REAL ESTATE LAW PRACTICE “KEYPOINTS”

(November 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. CONVEYANCES; INTENT TO DELIVER, SUBSEQUENT CONDUCT,  AND LAND TRUST FINE POINTS:

In The Estate of Richard W. Gabbett, (4th Dist., November, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/4thDistrict/June/Html/4040093.htm,  the Court affirmed the Trial Court’s determination that a conveyance into a land trust by the testator failed due to he absence  of delivery as an essential element of the conveyance, the conduct of the testator was inconsistent with the intent to convey, and because the decedent was simultaneously the Trustor, the Trustee, and Beneficiary of the purported land trust .

Gabbett died intestate leaving 220 acres of  property he had farmed with his nephew, Robert L. Ray.  The will specifically provided that Gabbett left his real estate in Jersey County “to my nephew Robert L. Ray.  Robert L. Ray has worked on the farm with me in recent years and I know that he will continue to operate the farm after my death.  This gift is made in appreciation of his help and kindness to me.”  The residue of the estate, (i.e., any personal property), was left to Gabbett’s daughters, Judith Landers and Joanne M. Ringhausen.  Landers filed a petition requesting the trial court to direct the executors to convey the farm to the daughters as personal property under the residuary provisions of the will based on a Deed in Trust that Gabbett executed three years, (1979), before the will, (1982), and some 23 years before his death in 2002.  The deed stated Gabbett was the grantor and also identified him as the grantee as trustee under the provisions of a trust agreement dated November 21, 1979 referred to as the Gabbett Land Trust.  The Trust Agreement was signed by Gabbett at the same time, and provided that Gabbett was the sole beneficiary of the trust.  The Deed in Trust was never recorded. Although Gabbett executed four certificates and assignments of the beneficial interest in the land trust to himself and his daughters, he also entered into a joint venture agreement with his nephew to farm the land as a livestock and grain farming operation for profit, without any reference to the land trust or assignments.

Following a hearing, the trial court found that Gabbett never treated the property as being held in the trust.  He never  filed fiduciary tax returns, never distributed income to the holders of beneficial interest, and acted contrary to the establishment of a trust arrangement in his joint venture agreement and in making provision for the passage of title to Ray in his will. 

The Fourth District affirmed noting that “A conveyance of real property does not occur merely through the execution of a deed. The grantor must also deliver the deed, and the grantee must accept it.” No delivery is presumed where  the grantor retains control or possession of the deed and it is not recorded.  Moreover, the Court noted that the failure to “separate” the trustee and beneficiary made the trust arrangement by the same grantee ineffectual.  “Although a settler may create a trust of personal property whereby he names himself as trustee and acts as such for the beneficiary, (citation), and a grantor/trustor settler may also be a beneficiary of a land trust (citation), there must be a complete separation and transfer of the legal interests from the beneficial interests, (citation). In the present case, Gabbett remained in possession of the land and exercised complete control over it for his own benefit.  A trust cannot exist when the  legal and beneficial interest are in the same person.”

Based on the failure of “delivery” and the conduct of Gabbett indicating that he did not intend to relinquish title, the farm remained Gabbett’s real estate and passed under the specific provisions of his will to his nephew Ray, rather than under the residuary to his daughters.

 

2. MORTGAGE FORECLOSURE; APPELLATE JURISDICTION AND MERS STATUS:

The decision in  MERS v. Estrella, (7th Cir., November 22, 2004), http://www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=04-2078.PDF, appears to be mostly about chastising the lawyers for failure to raise and deal with the issue of whether the Court has jurisdiction to consider an appeal when confirmation of sale is denied in a foreclosure proceeding, but there is a lot of  other information in this case  relating to MERS’ status and selling officers that make it worth while reading.

The appeal was brought by Cronus Projects,  LLC, the third party bidder at sale. At the sale, the Plaintiff, MERS, instructed the Commissioner to begin with an opening bid of $245,000, and then bid in increments of $1,000 up to the full mortgage debt of approximately $294,000.00.  The Commissioner erred in following the instructions, and the property was sold to Cronus for $252,000, resulting in a deficiency of  $54,000.  At confirmation hearing, the District Judge denied confirmation based on a finding  that  “justice…was not done” at the sale as required by Illinois Mortgage Foreclosure Law, 735 ILCS 5/15-1508. This was due to the fact that the ”Commissioner had fouled up” and the mortgagors would be responsible for a deficiency that would have otherwise not occurred had the bidding proceeded as intended. A second sale was ordered, and Cronus appealed.

