Triumph Cmty. Bank v. Ired Elmhurst, LLC

2021 IL App (2d) 200108

173 N.E.3d 647

447 Ill.Dec. 293

TRIUMPH COMMUNITY BANK, f/k/a the National Bank, as Assignee of First Midwest Bank, Successor in Interest to the Federal Deposit Insurance Corporation, Solely as Receiver for First Du Page Bank, Plaintiff-Appellee,

v.IRED ELMHURST, LLC; International Real Estate Development, LLC ; International Land Development Corporation; Inland Mortgage Direct Funding Corporation; Unknown Owners and Nonrecord Claimants, Defendants

(International Real Estate Development, LLC, and International Land Development Corporation, Defendants-Appellants; Robert Fontaine Jr. and Anthony Casaccio, Judgment Debtors-Appellants; IMC Mortgage Servicing Corporation, Intervenor-Appellant).

No. 2-20-0108 & 2-20-0109 cons.

Appellate Court of Illinois, Second District.

Opinion filed April 22, 2021

Michael Resis and Thomas P. Scherschel, of SmithAmundsen LLC, and Eugene S. Kraus and Miles V. Cohen, of Scott & Kraus, LLC, both of Chicago for appellants.

William J. McKenna Jr. and Andrew T. McClain, of Foley & Lardner LLP, of Chicago, for intervenor-appellant.

Brian T. Bedinghaus, of Roetzel & Andress, LPA, of Chicago, for appellee.

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

¶ 1 This case stems from a commercial mortgage foreclosure case against the defendants the mortgagor, IRED Elmhurst, LLC (IRED Elmhurst), and two guarantors, International Real Estate Development, LLC (IRED) and International Land Development Corporation (ILDC). Following the foreclosure, the trial court entered judgment against the guarantors, IRED and ILDC. Thereafter, the plaintiff, Triumph Community Bank (Triumph), formerly known as The National Bank, as assignee of First Midwest Bank, successor in interest to the Federal Deposit Insurance Corporation, solely as receiver for First Du Page Bank, issued citations to discover assets upon the guarantors. Triumph subsequently filed a motion for entry of judgment against Robert Fontaine Jr. and Anthony Casaccio, two corporate officers of the guarantors, for violating the citations. The trial court granted the motion. IRED, ILDC, Fontaine, and Casaccio appeal from this order. Additionally, during the proceedings, IMC Mortgage Servicing Corporation (IMC) filed a petition to intervene. The trial court denied the petition. IMC appeals from that order. We consolidated the appeals. We affirm in part and dismiss in part.

¶ 2 I. BACKGROUND

¶ 3 In November 2007, Triumph loaned $11,624,243 to IRED Elmhurst. The promissory note was secured by a construction loan agreement, a mortgage for a property in Elmhurst, and an assignment of rents and leases. Additionally, IRED and ILDC executed a guaranty of payment on the note, guaranteeing performance and prompt payment of IRED Elmhurst's obligations.

¶ 4 In November 2010, Triumph filed a three-count complaint for foreclosure and other relief related to the loan documents at issue. Count I was against IRED Elmhurst and sought to foreclose the mortgage. Counts II and III were against IRED and ILDC and sought to recover on the guaranty.

¶ 5 In May 2011, Triumph filed a motion for summary judgment. The trial court granted Triumph's motion for summary judgment on all three counts of the complaint and entered a judgment for foreclosure and sale. The sheriff conducted the foreclosure sale, and Triumph was the successful bidder. Thereafter, the trial court entered an order approving the sale and entered a deficiency judgment against IRED Elmhurst in the amount of $8,527,840. In January 2012, the trial court entered a written order approving the court-appointed receiver's final report, discharging the receiver, and striking all future dates.

¶ 6 In February 2014, Triumph filed a motion to reopen the case and to enter a judgment on counts II and III of the complaint in the amount of $8,527,840.50. Following a hearing, the trial court stated that the final order in the case was the order approving the foreclosure sale. The trial court stated that it lacked jurisdiction to reopen the case more than two years after the final order. The trial court thus denied the motion. Thereafter, Triumph filed a timely notice of appeal.

¶ 7 On appeal, this court held that the trial court erred in denying Triumph's motion to reopen the case. See First Midwest Bank v. IRED Elmhurst, LLC , 2014 IL App (2d) 140456-U, ¶ 24, 2014 WL 7343344. We concluded that the trial court did not lack jurisdiction, even after the entry of the order approving the foreclosure sale, because there was never a final judgment entered on counts II and III of the complaint. Id. ¶ 17. We thus reversed and remanded the matter for additional proceedings. Id. ¶ 26.

