Squires-Cannon v. Forest Pres. Dist. of Cook Cnty.

• Decision Date: 26 July 2018
• Docket Number: No. 16-3131,16-3131
• Citation: 897 F.3d 797
• Parties: Meryl SQUIRES-CANNON, et al., Plaintiffs-Appellants, v. FOREST PRESERVE DISTRICT OF COOK COUNTY, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

897 F.3d 797

Meryl SQUIRES-CANNON, et al., Plaintiffs-Appellants,

v.FOREST PRESERVE DISTRICT OF COOK COUNTY, et al., Defendants-Appellees.

No. 16-3131

United States Court of Appeals, Seventh Circuit.

Argued September 28, 2017

Decided July 26, 2018

Richard Kirk Cannon, Attorney, Law Offices of Cannon & Associates, Barrington, IL, for Plaintiffs-Appellants.

Christopher W. Carmichael, Attorney, Henderson Parks, LLC, Chicago, IL, for Defendant-Appellee Forest Preserve District of Cook County, Illinois.

David T. Audley, Attorney, Chapman & Cutler LLP, Chicago, IL, for Defendant-Appellee BMO Harris Bank N.A.

Donald R. Lorenzen, Attorney, Office of the United States Attorney, Chicago, IL, for Defendant-Appellee United States of America.

Jonathan D. Nusgart, Attorney, Craig C. Smith, Attorney, Michael J. Weik, Attorney, Smith & Weik, LLC, Oak Park, IL, for Defendant-Appellee Bayview Loan Servicing, LLC.

Joseph S. Messer, Attorney, Messer Strickler, Ltd., Chicago, IL, for Defendant-Appellee McGinley Partners, LLC.

Daniel Martin Feeney, Attorney, Miller, Shakman & Beem LLP, Chicago, IL, for Defendant-Appellee Francis L. Keldermans.

Before Bauer, Manion, and Hamilton, Circuit Judges

Hamilton, Circuit Judge.

The Forest Preserve District of Cook County, Illinois, has been trying to acquire a 400-acre estate in Barrington after the owners defaulted on a mortgage and note held by the Forest Preserve. The Forest Preserve foreclosed and then bought the property at the foreclosure auction. The original owners have expressed their opposition by filing five lawsuits of their own, in addition to raising affirmative defenses and counterclaims in the still-pending foreclosure action. This appeal arises in the owners’ third federal lawsuit, in which they have alleged unconstitutional takings, fraud, and derivative claims for conspiracy and aiding and abetting. The district court dismissed the suit for failure to state a claim. We affirm.

I. Factual and Procedural Background

A. Underlying Transactions

In 2006, plaintiffs Meryl Squires-Cannon and Richard Kirk Cannon purchased a 400-acre estate and horse farm in Barrington. The Cannons bought the property through two wholly-owned limited liability companies, Royalty Properties, LLC and Cannon Squires Properties, LLC, which are also plaintiffs in this lawsuit. The LLCs executed a one-year, $14.5 million note and mortgage loan agreement with Amcore Bank, N.A. The Cannons allege that Amcore committed to modify the loan to a longer term before the end of the initial one-year term. But the financial crisis intervened, and Amcore reneged. Under financial distress itself, Amcore called the loan and when, we assume, the Cannons were unable to refinance in the financial environment of the time, Amcore filed for foreclosure in an Illinois state court. Amcore then failed in 2009, and the FDIC became its receiver. BMO Harris Bank, N.A. bought Amcore’s loan assets at a discount from the FDIC, became the owner of the Cannons’ note, and took over as the plaintiff in the foreclosure action.

When the value of the estate fell in the midst of the financial crisis, BMO faced a risk that the note was worth more than the property securing it. And the FDIC had agreed to pay BMO 80% of any Amcore loan that BMO could not recover directly from the borrowers. To cut their losses on the Cannons’ loan, the FDIC and BMO had incentives to find a buyer for the note. Enter the Forest Preserve. The Cannons allege that the FDIC, BMO, Bayview Loan Servicing, LLC, and Does 1–15 secretly agreed to assign the note to the Forest Preserve for $14 million. After the Forest Preserve’s board approved the purchase, BMO assigned the note to the Forest Preserve, which became the plaintiff in the foreclosure action.

In 2013, the foreclosure court granted summary judgment for the Forest Preserve. The Forest Preserve then obtained board approval to offer a credit bid for the estate at the foreclosure sale. The Forest Preserve made the (winning) credit bid of about $14.5 million at the foreclosure sale. The foreclosure court also entered a deficiency judgment against the Cannons for over $6 million. See BMO Harris Bank, N.A. v. Royalty Properties, LLC , No. 1-15-1338, 2016 WL 6269967, at *3 (Ill. App. May 17, 2016). The Illinois Appellate Court later reversed the foreclosure judgments. Id. at *14. On remand, the foreclosure court reinstated its order making the Forest Preserve a mortgagee in possession, but the Illinois Appellate Court also vacated that order in an interlocutory appeal. Forest Preserve District of Cook County v. Royalty Properties, LLC , No. 1-17-1564, 2017 WL 3758758 (Ill. App. Aug. 29, 2017). As far as we know, there is at this time no judgment in the foreclosure action. The Cannons told us at oral argument that the foreclosure action is "starting from scratch."¹

B. Lawsuits

There have now been six separate lawsuits relating to the Cannons’ default on the note—three state and three federal. The three state lawsuits are:

