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06/29/94 LA SALLE NATIONAL TRUST v. VILLAGE

June 29, 1994

LA SALLE NATIONAL TRUST, N.A., SUCCESSOR TRUSTEE TO LA SALLE NATIONAL BANK, NOT INDIV. BUT AS TRUSTEE UNDER TRUST AGREEMENT DATED APRIL 25, 1985, A/K/A TRUST NO. 109930, BC VENTURE, A JOINT VENTURE FORMED AND ENTERED INTO BY CPS HOTEL MANAGEMENT SERVICES, INC., AND DOBBS HOUSE, INC., AND BUTLER HOTEL ASSOCIATES, LTD., PLAINTIFFS-APPELLEES AND CROSS-APPELLANTS AND SEPARATE APPELLANTS AND SEPARATE APPELLEES,
v.
THE VILLAGE OF WESTMONT, DEFENDANTS-APPELLANTS AND CROSS-APPELLEES (THE GRAY GROUP, INC., DEFENDANT-APPELLANT AND CROSS-APPELLEE AND SEPARATE APPELLEE; BOULEVARD BANK NATIONAL ASSOCIATION, DEFENDANT-APPELLANT AND SEPARATE APPELLANT AND SEPARATE APPELLEE).



Appeal from the Circuit Court of Du Page County. No. 92-CH-509. Honorable Bonnie M. Wheaton, Judge, Presiding.

Released for Publication August 3, 1994. Petition for Leave to Appeal Denied October 6, 1994.

Bowman, Inglis, Doyle

The opinion of the court was delivered by: Bowman

JUSTICE BOWMAN delivered the opinion of the court:

These consolidated appeals arise from a dispute over the zoning and use of a parcel of land located in the Village of Westmont (Village or Westmont). The defendants, Westmont and The Gray Group, Inc. (Gray), seek review of an order of the circuit court of Du Page County which overturned the rezoning of the parcel, which is owned by Gray, and enjoined the defendants from developing the site as single-family residences. Plaintiffs, who own property adjacent to the rezoned site, cross-appeal from the trial court's findings regarding the alternative grounds on which they sought relief from the rezoning. Plaintiffs also appeal separately from orders favorable to defendants, Gray and Boulevard Bank National Association (Boulevard or Boulevard Bank), in plaintiffs' action for recovery of sums claimed to be due pursuant to a covenant running with Gray's property and for enforcement of lien rights against the property. Defendant Boulevard Bank also appeals separately from an order dismissing its counterclaim.

The background facts of all three appeals are the same. In 1983 the estate of Paul Butler owned a 144.5-acre site in Westmont. The entire site, which was vacant except for a horse barn, was zoned for residential use. The estate engaged property development consultants to devise a plan for the use of the property which would maximize its value. Although they considered residential use, the consultants ultimately conceived a mixed-use commercial development. They sought to integrate an upscale hotel, serving the corporate, transient, and resort trade, with a golf course and business offices. The hotel and golf course were to be developed first in order to increase the value of the land designated for office development. In turn, it was foreseen that the offices would create demand for hotel rooms and other services. Carson Pirie Scott (Carsons), which had experience in operating two other resort developments in the Chicago metropolitan area, agreed to guarantee long-term financing. Carsons and the estate then moved toward development of the hotel and golf course.

The 16.9-acre parcel slated for business offices (office site) was retained by the estate and was to be developed later as a separate venture of the estate. However, the planning for the office site and the hotel and golf course proceeded as a unified, cooperative effort by Carsons and the estate. This included planning for physical connections, such as covered walkways, between the hotel and the future office buildings, as well as shared vehicular access, landscaping, signage, and parking facilities. The estate informed Carsons that it did not have a date certain for constructing the office facilities and that office development would occur only as dictated by the market. According to the witnesses who were representing the estate at the time, they told Carsons it could take from 5 to 10 years to bring offices to the site.

When the unified plan was presented to it, the Village of Westmont was receptive and encouraging. With professional planning assistance from Du Page County, the Village created a special business zoning district to apply to the property. On November 19, 1984, theVillage rezoned the 144-acre site, placing it in the new "B-3 Special Development District" classification, which allowed only business uses. The Village also approved a preliminary concept plan for the entire 144 acres as well as a final concept plan for the hotel and golf course. While there was not as yet any final concept plan for offices, the preliminary concept plan provided that the office site could include up to three 10-story buildings.

