City of Rockford v. Gilles, 2022 IL App (2d) 2100521 

The Second District of the Illinois Appellate Court (“2d District”) recently overturned an Illinois  Winnebago County (“County”) court’s granting of an untimely petition for judgment relief. In late 2020, Jeffrey Gilles (“Gilles”) filed a petition seeking relief from a 2017 foreclosure and sale judgment (“Petition”) following entry of an order of default favoring the City of Rockford (“City”).

Gilles owned 2 vacant lots (“Lots”) located in City and moved from Illinois to Colorado at some unknown point in time. Between 2004 and 2017, City recorded 20 special assessment liens against the Lots for City’s costs and expenses incurred in mowing, cleaning, and/or abating nuisance vegetation on the properties. The total amount of the 13 years’ worth of liens recorded was $11,465.

In November 2017, City filed to foreclose its special assessment lien, naming Gilles, a mortgage holder on the Lots, and all unknown owners and non-record claimants, as defendants. City attempted personal service on Gilles 3 different times at his last known address in Colorado, each in a 9-day period. The trial court granted City’s motion for service via publication after failed personal service.

In July 2018, City moved for default judgment, seeking foreclosure and sale of the Lots with a shortened redemption period because the Lots were abandoned. Notices of all motions were mailed to Gilles’ last known address in Colorado. In August 2018, the court entered orders for: (i) default judgment; (ii) foreclosure and sale of the Lots; (iii) appointing a selling officer; and (iv) a shortened redemption period. Notice of the sale was mailed to Gilles’ last known address in Colorado in September 2018. In November 2018, the Lots were sold, sale confirmed by court order finding no applicable redemption or reinstatement, and all defendants personally liable for any sale deficiency. In November 2018, City received and recorded a judicial deed for the Lots. In September 2020, City entered a contract with a third party to sell one (1) of the Lots.

Gilles discovered he was not the Lots’ owner when he did not receive a property tax bill for the Lots in September 2020. Gilles’ attorneys ordered a title search on September 3, 2020 and it was not returned until November 12, 2020, because of the Recorder Office closure due to the COVID-19 pandemic. The title search indicated that Gilles was no longer the Lots’ owner because of the City’s 2018 foreclosure action. Gilles spoke with his attorneys on November 17, 2020; his attorneys filed the Petition on November 18, 2020 – more than 2 years after City’s foreclosure action was finalized.

In November 2020, Gilles filed a Petition, with a supporting affidavit, seeking vacation of the orders of: (i) foreclosure; (ii) sale; and (iii) confirming sale. Gilles claimed he never received actual notice of the foreclosure, and made no efforts to evade service. Leading up to, and during, the foreclosure, Gilles spent most of his time either working in Montana as a physician, or attending to his wife who was being treated for brain cancer until her death. Gilles further alleged that the Lots’ actual worth between $500,000 and $1 million dollars was a windfall to City, specifically because the total value of City’s total cost spent on the foreclosure, plus City’s liens value being an estimated $25,000.

City responded that Gilles’ Petition was untimely under the applicable statute of limitations, which Gilles’ conceded. City also argued that equitable tolling did not apply because Gilles failed to allege the duration of the County Recorder Office’s closings or demonstrate the in-person visits were required to obtain such information, i.e., diligent efforts such as contacting the Office through other means.

Gilles conceded the Petition as untimely but argued that because the County building was closed for almost 2.5 months due to the Pandemic, and although Gilles was unaware of the foreclosure, such should have brought Gilles within the applicable limitations period. Gilles further argued that the 3-month period (rather than typical 2-weeks) between the date Gilles became aware he no longer owned the Lots, and when title search documents returned should also be applied to bring Gilles within the limitations period due to the County building’s closure as result of the Pandemic.

The trial court denied City’s motion to dismiss, granting Gilles’ Petition because the COVID-19 pandemic “posed an extraordinary barrier to Gilles obtaining information necessary” to filing the Petition. City argued that Gilles was not entitled to relief because: (i) Gilles was not entitled to actual notice; (ii) Gilles had actual notice in early September 2020, and failed to file the Petition until November 19, 2020; and (iii) granting the Petition severely prejudiced City, given the contract for sale involving one (1) of the Lots.

