Cannon v. Forest Pres. Dist. of Cook Cnty.
| Decision Date | 09 May 2016 |
| Docket Number | No. 14 C 5611,14 C 5611 |
| Parties | MERYL SQUIRES CANNON; RICHARD KIRK CANNON; ROYALTY PROPERTIES, LLC; and CANNON SQUIRES PROPERTIES, LLC, Plaintiffs, v. FOREST PRESERVE DISTRICT OF COOK COUNTY, ILLINOIS; BMO HARRIS BANK, N.A.; UNITED STATES OF AMERICA; BAYVIEW LOAN SERVICING, LLC; FRANCIS L. KELDERMANS; McGINLEY PARTNERS, LLC; ROBERT R. McGINLEY; and DOES 1 through 15; Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
OPINION AND ORDER
In their latest attempt to contest the foreclosure of their property, Plaintiffs Meryl Squires Cannon and Richard Kirk Cannon (collectively, the "Cannons"), now joined by their wholly-owned corporations, Royalty Properties, LLC ("RPL") and Cannon Squires Properties, LLC ("CSP"), have filed a second amended complaint against Defendants Forest Preserve District of Cook County, Illinois (the "FPD"); BMO Harris Bank, N.A. ("BMO"); the United States of America, acting through its agency, the Federal Deposit Insurance Corporation (the "FDIC"); Bayview Loan Servicing, LLC ("Bayview"); Francis L. Keldermans; McGinley Partners, LLC ("McGinley Partners"); Robert R. McGinley; and unnamed defendants (Does 1-15).1 The Courtdismissed the Cannons' initial complaint, finding that they could not proceed against the United States for claims arising from fraud and that they had failed to adequately plead their fraud and conspiracy claims against the remaining Defendants. In the second amended complaint, Plaintiffs reassert fraud and conspiracy to commit and aid and abet fraud claims against all Defendants but the United States. But in order to maintain federal jurisdiction, they have added federal takings claims against the FPD, alleging that the FPD unconstitutionally transformed the Cannons' property into a forest preserve through the passage of an ordinance and the foreclosure process, with the remaining Defendants allegedly acting as the FPD's co-conspirators and aiders and abettors.
All Defendants have filed motions to dismiss [61, 62, 64]. Plaintiffs' takings claims fail, as the FPD ordinance at issue merely entailed planning for future acquisition of the property and did not pass any interest in the land to the FPD. Nor was the FPD's acquisition of the property through the foreclosure process a taking, as the FPD acted in its proprietary, and not sovereign, capacity. The fraud claims fail because Plaintiffs have not adequately pleaded reliance or damages. And without underlying wrongful conduct, the conspiracy and aiding and abetting claims cannot proceed on their own. Thus, the Court grants Defendants' motions and dismisses Plaintiffs' second amended complaint with prejudice.
In December 2006, the Cannons, through their two wholly-owned limited liability companies RPL and CSP, purchased a horse farm ("Horizon Farm") in Barrington, Illinois. To finance the purchase, RPL and CSP executed a $14,500,000 mortgage loan agreement with Amcore Bank, N.A. ("Amcore"), which the Cannons personally guaranteed. After the loan matured and the Cannons did not refinance or pay it off, Amcore instituted foreclosure proceedings. Amcore failed in 2009, however, with the FDIC taking over Amcore's assets as receiver. The FDIC entered into an agreement with BMO through which BMO acquired the mortgage and substituted in as the plaintiff in the foreclosure action.
Sometime thereafter, behind closed doors, BMO, Bayview, the FDIC, and Does 1-15 entered into an agreement with the FPD for the FPD to pay $14,000,000 for the mortgage with taxpayer funds.3 Defendants refused to disclose to the Cannons that the FPD was the contemplated purchaser of the mortgage, despite this agreement. Instead, Keldermans, an attorney, affirmatively represented to the Cannons that the purchaser was a group of individuals operating as an LLC, identifying that LLC in a pre-negotiation and confidentiality agreement presented to them in a February 14, 2013 meeting as "Horizon Farms Loan Acquisition LLC." Doc. 60-2 at 18. The FPD's involvement was masked, in part, because Keldermans and the FPDknew the Cannons opposed turning Horizon Farm into a forest preserve. Based on Keldermans' representations, the Cannons discussed a potential deal with him wherein the "purchaser" would acquire the mortgage and forego seeking a deficiency judgment against the Cannons if they waived their ownership claims to Horizon Farm and assigned title to the purchaser. The Cannons rejected that offer, however. Thereafter, BMO sought court approval for the unnamed purchaser to inspect the property without disclosing the purchaser's identity.
