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Rosenblatt v. Michigan Avenue National Bank

OPINION FILED APRIL 9, 1979.

SAMUEL L. ROSENBLATT, TRUSTEE, ET AL., PLAINTIFFS AND CROSS-DEFENDANTS-APPELLANTS,

v.

MICHIGAN AVENUE NATIONAL BANK, TRUSTEE, ET AL., DEFENDANTS. — (JAMES M. FLANAGAN, RECEIVER-INTERVENOR-APPELLEE.)



APPEAL from the Circuit Court of Cook County; the Hon. NATHAN M. COHEN, Judge, presiding. MR. JUSTICE BUCKLEY*FN1 DELIVERED THE OPINION OF THE COURT: *FN1 THIS OPINION WAS PREPARED BY JUSTICE BUCKLEY WHILE ASSIGNED TO THE ILLINOIS APPELLATE COURT, FIRST DISTRICT.

This is an appeal from a decree for foreclosure of a lien representing fees of a receiver and his attorney, which lien was given priority over the lien of the party who petitioned for appointment of a receiver. For the reasons stated below, we affirm.

On October 6, 1975, the appellants, Samuel L. Rosenblatt, American National Bank and Trust Co. of Chicago and Sol Kitzis filed a complaint in Cook County circuit court to foreclose a trust deed which secured a note issued by Michigan Avenue National Bank of Chicago. The mortgaged premises, a two-story brick commercial building consisting of three units at 7445-53 South Cottage Grove Avenue, was in a state of disrepair and had minimal income and provided insufficient security for the indebtedness evidenced by the note.

On October 21, 1975, appellants petitioned for appointment of a receiver. In their brief, appellants state they asked for a particular individual to be appointed, William Smith, who had been collecting rents for the premises, and who had agreed to act at no charge. The judge, the Honorable Nathan M. Cohen, appointed as receiver James Flanagan.

On December 4, 1975, Flanagan petitioned the court to appoint Gilbert L. Berman as his legal counsel. In their brief appellants state that they objected and proposed appointment of their own attorney, who would act at no cost. Berman was appointed counsel to the receiver.

On February 27, 1976, when the receiver filed his first and final report and was discharged on his own motion, appellants filed answers to the timesheets of both the receiver and his attorney, asking the court to consider the circumstances of the premises before deciding what fees were reasonable. On March 11, 1976, over objections, the court ordered that within 10 days the receiver was to be reimbursed for the deficit in his expenses, $322.63, and be paid $900 as his fee and $750 as his attorney's fee, and that if payment were not made within 10 days, the fees would be increased pursuant to further order of the court.

The amounts under the March 11 order were not paid, and on May 5, 1976, that order was vacated and an order entered fixing the receiver's fee at $1,200 and his attorney's fees at $1,000, and establishing a lien of $2,200 upon the subject premises. The May 5 order included a finding that there was no just cause to delay enforcement or appeal. The receiver's motion had sought establishment of the lien in question as a first and prior lien. The order granting that motion, however, did not expressly state the lien's priority.

On June 18, 1976, the receiver filed a complaint for foreclosure which stated in part that the lien for receiver's and attorney's fees would have to be made a first and prior lien if it were to be effective. Subsequently, appellants filed an answer to this complaint admitting that a judgment had been entered for the amounts in question, but arguing that the receiver had no right to a lien on rents or on the premises and would have to wait until appellants' foreclosure action culminated in a sale in order to be reimbursed.

On November 24, 1976, a decree of foreclosure was issued which provided that, there being entered a judgment and lien for fees, and the receiver and his attorney having incurred further expenses in pursuing foreclosure, a lien in an amount representing both the prior and the new fees shall constitute a first and prior lien upon the premises and foreclosure of that lien was decreed.

Appellants did not provide a supersedeas bond, and while their appeal from the November 24 decree was pending the premises were sold to a party who was not connected with the litigation regarding the receivership, but was a defendant under appellants' original foreclosure action.

At no time from the appointment of a receiver to the sale under the November 24 decree of foreclosure did appellants make any effort to pursue their foreclosure action to a sale.

Appellants argue that the decree of foreclosure entered on November 24, 1976, should be reversed for the following reasons:

1. The fees for services rendered during the receivership were excessive, so that the entry of a decree of foreclosure based on such fees constituted an abuse of discretion;

2. Subordination of the plaintiff-mortgagee's lien to that of the receiver constituted an abuse of discretion, particularly when the plaintiff-mortgagee had objected to appointment of that receiver on the grounds that the subject premises would not produce adequate income to compensate that receiver;

3. Inclusion of an award of attorney's fees for the receiver's efforts after his discharge to collect his fees by pursuing a foreclosure action ...


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