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Royalty Farms, LLC v. The Forest Preserve District of Cook County

Court of Appeals of Illinois, First District, Second Division

December 5, 2017

ROYALTY FARMS, LLC, Plaintiff and Counter defendant-Appellant,
THE FOREST PRESERVE DISTRICT OF COOK COUNTY, ILLINOIS, Defendant and Counter plaintiff-Appellee.

         Appeal from the Circuit Court Of Cook County. No. 14 MR 03394 The Honorable Martin C. Kelley, Judge Presiding.

          PRESIDING JUSTICE NEVILLE delivered the judgment of the court, with opinion. Justices Pucinski and Hyman concurred in the judgment and opinion.



         ¶ 1 We must determine what happens to a judgment for eviction when ownership of the property awaits determination in a separate lawsuit for mortgage foreclosure. The circuit court granted the Forest Preserve District of Cook County, Illinois's (FPD), motion for summary judgment on a complaint to foreclose a mortgage on land Royalty Properties owned, land Royalty Properties purportedly leased to Royalty Farms, LLC (Royalty Farms). After FPD made the highest bid at a foreclosure sale of the property, Royalty Farms sued FPD for breach of its duties under the purported lease from Royalty Properties. FPD denied that Royalty Farms had a valid lease and counterclaimed for eviction. The circuit court awarded FPD a judgment evicting Royalty Farms. But in the separate lawsuit for foreclosure of the mortgage, the appellate court reversed the foreclosure judgment, finding that material factual issues required a trial. The circuit court, in the litigation over the lease, awarded possession of the property to FPD, despite the reversal of the foreclosure judgment. Royalty Farms now appeals.

         ¶ 2 We hold that the reversal of the foreclosure judgment voids the sale of the property to the FPD. If the circuit court, following trial, again awards a foreclosure judgment in favor of FPD, the court will need to hold a new foreclosure sale, and the purchaser at that sale will acquire the property owner's rights and duties under the lease with Royalty Farms (if Royalty Farms has a valid lease). Accordingly, we reverse the order awarding possession of the property to FPD and remand and stay the eviction proceedings pending resolution of the foreclosure action.

         ¶ 3 BACKGROUND

         ¶ 4 In 2004, Meryl Cannon and David Warner formed Royalty Farms. In December 2006, Meryl and Richard Cannon created Royalty Properties and signed documents presented to them by Amcore Bank (Amcore). Amcore labeled one of the documents a "Mortgage, " and the Cannons signed that document. Amcore loaned Royalty Properties $14.5 million, which Royalty Properties used to purchase a 400-acre horse farm in Barrington Hills, Illinois. In January 2007, Meryl, acting on behalf of both Royalty Properties and Royalty Farms, signed in two different capacities a document titled, "Agreement for Farm Lease, " purportedly leasing to Royalty Farms part of the horse farm.

         ¶ 5 On June 8, 2009, Amcore filed a complaint to foreclose the purported mortgage on the horse farm. Amcore did not list Royalty Farms as a defendant in the foreclosure action. Royalty Properties and the Cannons filed an answer with affirmative defenses and a counterclaim.

         ¶ 6 In April 2010, the federal Office of the Comptroller of the Currency determined that Amcore's "unsafe or unsound practices or conditions [were] likely to cause insolvency or substantial dissipation of assets or earnings." The comptroller appointed the Federal Deposit Insurance Corporation (FDIC) as receiver for Amcore's assets. As receiver, the FDIC sold substantially all of Amcore's assets, including its interest in the loan to the Cannon parties, to BMO Harris Bank (BMO Harris).

         ¶ 7 In 2013, BMO Harris sold to FPD its interest in all the documents it obtained from Amcore related to Royalty Properties and the horse farm. The circuit court granted FPD leave to substitute as plaintiff in the mortgage foreclosure action Amcore filed. In an order dated August 30, 2013, the circuit court granted FPD's motion for summary judgment and ordered a foreclosure of the purported mortgage and a sale of the farm. FPD, the highest bidder at the foreclosure sale, bid $14.5 million for the farm. The circuit court approved the sale. After further proceedings on the counterclaims, Royalty Properties filed a timely notice of appeal on May 8, 2015.

         ¶ 8 In September 2014, after the circuit court approved the foreclosure sale but before final judgment on the counterclaims, Royalty Farms filed a complaint against FPD, alleging that FPD breached the duties it assumed as a landlord when it bought the farm. FPD filed an answer and counterclaim. In count I of the counterclaim, FPD sought a judgment declaring the purported lease invalid. In count II, FPD sought a judgment declaring that the purported lease terminated on December 31, 2014. FPD sought to enforce the lease's indemnity provisions in count IV and requested money damages. In count III, the only count at issue in this appeal, FPD alleged (1) the purported lease had no legal effect, (2) Royalty Farms had breached the terms of the purported lease, and (3) FPD had effectively terminated the lease by notifying Royalty Farms of the termination. FPD prayed for an order evicting Royalty Farms from the horse farm.

         ¶ 9 On June 24, 2015, the circuit court entered a trial call order, setting the case for a status hearing. The order states, "Plaintiffs to vacate premises by 12/31/15." At a hearing held on July 8, 2015, Royalty Farms' attorney said, "We've signed a termination of the lease. *** We're leaving in December."

         ¶ 10 In January 2016, FPD filed a motion to hold Royalty Farms in contempt for failing to vacate the horse farm by December 31, 2015. The circuit court entered an order, dated March 4, 2016, in which the court noted that Royalty Farms did not dispute FPD's claim that it owned the horse farm. The court granted FPD possession of the property, effective December 31, 2015, but added that it would "stay enforcement of said Order until May 2, 2016." The court denied the motion for a finding of contempt.

         ¶ 11 Royalty Farms filed a motion to reconsider the March 4 order and asked the court to find no just reason to delay enforcement or appeal if it denied the motion for reconsideration. The circuit court, in an order dated April 25, 2016, denied the motion for reconsideration and repeated that Royalty Farms must vacate the premises, "with the ...

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