REAL ESTATE LAW PRACTICE “KEYPOINTS”

(February 2002)

 

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

e-mail:  sbashaw@bashawlaw.com

(Copyright 2002 - All Rights Reserved)

In addition to encouragement from the Illinois Institute of Continuing Legal Education and the Illinois State Bar Association’s Real Estate Section Council, it should be noted that Chicago Title Insurance Company helps underwrite the monthly production of these real estate law "Keypoints". Chicago Title is committed to the role of attorneys in real estate transactions and their continuing education in this area. Its staff attorneys are pleased to offer their view points on various developments in the law as set forth below from the perspective of a title company serving the public and the attorneys who represent their clients in real estate transactions.

 

1. AIR SPACE; FEDERAL PREEMPTION, STATE LAW and JURISDICTION:

In discussions of current events, there is the continual discussion of air travel safety, new airports, and "noise pollution" around O’Hare Airport, it is interesting to consider, as the Seventh Circuit recently did in Vorhees v. Naper Aero Club, Inc., (November 9, 2001). the interplay between State law and Federal law in determining the extent of an owner’s rights to the air space above and around his real estate. Vorhees, the executor of the estate of Helen Brach, one of the owners of an interest in a 312 acre farm adjacent to a small private airport, brought suit in the Chancery Division in DuPage County seeking to permanently enjoin the defendants, (consisting of a not-for-profit and corporate flying clubs and individuals who either own the airport or were private pilots that use the airport), from using the runway adjacent to the farm. They claimed that the airplane’s use of the airspace over the farm to approach the landing strip was trespass and that the use of the airspace over the farm to approach the landing strip was trespass and that the airplane’s use of the airspace over the farm to approach the landing strip was trespass and that the use diminished the ability to develop the property. In a previously filed case, the estate had argued that the provisions of the Illinois Aeronautics Act that "No person may create or construct any airport hazard which obstructs a restricted landing area or residential airport…", (620 ILCS 5/49.1), amounted to a restriction that prohibited the development of high rise structures on the farm, and therefore constituted a "taking" of property without just compensation; (the argument was that the estate was "forced" to grant an easement over the land adjacent to the landing strip to the planes landing). The defendants filed a motion to remove the case to federal district court based on the Federal Aviation Act (49 USC 40103(a) ) provision that the "United States Government has exclusive sovereignty of airspace of the United States." The case was removed to Federal Court, and then the estate sought to have the case remanded to the Circuit Court of DuPage, arguing that federal preemption was not so complete as to preclude the application of state trespass laws. The Defendants moved to dismiss the complaint alleging that only the FAA has authority to affect air flight and travel in navigable airspace. The District Court agreed with Defendants, denied Vorhee’s motion, and dismissed the complaint.

On appeal the central question was whether there is an action under state law for trespass to airspace, or whether the Federal Aviation Act completely preempts state law. The Seventh Circuit reversed, finding that the United States has "complete and exclusive national sovereignty in the air space; but this does not completely extinguish all rights based on state laws….some state law claims relating to air flight may still have merit, notwithstanding the broad scope of the Federal Aviation Act. "

Noting that the Circuit Court of DuPage would still have to determine if the Federal Aviation Act preempts the estate’s claim, the decision warns; "At the same time, we encourage the plaintiff to think long and hard before pursuing the case in state court. Most issues of air flight and navigable airspace, probably including takes-offs and landings, are within the sovereign regulatory powers of federal government."

Judge Wood dissented, stating his belief that "the regulation of air flight is totally preempted by the federal government," Noting that "navigable airspace" includes that which is "needed to ensure safety in takeoff and landing", and Texas, Nebraska and Connecticut courts have held that states may not regulate air traffic, Judge Wood Stated eloquently: "Federal control is intensive and exclusive. Planes do not wander about in the sky like vagrant clouds. They move only by federal permission, subject to federal inspection, in the hands of federally certified personnel and under an intricate system of federal commands."

(How does all this fit into the local real estate community concerns about "Peotone", "O’Hare Expansion", and the definition of a fee simple as all of the rights to the surface of the land, below to the center of the earth, and above to the "mote in God’s eye"? This case is bound to be cited in the not so distant future.)

