La Salle Nat. Trust, N.A. v. Village of Westmont

• Decision Date: 29 June 1994
• Docket Number: Nos. 2-93-0804,2-93-1070 and 2-93-1107,s. 2-93-0804
• Citation: 264 Ill.App.3d 43,636 N.E.2d 1157,201 Ill.Dec. 725
• Parties: , 201 Ill.Dec. 725 La SALLE NATIONAL TRUST, N.A., Successor Trustee to La Salle National Bank, not Indiv. but as Trustee, et al., Plaintiffs-Appellees and Cross-Appellants and Separate Appellants and Separate Appellees, v. The VILLAGE OF WESTMONT, Defendants-Appellants and Cross-Appellees (The Gray Group, Inc., Defendant-Appellant and Cross-Appellee and Separate Appellee; Boulevard Bank National Association, Defendant-Appellant and Separate Appellant and Separate Appellee).
• Court: United States Appellate Court of Illinois

Page 1157

636 N.E.2d 1157

264 Ill.App.3d 43, 201 Ill.Dec. 725

La SALLE NATIONAL TRUST, N.A., Successor Trustee to La Salle National Bank, not Indiv. but as Trustee, et al Plaintiffs-Appellees and Cross-Appellants and Separate Appellants and Separate Appellees, v. The VILLAGE OF WESTMONT, Defendants-Appellants and Cross-Appellees (The Gray Group, Inc., Defendant-Appellant and Cross-Appellee and Separate Appellee; Boulevard Bank National Association, Defendant-Appellant and Separate Appellant and Separate Appellee).

Nos. 2-93-0804, 2-93-1070 and 2-93-1107.

Appellate Court of Illinois,

Second District.

June 29, 1994.

James H. Ryan (argued), Charles H. Braun, Michael S. Friman, Horwood, Marcus & Braun Chartered, Chicago, for Village of Westmont and Gray Group, Inc.

Michael Weininger, Barry A. Erlich (argued), Katz, Randall & Weinberg, Chicago, for Boulevard Bank Nat. Assoc.

Robert J. Pugliese (argued), Diane I. Jennings, Lord, Bissell & Brook, Chicago, for LaSalle Nat'l Trust N.A., BC Venture, Dobbs Houses, Inc. and Butler Hotel Associates, Ltd.

Justice BOWMAN delivered the opinion of the court:

These consolidated appeals arise from a dispute over the zoning and use of a parcel of land located in the Village of Westmont (Village or Westmont). The defendants, Westmont and The Gray Group, Inc. (Gray), seek review of an order of the circuit court of Du Page County which overturned the rezoning of the parcel, which is owned by Gray, and enjoined the defendants from developing the site as single-family residences. Plaintiffs, who own property adjacent to the rezoned site, cross-appeal from the trial court's findings regarding the alternative grounds on which they sought relief from the rezoning. Plaintiffs also appeal separately from orders favorable to defendants, Gray and Boulevard Bank National Association (Boulevard or Boulevard Bank), in plaintiffs' action for recovery of sums claimed to be due pursuant to a covenant running with Gray's property and for enforcement of lien rights against the property. Defendant Boulevard Bank also appeals separately from an order dismissing its counterclaim.

The background facts of all three appeals are the same. In 1983 the estate of Paul Butler owned a 144-acre site in Westmont. The entire site, which was vacant except for a horse barn, was zoned for residential use. The estate engaged property development consultants to devise a plan for the use of the property which would maximize its value. Although they considered residential use, the consultants ultimately conceived a mixed-use commercial development. They sought to integrate an upscale hotel, serving the corporate, transient, and resort trade, with a golf course and business offices. The hotel and golf course were to be developed first in order to increase the value of the land designated for office development. In turn, it was foreseen that the offices would create demand for hotel rooms and other services. Carson Pirie Scott (Carsons), which had experience in operating two other resort developments in the Chicago metropolitan area, agreed to guarantee long-term financing. Carsons and the estate then moved toward development of the hotel and golf course.

The 16.9-acre parcel slated for business offices (office site) was retained by the estate and was to be developed later as a separate venture of the estate. However, the planning for the office site and the hotel and golf course proceeded as a unified, cooperative effort by Carsons and the estate. This included planning for physical connections, such as covered walkways, between the hotel and the future office buildings, as well as shared vehicular access, landscaping, signage, and parking facilities. The estate informed Carsons that it did not have a date certain for constructing the office facilities and that office development would occur only as dictated by the market. According to the witnesses who were representing the estate at the time, they told Carsons it could take from 5 to 10 years to bring offices to the site.

