REAL ESTATE LAW PRACTICE “KEYPOINTS”

(August 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. (Additionally, my good friend Myles Jacobs of Joliet and the ISBA Real Estate Section Council, deserves a great deal of credit for this month's work. Myles invited me to go fishing in Ontario at the beginning of the month. I went! I caught fish ! And….while he and others were playing cards late into the Canadian night…..).

 

1. SPECIFIC PERFORMANCE; LEGAL DESCRIPTION SUFFICIENT TO ENFORCE AND A DISSENT:

In Westpoint Marine, Inc. v. Mary A. Prange, (4th Dist., June, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/4thDistrict/June/Html/4030818.htm, the lease agreement for the riverfront portion of farm property contained an option to buy in the event the seller received an offer to purchase. Mary Prange received an offer and entered into a contract to sell her entire farm, which included the 500 feet of riverfront leased to Westpoint. West Point filed a specific performance action to force a sale under the option of the 500 feet of river front when Prange indicated that she would only sell the entire farm. The trial court held that Westpoint was not entitled to specific performance because the description in the lease was not specific enough. The majority opinion of the Fourth District affirmed. There was a dissent by Justice Cook.

A contract or an option for the sale of real estate must sufficiently describe the property in terms so certain and unambiguous that the court can require the specific thing contracted for to be done. A legal description is sufficient if it is so definite that a surveyor can locate the property. Here, the lease only described the property as "approximately 500 fee of river front at approximately mile 20 just below Hardin." Evidence at trial indicated that the particular 500 feet of riverfront used by Westpoint fluctuated from time to time and that there was no clear agreement as to how far inland the lease extended. Even the principal of Westpoint admitted that at the time of the exercise of the option he was not certain if he was buying the entire farm or just the riverfront. Because the lease did not contain "anything resembling a legal description of the property" or the precise location or dimensions of the property, specific performance would not lie.

Justice Cook dissented. The notice to Westpoint stated that it had fifteen days in which to exercise its option under the lease to purchase the property as described in the contract with a third party. Accordingly, the legal description, location, dimensions and extent of the property at issue could be determined from the competing contract. Additionally, the lease had been in existence since 1993, and, while it did not contain a precise description of the property, there had been no dispute about nature and extent of the property leased during the lease period. "A defective description of land may be aided by the conduct of the parties, such as, that the vendor put the purchaser in possession of the premises intended to be conveyed." Citing cases in which a description of land as only "my farm" had been upheld in conjunction with extrinsic evidence and circumstances, the dissent notes that "Just as an offer to sell 'my farm', is sufficient, an offer to purchase 'the property I lease' is sufficient, and opined that "The Majority here trashes the intent of the parties by its insistence that the lease 'indicate the precise location or the dimensions of either the Prange farm or the 500 feet of riverfront property…".

 

2. LANDLORD/TENANT FIXTURES; LEASE TERMINATION, DECLATORY JUDGMENT AND UNJUST ENRICHMENT:

The Kovilics brought a complaint for declaratory judgment against the City of Chicago in Kovilic v. City of Chicago, (1st Dist., June, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/1stDistrict/June/Html/1030782.htm. Count I sought a declaration of the rights and interest of the parties in a building on South Central Avenue in Chicago near Midway Airport. Count II sought damages for unjust enrichment against the City. The trial court granted the City's motion to dismiss, and Kovilic appealed.

The building was designed, paid for, and constructed by the Kovilics on property owned by the City of Chicago while the property was leased to the Federal Aviation Administration. The FAA leased the property for $1 a year for thirty eight successive one year terms to expire on September 30, 2029. The lease provided that the FAA, at its option, could terminate the lease by giving thirty days notice to the city, and authorized the FAA to build or construct improvements, with a provision that the improvements could be removed by the FAA within 90 days after termination, but if the improvements were not removed, they would become the property of the City. Kovilic built the building, and the FAA agreed to lease the property for annual rent of $120,120 the first year, and $128,700 each year thereafter, for a period of 19 successive one year terms, at the end of which the title to the improvements would pass to the FAA. The FAA moved in and began paying rent in 1991. In 1993, Kovilic requested that the City agree to an assignment to them in the event the FAA decided not to renew its lease with the City. The City stated it would not agree to the assignment. Over the next few years, the FAA reduced the portion of the building it rented from the Kovilics, then vacated on July 30, 2001, and terminated its lease with the city effective March 8, 2002. On March 22, 2002, the City notified Kovilic that the building had become the property of the City by virtue of the FAA's termination. This was followed on August 9, 2002 with a notice that inasmuch as 90 days had elapsed from the termination, the right to remove the improvements had also terminated. The next day, the Kovilics filed their complaint.