With the B-3 zoning in place, Carsons and the estate entered into a number of agreements which enabled them to seek financing and start construction. A joint venture, BC Venture, was created to hold the beneficial interest in the hotel land, take a long-term lease from the estate on the golf course land, and operate the hotel/resort. The estate, which contributed the land for the hotel, placed the legal title to the property in La Salle National Trust (La Salle), as trustee. Carsons guaranteed the venture's financial obligations to its lender. The joint venturers were, for Carsons, CPS Hotel Management Services, Inc. (CPS) and, for the estate (and the heirs of the Butler estate), Butler Hotel Associates, Ltd. (BHA), a partnership. BHA also held the beneficial interest in the golf course land, while legal title to the property had been placed in a separate trust at La Salle. Carsons and the estate also put in place an Easements, Covenants and Restrictions Agreement (Agreement or Easement Agreement) which granted cross-easements on all three sites--hotel, golf course, and office--for access, utilities, storm water retention, and the like. La Salle, BC Venture, CPS, and BHA were the original plaintiffs in this action.

BC Venture secured $49 million in financing for the development, and the Oak Brook Hills Hotel and Golf Course opened in April 1987. Due to subsequent asset transfers, corporate restructurings, and, ultimately, bankruptcy, Carsons' guaranty obligations came to rest on Dial Corporation. Dial had purchased most of the nonretail assets of Carsons late in 1987 in a stock purchase transaction. Included in the transaction, among other liabilities, was the Carsons guaranty. Late in 1992 Dobbs Houses, Inc. (Dobbs), a subsidiary of Dial Corporation, assumed the interest of CPS Hotel Management Services in BC Venture. Dobbs then became a plaintiff in the action.

Although the hotel and golf course were now open, there were no takers for the office site during the next few years. In October 1987 the estate encumbered the property with a mortgage in favor of Boulevard Bank. The mortgagors subsequently defaulted and, late in 1991, Boulevard foreclosed and took title to the site. Shortly thereafter, the bank contracted to sell the land to defendant Gray, a residential development company. The contract was contingent on the rezoning of the parcel. Gray, which hoped to build upscale, empty-nesterresidences on the land, immediately applied to Westmont to rezone the property accordingly. At the zoning hearings, plaintiffs expressed their opposition to any residential use on the office site. Nevertheless, in March 1992, at the Conclusion of the public hearing process, the Village approved Gray's application and adopted Ordinance 92-9 (Westmont, Ill., Ordinance 92-9 (March 16, 1992)), which rezoned the property to planned development with underlying R-4 classification, for residential development. The Village subsequently approved Gray's plan for 84 detached, single-family homes on the former office site, with access and storm water detention provided on the hotel site and golf course. In May 1992 plaintiffs filed an action for declaratory and injunctive relief.

Plaintiffs' amended complaint consisted of seven counts, the first six alleging the invalidity and/or ineffectiveness of the rezoning, and the seventh count alleging a breach of the Easement Agreement by defendants Gray and Boulevard. In a second-amended complaint, plaintiffs added counts VIII and IX, alleging lien rights with respect to the office site. In August 1992, Boulevard filed a counterclaim seeking a declaratory judgment that the rezoning to residential was valid. However, shortly before the date set for trial, Boulevard's counterclaim was dismissed, as were counts I through VI of the complaint, as to Boulevard.

Ultimately, counts VII, VIII, and IX were severed, and counts I through VI were tried before the bench. The court found in favor of plaintiffs only on count III, which had alleged that the rezoning was unconstitutional. The remaining defendants, the Village and Gray, prevailed on all the other counts. Subsequently, the trial court granted defendants' motion for summary judgment relative to count VII, as well as their motion to dismiss on the pleadings relative to counts VIII and IX. The first appeal and cross-appeal arise from the issues resolved at trial. The second appeal is from the Disposition of the last three counts of the complaint. The third appeal stems from the dismissal of Boulevard's counterclaim.

