Forest Preserve District v. First National Bank

SUPREME COURT CASES

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State: Illinois

Court: 2nd District Appellate

Docket No: 2-08-0565 Rel

Case Date: 05/27/2010

Preview:No. 2-08-0565 Filed: 5-27-10 ______________________________________________________________________________ IN THE APPELLATE COURT OF ILLINOIS SECOND DISTRICT ______________________________________________________________________________ THE FOREST PRESERVE DISTRICT OF DU PAGE COUNTY, ) Appeal from the Circuit Court ) of Du Page County. ) Plaintiff-Appellee, ) ) v. ) No. 99--ED--54 ) FIRST NATIONAL BANK OF FRANKLIN ) PARK, as Trustee under Trust Agreement ) dated December 17, 1984, a/k/a Trust No. ) 1056, AMERICAN NATIONAL BANK AND ) TRUST COMPANY OF CHICAGO, ) Successor Trustee to North Shore National ) Bank of Chicago, as Trustee under Trust ) Agreement dated February 1, 1978, a/k/a Trust ) No. 87, THE RAINBOW GROUP, ROBERT ) KRILICH, THE UNITED STATES OF ) AMERICA, THE CITY OF NAPERVILLE, ) and UNKNOWN OWNERS, ) ) Defendants-Appellants ) ) Honorable (The State of Illinois ex rel. Lisa Madigan, ) Stephen J. Culliton, Attorney General, Intervenor). ) Judge, Presiding. ______________________________________________________________________________ JUSTICE SCHOSTOK delivered the opinion of the court: In December 1999, the plaintiff filed this condemnation action against the defendants, seeking to take 204 acres of land in Naperville (the Property). Approximately eight years later, a jury found that just compensation for the taking was $10,725,000, based on the fair market value of the Property in 1999. The defendants appeal, arguing that the trial court erred in: (1) granting summary

No. 2--08--0565 judgment in favor of the plaintiff on the issue of whether the plaintiff met its obligation to negotiate in good faith before filing suit; (2) granting the plaintiff's motion in limine to bar certain evidence; and (3) denying the defendants' motion for a posttrial hearing to determine the fair market value of the Property as of December 2007. We affirm in part and reverse in part and remand for further proceedings. BACKGROUND In 1978, Naper Venture (in which the defendant Robert Krilich held a dominant interest) applied for the annexation into Naperville of a 456-acre planned unit development (PUD) to be called Country Lakes. The PUD was approved as a special use in connection with the annexation agreement. The PUD application for and the preliminary plat of the Country Lakes PUD designated as open space within the PUD an existing 150-acre public golf course, which was used to satisfy part of the open-space requirements for the PUD. Around the golf course were seven areas that were to be developed as residential areas of varying density. Area 1 was already developed at the time of the annexation agreement. By December 1999, areas 2 through 5 had been developed or were in the process of being developed. Areas 6 and 7 (totaling approximately 54 acres) had not yet been developed, and the Summit Development Corporation had a contract pending to purchase these areas (the Summit parcel) for development. In November 1999, the plaintiff decided to acquire the Property, which was the 204 acres comprising the golf course and the Summit parcel. It obtained a preliminary engineering report and, based on that, a preliminary estimate of value. The Polach Appraisal Group (Polach) provided a verbal estimate on November 23, 1999, that the Property had a value of $10.3 million. That same day, the plaintiff's board of commissioners approved an ordinance authorizing the plaintiff to

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No. 2--08--0565 negotiate for ownership of the Property, and the plaintiff's staff issued form letters to the two trusts that they had determined owned the Property. The letters offered the trustees a total of $9.27 million for the Property and gave them 10 working days to respond before the matter would be referred for condemnation proceedings. No appraisal report or other written basis for the amount of the offer was included with the letters. The plaintiff's chief negotiator for the Property later testified in a deposition that it was the plaintiff's policy to make an initial offer that was 10% below the appraised value. If the landowner made a counteroffer, the negotiator could immediately offer the full appraised value, and could go as high as 10% more than the appraised value before having to seek further approval from the plaintiff's board. On December 3, 1999, the plaintiff received from Polach an updated verbal appraisal in the amount of $11.02 million. The plaintiff's attorneys and staff then met with representatives of the Property's owners to discuss just compensation for the Property. A representative for the Summit Development Corporation was present, and Summit's pending contract to purchase areas 6 and 7 was distributed and discussed. The owners rejected the plaintiff's initial offer but did not make a counteroffer. After the meeting, the plaintiff received from Polach its first written appraisal of the Property's value, which reflected the verbal estimate of $11.02 million. Under the plaintiff's acquisition policy, it sought two appraisals on any piece of property it wished to acquire: an initial estimate by one certified appraiser, and a report by a second certified appraiser who reviewed the first estimate and gave his own estimate and the reasons for any difference between the two. The second appraiser for the Property was David W. Phillips. Phillips reviewed the Polach appraisal and, on December 6, 1999, faxed a one-page document to the plaintiff. Phillips stated that, although he concurred with the Polach appraisal of certain parcels, he disagreed

