Meryl Squires-Cannon v. Forest Preserve District of C
Opinion
*800 The Forest Preserve District of Cook County, Illinois, has been trying to acquire a 400-acre estate in Barrington after the owners defaulted on a mortgage and note held by the Forest Preserve. The Forest Preserve foreclosed and then bought the property at the foreclosure auction. The original owners have expressed their opposition by filing five lawsuits of their own, in addition to raising affirmative defenses and counterclaims in the still-pending foreclosure action. This appeal arises in the owners' third federal lawsuit, in which they have alleged unconstitutional takings, fraud, and derivative claims for conspiracy and aiding and abetting. The district court dismissed the suit for failure to state a claim. We affirm.
I. Factual and Procedural Background
A. Underlying Transactions
In 2006, plaintiffs Meryl Squires-Cannon and Richard Kirk Cannon purchased a 400-acre estate and horse farm in Barrington. The Cannons bought the property through two wholly-owned limited liability companies, Royalty Properties, LLC and Cannon Squires Properties, LLC, which are also plaintiffs in this lawsuit. The LLCs executed a one-year, $14.5 million note and mortgage loan agreement with Amcore Bank, N.A. The Cannons allege that Amcore committed to modify the loan to a longer term before the end of the initial one-year term. But the financial crisis intervened, and Amcore reneged. Under financial distress itself, Amcore called the loan and when, we assume, the Cannons were unable to refinance in the financial environment of the time, Amcore filed for foreclosure in an Illinois state court. Amcore then failed in 2009, and the FDIC became its receiver. BMO Harris Bank, N.A. bought Amcore's loan assets at a discount from the FDIC, became the owner of the Cannons' note, and took over as the plaintiff in the foreclosure action.
When the value of the estate fell in the midst of the financial crisis, BMO faced a risk that the note was worth more than the property securing it. And the FDIC had agreed to pay BMO 80% of any Amcore loan that BMO could not recover directly from the borrowers. To cut their losses on the Cannons' loan, the FDIC and BMO had incentives to find a buyer for the note. Enter the Forest Preserve. The Cannons allege that the FDIC, BMO, Bayview Loan Servicing, LLC, and Does 1-15 secretly agreed to assign the note to the Forest Preserve for $14 million. After the Forest Preserve's board approved the purchase, BMO assigned the note to the Forest Preserve, which became the plaintiff in the foreclosure action.
*801
In 2013, the foreclosure court granted summary judgment for the Forest Preserve. The Forest Preserve then obtained board approval to offer a credit bid for the estate at the foreclosure sale. The Forest Preserve made the (winning) credit bid of about $14.5 million at the foreclosure sale. The foreclosure court also entered a deficiency judgment against the Cannons for over $6 million. See
BMO Harris Bank, N.A. v. Royalty Properties, LLC
, No. 1-15-1338,
B. Lawsuits
There have now been six separate lawsuits relating to the Cannons' default on the note-three state and three federal. The three state lawsuits are:
(1) the foreclosure action, which is still pending;
(2) the Cannons' lawsuit against the Forest Preserve and BMO (the "taxpayer action"), which was dismissed, Baker v. Forest Preserve District ,393 Ill.Dec. 1 ,33 N.E.3d 745 (Ill. App. 2015) (affirming dismissal of all claims and rejecting theory that Forest Preserve's purchase of note and participation in foreclosure auction violated Cook County Forest Preserve District Act), and;
(3) a lawsuit by one of the Cannon entities against the Forest Preserve for breach of a purported lease after the foreclosure sale, which is stayed, Royalty Farms, LLC v. Forest Preserve District of Cook County ,419 Ill.Dec. 234 ,92 N.E.3d 943 (Ill. App. 2017) (reversing order awarding possession of property to Forest Preserve and remanding and staying eviction proceedings pending resolution of foreclosure action).
