Appeal from the Circuit Court of Cook County No. 08 CH 17629 Honorable Darryl B. Simko, Judge Presiding.
The opinion of the court was delivered by: Justice Epstein
JUSTICE EPSTEIN delivered the judgment of the court, with opinion.
Presiding Justice Lavin and Justice Fitzgerald Smith concurred in the judgment and opinion.
¶ 1 In this consolidated appeal, plaintiffs, CNA International, Inc. (CNA), and Gold Coast Development, LLC, appeal the trial court's orders: (1) granting the motion of defendants Steven
H. Baer and Rally Capital Service, LLC, to dismiss counts I through IV of plaintiffs' second amended complaint; (2) discharging Baer as receiver; (3) granting defendant Cole Taylor Bank's motion to dismiss counts V and VI of plaintiffs' second amended complaint; and (4) denying plaintiffs' request to file a third amended complaint. For the reasons that follow, we affirm.
¶ 3 On August 30, 2005, Gold Coast Development, LLC (Gold Coast), entered into a mortgage agreement with Cole Taylor Bank (Cole Taylor) relating to property located at 1938 West Diversey Avenue in Chicago (the subject property). The subject property was a partially constructed three-unit condominium building. This action arose when Cole Taylor filed a verified complaint for mortgage foreclosure on May 14, 2008 against Gold Coast regarding the subject property, as well as two verified complaints relating to two other properties.
¶ 4 In its complaint regarding the subject property, Cole Taylor alleged that it had made a commercial loan to Gold Coast for $907,605 evidenced by a promissory note and secured by a construction mortgage on the subject property. Cole Taylor further alleged that Gold Coast was in default because: (1) it had not paid monthly installments of principal and interest that were due; (2) mechanics' liens had been filed against the property; and (3) Gold Coast had not paid the real estate taxes that were due. Cole Taylor sought to recover $934,654.85 on a promissory note executed by Gold Coast, as well as guarantees executed by certain individuals. Cole Taylor also sought a judgment of foreclosure and sale, an order granting possession and appointing a receiver for the subject property, costs, expenses, and attorney fees.
¶ 5 The record indicates that Gold Coast had failed to procure insurance for the subject property, as required under the mortgage agreement. In June 2008 Cole Taylor "force placed" an insurance policy (No. CCP538144) with Century Surety Company protecting Cole Taylor's interests.
¶ 6 On November 10, 2008, Cole Taylor filed a verified motion for appointment of a receiver pursuant to section 15-1701 of the Illinois Mortgage Foreclosure Law. 735 ILCS 5/15-1701 (West 2008) (the Act). On December 23, 2008, Gold Coast filed a motion to strike Cole Taylor's motion for the appointment of a receiver. On December 24, 2008, over Gold Coast's objections, the court appointed defendant Steven Baer of Rally Capital Services, LLC, as receiver. The five-page order granted Baer the power and authority allowed under section 15-1704 of the Act (735 ILCS 5/15-1704 (West 2008)). Among other things, the receiver was "authorized to protect, possess, preserve, control, manage, and operate" the property. Gold Coast was directed to deliver possession of the subject property, any insurance policies, maintenance and service contracts, and other documentation relating to the management and development of the subject property. On December 30, 2008, the appointment of the receiver became effective when the court entered the receiver's bond of $25,000. Gold Coast did not file an appeal from the December 24, 2008 order.
¶ 7 On January 28, 2009, Cole Taylor filed an emergency motion for authority to forcibly enter the premises. The motion was granted on January 30, 2009, and the receiver was "authorized to forcibly enter the premises as of 3:30 p.m. CST on January 30, 2009." Gold Coast did not file an appeal from the January 30, 2009 order.
¶ 8 On January 30, 2009, according to a report in the record prepared for Baer by Vicky Jones of VJ Rally Capital Services, LLC, and dated February 6, 2009, Baer's agent gained access to the property by forced entry pursuant to the court order. The agent conducted a site inspection on January 30 and January 31, 2009, which revealed significant damage to the property. The report noted that the overall condition of the property was poor because it had not been winterized. The report further noted frozen and warped window casings, the presence of ice on the hardwood floors and in the cracked toilet tanks, as well as water damage and mold throughout the building.
