First District Rules on Block 37 Receivership

Posted on April 19, 2010 by Garrett Kern

 

In a March 31, 2010 decision, the First District Appellate Court of Illinois ruled in favor of Bank of America and other lenders against the Block 37 mall developer.  Bank of America led a group of lenders that moved to foreclose on Block 37 in late October, claiming the developer was in default on a $205-million construction loan. The Cook County Circuit Court appointed real estate services firm CB Richard Ellis as receiver on November 24. CBRE officially took control of the mall on February 1, after delays over insurance issues were resolved. The developer appealed the trial court’s ruling, citing the Illinois mortgage foreclose statute and arguing that Bank of America had not proven that there was a “reasonable probability” that it would prevail in the underlying foreclosure action and that it had shown “good cause” for not appointing a receiver.

In affirming the trial court’s order in appointing a receiver, the court noted the construction loan made to the developer is out of balance and, therefore, was in default pursuant to the terms of the loan agreement. The court found that the developer presented no evidence showing a commitment from a lender or investor to provide funding that would cure the imbalance. In addition, the arguments that the developer was in a better position to complete the project or that Bank of American had not shown or alleged fraud, mismanagement or waste were all deemed impermissible arguments that attempt to shift the burden of proof back on to the lender, when the burden of proof was on the developer to show why a receiver should not be appointed.

The First District’s ruling has made the road much easier for Bank of America to proceed with its foreclosure proceeding.

We will continue to keep you advised as to the progress of the Block 37 project, both during construction and in the court system.

 

Tags: , ,

Springfield Heating and A/C v. 39477-55 King Drive at Oakwood, LLC, et al, (1st Dist., Doc. No. 1-07-2987)

Posted on February 10, 2009 by FGPP Construction Group

The litigation involved the foreclosure of a mechanic’s lien by a HVAC and plumbing subcontractor. The general had hired the sub based on a contract for $465,000 to perform work on a property in Chicago commonly known as 3947-55 King Drive and 401-415 E. Oakwood.  As noted in the Google street map below, this location was home to Chicago's Rosscoe's which was the subject of a suit in 2008 (the Chicago IP Litigation Blog's Entry on the subject can be found here) and has since changed its name to Chicago's Home of Chicken and Waffles.


View Larger Map

The sub performed $289,302 in work before the relationship went south and it terminated its relationship with the general. The sub filed liens for the full amount – because the property was on two different parcels, it apparently recorded two separate liens against the properties, each for the full amount, rather than just recording a single document that listed the multiple properties.

Four days after the liens were filed, the sub sued to foreclose its lien and brought two extra counts, one for unjust enrichment and one for quantum meruit (two equitable claims alleging that even if there was no contract with the property owner, the owner benefited from the work the sub did, so the sub should be paid).

After multiple motions, the trial court dismissed all the claims made by the sub. The trial court found that the fact that two liens were recorded for a total that was in excess of the actual amount owed was constructive fraud on the part of the sub requiring dismissal of the foreclosure action. The court also found that the equitable claims were not available because the sub had no contract with the land owner.

The appellate court reversed finding that the duplicative filings did not amount to a showing of constructive fraud where the defendants could not show there was an intent to defraud and even the Illinois Mechanic’s Lien Act stated that the misstatement of the amount required a showing of intent to defraud before the misstatement could be used to defeat the lien. The appellate court upheld the trial court’s determination that the equitable claims were unavailable to a subcontractor that only had a contract with the general.

While no one is going to recommend filing a lien that hasn’t been proofed and double-proofed, it’s nice to see the intent of the law given form here to help people get paid even if a small technical error arises.

The opinion can be found here.

Tags: , , , ,

News & Notes 11/20/08

Posted on November 20, 2008 by FGPP Construction Group
  • Senate Bill 2725 which was originally introduced as a bill regarding the Conveyances Act, and which has been through several permutations on differing subjects in the past year has now been amended by the Illinois House of Representatives as a proposed bill that would halt certain mortgage foreclosures and any evictions for 90 days from the date it is signed. If passed, the bill would still need to go back to the Senate for approval.
  • The Skyline is now reporting that the Trump Spire won’t be lifted into place until mid-December, which probably ruins your plans to watch it during an outdoor picnic. The article sets the tentative date for the weekend of December 13 and 14.
  • There’s an article over at Greener Buildings about the Green Building Impact Report 2008 that will be of interest to those looking for a report delineating the actual reduction in environmental impact that green buildings (read LEED) have achieved.
Tags: , ,