REAL ESTATE LAW PRACTICE “KEYPOINTS”

(March 2004)

 

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 2004 - 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. MORTGAGES; WHAT ISN'T AN EQUITABLE MORTGAGE:

In the January 2004 collection of recent cases, we noted that what started out as a specific performance case actually became a case about an equitable mortgage in Nave v. Heinzmann, (5th Dist., November 21, 2003), http://www.state.il.us/court/Opinions/AppellateCourt/2003/5thDistrict/November/Html/5020091.htm. In February, 2004, Dick Bales gave us his insight from the title company's point of view of equitable mortgages in the February, 2004 issue. Now, through the courtesy of Mark D. Yura, we have the recent decision in 185 North Wabash, LLC v. Lake Wabash, LLC, (1st Dist., December 24, 2003) No. 1-03-0751, (to date not yet posted to the Court's website), to tell us a little more about what is not an equitable mortgage. It all surrounds, of course, the discernable intent of the parties. Here, the Defendant was an LLC formed by two attorneys with 'many years of experience in buying and selling real estate', rather than a layperson. The property consisted of six lots and a 23-story office building designed by Daniel Burnham. The real estate taxes were sold for nonpayment extending from 1991 to 1996, and the tax buyers obtained a deed, but later entered into a 'settlement agreement' with the Defendant, LW LLC. Under the agreement, LW LLC retained possession and leased the property, with an option to purchase the property back during a seven-month period for $6 million. LW LLC was unable to obtain financing to exercise the option and approached the owner of an adjacent parking lot, who agreed to purchase the property for $6.5 million, (allowing LW to obtain title back from the tax buyer), and lease the property back to LW for nominal rent with an option to repurchase for one year. At the closing of this transaction, the adjacent parking lot owner formed 185 LLC and this transaction was structured so that 185 North Wabash purchased from LW. LW paid a transfer tax of $48,750 at the closing, and received a lease for one year with an option to repurchase at a price equal to 185 LLC's cost of acquisition, financing costs, plus between $500,000 and $800,000, depending on when the option was exercised. Prior to the expiration of the option date, LW delivered a letter to 185 LLC notifying of their intent to exercise the option and enclosing a check for $50,000. The check was returned NSF. 185 LLC notified LW LLC that the it had not exercised the option properly and the option had terminated. The issue came to a head two months after the expiration of the option period when 185 LLC filed an action to evict LW LLC, and LW LLC counter sued for declaration that the sale and leaseback with an option to repurchase actually constituted an equitable mortgage. The trial court heard testimony from a number of attorneys and those involved in the transaction and ruled that this was a sale and not an equitable mortgage. The First District, Third Division "Order" dated December 24, 2003 by Justice Leslie South, with Hoffman and Hall concurring, affirmed by defining the circumstances under which a deed absolute may be considered an equitable mortgage and reviewing the 13 factors which have been considered by the courts in deciding whether a conveyance is a mortgage rather than a deed. (See Robinson v. Builders Supply and Lumber Co., (1st Dist., 1991), 223 Ill. App. 3d 1007, 586 N.E.2d 316, 166 Ill. Dec. 358. Noting that the intention of the parties is the focal point and that the evidence must be clear and convincing, giving deference to the trial court as the finder of fact, the record here indicated sufficient support to overcome an "against the manifest weight of evidence" standard to reverse on appeal. The option agreement LW obtained was "a one year reprieve from certain loss of the property to the tax buyers", and this was clearly sufficient consideration for a sale transaction.

