T2 Expressway, LLC v. Tollway
| Docket Number | 1-19-2616 |
| Decision Date | 28 June 2021 |
| Citation | 2021 IL App (1st) 192616,197 N.E.3d 263,458 Ill.Dec. 850 |
| Parties | T2 EXPRESSWAY, LLC, a Delaware Limited Liability Company, Plaintiff-Appellee, v. TOLLWAY, L.L.C., an Illinois Limited Liability Company; Tollway Industrial Center Limited Partnership, an Illinois Limited Partnership; George A. Moser; George M. Moser; Douglas C. Altenberger; Murphy & Hourihane, L.L.C. ; and Unknown Owners and Nonrecord Claimants, Defendants-Appellants. |
| Court | United States Appellate Court of Illinois |
David K. Welch and Brian P. Welch, of Burke, Warren, MacKay & Serritella, P.C., of Chicago, for appellants Tollway LLC, Tollway Industrial Center Limited Partnership, George A. Moser, George M. Moser, and Douglas C. Altenberger.
No brief filed for other appellants.
Edward F. Malone, of Barack Ferrazzono Kirschbaum & Nagelberg LLP, of Chicago, for appellee.
¶ 1 T2 Expressway, LLC (Plaintiff) made a loan to Tollway, L.L.C. (Tollway), that was secured by a mortgage against real property owned by Tollway. Plaintiff commenced a foreclosure action against Tollway, Tollway Industrial Center Limited Partnership (TICLP), George A. Moser (George A.), George M. Moser (George M.) and Douglas C. Altenberger (Altenberger) (collectively, Defendants). The circuit court entered a judgment of foreclosure and sale. Plaintiff subsequently purchased the mortgaged property at the Sheriff's sale. Defendants filed a motion for discovery and evidentiary hearing arguing that the sale price generated at the auction was "unconscionable, grossly inadequate, inequitable and justice was not done." The circuit court confirmed the sale. Defendants then filed a motion to reconsider, which the circuit court denied. Defendants appeal both orders of the circuit court and request this court to reverse and remand for discovery and an evidentiary hearing. For the following reasons, we affirm.
¶ 3 On October 10, 2014, Plaintiff made a loan in the original principal amount of $3 million to Tollway. In March 2016, TICLP (collectively with Tollway, Borrowers) became an additional borrower under the operative loan documents. The loan was secured by a mortgage against real property located at 2305 Pembroke Avenue, Hoffman Estates, Illinois (Property). The Property is comprised of approximately 11 acres of vacant land and includes four double-sided billboards constructed on the Property (Billboards).
¶ 4 The loan was guaranteed by George A., George M., and Altenberger (collectively, Guarantors). The loan was amended four times between December 2014 and April 2016 to extend additional credit to the Borrowers, resulting in the total principal under the loan totaling $4.4 million.
¶ 5 On November 9, 2017, Plaintiff commenced the underlying foreclosure action. On December 12, 2017, Plaintiff filed its first amended verified complaint for foreclosure and other relief (complaint). In the complaint, Plaintiff alleged various causes of action and theories of recovery against Defendants. Count I sought foreclosure of mortgage against Tollway, judgment lien holder Murphy & Hourihane, L.L.C., unknown owners, and nonrecord claimants. Count II sought foreclosure of liens and security interests in personal property against Tollway, Murphy & Hourihane, L.L.C. unknown owners, and non-record claimants. Count III alleged breach of promissory note against the Borrowers. Count IV alleged breach of guaranty against the Guarantors. Plaintiff sought to foreclose upon the mortgage; terminate junior liens, encumbrances, and/or alleged subordinate mortgages against the property; and enter a deficiency judgment against the Borrowers. Plaintiff also sought a money judgment against the Guarantors for the purported breach of their obligations under various guaranty documents.
¶ 6 On January 30, 2018, Plaintiff filed a verified motion to appoint receiver. On October 16, 2018, Adam Firsel (Firsel) was appointed receiver for the Property.
¶ 7 On October 26, 2018, Defendants filed a response denying the material allegations of the complaint. On December 10, 2018, Plaintiff filed a motion for judgment on the pleadings.
¶ 8 Prior to the hearing on the motion for judgment on the pleadings, Tollway filed a petition for bankruptcy. On February 1, 2019, the circuit court stayed the proceedings as to Tollway, defaulted unknown owners, nonrecord claimants and Murphy & Hourihane, and granted Plaintiff's motion only as to TICLP and the Guarantors. On March 29, 2019, Tollway dismissed its bankruptcy motion, and the automatic stay was lifted. On April 15, 2019, the circuit court entered judgment on the pleadings against Tollway.