The three federal lawsuits are:
(1) a lawsuit with allegations similar to this one, which was dismissed for lack of jurisdiction, Squires Cannon v. Forest Preserve District of Cook County , No.13 C 6589 ,2014 WL 1758475 (N.D. Ill. May 2, 2014) ;
(2) a lawsuit by Meryl Squires-Cannon against several Forest Preserve officials and employees for false arrest and malicious prosecution, which was dismissed on the merits, Squires-Cannon v. White ,864 F.3d 515 (7th Cir. 2017) (affirming dismissal), and;
*802 (3) the lawsuit in this appeal, which the district court dismissed, Squires Cannon v. Forest Preserve District of Cook County , No.14 C 5611 ,2016 WL 2620515 (N.D. Ill. May 9, 2016).
II. Analysis
Our review of a dismissal under Rule 12(b)(6) for failure to state a claim is
de novo
, and we may affirm on any ground in the record.
Brooks v. Ross
,
A. Takings Claims
The takings clause of the Fifth Amendment provides, "nor shall private property be taken for public use, without just compensation." U.S. Const. amend. V. The Fourteenth Amendment makes the takings clause applicable to the States and their subdivisions. See, e.g.,
Murr v. Wisconsin
, --- U.S. ----,
1. No Taking by Ordinance
After the Forest Preserve acquired the note from BMO, it passed an ordinance creating a forest preserve district for "lands now owned and lands to be acquired." The "lands" included the Cannon estate, and the ordinance stated that the Forest Preserve "shall acquire" those "lands." The ordinance also authorized the Forest Preserve to bid at the foreclosure auction and set a ceiling for the bid. Enactment of the ordinance was not a regulatory taking, and the district court properly rejected this theory.
A regulatory taking is "a restriction on the use of property that [goes] 'too far.' "
Horne v. Department of Agriculture
, --- U.S. ----,
The character of this government action defeats the Cannons' claim. The ordinance prospectively authorized the Forest Preserve to acquire the estate. The *803 ordinance did not effect the actual acquisition of the estate. And the estate became a part of the Forest Preserve only after the Forest Preserve bought it at the foreclosure sale, not before. (Recall, though, that the foreclosure sale has since been set aside by the state courts.)
The Cannons argue that the ordinance was not prospective because it also authorized condemnation. But the "mere enactment of legislation which authorizes condemnation of property cannot be a taking."
Danforth v. United States
,
2. No Taking via Foreclosure or Physical Entry
The district court properly rejected the Cannons' theory that the Forest Preserve took the property by buying the note, foreclosing on it, and then buying the estate at the foreclosure sale. By foreclosing on the note, the Forest Preserve exercised its contractual right, not a governmental prerogative. See
Warren v. Government Nat'l Mortgage Ass'n
,
The Cannons attempt to distinguish these proprietary-function cases by arguing that they contracted with a private party, not a government entity. Nevertheless, the note they signed to obtain more than $14 million gave the lender the right to assign the note to anyone else at any time without notice to or consent from the Cannons. Buying the estate at the foreclosure auction was also not a taking. See, e.g.,
Oglethorpe Co. v. United States
,
The Cannons' physical takings theory also fails because the Forest Preserve was acting as a creditor. If the Forest Preserve prematurely took possession of the estate, patrolled the property, or put up signs at estate entrances without being a mortgagee in possession, the Cannons may have state-law remedies for those claims, but we do not see any constitutional violations in these allegations that are tied so closely to the state-court foreclosure action. 4
*805
The Cannons' claims against all other defendants for conspiracy and aiding and abetting a taking also fail. Without an underlying constitutional violation, there is no derivative liability.
Champion Parts, Inc. v. Oppenheimer & Co.
,
B. Fraud Claims
The Cannons also allege claims for fraudulent misrepresentation and fraudulent concealment: one against the Forest Preserve and its lawyer, Francis Keldermans, and another against the Forest Preserve and a neighbor, Robert McGinley, and McGinley Partners, LLC. For the claim against Keldermans and the Forest Preserve, the Cannons also add conspiracy and aiding-and-abetting claims against all defendants except the United States. Although the claims differ based on the allegedly fraudulent misrepresentations and concealments, both fraud claims fail for the same reasons: no damages and no duty.