2. ESCROW ACCOUNTS; DISBURSEMENT OF EARNEST MONEY WITHOUT AUTHORIZATION:

In International Capital Corporation v. Moyer, (1st Dist., March 10, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/1stDistrict/March/Html/1022401.htm, International sued Greg Moyer and Millichap Real Estate Investment Brokerage Company of Chicago, (M&M) seeking damages for disbursing earnest money deposited in escrow with M&M as the broker in a purchase transaction for a 128 unit apartment building in Madison, Wisconsin. When the contract was originally executed in April 1998, ICC deposited $25,000 as earnest money with M&M for a closing that was intended to take place in July 1998. There was no written escrow agreement. In April, 1998, ICC requested an extension of the closing date and added $10,000 to the earnest money escrow. In October, ICC requested another extension by letter and deposited an additional $5,000 to bring the earnest money escrow to a total of $40,000.00. The letter specifically stated, "We would appreciate the Seller reinstating and extending the contract to a final closing date on or before December 15, 1998. In consideration for this extension, I am prepared to provide a check in the amount of $5,000 to be added to the previously submitted $35,000 earnest money deposit, which will be considered liquidated damages if the property is not purchased by our investment group." This letter was signed by the Seller accepting the request. When the transaction did not close in December 1998, the sellers demanded M&M release the earnest money, and M&M wrote to ICC advising of the demand and requesting authorization to release the funds. ICC replied that it was working on securing the funds to complete the transaction and that it "would like to request that the funds remain in escrow". In May 1999, ICC contacted M&M and was told that it had "been pressured by the sellers into releasing the escrowed funds" and did so upon receipt of an indemnification agreement from the sellers. ICC never received a notice of termination of the contract from the sellers. The trial court granted judgment against M&M for breach of its fiduciary duty in releasing the escrowed funds without authorization and included prejudgment interest. The reasoning that since the oral escrow instructions did not direct M&M to pay the funds to the sellers upon a specific condition, the disbursement without authorization was a violation of M&M's duty to hold the funds for the mutual benefit of the parties was approved by the Appellate Court. The decision on appeal rejected the broker's rationale that since the modification letter of October 1998 designated the earnest money as "liquidated damages", this gave M&M authority to disburse when the closing did not occur on December 15, 1998. "Moreover, 'liquidated damages' means 'an amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one party if the other party breaches.", but the reference in the October letter "merely determined the amount of damages, not what constituted a breach of contract or under what conditions M&M could disburse the escrowed funds." Distinguishing the ruling that a distribution of escrowed funds was not a breach of fiduciary duty where the terms of a written agreement allow disbursement without written authorization in Fantino v. Lenders Title, the Court held that here there was no written agreement and the October 1998 letter did not authorize distribution. Accordingly, M&M were obligated by their fiduciary duty to continue to hold the funds for the mutual benefit of the parties. The imminently quotable language for practicioners is: "An escrowee which is willing to ignore the instructions of one of its principles in order to comply with the instructions of the other cannot escape being held accountable for its actions. Faced with this dilemma, the Bank's only prudent course of action would have been to file an action interpleading [the sellers] and [the purchasers] and deposit the documents with the court. [Citation.]" McBride, 101 Ill. App. 3d at 765-66, 428 N.E.2d at 742. The additional authority provided by this decision is the reference to the Illinois Administrative Code, (68 Ill.Adm.Code Section 1450.40, now found at 68 Ill.Adm.Code Section 1450.175(h)): "In the event of a dispute over the return or forfeiture of any escrow monies held by the broker…the broker shall continue to hold the deposit in his special account: (A) until he has a written release from all parties consenting to its disposition; (B) until a civil action is filed." The Brokers was, however, more successful with its other, more ingenious, assertion relating to the trial court's award of damages. Because ICC never established that the seller breached the contract, permitting it to recover rather than forfeit its earnest money, the Broker argued, the trial court's award of the amount of earnest money as damages was in error. The Appellate Court agreed and reversed this portion of the case holding that since there was no judicial determination as to whether ICC would be entitled to a return of its earnest money, "In the absence of a finding that ICC was entitled to the return of its earnest money, M&M's breach of its fiduciary duty does not automatically entitle ICC to damages in the amount of the escrowed funds." Since the award of damages must be related to the damages proximately cause by the disbursement of the funds, a remand for a new hearing on damages was necessary.