The trial court dismissed the complaint for declaratory judgment, and further found that there was no unjust enrichment in this instance because "a party is not unjustly enriched by retaining a benefit which law and equity gives him an absolute right to retain; that the City had 'an absolute right to retain the building, and that the plaintiff's 'had an opportunity to protect their interest and negotiated the lease that they negotiated."

The appellate decision affirms and notes that to support an action for declaratory judgment, a plaintiff must plead (1) a tangible legal interest, (2) an opposing interest of the defendant, and (3) an actual controversy. Focusing on the first element, the Court stated "Quite simply we find that the plaintiffs are unable to show that they have a legal tangible interest in the building….the FAA-Kovilics contract gave the Kovilics no rights against the City." The City was not a party to the lease, and any rights the Kovilics had were derived from the FAA; "the well-established principal of property law that a transferee of property can never obtain a greater interest in the property than the person conveying the property has the power to convey…" This rule limited Kovilic to the FAA's rights. Since the FAA lost all interest in the improvements 90 days following its decision to terminate the lease with the city, Kovilic could have no greater rights, and certainly no basis upon which to claim unjust enrichment. Landlord tenant law general rules are that fixtures built on property by a lessee become part of the property after the lease has expired, and the Court was simply enforcing the contracts as written and agreed to by and between the parties. Kovilic had no legal, tangible interest in the building to support declaratory judgment and the theory of unjust enrichment does not lie because the City was simply exercising its contractual rights: "An unjust enrichment claim is not a means for shifting risk one has assumed under contract."

 

3. EMINENT DOMAIN; AUTHORITY TO EXERCISE POWER:

A few months ago the case of Board of Trustees v. Shapiro, (1st Dist., September 30, 2003), http://www.state.il.us/court/Opinions/AppellateCourt/2003/1stDistrict/September/Html/1020914.htm suggested that had the Defendant questioned the authority of the condemning body under the empowering legislation by traverse, he might have prevailed because the specific parcel at question was not included in the empowering legislation. The landowner failed to raise, and thereby waived, the argument in that case. The recent case of Trotter v. Spezio, (3rd Dist., June, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/3rdDistrict/June/Html/3030747.htm, however, deals with another extreme. Here, the land owners argued in their traverse that the complaint should be dismissed because it did not set forth each and every basis upon which the township road commissioner had the authority to condemn a parcel, and lost.

The parcel was located at an "S" curve in the roadway. The purpose for taking this specific property was to deal with the flooding and drainage issues in the process of widening White Tie Road. The complaint was filed alleging only that the commission was seeking to "modify, alter and improve White Tie Road" under Section 6-303 of the Highway Code. The action complained of by the landowners was the taking for the purpose of altering "Claypool Ditch" adjacent to White Tie Road to provide proper water drainage and prevent flooding on the roadway. The trial court rejected the landowner's claim that the statutory requirement of 735 ILCS 5/7-102, (that the complaint contain allegations "setting forth, by reference, his, her or their authority"), was violated because the reference to Section 6/6-303 was only to alter roadways, and did not refer to drainage ditches. Accordingly, the land owners argued, the statutory mandate that the complaint set forth every statutory authority through which a parcel of land is sought to be taken was violated.

The Third District opinion affirmed the Circuit Court of Grundy County's decision in favor of the Commissioner. A condemning authority must have the appropriate authority to acquire land, and that the legislative enactment or resolution must set forth: (1) the land to be taken, (2) the necessity for the taking, and (3) a statement of the position of the commissioner with respect to the acquisition sufficient to allow the landowner or citizen to determine the board's position. There is no necessity, however, that the complaint set forth every authority under which the land is sought to be taken. In this case, 605 ILCS 5/6-303 provides that roads may be widened as authority for condemnation. "Inherent in this authority is the ability to construct the altered road in a manner consistent with public safety. As such, it may obviously become necessary to alter ditches and other land in proximity to the newly altered road so it does not overflow or wash out…" Modifying or altering White Tie Road in the manner intended by the commission necessitated altering the adjacent ditch to provide drainage and prevent flooding of the road way. The empowering statute and the allegations of the complaint were sufficient to withstand the motion to dismiss by way of traverse.

