Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

CAGAN v. INTERVEST MIDWEST REAL ESTATE CORP.

August 7, 1991

JEFFREY CAGAN and CAGAN REALTY, INC., RECEIVER, Plaintiff,
v.
INTERVEST MIDWEST REAL ESTATE CORPORATION, f/k/a INLAND REAL ESTATE CORPORATION, Defendant



The opinion of the court was delivered by: SHADUR

 MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE

 Jeffrey Cagan and Cagan Realty, Inc. (collectively "Cagan," treated as a singular noun) sues Intervest Midwest Real Estate Corporation ("Intervest") for Intervest's default on a $ 2,594,809 promissory note (the "Note") delivered to Briarbrook Joint Venture ("Venture") in consideration for the purchase of certain property. *fn1" Cagan now moves for judgment on the pleadings pursuant to Fed. R. Civ. P. ("Rule") 12(c). *fn2" For the reasons stated in this memorandum opinion and order, the motion is granted and judgment will be entered in Cagan's favor on August 30, 1991.

 Facts

 In 1975 Kenneth Boula ("Boula") and Dean Gordon ("Gordon") acquired the 342-unit Briarbrook Village apartment complex located in Wheaton, Illinois (the "Property") on Venture's behalf. At the time of the purchase, legal title to the Property was held by LaSalle National Bank as trustee ("Trustee") of Land Trust No. 46363 dated July 13, 1973 (the "Land Trust"), subject to a first mortgage insured by the Department of Housing and Urban Development ("HUD") and a HUD Regulatory Agreement to which Trustee was a party. This was among the restrictions contained in the Regulatory Agreement (Amended Complaint ("Complaint") Ex. A *fn3" at 2):

 
6. Owner shall not without the prior written approval of the Secretary:
 
(c) Convey, assign, or transfer any beneficial interest in any trust holding title to the property . . . .

 HUD imposed similar restrictions in the Land Trust Agreement: No assignment of beneficial interest could be binding until lodged with Trustee, and no assignment could be accepted by Trustee until ten days after HUD had been notified and the new assignee had become a party to the Regulatory Agreement (Ex. B at 3).

 As principal and general partner of Inland-Briarbrook Limited Partnership ("Inland-Briarbrook"), Intervest (which was known as Inland Real Estate Corporation until it changed its name on August 16, 1989) *fn4" entered into a contract for purchase of the Property from Venture on December 7, 1981 *fn5" (the "Contract"). In the Contract all parties acknowledged the existence of the HUD financing and Regulatory Agreement, and Inland-Briarbrook agreed to acquire the Property subject to the HUD mortgage and Regulatory Agreement. After HUD approval was obtained, the sale closed on December 23, 1982. At closing Venture assigned the beneficial interest in the Land Trust to Inland-Briarbrook, and in late 1982 or early 1983 HUD approved that assignment.

 In partial payment for the Property (and as the Contract had provided from the beginning), Intervest issued the Note dated December 15, 1982 in the amount of $ 2,594,809 and assumed the HUD first mortgage loan in the approximate amount of $ 4,884,839. One provision of the Note stated in relevant part (Ex. G at 4-5):

 
This Note . . . shall immediately become due and payable without notice or demand upon the occurrence with respect to the maker hereof of any of the following events: . . .
 
assignment of security or beneficial interest in land Trust No. 46363 at LaSalle National Bank and Trust Company of Chicago.

 On March 14, 1988 Intervest refinanced the Property and, acting as general partner of Inland-Briarbrook, assigned the beneficial interest in the Land Trust to Briarbrook Village Limited Partnership ("Briarbrook Village"). That assignment was substantive in nature -- not merely for collateral purposes. *fn6" Later that same day Intervest, this time acting as general partner of Briarbrook Village, granted a security interest and collateral assignment in the Land Trust to Heller Financial, Inc. Intervest also executed a Joinder by Holder of Power of Direction (Ex. I at 8):

 
The undersigned, being the sole holder of the power of direction under the Trust, hereby joins in the foregoing Combined Security Agreement and Collateral Assignment of Beneficial Interest in Land Trust for the purposes of: (i) granting, transferring, setting over and assigning to Secured Party, all of his rights, title and interest in and to the power of direction under the Trust, and (ii) agreeing to be bound by all of the representations, warranties, covenants and agreements contained in the foregoing instrument.

 On February 15, 1990 Intervest again refinanced the Property and, again acting as general partner of Briarbrook Village, granted a security interest and collateral assignment in the Land Trust to Confederation Life Insurance Company.

 On July 14, 1988, pursuant to an Agreed Order in Gaskill, Cagan was appointed as federal receiver authorized to acquire most of the properties belonging to entities owned by Boula and Gordon (see the later opinion in Gaskill, 1988 U.S. Dist. LEXIS 10957, at 1) and came into ownership of the Note in that capacity. On August 31, 1989 Cagan signed a stipulation that Intervest had fulfilled its obligations with respect to the Property -- but at that time Intervest had never informed Venture or Cagan that it had refinanced the Property before that stipulation. On August 17, 1990 Cagan asserted a default under the terms of the Note and demanded payment of all principal and interest.

 Jurisdiction

 Intervest's Answer to the Complaint admits this Court's subject-matter jurisdiction (Answer para. 4). But because such jurisdiction cannot of course be conferred by consent of the parties, a few words should be said about its existence -- something that this Court had confirmed at the outset of this lawsuit as part of its threshold obligation, as summarized succinctly in Wisconsin Knife Works v. National Metal Crafters, 781 F.2d 1280, 1282 (7th Cir. 1986):

 
 
The first thing a federal judge should do when a complaint is filed is check to see that federal jurisdiction is properly alleged.

 Complaint para. 2 first identifies Cagan as the federal receiver appointed in Gaskill and then goes on with a number of allegations about Boula and Gordon and about a massive Ponzi scheme that they had assertedly carried on through a series of limited real estate partnerships, including Venture. Because Intervest disclaims knowledge or information sufficient to form a belief as to the truth of those allegations (Answer para. 2), all of them are deemed denied under Rule 8(b) -- so that this Court cannot take cognizance of them for purposes of Cagan's Rule 12(c) motion (see nn. 1 and 2).

 But this Court's ability to take judicial notice of the court order in Gaskill appointing Cagan as receiver (see 5A Wright and Miller, Federal Practice and Procedure: Civil 2d ยง 1367, at 509 & n. 3 (2d ed. 1990)) solves that problem. That being so, Cagan's status as federally-appointed receiver is his jurisdictional ticket of entry to this District Court. As Tcherepnin v. Franz, 485 F.2d 1251, 1255-56 (7th Cir. 1973) (footnotes and citations omitted) put it:

 
The ancillary jurisdiction of federal courts over actions incident to a receivership established by a federal court has long been recognized. So long as an action commenced by a court appointed receiver seeks "to accomplish the ends sought and directed by the suit in which the appointment was made, such action or suit is regarded as ancillary so far as the jurisdiction of the . . . court of the United States is concerned."

 Legal Positions of the Parties

 Cagan argues that judgment on the pleadings is appropriate because the several assignments made by Intervest (even one of which would have been enough for the purpose) triggered the acceleration clause in the Note, thus making the Note due immediately. Intervest admits that the assignments were made but contends that the Note never became due for several reasons that may be summarized in these terms: *fn7"

 
1. That acceleration clause in the Note is unenforceable as a restraint on alienation.
 
2. Ambiguities in the acceleration clause give rise to factual disputes.
 
3. There was a mutual mistake as to the form of the Note as it was signed and delivered, as compared with what ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.