(May, 2000)


By Steven B. Bashaw

Steven B.  Bashaw, P.C.

Suite 1012

1301West 22nd Street

Oak Brook, Illinois  60523

Tel.: (630) 472-9990

Fax.: (630) 472-9993


(Copyright 2000 - All Rights Reserved)


(Editor's Note: Chicago Title Insurance Company is proud to help underwrite the keypoints, and its staff attorneys are pleased to offer their viewpoint on the various developments in the law. Chicago Title is committed to the role of attorneys in real estate transactions and their continuing education in this area.)



In a Second District case, Village of Wadsworth v. Kerton, (2nd Dist., March 2, 2000),, an interesting and almost compelling set of facts served as a background for the Court to nonetheless rule that there was no estoppel of a municipality by the issuance of a permit to erect a fence to in a later action to require the removal of the fence.

Kerton purchased a vacant lot which had a deed restriction designating a portion of his property as "deed restricted open space" and part of a "scenic corridor" area. The deed restriction provided that the open space was to be maintained in its natural, undisturbed condition, and "no man-made structures of any kind shall be constructed thereon". The "man-made structure" Kerton had in mind was a stockade fence along the border of his property abutting highway Route 41 for security. Before embarking on the project, he went to the Village hall and received a permit to build the fence. The administrative assistant for the Village who issued the fence testified she was unaware that the fence was to be located on the scenic corridor, (although she had a copy of the plat of subdivision with the restriction in her office), and that she would not have issued the permit had Kerton told her that the fence was going to be erected in the open space area. For his part, Kerton admitted that the restrictions were contained in his deed, a copy of the covenants he received at closing, and noted on his title policy, but stated he understood and never read the documents after he received them. Upon receiving his permit, Kerton placed his order for the fencing, waited approximately six weeks for delivery before erecting the fence, but never heard anything from the Village in the interim following the issuance of the permit. It was not until he had removed vegetation from the area, installed the fence, and planted trees and landscaping, (the removal of vegetation and plantings were also violations of the restrictions), that Kerton was advised by the building inspector for the Village that the fence would have to be removed and erected outside the scenic corridor.

In an action for an injunction to remove the fence, restore the vegetation, and impose fines brought by the Village, the trial court ruled in Kerton's favor; finding that the Village was estopped from requiring the Defendant to remove the fence. On appeal, the Second District reversed with an opinion that is a primer in the application of equitable estoppel to municipalities. While the doctrine of equitable estoppel may apply, its use against a public body is not favored. Estoppel will lie only in extraordinary or compelling circumstances. Two requisites must be met: (1) there must be an affirmative act on the part of the municipality, and (2) there must be an inducement of substantial reliance by the affirmative action. The affirmative action on the part of the municipality can not be based on the unauthorized act of a ministerial officer beyond the scope of his duties, but must be an act of the municipality itself, such as a legislative enactment. Here, where the administrative assistant issued the permit in error, there is no "affirmative act of the municipality", but the unauthorized act of an employee despite their directives. If the unauthorized acts of government employees were allowed to bind a municipality by equitable estoppel, the Court noted, the municipality would remain helpless to remedy errors and be forced to permit violations in perpetuity. Additionally, there was no substantial loss to the Defendant here. The fence cost approximately $2,000, and this was neither a substantial loss nor a compelling circumstance for invoking estoppel against the Village.

There is some good language in this case about the effect of the constructive notice given Mr. Kerton by the recording of the restrictions and statements that: "The party seeking to claim benefit of estoppel cannot shut his eyes to obvious facts, or neglect to seek information that is easily accessible, and then charge his ignorance to others.", and "Once a subdivision plat with restrictions is recorded, every lot purchaser has constructive notice of the restriction."



In The City of Springfield v. West Koke Mill Development Corporation, (4th Dist., April 14, 2000),, the city filed a petition to condemn a portion of Defendant's property to make roadway improvements. The two issues on appeal related to the method to evaluate the condemned property and whether the city failed to make a bona fide offer to negotiate a price prior to bringing suit.