When the unified plan was presented to it, the Village of Westmont was receptive and encouraging. With professional planning assistance from Du Page County, the Village created a special business zoning district to apply to the property. On November 19, 1984, the Village rezoned the 144-acre site, placing it in the new "B-3 Special Development District" classification, which allowed only business uses. The Village also approved a preliminary concept plan for the entire 144 acres as well as a final concept plan for the hotel and golf course. While there was not as yet any final concept plan for offices, the preliminary concept plan provided that the office site could include up to three 10-story buildings.

With the B-3 zoning in place, Carsons and the estate entered into a number of agreements which enabled them to seek financing and start construction. A joint venture, BC Venture, was created to hold the beneficial interest in the hotel land, take a long-term lease from the estate on the golf course land, and operate the hotel/resort. The estate, which contributed the land for the hotel, placed the legal title to the property in La Salle National Trust (La Salle), as trustee. Carsons guaranteed the venture's financial obligations to its lender. The joint venturers were, for Carsons, CPS Hotel Management Services, Inc. (CPS) and, for the estate (and the heirs of the Butler estate), Butler Hotel Associates, Ltd. (BHA), a partnership. BHA also held the beneficial interest in the golf course land, while legal title to the property had been placed in a separate trust at La Salle. Carsons and the estate also put in place an easements, covenants and restrictions agreement (Agreement or Easement Agreement), which granted cross-easements on all three sites--hotel, golf course, and office--for access, utilities, storm water retention, and the like. La Salle, BC Venture, CPS, and BHA were the original plaintiffs in this action.

BC Venture secured $49 million in financing for the development, and the Oak Brook Hills Hotel and Golf Course opened in April 1987. Due to subsequent asset transfers, corporate restructurings, and, ultimately, bankruptcy, Carsons' guaranty obligations came to rest on Dial Corporation. Dial had purchased most of the nonretail assets of Carsons late in 1987 in a stock purchase transaction. Included in the transaction, among other liabilities, was the Carsons guaranty. Late in 1992 Dobbs Houses, Inc. (Dobbs), a subsidiary of Dial Corporation, assumed the interest of CPS Hotel Management Services in BC Venture. Dobbs then became a plaintiff in the action.

Although the hotel and golf course were now open, there were no takers for the office site during the next few years. In October 1987 the estate encumbered the property with a mortgage in favor of Boulevard Bank. The mortgagors subsequently defaulted and, late in 1991, Boulevard foreclosed and took title to the site. Shortly thereafter, the bank contracted to sell the land to defendant Gray, a residential development company. The contract was contingent on the rezoning of the parcel. Gray, which hoped to build upscale, empty- nester residences on the land, immediately applied to Westmont to rezone the property accordingly. At the zoning hearings, plaintiffs expressed their opposition to any residential use on the office site. Nevertheless, in March 1992, at the conclusion of the public hearing process, the Village approved Gray's application and adopted Ordinance 92-9 (Westmont, Ill., Ordinance 92-9 (March 16, 1992)), which rezoned the property to planned development with underlying R-4 classification, for residential development. The Village subsequently approved Gray's plan for 84 detached, single-family homes on the former office site, with access and storm water detention provided on the hotel site and golf course. In May 1992 plaintiffs filed an action for declaratory and injunctive relief.

Plaintiffs' amended complaint consisted of seven counts, the first six alleging the invalidity and/or ineffectiveness of the rezoning, and the seventh count alleging a breach of the Easement Agreement by defendants Gray and Boulevard. In a second-amended complaint, plaintiffs added counts VIII and IX, alleging lien rights with respect to the office site. In August 1992, Boulevard filed a counterclaim seeking a declaratory judgment that the rezoning to residential was valid. However, shortly before the date set for trial, Boulevard's counterclaim was dismissed, as were counts I through VI of the complaint, as to Boulevard.

Ultimately, counts VII, VIII, and IX were severed, and counts I through VI were tried before the bench. The court found in favor of plaintiffs only on count III, which had alleged that the rezoning was unconstitutional. The remaining defendants, the Village and Gray, prevailed on all the other counts. Subsequently, the trial court granted defendants' motion for summary judgment relative to count VII, as well as their motion to dismiss on the pleadings relative to counts VIII and IX. The first appeal and cross-appeal arise from the issues resolved at trial. The second appeal is from the disposition of the last three counts of the complaint. The third appeal stems from the dismissal of Boulevard's counterclaim.

APPEAL NO. 2-93-0804

Defendants Westmont and Gray appeal from the trial court's determination that Westmont's ordinance No. 92-9, which applied residential zoning to the office site, was unconstitutional. A zoning ordinance is presumed to be valid, and the party challenging the presumption has the burden of establishing by clear and convincing evidence that, as to the subject property, the ordinance is arbitrary, capricious, and unreasonable, and bears no substantial relationship to the public health, safety, or general welfare. Harvard State Bank v. County of McHenry (1993), 251 Ill.App.3d 84, 85, 190 Ill.Dec. 99, 620 N.E.2d 1360; Tim...