3. PUBLIC WORKS DAMAGE TO REAL PROPERTY: METROPOLITAN WATER RECLAMATION ACT AND COMPENSIBLE 'TAKING':

If you only read the headnotes, Pineschi v. Rock River Water Reclamation District, (2nd Dist., March 16, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/March/Html/2021337.htm, appears to be a case in which a Section 2-1401 petition to vacate a default judgment is denied. The decision's focus on the "meritorious defense" aspect of the case, (i.e., that the Water Reclamation District didn't have a meritorious defense), makes the case good reading for real estate practitioners. Pinesche brought an action against the Water Reclamation District when, in the process of maintenance on the sewer system in the Plaintiff's subdivision, black water and fecal matter backed up into the basement of their home and lot. The six count complaint alleged the District was negligent, guilty of trespass, create a nuisance, sought damages under Section 19 of the Metropolitan Water Reclamation District Act, (70 ILCS 2605/19) and sought compensation for a "taking" of plaintiff's property when they had to evacuate the property for several days under the Illinois and United States Constitution. A default order was entered when summons was served on the agent of the District and no appearance or answer was filed and an award of $12,523.25 granted to Pinesche. The District filed a motion to vacate attacking the form of service of process in the trial court, lost, and on appeal argued that the trial court abused its discretion when it refused to vacate the default. The Appellate Court's decision first noted that simply because the trial court indicated the facts were "close" on the issue of proper service does not create a basis for appeal. The return of a summons is prima facia proof of service that can be overcome only by clear and convincing evidence. "A person's mere testimony that she was not served is insufficient to overcome the presumption of service. Then, focusing on the existence of a meritorious defense under the Code, the decision notes that Section 19 of the Metropolitan Water Reclamation District Act does not require negligence for recovery and finds that the Section applies to "repair" of the sewer under the language of "construction, enlargement or use". Even stronger is the application of the law that the deprivation of use by the homeowner, while only a 'temporary taking', is compensable under the U.S. and Illinois Constitution. "If government makes your house uninhabitable, that is taking your property even if you retain a clear title…a temporary taking is as subject to just compensation as is a permanent one…it is simply not the law that only intentional appropriations of property are actionable. Compensation is required when the noise and disruption from airplane overflights render property essential unusable…when the construction or operation of public works results in the deposit of water or earth onto property, thereby destroying or impairing the property's usefulness."

4. FROM THE TITLE COMPANY'S PERSPECTIVE; RECENT LEGISLATION:

"FROM THE TITLE INSURANCE PERSPECTIVE Since Steve has the case law all pretty much under control, I thought that I might comment on some recent new legislation. Generally speaking, a public utility has the right to install underground utilities in a statutory dedicated road. Such underground installations are regarded as being within the easement for highway purposes, in favor of the public. But see 605 ILCS 5/9-113 for limitations on this right. This statute suggests that the consent of the underlying fee owner of a common law dedication would be a necessary prerequisite to the installation of any utilities. See especially 605 ILCS 5/9-113(l); see also 605 ILCS 5/9-113(a), which provides that utilities cannot be placed within or along a right-of-way without first obtaining the consent of the appropriate highway authority. There have been numerous cases concerning this issue. See, e.g., Chicago Title and Trust v. Village of Burr Ridge, 41 Ill. App. 3d 112 (1976), which allowed the construction of a municipal water main under the highway without compensating the owner of the fee interest. See also 65 ILCS 5/11-135-7, which allows for the construction of water mains under and across highways and streets. But on the other hand, see Cammers v. Marion Cablevision, 64 Ill.2d 97 (1976). Here the court stated that a cable television company, being a private company and not a public utility, had no right to install its lines in a street without the consent of the adjoining landowner when the underlying land is owned by said landowner. Also, see Benno v. Central Lake County Joint Action Water Agency, 242 Ill.App.3d 306 (1993), where the court held that the installation of a water main under the highway was beyond the scope of the highway easement. Thus, the water agency was not free to install the water main in the land without obtaining the property owner's permission. 605 ILCS 5/9-113(h) formerly provided that "upon receipt of an application therefor, consent to so use a highway may be granted subject to such terms and conditions not inconsistent with this Code as the highway authority deems for the best interest of the public." This subsection does not require the consent of the adjoining landowner to the utility's use of the right-of-way. However, former section 65 ILCS 5/9-113(l) seems to require it: "The consent to be granted pursuant to this Section by the appropriate highway authority shall be effective only to the extent of the property interest of the State or government unit served by that highway authority. Such consent shall not be binding on any owner of the fee over or under which the highway or road is located and shall not otherwise relieve the entity granted that consent from obtaining by purchase, condemnation or otherwise the necessary approval of any owner of the fee over or under which the highway or road is located." Although the Benno case presents an excellent discussion of the law in this area, the impact of this case has been changed. Public Act 93-357, effective January 1, 2004, adds new Subsection (h-1) to 605 ILCS 5/9-113 and drastically amends subsection (l). This new subsection only applies to public utilities providing water or sanitary sewer services. The statute provides that before utilities can be placed within a right of way, the written consent of the appropriate highway authority is needed. But consider the wording of this new subsection (h-1): "The consent shall not otherwise relieve the entity granted that consent from obtaining by purchase, condemnation or otherwise the necessary approval of any owner of the fee over or under which the highway or road is located, except to the extent that no such owner has paid real estate taxes on the property for the 2 years prior to the grant of the consent." What is the meaning of this ambiguous change to the statute? Does this mean that if one's land runs to the center of the road, but the owner is not paying taxes on that part of the land falling in the road, then the owner need not give consent? Or does it mean that if one's land runs to the center of the road, but one's taxes for one's entire tax parcel are delinquent, then the owner need not give consent? Or does it mean that if A's land runs to the center of the road, but if A sells the land to B in 2004, then B need not consent to the placement of utilities in the roadway six months later, because B has not paid taxes on the property for the previous two years? The new subsection also states that the certain types of owners whose property physically abuts the highway are not entitled to compensation: "Owners of property that abuts the right-of-way but who acquired the property through a conveyance that either expressly excludes the property subject to the right-of-way or that describes the property conveyed as ending at the right-of-way or being bounded by the right-of-way or road shall not be considered owners of property located in the right-of-way and shall not be entitled to damages by reason of the use of the highway or road for utility purposes. . . ." Dick Bales Chicago Title Insurance Company Wheaton, Illinois