Gilles responded that: (i) City’s action constituted an “equitable forfeiture”  because of the substantial difference between the Lots and the liens’ value; (ii) all 3 personal service attempts occurred in a 9-day period, while Gilles drove 20+ hours between his wife in Colorado and his job in Montana; (iii) City’s failure to give actual notice caused Gilles’ failure to act “diligently”; and (iv) City’s only potential prejudice would be loss of a windfall.

The trial court granted Gilles’ Petition vacating the orders of: (i) default judgment; (ii) foreclosure and sale; and (iii) approving the sale and distribution; (iv) confirmation; and (v) eviction. The court found Gilles established a defense of an “excusable mistake” in being unaware to the Lots foreclosure. While City’s contract for sale of one (1) the Lots was “complicating,” Gilles met the requirements for granting the Petition after the court weighed the equities of the case. City appealed.

The issue before the 2d District was whether equitable tolling, a judicial doctrine, applies to the general 2-year statute of limitations for vacating a final judgment in Illinois. The Illinois Code of Civil Procedure (“Code”) allows for a civil judgment to be vacated and/or modified at least 30 days but no more than 2 years after entry. The Code provides specific reasons for granting a Petition: (i) existence of a meritorious claim/defense; (ii) due diligence in presenting the claim/defense; and (iii) due diligence presenting the Petition. Tolling only applies if the petitioner was under a legal disability, duress, or any ground for relief is fraudulently concealed from them.

The Illinois Supreme Court (“Court”), while ruling on different issues, has made clear that if the petitioner fails to establish any of the 3 specific grounds for equitable tolling to apply, a Petition must be denied. The 2d District noted that equitable tolling is appropriate only if the petitioner was actively misled, or otherwise prevented from asserting their rights in some “extraordinary” way, or mistakenly asserted their rights in a wrong forum. Equitable tolling is rarely applied in Illinois; the Court has applied it only once (1) in a case involving a question of federal law.

While the 2d District noted the case’s unfortunate facts, failure to meet any of the 3 requirements for tolling must result in a Petition’s denial. The 2d District reversed, finding for City.

Young v. Wilkinson d/b/a Hammer It Construction, 2022 IL App (4th) 220302 

Illinois’ 4th Appellate District Court (“4th District”) recently affirmed a Carroll County court’s assessment and award of damages relating to the construction of the Plaintiffs’ home.

In 2014, Plaintiffs, Gabe, and Annetta Young (“Youngs”), contracted with Defendant, Dustin Wilkinson d/b/a “Hammer It Construction” (“Wilkinson”) to build a residence for $253,400, work to be completed in a “substantial workmanlike manner.”  Construction began in the summer of 2014; by September 2014, Youngs paid Wilkinson all but $10,000 of the purchase price. However, the Youngs raised concerns to Wilkinson regarding specific construction defects and refused to pay the remaining $10,000 until those concerns were addressed and corrected. Wilkinson failed to return to the property.

In 2015, Youngs filed a breach of contract claim against Wilkinson; the Youngs voluntarily dismissed this claim in March 2019 before trial.  The 2015 litigation went to hearing only on Wilkinson’s counterclaims for breach of contract and mechanic’s lien foreclosure. The Youngs prevailed on both issues at an April 2019 bench trial based, in part, on expert testimony establishing that the residence was “plagued” with several “substantial” construction defects requiring “expensive remedy.”  The trial court found that Wilkinson’s construction deficiencies were “more than contractual “omissions or deviations,” thus Wilkinson was not entitled to foreclose his mechanics’ lien, or contract damages.