 

2. RIPARIAN RIGHTS; ADJACENT LANDOWNER ACCESS FOR RECREATION:

While we are on the topic of the bundle of rights that constitute ownership of real estate other than the surface rights, the case of Roketa v. Hoyer, (5th Dist., January 25, 2005),

http://state.il.us/court/Opinions/AppellateCourt/2002/5thDistrict/January/Html/5000336.htm, dealing with a dispute over the right to use a lake is worth review. June Lake is a man-made lake in Effingham County, that was created Joseph Bohn and Joyce Bohn at a time when they owned all of the real estate surrounding the lake. In the 1980s, they subdivided the real estate into several parcels, each of which had lake frontage, and began selling the tracts. Bohn sold one parcel to Hoyer under a contract sale, and deposited the deed into escrow for delivery upon the payment of the final installment described the tract of land as bounded by the lake; but did not expressly convey the lake or any interest or easement for access to the lake, and was silent relating to the grantee’s use of the lake. Thereafter another deed to another parcel adjacent to the lake did include a grant of the right to use the lake for recreation, but prohibited any commercial use by that grantee. Later, by a deed in lieu of foreclosure Bohn conveyed title to the remaining unsold parcels, and including title to the lake, to Effingham State Bank. The bank’s title eventually was conveyed to Roketa "subject to the rights of other owners of land bordering on June Lake…".

Roketa began raising catfish in the lake, and when some of the catfish came up missing, Roketa told Hoyer he could not fish or boat in their lake, and then sought to enjoin Ralph Hoyer from using the lake. Hoyer counterclaimed arguing that since had had title to real estate along the shoreline of the lake, he had an easement to access and recreational use of the lake. The trial court granted summary judgment in favor of Hoyer. On appeal, the Fifth District affirmed.

The decision in this case sets forth the basic principals of riparian rights. The right to use the real estate to access adjacent water is presumed to be conveyed with all of the other "benefits and burdens that appear at the time of the sale". The grantor will be presumed to have intended to convey "the full benefit of the land conveyed, including all other things necessary to the enjoyment of the land granted…without requiring specific mention of the benefits or appurtenances." The open and visible benefit to the land of the lake front was "essential to the beneficial enjoyment of the tracts that boarder it", and therefore the conveyance included an easement appurtenant for access and recreational use of the lake to all grantees. That use, of course, was to be a "concurrent use, rather than an exclusive use", and therefore Hoyer could not interfere with Roketa’s catfish farm, (by removing the catfish just before dinner?), but Roketa could not expand the catfish farm or interfere with the recreational use of the lake by Hoyer. (Those folks in Southern Illinois DO take their catfish seriously, don’t they?)

[See "Keypoint" No. 10 below for Dick Bales’ thoughts on this case "from the title company point of view.]

3. POWERS OF ATTORNEY; GUARANTIES AND THIRD PARTY PROTECTION:

Last month Dick Bales "beat me to the punch" with his views on Amcore Bank N.A. v. Hahnaman-Alrecht, Inc., (2nd Dist., November 14, 2001), http://state.il.us/court/opinions/AppellateCourt/2001/2ndDistrict/November/Html/2001462.htm. We both agree that this is an extraordinarily important case. Dick sees it from the title company’s perspective, and last month discussed the implications the case has for him reviewing powers of attorney at transaction closings with the ultimate goal of insuring title. I see it as a case attorneys must understand and know about whenever they deal with guaranty and authority issues.

Hahnaman-Albrecht, Inc. was a grain elevator, storage and fertilizer sale operation located in Lee County, and had a long history of borrowing significant sums of money with local area banks. In 1994, it began anew banking relationship with Amcore Bank. The bank required that a $17 million line of credit be guarantied by the principal shareholders and founders of the company. One of the corporate principals was Thomas Conley. Mr. Conley had been suffering from Parkinson's disease since the mid-1970's, and began suffering from dementia in the early 1990's. In 1988, Conley created a trust as part of his estate plan naming himself as trustee and naming the predecessor to Grand Premier Trust and Investment, Inc. as his successor if he became unable act. In 1992, Conley's attorney reviewed the estate plan and prepared a durable power of attorney for Conley naming his son Kristopher as his attorney in fact. The letter forwarding the draft of the power to Conley for review stated that it was prepared with language that was NOT broad enough to allow a guaranty of any business debt inasmuch as "Those decisions I believer should be made only by Tom alone."

