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United Legal Foundation v. Maria Pappas

May 31, 2011

UNITED LEGAL FOUNDATION,
PLAINTIFF-APPELLANT,
v.
MARIA PAPPAS, INDIVIDUALLY AND AS COOK COUNTY TREASURER AND EX OFFICIO COLLECTOR; DAVID ORR, INDIVIDUALLY AND AS COOK COUNTY CLERK;
THE COUNTY OF COOK; Z FINANCIAL, LLC; AND KEITH MOLL, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 06 COMS 11 Honorable Patrick McGann Judge Presiding

The opinion of the court was delivered by: Justice Karnezis

JUSTICE KARNEZIS delivered the judgment of the court, with opinion. Presiding Justice Cunningham and Justice Harris concurred in the judgment and opinion.

OPINION

Plaintiff United Legal Foundation (United) appeals from the circuit court's orders in favor of defendants Maria Pappas, individually and as Cook County treasurer and ex officio collector; David Orr, individually and as Cook County clerk; the County of Cook; Z Financial, LLC; and, Keith Moll. United contends on appeal that its complaint against defendants for violations of the Property Tax Code (35 ILCS 200/1-1 et. seq. (West 2006)), should not have been dismissed and its claim for breach of contract should have been decided in its favor. For the following reasons, we affirm the circuit court's orders.

Background

This case arose as a result of Z Financial's purchase of United's 2004 delinquent property taxes for certain property at the county's annual tax sale. Z Financial ultimately purchased those taxes for $49,687.10, with an 18% interest penalty. United filed a complaint seeking to vacate Z Financial's purchase; however, the circuit court ultimately found in Z Financial's favor. United appeals from the court's orders.

In Illinois, where a property has delinquent taxes, those taxes will be sold at an annual tax sale. The buyers will base their bids on what penalty, or interest rate, they will accept from a property owner who subsequently seeks to redeem the property. The maximum penalty or interest rate that can be bid is 18%, which will be applied to the property owner's tax debt. If the winning bid has a penalty of 18%, the bidder becomes known as an "18 percenter," which means that after the bidder pays any prior delinquent taxes, the bidder will obtain a tax certificate that earns 18% interest for each six-month period that passes. If the property owner wants to redeem the property, the owner owes the bidder the amount of the tax debt plus 18% for every six-month period that has passed, or 36% per annum. If a bidder fails to pay any prior delinquent taxes, the bidder receives a certificate representing a lien that has only a 5% interest rate per year and becomes known as a "5 percenter."

United is an Illinois charitable corporation, founded in 1969. It operates as a public interest law firm, undertaking impact litigation that affects minorities. Rufus Cook was involved in United's creation and served as its attorney during the relevant time period. In 1991, United acquired the property at issue in this case, which is known as the Ridgeland Club, located at 7330 South Ridgeland Avenue, in Chicago. The property is also known as parcel 10 and has the property index number (PIN) 20-25-124-010-0000. United operated the club as a banquet facility and conference center, and it housed United's offices as well. Ultimately, in 2006, United sold the property to Jackson Park Pinnacle Plaza (Jackson Park).

Prior to the sale of the property to Jackson Park, United's board of directors directed Cook to attempt to either reduce the property's taxes or to have the property declared tax exempt. In May 2003, United filed a property tax-exemption application with the Cook County board of review seeking to declare the property tax exempt because it was being used for charitable purposes.

In 2003, defendant Maria Pappas, as county treasurer/collector, sought to sell the lien for delinquent taxes on the property at the 2003 tax scavenger sale. The delinquent taxes were for tax years 1990-2001. United objected to the proposed sale, and on November 14, 2003, the circuit court entered an order that the property should not be sold because of United's pending tax-exemption application.

On November 23, 2005, Pappas again sought to sell the lien for delinquent taxes on the property at the 2005 tax scavenger sale. The delinquent taxes were for tax years 1990-2001 and 2002-03. United again objected to the proposed sale, and the circuit court entered an order on April 13, 2006, vacating the sale with respect to tax years 1990-2001, but upholding the sale with respect to tax years 2002-03.

In 2006, Pappas sought to sell the lien for the 2004 delinquent taxes on the property at the 2006 tax scavenger sale. This sale is the sale at issue in this case. Z Financial ultimately purchased those taxes for $49,687.10, with an 18% interest penalty on June 16, 2006.

Z Financial is in the business of purchasing delinquent property taxes at annual tax sales. Prior to purchasing the lien, Keith Moll, a manager at Z Financial, researched the property and believed that it did not have any prior delinquent taxes, other than for the 2004 tax year. However, after purchasing the 2004 delinquent taxes, Moll received documentation from the county on July 28, 2006, that United owed $993,889.92 in prior taxes. As a result, Z Financial could pay the prior taxes and become an "18 percenter" and eventually obtain a deed to the property or not pay the prior taxes and become a "5 percenter." Moll testified that becoming a "5 percenter" was almost "worthless."

According to section 21-240 of the Property Tax Code (35 ILCS 200/21-240 (West 2006)), Z Financial had 10 days from the date it learned of the prior taxes to inform the county whether it would pay the prior taxes and become an "18 ...


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