5. TAX DEEDS; REVIEW OF THE TRIAL COURT'S DECISION TO ISSUE A TAX DEED AND TIME FOR APPEAL:

In the case of In Re Country Treasurer v. Denis Dwyer, (1st Dist., February 26, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/1stDistrict/February/Html/1023493.htm, the home owners of a single family residence lost to a tax buyer for failure to pay general taxes for the year 1996 sought to appeal the trial court's granting of the tax deed. The appeal was denied and dismissed at the appellate level for failure to timely file under Supreme Court Rule 303(a), (i.e., within 30 days after the entry of a 'final order'), and in the process the First District diverges from a 1996 decision of the Second District relating to the constitutionality of the limitation of grounds for re-hearings in tax deed cases found in Property Tax Code, (35 ILCS 200/22/45). That result in this case suggests that an appeal to the Supreme Court may be forthcoming to resolve the divergence on this issue of law. Section 22/45 limits a party to only two basis upon which to seek relief from a trial court's order for the issuance of a tax deed: (1) direct appeal or (2) a 2-1401 motion to vacate under the Code of Civil Procedure, (735 ILCS 5/2-1401), based on limited grounds. Action under the first, of course, must be taken within 30 days of the final order pursuant to Supreme Court Rule 303(a). This same rule would allow for a direct appeal later, but only provided that a timely post-trial motion is filed within 30 days and the appeal is taken within 30 days of the disposition of that post- trial motion. Here, Dwyer filed a Post Trial Motion to reconsider the trial court's finding that service of summons was sufficient even though there was a typographical error in the case number on the complaint served. The motion was filed within 30 days of the order granting the deed. The subsequent appeal however was filed 112 days after the order directing the deed issuance. The question became, of course, whether the filing of the Post Trial Motion served to extend the time to file the notice of appeal to the 112th day. Section 22/24 of the Property Tax Code limits the grounds under which relief under Section 1401 can be granted in tax deed cases to: (1) proof that the taxes were paid prior to sale, (2) proof that the property was exempt from taxation , (3) proof by clear and convincing evidence that the tax deed had been procured by fraud or deception, or (4) proof that a person holding an interest of record in the property was not named as a party in the notices required under the statute and the tax deed applicant did not make a diligent inquiry and effort to serve them. Because Dwyer's grounds for re-hearing were that jurisdiction was not proper due to service of summons with a misnumbered complaint, (the clerk of the court misnumbered the case "00 CoTD 4607" rather than the correct case number "00 CoTD 4670"), this First District decision holds that the post-trial motion was outside of the limited grounds for re-hearing and therefore the trial court "had no basis for receiving or determining the post-trial motions" under the statute. Accordingly, the time within to file the appeal was not extended, with the result that the instant appeal was dismissed. After analysis of the Dwyer motion in the trial court as actually one that "more closely resemble [d a] Section 2-1203 motion for reconsideration, the opinion notes that the grounds limitation of Code Section 22-45 had been previously found unconstitutional by the Second District for violation of the principle of separation of powers. In re Application of the County Collector (Parisi), (1996), 281 Ill.App.3d 467. There the Court held that the legislature's efforts in Section 22-45 to limit the grounds upon which a trial court could entertain a motion attacking an order for the issuance of a tax deed violated the separation of powers doctrine by encroaching upon the trial court's inherent power to review its own orders within 30 days. However, "Noting that a decision by one district of the appellate court is not binding upon other districts, (citation), [the First District states], we respectfully disagree.", the First District finds that "any perceived total divestment of the trial court's general jurisdiction does not, in fact exist" under Section 22-45 and therefore the doctrine is not violated. The First District views the grounds limitation as a constitutional step