The denial of confirmation of sale is not a “final order” under 28 USC Section 1291.  Noting that this is well established law in federal court as well as Illinois case law under the Code of Civil Procedure, the opinion by Judge Easterbrook notes that this was not simply a matter of  oversight by counsel of their “duty to alert the court to a jurisdictional problem”,  but was “Worse still” because both counsel had  an “essentially identical appeal” before the Court in which the  same jurisdictional problem was noted and both counsel had conceded the appeal there had been filed without jurisdiction.  “This has been a sorry performance by members of our bar. Both [counsel named] deserve (and hereby receive) a public chastisement.”  The appeal was dismissed.

Interestingly, however, the decision continues with two further  insights.  First, the status of MERS is discussed in the perspective of subject matter jurisdiction. Noting that “MERS is not the lender. It is a membership organization that records, trades, and forecloses loans on behalf of many lenders, acting for their accounts rather than its own.”, Judge Easterbrook concludes that MERS’ principal place of business was not the relevant basis for determining  if diversity of citizenship exists for jurisdiction. “… it is the citizenship of the principal, (i.e., the lender for whom MERS is acting), and not that of the agent (MERS) that matters.”  Here, the lender was Prism Mortgage, an Illinois corporation, “so federal jurisdiction is doubtful…This should be the district judge’s next order of business.”

Secondly, the Court states that before proceeding with the new sale, the status of the Commissioner should be clarified and the results of the interplay between the parties considered. The Commissioner is a “neutral” and there is no basis in Illinois law for treating the Commissioner as the lender/plaintiff’s agent for the purpose of  bidding at the sale.  “It is not clear to us why MERS should benefit from a second auction after its effort to conscript the auctioneer failed. Moreover, to the extent that the Commissioner really was MERS’s agent, then his errors redound to its detriment. Why should Cronus suffer for a gaffe by MERS’s agent. (Cite) It is easy to protect the Estrellas: the district judge has discretion to deny the lender a deficiency judgment, when a price shortfall at an auction results from negligence of the lender or its agent.”

The Court was without jurisdiction to consider the appeal of the third party bidder here, but there is plenty of direction coming from the Court that should be instructive for other attorneys practicing in this arena.

 

3. LANDLORD/TENANT LAW; SAFETY DEPOSIT BOXES AND EXCULPATORY CLAUSES:

At first blush,  Jewelers Mutual Insurance Company v. Firstar Bank Illinois, (Illinois Supreme Court,  November 19, 2004), http://www.state.il.us/court/Opinions/SupremeCourt/2004/November/Opinions/Html/96805.htm, seems hardly a case to be reported in a real estate case law update, but some interesting law about landlord/tenant relationships and exculpatory clauses make it worthwhile.  Firstar Bank rented three safety deposit boxes from which over $1 million worth of jewelry and loose diamonds were stolen. The safety box lease provided that the relationship of the parties was that  of landlord and tenant rather than the traditional bailor and bailee.  It further provided first that “lessee assumes all  risks in connection with the depositing of such contents…there shall be no liability on the part of said bank”, and then, later in the same lease, that “The liability of said bank is limited to  the  exercise of ordinary care to prevent the opening of said safe by any person not authorized…”  Relying on the exculpatory clause, Firstar Bank moved for summary judgment at the trial court, and its motion was granted. On appeal, the Illinois Supreme Court holds that the exculpatory clause is not enforceable.

The contract provisions are ambiguous because while one sentence provides for a complete exculpation of liability, a subsequent sentence provides for merely limiting liability to the exercise of ordinary care.  The Illinois Landlord and Tenant Act, (765 ILCS 705.01 et seq.), mandates that exculpatory clauses in favor of landlords are void as against public policy.  Here, in addition to the provision that defined  the parties’ relationship as one of a landlord and tenant, the “heart of the parties’ agreement” is the bank’s undertaking to exercise care in permitting access to the safety box. “A party cannot promise to act in  a certain manner in one portion of a contract and then exculpate itself from liability for  the breach of that very promise in another part of the contract….Here, the plaintiffs have received nothing in return for their rental fee if they cannot hold defendant to its  contractual obligation to exercise ordinary care to prevent unauthorized persons from accessing their safety deposit boxes.”   Citing a Florida District Court of Appeals case, the Illinois Supreme Court notes that an exculpatory clause can not be employed to negate the specific contractual obligation undertaken. In such a case, there would be an absence of mutuality obligation and mutuality of remedy rendering the contract provision exculpating the bank unenforceable. This concentration on the essential elements of the agreement of the parties made it unnecessary for the Court to base its holding reversing the trial court’s grant of summary judgment in favor of Firstar on whether the relationship of the parties was that of Landlord/Tenant.  A party to a contract, it would appear, simply can not exculpate itself from liability for breach of the promise of performance that is the very heart of the agreement.

