Velasquez v. Downer Place Holdings, LLC (In re Cnty. Treasurer & Ex Officio Cnty. Collector of Kane Cnty.)

2018 IL App (2d) 170418

118 N.E.3d 659

427 Ill.Dec. 458

IN RE Application of the COUNTY TREASURER AND EX OFFICIO COUNTY COLLECTOR OF KANE COUNTY, ILLINOIS, for Order of Judgment and Sale Against Real Estate Returned Delinquent For the Nonpayment of General Taxes for the Year 2011 and Prior Years

(Samuel N. Velasquez, Petitioner-Appellee,

v.Downer Place Holdings, LLC, Respondent-Appellant).

No. 2-17-0418

Appellate Court of Illinois, Second District.

Opinion filed October 15, 2018

Modified upon denial of rehearing November 16, 2018

Elizabeth M. Bartolucci, of Bartolucci Law, LLC, of Chicago, for appellant.

John W. Stanko Jr. and Emmett R. McCarthy, of Stanko McCarthy Law Group, Ltd., of Chicago, for appellee.

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

¶ 1 The circuit court of Kane County issued a tax deed for the property located at 40-46 West Downer Place, Aurora (Property), to the petitioner, Samuel N. Velasquez, over the objections of the respondent, Downer Place Holdings, LLC (DPH). DPH appeals, arguing that Illinois law bars Velasquez from obtaining the tax deed, because he held an interest in the Property. We find that he had no interest that would prevent issuance of the tax deed to him and affirm the judgment.

¶ 2 I. BACKGROUND

¶ 3 The Property is a two-story multi-unit commercial property that is zoned for mixed use. In October 2012, the 2011 property taxes on the Property, which had not been paid, were sold to MTAG, identified as the custodian for Alterna Funding 1, LLC (collectively, Alterna). After extensions, the final date for any redemption of the taxes was October 28, 2015.

¶ 4 In 2013, the ownership of the Property was transferred to a land trust, the beneficiary of which was DPH. James B. Liggett was the sole owner of DPH. The trustee for the land trust was Standard Bank and Trust Company.

¶ 5 In April 2014, DPH leased one of the units at the Property to Velasquez and his wife, Katie, to operate a wedding services business. The lease provided that, in addition to rent, the Velasquezes would pay for the unit's gas and electric service. The lease did not require them to pay for property insurance, property taxes, or water.

¶ 6 Over the years, various mechanic's liens were filed against the Property, and in 2014 a foreclosure suit involving the Property was filed. Trial was scheduled for May 7, 2015.

¶ 7 Shortly before then, Velasquez and DPH began negotiations over a possible transfer to the Velasquezes of some of DPH's interest in the Property. On May 5, 2015, Velasquez and DPH entered into a "trust share purchase agreement" (Agreement). The Agreement identified Liggett—as "managing member" of the land trust that owned the Property—as the seller and the Velasquezes as the buyers. Under the Agreement, the Velasquezes were to obtain a 51% interest in DPH in return for paying $51,000 to DPH by October 27, 2015. The Agreement stated that Velasquez "pledged by this document" that the 2011 taxes on the Property would "be paid in full no later than October 27th 2015" and that Velasquez would "become the Managing Member upon completion of full payment by or before October 27th 2015." Further, the parties agreed that Velasquez would pay off the mechanic's liens against the Property. (Although this condition does not appear in the written contract, both parties have agreed throughout this litigation that the condition was a part of the Agreement.) The Agreement was signed by Liggett and Velasquez. That same day, Velasquez paid $23,000 to settle the foreclosure case involving the mechanic's liens. On May 7, 2015, the foreclosure case was dismissed.

¶ 8 On May 13, Liggett (as "manager" of DPH) executed a form assignment of 51% of DPH's interest in the land trust to the Velasquezes. However, the assignment contained a limiting clause: "This assignment shall not be binding on the Trustee unless and until the original thereof is lodged with the Trustee and its acceptance indicated thereon." It is undisputed that the trustee took no action with respect to the assignment, and neither party argues that it ever became effective.

¶ 9 On May 18, both Liggett and Velasquez signed a 30-day notice terminating the tenancy of one of the other tenants at the Property. However, about this time, the relationship between Liggett and Velasquez began to deteriorate. On May 29, DPH's attorney circulated a notice to all of the tenants at the Property, advising them that Liggett was "still the managing member for the ownership of the building" and that the tenant named in the 30-day notice was the building manager. Nevertheless, on June 1, Velasquez paid one installment of the 2014 property taxes on the Property, in the amount of $2028.29.