APPEAL NO. 2-93-0804

Defendants Westmont and Gray appeal from the trial court's determination that Westmont's ordinance No. 92-9, which applied residential zoning to the office site, was unconstitutional. A zoning ordinance is presumed to be valid, and the party challenging the presumption has the burden of establishing by clear and convincing evidence that, as to the subject property, the ordinance is arbitrary, capricious, and unreasonable, and bears no substantial relationship to the public health, safety, or general welfare. Harvard State Bank v. County of McHenry (1993), 251 Ill. App. 3d 84, 85, 620 N.E.2d 1360; Tim Thompson, Inc. v. Village of Hinsdale (1993), 247 Ill. App. 3d 863, 872, 617 N.E.2d 1227.

In determining the validity of a zoning ordinance, the following factors are generally considered: (1) the existing uses and zoning of nearby property; (2) the extent to which property values are diminished; (3) the extent to which the destruction of property value of the plaintiff promotes the health, safety, morals or general welfare of the public; (4) the relative gain to the public as opposed to the hardship imposed upon the individual property owner; (5) the suitability of the subject property for the zoned purposes; (6) the length of time the property has been vacant as zoned considered in the context of land development in the area; (7) the care with which a community has undertaken to plan its land-use development; and (8) community need for the use proposed by the plaintiff. ( Sinclair Pipe Line Co. v. Village of Richton Park (1960), 19 Ill. 2d 370, 378, 167 N.E.2d 406; La Salle National Bank v. County of Cook (1957), 12 Ill. 2d 40, 46-47, 145 N.E.2d 65; Thompson, 247 Ill. App. 3d at 872.) While no single factor is controlling, and each case must be decided on its own facts ( Harvard, 251 Ill. App. 3d at 86), of paramount importance is the existing use of surrounding property and whether such use is uniform and established. ( La Grange State Bank v. County of Cook (1979), 75 Ill. 2d 301, 309, 388 N.E.2d 388; Harvard, 251 Ill. App. 3d 84 at 86, 620 N.E.2d 1360; Thompson, 247 Ill. App. 3d at 873.) Illinois courts examine and attempt to balance these factors in order to determine whether the zoning in question is fair to the owner of the subject property, owners of surrounding properties, and the public. Harvard, 251 Ill. App. 3d at 86.

As in other cases, in zoning cases the trier of fact is in a better position than the reviewing court to determine the credibility of the witnesses and their opinions. ( La Salle National Bank, 12 Ill. 2d at 48; Glenview State Bank v. Village of Deerfield (1991), 213 Ill. App. 3d 747, 759, 572 N.E.2d 399.) Hence, the trial court's findings of fact on zoning issues will be overturned only if they are against the manifest weight of the evidence. Cosmopolitan National Bank v. County of Cook (1984), 103 Ill. 2d 302, 318, 469 N.E.2d 183; Glenview State Bank, 213 Ill. App. 3d at 759.

With regard to the most important factor, the existing uses and zoning of nearby property, the 16.9 acres of land which were rezoned (hereafter subject site) abut the east side of the hotel property. Along with the 16.8-acre hotel property, the subject site is located toward the center of the larger, 144-acre parcel which had previously been placed in the B-3 special development district classification. The golf course, which makes up the bulk of the remaining 110 acres, surrounds the hotel and the subject site. (See figure 1.) Property to the west of the 144-acre parcel is. zoned andused for residential. However, this property is separated from the 144 acres by Cass Avenue, which one of the witnesses described as a four-lane highway with speed limits of 35 to 40 miles per hour. Thus, the subject site is separated from those residences, first by the hotel, then by the golf course, and finally by a significant, heavily travelled roadway. (See figure 1.) The property to the north is also zoned and used for residential, but it is separated from the 144 acres by 35th street, which is referred to in an appraisal of the property as a "secondary thoroughfare." Once again, the subject site is separated from the residential areas by both the golf course and an improved street. The property abutting the east edge of the 144 acres is primarily residential, while to the south the property is zoned for business and manufacturing uses. These last two uses are separated from the subject site only by the golf course. (See figure 1.) On the east, the golf course was originally intended to serve as a buffer between the hotel and office uses, and the residential use. There is evidence in the record that when Westmont considered the plan which led to B-3 zoning, it wanted the hotel to be separated from residential areas by the width of at least two fairways.