(1) the foreclosure action, which is still pending;

(2) the Cannons’ lawsuit against the Forest Preserve and BMO (the "taxpayer action"), which was dismissed, Baker v. Forest Preserve District , 393 Ill.Dec. 1, 33 N.E.3d 745 (Ill. App. 2015) (affirming dismissal of all claims and rejecting theory that Forest Preserve’s purchase of note and participation in foreclosure auction violated Cook County Forest Preserve District Act), and;

(3) a lawsuit by one of the Cannon entities against the Forest Preserve for breach of a purported lease after the foreclosure sale, which is stayed, Royalty Farms, LLC v. Forest Preserve District of Cook County , 419 Ill.Dec. 234, 92 N.E.3d 943 (Ill. App. 2017) (reversing order awarding possession of property to Forest Preserve and remanding and staying eviction proceedings pending resolution of foreclosure action).

The three federal lawsuits are:

(1) a lawsuit with allegations similar to this one, which was dismissed for lack of jurisdiction, Squires Cannon v. Forest Preserve District of Cook County , No. 13 C 6589, 2014 WL 1758475 (N.D. Ill. May 2, 2014) ;

(2) a lawsuit by Meryl Squires-Cannon against several Forest Preserve officials and employees for false arrest and malicious prosecution, which was dismissed on the merits, Squires-Cannon v. White , 864 F.3d 515 (7th Cir. 2017) (affirming dismissal), and;(3) the lawsuit in this appeal, which the district court dismissed, Squires Cannon v. Forest Preserve District of Cook County , No. 14 C 5611, 2016 WL 2620515 (N.D. Ill. May 9, 2016).

II. Analysis

Our review of a dismissal under Rule 12(b)(6) for failure to state a claim is de novo , and we may affirm on any ground in the record. Brooks v. Ross , 578 F.3d 574, 578 (7th Cir. 2009), citing Tamayo v. Blagojevich , 526 F.3d 1074, 1081 (7th Cir. 2008), and citing Bennett v. Spear , 520 U.S. 154, 166, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997). We accept the complaint’s well-pleaded facts as true and draw all reasonable inferences from those allegations in the Cannons’ favor. Abcarian v. McDonald , 617 F.3d 931, 933 (7th Cir. 2010), citing London v. RBS Citizens, N.A. , 600 F.3d 742, 745 (7th Cir. 2010). But written exhibits attached to the complaint may trump contradictory allegations. Id. , citing Northern Indiana Gun & Outdoor Shows, Inc. v. City of South Bend , 163 F.3d 449, 455 (7th Cir. 1998).

A. Takings Claims

The takings clause of the Fifth Amendment provides, "nor shall private property be taken for public use, without just compensation." U.S. Const. amend. V. The Fourteenth Amendment makes the takings clause applicable to the States and their subdivisions. See, e.g., Murr v. Wisconsin , ––– U.S. ––––, 137 S.Ct. 1933, 1942, 198 L.Ed.2d 497 (2017), citing Chicago, Burlington & Quincy R.R. Co. v. Chicago , 166 U.S. 226, 17 S.Ct. 581, 41 L.Ed. 979 (1897) ; cf. Dolan v. City of Tigard , 512 U.S. 374, 405–06, 114 S.Ct. 2309, 129 L.Ed.2d 304 (1994) (Stevens, J., dissenting) (criticizing citation of Chicago, Burlington & Quincy Railroad Co. as resurrecting substantive due process analysis identified with Lochner v. New York , 198 U.S. 45, 25 S.Ct. 539, 49 L.Ed. 937 (1905) ). The Cannons allege that the Forest Preserve violated the takings clause here in three ways: (1) by passing an ordinance converting the estate into a forest preserve; (2) by buying the mortgage from BMO and then taking over as the plaintiff in the foreclosure action; and (3) by physically entering the estate and installing Forest Preserve signs at the estate entrances. All three theories fail, and the derivative conspiracy and aiding-and-abetting claims fall with them.

1. No Taking by Ordinance

After the Forest Preserve acquired the note from BMO, it passed an ordinance creating a forest preserve district for "lands now owned and lands to be acquired." The "lands" included the Cannon estate, and the ordinance stated that the Forest Preserve "shall acquire" those "lands." The ordinance also authorized the Forest Preserve to bid at the foreclosure auction and set a ceiling for the bid. Enactment of the ordinance was not a regulatory taking, and the district court properly rejected this theory.

A regulatory taking is "a restriction on the use of property that [goes] ‘too far.’ " Horne v. Department of Agriculture , ––– U.S. ––––, 135 S.Ct. 2419, 2427, 192 L.Ed.2d 388 (2015), quoting Pennsylvania Coal Co. v. Mahon , 260 U.S. 393, 415, 43 S.Ct. 158, 67 L.Ed. 322 (1922). To determine how far is too far, we consider factors that include "the economic impact of the regulation, its interference with reasonable investment-backed expectations, and the character of the government action." Id. , citing Penn Central Transportation Co. v. New York City , 438 U.S. 104, 124, 98 S.Ct. 2646, 57 L.Ed.2d 631 (1978).

The character of this government action defeats the Cannons’ claim. The ordinance prospectively authorized the Forest Preserve to acquire the estate. The ordinance did not effect the actual acquisition of the estate. And the estate became a...