that "regulates the litigants, which is not prohibited by Rule 303(a)(1), and says nothing regarding abridgement of the trial court's jurisdiction, [and therefore] we simply cannot find a conflict with Rule 303(a)(1)." The conclusion is that "In the case at bar, as noted, the trial court entered its order for deed on July 30, 2002. The Dwyers each filed presumably what amounted to postrial motions for reconsideration pursuant to section 2-1203 on August 21, 2002. However, because those options failed to specifically request one or more of the statutorily authorized types of relief for a post trial motion under section 22-45, they were not 'post trial motions' that would extend the time for filing their notices of appeal. [citation] Ultimately, because the respondents filed their notice of appeal on November 19, 2002, well beyond 30 days after entry of the trial court's final order, we have no choice but to dismiss their appeal for failing to comply with Supreme Court Rule 303(a)(1).

6. ADVERSE POSSESSION; BURDEN OF PROOF AND DIRECTED VERDICTS:

In Dwyer v. Love, (2nd Dist., March, 2004), Dwyer, a farmland owner, filed a suit for declaratory judgment and injunctive relief against Love, the adjoining landowner based on a claim of title by adverse possession. The land was a strip on the western edge of Dwyer's farm and the eastern boundary of Love's property and varied in width from four to eleven feet at various points. The boundary was physically defined by a wire fence and hedgerow of wild shrubs and trees that had grown around the fence that ran along the property line from north to south. Mrs. Dwyer testified that the fence had existed since at least 1956 when she married Mr. Dwyer. Her husband had continuously farmed the land until his death, when his son took over. In 1986 a local township trustee had conducted a "fence viewing", based on Dwyer's complaint that the Love's predecessors were not maintaining their "fair share" of the fence, and ordered Dwyer to maintain the north half of the fence and the owner of the Love's property to maintain the south half. Dwyer maintained the north half thereafter, but the southern half of the fence had fallen into disrepair. When the Loves purchased the property in 1991, a survey disclosed the fact that the Love's property actually extended from 4 to 11 feet beyond the fence line. Nonetheless, Dwyer testified that her husband and son continued to cultivate the fields along and up to the fence just has they had every year since 1956. Love testified he did not think that the crops grew right up to the fence, but believed that the crop were 15 to 20 feet from the fence. The trial court ruled, and the Second District affirmed, that Dwyer had established title by adverse possession as required by the Limitations Act, (735 ILCS 5/13-101). The requirements are possession which is (1) continuous, (2) hostile or adverse, (3) actual, (4) open, notorious and exclusive, (5) under claim of title inconsistent with that of the true owner. Dwyer "continuously" cultivated the land for over forty years. The possession was "actual", and cultivation of land is sufficient "possession". The trial court's finding relating to the differing testimony about the fact that the crops either did or did not grow right up to the fence was not against the manifest weight of evidence and not disturbed by the appellate court. The "fence viewing" clearly established the element of "hostile" or "adverse" and a "claim of title" that was inconsistent with Love's. The testimony established that Dwyer "solely managed and controlled all of the land east of the fence", and the fence and hedgerow created a "clearly discernable boundary line" from the northern to the southern edge of the property. This decision clearly states the burden of proof: "Nonetheless, all presumptions are drawn in favor of the title owner, and the party claiming title by adverse possession bears the burden of proving each element by clear and unequivocal evidence." Dwyer met that burden with the evidence presented and established a prima facia case sufficiently to overcome the Love's motion for a directed finding at the close of the Dwyer's case in the trial court. Trial attorneys will note the directed verdict portion of this decision holding that where, as here, Love proceeded after the denial of that motion "to adduce evidence on its own…the defendant waives its motion for a directed finding" on appeal.