 

4. FROM THE TITLE INSURANCE COMPANY PERSPECTIVE; FIRST RIGHT OF REFUSAL AND RESUBDIVSION REDUX:

 

Two items mentioned in last month’s Flashpoints deserve further mention here.

 

Steve mentioned Crestview Builders, Inc. v. Noggle Family Limited Partnership, No. 2-04-0015 (2d Dist., October 2004) in his report.  This case concerned a right of first refusal. Here the Second District noted that a right of first refusal does not have to specify the price, as long as it provides a method for determining the price.  But as the right of first refusal in question did not specify either a price or a method by which the price could be determined, the court found that the right of first refusal was unenforceable.

 

I must confess that I was somewhat troubled by this decision. The right of first refusal was referred to in the contract only.  The parties were in court because they were unable to agree on a final draft of the right of first refusal.   Rather than find the right unenforceable, couldn’t the court have supplied the missing terms based on either the Black’s Law Dictionary definition of “right of first refusal” (the plaintiff suggested this possibility) or by custom?  The court has done something like this in other instances.  For example, in Merchants Environmental Industries, Inc. v. SLT Realty Limited Partnership, 314 Ill.App.3d 848 (2000), the First District held that a mechanics lien was not enforceable against third parties because it did not contain a “work completion date.”  Although the court admitted that section 7 of the Mechanics Lien Act (770 ILCS 60/7) did not require a work completion date, it stated that “nevertheless that requirement must be inferred.”

 

But the court in Crestview Builders, Inc. did not supply the missing term, and after reading this case, I was reminded that rights of first refusal are not the only legal documents wherein price is paramount.  For example, in Northridge Bank v. Lakshore Commercial Finance Corporation, 48 Ill.App.3d 82 (1977), the court determined that a mortgage that contained no language setting a cap on future advances was insufficient to give constructive notice of said advances.  Mechanics liens are creatures of statute, and the aforementioned section 7 indicates that a mechanics lien must include the “balance due.” If there is a lesson to be learned from the Crestview Builders case, it is that key terms, especially price, must not be overlooked when drafting documents.

 

Last month I reported on the case of Ruble v. Sturhahn, 348 Ill.App.3d 667, 810 N.E.2d 278, 284 Ill. Dec. 625 (4th Dist. May, 2004).  In this case the court stated that a party who purchases land in a subdivision with reference to a recorded plat acquires the right to have the streets and alleys remain open as originally platted.  The court stated that “even if no especial inconvenience or loss is shown, one who purchases in reference to a plat is entitled, under the law, to demand that, as between him and the author of the plat, and those claiming under the author, the representations made by the plat as to the streets thereon be preserved.  This rule equally applies to platted streets and roads not yet in existence.”

 

I later received a note from an attorney who represents several developers.  He offered a different perspective on this case.  He commented: “I’m wondering if it would work to add some form of waiver provision to the plat which prohibits owners of property not being a part of the vacated or re-platted area from objecting solely on the basis of the Plat Act.  In large multi-use projects we sometimes plat the entire project with express language in the entitlement documents allowing for resubdivision as specific uses in later phases are better defined.  The use of a master plat appears very dangerous unless a waiver on the face of the plat would work to preclude residential lot owners from being required signatories on each commercial resubdivision.  Do you think the provisions of the Annexation Agreement and the Planned Unit Development ordinance which allow for such resubdivisions and which are recorded against all of the land and which constitute covenants running with the land accomplishes this?  I usually add language to the Annexation Agreement that provides that the agreement may be amended as to a portion of the project without the consent of the owners of the balance of the project, but subject to certain limitations. Should this type of provision be expanded to expressly reference the Plat Act and the provisions of concern thereunder?”

 

I had no idea that developers were aware of (and concerned of) this replatting issue.  But after reading this attorney’s letter, my first reaction was: is putting the cautionary language in the annexation agreement and the PUD ordinance sufficient notice to third party purchasers?  Does such notice create a covenant, condition, and restriction (CC&R) that binds subsequent purchasers?

 

 A covenant “runs with the land” (that is, it is binding on subsequent owners of the property) if: (1) the parties so intended, (2) the covenant “touches and concerns” the land (that is, it relates to the use, value, enjoyment, or occupation of the land), and (3) there is privity of estate between the parties.  See Drayson v. Wolff, 277 Ill.App.3d 975, 661 N.E.2d 486 (1996); United States Fidelity and Guaranty Company v. Old Orchard Plaza Limited Partnership, 284 Ill.App.3d 765, 672 N.E.2d 876 (1996).

