Metro. Water Reclamation Dist. of Greater Chi. v. Terra Found. for Am. Art

• Decision Date: 09 June 2014
• Docket Number: No. 1–13–0307.,1–13–0307.
• Citation: 13 N.E.3d 44
• Parties: METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO, Plaintiff and Counterdefendant–Appellant, v. TERRA FOUNDATION FOR AMERICAN ART, Defendant (664 N. Michigan, LLC, and NM Project Company, LLC, as Successor–in–Interest to Terra Foundation for American Art, Defendants and Counterplaintiffs–Appellees; and Unknown Owners, Nonrecord Owners, and Nonrecord Claimants, Defendants).
• Court: United States Appellate Court of Illinois

13 N.E.3d 44

METROPOLITAN WATER RECLAMATION DISTRICT OF GREATER CHICAGO, Plaintiff and Counterdefendant–Appellant

v.TERRA FOUNDATION FOR AMERICAN ART, Defendant (664 N. Michigan, LLC, and NM Project Company, LLC, as Successor–in–Interest to Terra Foundation for American Art, Defendants and Counterplaintiffs–Appellees; and Unknown Owners, Nonrecord Owners, and Nonrecord Claimants, Defendants).

No. 1–13–0307.

Appellate Court of Illinois, First District, First Division.

June 9, 2014.

Michael I. Rothstein, Gino L. DiVito, John M. Fitzgerald, and Brian C. Haussmann, all of Tabet DiVito & Rothstein, of Chicago, for appellant.

Clifford Law Offices (Robert A. Clifford, Colin H. Dunn, and Robert P. Sheridan, of counsel), and David C. Gustman, Jill Anderson, and Daniel C. Curth, all of Freeborn & Peters LLP, both of Chicago, for appellees.

OPINION

Justice HOFFMAN delivered the judgment of the court, with opinion.

¶ 1 The Metropolitan Water Reclamation District of Greater Chicago (the District) appeals from a $36,432,047 judgment entered against it and in favor of the counterplaintiff, NM Project Company, LLC, (hereinafter, the Project Company). The damages were awarded after the District was found to have intentionally interfered with the easement rights of the Project Company and its predecessors-in-interest to use and enjoy an alley owned by the District. For the reasons that follow, we affirm the judgment of the circuit court, as modified.

¶ 2 The litigation in this case has developed over the course of eight years, creating a voluminous record, which we summarize here, in relevant part, to address the issues now before us.

¶ 3 The District is a municipal corporation with its headquarters at 100 East Erie Street in Chicago, near the intersection of Michigan Avenue and Erie Street. On the eastern border of its headquarters, parallel to Michigan Avenue, the District owns an alley (the Alley), which separates its property from three properties, 664, 666, and 670 N. Michigan Avenue (collectively referred to as the Property), now owned by the Project Company.

¶ 4 In June 2005, the Terra Foundation for American Art (Terra) and 664 N. Michigan, LLC, entered into an “Option and Purchase Agreement” covering the purchase and development of the Property which was then owned by Terra. Two of the three properties, 666 and 670 N. Michigan Avenue, benefited from three recorded easements over the Alley dating back to the 1940s. The easements provided that the owners of the 666 and 670 N. Michigan parcels have “full and free right and liberty to use and enjoy” the Alley. 664 N. Michigan, LLC, planned to develop the Property by demolishing the existing buildings and constructing a 40–story luxury condominium and retail store complex. The plan contemplated use of the Alley to provide access to the proposed garage for residents of the condominium complex. Shortly after entering into the “Option and Purchase Agreement,” the 664 N. Michigan, LLC, assigned its rights under the agreement to the 670 N. Michigan, LLC, of which it was the managing member.

¶ 5 Upon learning of the plans for the development of the Property at a meeting with its representatives in the summer of 2005, the District objected and contended that use of the Alley for the proposed garage exceeded the terms of the easements. Despite the District's objections, the design phase for the development of the Property immediately began and financing opportunities were pursued. By September 2005, the Ritz Carlton Corporation had been contacted regarding the use of its brand name in the marketing and the management of the condominium units to be constructed on the Property. Marketing efforts began in January 2006 based on the initial development plans, with construction projected to begin sometime between October 2006 and March 2007. Delivery of completed condominium units to purchasers was planned for early 2009.

¶ 6 On July 12, 2006, the District filed the instant action against Terra and 664 N. Michigan, LLC, seeking judicial declarations concerning the scope of the easements. The District alleged that the intended use of the Alley in connection with the development plan exceeded the scope of the easements. It further claimed that the 664 N. Michigan Avenue parcel had no easement rights, and therefore, the Alley could not be used for that parcel's benefit.