Beginning with the proposition that "The purpose of condemnation proceedings is to place the landowner, or condemnee, in the same economic position as if no condemnation occurred, not to improve the condemnee's financial status.", the Court grappled with the application of the "unit rule" in evaluating the condemned property where only a portion of the total premises are being taken. Just compensation is "the amount of money that a purchaser, willing but not obligated to buy the property, would pay to an owner willing but not obligated to sell in a voluntary sale." This definition has occasionally proved difficult in partial taking situations where the public body seeks to take a narrow strip along a road way or some other oddly shaped parcel, which may contribute significantly to the value of the whole, but has limited economic value as a separate piece of land. Two different values can result. The first value is based simply on the market value of the small or oddly shaped parcel in the market place. The second is to determine the value that the parcel provided to the owner because of its relationship to the rest of the owner's land. Two different approaches to value are also commonly used. The "unit value" approach suggests finding the value of the whole parcel, then determining value on a per unit basis, (i.e., per square foot), and applying that unit value to the parcel taken. The "before and after" approach simply has an appraiser value the entire parcel prior to the condemnation, then value the remainder of the parcel after the taking, and the difference is the resulting award valuation.

Here, the Court rejected the "unit rule" approach suggested by the owner. Even though this approach has been approved by the Illinois Supreme Court in past cases, the Fourth District held that there is no authority that the landowner is entitled to a "unit rule" valuation, and notes that just compensation requires that the owner be paid for whatever economic loss is incurred, even if that loss is disproportional to the area of land condemned. " does not follow that the vacant land is as valuable as the land which has the improvements on it, nor does it mean that every part of the vacant land is as valuable as every other part."

Turning to the next issue, the Court disagreed with the owner's contention that the City failed to make a bona fide offer to negotiate prior to filing the complaint. Case law holds that as a condition precedent to filing a condemnation petition, the City is required to engage in a good-faith effort to reach an agreement with the owner on an amount of compensation. Nonetheless, the Court refused to find that the City's "take-it-or-leave-it" offer of $200 for property that the jury later granted the owner a $54,925 award on was not in good faith, ruling the owner had procedurally "forfeited this issue".

Justice Cook's dissent took issue with the bona fide offer portion of the majority opinion. "The power of the government to take the private property of an individual is a tremendous power, one capable of great abuse...The taking body does not have the option of "playing hardball."... We should not allow plaintiff, or any taking body, to begin these proceedings after making only a token insignificant offer."



In Dimucci Home Builders, Inc. v. Metropolitan Life Insurance Co. , (1st Dist., March 31, 2000),, the Court was confronted with the issue of title to a sewer line. The Plaintiff, Dimucci brought suit against Metropolitan Life and EQR-Bourbon Square Vistas, Inc. to recover unpaid fees for use of the sewer line. The Defendants counterclaimed seeking a declaration that the ownership of the sewer line passed with the conveyance of the title to the property and therefore they need not pay a user fee for using that which they owned. The interesting part of the facts in this case is that 90% of the sewer line was "off-site", (i.e., not within the boundary lines of the property), and the Defendants argued that they owned the off-site sewer line as an "appurtenance", ("Upon conveyance of property the law implies a grant of all incidents rightfully belonging to that property at the time of conveyance and which are essential to the full and perfect enjoyment of the property."). An interest in the off-site sewer line was therefore included in the conveyance of the land, they argued. The First District disagreed. Citing the Illinois Supreme Court case of McPeak v. Thorell for the proposition that when real property is conveyed only those "buildings and appurtenances located thereon are likewise conveyed", and noting that here the Plaintiff did not record a sewer easement or other document reserving title to the sewer, it held that the off-site sewer line located outside of the property boundaries is NOT appurtenant to the land.

This made some good sense to me, (although I'm still wondering what happens if the 90% of the sewer line off-site needs repairs and Dimucci doesn't want to do them), but Dick Bales at Chicago Title Insurance had a little different insight to the issues in this case:


Every seasoned title insurance veteran knows that when one conveys land benefited by an easement appurtenant, the easement parcel does not have to be described in the deed of the land burdened by the easement in order for the easement to be conveyed by the deed. (See, e.g., Messenger v. Ritz, 345 Ill. 433, 178 N.E. 38 [1931.]) So as I read Dimucci Home Builders v. Metropolitan Life Insurance Company, all I could think was, "Why didn't the defendants at least try to argue this point of law?" After all, this case indicated that "defendants argue that the off-site sewer line was conveyed to Metropolitan, and then to EQR, as an appurtenance to the Bourbon Square property."