 

An annexation agreement is an agreement between the municipality and the developer.  It is clear that the rights outlined in Ruble v. Sturhahn are valuable property rights.  Would a court determine that the parties to an annexation agreement created enforceable CC&Rs that run with the land when they bury a prohibition on the exercise of these rights in this agreement?  I think that the court that issued the Ruble decision might possibly determine that no such CC&R was created.  For example, the court might state that if the parties truly intended to create a CC&R that ran with the land, it would put the CC&R in a declaration or on the face of the plat instead of hiding it in an annexation agreement.

 

Indeed, this attorney suggests including the language on the plat.  That seems to be the better method of putting prospective purchasers on notice of the CC&R.

 

But there is one more issue to consider.  Is it possible that a court would consider this right outlined in Ruble v. Sturhahn to be so fundamental that any attempted fettering of it would not be enforceable?  This attorney suggests including some “limitations” on any “no consent needed” language.   This is probably an excellent idea.

 

Dick Bales

Chicago Title Insurance Company

Wheaton, Illinois

5. REAL ESTATE CONTRACTS; BREACH FOR FAILURE TO CLOSE, TENDER  OF PERFORMANCE, AND CONDITIONS PRECEDENT TO OBLIGATION TO CLOSE:

As noted below, (“10. ERRATA AND SUCH: IRELA CLE RE: CONTRACT FORMATION AND MODIFICATION ISSUES), transactional attorneys seem to provide the Courts with far too much controversy when it comes to contract formation, modification, and closing issues.  A recent example is Radkiewicz v. Radkiewicz, (2nd Dist., November, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/November/Html/2030878.htm.  Edward and Robert Radkiewicz entered into a contract  with Olympia Investments to sell a 27 acre parcel of land in DuPage County.  Edward and Robert were beneficiaries of a trust established by their parents. Their brother, William, was also a beneficiary of the trust, but Edward and Robert represented to Olympia that they had authority to enter into the contract on behalf of the trust without their brother. The contract provided for a “Final Contingency Date” of September 1, 2001, and that the closing was to take place within 15 days of the final contingency date or March 1, 2002, if the purchaser elected to extend the closing. Olympia did elect to extend the closing date and deposited an additional $30,000 of earnest  money.  In October, 2001, however, William filed suit against his two brothers contesting their right to contract to sell the property without his consent, joined Olympia as a party, and filed a lis pendens against the property .   The  closing did not take place according to the contract timing, and the lis pendens was not removed as a cloud on title. On March 11, 2002, the Radkiewicz brothers sent a notice of default to Olympia declaring a breach for failure to close,  stating that they were ready, willing and able to close, and demanding the total of  $55,000 being held as earnest money. Olympia took the position that the pending lis pendens and litigation were a cloud on title rendering it unmarketable. Testimony at trial revealed that neither attorney for the parties actually scheduled the closing. Olympia’s agent testified that  it did not close because the lis pendens rendered the title unmarketable. The Radkiewiczes’ attorney acknowledged that the lis pendens was a matter that would have had to have been resolved, but stated that he spoke to Richard (none-other-than!) Bales at Chicago Title about insuring over the lis pendens, and intended to, but had not completed the arrangements because the closing had not yet been scheduled.

The trial court found in favor of Radkiewicz and held that Olympia had defaulted on the contract because it did not notify the sellers that it considered the lis pendens an impediment to closing to afford them with an opportunity to cure.  The Second District reversed.

Disregarding Olympia’s failure to order a title commitment based on the Radkiewiczes’ admission that they did not clear the title and the Radkiewiczes position that Olympia was ”presumptuous” in believing that lis pendens would not be removed at closing, the Opinion by Justice O’Malley  holds that ”Olympia never breached the real estate contract because the Radkiewiczes never tendered their performance…Where the contract requires the buyer to pay money and  the seller to deliver the object of the sale at a certain time, those covenants are  mutual and dependent.  Under such circumstances, neither party can compel the other to perform without first tendering the money or the item. The tender required is an expression of readiness, willingness, and ability to perform.” While the contract did not place the burden to schedule the closing on either party, the Court’s decision turned on the fact that at no time did Radkiewicz indicate that they were in a position to tender clear title; “only a tender of performance by the Radkiewiczes could have placed Olympia in default…”

While procedurally the pleading of performance is a condition precedent to liability on a contract, (i.e., that Radkiewicz was ready, willing, and able to deliver clear title), and requires a specific rather than a general denial by the responding party under Supreme Court Rule 133(c), an affirmative defense setting forth “impossibility” of performance here was sufficiently specific and served as an appropriate denial.

