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12/12/97 CITY CHICAGO v. BOULEVARD BANK NATIONAL

December 12, 1997

CITY OF CHICAGO, A MUNICIPAL CORPORATION, PLAINTIFF-APPELLEE,
v.
BOULEVARD BANK NATIONAL ASSOCIATION, AS TRUSTEE UNDER TRUST AGREEMENT DATED NOVEMBER 11, 1986 AND KNOWN AS TRUST NUMBER 8348, TOMMY'S CHICAGO BAR AND GRILL, PLAZA BANK, A CORPORATION OF ILLINOIS, THE MORTGAGEE IN THE MORTGAGE RECORDED AS DOCUMENT 92070440 AND THE ASSIGNEE IN THE ASSIGNMENT OF RENTS RECORDED AS DOCUMENTS 92070441, AND THE SECURED PARTY IN THE FINANCING STATEMENT FILED AS NUMBER 92U2202, FIELD'S RESTAURANT, HARRY BOCKOS, BILL BOCKOS, GOLDEN P CORPORATION, PETER A. PALIVOS, DEARBORN RESTAURANT AND LOUNGE, INC. AND UNKNOWN OWNERS, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Cook County. Honorable Joanne L. Lanigan, Judge Presiding.

As Corrected December 17, 1997. Released for Publication January 22, 1998.

The Honorable Justice Quinn delivered the opinion of the court. Theis, J. and Zwick, J., concur.

The opinion of the court was delivered by: Quinn

The Honorable Justice QUINN delivered the opinion of the court:

This case is brought on appeal from an August 5, 1996, order entered by the circuit court of Cook County denying defendants' traverse and motion to dismiss the City of Chicago's ("City") complaint for condemnation, with respect to the quick take of the Oliver Typewriter Building located at 159 North Dearborn Street.

On appeal, defendants contend that: (1) the trial court erred in holding that the City could acquire the Oliver Building with tax increment financing ("TIF") for the stated purpose of assembling the property with the Oriental Theater where the City failed to amend the existing TIF plan pursuant to the Illinois Tax and Increment Allocation Redevelopment Act ("TIF Act"), 65 ILCS 5/11-74.4-1 et seq. (West 1994); (2) due to the failure to amend the existing TIF plan, the Oriental Theater Project could not proceed and therefore the requisite necessity for taking the Oliver Building was lacking; (3) the City failed to provide the requisite certainty as to whether or not the Oliver Building was at risk of condemnation; and (4) the quick-take provisions of Section 5/7-103 of the Illinois Code of Civil Procedure are unconstitutional special legislation. For the following reasons we affirm.

Defendants, Golden P Corporation and Peter Palivos, respectively, are the manager and owner of the Oliver Building, and were among the defendants named in the City's complaint. Palivos had purchased the Oliver Building for $2,000,000 in late 1986 and allegedly invested $750,000 in it. The rear of the Oliver Building abuts the Oriental Theater Building which faces onto Randolph Street. The Oriental Theater has not operated as a commercial theater since 1981. In 1994, Livent Inc. ("Livent"), a live entertainment and development company headquartered in Toronto, secured an option to purchase the Oriental Theater. Livent then notified the City that they had secured the option on the Oriental Theater. The City's consultant for North Loop development, U.S. Equities Development Company, commissioned a report which in January of 1995 determined that the stage area of the Oriental Theater was too shallow to accommodate modern live musical productions and that this failing would need to be remedied by expanding the stage area back into the Oliver Building before renovation of the Oriental Theater could proceed. A Chicago real estate developer retained by Livent in March of 1995 valued the building at less than $3,000,000. On April 14, 1995, Palivos told Livent he would sell the Oliver Building and the adjacent Delaware Building for $10,000,000. No further negotiations were had between Palivos and Livent.

On December 1, 1995, the City signed a letter of understanding with Livent agreeing to acquire the Oliver Building on behalf of Livent to assist in the redevelopment of the Oriental Theater. By letter dated January 11, 1996, the City informed Palivos that it intended to acquire the Oliver Building.