¶ 7 While this action was pending but unresolved, the District blocked access to the Alley by locking the security gate, which had been installed in 1997. The District also had cars parked in the Alley in such a manner as to block ingress and egress.

¶ 8 On April 29, 2008, the 670 N. Michigan, LLC, assigned all of its rights under the “Option and Purchase Agreement” to the Project Company. On the following day, April 30, 2008, the Project Company closed on its purchase of the Property from Terra. Thereafter, on July 2, 2008, the Project Company and 664 N. Michigan, LLC (collectively referred to as the counterplaintiffs), filed a three-count counterclaim against the District. Count I of the counterclaim sought injunctive relief and damages for the District's interference with the counterplaintiffs' right to use the Alley pursuant to the terms of the easements. Specifically, count I requested “actual damages resulting from the District's interference, as well as costs and such further relief as is just and equitable.” Count II sought judicial declarations, in part, that the District had no right to: impair access to the Alley using a gate or otherwise; block the alley with vehicles; or impair the counterplaintiffs' access to the Alley to engage in construction and demolition activities associated with their development of the Property. Count II also requested “costs and such further relief as is just and equitable.” Count III alleged that the District intentionally trespassed on the Project Company's property by constructing the security gate at the end of the Alley on the 664 N. Michigan Avenue property. Count III requested “actual damages and punitive damages to deter future illegal conduct,” plus costs, and other such “further relief as is just and equitable.”

¶ 9 Among the facts incorporated in all three claims, the counterplaintiffs alleged that the District had blocked access to the Alley by locking the security gate, refused to allow access to the Alley for legitimate construction purposes, and allowed its employees and other invitees to park in the Alley in a manner which obstructed ingress and egress. Specifically, the counterplaintiffs alleged that: “[i]n late 2005 and early 2006, * * * [they] began offering the residential units for sale, with delivery expected in late 2009”; they had “secured the necessary financing, and anticipate[d] that the cost of the Development [would] exceed $183,000,000”; and that, in order to construct the complex, they had to demolish the existing structures on the Property. The counterplaintiffs alleged that the District's conduct prevented their construction workers from erecting scaffolding necessary for demolition activities. They also alleged that “in recent months, the District [had] embarked upon an unlawful campaign to interfere with the Alley Easement and keep the * * * [counterplaintiffs] from accessing and using the Alley.” After it closed on the purchase of the Property, the Project Company asked the District to remove the gate, but the District refused. Thereafter, the District began allowing vehicles to park in the Alley for entire workdays and storing garbage dumpsters in the Alley to prevent ingress and egress.

¶ 10 According to the counterclaim, the District's interference was alleged to have: impaired the counterplaintiffs' unencumbered right to use the Alley and to enjoy the 666 and 670 North Michigan Avenue properties, including their efforts to proceed with the construction of the improvements on the Property; threatened the counterplaintiffs' agreements with contractors and subcontractors, who were unable to perform their work at the time and in the manner contemplated by their respective contracts; impaired the counterplaintiffs' ability to comply with their financing agreements, equity partner agreements, and the redevelopment agreement with the City of Chicago; “threaten[ed] to deter potential customers from purchasing units in the Development”; “delayed the * * * [counterplaintiffs] from obtaining a demolition permit from the City, and required [them] to incur additional expenses, including but not limited to attorneys' fees, consulting fees, and interest.”

¶ 11 On August 14, 2008, after a lengthy hearing, the trial court entered a preliminary injunction against the District, enjoining it from interfering with the Project Company's use and enjoyment of the easements over the Alley. However, the trial court found that the 664 N. Michigan Avenue parcel held no rights under the easements at issue and, therefore, the Project Company had no right to use the Alley for the benefit of that parcel. The trial court further enjoined the District from parking cars in the Alley, obstructing access with a security gate, interfering with scaffolding placement, denying access to construction workers, and interfering with the removal of the security gate. The trial court specifically found that the “District began to deny access after learning of the developer's plans for the new buildings and ha[d] intensified its efforts in denying access since April 30, 2008.”

¶ 12 The District appealed the trial court's preliminary injunction order, and, on April 22, 2009, this court affirmed that order. See Metropolitan Reclamation District of Greater Chicago v. Terra Foundation for American Art, No. 1–08–2223, 388 Ill.App.3d 1134, 367 Ill.Dec. 607, 982 N.E.2d 285 (2009) (unpublished order under Supreme Court Rule 23 ). Following this court's order, the District removed the security gate from the Alley. In the interim, a February 2, 2009, trial date had been set for the Project Company's request for...