¶ 8 In December 2015, based on the guaranty, the trial court (Judge Bonnie Wheaton) entered judgment against IRED and ILDC jointly and severally in the amount of $2,131,960.

¶ 9 On January 25, 2016, Triumph issued citations to discover assets upon IRED and ILDC. The citations were served upon CT Corporation System, as registered agent for IRED and ILDC. The citations contained a restraining provision, pursuant to section 2-1402(f)(1) of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-1402(f)(1) (West 2014)), prohibiting IRED and ILDC, or anyone acting on their behalf or under their control, from allowing any transfer or other disposition of any property that was not exempt from the guaranty judgment. The citations were set for a return date on March 10, 2016, and were continued several times by the parties’ agreement. On March 29, 2017, the trial court granted Triumph's motion to substitute counsel and continued the citations until April 19, 2017.

¶ 10 On April 19, 2017, the citations were dismissed because Triumph's attorney did not appear in court for the status hearing. Two days later, Triumph filed a motion, pursuant to section 2-1301(e) of the Code (735 ILCS 5/2-1301(e) (West 2016)), to vacate the dismissal and reinstate the citations. At an April 25, 2017, hearing, Triumph explained that its absence at the court hearing on April 19 was the result of a documenting error. Counsel for IRED and ILDC objected, noted that the matter was within the court's discretion, and requested costs and fees for appearing in court on April 19. The court granted the motion to vacate the April 19 order, reinstated the citations, awarded IRED and ILDC's counsel reimbursement for one hour of attorney time, and reset the citations for status.

¶ 11 Thereafter, the trial court granted Triumph leave to serve additional requests for documents. By mid-April 2018, Triumph received most necessary documents, including bank statements and three organizational structure charts. The bank statements showed that, between January 25, 2016 (when the citations were issued), and February 28, 2018, at least $1,270,330 had been transferred through the operating accounts of IRED and ILDC. According to the organizational charts, IRED was the parent company of a family of real estate investment and development companies. One of IRED's subsidiaries was Washington Properties LLC, which, as of August 2011, was the parent company to ILDC.

¶ 12 On June 7, 2018, Fontaine appeared for a citation examination on behalf of IRED and ILDC. Fontaine testified that he was the treasurer of IRED and ILDC and that he held that position since about October 2011. He testified that Casaccio was the president of IRED and ILDC. They were elected to those positions by IRED's board. They held those positions throughout the citation proceedings. Fontaine testified that all bank account transfers and written checks required two signatures for authorization. He and Casaccio were the only two authorized signatories for the bank accounts of IRED, ILDC, and each of the IRED subsidiaries. Fontaine testified that, at the time the citation was issued to IRED, IRED was indebted to IMC, IRED's secured lender, in excess of $20 million.

¶ 13 Fontaine testified regarding a particular series of transfers involving IRED and its subsidiaries. One of the direct subsidiaries, Midwest Residential Rehab LLC (Midwest Rehab), was a limited liability company authorized to establish a series of LLCs that would each purchase, develop, and sell for profit one piece of real property. One of Midwest Rehab's series of LLCs was an entity named Series E. Series E purchased a parcel of real estate in 2015, developed it, and sold it in April 2017. International Montgomery LLC (International Montgomery) was an indirect subsidiary of IRED. International Montgomery was the record owner of real property located in Montgomery, Illinois, for which it would collect rent proceeds.

¶ 14 Regarding a transaction that ultimately resulted in a payment to a general contractor for the Series E development project, Fontaine acknowledged the following transfers. In August 2016, International Montgomery transferred $210,000, money it received as rent proceeds, to International Development Ventures LLC (IDV). IDV then transferred that amount to IRED, which transferred that amount to Midwest Rehab, which then transferred that amount to Series E, which then paid a contractor. When asked why the funds did not just go directly from International Montgomery to Series E, Fontaine stated that they followed the ownership structure. Each transfer was either an extension of a loan or a repayment of a loan from one entity to the next. When asked why the initial transfer from International Montgomery to IDV skipped over International Montgomery's direct parent, Ogden Hill LLC, Fontaine explained that, before he started, there were loans directly from IDV to International Montgomery, so they continued to follow that process for record keeping purposes. Fontaine testified that year-end financial statements showed what each entity owed or was owed by another entity.

¶ 15 In an affidavit, Fontaine stated that IRED did not own any real estate when or after the citations were issued. Its account balance at the time was $29,473.48. In addition, after the...