McGinley Partners, LLC v. Royalty Props., LLC
| Decision Date | 31 March 2020 |
| Docket Number | Nos. 1-19-0546,1-19-0785 (cons.),s. 1-19-0546 |
| Citation | 440 Ill.Dec. 232,151 N.E.3d 704,2020 IL App (1st) 190546 |
| Parties | MCGINLEY PARTNERS, LLC, an Illinois Limited Liability Company, Plaintiff-Appellee, v. ROYALTY PROPERTIES, LLC, a Florida Limited Liability Company; Richard Kirk Cannon, an Individual; and Meryl Squires Cannon, an Individual, Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
Richard K. Cannon, of Barrington, for appellants.
Katherine M. Saldanha Olson and Joseph S. Messer, of Messer Strickler, Ltd., of Chicago, for appellee.
¶ 1 The instant consolidated appeals represent the second attempt of defendants Royalty Properties, LLC (Royalty Properties), Richard Kirk Cannon, and Meryl Squires Cannon to vacate a judgment against them and in favor of plaintiff McGinley Partners, LLC, under section 2-1401 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-1401 (West 2018) ). Plaintiff filed a lawsuit against defendants to enforce a note and guaranty executed in connection with the sale of a horse farm, and obtained an $8.3 million judgment against defendants in February 2017. Defendants filed their first section 2-1401 petition nine months after the entry of judgment, which was denied by the trial court. Defendants then filed a second section 2-1401 petition in February 2019, based on alleged fraud and forgery in the execution of one of the closing documents. While that petition was pending, defendants also filed a motion for a temporary stay to perfect a settlement, claiming that the parties had reached a settlement. The trial court denied both the section 2-1401 petition and the motion for a stay. Defendants appeal both orders and, for the reasons that follow, we affirm.
¶ 3 As noted, the instant appeal is not the first time the parties have been before this court regarding the loan and guaranties at issue.1 Accordingly, where appropriate, we draw from our prior decisions for our facts.
¶ 4 Defendants Richard Cannon and Meryl Squires Cannon (collectively, the Cannons) owned 43 horses, which resided on a farm in Barrington Hills owned by Horizon Farms, Inc. (Horizon Farms). In 2006, Horizon Farms solicited bids in an effort to sell the farm, and the Cannons submitted a bid of $19.35 million for the property, which was accepted. The Cannons made an earnest money deposit of nearly $2 million and financed the rest of the purchase price, primarily by obtaining a loan of $14.5 million from Amcore Bank in exchange for a mortgage on the property and the personal guaranties of the Cannons. In order to obtain this financing, Amcore Bank required the Cannons to form a limited liability corporation to sign for the loan as the mortgagee. Accordingly, the Cannons created defendant Royalty Properties, LLC (Royalty Properties). In addition, Horizon Farms, the seller, loaned $1.5 million to Royalty Properties, evidenced by a promissory note and secured by a second mortgage on the property, as well as the personal guaranties of the Cannons. Horizon Farms subsequently assigned its interest in the note and guaranty to the William J. McGinley Marital Trust (trust) upon the dissolution and liquidation of Horizon Farms. On November 10, 2009, the trust assigned all of its right, title, and interest in the note and guaranty to plaintiff McGinley Partners, LLC. It is this loan that is the subject of the instant litigation.
¶ 5 In 2009, Amcore Bank filed a complaint to foreclose its primary mortgage. In 2010, during the pendency of the lawsuit, the loan was sold to BMO Harris Bank, which took over the foreclosure action.
BMO Harris Bank, in turn, sold the loan to the Forest Preserve in June 2013. In August 2013, the trial court granted summary judgment in favor of the Forest Preserve and entered a judgment of foreclosure and ordered the sale of the farm. The Forest Preserve was the highest bidder at the foreclosure sale, and the trial court entered a $6.2 million deficiency judgment against defendants.2
¶ 6 On May 15, 2014, plaintiff filed a verified complaint against defendants to enforce the note and guaranty executed by them with respect to the Horizon Farms loan. The complaint alleged that, on December 21, 2006, Royalty Properties executed a promissory note in favor of Horizon Farms in the amount of $1.5 million, which was secured by a second mortgage. The note was personally guaranteed by the Cannons pursuant to a guaranty agreement dated December 21, 2006.