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No. 2--08--0565 on other parcels and believed that Polach's estimate of $11.02 million for the Property was too high. Phillips' estimate for the Property was $8.995 million. On December 7, 1999, the plaintiff's board of commissioners met and considered the negotiations for the Property. Both the Polach and the Phillips appraisals were before them, as was a log of all of the communications in connection with the negotiations. Neither side had made any further offers or counteroffers since the November 23 offer letters. Krilich (the majority beneficiary under both trusts) had expressly rejected the initial offer. The board of commissioners adopted an ordinance finding an inability to agree, revoking authority to negotiate further, and authorizing condemnation of the Property. The plaintiff sent letters to the two trustees and Summit Development Corporation enclosing a copy of the December 7 ordinance. On December 21, 1999, the plaintiff filed a complaint for condemnation. At the time the complaint was filed, the ownership of the Property was disputed and separate litigation to determine the ownership was ongoing. Proceedings in this case were stayed until the ownership suit was resolved in October 2001. A further delay arose when Krilich and Edward White, two of the beneficiaries of the trusts that owned the Property, began to dispute among themselves who had the right to control the defense in the condemnation action. That dispute was not resolved until November 2004. In March 2005, the defendants filed a second amended traverse and a motion to dismiss, arguing that the trial court lacked jurisdiction and that the condemnation complaint should be dismissed for several reasons. The parties conducted discovery on the issues raised in the traverse. In September 2006, the plaintiff filed four motions for partial summary judgment, each motion addressing an issue raised in the traverse. One of the plaintiff's motions concerned whether the

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No. 2--08--0565 plaintiff had engaged in good-faith negotiations prior to filing the condemnation complaint. On December 4, 2006, the trial court granted all four motions and entered summary judgment in the plaintiff's favor on those issues. On August 3, 2007, the defendants filed a motion asking the trial court to schedule a posttrial evidentiary hearing pursuant to Kirby Forest Industries, Inc. v. United States, 467 U.S. 1, 81 L. Ed. 2d 1, 104 S. Ct. 2187 (1984) (a Kirby hearing), on the value of the Property as of the time of trial. On October 18, 2007, the plaintiff filed several motions in limine. The first of these motions (motion in limine No. 1) sought to bar the defendants from presenting any evidence at trial regarding the value of the Property if the defendants were able to develop residential units on the 150 acres then being used as a golf course. Following briefing, on November 13, 2007, the trial court heard oral argument on the Kirby motion and motion in limine No. 1. At the close of the hearing, the trial court denied the motion for a Kirby hearing. The trial court issued its ruling on motion in limine No. 1 on November 20, 2007. In that ruling, the trial court found that the only use permitted for the golf course under the PUD preliminary plat was as a golf course, that no residential uses had ever been contemplated by the parties or approved by the City of Naperville, and that the defendants therefore could not present valuation evidence based on the assumption that the golf course could be developed, as of right, with residential units. The trial court therefore granted motion in limine No. 1. The case proceeded to a jury trial on December 12, 2007. After the close of evidence, the defendants made an offer of proof to the effect that, if they had been permitted to present evidence regarding the value of the Property if the golf course were developed with residential units, the evidence would have shown a value of up to $20 million. The jury determined that the fair market