In January, 1994, Amcore made the loan to HAI, and Kristopher signed the guaranty on behalf of his father pursuant to the power of attorney. During the loan negotiations, Amcore was advised the Kristopher would sign pursuant to the power, and its loan officer called the Conley attorney by telephone, who advised him that the broad grant of authority "to perform every act of every kind and nature" in the power was sufficient to allow the guaranty to be executed by Kristopher. Amcore also spoke with their own attorney to confirm this opinion, but was told that research on the issue was "inclusive", and if it relied upon Kristopher's power, it could end up in litigation. An attorney for HAI also provided a letter of opinion stating that the guaranties were enforceable.

When the loan defaulted, Amcore sued Conley on the guaranty, and named his successor-trustee, Grand Premier, in order to collect against the trust assets. Grand Premier defended, alleging that the Conley guaranty was invalid as beyond the scope of Kristopher' s power of attorney because the document did not specifically grant the power to execute guaranties. The trial court granted summary judgment in favor of Grant Premier.

On appeal, the Second District opinion by Justice Callum presents a great deal of law succinctly and with unusual clarity, affirming the trial court. Turning first to actual authority, the case restates the law that a' catchall' provision in a power will not expand powers otherwise expressly limited in the document and will be "disregarded as meaningless verbiage". The law in Illinois is that a general grant of agency does not include the power to execute a contract of guaranty unless specifically granted. There was no express grant of authority to Kristopher in the power, (in fact, Conley gave the authority to guaranty trust assets to the trustee), and the facts indicated that there was no intent to give implied authority to sign a guaranty. Noting that "only the words and conduct of the alleged principal, not the alleged agent, establish the agent's authority", there was no finding of conduct by Conley that would support apparent authority to sign the guaranty. The Bank also argued that it relied in good faith upon the power of attorney and therefore should be "fully protected" as provided by the Power of Attorney Act, (755 ILCS 45/2-8). Noting that the legislature amended the Act in1997 following the decision In re Estate of Davis, 260 Ill.App.3d 252, (holding that a bank could not rely in good faith on a forged power), to provide that good faith reliance may be upon a document "purporting to establish an agency", Justice Callum nonetheless distinguishes the Conley power. This power was not a forgery, nor was it a fraud. It simply did not purport to give the power to execute a guaranty, and therefore there was no basis for the bank to make a good faith reliance claim because there was no stated authority to rely upon. The argument that there was ratification was also rejected. The ratification must be that of the principal. Here, the argument that the Trustee ratified was misplaced because the ratification argued was that of the Grand Premier and not the principal, Conley. "Only a principal can ratify this agent's actions."

Knowing about this decision is important, as Dick Bales indicated, in daily transactional practice where powers of attorney often arise. Understanding the reasoning and analysis of the principals of agency, express authority, implied authority, apparent authority, good faith reliance, and ratification Justice Callum presents is indispensable to anticipating the next case in this area of the law.

 

4. TAX SALE REDEMPTIONS; STANDING TO REDEEM and CONVEYANCE MISNOMER:

In Application of the Cook County Collector v. 1MB. Inc., (1st Dist., January 25, 2002 ), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/January/Html/1010570.htm, the unusual circumstances of a common name and redemption of taxes by a successor gives us some interesting law on the issue of redemptions, misnomers in deeds, mortgages, and conveyancing. The property sold for non-payment of taxes was sold by Odessa Bell in 1993 to Johnny C. Smith. The formal designation of the grantee in the deed was "Johnny Calvin Smith", whereas the future tax bills and the recorded instrument were to be mailed to "Johnny C. Smith". Thereafter, the real estate taxes were sold to Random Corporation, which on February 1, 1999 filed a petition for the issuance of the tax deed and served notice on Johnny C. Smith at with advice that the redemption period would expire on June 30,1999. On June 25,1999, Johnny C. Smith executed a quitclaim deed to IMG, Inc. for $300.00, and IMG, Inc. paid $10,095.98 to redeem the property prior to the expiration of the redemption period.

