Court of Appeals of Illinois, First District, Fourth Division
from the Circuit Court of Cook County, No. 13-M-1403327; the
Hon. Joseph M. Sconza, Judge, presiding.
Udell Pomerantz, Ltd., of Chicago (Shorge Sato, of counsel),
Warren, MacKay & Serritella, P.C., of Chicago (James C.
Geoly and Mark O. Stern, of counsel), for appellee.
JUSTICE BURKE delivered the judgment of the court, with
opinion. Presiding Justice Ellis and Justice McBride
concurred in the judgment and opinion.
1 Receiver CR Realty Advisors, LLC (CR Realty), appeals
several of the trial court's orders, arguing that (1) the
trial court erred by reviewing its "hard costs"
under an ex post facto "reasonableness"
standard and by holding an evidentiary hearing as to its
accounting, (2) the court erred by denying CR Realty's
motion in limine, (3) the evidence did not support
the court's reduction to CR Realty's accounting, and
(4) the court erred by summarily denying CR Realty's
motion for approval of final accounting.
2 For the following reasons, we affirm in part, reverse in
part, and remand with directions.
3 I. BACKGROUND
4 A. The Procedural History of This Case
5 On November 18, 2013, the City of Chicago (City) filed a
complaint for equitable and other relief against defendant,
Concordia Evangelical Lutheran Church (Concordia). The City
alleged, inter alia, that the steeple of a church
owned by Concordia was in imminent danger of collapse and
needed to be removed because it was leaning toward Belmont
Avenue. The City also filed an emergency petition for the
appointment of a limited receiver pursuant to section 11-31-2
of the Illinois Municipal Code (Code) (65 ILCS 5/11-31-2
6 A hearing on the City's emergency receiver petition
commenced that day. Inspector Jose Aparicio testified the
steeple of the church was "swaying" and that the
steeple and mansard roof were water damaged, were imminently
dangerous and hazardous to the public, and had to be removed
immediately. The City requested that the trial court grant
the emergency receiver petition and appoint CR Realty as
limited receiver. The City further requested that CR Realty
be authorized to employ Green Demolition (Green) as its
7 The trial court granted the emergency receiver petition and
appointed CR Realty as limited receiver, with directions to
(1) immediately remove the steeple and mansard roof, (2)
remove and store three church bells inside the garage, and
(3) place a rubberized flat roof over the open area left by
removal of the steeple and mansard roof. The court ordered CR
Realty to have Green submit an itemized cost sheet of all
time, labor, and materials used to perform the work. The
court's order authorized CR Realty to retain counsel,
employ agents to assist in the performance of its
receivership duties, and issue receiver's certificates
for the costs and expenses of the receivership.
8 The work at the church was performed between November 18
and November 21, 2013. On December 18, CR Realty filed a
motion for approval of accounting for the period of time
between November 18 and December 18. CR Realty divided its
costs into two categories: (1) "hard costs, " or
its out-of-pocket expenditures to third-party vendors
(excluding legal) for which it was seeking reimbursement, and
(2) "soft costs, " or those costs CR Realty
incurred in performing the work. It requested the issuance of
one receiver's certificate for its "hard costs,
" in the amount of $111, 312.17, and one for its
"soft costs, " in the amount of $20, 697.50, which
reflected its professional fees and legal expenses.
9 CR Realty attached to its motion, inter alia, a
cost sheet from Green detailing Green's time, labor, and
equipment charges. It also attached its own timesheet and
invoices from two other entities that performed work on the
project, Contractor's Access and Imperial Crane Services,
Inc. (Imperial). In addition, CR Realty attached an expense
register in which it summarized its own fees and costs, its
payments to Contractor's Access and Green, and its
third-party markup fee. It listed the following expenses:
$3375 for Contractor's Access; $102, 556.59 for Green;
$5300.58 for its third-party markup; and $19, 197.50 for its
10 In a December 18, 2013, agreed order, the trial court
allowed Concordia 35 days to respond to CR Realty's
11 The parties dispute whether Concordia ever filed
objections to the accounting. Concordia's motion for
reduction of damages appears in the appendix to CR
Realty's brief; however, it is not file-stamped, and
Concordia has not provided a record citation for the motion.
In a footnote in a later filing in the trial court, CR Realty
stated it could not be certain when Concordia filed its
objections, if at all, because the copy of the motion for
reduction of damages tendered to CR Realty contained no file
stamp and was not accompanied by a notice of filing, notice
of motion, or certificate of service. Based on this, it
appears Concordia may have provided CR Realty and the court
with copies of the motion for reduction of damages without
actually filing the document in court.