But the defendants ignored this principle of the law and so the court instead stubbornly followed the finding in McPeak v. Thorell, 148 Ill.App.3d 430 (1986), which it quotes: "When real property is conveyed by deed, only those buildings and appurtenances located thereon are likewise conveyed." (Emphasis added by the court.) Hence the court found for the plaintiff. Nonetheless, the court still made the right decision. There had never been any formal grant of easement to the defendants. Instead, the plaintiff, pursuant to permits, had constructed, operated, and maintained the private sewer line that serviced the Bourbon Square property. It would have been inequitable for the court to find that the plaintiff had no legal basis to charge for the use of the sewer line.

But now let's change the facts slightly. Assume that the plaintiff did grant a sewer easement to the defendants over the south ten feet of the plaintiff's property, wherein the defendants could use the sewer line to be constructed within the easement area at no charge. But the actual sewer line is constructed north of and completely outside the easement area, but on land still owned by the plaintiff--the north ten feet of the south twenty feet of plaintiff's property. Now consider these questions:  

1. Assuming that the "easement" is the right to use the sewer line, can the defendants still use the sewer line without compensating the plaintiff?

2. Clearly an easement appurtenant to land is conveyed when the servient estate is conveyed. But here, if and when the defendants sell their land, does the right to use the sewer line pass with the deed, when the deed mentions only the servient estate? Would the right to use the sewer line pass if the deed mentioned the easement, but the easement parcel was described as the south ten feet of the land?

3. Assume that a title company is insuring the sale of the defendant's land. The title company is provided with an ALTA/ACSM land title survey that discloses the sewer line as clearly being outside the easement area.  The purchaser's attorney wants the easement insured. Is the easement insurable? If it is, does the title company have to raise the sewer line as an encroachment on its title policy? If the title company does not think that the easement in its present state is insurable, would it be insurable if the easement parcel were added to the deed as an additional parcel, but legally described as the north ten feet of the south twenty feet of parcel one?


Dick Bales, Chicago Title, Wheaton



In a decision that interprets the application of the decision of the Zoning Board of Appeals of the City of Highland Park, the Second District gives us a little insight of the lengths to which some neighbors will go in opposing a variance request, as well as the weight the Court will give to those efforts. Weinstein v. Zoning Board of Appeals of the City of Highland Park, (2nd Dist., April 6, 2000), Here, the City granted the request of the Litkes for a variance to allow them to construct an addition to their home. The variance allowed the Litkes to exceed the maximum floor area ratio and encroach into the front, back and side yard setbacks to build an addition, garage, and covered porch. The existing dwelling already encroached 6 feet 3 inches into the side yard setback. At the hearing, the Litke's architect presented a design for the addition. There was testimony that due to the steep slope of the lot, it would be extremely expensive to put the addition on the rear of the home and the end result as proposed was a reasonable use in conformity with other residences in the area. There was also testimony that the current improvements were obsolete and difficult to sell in the market place, and the owner needed more space for his growing family. Barry Weinstein, an architect and opponent of the request, (I presume he was also a neighbor), presented an alternative plan that would not require a variance if adopted by the Litkes. The Board granted the variance finding that it was nothing more than an extension of the existing legal non-conforming use that harmonized well with the area. Weinstein filed a complaint for administrative review and then appealed the trial court's affirmation of the Board's decision.

The Appellate Court affirmed. Setting forth the findings of fact and ruling that the Litkes provided evidence that the unique circumstances and unusual hardship would be alleviated by the variance, the Court also rejected the Weinstein's assertion that because they presented an alternative plan which would avoid the need for a variance there was no particular hardship. There is no basis in the law to "...suggest that, because they (Weinstein) presented a plan that complied with the zoning ordinances, the Board was obligated to accept that plan....A reviewing court may not reweigh the evidence but will only determine whether the Board's decision was against the manifest weight of the evidence."