 

4. MECHANIC'S LIENS; RECORDING MULTIPLE NOTICES AS CONSTRUCTIVE FRAUD RENDERING LIEN UNENFORCEABLE:

Attorneys representing contractors who may have a propensity to be over exhuberent in their claims should keep a copy of a recent First District opinion ready and at hand as a primer. In Hartmann v. Capitol Bank, (1st Dist., July, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/1stDistrict/July/Html/1033296.htm, Hartmann sought compensation for the cost of removal and disposal of contaminated soil from the property at 2800 West Irving Park Road, Chicago, Illinois. The original contract was for the removal of underground storage tanks for the grand sum of $9,700.00, but, pursuant to a provision for contaminated soil removal at "cost plus 20%", resulted in a lien claim of $279,824.35 according to multiple recorded lien claims. The trial court held that recording multiple notices of lien constituted fraud, rendering Hartman's mechanic's lien claim unenforceable. Hartmann appealed, and Ross filed a cross appeal based on the jury's award of damages to Hartmann based on the breach of contract count in the sum of $404,902.83.

The First District opinion reversing the trial court's ruling on the multiple lien claims begins by noting that Section 7 of the Mechanics Lien Claim Act, (770 ILCS 60/7), provides protection to "an honest claimant who makes a mistake rather than a dishonest claimant who knowingly makes a false statement" in filing a notice of claim for lien, citing Bank of America v. Zedd Investments and Lohmann Golf Designs v. Keisler. The same cases, however, provide that where a lien claimant knowingly files claims which contains a substantial overcharge, such that the appearance is that of a greater lien on property than that to which the claimant is entitled, the claim will be defeated on the basis of constructive fraud.

One who knowingly makes a false statement of a material matter in a claim will be undone thereby and not be allowed to recover under the Act. In Lohmann, for example, the subcontractor recorded separate mechanic's liens against each of three parcels making up a golf course owned by three separate owners. Each lien was for the full amount of the balance due. As a result, the Court found that a person inspecting the public record would presume that the total amount due was three times the actual balance. The president of the claimant company signed all three notices and therefore acted "knowingly". In Zedd, an electrical subcontractor filed 60 separate liens against parcels in a residential subdivision, with each lien stating the value of the work itemized as to that parcel, but then also filed a blanket lien against all of the property in the subdivision claiming a sum different than the total of the individual liens, followed by further, additional blanket liens. Again, the Court held the contractor committed constructive fraud by filing multiple liens which misrepresented the amount it was owed, and therefore was barred recovery under the Mechanic's Lien Claim Act. The Zedd decision states: "[t]he Lohmann decision puts contractors on notice that they must exercise their rights under the Mechanics Lien Act in a manner that does not diminish the integrity and accuracy of land records…lien claims should be defeated on the basis of construction fraud where a lien claimant files multiple liens that create the appearance of an encumbrance on the property which is substantially greater than the amount the claimant is owed".

Justice Hartmann distinguished Lohmann and Zedd in his decision in this case. There was no recorded notice which overstated the amount due on its face here. While there were multiple notices, they all stated the same contract, the same work, on the same property with the same completion date, and, with a single exception, for the same amount of $279,824.35. There was no attempt to cumulate the sums due, and the amounts stated in the claims and lis pendens were identical. Noting that "Amendment of a notice does not indicate fraud", there was a "total lack of any intent by Harmann to defraud", and "no evidence that Hartmann intentionally overburdened the land records or that any person was misled by the documents Hartmann recorded and registered."

On the issue of the damages verdict by the jury, acknowledging that the pleadings and proofs consistently presented evidence entitling the contractor to $279,824.35, whereas the jury awarded $404,902.83, the Appellate Court offered Hartmann the alternative of remittitur. The amount of the award is primarily within the discretion of the jury and will not be altered on appeal, unless the variance "is of such magnitude as to reflect, and result from, passion and prejudice". Where, however, the verdict exceeds the proven damages, it must be "corrected". The form of "correction" is remittitur; which requires the Plaintiff's consent to the reviewing court's reduction of the award, or results in a new trial on the issue of damages. "A court does not have the authority to reduce the damages by entry of remittitur [however] if plaintiff objects or does not consent…the trial court must afford the plaintiff the choice of agreeing to refusing to the entry of a remittitur, with the proviso that the plaintiff's refusal to agree to the entry of remittitur will result in the ordering of a new trial." Here, Harmann was offered the alternative of accepting a reduction in the judgment of $125,078.48, (i.e., the difference between $279,824.35 and $404,902.83), or a new trial on damages pursuant to Supreme Court Rule 366(a)(5).