12 In the motion for reduction of damages, Concordia stated
it had contracted with independent consultant J. Bradley
Sargent, who reported that CR Realty's charges were
undocumented and unsubstantiated, egregiously excessive, and
inconsistent. The motion evidently included as an attachment
Sargent's report detailing the various charges that he
challenged. Sargent disputed a total of $54, 674.
Specifically, he objected to all of the Contractor's
Access charge; $34, 489 of the Green charge; $5301 of CR
Realty's third-party markup; and $11, 510 of CR
Realty's own fees.
13 In September 2014, the trial court entered an agreed order
allowing CR Realty to reply to Concordia's amended
objections to the accounting. In October 2014, CR Realty
filed its reply, arguing its motion for approval of
accounting should be granted in full.
14 At a hearing on November 3, 2014, the trial court granted
CR Realty leave to supplement its accounting based on
Sargent's objections. The court continued the matter for
an evidentiary hearing.
15 On November 19, 2014, CR Realty filed its supplement,
attaching thereto, inter alia, affidavits from CR
Realty principal Josh Nadolna and CR Realty employee Phillip
Curtis Bettiker, as well as a purported bid from Imperial to
Green. These documents are discussed in greater detail later
in this opinion.
16 On November 20, CR Realty filed a motion in
limine to strike and bar Sargent's testimony and to
disqualify him as an expert witness. CR Realty argued,
inter alia, that Sargent's testimony was not
based on any generally accepted methodology, it improperly
invaded the judicial fact-finding function of the court, and
Sargent's opinion testimony was fundamentally unreliable
and, in many respects, wrong or unfounded.
17 B. The Motion in Limine Hearing
18 A hearing commenced in December 2014. Sargent testified
that he was a certified forensic accountant, specializing in
financial investigations and in providing expert testimony.
He reviewed CR Realty's billing file but not the
supplemental accounting that CR Realty filed. He described
the methodology he employed in this case as the
"generally accepted accounting principles that talk
about being professionally skeptical of evidence that's
presented to you." He also adhered to Statement of
Auditing Standard No. 106, which he testified "very
clearly identifies sufficiency of evidence for
accounting." The "actual work" that Sargent
did was "simple math for the most part, simple math and
reviewing documents in detail."
19 Following Sargent's testimony, the trial court denied
CR Realty's motion in limine and qualified
Sargent as an expert, stating it believed Sargent could be of
20 C. The Evidentiary Hearing on CR Realty's Accounting
21 Thereafter, an evidentiary hearing on the reasonableness
of CR Realty's fees commenced. In the interest of
brevity, we provide a brief overview of the evidence
presented but only set forth in detail the evidence pertinent
to the issues before us.
22 1. Evidence Regarding the Work Completed at Concordia
23 CR Realty principal Josh Nadolna testified that he arrived
at Concordia prior to the emergency receiver hearing, after
receiving a call from corporation counsel for the City.
Nadolna went into the steeple and discussed ideas regarding
its removal with a city engineer and an engineer appointed
for Concordia. Nadolna billed time for this meeting and for
the emergency receiver hearing. He testified that in
appointing CR Realty as receiver, the trial court did not
require CR Realty to engage in a feasibility report or
competitively bid for the project. He further testified that
no cap was placed on the amount CR Realty could spend to
perform the work, no restrictions were placed on the means by
which CR Realty was to perform the work, and no form of
accounting was required, other than the submission of
Green's itemized cost sheet.
24 Michael James Brough, the operating manager/owner of
Green, testified that he did not provide a written estimate
to CR Realty before the project because "[i]t would be
impossible to bid a job that there is so many unforeseens on
[sic]." Brough also testified that CR Realty
did not provide him with a spending cap or budget. According
to Brough, seven Green laborers, including himself, worked at
Concordia on November 18. The laborers performed
"shoring" or "bracing" on the steeple.
25 Nadolna recalled three Contractor's Access laborers
also being on-site on November 18 to shore the exterior of
the steeple. The invoice for Contractor's Access shows
that it charged CR Realty for "PORT TO PORT CHURCH
STEEPLE EMERGENCY JOB." The invoice indicated a
three-man crew worked from 3:30 to 11 p.m. but did not
contain any other details regarding the work that was
performed. The trial court ...