In another case which highlights with land use and local municipal regulation, Richard M. Daley v. American Drug Stores, (1st Dist. April 14, 2000),, deals with the an attempt to come within the exception to the liquor license moratorium currently in effect in portions of the City of Chicago. Section 4~60~23 of the Chicago Municipal Ordinance, ("moratorium"), prohibits the issuance of new liquor licenses in the area of the city in which American Drug Stores sought a license for an Osco drug store. The building had previously had a liquor license issued to a Jewel Food Store from 1963 until 1993, when it closed. In 1993, American Drug Store, (the parent company of both Jewel and Osco), demolished the building and built a new Osco on the same land, which opened in January, 1995. The Liquor Control Commission denied the application for a package goods liquor license and Osco appealed to the License Appeal Commission, which reversed the denial. The Circuit Court affirmed the Commission and this appeal ensued. Construing the provisions of the Ordinance setting forth the exception to the moratorium relating to "continued operation of an existing any other person who is acquiring the licensed business by purchase" as inapplicable, the court held that Osco did not "purchase" the store from an "existing...licensed business". The vacant status of the land for over 18 months during demolition and rebuilding took the matter out of the exceptions as stated in the Ordinance. There is some procedural complexity noted in the opinion relating to waiver of the moratorium, but the Court deals with this fairly perfunctorily and gives some insight to the interplay between the ordinance and the Liquor Control Act which may be helpful to real estate practitioners who are called on to consider liquor licenses as part of a purchase of commercial property.



And, while we are looking into cases in which an intricacies in the relationship between the parties suggests an interesting issue, consider Westerdale v. Grossman, (3rd Dist., April 3, 2000), This case will hearken you back to your law school future interests class and then leave you with a headache.

Loretta Westerdale died testate leaving her real estate divided into three shares for each of her three children, Wallace, Sarah and Ruth. The sisters each received a one-third share, but Wallace received only a life estate in the remaining one-third. The remainder on that third was left to any surviving children of Wallace, except his only child at the time the action was filed, Vicoria. (Did you get that? Wallace has a life estate and the contingent remainder was left to such unborn child(ren) as he may have thereafter, and if he has no other children, then the remainder goes to his sisters if they survive him, and, if they don't survive him and there are not further children, the remainder passes to the estates of Wallace, Ruth and Sarah...if I were Wallace, I simply would have called 'Regis', gotten him to produce a new tv show called "How to Marry a Land Baron", and had another child to remove the contingency from the remainder and set the matter at rest...but....)

Wallace filed a complaint to partition the land. Ruth filed a motion to dismiss claiming that because Wallace could still have children, the remainder was contingent, and a partition could not be accomplished because it would be impossible to determine what share each child of Wallace would receive. The trial court agreed with Ruth and dismissed the partition. Wallace appealed and the Third District reversed.

The issue on appeal was whether Wallace, a life tenant could bring a partition even though the remainder interest in the life estate is contingent. The Code of Civil Procedure applicable to Partitions, (735 ILCS 5/17-101), provides that when property is held as tenants in common, "any one or more of the persons interested therein may compel a partition thereof." Holding that a tenant in common has an absolute right to partition, which is imperative and completely binding upon a court when a case is fairly brought and yields to no consideration of hardship, inconvenience, or difficulty, the Court stated that "We find no evidence in the record, and his sisters do not contend, that Wallace is using the partition action to circumvent the law or public policy of this state." Rejecting Ruth's argument that only a vested remainderman who holds an interest in fee, and not a life tenant, may bring a suit for partition, Justice Breslin noted "But Wallace did not ask the trial court to partition the remainder of his life estate. Instead, he requested that his life estate be partitioned from that of his sisters. Thus, his estate would remain intact until his death when it would be divided among his children, should he have any in addition to Victoria.", and reversed and remanded the case for further proceedings consistent with the opinion.

(Huh? Here's what I don't understand: In the end, what is going to be sold at a partition sale presuming there is no accord to which the parties can agree? Does the successful bidder get a fee simple absolute, a fee subject to a condition subsequent, (Wallace having a child or two or three), a life estate per autre vie, or what???)