7. CONDOMINIUM ASSOCIATIONS; COMMON AREAS AND LIABILITY FOR PERSONAL INJURY FOR OPEN AND OBVIOUS CONDITIONS:

There is "good news" for Condominium Association Lawyers in the decision in Bellumomini v. Stratford Green Condominium Association, (2nd Dist., February 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/February/Html/2021191.htm. Helga Belluomini filed suit against Stratford Green Condominium Association for person injuries she received when she fell over a bicycle chained to a staircase railing in the common area. The trial court granted summary judgment to the Association based on the deposition of the Plaintiff in which Ms. Belluomini admitted that the bicycle was an "open and obvious condition" and that she was not "distracted" when she tripped over the bicycle as she was leaving her apartment for work. The Second District affirmed, finding that because it was open and obvious, the Association owed no duty to the plaintiff and was not negligent for failing to remove or requiring the owner of the bicycle to remove the bicycle and allowing the bicycle to be stored in the common area. While it would have been nice to have had language in the decision that addressed the special relationship of condominium associations in these circumstances, the factual determination of no liability will and should make some associations feel a little more secure. The important facts in the case were the admissions that the bicycle was "open and obvious", and that there was nothing that distracted the Plaintiff so that she couldn't pay attention and avoid the hazard. Where there is an obstruction in a condominium common area that is open and obvious, there will be no resulting liability for injury because "If defendant owed no duty, there will be no liability, because a legal duty is a prerequisite to liability". While landowners should anticipate injury even where the condition is open and obvious if there is a possibility of distraction, where the injured person admits to seeing the hazard and also admits not actually being distracted, there is no liability.

8. EMINENT DOMAIN; COMPENSATION OF TENANTS AND ABANDONMENT PRIOR TO POSSESSION:

The facts in City of Chicago v. Harris Trust and Savings Bank, (1st Dist., February, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/1stDistrict/February/Html/1023213.htm are quite unique, but offer an interesting insight into condemnation and what happens when the "timing" issues are crucial. In 1999, the City of Chicago began condemnation proceedings to acquire property at the corner of Randolph and State Streets in downtown Chicago. The property was improved with a two story commercial building that had a large rooftop billboard sign. One of valuable components of the property was the lease the owner had with Whiteco to rent the signage until November 2001. The lease provided that the owner of the property could terminate the lease to demolish or add to the building with one year's prior notice, and that the tenant would remove the signage within seven days prior to the termination of the lease. The City sought to condemn Whiteco's lease interest by a quick-take action, and the Court determined the value of the leasehold to be $92,400.00. The City thereafter deposited $92,400.00 with the Clerk of the Court, and an order vesting possession and title to Whiteco's leasehold interest in the City was entered. When Whiteco filed its petition some time later to withdraw the compensation award, the City filed a counter-motion to abandon its taking, arguing that a condemning body can abandon the taking at any time before it has taken both title and possession of the property. In the motion, the City advised the trial court that because there had been a significant delay in the downtown re-development project the lease had actually terminated by lapse of time and there was nothing remaining to be condemned. It no longer needed to condemn the leasehold, so it simply wished to abandon the condemnation. Whiteco responded that once the City had acquired title by the Order vesting title and possession, it no longer was able to abandon. There was no dispute that Whiteco had retained possession of the sign throughout the interim period. Accordingly, "Following the plain and ordinary language in [735 ILCS 5/Section 7-110, [citing Lulay v. Lulay, 193 Ill. 2d 455, at 466], abandonment of the condemnation proceeding is precluded only after a plaintiff has taken possession of the property." Deposit of the award sum did not curtail the right to abandon. Whiteco continued to enjoy possession of the billboard space and continue to use the space for advertising. The constitutional protections due to an owner in the exercise of eminent domain extend to a leasehold tenant, and a lessee does have an expectancy that the lease will be renewed, but here compensating Whiteco would have placed it in a better position that it would have been had the city not proceeded because it would receive both use and enjoyment and compensation if there was no abandonment permitted.