6. ZONING; CALCULATION OF FAR RATIOS UNDER BOCA:

The Village of Shiloh denied the Plaintiff’s application for a special use permit to convert its 6-unit townhouse building into a 10 unit townhouse by adding  four additional rental units. The denial was  based on a determination that the addition would exceed the permissible 40% floor-to-area ratio permitted on the property under the Village ordinance.  RVS Industries, Inc. v. Village of Shiloh, (5th Dist., October, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/5thDistrict/October/Html/5030360.htm  The  Village had adopted the BOCA  National Building Code, which define the area of a building as derived by measuring the area of the largest story on or above grade, measuring from the inside face to the inside face of the exterior walls, and including areas which do not have surrounding walls if such areas are within the horizontal projection of the roof or floor above.  At issue was whether the calculation should include the porch and parking areas of the building as existing and proposed. If the existing and proposed parking areas were excluded, the floor to area ratio of the permit as requested would be 27%,  and come well within the 40% maximum allowable under the ordinance. Additionally, if the existing and proposed porch areas were excluded, the  project would only cover 39% of the total square footage and not exceed the 40% maximum lot coverage.

There was no dispute that both the proposed and existing porches were outside of the building’s surrounding walls, but beneath the horizontal projection of the roof  above by virtue of the overhang or cantilever, and therefore the Court held that the Village properly included these areas in the calculation of the total lot coverage.

The Court also determined that the parking area should be included  in the calculation of the lot coverage and FAR ratio.  The Village area and bulk regulations table specified areas within the zoning districts that were permitted to exclude parking areas in calculation of lot coverage in order to provide for great lot coverage for customer parking in retail, trade, professional and shopping areas.  The Plaintiff’s parcel was not so designated, and because the parking areas were not specifically excluded in the regulations table, the parking areas must be included in calculating the plaintiff’s lot coverage.  As a result, the floor to area ratio exceeded the allowable 40%, and supported the Court’s affirmation of  the Village’s denial of the special use permit based on the calculation of the floor to area coverage.

 

7. LANDLORD/TENANT; TENANCY AT SUFFERENCE AND APPLICABILITY OF THE SECURITY DEPOSIT RETURN ACT

In Hoffman v. Altamore, (2nd Dist., September, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/September/Html/2031093.htm , the tenant, Hoffman, sued the landlord, Altamore, seeking return of her security deposit in the sum of $550.00, plus statutory penalties and fees for failure to return. The parties initially entered into a lease for one year to expire on August 31, 2002. In the middle of the last month, Hoffman advised Altamore that she could not  afford to extend her lease for another year, but asked if she could rent from month to month. The landlord denied the request, and Hoffman told him she was not certain if she would be able to renew or not.  Thereafter, she did not contact Altamore again, but testified in the trial court that she removed all of her belongings on August 31, 2002,  and returned the next day, September 1, 2002 to clean the apartment .   On the afternoon of September 1, 2002, during Labor Day weekend, Hoffman deposited  her key in the Altamore’s mailbox with a note that the apartment was clean,  empty and available.  The landlord testified that he did not find the note in his mailbox or realize that Hoffman had moved out until a week later when he inspected the apartment. He retained Hoffman’s security deposit as rent for the month of September, 2002 because she had not vacated the apartment by September 1st.  The apartment was in one of five buildings owned by Altamore on Boxwood  Drive, each of which consisted of four rental  units.

In rendering judgment in favor of Hoffman in the sum of $531.67, the trial court held that the lease terminated by its own terms on August 31, 2002,  and did not require any further notice from Hoffman to Altamore;  she only had to vacate the property.  Moreover, the Security Deposit Return Act did not apply to support  an award of  penalties against the landlord because the security deposit was not withheld  by Altamore due to property damage,  but as the next month’s rent because of her failure to vacate the premises on August 31st.

The Second District opinion  affirms.  Hoffman did not become a tenant at sufferance on September  1, 2002, requiring the payment of rent for an additional month.  While Illinois law holds   that a tenant who retains possession after his lease has expired becomes a tenant at sufferance, the tenant must “exercise dominion over the premises indicative of an intent to continue the tenancy”. Citing two long established cases, the Court notes that the crucial issue is whether the landlord had reason to believe that  the tenant intended to extend the lease given the fact that the only obligation of the tenant was to yield up possession of the leased premises at the expiration of the term. In the case at bar, Hoffman yielded up possession on August 31, 2004, attempted in good faith to communicate that intent, (despite no actual obligation to do so inasmuch as the lease terminated  by its terms), and did not retain possession after the lease had terminated, but only returned the next day to cleanup. It was the landlord’s obligation to determine whether Hoffman had vacated the premises, and his failure to do so until  a week afterward did not alter the tenant’s surrender. 