Random Corp. filed a petition to expunge the redemption alleging that IMG, Inc. did not have a valid interest in the property required to redeem because "Johnny C. Smith" had executed the deed to it, whereas "Johnny Calvin Smith" was the title holder. IMG filed a motion to dismiss Random Corp.'s petition and attached a copy of the quit claim deed from "Johnny C. Smith" as evidence that it was the owner and had an interest sufficient to allow it to redeem. The evidence before the trial court established that "Johnny C. Smith" lived at 525 West Eugenie, Chicago, Illinois, was a registered voter at that address with a birth date of April 27, 1951, and had a telephone number that corresponded to that listed in the name of June G. Edward at 525 West Eugenie, who was the mother, according to the birth certificate, of Johnny Calvin Smith, Jr., born on April 27, 1951. Random Corp. ' s notices relating to the tax deed were send to Johnny C. Smith at his 1993 address of 1141 North Noble, Chicago rather than the 1999 address on Eugenie.

The Appellate Court reversed the trial court's order granting Random Corp.'s petition to expunge the redemption and denying IMG's motion to dismiss. Noting that there was no indication in the record for the basis of the trial court's ruling, and therefore "We can only presun1e that the trial court concluded that Random Corp. met its burden of showing that Johnny C. Smith, the grantor of the quitclaim deed to IMG, Inc., is not the same person as Johnny Calvin Smith, the grantee in the 1993 deed. ..", the Court held that IMG, Inc. was entitled to redeem. First, of course, Illinois law encourages redemptions. Secondly, it was the burden of Random Corp. to show that IMG, Inc. had no legal or equitable interest sufficient to allow it to redeem. The right of redemption exists "in any owner or person interest in that property ...whether or not the interest in the property sold is recorded or filed." (35 ILCS 200/21-345) Case law has held that there is an interest in the property that permits redemption by an owner's title insurer, a contract purchaser even though the vendor had previously conveyed by deed to another who had not recorded that deed, and a shareholder of a dissolved corporation. The courts have considered misnomers and upheld conveyance to "an existing grantee but under a name other than the correct one", a misnamed corporation, and a mortgage where the named parties have been misstated. Not finding any evidence that the "Johnny C. Smith" in the 1999 quitclaim deed was not the same person as "Johnny Calvin Smith", there was an "unbroken chain of title" to IMG, Inc., and Random Corp. was held "unable to satisfy its heavy burden".

 

5. CONTRACT INTERPRETATION; CUSTOM AND USAGE vs EXPRESS TERMS:

Although the case of North Grand Mall Associates, LLC v. Grand Center. Ltd., is a case from the 8th Circuit, (interpreting Iowa law), it nonetheless has a factual pattern and holding that are noteworthy; and may well come in handy to real estate lawyers involved in lease/option contract interpretations.

North Grand became the lessee of a 99 year lease when it paid the previous tenant 20 million dollars in June, 1998, with 69 years remaining on the lease term. Two months later, North Grand gave the lessor, Grand Center, notice of its intent to exercise the lease option to purchase. The dispute involved not the exercise of the option, but the method of calculating the purchase price. Grand Center believed that the three year period to be used to calculate the price should include current year during which the option was exercised, (i.e., 1996, 1997, and 1998), and produced testimony that business people using the capitalization method in that area would use the most current rental period to calculate the option price. North Grand, on the other hand, argued that the language of the option price stated that the three years prior to the year in which the option was exercised was the basis for the calculation. This resulted in a purchase price $129,400.00 less than Grand Center's computation. Faced with this divergence, Grand Center argued that the lease was ambiguous, and North Grand should have known what the parties intended, (even though North Grand was a bona fide purchaser from the original lessee and not a party to the negotiations), because of the established custom. The trial court adopted Grand Center's argument and held that it was custom in the area to use the most current period to calculate the option price, and reformed the contract to provide for the higher purchase price.

