The U.S. Seventh Circuit Court of Appeals dealt a blow to the owners of a horse ranch near Barrington in their property ownership battle with the Cook County Forest Preserve District, as judges said the Forest Preserve’s attempt to use the foreclosure process to acquire the land did not amount to an unconstitutional taking.
Judges William Bauer, Daniel Manion and David Hamilton heard arguments Sept. 28 covering part of a dispute pitting owners of a 400-acre Barrington estate against the Forest Preserve District, which held the mortgage on the land at the time the owners defaulted, foreclosed and then bought the property at the foreclosure auction. Hamilton wrote the decision issued July 26.
Meryl Squires-Cannon and Richard Kirk Cannon bought the land in 2006 through two wholly-owned limited liability companies, Royalty Properties and Cannon Squires Properties. The LLCs, also plaintiffs in the complaint, executed a one-year, $14.5 million mortgage with Amcore Bank. The Cannons maintain Amcore committed to modify the loan to a longer term before the end of the initial year, “but the financial crisis intervened,” Hamilton wrote, explaining a series of transactions that led to the Forest Preserve buying the mortgage from the FDIC and BMO Harris Bank, which purchased Amcore’s loan assets after its failure.
There have been three state and three federal lawsuits connected to the Cannons’ default on the loan; the one at appeal before the Seventh Circuit was dismissed by federal judge Sara Ellis, who determined the Cannons failed to state a claim the Forest Preserve violated the Fifth Amendment by illegally seizing the property.
Although the District passed an ordinance authorizing itself to acquire the state, the appeals panel noted that ordinance “did not effect the actual acquisition of the estate,” which would have violated federal law. Rather, “the estate became a part of the Forest Preserve only after the Forest Preserve bought it at the foreclosure sale, not before.”
Likewise, the Cannons noted the ordinance authorized condemnation and designated the land as a future forest preserve, but Hamilton explained neither action formally constitutes a taking.
“If merely authorizing condemnation amounted to a taking, government projects requiring condemnation and compensation would become unmanageable,” Hamilton wrote.
The panel further backed Ellis’ ruling, saying the Forest Preserve didn’t foreclose on the property as a governmental prerogative, but in exercising its contractual right as the note holder. The Cannons insisted they contracted with a private party — Amcore — but as Hamilton wrote, the mortgage terms “gave the lender the right to assign the note to anyone else at any time without notice to or consent from the Cannons.”
The Cannons’ claims of fraudulent misrepresentation and concealment, which also included allegations against Forest Preserve lawyer Francis Keldermans, as well as a neighbor, Robert McGinley and McGinley Partners LLC, suffered from a failure to allege damages suffered and to show which facts the defendants were obligated to disclose.
They said both Keldermans and McGinley negotiated with them while obscuring their established partnership with the Forest Preserve. Had they known the truth, the Cannons maintain, they could have negotiated successfully with BMO. However, the Seventh Circuit panel agreed with Ellis in determining “the Cannons inflicted their own damage by defaulting on the note.” When the Cannons met with Keldermans and later McGinley, the Forest Preserve had already agreed to buy the note.
Finally, the Cannons failed to demonstrate what duty either Keldermans or McGinley owed, as they did not allege a fiduciary or confidential relationship, a determination that also scuttled derivative claims for conspiracy and aiding and abetting.
The panel affirmed’ Ellis opinion in full, saying she was right to grant the Forest Preserve its motion to dismiss the Cannons’ complaint.
Richard K. Cannon has represented the Cannons, according to federal court records.
The Forest Preserve District has been represented by attorneys Christopher W. Carmichael, of the firm of Henderson Parks LLC, and Maureen E. Schoaf, of the firm of Holland and Knight LLP, both of Chicago.