A common-law fraud claim in Illinois requires five elements: "(1) a false statement of material fact; (2) defendant's knowledge that the statement was false; (3) defendant's intent that the statement induce the plaintiff to act; (4) plaintiff's reliance upon the truth of the statement; and (5) plaintiff's damages resulting from reliance on the statement."
Connick v. Suzuki Motor Co.
,
Illinois also recognizes the common-law tort of fraudulent concealment, which requires a plaintiff to "allege that the defendant concealed a material fact when he was under a duty to disclose that fact to plaintiff."
*806 The Cannons allege that attorney Keldermans, on behalf of the Forest Preserve, attempted to negotiate with them for an agreement for a deed in lieu of foreclosure. Before that negotiation began, Keldermans asked the Cannons to sign a "Pre-Negotiation and Confidentiality Agreement." That confidentiality agreement identified the purchaser as "Horizon Farms Loan Acquisition LLC, an Illinois limited liability company to be formed." Keldermans also allegedly told the Cannons that the purchaser was "not just one individual." The Cannons allege that these statements were fraudulent because the real purchaser was to be the Forest Preserve, and they claim that Keldermans fraudulently concealed that fact. The Cannons allege that they relied on these statements by signing the confidentiality agreement, divulging confidential information to Keldermans, and refraining from learning that the Forest Preserve was the purchaser in time to oppose the Forest Preserve's approval of the note purchase. The Cannons claim that they were damaged because, once the Forest Preserve had the option to buy the note, BMO could not negotiate a resolution with them-even though the Cannons offered the same amount for the note that the Forest Preserve had.
The allegations against McGinley and McGinley Partners are similar. McGinley met with the Cannons and told them that a "group of neighbors" was interested in buying the estate if the Cannons would assign title to them. The Cannons allege that McGinley concealed from them the fact that he was acting on behalf of the Forest Preserve. The Cannons relied, they say, by disclosing their willingness to negotiate, and they claim they were damaged because they could have opposed the Forest Preserve's efforts and successfully negotiated with BMO.
Even if these statements were fraudulent, the Cannons fail to allege any plausible damage. We agree with the district court: the Cannons inflicted their own damage by defaulting on the note. BMO could assign the note without any apparent restrictions.
Squires-Cannon
,
The fraudulent concealment claims also fail because Keldermans and McGinley had no duty to disclose to the Cannons the Forest Preserve's involvement in the deals they were trying to negotiate. The Cannons do not allege a fiduciary or confidential relationship. And their allegations do not indicate a special trust relationship because "the standard for identifying a special trust relationship is extremely similar to that of a fiduciary relationship."
Toulon v. Continental Casualty Co.
,
Without an underlying tort, the derivative claims for conspiracy and aiding and abetting fail.
Champion Parts, Inc. v. Oppenheimer & Co.
,
The district court correctly granted the defendants' motion to dismiss, and its judgment is
AFFIRMED.
The lack of a final judgment in the foreclosure action could create a ripeness issue for a takings claim. Usually, a plaintiff "must try to obtain compensation under state law before litigating a takings suit."
Kolton v. Frerichs
,
Illinois courts have held similarly. E.g.,
City of Chicago v. Loitz
,
We assume it is possible for a government entity that is a party to a relevant contract to commit a taking by infringing a property right that exists independent of the contract. See
Clear Creek Community Services District v. United States
,
The district court's order indicates that the Cannons' second amended complaint did not include this allegation.
Squires Cannon
,
We affirm the dismissal of the takings claims on the merits, but claim preclusion (res judicata) based on the final judgment in the taxpayer action could provide an additional basis for affirmance. Because the judgment in the taxpayer action is an Illinois judgment, we would look to the law of Illinois to determine whether claim preclusion bars the claim.
Walsh Construction Co. of Ill. v. Nat'l Union Fire Ins. Co. of Pittsburgh
,
Reference
- Full Case Name
- Meryl SQUIRES-CANNON, Et Al., Plaintiffs-Appellants, v. FOREST PRESERVE DISTRICT OF COOK COUNTY, Et Al., Defendants-Appellees.
- Cited By
- 80 cases
- Status
- Published