The Court of Appeals reversed on appeal. The language of the lease provided that the purchase price was to be computed as the average sum of the rent for "the three Lease Years immediately preceding the year in which Lessee notifies Lessor…" divided by (i.e., capitalized at) 7%. Immediately following this language was an example of an option exercised in May 2010 showing the "Lease Year Ending" as 1-31-2007, 1-31-2008, and 1-31-2009. The lease also defined the term "Lease Year" as the twelve-month period beginning of the first day of February and ending on the last day of the following January gave the lease even more clarity. Based on this, the Court held that there was no ambiguity: "In our view, the language (setting forth the method of price calculation) was not ambiguous. We accept the District Court's finding of custom, but a custom, however well established, cannot prevail against the unambiguous words of an express contract." The real estate arena and industry is controlled largely by local custom and usage. Those customs, however well established, can not overcome the unambiguous words contained in a contract. Accordingly, here, where the contract clearly provided that the purchase price was to be calculated based upon the income capitalization rate applied to the previous three years rental income, (rather than the current time period when the option is exercised as dictated by custom), the contract controls.

While the specific facts and jurisdictional aspects of this case are not unimportant, t he rationale and language relating to unambiguous contract language prevailing over an established local custom are a valuable arrow in a real estate transactional quiver.

 

6. RESCISSION; DAMAGES AND AWARD CALCULATION

Todd and Lisa Gibson entered into a contract to purchase a home under articles of agreement (installment contract) from Anthony and Beverly Capasso in Gibson v. Belvidere National Bank and Trust Company, (2nd Dist., November 26,2001),

http://www.state.il.us/court/Opinions/AppellateCourt/2001/2ndDistrict/November/Html/2000734.htm, The initial closing took place on January 29, 1999, Gibson discovered that there was a mistake regarding the size of the property in March, 1999, and returned possession of the property to Capasso on or about March 24, 2000. Gibson then filed suit for rescission to recover their installment payments and improvements to the property, alleging misrepresentation, fraud and breach of contract. Capasso counterclaimed alleging that Gibson failed to make all the installment payments under the agreement for deed, failed to pay for personal property purchased as part of the transaction, and committed waste while during possession. The trial court found that there was a mutual mistake regarding the actual number of acres conveyed and ordered rescission. It is in the calculation/determination (and review of the Appellate Court) of the damages and set-off necessary to place the parties into their pre-contract position that makes this opinion of interest to real estate practitioners.

In its first judgment, the court ordered Gibson deliver possession of the property to Capasso; pay $42,504 for use and occupancy of the property "through May 31, 200", and $2,400 as the balance due for personal property .The Capasso' s were ordered to refund the monthly installments actually paid by the Gibsons of $64,615.46, plus $1,450.17 as the value of improvements made to the property by the purchasers. In a post-judgment motion alleging the court miscalculated the use and occupancy based upon a May 31, 2000 surrender date when they actually surrendered possession on March 24,2000, the Gibson's sought a reduction in the award. Capasso also petitioned to reconsider the award, arguing that the Gibson' s should pay the additional sum of $668 per month of occupancy for real estate taxes. The Court amended the judgment accordingly. The second judgment was also the subject to further post-trial motions relating to the calculation of the award, and then Capasso appealed, arguing that the trial court miscalculated the sums owed by Gibson. (The primary focus of the opinion and dissent are the jurisdictional issues that arise when there are successive post-judgment motions -Judge Callum's dissent argues that the time for filing the appeal is not extended by successive motions.)

Beginning with the statement that when a court orders rescission, the parties must be restored to their status before contracting, (i.e., the purchaser must be refunded any consideration paid, and the seller must be paid consideration for the benefit received by the purchaser), Justice McClaren's opinion unravels the trial court's award with aplomb. The monthly "benefit" for use and occupancy was determined to be properly based upon the three monthly installments the Gibsons did pay to Capasso before discovering the mistaken acreage. This sum was then multiplied by the actual number of months in possession. (Here the trial court simply miscalculated the number of months) The appellate court affirmed the trial court's addition of a monthly sum for real estate taxes in the amended judgment. Noting that the Gibsons did not receive the personal property at issue, the Second District determined the Capassos were not entitled to a setoff for that sum. The result of these long and tedious calculations? The Capassos owed the Gibson's $7,804.63. (How much do you think the attorney's fees were?) The case, nonetheless, is a good exercise in the computation of damages and monetary results of rescission. (The decision and dissent are also worthwhile if your practice gives you a need to consider filing successive motions to reconsider a judgment and wonder just when the appeal time runs.)