 

5. MORTGAGE FORECLOSURE; FEDERAL PREEMPTION OF STATE FEE LIMITS AND THE ILLINOIS INTEREST ACT:

In U.S. Bank N.A. v. Clark, (1st Dist., March, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/1stDistrict/March/Html/1012535.htm, the defendants appealed orders of the Circuit Court of Cook County dismissing counterclaims and affirmative defenses in nine consolidated foreclosure cases. The defendants all argued that the lenders charged fees in excess of 3% in violation of the Illinois Interest Act, 815 ILCS 205/1a(f), on residential loans with an interest rate in excess of 8%. The issue before the court was whether the Depository Institutions Deregulation and Monetary Control Act, (12 U.S.C. 1735 et seq., "DIDMCA"), and the Alternative Mortgage Transaction Parity Act, (12 U.S.C. 3801 et seq, "Parity Act"), federally preempted the Illinois Interest Act. The trial court ruled in favor of preemption.

The First District reversed and found that the trial court erred in dismissing the defendant's defenses and counterclaims as preempted by DIDMCA. The preemption of Illinois by federal law is an affirmative matter properly raised by a motion to dismiss brought pursuant to 735 ILCS 5/2-619. The DIDMCA provides that "The provisions of the constitution or the laws of any State expressly limiting the rate or amount of interest, discount points finance charges, or other charges...shall not apply to any loan, mortgage, credit sale or advance which is…secured by a first lien on residential real property, by a first lien on all stock allocated to a dwelling unit in a residential cooperative housing corporation, or by a first lien on a residential manufactured home…made after March 31, 1980, and...described in section 527(b) of the National Housing Act." 12 U.S.C. 1735f-7a(a)(1) There were then competing decisions reaching contrary findings in the Illinois Appellate and Seventh Circuit Courts. In Fidelity Services v. Hicks, the First District held in 1991 that the loan at issue was not controlled by the DIDMCA because it was unclear that the trust deed at issue was a first lien and the federal law only applied to purchase money mortgages. Further dicta questioned the preemption generally. That decision declined to follow the earlier, 1988, decision by the 7th Circuit in Currie v. Diamond Mortgage holding in favor of pre-emption. There then followed several unpublished decisions of the Northern District of Illinois, an opinion letter issued by the Illinois Attorney General in 1996, (Op. No. 96-37), and a 1998 letter issued by the Illinois Office of Banks and Real Estate, all of which also supported preemption.

After noting that neither the federal decisions or opinions were binding, and an extensive discussion of the distinction between obiter dicta and judicial dicta, the First District opinion by Justice Campbell turns to the provision in the DIDMCA that "At any time after [the date of enactment], any State may adopt a provision of law placing limitations on discount points or such charges on any loan, mortgage, …", to note that "circumstances have changed following Hicks". The Illinois General Assembly enacted an amended version of the Interest Act effective January 1, 1992, (Public Act 87-496), and this, Justice Campbell, reasons "may be fairly said to show a legislative intent to dispel the questions raised by the tensions between Currie and Hicks… [and]… the trial court erred in dismissing the debtors' defenses and counterclaims as preempted by the DIDMCA, as the reenactment of Section 4.1a of the Interest Act overrode the federal law." Turning to the Alternative Mortgage Transaction Parity Act, Justice Campbell notes that the stated purpose of the Act is to prevent discrimination against State-chartered depository institutions and non-federally chartered housing creditors, provided their transactions are made in accordance with regulations governing alternative mortgage transactions issued by the Office of Thrift Supervision. The "OTS has not otherwise issued the kind of blanket preemption of state regulation of loan-related fees that the creditors in the case here believe exists… [and, accordingly] the creditors have failed to show that the debtors' defenses and counterclaims are preempted by the Parity Act."

 

6. REAL ESTATE CONTRACTS; USE AND OCCUPANCY MODIFICATION ALTERING REMEDIES:

In Schwinder v. Austin Bank of Chicago, (1st Dist., April, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/1stDistrict/April/Html/1030566.htm, the purchasers of a new construction condominium brought an action for specific performance against the builder. The Builder countered with the argument that the underlying contract contained a provision limiting the buyer's remedy upon termination to return of the earnest money. The buyers, however, convinced the trial court that the execution of a pre-closing possession agreement modified the contract to permit them additional remedies, and that due to the change of their position and detrimental reliance, the builder was estopped to assert the limitation of remedy to the return of earnest money. The First District affirmed.

