Lyons Sav. and Loan Ass'n v. Gash Associates

• Citation: 136 Ill.Dec. 888,545 N.E.2d 412,189 Ill.App.3d 684
• Decision Date: 29 September 1989
• Docket Number: No. 1-88-3735,1-88-3735
• Parties: , 136 Ill.Dec. 888 LYONS SAVINGS AND LOAN ASSOCIATION n/k/a Lyons Savings, Plaintiff-Appellee, v. GASH ASSOCIATES, et al., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 412

545 N.E.2d 412

189 Ill.App.3d 684, 136 Ill.Dec. 888

LYONS SAVINGS AND LOAN ASSOCIATION n/k/a Lyons Savings, Plaintiff-Appellee, v. GASH ASSOCIATES, et al., Defendants-Appellants.

No. 1-88-3735.

Appellate Court of Illinois,

First District, Fourth Division.

Sept. 29, 1989.

Gary L. Starkman, Malcolm S. Kamin and Thomas F. Sax, of Arvey, Hodes, Costello & Burman, Chicago, for defendants-appellants.

James M. Crowley, Garvey and Novy, Ltd., Harvey J. Barnett and Martin D. Tasch, Harvey J. Barnett & Assoc., Ltd., Thomas T. Burke, Wm. E. Ryan and Barry A. Springer, Burke and Ryan, Chicago, for plaintiff-appellee.

Justice McMORROW delivered the opinion of the court:

Gash Associates (Gash) appeals from the trial court's approval of a sheriff's sale of commercial property located in Rosemont, Illinois pursuant to a mortgage foreclosure action filed by Lyons Savings and Loan Association (Lyons) and others. Gash argues that the trial court should have disapproved the sheriff's sale because it awarded the property at less than its fair market value to the Village of Rosemont (the Village), which bid upon the property at the sheriff's sale during the pendency of the Village's action to acquire the property in condemnation proceedings. Because we can find no abuse of the trial court's discretion in approving the sheriff's sale under the facts of this case, we affirm.

Gash is an Illinois general partnership formed to acquire ownership of the commercial property at issue herein. Title to the property was originally held by Gash in a land trust, and Gash owned the entire beneficial interest in the trust. Gash sold its beneficial interest in the trust to a third party in November 1983 for $6.8 million. In consideration for this sale, Gash received a non-recourse wrap around note in the amount of $5 million and a non-recourse note in the amount of $900,000. Each of the notes was collateralized by a trust deed on the property to secure that portion of the purchase price that was to be paid in the future. The purchaser fell behind in its payments to Gash, and as a result Gash filed suit to foreclose the trust deed in June 1985. This action was dismissed by stipulation of the parties upon tender of the delinquent payments to Gash, but was reinstituted when payments again became delinquent.

The trust deed Gash sought to foreclose was junior to three prior mortgages, which were also the subject of foreclosure suits eventually consolidated with Gash's foreclosure action: (1) a trust deed secured by a note held by Northwestern National Life Insurance Company (Northwestern National) in the principal amount of $1.55 million; (2) a mortgage to American National Bank and Trust Company (American National) in the principal amount of $1 million; and (3) a mortgage held by Lyons in the principal amount of $2.5 million.

Each of the mortgagees, including Gash, moved for the summary entry of judgment of foreclosure. The awards for principal, interest, attorney fees and costs were determined by the court to be: Northwestern National, first mortgagee, $913,947.99; American National, second mortgagee, $1,138,122.53; and Lyons, third mortgagee, $3,064,197.35.

Gash thereafter filed notice of sheriff's sale and the property was scheduled for sale on July 21, 1987. On July 14, 1987, Gash received an assignment of the beneficial interest in the land trust holding title to the property in exchange for the amount due Gash in its mortgage foreclosure judgment. After notice of sale was filed, but prior to sale, the Village offered to purchase the property for $3.8 million. Gash refused the offer, but filed a motion to continue the sheriff's sale so that it could negotiate a purchase of the property with the Village. The trial court denied Gash's motion to continue the sheriff's sale. On July 20, 1987, Gash filed a petition for bankruptcy in the Federal court. On the same day that Gash filed its petition for bankruptcy, the Village filed a petition to condemn the property pursuant to an ordinance that had been adopted approximately six weeks earlier. The bankruptcy petition automatically stayed both the condemnation proceeding and the court-ordered sheriff's sale of the property pursuant to the mortgage foreclosure actions.

Thereafter Gash, Northwestern National, and American National entered into an agreed order in Federal court to lift the automatic stay in the bankruptcy proceeding. This allowed both the condemnation action and the sheriff's sale to proceed. The foreclosure sale was held on May 26, 1988. Northwestern National and American National bid the value of their respective claims. The Village bid $3.8 million, the same amount it had previously offered Gash to purchase the property. Bidding by Lyons and the Village continued until the bid submitted by the Village for $4,005,000 was accepted. Lyons' final bid was $4 million. The sheriff's report of sale and distribution were filed the following day.

American National, Northwestern National, and Lyons thereafter moved to approve the sale. Gash objected on the basis that the amount bid by the Village was less than the amount which Gash would receive from the Village as just compensation for its condemnation of the property. Gash also argued that the Village's bid amount was grossly inadequate. In an order entered in June 1988, the trial court disapproved the sale on the grounds asserted by Gash and, because trial of the condemnation action was scheduled for October 20, 1988, stayed the foreclosure sale until October 21, 1988 in order to enable the condemnation trial to proceed.

On October 20, 1988, however, the condemnation trial was continued, and, pursuant to Gash's motion, the trial court extended the stay of the sheriff's sale for 10 days, until November 2, 1988. The trial court denied Gash's motion to further continue the stay of the foreclosure sale or to restrain the Village from bidding at the sale. The sheriff's sale was held on November 3, 1988, and the Village was again the successful bidder at $4,005,000. Lyons moved for approval of this sale, and Gash again objected, on the grounds that the amount bid by the Village was grossly inadequate, and that the Village would have to pay a greater amount for the property in its condemnation suit.

To support its argument that the Village's bid price was grossly inadequate, Gash presented the affidavits of three appraisers to the effect that the value of the property at its highest and best use as of July 20, 1987 was between $5 million and $5.8 million. Gash also presented the affidavit of an individual representing an entity which was allegedly willing to purchase the property for $5 million, contingent upon the dismissal and perpetual non-reinstatement of the condemnation proceeding.

Lyons, Northwestern National, and American National, all contested Gash's arguments, claiming inter alia that the Village's bid price was not grossly inadequate. The Village presented the affidavits of two appraisers...