Additionally, the provision of the Security Deposit Return Act requiring the lessor of residential real property containing five or more units to furnish the tenant with an itemized statement of damage alleged to have been caused was not triggered here. Altamore did not rent the requisite number of units for application of the penalty provision.  Each of the apartment buildings contained only four units. And, while there is a provision in the Security Deposit Interest Act (765 ILCS 715/1) which permits aggregating buildings within a complex on contiguous parcels to achieve the requisite 25 or more units, there is no such aggregating language in the Security Deposit Return Act (765 ILCS 710/1), and ”Therefore, ‘residential real property’ for the purposes of section 1 of the Security Deposit Return Act is limited to buildings on the same parcel of real property.”

8. ZONING; SPECIAL USE PERMITS AND DUE PROCESS – KLAEREN FINALE’:

We have seen Klaeren I, (2nd Dist., 2000), 316 Ill.App.3d 770, Klaeren II, (Il. S. Ct., 2002), 202 Ill.2d 164, and now, the Court has ruled in Klaeren III, (2nd Dist., October, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/October/Html/2030786.htm , in the dispute over whether a public hearing relating to an application for annexation, a special use permit, and rezoning to permit the construction of Meijer’s store is either a quasi-judicial proceeding or legislative in nature.  If a purely legislative function, the requirements of due process and cross examination of witnesses is inapplicable. If a quasi-judicial proceeding, the hearing must be conducted in a manner that permits cross examination and other due process protections. The Supreme Court affirmed the Second District in holding the hearing to be quasi-judicial in nature in a decision that dramatically changed the law in Illinois. In the second Klaeren case, the Court considered  and applied the finding in Klaeren I retroactively to the matter at hand, and now affirms the trial court’s ruling that although there were three separate municipal bodies considering different facets of the development, the nature of the issues did not permit separation of the process so that the entire hearing process violated the rights of the public to due process rendering the annexation, re-zoning, and grant of a special use permit were all  invalidated. Meijer filed the instant appeal.

Initially, the Second District opinion begins by rejecting Meijer’s argument that the decision in Klaeren II be applied only prospectively, noting that to do so would be “a non sequitur…ignoring the sotto voce general rule that the law announced in a case is applied to the case in which it is announced.”  Accordingly, Klaeren’s rule will apply prospectively to  all cases in which the notice of appeal was filed on or after the decision, despite the fact that there is at least one case, (Bogseth v. Emanuel), in which the court declined  to subject the parties to the rule announced in that case. Likewise, the Court refuses to limit the invalidation to only the special use permit hearing, finding “The joint public hearing in this case so intricately intertwined all of the proceedings from the various bodies that they can not be separated….where the mechanism of a joint public hearing was used, and where there was no separation of proceedings, the most stringent procedural requirement must apply to all approvals addressed in the joint public hearing to preserve procedural due process.” While the court acknowledges that the other actions, (annexation, re-zoning and subdivision approval), were legislative in nature, and only the special use hearing was actually quasi-judicial, “all the other actions were undertaken cheek-by-jowl with the special use.”

Turning to the Plaintiff’s Cross-Appeal on the issue of their request for attorneys fees and the trial court’s refusal to allow them to amend their complaint to add a claim for a writ of certiorari, the Second District also affirmed the final rulings of the trial court.   The Plaintiff’s request for attorney’s fees was based on the provision in the Municipal Code, (65 ILCS 5/11-13-15), that any owner or tenant within 1200 feet of property may institute proceedings to prevent unlawful construction, reconstruction, alteration, repair, conversion, etc., and, if the court finds the defendant has engaged in prohibited activities, will recover reasonable attorneys fees.  Unfortunately, the Plaintiff’s allegations were not brought expressly pursuant to the Municipal Code nor  were they directed towards any activities of Meijer; but rather toward the conduct of the Village of Lisle.