¶ 10 On June 2, an attorney representing Liggett and the trustee wrote the Velasquezes, informing them that Liggett "elects to and hereby does terminate" the Agreement and that they should "consider this Agreement as null, void and of no legal effect." On June 11, Liggett (on behalf of DPH) served the Velasquezes with a 10-day notice terminating their tenancy at the Property. On June 23, the attorney for Liggett and the trustee wrote Velasquez's attorney regarding the 10-day notice. That letter stated that there were "no existing agreements in force other than the lease agreement." The letter further stated that the Velasquezes "never acquired more than a possessory interest in the property" and that the Agreement "was terminated some time ago in writing."

¶ 11 In early July 2015, DPH filed a forcible detainer (eviction) complaint against the Velasquezes. The Velasquezes filed an answer that included an affirmative defense and counterclaims for specific performance of the Agreement and for misrepresentation. The affirmative defense alleged that DPH had induced Velasquez to enter into the Agreement and to pay off the mechanic's liens and the current property tax bill, thereby unjustly enriching DPH, and thus no rent was due. The counterclaim for specific performance alleged that Velasquez had partially performed their obligations under the Agreement and were willing to complete their performance if DPH were required to proceed with the Agreement. The misrepresentation counterclaim alleged that, although DPH had promised to convey 51% of its interest in the Property, it never intended to perform this promise but instead always intended to revoke the Agreement without refunding any of Velasquez's payments on DPH's behalf, as in fact it did. The outcome of the eviction action does not appear in the record on appeal. Although the Velasquezes' occupancy at the Property appears to have continued, the record does not contain evidence documenting the nature of that occupancy.

¶ 12 On July 16, 2015, Alterna filed a petition for a tax deed for the Property, alleging that the time to redeem the taxes would expire on October 28, 2015, and that no one had yet done so. Paragraphs 1 through 5 of the petition alleged that all of the conditions for issuance of a tax deed had been met, and the relief sought was the issuance of such a deed once the redemption period expired. On October 6, 2015, Velasquez bought the tax-sale certificate from Alterna. No one redeemed the taxes by October 28, 2015. On November 24, 2015, Velasquez was substituted for Alterna as the petitioner in the tax-deed proceeding.

¶ 13 In April 2016, DPH filed an answer in which it argued that Velasquez should not receive a tax deed because he had breached the Agreement, had unclean hands, and was subject to promissory and judicial estoppel. That answer was stricken by agreement. In October 2016, DPH filed a new answer. It admitted the allegations of paragraphs 1 through 5 of the petition but asserted the affirmative defense of fraud, alleging that Velasquez induced DPH to enter into the Agreement by promising to redeem the 2011 taxes on the Property but then failed to do so.

¶ 14 In November 2016, Velasquez moved for summary judgment. He noted that all of the legal requirements for issuance of the tax deed had been met through DPH's admissions of the first five paragraphs of the petition for tax deed, and he argued that, in light of DPH's June 2015 anticipatory repudiation of the Agreement, DPH could not sustain its affirmative defense of fraud. He attached as exhibits copies of the letters dated June 2 and 23, 2015, terminating and confirming the termination of the Agreement. DPH's response to the motion did not refute or even address the evidence of anticipatory repudiation, instead arguing that fraud in the inducement was a permissible defense to a tax-deed petition under section 22-45 of the Property Tax Code (Code) ( 35 ILCS 200/22-45 (West 2014) ) and that DPH had asserted this defense. DPH also attached an affidavit by Liggett describing the Agreement and charging that it was "an artifice of fraud concocted by * * * Velasquez to deprive [DPH] of its value in the Subject Property."

¶ 15 On December 20, 2016, the trial court heard argument on the motion for summary judgment. The record does not contain any transcript or other record of that hearing. The order entered that day stated:

"[T]he court having reviewed the briefs, pleadings and oral argument of the parties, it is hereby ordered that petitioner's motion for summary judgment is granted as to [the] affirmative defense of fraud. The court finds that there is no issue of material fact regarding fraud in procurement of the tax deed."

The order continued the case for prove-up on January 10, 2017.

¶ 16 On January 10, 2017, Velasquez and DPH appeared through their attorneys, and Velasquez filed an application for an order directing the issuance of a tax deed. A wrinkle arose when Velasquez's attorney informed the court that outside the courtroom he had met John Grafft, who claimed to be the record owner of the Property. Grafft produced a deed recorded on December 29, 2016, conveying the Property to Grafft from a land trust held at the State Bank of Geneva (Geneva bank). Velasquez's...