On these facts the trial court found that the existing uses and zoning of property near the subject site were commercial, meaning the hotel and golf course, rather than residential. At defendants' request the trial court had viewed the 144 acres and had walked the perimeter of the subject site. In her order the trial Judge specifically stated that, on inspection, she noted that the hotel and golf course were the predominant use of surrounding property. The court also observed the separation effected by Cass Avenue and 35th Street. The court summarized that the "overwhelming presence" in the area was the hotel, together with its associated uses.

Defendants insist the trial court erred by looking only at the hotel and golf course, which were the uses immediately adjacent to the subject site. They maintain the court should have looked farther and given more weight to the residences surrounding the entire 144-acre parcel. We find no error.

First of all, it is clear from its order that the trial court was well aware of the residential uses in the vicinity of the 144 acres. Therefore, we reject defendants' suggestion that the court did not consider these areas. Moreover, we do not agree that the lower court failed to give sufficient weight to the presence of the residential neighborhoods. What the court was faced with was a 144-acre parcel that had been zoned, in its entirety, for commercial purposes, with the most intensive commercial uses deliberately grouped together in the middle of the acreage and deliberately surrounded by the leastintensive uses. While no development has yet occurred on the subject site itself, the remainder of the 144 acres has been developed commercially, and the subject site remains identified with and oriented toward those commercial uses.

The 16.9 acres which make up the subject site are surrounded by 127 acres of commercial development in the form of the hotel and golf course. The entire west side of the subject site directly abuts the hotel property. Specifically, it backs up on to the hotel parking lot and the hotel tennis courts. The only access to the subject site is via the road which also serves the hotel. (See figure 1.) In contrast, due to the intervening golf course, the subject site is distinctly separated from and without access to the single-family homes to the east. We find highly significant the trial court's description that the "overwhelming presence" in the area of the subject site is the hotel and its associated uses. Our own perusal of the exhibits, and particularly the aerial photos of the entire 144 acres, affirms the lower court's impression. Under the circumstances, we find the subject site to be cloaked much more heavily with the character of the commercial uses than that of even the closest residential use.

Moreover, in our opinion, the adjacent uses are entitled to considerably more weight than the more distant residential uses to the north and west. The subject site, to a large extent is isolated from those residential areas, if not by the significant expanses of intervening golf course, then certainly by Cass Avenue and 35th Street. When the subject site and all of the surrounding uses are considered in their overall context, and in relation to one another, it is evident that the trial court's finding that the existing uses and zoning of nearby property is commercial, is not against the manifest weight of the evidence.

The evidence presented is of little help in weighing the second factor, i.e., the extent to which property values are diminished. Defendants acknowledge the theoretical plausibility of plaintiffs' contention that office development on the subject site would add more to the value of the businesses of the golf course and hotel than would residential development. However, as they are quick to point out, the site is presently vacant. The trial court cited "considerable testimony" regarding the adverse effects of residential development upon the existing hotel and golf course. Most of this testimony, however, concerned complaints which would probably be received from future residents of the subject site about the routine activities and normal operations associated with a resort hotel and golf course.

The witnesses foresaw complaints about such things as errant golf balls causing injury or damage; noise, lights, and fumesemanating from the premises; and golfers trespassing on private property. The trial court correctly characterized these as "anticipated" adverse effects, but noted testimony from plaintiffs' witnesses which reflected that similar complaints were received from adjacent residential users at two similar hotel/golf course complexes operated by Carsons. Defendants nevertheless describe these "anticipated" complaints as highly speculative and point out that plaintiffs did not elicit testimony regarding adverse effects from present residents living adjacent to the golf course, some of whom lived there before the hotel and golf course were built.

While the existing residents did not testify, there was evidence from the hotel employees that numerous complaints had been received. Even the Village acknowledged receiving at least one complaint regarding an errant golf ball. More significantly, though, testimony about anticipated adverse effects is not particularly helpful since, as the trial court observed, there was no evidence showing that the general fact of rezoning to a residential use generally, or that adverse effects specifically, would actually result in lower property values for the hotel and golf course. There was testimony that continuing complaints and differences with residential neighbors might affect the operation or profitability of plaintiffs' businesses, but we do not believe such testimony showed a negative effect on the plaintiffs' actual property value.