The case of In Re: Estate of Edwin Long, (4th Dist., March 10, 2000),, we find some perhaps useful lessons relating to the nature of farm leases and land values, fiduciary relationships, and undue influence. Edwin Long did not read or write other than to sign his name. He farmed the 134 acre parcel his wife inherited until 1986, when he leased it to Bruce Lyon on an oral, 50/50 crop-share, annual lease. Marion Knobloch lived in a farmhouse a few miles away and after his wife's death visited daily with Edwin to read him his mail, write letters for him and do his bookkeeping. When she moved with her husband to Illiopolis in 1991, she nonetheless spoke with him daily by telephone. In 1993, Edwin began suffering a series of illnesses which eventually lead to his demise in December, 1995. Prior to that time, however, Edwin executed a codicil to his will which named Marion Knobloch as his executor, adding Bruce Lyon as his co-executor. In November, 1994, Bruce presented Edwin with an eight page farm lease prepared by Bruce's attorney. The lease provided for a 15 years term (rather than the annual term lease they had orally agreed upon in the past), and after a few days, Edwin signed the lease. Edwin also executed a power of attorney for health care in favor of Bruce. Upon his death, Edwin's children and Marion first learned of the 15 year farm lease for the first time, and Marion brought this action as executor, (Bruce had declined to serve), to sell the farm free and clear of the lease, asking that it be declared invalid based on undue influence.

Testimony in the case from Edwin's attorney revealed that he had never seen this lease, nor had he ever seen any 15 year farm lease during his years of practice in the area. A farm management and appraisal expert testified that a long term lease significantly reduces the value of farmland because it takes active farmers out of the market to purchase, and that he, too, had never seen a 15 year farm lease in this area, where the customary lease was on an annual basis. Bruce also testified that he knew the 15 year lease was "unusual [and] a detriment to the value of the land", but stated that he had to buy expensive farming equipment, (a long term proposition), and did not in any way attempt to influence the decedent.

Justice Cook's decision notes that a person who cannot read can still execute a binding agreement where the contents of the agreement are read to him and understood by him. This particular lease was not prepared at the decedent's request, but by Bruce Lyons' attorney, and there was no evidence that Edwin discussed it with a third party or that it was suggested to him that he do so. The Court also affirmed that the relationship between Edwin and Bruce was a fiduciary one. Bruce was not merely a tenant farmer. He drove Edwin to the doctor and hospital, held a power of attorney for Edwin's health care, and was named as the co-executor of his will under a codicil. The lease was executed less than two weeks after a petition for Edwin's guardianship was denied, and was unknown (kept secret?) from Edwin's children and attorney. "Once a fiduciary duty is established, the law presumes that any transaction between the parties in which the dominant party has profited is fraudulent, a presumption that my be rebutted only by clear and convincing proof...[that may include] a showing that the fiduciary made a frank disclosure...paid adequate consideration, and the principal had competent and independent advice." Noting that no reasonable farm owner would bind himself to use the same tenant for the next 15 years, ("Just as no reasonable person would bind himself to see the same doctor or lawyer for the next 15 years"), there was no evidence that Bruce made a frank disclosure to Edwin Long, that Edwin was told to or sought independent advice, or that adequate consideration was paid, and the lease was found to be presumptively fraudulent and set aside so the sale could proceed.



Most real estate practitioners have witnessed the documentation of the sale of a mortgage at residential closings, and most, I suspect, have wondered what happens when the loan sold goes immediately into default or is in some other manner not acceptable to the purchaser after closing. There is an entire industry that is devoted to the "packaging" and sale of loans. The case of Saxon Mortgage v. United Financial Mortgage Corporation, (1st Dist., March 24, 2000),, offers some insight and instruction on litigation in this area.

Saxon, a Virginia corporation, is in the business of purchasing residential mortgage loans. United, an Illinois corporation, is in the business of originating, selling and servicing residential mortgages. They entered into a sales and serving agreement whereby Saxon agreed to purchase loans from United according to terms and conditions set forth in Saxon's Seller/Servicer Guide, which was specifically incorporated into the agreement. One provision of the Guide stated that if a loan purchase by Saxon from United for a premium was prepaid in full within 180 days following the purchase, United would reimburse Saxon for any premium paid to it on the sale of that loan. Between October 1996 and April 1998, eight of the loans purchase by Saxon from United prepaid within the 180 day period. Saxon alleged it was entitled to a return of premiums of $70,455.77 paid for the loans to United by virtue of the prepayment in the complaint filed in this case in the Circuit Court of Cook County. Prior to this suit, however, Saxon had filed another action on May 1, 1997, in Federal Court in the Northern District of Illinois, against United to recover in a seven count complaint for breach of contract, breach of implied covenant of good faith and fair dealing, breach of express warranty, indemnification, intentional misrepresentation and negligent misrepresentation on a delinquent loan identified as the "Stulka" mortgage. (The "Stulka" mortgage was NOT one of the prepaid loans which were the subject matter of the Cook County case.) United filed its motion to dismiss the Cook County complaint pursuant to Section 2-619, alleging rest judicator based on the fact that the sales and servicing agreement which formed the contractual basis of the complaint in Cook County was the same contract which was the foundation of prior the Federal Court proceeding, and therefore Saxon was guilty of "splitting a single cause of action into more than one proceeding" and should be barred by res judicata from raising in State court that which could have been raised in Federal Court. The trial court, (Judge Lee Preston), agreed and dismissed the Cook County complaint.