In September 2019, the Youngs refiled their breach of contract claim against Wilkinson. Wilkinson filed a motion to dismiss, asserting that Youngs’ claim was barred, based on the resolution of the 2015 litigation. The trial court denied Wilkinson’s motion, finding that Youngs were not required to litigate their contractual claims against Wilkinson during the 2015 litigation; the only trial issue was whether Wilkinson substantially performed his work under the contract. The 2019 case proceeded to trial where Youngs established that the residence’s value “as is” was only $34,528, as compared to comparative residences built in a “substantial workmanlike manner” of approximately $275,000; a difference of $240,472. The trial court awarded Youngs damages of $168,223.44, plus costs – representing the cost of repairs due to the diminution of value resulting in damages exceeding repair costs.

Wilkinson appealed to the 4th District, arguing that: (i) Youngs’ 2019 Complaint was barred; (ii) Youngs’ evidence establishing damages should have been barred; and (iii) the same evidence was insufficient to support the court’s damages calculation, and the trial court erred in rejecting Wilkinson’s mitigation of damages defense.

Under Illinois law, res judicata is the legal doctrine that a final judgment on the merits of a court of competent jurisdiction bars any subsequent actions between the same parties or their privies, on the same cause of action. Reviewing res judiciata’s 3 required elements, the 4th District affirmed the doctrine as inapplicable because Youngs were not required to bring any claim against Wilkinson, or otherwise establish the issue of Wilkinson’s non-compliance with the contract, in defending against his breach of contract and foreclosure actions. Further, any result of the Youngs’ 2019 Complaint would have no legal effect on the 2015 litigation’s final judgment. If anything, Wilkinson should have been barred under collateral estoppel from relitigating any issues relating to his compliance with the contract.

Wilkinson further argued that testimony from one (1) of the Youngs expert witness should have been excluded from evidence. Asides from procedural issues, Wilkinson argued that the testimony was improper due to a lack of evidence that the expert based his testimony on “generally accepted” knowledge “in the particular field in which [he] belongs.” The court quickly rejected this argument, as Wilkinson failed to expressly raise any such objection, and failed to provide any evidence that the expert’s methodology was “new” or “novel,” requiring further scrutiny before admittance to evidence.

Wilkinson’s final argument was that the trial court erred by: (i) utilizing an improper measurement of damages; (ii) failed to consider the “necessity of repairs” by a 3rd party; (iii) failed to consider “comparable sales” for the “as built” residence; (iv) considering Youngs’ expert methodology in rendering his “as built” valuation; and (v) rejecting Wilkinson’s mitigation of damages defense.

In Illinois, the measure of damages for breach of contract where a contractor provides less than full performance or “defective” performance is generally the cost of repairing the defective condition. However, an exception may apply if either: a) a defective condition can only be corrected at an “unreasonably disproportionate” benefit to the purchaser; or b) correcting the defective condition entails “unreasonable destruction” of the contractor’s work. The trial court reviewed the latter subrule, because the residence’s garage and porch were “completely replaced,” however it found the destruction was “reasonable” because of Wilkinson’s defective performance. Because the destruction was “reasonable,” and Wilkinson failed to provide evidence otherwise, cost of repairs was the correct measurement of damages.

Regarding the trial court’s calculation of damages, the 4th District found no error because the trial court properly relied on tangible and oral evidence at trial to determine the cost of repairs spent by Youngs, and such evidence demonstrated that the repairs were “reasonable and necessary.”  The court rejected Wilkinson’s arguments regarding Youngs’ expert methodology, finding the expert’s testimony played “no role” in the trial court’s determination regarding the  “reasonableness” of the garage and porch’s destruction, and made no difference to the case’s ultimate outcome. The court made quick work of Wilkinson’s mitigation argument, finding he established little to no evidence of such.

Tyler v. Hennepin County (8th Cir. 2022)

In January 2023, the United States Supreme Court (“Court”) granted a homeowner’s Petition for a writ of certiorari to the Court regarding a local government’s tax forfeiture action. The Court will hear oral arguments over this case in its next term where its decision will be of interest to units of local government and homeowners, among others.