Finally, we agree with the trial court's observation that, while decrease in property value caused by zoning restrictions is to be considered, that the property would be worth more if the zoning were reclassified is not determinative, since this would be true in virtually all zoning restriction cases. (See Grobman v. City of Des Plaines (1975), 59 Ill. 2d 588, 595, 322 N.E.2d 443.) In sum, while this factor is not decisively unfavorable to plaintiffs, neither does it provide substantial support for their challenge to the zoning ordinance. It is entitled to little weight in our analysis.

With regard to the third factor, the extent to which the negative effect on the value of plaintiffs' property promotes the public welfare, the trial court squarely found for plaintiffs. In fact, the court concluded that it was nearly certain that the combination of the hotel/golf course uses with the proposed residential use would produce a negative effect on the health, safety, and welfare of the public. After reviewing the record, we find that the evidence supported the lower court's Conclusion.

Much of the testimony pertained to safety risks. Thompson Dyke, plaintiffs' expert, testified regarding standards for the space which should be maintained between golf courses and residential areas. Current guidelines called for a minimum of 150 feet between the center line of the fairway and residences, while pending guidelines, which were to be adopted in 1993, required a minimum distance of 210 feet. Of the 84 homes proposed for the subject site, 28 lay less than 210 feet from the center of a fairway. Those 28 homes were within foreseeable range of misplaced golf balls.

Richard Weber, the hotel manager, indicated that the majority of the golfers who played the course were not serious golfers but played for social and job-related reasons. Randy Bolstad, the PGA professional at the golf course, testified that 26,000 rounds of golf were generally played on the course during the golf season. The official starter at the golf course, Jim Palmer, estimated that 20% of the balls hit off the first tee go into the 17-acre subject site, and that most golfers go onto the property to retrieve their balls. Similar to Weber, Palmer indicated that many of the golfers on the course do not control the ball. Defendants attack the testimony of the hotel and golf course employees regarding safety risks as "absurd" and self-serving. However, where there is a conflict in the testimony, it is for the trier of fact to determine the credibility of the witness and their opinions and to determine the weight to be given their testimony. ( La Salle National Bank, 12 Ill. 2d at 48; Glenview State Bank, 213 Ill. App. 3d at 759.) We find that the trial court properly performed these tasks in the case before us.

Randy Bolstad also testified about the charging of the batteries in the golf carts. The carts, 65 in number, are all recharged in the evening, starting between 8 and 10:30 p.m. It can take up to five or six hours to fully charge the batteries. Bolstad described the sound of the recharging as annoying and a humming or buzzing sound which can be heard from a distance when they are all going at once. The trial court stated that, when it viewed the property, it could hear the sound of the charging mechanism, which was indeed an obnoxious buzzing sound." Trial exhibits show that the charging area is located within a few feet of the rear yards of the proposed homes.

Richard Weber testified regarding the operation of the hotel. The facility is open 24 hours a day, 365 days a year, and has banquet facilities for 1,000 people. Weather permitting, the hotel tries to make use of its outdoor areas both during the day and at night. For large outdoor events and for additional banquet space, the hotel uses two tents, each one seating 200 people. These functions often have music and alcoholic beverages. The only thing which would separate the tents from the property of the single-family homes would be the tennis courts and the golf cart recharging area. Weber testified that when the tents are used the hotel receives complaints about noisefrom residents on the east side of the golf course, even though these homes are approximately one-quarter mile away and are separated from the hotel by the golf course. The neighbors also complain about the lights from the tennis courts.