Similarly, McGinley, one of the Cannons' neighbors, made overtures to the Cannons regarding Horizon Farm on the FPD's behalf. McGinley acted in exchange for certain recognition, compensation, and consideration from the FPD, such as use of Horizon Farm for fox hunting and equine purposes. On or about March 11, 2013, he met with the Cannons about a group of neighbors' interest in acquiring part or all of Horizon Farm, indicating the Cannons could share ownership or alternatively assign title to the group.4 The Cannons asked for further details, including the identity of the neighbors, as they indicated they would not negotiate or share title with certain neighbors. Although they requested a more specific proposal from McGinley, soon after that conversation, they instead received a revised offer from Keldermans that for the first time included the opportunity to retain title to the house on Horizon Farm if the remainder of the property was deeded to the purchaser.
On June 27, 2013, the FPD executed and closed an assignment and assumption agreement with BMO, pursuant to which the FPD acquired the mortgage. The agreement wasentered into with the FDIC's and Bayview's assistance and approval. The FPD thereafter substituted in as the plaintiff in the foreclosure action. On August 30, 2013, the FPD obtained a judgment of foreclosure and sale.5 On October 1, the FPD Board authorized the FPD to bid up to the judgment amount of $20,449,561.08 at the foreclosure sale. At the same meeting, the FPD Board enacted an ordinance to convert Horizon Farm to a forest preserve once the FPD acquired the land. See Doc. 60-1at 24-25 (). On October 10, the state court entered an order placing the FPD in possession of Horizon Farm as of November 18, 2013, requiring the Cannons to vacate the property as of that date. The FPD prevailed at the foreclosure sale on October 18, paying $14.5 million. The FPD took title of Horizon Farm on May 16, 2014.
A motion to dismiss under Rule 12(b)(6) challenges the sufficiency of the complaint, not its merits. Fed. R. Civ. P. 12(b)(6); Gibson v. City of Chicago, 910 F.2d 1510, 1520 (7th Cir. 1990). In considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all well-pleaded facts in the plaintiff's complaint and draws all reasonable inferences from those facts in the plaintiff's favor. AnchorBank, FSB v. Hofer, 649 F.3d 610, 614 (7th Cir. 2011). To survive a Rule 12(b)(6) motion, the complaint must not only provide the defendant with fair notice of aclaim's basis but must also be facially plausible. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.
Rule 9(b) requires a party alleging fraud to "state with particularity the circumstances constituting fraud." Fed. R. Civ. P. 9(b). This "ordinarily requires describing the 'who, what, when, where, and how' of the fraud, although the exact level of particularity that is required will necessarily differ based on the facts of the case." AnchorBank, 649 F.3d at 615 (citation omitted). Rule 9(b) applies to "all averments of fraud, not claims of fraud." Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007). "A claim that 'sounds in fraud'—in other words, one that is premised upon a course of fraudulent conduct—can implicate Rule 9(b)'s heightened pleading requirements." Id.
The Fifth Amendment's takings clause (applicable against the states and their subdivisions through the Fourteenth Amendment) provides that private property shall not "be taken for public use, without just compensation." U.S. Const. amend. V. Plaintiffs bring two substantive takings claims. First, they argue that the FPD's enactment of the October 1, 2013 ordinance approving the creation of a forest preserve to include Horizon Farm amounted to a taking because it imposed significant legal disabilities on the property, reduced its value before the October 18 foreclosure sale, discouraged other parties from bidding at the sale, and allowed the FPD to obtain the property at a lower price. Next, Plaintiffs argue that the FPD effected ataking by manipulating the mortgage foreclosure process so as to avoid paying just compensation for Horizon Farm. Finally, Plaintiffs contend that the remaining Defendants are also liable for the alleged takings as co-conspirators and aiders and abettors. The Court addresses these claims in turn.
First, Plaintiffs argue that the enactment of the October 1, 2013 ordinance amounted to a regulatory taking of Horizon Farm. A regulatory taking is "a restriction on the use of property that [goes] 'too far.'"6 Horne v. Dep't of Agric., --- U.S. ----, 135 S. Ct. 2419, 2427, 192 L. Ed. 2d 388 (2015) (quoting Penn. Coal Co. v. Mahon, 260...
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