¶ 9 On June 7, 2019, the circuit court entered a judgment of foreclosure and sale in the amount of $6,440,056.75, plus additional amounts and costs. On July 24, Plaintiff purchased the Property for $3.5 million at the Sheriff's sale.
¶ 10 On August 2, 2019, Plaintiff filed a motion to confirm sale. In the motion, Plaintiff sought the entry of an order approving the sale and a deficiency judgment against the Defendants in the amount of $3,124,256.84.
¶ 11 On September 5, 2019, Defendants filed a combined motion for discovery and evidentiary hearing and response to plaintiff's report of sale and distribution for order of possession and deficiency judgment (combined motion and response). Defendants argued that the sale price generated at the auction was "unconscionable, grossly inadequate, inequitable and justice was not done." Defendants claimed that a contemporaneous appraiser's opinion showed the Property was worth between $5.5 and $6.5 million, and other indicia of value supported the conclusion that the Property was worth more than $6.5 million. Defendants requested that the circuit court deny the motion to confirm sale and allow discovery and an evidentiary hearing into the adequacy of the sale.
¶ 12 Gary K. DeClark (DeClark), the principal and managing director of Valbridge Property Advisors—Chicago Metro (Valbridge), submitted an affidavit providing his opinion on the value of Property. Defendants attached his affidavit to the combined motion and response. In the affidavit, DeClark testified that he holds an appraiser's general certification from the State of Illinois, has been a real estate appraiser for 39 years, has personally inspected the Property, and has knowledge of the market value of the Property and similar properties. DeClark testified that as of July 24, 2019, the market value of the Property, incorporating both land and billboard components, was between $5.5 and $6.5 million. DeClark added that an appraisal report was being prepared to set forth an estimate of value.
¶ 13 Defendants also attached a copy of a Purchase and Sale Agreement (Shout PSA) between Tollway and Shout Outdoor Media, LLC (Shout) dated September 7, 2018. Shout agreed to pay Tollway $3.6 million for the sale of Billboards, but the sale was conditioned upon the approval of the Plaintiff, as the secured lender.
¶ 14 Finally, Defendants attached a copy of a marketing proposal relating to the Property prepared by CBRE. In the marketing proposal, CBRE concluded that the value of the vacant land (not including the Billboards) was $4.50 per square foot to $6.50 per square foot. The price per square foot over the entire 10.91 acres of the vacant land would be between $2,138,578 and $3,089,057.
¶ 15 On September 13, 2019, Plaintiff responded to the combined motion and response. Plaintiff argued that Defendants’ objection to the sale failed because the $3.5 million sale price was between 54% and 64% of Defendants’ valuation and was within the range that has been found adequate by Illinois courts. Plaintiff also argues the evidence Defendants submitted was insufficient to support the valuation they claimed.
¶ 16 Plaintiff's reply included a declaration from Dennis Jacobs, Plaintiff's chief credit officer. Jacobs explained that Plaintiff had calculated its $3.5 million bid by applying a 25% discount to a $4.6 million valuation of the Property. The $4.6 million valuation was based on the Shout PSA of $3.6 million for the Billboards and a $1 million estimate of the value of the vacant land. Jacobs also considered other information, including a January 2019 restricted appraisal valuing the Property at $4.35 million. Jacobs explained that the 25% discount was the result of the Property being sold in foreclosure and the Shout PSA overvaluing the Billboards because it did not account for certain facts that impaired their value. These facts included the right of the Hoffman Estates Park District (Park District) to the revenue from one of the four Billboards and the offer's condition that its foreclosure litigation be terminated.
¶ 17 Firsel also described factors impairing the value of the Property in a declaration (Firsel declaration). Firsel explained that the Shout PSA overstated the value of the Billboards because it failed to account for the Park District's interest in the Billboards, including the right to collect rent generated by one of the Billboards and the ability of the State of Illinois or the Village of Hoffman Estates (Village) to terminate the right of the Billboards’ owner to lease them. Firsel also described his attempt to sell the Property to the Village for $5.5 million, but the Village rejected, stating that the Property was worth only $3 million.
¶ 18 On September 17, 2019, the circuit court confirmed the sale. The circuit court explained its analysis as follows:
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¶ 19 On October 17, 2019, Defendants filed a motion to reconsider. In addition to re-stating issues set forth in the...
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