Collectively, we find the evidence more than adequate to support the trial court's Conclusion that combining the proposed residential use with the hotel and golf course will have a negative effect on the public health, safety, and welfare. Defendants focus only on the evidence of the likelihood of future complaints, and assert, as they did with the second factor, that such evidence was too speculative to be given weight by the trial court. Defendants misconstrue the trial court's use of the evidence. Unlike factor two, where the court was concerned with the adverse effects of anticipated complaints on plaintiffs' property value, in its Discussion of this factor the court did not concentrate on the potential for complaints. Rather, it dwelt, first of all, on those aspects of the existing situation--things which were actually happening--which would constitute safety threats to anyone living on the subject site. In addition the court emphasized those existing hotel/golf course activities and functions which would actually intrude on at least some of the residential properties merely because of their proximity to the resort facilities. These included not only golf balls, but also golfers, noise, light, and fumes.

Defendants claim the residents to the east have not complained, but point only to evidence that the Village had received only one complaint. This evidence does not really conflict with plaintiffs' evidence that the hotel had received numerous complaints. Even if it did conflict, however, it is for the trial court to resolve conflicts in the evidence, and we have no reason to set aside the lower court's apparent finding that the present neighbors have complained about the hotel and golf course.

We observe, too, that what is to be decided here is whether Gray's proposed residences should be allowed on the subject site. Since they are not already built, there is no way to determine the precise effect of the hotel and golf course activities on the homes. Therefore, it is necessary to determine what will most likely happen by using evidence of what is presently occurring on the vacant land as well as what has happened in similar situations, by physically viewing the relationships between the uses, and by applying reason and common sense. All of these the trial court did. Despite the negligible extent to which the evidence was speculative, the trial court gave it appropriate weight.

We note that defendants also urge that the subject site was always designed to house office workers and their cars and was alwaysto be surrounded by the hotel and golf course. However, there is a vast difference between three, 10-story office buildings and 84 single-family homes placed on 16.9 acres of land. Plus, there was evidence that it is easier to design office buildings to accommodate the risks posed by the golf course than it is to so design single-family, detached residences.

Factor number four concerns the relative gain to the public as opposed to the hardship imposed on the individual property owner. There is no dispute that residential development will generate real property taxes far in excess of what is now generated by the vacant land. Gray's evidence also projected payment of $354,000 in impact fees to the relevant taxing bodies. While the trial court acknowledged that the public would benefit from the receipt of greater tax monies and impact fees, it found that gain to be offset by the likely negative effect on the business activities of the hotel and golf course. In essence, the court found this factor to be relatively evenly balanced. The court's findings are supported by the evidence.

As we said earlier, defendants appear to concede that office development on the subject site would be more beneficial to the hotel and golf course than single-family homes. Under residential zoning plaintiffs lose even the potential, not only for the beneficial business offices which were originally contemplated, but also for any other commercial development which might be allowed in the B-3 district and might support the hotel and golf course. This hardship becomes more significant in light of evidence that, at the time it adopted the B-3 zoning which allowed office buildings on the subject site, the Village had been told that office development could take considerable time, meaning 5 to 10 years.

Furthermore, while evidence of actual loss of property value was not clear, other testimony showed that the safety and nuisance problems almost certain to arise from residential development would result in economic hardship to the business of the hotel and golf course. Richard Weber testified that these types of problems increase operating costs in that changes must be made in security requirements. For example, a school located adjacent to the south-east corner of the golf course (see figure 1) threatened legal action when golf balls started flying onto their property. Fencing was, in fact, erected at the school site, as well as other locations, to catch misguided golf balls. Also, according to Weber, insurance costs go up. Significantly, Weber further indicated that when too many rules are imposed in order to alleviate these problems, the golf course generally becomes less attractive to golfers. Similarly, Thompson Dyke testified that problems with neighbors would ultimately cause the hotel to restrictthe use of its own outdoor areas, thus reducing its space available and ultimately its income. Dyke also mentioned that such problems become detrimental to the reputation of a golf course.

Finally, while defendants once again downplay the plaintiffs' evidence as speculative, and stress the property taxes to be realized from residential development, we note that receipt of tax revenues is not determinative. In Concerned Citizens for McHenry, Inc. v. City of McHenry (1979), 76 Ill. App. 3d 798, 395 N.E.2d 944, the primary justification for rezoning was the anticipation of an increase in the community's tax base. We called this justification "totally illusory" and said:

"If the profit motive were the sole reason that zoning authorities varied their classifications, then any use whatsoever would be appropriate next to any other use so long as the maximum amount of taxes could be generated for the ...


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