 

7. DEDICATION OF ROADWAYS; STATUTE OF LIMITATIONS AND EASEMENT BY PRESCRIPTION

In Klose v. Mende. Commissioner of Highways, (3rd Dist., December 7,2001), http://www.state.il.us/court/Opinions/AppellateCourt/2002/3rdDistrict/April/Html/3010098.htm, there is presented a fairly full spectrum the law governing roadway rights between an owner and the county highway commission. Klose obtained title by a warranty deed in 1995 which described their property by metes and bounds, and included portions of the roadways commonly known as North 4550th Road and East l0th Road. The next year, the Commissioner of Highways sent a right of way agreement to Klose requesting that they grant a 66 foot right of way through their land to accommodate improvements planned for both roads. Klose refused. The Commissioner took the position that they could not refuse because the highways had actually been dedicated to and were owned by the Township. The only evidence of this was a ledger entry made in the township ledger in 1856 that referred to a dedication of the roadways as public highways. Klose filed a complaint for declaratory judgment to establish their fee title to the two roadways. The trial court held that the 1856 dedication was valid and the Township owned the right-of-way. The owners appealed.

In a decision that truly reflects the plaintiffs "historic research", Justice McDade's opinion reverses the trial court. Turning first to 1851 Ill. Laws 35, the opinion notes that the 1856 dedications were invalid for failure to comply with the statutory requires mandating an "order of dedication" with a petition, notice of and a date for a public hearing, survey report and plat attached. Drawing upon early Illinois Supreme Court decisions holding that the introduction of an order of dedication is prima facie evidence of a valid dedication and a valid order requires clearly stated courses and distances of the roadway to be valid, this modem-day decision notes that the 1856 dedication was not valid. There was nothing indicating compliance with the Township Act as it existed in 1856, and the mere notation of a dedication in the Township Ledger, without more, was not sufficient.

The owner's argument that the Township's claim to a fee interest by virtue of the dedication was also time barred by the 40-year statute of limitations relating to real estate was also endorsed by the Appellate Court. Although there is a public use exception to the limitations act so that it will not be applied to invalidate any encroachment on any street, highway or public waters, given the fact that the Township's dedication was invalid, no rights existed to be protected by the exception.

Even though it was not able to assert a fee interest based on the dedication, Township still has an easement by prescription over the road which is currently used by the public. The road had been openly, uninterruptedly, continuously and exclusively used for more than the twenty years-over 140 years, since 1856, actually. While the Township had an easement, however, it was unable to demand the right to make material alterations such as widening the roadway so as to place a greater burden on the Klose's property or interfere with their use or enjoyment of the property.

 

8. PREMISES LIABILITY; CONSTRUCTION SITES:

Most real estate lawyers represent at least one builder or developer. Invariably, the question of the nature and extent of liability to children injured on a construction site comes up in discussion. In the recent case of Jakubowski v. Alden-Bennet Construction Company, (1st Dist., January 11, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/1stDistrict/January/Html/1004030.htm, the duty and liability of a landowner and contractor for injury to a minor child trespassing on a construction site are reviewed-- and refined relating to the principal of a duty by voluntary undertaking. The injured minor, Frank, was 13 years old and lived across the street from the construction site. He had been seen on the site before the accident and told by the contractor, his parents and the policy not go on to the property. One evening, after dark, Frank was walking around on the newly added second floor when he thought he saw a police car. In his haste to duck out of sight, he fell through an open stairway to the first floor.

The general rule is that an owner or person in possession of land has no duty to keep the premises safe for trespassers. They are not required to anticipate people will wrongfully enter the property and provide for their safety. A narrow exception exists where one knows or should know that young children are in the area and, because of their immaturity, are not able to appreciate the risks on the property, or are so distracted by the conditions present that they can not avoid the danger. A further condition of this exception is that the cost and inconvenience of making the area safe is slight compared to the risk presented. A litany of cases, however, have held that the exception should not be applied where the dangers are open and obvious Here, the open stairwell presented an open and obvious danger of falling, and neither the owner nor the contractor had a duty to protect Frank from the open and obvious danger.