The language of the contract was clear and unequivocal: "If this contract is terminated without Purchaser's fault, the earnest money shall be returned to Purchaser…Return of the Purchaser's funds shall be the Purchaser's sole exclusive remedy in the event of Seller's default…The return of such earnest money shall be Purchaser's sole and only remedy…" When the agreed upon date for closing approached, the Builder advised the Purchaser she could not close due to a pending Order in the Builder's divorce proceeding enjoining the sale of the premises. The Purchasers had deposited the earnest money, obtained financing, withdrew an additional ten thousand dollars from a retirement account to fund the balance due at closing, and were in need of obtaining possession of the condominium unit because the lease on their current residence was expiring. The underlying contract provided that possession would not be surrendered until closing, so the Builder's attorney prepared and the parties executed a pre-closing possession agreement allowing Purchasers to take immediate possession. The agreement granted Purchasers possession until the Builder "was able to close on the sale of the property", provided Purchasers were to pay $1,500 per month for use and occupancy "until such time as Seller is able to close on the sale of the property.", and stated specifically that the Purchasers had "the sole option [to] terminate this [agreement] together with the Condominium Purchase Agreement…by giving 30 days written notice to the seller" if closing did not occur within the 90 days following. Approximately 70 days later, an agreed order was entered in the Builder's divorce case allowing the sale closing to proceed. A number of letters were written by the Purchasers attempting to schedule closing unsuccessfully, with only the last receiving a response from the Builder's attorney to the effect that he was no longer representing her. The builder requested payment of the use and occupancy, but Purchasers refused after the entry of the Order allowing closing "claiming they did not want to be renters". In the interim period the Builder completed some but not all of the punch list items agreed to at the time the parties anticipated closing and entered into the possession agreement.

The trial court found that the pre-closing possession agreement modified the underlying contract to permit specific performance and that the Builder was estopped from simply returning the Purchaser's earnest money. The judgment also found that the Purchasers did not owe rent after the entry of the order in the divorce court granting the Builder the right to close the sale. The First District affirmed.

Acknowledging that "The controlling issue in this case is whether the Plaintiffs had a right to seek specific performance when the purchase contract limited their remedy to the return of their earnest money.", the Court held that the Possession Agreement modified the purchase contract, "thereby divesting defendants of that right", and "In the alternative…they were estopped from doing so due to [the Builder's] actions and plaintiff's detrimental reliance thereon." The pre-closing possession agreement met the criterion of a contract, (offer, acceptance, consideration and mutual assent), and modification. "A modified contract containing a term inconsistent with a term of an earlier contract between the same parties is interpreted as including an agreement to rescind the inconsistent term in the earlier contract." Here, while the underlying contract provided a limited remedy of return of earnest money, the modification (pre-closing possession agreement) provided only that the Purchasers were to have "the sole option [to] terminate this [agreement]. This was made clear by the fact that the underlying contract, which prohibited pre-closing possession, was modified by the possession agreement to allow possession despite the fact that the closing had not yet taken place. "Finding that the [agreement] was a valid modification of the purchase contract, to the extent that the [agreement] contained inconsistent terms with the purchase contract, the [agreement] should control…the inconsistencies…divested defendants of any right to terminate the purchase agreement….no longer limited plaintiffs to the remedy of return of their earnest money, thereby implicitly opening the door to remedies allowed by law and equity." The further underpinning of the decision is an extensive discussion of the application of estoppel based on the Purchaser's change in their position in detrimental reliance on the Builder's promise to close when able to do so in the pending divorce proceeding.

 

7. FROM THE TITLE COMPANY PERSPECTIVE: ADVERSE POSSESSION OF PUBLIC LAND:

FROM THE TITLE COMPANY PERSPECTIVE

The ISBA attorney listserv continues to serve as a source of interesting legal topics. The other day someone wrote in and commented about adverse possession and remarked that there was "no adverse possession against the state."

When I read this, my mind flew back about twenty years; I remembered reading a copy of an IICLE book, ILLINOIS MUNICIPAL LAW. The book (probably out of print now, or at least in a new edition) indicated that the "no adverse possession against the state" rule is a maxim that is riddled with exceptions.