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No. 2--08--0565 value of the Property on December 21, 1999 (the date the condemnation complaint was filed), was $10.7 million. The defendants filed a motion for a new trial, which the trial court denied. This appeal followed. ANALYSIS On appeal, the defendants raise three arguments. First, they argue that the trial court erred in granting the plaintiff summary judgment on the issue of whether the plaintiff engaged in goodfaith negotiations prior to filing the condemnation complaint. Second, they argue that the trial court erred in granting motion in limine No. 1, and that they are entitled to a new trial as a result. Finally, they contend that the trial court erred in denying their motion for a posttrial Kirby hearing. I. GOOD-FAITH NEGOTIATION In their second amended traverse, the defendants asserted that the condemnation complaint should be dismissed because the plaintiff did not negotiate in good faith before filing the complaint. After discovery on the issues raised in the traverse, the plaintiff filed a motion for summary judgment on this issue. The plaintiff attached to its motion copies of the appraisals it received from Polach and Phillips, and a transcript of the deposition of its employee Janice Roehll, who had primary responsibility for conducting the negotiations for the Property. In their response, the defendants argued that the plaintiff's exhibits could not be considered, because the appraisals were inadmissible hearsay and Ms. Roehll's deposition had not been properly certified. They also argued that, even if Ms. Roehll's testimony were taken into account, certain aspects of the plaintiff's offer--the failure to include an appraisal with the offer letters, the limitation of the negotiation period to 10 days, and, above all, the failure to offer the defendants the full amount of the Polach valuation of the Property--created genuine factual issues relating to the good faith of the negotiations. The

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No. 2--08--0565 defendants did not support their response with any affidavits or other evidence. In its reply, the plaintiff argued that the Polach and Phillips appraisals were not hearsay because they were not offered to establish the truth of their contents, that is, what the Property was worth; instead, they were verbal acts, relevant to show the information upon which the plaintiff relied in making its offer for the Property. The plaintiff also pointed out that its offer exceeded one of the valuations it received, that the offer was rejected by the defendants and the defendants never made any counteroffer, and that a substantial gap existed between the parties' estimations of the Property's value, thereby establishing an impasse as a matter of law. At the hearing on the motion for partial summary judgment, the parties stipulated that the plaintiff had sent the two offer letters to the trusts listed as owners of the Property, offering a total of $9.27 million for the Property. The trial court found that this offer was "supported by a bona fide appraisal." The trial court also found, after questioning the parties regarding the evidence submitted in connection with the briefs, that it was undisputed that the defendants did not accept the offer and did not obtain their own appraisal of the Property prior to the close of negotiations. The defendants admitted that none of them had made any counteroffer to the plaintiff; the only counterproposal received by the plaintiff (suggesting a cutback in the amount of property to be taken) came from Summit Development Corporation, which was not an owner of the Property. The trial court also found that the Polach and Phillips appraisals were admissible, not as evidence of the actual value of the Property, but as evidence of the information that was before the plaintiff's board when it decided to terminate negotiations, as supported by Ms. Roehll's testimony. The trial court then granted summary judgment in the plaintiff's favor on the issue of whether the plaintiff negotiated in good faith before proceeding with condemnation.

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No. 2--08--0565 On appeal, the defendants attack the grant of summary judgment on a number of bases, none of which have merit. We review the grant of summary judgment de novo. Ioerger v. Halverson Construction Co., 232 Ill. 2d 196, 201 (2008). The statute governing condemnation at the time of the negotiations at issue, the 1998 Eminent Domain Act (Act) (735 ILCS 5/7--101 et seq. (West 1998)), provided that a governmental body may exercise the power of eminent domain through a condemnation proceeding only where, among other things, "the compensation to be paid for or in respect of the property sought to be appropriated *** cannot be agreed upon by the parties interested." 735 ILCS 5/7--102 (West 1998). Our supreme court has held that, as part of the requirement that the parties cannot agree on the compensation due, "good-faith negotiations with the landowner are a condition precedent to condemnation proceedings under the Eminent Domain Act." Department of Transportation v. 151 Interstate Road Corp., 209 Ill. 2d 471, 480 (2004). The primary argument raised by the defendants is that, as a matter of law, in order for a court to find that a governmental agency negotiated in good faith, the agency must show that it made an offer that was equal to the appraised value of the property sought to be taken. In support, the defendants cite to City of Naperville v. Old Second National Bank of Aurora, 327 Ill. App. 3d 734 (2002). In that case, the city offered the property owners less than half of the appraised value (as determined by its own appraisers) for the property, and, although the city eventually increased its offer, the highest offer was still below the appraised value. We found that these low offers did not meet the good-faith requirement. In doing so, we canvassed Illinois case law on the extent to which a finding of good faith requires an offer equal to the acquiring body's own appraisal of the property's worth. We commented:

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No. 2--08--0565 "In cases where Illinois courts have found that the condemning authority had satisfied its statutory obligation to make a bona fide attempt to agree, the condemning authorities offered to purchase the properties for their appraised value. [Citations.] Indeed, our research has uncovered only one case in which the condemning authority failed to offer the appraised value, and in that case the court found that the condemning authority had failed to negotiate in good faith. [Citation.] Although we are aware of no legal requirement that the condemning authority must offer the appraised value of the property in order to satisfy the negotiation requirements of section 7--102 [of the Act (735 ILCS 5/7--102 (West 1998))], we nonetheless believe that good faith requires that the condemning authority offer a price that correlates to the fair market value of the property as determined by the condemning authority." City of Naperville, 327 Ill. App. 3d at 741. The intervening years since City of Naperville was decided have not given us any reason to reject its reasoning. Indeed, that case has since been followed by at least one other district of the appellate court. See City of Chicago v. Zappani, 376 Ill. App. 3d 927, 934 (2007) (where city made only a single offer of 60% or less of the properties' values as determined at trial, city did not show goodfaith negotiations). Nevertheless, those cases do not dictate the outcome here, for the simple reason that in this case the plaintiff's offer was more than the appraised value offered by one of its appraisers, Phillips. The plaintiff offered $9.27 million; Phillips valued the Property at $8.995 million. Thus, although the plaintiff's offer was less than the valuation it received from Polach, which was initially $10.3 million and then increased to $11.02 million, it was still $275,000 more than the valuation it received from Phillips. Under these circumstances, the cases cited by the defendants have no application.

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No. 2--08--0565 The plaintiff's decision to offer the defendants an amount that was slightly less than the first valuation it received but more than the second valuation (which it received prior to its decision to commence condemnation proceedings) is not comparable to the egregious behavior present in City of Naperville, in which the city offered less than half of its own appraised value for the property, and Zappani, in which the city offered between 45% and 60% of the appraised value of the parcels it sought. We hold that, in these circumstances, the plaintiff was not required to immediately offer the full amount of the highest appraisal it received, and its failure to do so does not show a lack of good faith in its negotiations. The defendants also argue that the plaintiff's appraisers failed to take into account the Summit parcel's contract price and that this failure violated accepted professional standards for the appraisal industry. They have forfeited this argument, however, because they did not raise it before the trial court. A reviewing court will not consider arguments not presented to the trial court. In re County Treasurer & ex officio County Collector, 373 Ill. App. 3d 679, 702 (2007). The defendants suggest that they did not forfeit this argument, because it was part of the general issue of "good faith attempt to agree" that they raised in the trial court. This suggestion is simply wrong: although the defendants criticized the failure to include an appraisal with the offer letters, the limitation of the negotiation period to 10 days, and the failure to offer the defendants the full amount of the Polach valuation of the Property, they never attacked either the Polach or the Phillips valuation as being too low because those appraisers used invalid appraisal methods. Had the defendants raised this argument in the trial court, the parties could have conducted discovery on it, argued it orally, and created a record that would aid this court in resolving the issue. Because they failed to do so, we hold that they have forfeited the opportunity to raise the argument on appeal.

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No. 2--08--0565 The defendants offer two other arguments related to good faith: they argue that the plaintiff's lack of good faith is shown by its failure to attach an appraisal to its offer letters and by its 10-day limit on the negotiation period. As the plaintiff points out, however, neither of these actions violated any requirement placed on condemning bodies. Under section 7--102.1 of the Act, the condemning body's offer letter to the landowner must include "[t]he amount of compensation for the taking of the property proposed by the agency, and the basis for computing it." 735 ILCS 5/7--102.1(d)(1) (West 1998). No Illinois court has held that including "the basis for computing" the amount of compensation means that the condemning body must unilaterally tender its own appraisal to the landowner. Similarly, a condemning body need not offer more than 10 days for negotiations. No Illinois court has imposed such a requirement, and we are aware of at least two cases in which the offer letter set a 10-day period for negotiations and the court found that the condemning body made a good-faith attempt to agree on compensation. See County Board of School Trustees v. Batchelder, 7 Ill. 2d 178, 180-82 (1955); Illinois State Toll Highway Authority v. Karn, 9 Ill. App. 3d 784, 791 (1973). As the plaintiff was not required by law to either attach the appraisal to its offer letter or allow more than 10 days for negotiations, we cannot find that its failure to do so indicates a lack of good faith. Perhaps we would reach a different result if the defendants had asked to see the basis for the plaintiff's offer, or asked for more time to negotiate, and the plaintiff had unreasonably refused. The record does not disclose any such requests, however. Finally, in their reply brief, the defendants argue that the appraisals that the plaintiff attached to its motion for partial summary judgment were inadmissible hearsay, and they argue that without those exhibits there was no basis for summary judgment. The defendants have forfeited this argument through their failure to raise it in their opening brief. 210 Ill. 2d R. 341(h)(7); Kirkpatrick