9. DEMOLITION; CONSTITUTIONALITY OF STATUTE AND DUE PROCESS RECONSIDERED:

In the November, 2002 "Keypoints", we reported Village of Lake Villa v. Staokovich, (2nd Dist., October 29, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/2ndDistrict/October/Html/2000943.htm, where the Second District held the section of the Illinois Municipal Code (65 ILCS 5/11-31-1) that authorizes demolition of property which is dangerous and hazardous to the public health and safety unconstitutional based on the fact that it (1) fails to allow a property owner a reasonable time within which to repair his property after receipt of a demolition notice requiring repair of unknown conditions within 15 days, and (2) fails to provide a choice of repair to the owner based on the presumption that the municipality "may demolish" or "cause the demolition" of the property without offering the owner the alternative of repair. In February 2004, the Illinois Supreme Court reversed the Second District and found that statute constitutional. Village of Lake Villa v. Staokovich, (February 20, 2004) http://www.state.il.us/court/Opinions/SupremeCourt/2004/February/Opinions/Html/95118.htm). While "property rights" are fundamental constitutional rights, and the courts have acknowledged that "every owner has a right to use his own property in his own way and for his own purposes, subject only to the restrain necessary to secure the common welfare…We agree with the Village that a property owner does not have a fundamental right to permit his property to fall into such disrepair as to create a risk to the health and safety of the public." Rather than referring to the classic "yelling fire in a crowded theatre argument", Justice Garman here draws the analogy that brings this case alongside of the decisions that allowed the City of Chicago to limit the Chicago Cubs use of Wrigley Field in order to abate the 'public nuisance' of the disruption created by nighttime sporting events in residential areas and Beverly Bank v. D.O.T., where the exercise of police power to reduce the potential for flood damage was sufficiently compelling to allow interference with a property owner's ability to "chose" to construct a new residence in a flood plain. Accordingly, the burden was on the property owner to overcome the presumption of constitutionality of the demolition statute, and the test to be applied was whether the law bears a "rational basis" to the purpose rather than the "strict scrutiny" test applied to fundamental constitutional rights. Here all three prongs of the rational basis test are met: (1) the public interest is to assure property does not become dangerous and hazardous to the community through disrepair, (2) the statute bears a rational relationship to that interest, and (3) the method chosen by the legislature (demolition) is reasonable under the circumstances. Additionally, under this statute, the order for demolition was to issue not from a municipal official, but from a judicial officer, following no less than 15 days notice prior to filing a complaint for demolition requiring a due process hearing at which the burden of proving the property is dangerous and unsafe, with demolition being the most appropriate course of action and substantial reconstruction would be necessary to correct the defects. (See City of Aurora v. Meyer, (1967) 38 Ill. 2d 131.) This added 'due process' distinguishes this statute from a number of ordinances found unconstitutional in other states where judicial proceedings with specific burdens of proof were not employed. The ultimate finding by the Illinois Supreme Court is that: "The statutory framework chosen by the legislature is entirely reasonable and protects the property owner while permitting the municipality to deal expeditiously with threats to the public health and safety". The safeguards enunciated by the Court in City of Aurora v. Meyer are restated with approval, but the circuit court's decision to issue an order of demolition was not supported by the evidence at trial. For that reason, the case was remanded to the circuit court for evidence on the current value of the building and whether repair makes "economic sense" vis-à-vis demolition. Justice Freeman concurred in part and dissented in part. His concurrence was with the majority's decision that the failure of the owners to comply with Supreme Court Rule 19, (which requires notice to the Attorney General, State's Attorney, or municipal counsel or agency attorney when the constitutionality of a statute, ordinance or regulation affecting the public interest is raised at the time of the filing of the suite, answer or counterclaim is raised or the decision of a tribunal raises the issue of constitutionality), did not deprive the Court of jurisdiction, and that the owners had standing to challenge the constitutionality. The dissent was limited to the length the Circuit Court need go to on remand to obtain an evidentiary basis for denial or grant of the village request for demolition.