I don't profess to be an expert in this area, but I have made notes on this subject through the years, and I thought that readers of this column might want to file these thoughts away for future reference. Again, I have not made a full analysis of all these cases, and so I may be off-track here a bit, but the information may nonetheless be helpful.

For statutory citations, see 735 ILCS 5/13-111, 735 ILCS 5/13-120[6].

Generally speaking, the "no adverse possession against the state" rule applies only to municipally-owned property that is held for a public use. Thus, in City of Chicago v. Middlebrooke, 143 Ill. 265 (1892), there was allowed the adverse possession of city-owned property where the court found that "...the property in question was not devoted to any public use or held for any public purpose." 143 Ill. 265 at 269.

Example: A municipality owns a vacant lot. At one time the municipality was going to put a public park in the lot, but it never did. Now it stands vacant and unused. Since this lot serves no public purpose, it is possible that one might be able to adversely possess it. See Wanless v. Wraight, 202 Ill.App.3d 750 (1990); app. den. 135 Ill.2d 567.

The idea seems to be: If the land serves no public purpose, it can be sold and conveyed by the municipality without any breach of municipal duty. It is as if the municipality owns the land as an individual. Since the municipality owns the land as if it were an individual, there can be adverse possession of this land. See Black v. Chicago, D & Q.R. Co., 237 Ill. 500 (1909); Hammond v. Shepard, 186 Ill. 235 (1900).

Secondly, the "public purpose" that is necessary to prevent the statute of limitations from running is a public right and use, vested in the people of the State of Illinois at large, and not in the inhabitants of a particular local district. The court, thus, in Brown v. Trustees of Schools, 224 Ill. 184 (1906), distinguished the "public right" in property such as streets and highways from the "public right" in such municipal property as city offices, a library site, or the use of a fire department. The court stated that this latter property is held and used for strictly local purposes.

The court in the Brown case seems to be making a distinction between "public" property that truly serves the public at large, like streets and highways, and "public" property that serves only a few people, like a library or municipal offices.

For example, a city hall might be "public" property, but it doesn't serve all the public, just the people who live in that municipality. You might have a public library, but it only serves the people whose real estate taxes help support that library.

The court seems to be stating that the "no adverse possession against the state" is only applicable for public property that serves the public at large, that one could adversely possess public property that only serves a local purpose.

This, it seems to me, appears to be a close distinction, and one that probably deserves further attention. I have NOT made a detailed analysis of this facet of this issue.

Finally, a municipality's title to property can be defeated by the evidentiary presumption of an ancient grant. See Trustees of Schools of Township No. 8 v. Lilly, 373 Ill. 431 (1940); Superior Oil Co. v. Harsh, 126 F.2d 572 (1942).

Note that title companies have actually insured property based on some loose concept of adverse possession. For example, I recently was asked to insure the sale of a home that consisted of two parcels; each parcel had its own permanent index number for tax assessment purposes. For whatever reason, one of the parcels was never conveyed to the "homeowner." However, the homeowner was in possession of the home and had been paying taxes on both parcels for many years. I agreed to insure the sale of the home upon being furnished a satisfactory survey of the land, copy of the original real estate contract and all correspondence relating thereto, and an "affidavit of adverse possession" that I recorded. This affidavit served to explain the details of what happened and also helped to establish a new link in the broken chain of title.

Dick Bales Chicago Title Insurance

 

8. MORTGAGE FORECLOSURE; FEDERAL PROCEEDINGS FOLLOWING STATE FORECLOSURE AND THE ROOKER-FELDMAN DOCTRINE:

Marrietta Taylor lost her home in a state mortgage foreclosure filed in Indiana. She then filed a separate law suit in the state court alleging that Federal National Mortgage Association and Waterfield Mortgage Company, her lender and its servicer, committed fraud upon her and the court by filing a 'wrongful foreclosure'. The lenders removed the case to federal district court, which then dismissed the case for lack of jurisdiction in Taylor v. FNMA, (7th Cir., July, 2004), 374 F.3d 529. The basis for her allegation of wrongful foreclosure was the lender's failure to accept payments tendered after a default because the loan had been referred for foreclosure and attorney's fees incurred. She also alleged a violation of the Equal Credit Opportunity Act. The district court's dismissal was based on the "Rooker-Feldman Doctrine", which "derives its name from two decisions of the United States Supreme Court, Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) and District of Columbia Court of Appeals v. Feldman, 460 U.S. 462 (1983). Simply put, the Rooker-Feldman doctrine 'precludes lower federal court jurisdiction over claims seeking review of state court judgments…[because] no matter how erroneous or unconstitutional the state court judgment may be, the Supreme Court of the United States is the only federal court that could have jurisdiction to review a state court decision."