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No. 2--08--0565 v. Strosberg, 385 Ill. App. 3d 119, 127 (2008). Even if this argument were not forfeited, it would be unsuccessful, as the Polach and Phillips appraisals were not hearsay--they were not offered for the truth of their contents (see People v. Kliner, 185 Ill. 2d 81, 150 (1998))--and an adequate foundation for their admissibility was laid by Ms. Roehll in her deposition testimony. The trial court did not err in granting summary judgment in the plaintiff's favor on the issue of whether the plaintiff made a good-faith attempt to agree on compensation before commencing the condemnation proceedings. PLAINTIFF'S MOTION IN LIMINE No. 1 Before trial, the plaintiff moved to bar any testimony stating the legal opinion that the defendants were entitled to develop residential units on the golf course portion of the Property and to bar any evidence relating to valuations of the Property based on such a legal opinion. The plaintiff argued that the preliminary plat of the PUD governed the defendants' use of the golf course and required that the golf course continue to be used as such; that any reduction in the open space provided by the golf course would be a "major change" that would require approval by the city council under the Naperville zoning ordinance; and that the defendants therefore could not develop, as of right, residential units on the golf course. The plaintiff sought to bar any contrary testimony as unsupported by the law or the evidence. The defendants premised their counterarguments on the expiration of the annexation agreement that the parties entered into at the same time that the preliminary plat for the PUD was approved. Specifically, the defendants contended that under this court's decision in Bank of Waukegan v. Village of Vernon Hills, 254 Ill. App. 3d 24 (1993), the special uses and zoning established by the PUD documents expired at the same time as the annexation agreement, with the

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No. 2--08--0565 result that the golf course reverted to the underlying zoning under the Naperville zoning ordinance, namely R-4. Thus, they argued, they could build as of right multifamily residences on the golf course, and their expert witnesses were entitled to testify to the value of the Property if it were developed in this way. Because this is a purely legal issue centering on statutory interpretation, we review de novo the trial court's decision to grant motion in limine No. 1. Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d 100, 129 (2005). We begin with a brief review of the history of the Country Lakes PUD. In February 1978, Naper Venture (the developer) filed an application for a PUD on land including the Property. The application stated that the required park donation would be met by "the permanent maintenance of a 145 acre, 18-hole golf course." The city of Naperville annexed the Property and other land under the terms of an annexation agreement dated June 19, 1978, and signed by the landowners (the Agreement). The Agreement recited that the parties wished to develop as a PUD the land being annexed. The city agreed to adopt an ordinance approving a preliminary plat for the PUD, and the landowners agreed that the land would be developed in accordance with that preliminary plat. The golf course was specifically mentioned: the city agreed that the developer would receive credit for its required park contribution under the specified formula, and the developer agreed that the golf course would remain available to residents of the PUD for use as a golf course and that if the developer or its successors abandoned the golf course, the golf course would be dedicated to the city without cost. The Agreement also addressed the effect of upcoming amendments to the Naperville zoning ordinance, stating: "it is understood and agreed upon by the parties hereto that the CITY is in the process of adopting a new comprehensive Zoning Ordinance, and the terms and conditions of same, upon its adoption, shall apply to the Subject Premises so long as said terms and conditions

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No. 2--08--0565 shall not modify the Planned Unit Development as adopted hereby." Finally, the Agreement contained a survival clause, which provided as follows: "This Annexation Agreement shall be binding upon and inure to the benefit of the parties hereto, successor owners of record of land which is the subject of this Agreement, assignees, lessees and upon any successor municipal authorities of said CITY and successor municipalities for a period of ten (10) years from the date of execution hereof, and any extended time that may be agreed to by amendments, with the understanding that the zoning and P.U.D. Special Use Designations granted hereby shall survive the expiration of this Agreement, unless changed as provided in paragraph 6." (Emphasis added.) At the same time that the parties entered into the Agreement, the city of Naperville adopted ordinance 78--68, approving the preliminary plat for the Country Lakes PUD. The preliminary plat designated the golf course portion of the Property as a golf course and did not show any residences on it. In 1980, the city of Naperville enacted a comprehensive zoning ordinance. Section 6--4--6 of the ordinance provides that a PUD "shall be constructed in accordance with the approved preliminary or final plat" of the PUD, and that "[t]hese plats shall control and limit the use of the parcel of land *** and the location of buildings and structures in the planned unit development as indicated on the plats." Naperville Municipal Code

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