A public hearing on the Oriental Theater Project was held by the Community Development Commission ("CDC") on January 29, 1996. At this hearing, the CDC adopted two resolutions: the first authorized publication of a notice of the City's intent to negotiate a redevelopment agreement with Livent and to request alternative proposals, and recommended to the Chicago City Council that Livent be designated as the developer if no other responsive alternative proposals were received; the second authorized the City to advertise its intent to enter into a negotiated sale of the Oliver Building to Livent. On January 31, 1996, these public notices were run in the Chicago Sun-Times. The notices provided 30 days for members of the public and other developers to make alternative proposals and bids. No alternative proposals were submitted. On March 22, 1996, Palivos appeared at the Chicago City Council Committee on Finance and expressed his opposition to the acquisition of the Oliver Building.

On March 26, 1996, the Chicago City Council passed two "Substitute Ordinances." The first ordinance declared that the redevelopment of the Oriental Theater property and the Oliver Building Property would be "in accordance with" the North Loop Tax Increment Financing Project ordinances passed in June, 1984. ("1984 TIF Plan"). It further provided that Livent was to be the developer of the Oriental Theater Project and that the City would finance the acquisition of the Oliver Building with tax increment financing and then convey the Oliver Building to a Livent subsidiary for assemblage with the Oriental Theater. The second ordinance found it necessary to acquire the Oliver Building and authorized its acquisition pursuant to the City's home rule power in a quick take proceeding.

On April 9, 1996, the City of Chicago filed an eminent domain action to acquire the Oliver Building. The City subsequently filed a motion for vesting of title and requested that the trial court assign the matter for a "quick take" hearing pursuant to section 5/7-103 of the Illinois Code of Civil Procedure. 735 ILCS 5/7-103 (West 1994). On May 15, 1996, defendants filed an amended traverse and motion to dismiss, challenging the City's authority to condemn the Oliver building and invocation of quick take procedures because the ordinances authorizing the condemnation of the Oliver Building changed the nature of the redevelopment project and the condemnation affected the general land uses established in the North Loop 1984 TIF Plan. Defendants further alleged that the renovation of the Oriental Theater also changed the nature of the redevelopment project and affected the general land uses established in the North Loop 1984 TIF Plan. The defendants asserted that these changes required the City to go through the approval process required by section 11-74.4-5(c) of the TIF Act (65 ILCS 5/11-74.4-5(c)(West 1994)). The defendants also claimed that the City failed to provide the requisite certainty that the Oliver Building was at risk of condemnation. The defendants further claimed that the quick-take statute is unconstitutional special legislation.

The record indicates that at the hearing before the trial court on the factual issues, the City submitted the ordinances, resolutions and offers setting forth the purpose and necessity of the acquisition of the subject property and establishing the blighted character of the subject area. In rebuttal, defendants presented testimony of certain City officials called as adverse witnesses, as well as the testimony of representatives of Livent. On August 5, 1996, the trial court entered an order denying defendants' traverse and motion to dismiss. The trial court found that the Oliver Building was located in a blighted commercial area and that the Chicago City Council had passed ordinances authorizing the condemnation proceedings. The trial court found that the condemnation of the Oliver Building did not change the general land use or the nature of the redevelopment project and therefore the City was not required to comply with the notice requirements of the TIF Act before acquiring the Oliver Building. 65 ILCS 5/11-74.4-5(a)(c)(West 1994).

As to defendants' assertion that the agreement between the City and Livent regarding the renovation of the Oriental Theater violated the TIF Act, and therefore the taking of the Oliver Building was not necessary, the court ruled that the agreement was not before it. The defendants assert that the trial court ruled that the renovation agreement violated the notice provisions of the TIF Act. However, the record reveals that the trial court stated it would not consider whether the agreement between the City and Livent as to the renovation of the Oriental Theater required the City to follow the notice requirements of section 5/11-74.4-5(c) of the TIF Act. The trial court further ruled that the City provided the defendants with the requisite certainty that the Oliver Building was at risk for condemnation. The trial court also rejected defendants' argument that the quick take statute is unconstitutional special legislation. The trial court subsequently denied defendants' motion for reconsideration, at which time defendants filed an interlocutory appeal of both aforementioned rulings as a matter of right pursuant to Supreme Court Rule 307 (134 Ill. 2d R.307) and 735 ILCS 5/7-104 (West 1994).

