trial court denied defendants' motion for leave to file their amended affirmative defenses, granted summary judgment in favor of the Forest Preserve, and granted the foreclosure of the mortgage and sale of the farm. The Forest Preserve was the highest bidder at the foreclosure sale, and the trial court entered a $6.2 million deficiency judgment against defendants.

¶ 6 Defendants appealed and we reversed, finding that defendants had adequately alleged facts that could support judgment in their favor and that there remained questions of material fact precluding entry of summary judgment. BMO Harris Bank , 2016 IL App (1st) 151338-U, ¶ 71. Specifically, we noted that defendants had alleged (1) that Amcore had only presented them with the 500 pages of closing documents the night before the closing, (2) that Amcore knew that they needed to close or forfeit their nearly $2 million escrow deposit, and (3) that some of the loan documents provided by Amcore contained terms different than those previously discussed. BMO Harris , 2016 IL App (1st) 151338-U, ¶¶ 10, 47. We found that "[t]he allegation that the Cannon parties would lose their entire deposit of almost $2 million if they walked away from the deal, when they had an inadequate opportunity to review the loan documents or arrange alternate financing, suffices to state a claim for economic duress that violated Amcore's duties of negotiating in good faith and dealing fairly with the Cannons." BMO Harris , 2016 IL App (1st) 151338-U, ¶ 48.

¶ 7 Additionally, we found that defendants adequately alleged facts to support a violation of TILA. BMO Harris , 2016 IL App (1st) 151338-U, ¶ 52. We noted that TILA applies only to consumer loans, not to loans for commercial purposes, and that the trial court had found that the loan documents established that Amcore made a commercial loan. BMO Harris , 2016 IL App (1st) 151338-U, ¶ 51. We further noted that defendants had presented evidence that the Cannons had intended to use the property as a residence and that there were zoning regulations and easements that severely limited the use of the land and largely forbade commercial use of the property. BMO Harris , 2016 IL App (1st) 151338-U, ¶ 52. We found that "[t]he circuit court improperly focused on Amcore's purpose in making the loan, when applicable case law requires the court to consider primarily ‘the borrower's purpose in obtaining the loan.’ " BMO Harris , 2016 IL App (1st) 151338-U, ¶ 52 (quoting People's Bank of Arlington Heights v. Atlas , 2015 IL App (1st) 133775, ¶ 28, 393 Ill.Dec. 771, 35 N.E.3d 163 ). Accordingly, we found that defendants had adequately alleged facts to raise a question of fact as to whether TILA applied to the loan transaction. BMO Harris , 2016 IL App (1st) 151338-U, ¶ 52. We reversed the trial court's grant of summary judgment and its decision to strike defendants' affirmative defenses and remanded "for further proceedings in accord with this order." BMO Harris , 2016 IL App (1st) 151338-U, ¶ 71.

¶ 8 After remand, on May 30, 2017, the parties appeared before the trial court to reinstate the case, and defendants requested that possession of the property be returned to them. The parties discussed the "status quo" that had been in place prior to the entry of summary judgment, with defendants arguing that possession remained presumptively with them because there was no showing that the property was nonresidential. The trial court found that, prior to the entry of summary judgment, there had been an order finding the Forest Preserve as mortgagee in possession and appointing a receiver and that the status quo would be continuing with the Forest Preserve as mortgagee in possession. The trial court accordingly entered an order providing that "the Plaintiff Forest Preserve District of Cook County is mortgagee in possession, pursuant to the October 10, 2013 ORDER, which is now reinstated." Defendants again appealed to this court, and we again vacated the order. Forest Preserve District v. Royalty Properties, LLC , 2017 IL App (1st) 171564-U, 2017 WL 3758758. We noted that, in the prior appeal, "[t]he appellate court expressly held that the Cannon parties stated several viable affirmative defenses supported by sufficient evidence to withstand the motion for summary judgment. The appellate court found that the Cannon parties stated facts which could support a finding that fraud in the factum rendered the purported mortgage documents void." Forest Preserve District , 2017 IL App (1st) 171564-U, ¶ 7. We found that the questions of fact surrounding the validity of the mortgage precluded the trial court from finding the Forest Preserve as mortgagee in possession. Forest Preserve District , 2017 IL App (1st) 171564-U. Specifically, we found:

"The Cannon parties' allegations in their affirmative defenses, on which the circuit court has heard no testimony, would support a finding that no written instrument created a ‘consensual lien,’ because Amcore obtained the Cannons' signatures on the purported mortgage through fraud or duress. Because the circuit court has not yet heard sufficient evidence to determine whether the document [the Forest Preserve] presented meets the statutory definition of ‘mortgage,’ and whether Amcore and those who derive their rights from Amcore qualify as mortgagees, the circuit court did not have an adequate basis for naming [the Forest Preserve District] as mortgagee in possession." Forest Preserve District , 2017 IL App (1st) 171564-U, ¶ 15.

Accordingly, we found that "the record does not yet permit the circuit court to designate [the Forest Preserve] as a mortgagee in possession of the property at issue" and vacated the...