The District Court determined that the "injury" which Marietta Taylor sought to redress was the result of the state court judgment of foreclosure rather than any independent action of the lenders. She also had a reasonable opportunity to raise her allegations of wrongful foreclosure as an affirmative defense or counterclaim in the state proceedings.

The Seventh Circuit opinion affirmed. The focus of the determination is whether Taylor was seeking to present an "independent claim", or simply seeking to set aside a state court judgment in a manner other than by a direct appeal. A claim which is "inextricably intertwined" with the state proceeding is barred, whereas "an independent prior injury that the state court failed to remedy" will not be barred. Even if a claim is inextricably intertwined, it may not be barred, however, if the plaintiff does not have a reasonable opportunity to raise the issue(s) in the state court proceedings.

In this case, Taylor's cause of action, although purportedly an "independent claim" under ECOA was entirely based upon the loss of her home. The remedy sought was "to recover her home, or equal monetary value plus interest of 10% per annum, plus punitive damages." The redress available for wrongful foreclosure or perpetrating a fraud upon the court is to set aside the judgment. The Court also recognized that "Usually, Rooker-Feldman is raised by defendants when a disappointed state court litigant brings suit in federal court to overturn the state court decision…[however] the Rooker-Feldman doctrine should not be confused with res judicata….[and] We have not determined that Taylor is barred by res judicata…the res judicata issue (if there is one) is for the state court to determine on remand.", and the district court's dismissal order remanding her case to state court was affirmed.

 

9. PREMISES LIABILITY; OPEN AND OBVIOUS RISK, DISTRACTION EXCEPTION, DELIBERATE ENCOUNTER EXCEPTION, AND BALANCING TEST:

In Bonavia v. Rockford Flotilla 6-1, Inc., (2nd Dist., April, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/April/Html/2030338.htm, Justice Byrne's opinion presents a comprehensive review of the law of premises liability, the general rule relating to 'natural accumulations' on property, and the related distraction and deliberate encounter exceptions in affirming the trial court's grant of summary judgment to the Defendant.

The Plaintiffs were Michael Bonavia and his wife Mary, suing over personal injury that occurred to Michael when he slipped and fell on the boat launch run by the Defendant Rockford Flotilla on Rockford Park District property. Michael was removing a portable toilet weighing 35-40 lbs from his boat when he slipped and fell on a concrete sep adjacent to the ramp. He had visited the launch area four times prior to the day of the incident. The weather was clear and the sun had not yet set when the accident occurred on the second or third of Michael's trips from the boat to his car. He testified that he had noticed that the ramp and step were covered with algae, the surrounding area was overgrown by weeds and strewn with twigs and gravel, and that some boards on the pier were broken or missing. There was a sign near the ramp that warned "Caution, Slippery When Wet". When Michael fell, he did not seek medical attention immediately, but later that night was taken to the hospital by ambulance when his pain did not subside, and there diagnosed as suffering with broken ribs.

The Defendant moved for summary judgment based on the position that it did not owe Michael any duty to prevent his injuries because the cause of his fall was due to "a natural accumulation of algae". The trial court granted summary judgment and the Second District affirmed.

A plaintiff must prove a duty owed, a breach of that duty, and resulting damages to recover in negligence. Here, there was a question of the duty element based on the fact that "a possessor of land is not liable to his invitees for physical harm caused to them by any activity or condition on the land whose danger is known or obvious to them, unless the possessor should anticipate the harm despite such knowledge or obviousness." This is the "open and obvious danger" rule. It is generally applied to situations in which there is a 'natural accumulation' of elements that lead to injury; (i.e., a property owner has no duty to remove a natural accumulation of snow or ice unless he voluntarily does so and his actions result in an unnatural accumulation because such natural accumulations are open and obvious.) There are two exceptions to the general rule about natural accumulations: (1) where there is reason expect the person's attention may be distracted, (the "distraction exception"), and (2) where there is a reasonable expectation that the person may proceed regardless of the known and obvious danger because the advantages outweigh the risk, (the "deliberate encounter exception"). Here the distraction exception was not applicable because Michael had visited the area four times earlier, made one or two trips prior to the incident, and the "Caution, Slippery When Wet" sign gave him warning; therefore he had not basis upon which to claim to simply be 'distracted'. Likewise, the deliberate encounter exception was not applicable here because Michael had an alternative route that would have avoided the algae and vegetation. A less risky alternative made Michael's actions a voluntary assumption of the risk, negating the exception to the rule. Finally, applying the 'Balancing Test" to the (1) reasonable foreseeability of the injury, (2) likelihood of injury, (3) burden of guarding against injury and (4) the economic consequences of the burden, supported a finding of no duty by the Flotilla to Michael. The likelihood and forseeability of Michael's injury were slight when compared to the burden and consequences of imposing a duty and liability, and, in any event "the record indicates that the Flotilla met this burden by posting a sign warning of the risk of slipping on the launch ramp. Therefore, even if the Flotilla owed a duty to warn Michael of the slippery slope, the Flotilla met his burden."