Geraldine Tyler (“Owner”) owned a condominium unit in Minneapolis, Minnesota. When Owner moved to another state, Owner stopped paying property taxes on the unit. Under Minnesota law, property taxes not paid during the year owing are delinquent upon January 1 of the following calendar year. Each county in Minnesota is required to file a delinquent tax list, where the state files a lawsuit to foreclose the perpetual lien against the parcel. Minnesota law requires delinquent owners receive multiple adequate notices before a default judgment can be entered.

When Owner stopping paying the property taxes owing in 2010, Hennepin County, Minnesota (“County”) filed a foreclosure action to collect a delinquent tax balance of $15,000. Owner received lawful notice and failed to respond. In 2012, County obtained Default, which Owner again received notice of and failed to respond or otherwise exercise the right to redeem or confess judgment, which would have extended the period of Owner’s equity in the unit. The State of Minnesota (“Minnesota”) obtained absolute title to the unit in 2015, extinguishing the $15,000 lien, and then County, on Minnesota’s behalf, sold the unit to a private party for $40,000, distributing sale proceeds to all taxing bodies with liens against the unit. Owner received no sale proceeds.

Owner filed suit in federal court, alleging federal and Minnesota state constitutional claims. Specifically, Owner argued that County’s property sale, and failure to distribute any portion of the difference of the $40,000 sale price and $15,000 delinquent tax balance was a violation of the U.S. Constitution’s prohibition of governmental “taking” of private property, absent just compensation. The federal district court granted County’s motion to dismiss on all of Owner’s claims. Owner appealed to the United States Court of Appeals for the Eighth District (“8th Circuit”).

Under Court precedent, the first step in a “takings” analysis is what “interest” the claimant has, if any, in the property. On appeal, Owner did not argue that County lacked lawful authority under Minnesota law to foreclose on Owner’s interest in the unit to satisfy the delinquent debt, but that County’s retention of sale profits without any distribution to Owner, after satisfaction of the total lien balance, was a “taking.”  In doing so, Owner relied on an 1800s Minnesota common law case, asserting that Owner retained judicially created interest in the sale profits in a tax forfeiture proceeding.

However, the 8th Circuit affirmed the district court, finding that even if Owner did retain a common-law interest in the profits, that such an interest was abrogated by Minnesota law providing for tax forfeiture surplus sale distribution, with provided exactly how County was required to spend the entire surplus balance, and none gave Owner any right to the surplus. The 8th Circuit reviewed the laws’ notice procedures and specifically noted Owner’s failure to respond and affirmed the district court’s dismissal of all Owner’s claims.

The case will be heard for oral argument on Wednesday, April 26, 2023.

Billie v. Village of Channahon, Illinois, No. 22-1660 (7th Cir. 2023)

In 1993, a Village approved a plat within a residential subdivision simultaneously lying within a Special Flood Hazard Area (“Area”) and issued residential construction permits. All homes constructed experienced flooded basements when the river within the Area was at “high water.”

The owners of each home (“Owners”) filed suit against Village, alleging that Village violated the United States Constitution when either: a) granting the construction permits; or b) failing to build dykes to prevent flooding. The federal Northern District Court of Illinois (“District Court”) granted Village’s motion to dismiss. Owners appealed to the 7th Circuit.

The 7th Circuit affirmed the District Court’s dismissal, noting that Owners failed to allege that Village required Owners to build their houses where they in fact did, nor did the Village require Owners to dig basements; or that Village took any affirmative steps following construction of the homes to make the flooding worse, such as specific acts that would have increased the likelihood of the river to flood, or the resulting damage thereof. The 7th Circuit further noted that while the Constitution provides several rights promoting freedom from overt governmental interference of individual liberties, it does not compel the government to assist persons, and therefore, even if Village violated any local laws or federal regulations when granting the construction applications, the Constitution did not entitle Owners to accurate enforcement of any applicable construction laws or regulations. Regarding Owners’ “taking” argument, the 7th Circuit found that Village did not take any property under any “taking” theory recognized by its or United States Supreme Court precedent.

The 7th Circuit specifically noted that for Village to be liable to Owners for just compensation, it would have had to induce the river to flood, in some overt manner. The Court found that Owners failed to allege Village induced compensable flooding, as a matter of law.