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Squires-Cannon v. Forest Preserve District of Cook County

United States Court of Appeals, Seventh Circuit

July 26, 2018

Meryl Squires-Cannon, et al., Plaintiffs-Appellants,
v.
Forest Preserve District of Cook County, et al., Defendants-Appellees.

          Argued September 28, 2017

          Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 14-CV-5611 - Sara L. Ellis, Judge.

          Before Bauer, Manion, and Hamilton, Circuit Judges

          HAMILTON, CIRCUIT JUDGE

         The Forest Preserve District of Cook County, Illinois, has been trying to acquire a 400-acre estate in Barrington after the owners defaulted on a mortgage and note held by the Forest Preserve. The Forest Preserve foreclosed and then bought the property at the foreclosure auction. The original owners have expressed their opposition by filing five lawsuits of their own, in addition to raising affirmative defenses and counterclaims in the still-pending foreclosure action. This appeal arises in the owners' third federal lawsuit, in which they have alleged unconstitutional takings, fraud, and derivative claims for conspiracy and aiding and abeting. The district court dismissed the suit for failure to state a claim. We affirm.

         I. Factual and Procedural Background

         A. Underlying Transactions

         In 2006, plaintiffs Meryl Squires-Cannon and Richard Kirk Cannon purchased a 400-acre estate and horse farm in Barrington. The Cannons bought the property through two wholly-owned limited liability companies, Royalty Properties, LLC and Cannon Squires Properties, LLC, which are also plaintiffs in this lawsuit. The LLCs executed a one-year, $14.5 million note and mortgage loan agreement with Amcore Bank, N.A. The Cannons allege that Amcore commited to modify the loan to a longer term before the end of the initial one-year term. But the financial crisis intervened, and Amcore reneged. Under financial distress itself, Amcore called the loan and when, we assume, the Cannons were unable to refinance in the financial environment of the time, Amcore filed for foreclosure in an Illinois state court. Amcore then failed in 2009, and the FDIC became its receiver. BMO Harris Bank, N.A. bought Amcore's loan assets at a discount from the FDIC, became the owner of the Cannons' note, and took over as the plaintiff in the foreclosure action.

         When the value of the estate fell in the midst of the financial crisis, BMO faced a risk that the note was worth more than the property securing it. And the FDIC had agreed to pay BMO 80% of any Amcore loan that BMO could not recover directly from the borrowers. To cut their losses on the Cannons' loan, the FDIC and BMO had incentives to find a buyer for the note. Enter the Forest Preserve. The Cannons allege that the FDIC, BMO, Bayview Loan Servicing, LLC, and Does 1-15 secretly agreed to assign the note to the Forest Preserve for $14 million. After the Forest Preserve's board approved the purchase, BMO assigned the note to the Forest Preserve, which became the plaintiff in the foreclosure action.

         In 2013, the foreclosure court granted summary judgment for the Forest Preserve. The Forest Preserve then obtained board approval to offer a credit bid for the estate at the foreclosure sale. The Forest Preserve made the (winning) credit bid of about $14.5 million at the foreclosure sale. The foreclosure court also entered a deficiency judgment against the Cannons for over $6 million. See BMO Harris Bank, N.A. v. Royalty Properties, LLC, No. 1-15-1338, 2016 WL 6269967, at *3 ( Ill. App. May 17, 2016). The Illinois Appellate Court later reversed the foreclosure judgments. Id. at *14. On remand, the foreclosure court reinstated its order making the Forest Preserve a mortgagee in possession, but the Illinois Appellate Court also vacated that order in an interlocutory appeal. Forest Preserve District of Cook County v. Royalty Properties, LLC, No. 1-17-1564, 2017 WL 3758758 ( Ill. App. Aug. 29, 2017). As far as we know, there is at this time no judgment in the foreclosure action. The Cannons told us at oral argument that the foreclosure action is "starting from scratch."[1]

         B. Lawsuits

         There have now been six separate lawsuits relating to the Cannons' default on the note-three state and three federal. The three state lawsuits are:

(1) the foreclosure action, which is still pending;
(2) the Cannons' lawsuit against the Forest Preserve and BMO (the "taxpayer action"), which was dismissed, Baker v. Forest Preserve District, 33 N.E.3d 745 ( Ill. App. 2015) (affirming dismissal of all claims and rejecting theory that Forest Preserve's purchase of note and participation in foreclosure auction violated Cook County Forest Preserve District Act), and;
(3) a lawsuit by one of the Cannon entities against the Forest Preserve for breach of a purported lease after the foreclosure sale, which is stayed, Royalty Farms, LLC v. Forest Preserve District of Cook County, 92 N.E.3d 943 ( Ill. App. 2017) (reversing order awarding possession of property to Forest Preserve and remanding ...

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