On appeal, the First District reversed, providing an excellent review of the doctrine of res judicata and the "transactional analysis" adopted by the Illinois Supreme Court in determining that it did not apply in this case. Res Judicata, of course, provides that a final judgment rendered on the merits by a court of competent jurisdiction is an absolute bar to a subsequent action involving the same claim, demand or cause of action between the same parties. The doctrine extends to not only those claims actually decided, but also those issues that could have been decided in the suit. In this case, even the application of the "transactional test" rather than the "same evidence test" reveals that res judicata is not present. The Federal Court claim, while based on a "blanket contract" (the sales and servicing agreement) was of an entirely different nature from the State Court claim. The basis for the Federal case was a delinquent mortgage with numerous underwriting issues. The basis of the State case with the fact that the loans had paid-off early, without any delinquency or underwriting problems. The transactions took place in different time periods, and one of the State court claims did not even arise until after the Federal suit was filed. "...two claims are not the same cause of action simply because they involve the same contract or contractual relationship...for res judicata purposes."



There have been some developments relating to the publication of the Koenig & Strey memo that stated that parties really don't need the representation of attorneys at closing in the last month or two. The Illinois Real Estate Lawyers Association has proactively issued a "cease and desist" letter to Koenig & Strey relating to the memo and practice of encouraging their agents and clients to not use attorneys at closing. It is reported that IRELA will ready and willing to litigate. The Illinois State Bar Association leadership has indicated support of IRELA's efforts and a willingness to join with an amicus brief on issues of the unauthorized practice of law. Intercounty Title Company was embroiled in all kinds of problems and issues, (some of which are still unclear), recently relating to the practices of a related or unrelated trust services company which cast doubt upon its financial security, and may well be the precursor to some close scrutiny of the underwriting and financial capability of a number of the "marginal" title companies currently active in this area. (Do you know where your title and indemnity money is now?? Were the taxes really redeemed as promised after closing?) IRELA's President, John O'Brien spoke at a recent DuPage County Bar Association seminar and advised the audience that his association's canvas of closing costs in the Chicago area as contrasted with the same costs in the Los Angeles and Phoenix, Arizona areas revealed unequivocally that transactional costs are greatly reduced when the parties are represented by attorneys whose duty and responsibility is to their client rather than the real estate brokerage that is selling "One Stop Shopping" as a method of controlling the transaction regardless of the cost to the consumers. More to come......



The first full weekend in May this year is the time for the semi-annual meeting sponsored by the Illinois State Bar Association Civil Practice Section known as the "Allerton House Conference". The Allerton House Conference is one which traditionally and intentionally focuses the attention of the leaders of the bench and bar on issues of great importance to the law and administration of justice. The topic of the Allerton House Conference which is either being conducted or has just been completed as you read this is Multi-Disciplinary Practices, ("MDP"). If there was ever a more timely and important topic for the leadership of the bar and on the bench in the State of Illinois to consider, I simply do not know what it could possibly have been. I attended an Allerton House Conference a number of years back that focused on Alternative Dispute Resolution when I was ascending to the Chair of the ADR Section (before it became a section), and witnessed the strength and creativity that the assembly brought to that area. The result was the unprecedented growth of ADR in our legal culture and the adoption of mandatory ADR largely throughout the state. I have no doubt that the focus of attention of the assembly at the Allerton House on the issue of MDP can have an equal potential for the practice of law as we know it. I urge you to inquire into and follow the pronouncements of the Allerton House Conference as they come forth in the next few weeks and months. I will attempt to report or obtain comments from attendees on the impact on the practice of real estate law for next month's keypoints.