10. EMINENT DOMAIN; INTERLOCUTORY APPEAL OF THE ISSUE OF GOOD FAITH NEGOTIATIONS:

Recent case law has set forth that a condemning authority must negotiate in good faith with the owner of property as a precondition to filing a proceeding in eminent domain, and then detailed what that requires. (See City of Naperville v. Old Second National Bank of Aurora, (2nd Dist., February 7, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/2ndDistrict/February/Html/2001482.htm and DOT v. 151 Interstate Road Corporation, (2nd Dist., May, 2002), http://www.state.il.us/court/Opinions/AppellateCourt/2002/2ndDistrict/May/Html/2010870.htm) The recent decision in D.O.T. v. 151 Road Corporation, (Il. S. Ct., February 5, 2004), http://www.state.il.us/court/Opinions/SupremeCourt/2004/February/Opinions/Html/95042.htm, resolves a divergence among the appellate districts relating to whether the good faith negotiation issue is a matter than can be appealed on an interlocutory basis. Previously, the Fifth District had considered this question and held in Southwestern Illinois Development Authority v. National City Environmental LLC, (5th Dist., 2002) 304 Ill.App.3d 542, that the issue of good faith negotiation is not a proper subject of an interlocutory appeal. The Third District, however, in DOT v. Hunziker, (3rd Dist., 2003), 342 Ill.App.3d 588, had held otherwise, and the Second District in the case at hand below followed the Third District opinion holding that an interlocutory appeal would lie. The Illinois Supreme Court granted IDOT's request for leave to appeal to resolve the conflict, and granted the DuPage County Forest District leave to file an amicus brief. In the trial court, the owners alleged that IDOT's petitions were fatally defective because they failed to allege a bona fide attempt to reach a negotiated agreement. Following a two day hearing, the trial court denied the owner's motion to dismiss, and a notice of interlocutory appeal was filed pursuant to Supreme Court Rule 307(a)(7). Supreme Court Rule 307(a)(7) specifically provides for appeals limited to the three issues set forth in the Eminent Domain Act, Section 7-104(b), including: (1) the condemning body's authority, (2) that the property taken is subject to the exercise of the authority, and (3) that the right is not being improperly exercised in the particular proceeding. Here, the owner's allegations that IDOT did not negotiate in good faith as a precondition to filing clearly relates to whether the right of eminent domain was "being improperly exercised in the particular proceedings." While the Eminent Domain Act does not specifically require good faith negotiations prior to filing, the appellate courts have inferred this as a condition precedent, and the opinion of the Illinois Supreme Court here agrees this a requirement. Further, whether there have been attempts at good faith negotiations bears direction on the "improper exercise" of the condemnation authority, and the ruling of the trial court on this issue are properly appealed in an interlocutory proceeding. The Fifth District's ruling in SWIDA v. National City did not offer analysis or basis for determining that there was no interlocutory right, and the Supreme Court's affirmation of the Fifth District's ruling in that case did not consider the interlocutory aspect of the case in its decision. Further language in this decision is instructive in that it highlights the Eminent Domain Act requirement that a letter be send to the property owner by certified mail, return receipt requested at least 60 days before filing a petition, stating the amount of compensation offered, the basis upon which the compensation offer was computed, and advising the owner that the agency will continue to seek a negotiated agreement with the property owner. "…these notice provisions are mandatory."