Based on the site inspection, the report contained several "recommendations to be considered to preserve and protect the property in order to not have continued damage and increasing costs of repairs." The recommendations included having all mechanicals inspected by trade professionals and to follow their recommendations, remediating all water-damaged areas, establishing utility services in Baer's name, removing construction debris from the site, inspecting the roof, installing a security system, implementing a maintenance schedule for mechanicals, and establishing general property maintenance - landscaping, filters, lights and a security system.
¶ 9 The court order appointing Baer provided that he file the initial report with the court on or before January 30, 2009 and that a hearing on the report was to be conducted on February 6, 2009. The record is unclear as to whether either occurred but no party has raised it as an issue. Baer did provide a copy of the report to Cole Taylor and it chose not to follow the receiver's recommendations. In February 2009, Cole Taylor submitted a claim for property damage to Century Surety Company.
¶ 10 While the litigation was pending, Cole Taylor began settlement discussions with Gold Coast and the personal guarantors. They began negotiating a potential "global" resolution of this and the two other mortgage foreclosure actions.
¶ 11 On July 20, 2009, Cole Taylor entered into a settlement agreement and general mutual release with Gold Coast. Cole Taylor accepted a deed in lieu of foreclosure on one of the three properties, that is not involved in this appeal. As part of the settlement, Cole Taylor agreed to assign certain of its rights, titles, and interests to plaintiff CNA, in exchange for, among other things, a single, lump sum of $1,920,000 representing a payoff of the notes on the subject property and a second property. CNA was created by the guarantors.
¶ 12 The agreement provided that nothing in it "shall prevent [CNA] from bringing any claims, demands or suits against Steve Baer, as the Court-appointed Receiver, for ay [sic] acts or omissions of his that occurred during the period of time in which he served as the Court-appointed Receiver." The settlement agreement also provided that Cole Taylor would provide to CNA "the contact names, policy numbers and phone numbers of current insurers of the property and the respective expiration dates, including any builder risk policies in place." However, nowhere mentioned in the agreement is Cole Taylor's right, title, or interest in or to any insurance policy, or its proceeds. The agreement contained an unconditional release and discharge from Gold Coast to Cole Taylor "from any and all obligations, claims, demands, actions, arbitrations, attorneys fees and liability, past, present, and future, of whatever kind and character, known or unknown including without limitation, all such claims relating in any way to, arising from or concerning [the subject property, and the other two properties]." The agreement expressly assigned to CNA all of Cole Taylor's rights to the pending litigation against Gold Coast.
¶ 13 Pursuant to the settlement agreement, as evidenced by the various documents, Cole Taylor and CNA executed specific assignments: (1) property assessment appeal for one of the other properties; (2) construction mortgage regarding subject property; (3) promissory note regarding subject property; (4) mortgage regarding a second property; (5) promissory note regarding a second property; (6) three commercial guaranties from certain individuals; (7) guaranty of completion and performance from a certain individual; and (8) rights to the pending litigation against Gold Coast. With respect to the assignment of the construction mortgage, Cole Taylor assigned to CNA all of Cole Taylor's "right, title and interest now owned or hereinafter acquired in, to and under that certain Construction Mortgage dated August 30, 2005 made and executed by Gold Coast *** together with the Note as described therein, and the money due or to become due thereon." There is no document evidencing any assignment of any insurance policy or any proceeds resulting therefrom, including the Century Surety Company insurance policy.
¶ 14 CNA gained access to the property in July 2009 and discovered significant water damage. The record contains an affidavit from Soodong Choi, one of the guarantors, in his role as general counsel for CNA, stating that "in mid-August of 2009, CNA filed a claim against the insurance policy issued by Century Surety Company."
¶ 15 In September 2009, CNA filed a motion to substitute its appearance in the litigation in place of Cole Taylor. On October 16, 2009, the court granted the motion. Thus, CNA became ...