 

10. ERRATA AND SUCH:

CORRECTING LAST ISSUE'S HOLDING IN OAK GROVE JUBILEE CENTER v. GENOA:

Last month, in the final segment, there was a reference to the extensive history and holdings in Oak Grove Jubilee Center, Inc. v. City of Genoa, (2nd Dist., April 20, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/April/Html/2010938.htm. (See Oak Grove Jubilee Center, Inc. v. City of Genoa, (2nd Dist., May, 2003) 338 Ill.App.3d 967, and Oak Grove Jubilee Center, Inc. v. City of Genoa, (2nd Dist., June, 2002), 331 Ill.App.3d 102, 770 N.E.2d 1243, 264 Ill.Dec. 547). This case has been inextricably bound to the decisions in Second District, People ex rel Klaeren v. Village of Lisle, (2nd Dist., October, 2000), 316 Ill.App.3d 770, and the Illinois Supreme Court ruling, People ex rel. Klaeren v. Village of Lisle, (Il. October, 2002), 202 Ill.2d 164. The comments were correct that these cases hold for the first time in Illinois that the grant or denial of a special-use permit constitutes a legislative rather than an administrative proceeding, therefore entitling property owners affected by the action with certain procedural due process rights that they had not previously had. David Zajicek of Holland & Knight, (a former partner and regular practitioner in this area) noted the conclusions reached in the comments relating to the Second District's decision on the retroactive application of the law were incorrect. The Court's holding was: "Accordingly, having considered the test set forth in Bogseth, 166 Ill. 2d at 515, we hold that Klaeren should not be applied retroactively in the instant case. Klaeren overruled clear past precedent. Limiting it in this case will neither promote nor retard its purpose. Most significantly, giving it retroactive application here would severely prejudice plaintiff, while failing to do so does not prejudice defendant whatsoever." Thank you David for correcting this!

DEVELOPMENTS NOTED FROM THE ISBA LISTSERV:

TENANTS' RIGHTS ISBA Legislative Affairs Director, Jim Covington also reports that Public Act 93-891 creates the Residential Tenants' Right to Repair Act, which authorizes tenants to make repairs after written notice in certain situations. Read the new act at http://www.legis.state.il.us/legislation/publicacts/fulltext.asp?name=093-0891

MORE ON ATTORNEYS AND TITLE OPINIONS A must-read for anyone interested in attorneys and title insurance is Bill Anaya's article in the June 2004 issue of ISBA's Real Property newsletter, "Call to arms: A 21st century call to professionalism for real estate lawyers." It's at: http://www.isba.org/sections/RealEstate/6-04.pdf

PROPERTY TAX RELIEF Illinois homeowners could get to keep more of their money under a property tax relief bill signed Monday by Gov. Rod Blagojevich that critics contend will shift more of the tax burden to businesses. The measure would increase the standard exemptions -- the portion of a home's value that can be shielded from taxation -- for all homeowners. The homeowner exemption would jump to $5,000, from $4,500 in Cook County and from $3,500 in the state's other counties. It also would let counties put a limit on increases in property assessments, the official value estimates that are used to calculate tax bills. The 7 percent cap per year would last for three years and take effect only in counties that adopt it, preventing the huge assessment jumps that result in increased tax bills. Story is in the Chicago tribune at http://www.chicagotribune.com/news/local/chi-040712taxrelief,1,4010370.story?coll=chi-news-hed Another story is in the Peoria Journal-Star at http://www.pjstar.com/news/topnews/b3iokge9007.html (There was significant follow-up comment by real estate transactional lawyers on how this impacts closings on the listserv.)