The most interesting aspect of this decision, (for non-personal-injury lawyers), is the question presented by the fact that the contract between the owner/developer and contractor specifically sets forth that the contractor was responsible for taking safety precautions on the job site to prevent accidents. While Illinois does hold that a party to a contract may be liable for injury to a third party to whom he otherwise owes no duty by undertaking to protect such a third party in a contract, the theory of "voluntary undertaking" is narrowly construed by public policy. Here the contractor did not undertake any greater duty toward Frank than the owner would have had to the child as a trespasser injured by an open and obvious danger. "To so hold might inhibit parties who enter in to construction contracts from clearly spelling out their responsibilities in contracts." The contractor owned no duty to Frank based on its contractual duties and was not liable under the theory of voluntary undertaking.

9. EMINENT DOMAIN; EVIDENCE OF HIGHEST AND BEST USE, FUNDAMENTAL FAIRNESS & MOTIONS IN LIMINE:

"In eminent domain cases, the only question for the jury to decide is the just compensation owed to the owner of the property to be condemned." So begins the decision in City of Quincy v. Diamond Construction Company, (4th Dist., January 16, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/4thDistrict/January/Html/4010328.htm where the issue was whether a second appraisal obtained by the City could should have been excluded by the trial court based on a motion in limine. The City of Quincy first indicated its intent to condemn the asphalt plant owned by Diamond Construction Company as part of its plan to extend 18th Street in September 1997. The taking would divide the property into two separate parcels, and the remaining property could not be used as an asphalt plant thereafter. Diamond, concerned that it would be required to move during the regular construction season, began communicating with the City on a regular basis to determine how to best accomplish its relocation. Two years later, in December 1999, Diamond received a letter offer of $462,000 from the City. The City had an appraisal of the entire parcel at $1,300,000, which indicated that the highest and best use of the property was as an asphalt plant, and that after division into two separate parcels, the property would no longer be suitable for that use. Diamond began the relocation process in order to survive the move and determined that it would take approximately one year to obtain machinery and set up a new plant. Throughout the winter, Diamond attempted to negotiate reimbursement for its relocation expenses and a low-interest loan from the City to no avail. On April5, 2000, Diamond formally rejected the City's offer of $462,000.

On April 6, 2000, the City filed a condemnation action to acquire the plant. In the process that followed, Diamond received a second appraisal from the City by the same appraiser, but dated on the filing date of the Complaint, listing the highest and best use of the property as vacant industrial land rather than an asphalt plant, and stating that $220,000 was the value of the entire tract, with $111,000 being just compensation for the taking. Diamond filed a motion in limine to exclude the second appraisal. The trial court granted the motion, finding that "fundamental fairness dictated the highest and best use of Diamond's property would be limited to that of an asphalt plant as in the City's first appraisal and before Diamond began its relocation process." Diamond's appraiser testified that the value of the entire parcel was $1,985,000, and the jury awarded a total of$1,558,640 to Diamond. The City appealed, contending that the trial court erred in granting the motion in limine.

Noting that " A trial court has broad discretion to grant or deny a motion in limine as part of it inherent power to admit or exclude evidence.", and will not be reversed absent a clear abuse of discretion, the Forth District affirmed. While the statute (735 ILCS 5/7-121) provides that just compensation is the value of the property at its highest and best use on the date of filing of the complaint to condemn, highest and best use is also the property's current use or any future use

that may be anticipated with reasonable certainty. Moreover, Diamond had detrimentally relied upon the City's first appraisal and offer when it began its efforts to relocate and dismantled its asphalt plant. Accordingly, the City could not assert that the highest and best use was thereby rendered to be a vacant industrial site at only a fraction of the previous value. Diamond was required to act in order to assure the survival of its business, and the trial court's determination of fundamental fairness "did not contradict the well-settled rules of eminent domain law, i.e., the date of valuation is to be was determined on the date the condemnation complaint is filed", or undermine the principal that differences in opinion as to highest and best use and value are questions of fact for the jury.