¶ 7 The complaint set forth two counts. The first count was for breach of the promissory note and was against Royalty Properties. Count I alleged that the note was in default as a result of nonpayment and that, as of May 14, 2014, $3,509,025.22 was due and owing under the note. Count I further alleged that under the terms of the note, interest continued to accrue at an annual rate of 20% and that Royalty Properties has refused to pay the amounts due and owing under the note.
¶ 8 Count II was for breach of guaranty against the Cannons, and alleged that the Cannons guaranteed all sums due and owing under the note and that if the note was in default, the holder of the note was permitted to demand payment of the note from the guarantors. Count II further alleged that plaintiff did demand payment but the Cannons refused to pay the amounts due and owing under the note.
¶ 9 Attached to the complaint were copies of the promissory note; the mortgage; the guaranty; and the affidavit of James McGinley, a trustee and beneficiary of the trust, which made the demand for payment prior to the trust's assignment to plaintiff.
¶ 10 After a denial of a motion to dismiss, the parties engaged in discovery, and plaintiff filed a motion for summary judgment, which was granted on August 31, 2016. After plaintiff filed its prove-up affidavit, the trial court issued an opinion in which it found that there was a question of fact concerning the amount of damages. Plaintiff filed a motion to reconsider and, on February 2, 2017, the court granted plaintiff's motion for reconsideration, finding that there was actually no question of fact concerning the amount of damages, and entered judgment in favor of plaintiff against defendants in the amount of $8,320,669.43. We affirmed the trial court's grant of summary judgment in McGinley Partners , 2018 IL App (1st) 171317, ¶ 68, 427 Ill.Dec. 270, 117 N.E.3d 1207.
¶ 11 On November 9, 2017, while the appeal from the grant of summary judgment was pending, defendants filed a petition to vacate the February 2, 2017, judgment pursuant to section 2-1401 of the Code of Civil Procedure. Defendants claimed that a December 21, 2006, "Intercreditor Agreement" was an enforceable contract between the parties that barred plaintiff's action against defendants and that this agreement was not disclosed in any way by plaintiff in the instant action. Defendants acknowledged that the agreement was signed by defendant Richard Cannon, but claimed that he was given the document as part of a 500-page group of loan documents and was not given the chance to review them prior to the closing.3 Defendants claimed that the agreement did not come to their attention until they reviewed the closing documents during the foreclosure action filed by the senior lender (currently the Forest Preserve).
¶ 12 On November 15, 2017, plaintiff filed a motion to dismiss the section 2-1401 petition, claiming that (1) defendants had not alleged a defense that would have precluded the entry of judgment against them, (2) plaintiff had not engaged in any deception and had attached and produced all documents required by it during the course of the litigation, (3) none of the defendants had standing to enforce the intercreditor agreement, and (4) defendants were not diligent in bringing the matter to the trial court's attention because the document had been in their possession since 2006.
¶ 13 On November 22, 2017, the parties appeared before the trial court for a hearing on the section 2-1401 petition, as well as on plaintiff's motion to dismiss the petition. Prior to the commencement of the hearing, the trial court asked the parties whether, Defendants' counsel indicated that he was prepared to proceed with the hearing at that time. However, counsel noted that "I learned something last night—or literally late in the afternoon yesterday that I think is important both factually and legal for these proceedings today, which I will raise with the Court, that I think might indicate or shed some different light on this."
¶ 14 Plaintiff's counsel proceeded to argue that the section 2-1401 petition should be dismissed because defendants had failed to establish a meritorious defense or that they had been diligent in bringing the matter to the court's attention. During his argument, defense counsel argued that the terms of the intercreditor agreement barred plaintiff's suit and argued that defendants had not closely examined the closing documents until discovery in the foreclosure suit, at which point they discovered the intercreditor agreement. Defense counsel argued that he was not required to "fly spec" each closing document, as the issues were framed by the pleadings, and claimed that plaintiff had been deceptive in not disclosing the existence of the intercreditor agreement. Defense counsel then claimed that "we learned last night" that there were e-mails showing that there had been a prior version of the intercreditor agreement. Defense counsel argued that "what we have here, what we have is an indication that this agreement was in one form, in one version on the day of the closing signed by my client, even though h...
To continue reading
Request your trial
-
McGinley Partners, LLC v. Royalty Props., LLC
...litigation, resulting in a number of appeals before this court, most recently in McGinley Partners, LLC v. Royalty Properties, LLC , 2020 IL App (1st) 190546, 440 Ill.Dec. 232, 151 N.E.3d 704. We relate here only the details necessary to understand the context for the instant litigation, dr......