 Thus endeth, perhaps, the saga of People ex rel Klaeren v. Village of Lisle

9. INJUNCTIONS; LAND DEVELOPMENT AND  ALTERING THE NATURAL FLOW OF WATER FLOW ACROSS ADJACENT PROPERTY:

Bollweg v.Richard Marker Associates, Inc., (2nd Dist., November, 2004), http://www.state.il.us/court/Opinions/AppellateCourt/2004/2ndDistrict/November/Html/2040698.htm, is an interlocutory appeal from the trial court’s grant of a preliminary injunction preventing the defendant land developer from changing the existing flow of water from his property across Bollweg’s property.  Both parcels were once a  party of the larger Taus Farm on the Fox River in unincorporated Kendall County near Yorkville.  Bollweg purchased 17 acres  on the river from the Taus family trust in 1986.  The property was rezoned for residential use and Bollweg constructed a home and commercial nursery. In 2001 Marker entered into a contract to purchase 129 acres from Taus to develop and construct 262 single family homes. Prior to beginning development and construction representatives of Marker met with Bollweg to discuss  obtaining either an easement or a license to install an underground drainage system from a retention pond to be constructed on defendant’s property across plaintiff’s property to a point o discharge on the river. No agreement was reached, and Bollweg informed Marker that they did not want an underground pipe on their  property.  Later, the Bollwegs complained that construction activities resulted in water flowing across their  property in volumes and patterns that had not previously occurred, deposited silt and caused erosion on their property in new areas, and resulted in water remaining on their property longer than before and in places which limited their ability to use equipment and operate their  nursery as before.   They filed a complaint for damages and injunctive relief seeking to restrain defendant from altering the natural flow of  water and causing excess silt and debris flow. The developer responded that the storm water management system complied with municipal ordinances and that the balance   After hearing an extraordinary amount of testimony and evidence in eight hearings over month, the trial court granted the injunction. There was no dispute that the development will increase the volume of water flowing onto the plaintiff’s property as a result of regarding and landscaping that resulted in surface water coming from an additional 18 acres of property that did not previously drain onto plaintiff’s land,  and that the discharge would be over a longer period  of time and increase the time that plaintiff would be unable to use certain parts of his property. The Second District affirmed.

The underlying principal is  that an upper landowner has a duty not to increase the natural flow of surface water onto the property of an adjacent landowner as a result of his activities on his own land. Because there clearly was a substantial increase in the amount, pattern of coverage, and length of time of water flow as a result of defendant’s development activities, Plaintiff had a protectable interest to support the injunction.  Marker proceeded with the development even though it knew before hand that Bollweg objected to the development for fear of a change of the natural flow and would not agree to grant an easement or license as proposed. The Defendant’s actions altered the pre-existing drainage and flow, thereby nullifying any ability to claim an easement as a matter of law pursuant to the Illinois Drainage Code (70 ILCS 605/1 et seq.).  “An easement once definitely settled and located cannot be changed by either party without the consent of the other where the change results in a substitution of a servitude different from that which existed previously. “  The ‘civil rule’ is that an owner of the dominant or higher land has a natural easement over the servient or lower land to allow surface water to flow naturally off the dominant estate and onto the servient estate, but  the servient estate need not endure surface water in different quantities or at different times as a result of actions on the dominant estate. The “good husbandry” exception to the rule allows an increase or alteration of the flow but only  if required by “good husbandry” and with a range of reasonableness. While it is true that “good husbandry” is not limited to agricultural purposes, but also applies to urban and  suburban settings,  the use of the exception  must still be “within a range consistent with the policy of reasonableness of use”.   Here, based on balancing the benefit to the dominant estate against the harm caused to the servient estate, and the fact that defendant elected to proceed with the development knowing full well that the plaintiff objected to the increase in the flow of water, evidenced that the defendant took a calculated risk by proceeding with the development, and supports the trial court’s finding in favor of the plaintiff.

 

 

10. ERRATA AND SUCH:

DEVELOPMENTS NOTED FROM THE ISBA LISTSERV:

Dick Bales’  invaluable insight on adverse possession taken from the ISBA List Serve last month includes the statutory references and an excellent draft of an affidavit for the busy practitioner:

Adverse possession is the open and hostile possession of land under claim of title to the exclusion of the true owner, which, if continued for the period prescribed by statute (20 years), ripens into an actual title.  See 735 ILCS 5/13-101, 5/13-107, 5/13-109, 5/13-110; see also Joiner v. Janssen, 85 Ill.2d 74, 421 N.E.2d 170, 51 Ill.Dec. 662 (1981)

 

735 ILCS 5/13-101

20 years occupation

 

735 ILCS 5/13-107

7 years occupation

connected title

 

735 ILCS 5/13-109

7 years occupation

color of title

7 years of payment of taxes

 

735 ILCS 5/13-110

7 years of payment of taxes

vacant land      

color of title

 

735 ILCS 5/13-111; 735 ILCS 5/13-120(6); generally speaking, there is no adverse possession against the state, but see Wanless v. Wraight, 202 Ill.App.3d 750, 559 N.E.2d 798, 147 Ill.Dec. 458 (3rd Dist. 1990).

 

AFFIDAVIT OF ADVERSE POSSESSION

 

John Doe and Jane Doe hereby affirm that they have resided at the property commonly known as 3007 W. Blackacre Street, Lombard, Illinois 60148 since 1953.