 

10. RIPARIAN RIGHTS FROM THE TITLE COMPANY’S POINT OF VIEW:

After I had written my thoughts about Roketa v. Hoyer, (see "Keypoint" No. 2 above), Dick Bales forwarded me the following material. As always, I think you will appreciate and enjoy his perspective on the case:

From the Title Insurance Perspective

Roketa v. Hoyer, 5-00-336 is an interesting case involving easements and water rights.

In about 1980 Joseph and Joyce Bohn owned a private man-made lake, June Lake, and the surrounding land. In April of 1981 the Bohns sold a tract of land "bounded on the west" by the shoreline of the lake to Hoyer via articles of agreement for warranty deed. The deed did not convey any of the lake to Hoyer, and the deed was silent as to the right of Hoyer to use the lake.

In September of 1981 the Bohns sold a tract of land to Roketa. Although the deed did not convey any portion of the lake, it did include a provision that allowed Roketa to use the lake.

In 1985 the Bohns conveyed all of the lake and the land they owned around the lake to Effingham State Bank (Bank). This was a deed in lieu of foreclosure. This deed included the Hoyer tract, as Hoyer was still making installment payments.

In 1986 Bank conveyed title to the lake and some adjoining land parcels to Robert and Josephine Arnold. Bank retained title to a small tract of land and also the Hoyer tract. The deed reserved to the Bank the use of June Lake for recreational purposes for the benefit of specifically described land, including the Hoyer tract.

In 1995 the Arnolds conveyed June Lake and some adjoining tracts of land to Roketa, the plaintiffs. The deed to Roketa was subject to "the rights of other owners of land bordering on June Lake with respect to land lying within June Lake and in respect to the water and use of the surface of said lake."

Hoyer completed his contract payments in 1998 and the deed (silent as to any right to use the lake) was then delivered to Hoyer and subsequently recorded.

Plaintiffs started a catfish farm in a penned-in area near the bank of plaintiffs' lakefront property. When plaintiffs discovered that someone had stolen some fish, plaintiffs told defendant that he could not fish or boat in "their" lake. Defendant ignored plaintiffs' directive, which resulted in plaintiffs seeking a permanent injunction preventing defendant from using the lake. Plaintiffs argued that defendant had no property right in the lake or the right to use the lake. The trial court found summary judgment in favor of the defendants and the appellate court affirmed the decision of the trial court.

The appellate court noted the famous easement case, Beloit Foundry Co. v Ryan, 28 Ill. 2d 379 (1963), which stands for the proposition that an appurtenant easement runs with the land and passes with a conveyance of the land even if the deed of conveyance makes no mention of the easement. The court stated that it was evident that the lake was created to benefit the land which surrounded it and that the plaintiffs' property was subject to an easement for the benefit of the Hoyer tract. Therefore, Hoyer had the right to use the lake, as the use of the lake was an easement appurtenant that benefited the adjoining land.

The court ended its decision by noting that the owner of a servient estate must not interfere with the use of the easement by the owner of the dominant estate. Therefore, plaintiffs could continue to operate their catfish farm, but are prohibited from expanding the area of the farm and could not conduct their operations in a manner that would interfere with the reasonable recreational use of the lake by the defendant.

I find this case interesting because it reminds us that easements can both be granted and reserved. For example, assume that lots 1 and 2 are in common ownership. Although lot 1 has street access, lot 2 is landlocked.

If lot 1 is sold first, the deed should contain a reservation of an easement over lot 1 and in favor of lot 2. If lot 2 is sold first, the deed should contain a grant of easement over lot 1 and in favor of lot 2. In the Roketa case, the deed to Roketa's predecessor in title contained a reservation of an easement in favor of the land owned by the defendant. This was a valid easement, and once an easement appurtenant is created, it passes with a conveyance of the dominant estate, even if the subsequent deed contains no specific reference to the easement. (Roketa's deed was "subject to" this previously-created easement. Technically, an easement cannot be created by "subject to" language.)

This case should also remind title searchers and examiners to be especially careful when searching and examining title to land that has been carved out of a larger tract. One of my first claims involved the insuring of half of a lot. At one time one person owned the entire lot; when he sold off half of it, the deed reserved an easement for a party driveway over the half being conveyed and for the benefit of the half retained. We never discovered the easement.

Dick Bales