We first examine defendants assertion that since the 1984 TIF Plan designated the Oliver Building as "rehabilitation without acquisition," the City was required to amend the TIF plan before acquiring it for the purpose of assembling it with the Oriental Theater. Defendants further claim that since the 1984 TIF plan did not mention the Oriental Theater, the City was required to amend the TIF plan before making TIF funds available to Livent to purchase and rehabilitate it. Defendants argue that the City's failure to amend the TIF plan to provide for the Oriental Theater Project makes the stated subsequent use of the Oliver Building unlawful and therefore its taking unnecessary as a matter of law. Specifically, defendants assert that the City changed the nature of the redevelopment project without going through the approval process required by section 5/11-74.4-5(c) of the TIF Act. (65 ILCS 5/11-74.4-5(c)(West 1994)). Section 11-74.4-5(c) of the TIF Act provides:

"After the adoption of an ordinance approving a redevelopment plan or project or designating a redevelopment project area, no ordinance shall be adopted altering the exterior boundaries, affecting the general land uses established pursuant to the plan or changing the nature of the redevelopment project without complying with the procedures provided in this division pertaining to the initial approval of a redevelopment plan project and designation of a redevelopment project area." 65 ILCS 5/11-74.4-5(c)(West 1994).

The procedures pertaining to the initial approval of a redevelopment plan project include a requirement of a public hearing to allow "interested person(s) or affected taxing district(s)" to file written objections to the plan with the municipal clerk and to be heard orally as to issues embodied in the plan.

Upon a municipality's determination that an area qualifies as a redevelopment project area as defined in section 5/11-74.4-3(p) of the TIF Act, it may then develop a redevelopment plan. Section 5/11-74.4-3(n) of the Act provides, in pertinent part:

"'Redevelopment plan' means the comprehensive program of the municipality for development or redevelopment intended by the payment of redevelopment project costs to reduce or eliminate those conditions the existence of which qualified the redevelopment project area as a 'blighted area' or 'conservation area' or combination thereof or 'industrial park conservation area' and thereby to enhance the tax bases of the taxing districts which extend into the redevelopment project area." 65 ILCS 5/11-74.4-3(n)(West 1992).

Section 5/11-74.4-3(n) of the Act requires that the redevelopment plan be in writing and meet certain other criteria not germane to this appeal.

Following creation of the redevelopment project area and approval of a redevelopment plan and project, the municipality is granted the power, among other things, to:

"(c) Within a redevelopment project area, acquire by *** eminent domain, own, convey, *** or dispose of land and other property, real or personal, *** all in the manner and at such price the municipality determines is reasonably necessary to achieve the objectives of the redevelopment plan and project; (d) Within a redevelopment project area, clear any area by demolition or removal of any existing buildings and structures; (e) Within a redevelopment project area, renovate or rehabilitate or construct any structure or building." 65 ILCS 5/11-74.4(c,d,e)(West 1994).

A review of the City's efforts to develop the North Loop Area shows that in March of 1979, the Chicago City Council enacted an ordinance declaring the North Loop Development Area a blighted commercial area. The City's goals for the North Loop were set out in the Redevelopment Plan for Blighted Commercial Area North Loop, approved by the City Council on March 28, 1979 ("1979 Redevelopment Plan"). As originally enacted, the redevelopment plan contained an acquisition map which designated the Oliver Building as "not to be acquired." The Redevelopment Plan noted however that such acquisition status would change where;

"the exclusion of the property has a detrimental effect on the disposition and redevelopment of the ...


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