 

Said land is legally described as follows:

 

Lot 1001 in Ellis’ Resubdivision of Block “G” in Greenfield Resubdivision of Outlot 2 and part of Outlot 3 in the southeast quarter of Section 6, Township 39 North, Range 11, East of the Third Principal Meridian, according to the plat of Ellis’ Resubdivision recorded June 29, 1927 as document 238649, in DuPage County, Illinois.

 

Permanent Index Number: 06-06-300-001

 

John Doe and Jane Doe affirm that they have been in actual, open, notorious, adverse, visible, hostile, exclusive, and continuous possession under a claim of right and color of title since 1963, and that during all this time they have paid to the proper authorities all taxes and assessments levied or assessed on the land.

 

John Doe and Jane Doe affirm that in all the time they have been in possession of the land, their title, ownership, or occupancy has never been questioned or disturbed.

 

This affidavit has been executed and recorded to put third parties on notice of the undersigned’s ownership interest in the above-described property and to induce Chicago Title Insurance Company to issue a title insurance policy insuring the title to this property.

 

Further affiants sayeth not.

 

 

 

IRELA CLE RE: CONTRACT FORMATION AND MODIFICATION ISSUES:

In early November, IRELA included an update and forum to discuss the issues relating to contract formation and modification that arise all too often in residential transactions when an attorney exercises the attorney review/modification/disapproval provisions found in  most contract forms currently in circulation. The invaluable  listing of cases and articles relating to  contract formation, acceptance, modification and termination compiled by Steve Bashaw and Dick Bales for the attendees is:

Olympic Restaurant Corp. v. Bank of Wheaton, 251 Ill.App.3d 594 (Second Dist. 1993); Grossinger Motorcorp, Inc. v. National Bank and Trust Company, 670 N.E.2d 1337 (1992); Groshek v. Frainey, 274 Ill.Ap.3d 566, 654 N.E.2d 467, 211 Ill.Dec. 5 (First Dist. 1995); Hubble v. O’Connor, 291 Ill.App.3d 974, 684 N.E.2d 816, 225 Ill.Dec. 825 (First Dist. 1997); McKenna v. Smith, 302 Ill.App.3d 28, 704 N.E.2d 826, 235 Ill.Dec. 253 (First Dist. 1998); Catholic Charities of Archdiocese of Chicago v. Thorpe, No. 1991717, (First Dist. 2000); Voyles v. Sandia Mortgage Corp., 311 Ill.App.3d 649 (2nd Dist 2000); Schwinder v. Austin Bank of Chicago, 2004 WL 885197 (First Dist. 2004); Terry v. Cafferata, No. 2-03-0498 (Second Dist. 2004, Rule 23 Opinion); “Attorney’s Approval Rider--A View from other Jurisdictions,” by Richard W. Kuhn, Real Property, April 1989;  “Attorney’s Approval Provisions Revisited,” by Richard W. Kuhn, Real Property, May 1994; “Attorney’s Approval Revisited. . . Again!,” by Richard W. Kuhn, Real Property, January 1996; “Attorney Approval Provisions--the Good Faith Requirement, by Richard W. Kuhn,” Real Property, October 2000; “Liquidated Damages: You Can’t Have Your Cake and Eat It Too,” by Mark G. Hanley and Mark C. Zimmerman, Real Property, May 2001; “Recent Cases on Contract Formation. . . .,” by Steven B. Bashaw, Real Property, May 2001; “There is a Difference!  Attorney Modification versus Attorney Approval Clauses,” by Richard W. Kuhn, Real Property, December 2001.

TRANSACTIONAL ATTORNEY’S RELIEF; CITY OF CHICAGO WATER CERTIFICATIONS FOR CONDOMINIUMS, COOPERATIVES AND TOWNHOMES AND ONLINE SEARCHING AT THE RECORDER’S OFFICE:

The City of Chicago advised in a press release that as of November 15, 2004, residential units that are townhouses, condominiums or cooperative apartments that do not have separate water service or a separate city water assessment for the residential unit will NOT require a certificate of payment from the Department of Water Management in order to receive City of Chicago Transfer Tax Stamps.  However, before control of a condominium property is transferred from the developer to the board of managers, a certificate of payment will have to be obtained within 30 days prior to the election of the first unit owner board of managers.  For more information, contact Jennifer Margolis at the city at 312-744-4223.

The Cook County Recorder of Deeds now allows online searches for property records from 1985 on.  Go to <http://www.ccrd.info/CCRD/il031/index.jsp> to check it out.  And the Cook County Board of Review's website is at <http://www.cookcountyboardofreview.com/>