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Wednesday, May 20, 2015

Non-Home Rule Unit May Buy Land in Foreclosure Sale

Sometimes courts have to answer a question that nobody thought was a question.  In this case, the question arose from an unusual challenge to the authority of the Cook County Forest Preserve District (“FPD”) to acquire title to real estate.

In the case of Baker, et al. v. Forest Preserve District of Cook County, et al., 2015 IL App. (1st) 141157, decided May 18, 2015, the Illinois Appellate Court held that the Forest Preserve District, a non-home rule unit, has authority to acquire property in a foreclosure sale.

Plaintiffs had guaranteed a mortgage loan to purchase “Horizon Farms.”  The borrowers defaulted on the loan and the property went into foreclosure.  FPD purchased the borrowers’ note from the mortgage lender for $14 million, made the highest bid at the foreclosure sale and acquired fee simple title to the property by sheriff’s deed. 

Plaintiffs, who had lost title to the property when they defaulted on the mortgage, filed a “taxpayers’ suit” claiming that FPD had no authority to acquire Horizon Farms by purchase of the note and bidding in the foreclosure sale.  Plaintiffs’ arguments included the claims that FPD does not have statutory authority to expend public funds in private foreclosure litigation, purchase commercial paper (the borrowers’ note), or to act as a speculative investor, and violated its own policies in acquiring the property.  Plaintiffs asked the court to declare the purchase void and order the lender to return the public funds paid by FPD.  The circuit court granted FPD’s motion for summary judgment and the appellate court affirmed. 

The appellate court began its analysis of the merits of the arguments by noting that FPD, as a non-home rule governmental unit, has only the powers granted to it by statute.  The Cook County Forest Preserve District Act (“Act”) authorizes FPD to acquire property by purchase.  The court disagreed with plaintiffs’ contention that FPD exceeded its authority to “purchase” property when it bought the mortgage note, because it did not receive a deed for fee simple title in exchange for the public funds paid.  The court declined to interpret the Act to require the simultaneous exchange of money and title in order to constitute a purchase.  The court disagreed with plaintiffs’ argument that purchase of land in a private foreclosure sale is not acquisition for a “public purpose,” for which the expenditure of public funds is authorized.  The court also rejected plaintiffs’ position that FPD’s acquisition of Horizon Farms conflicts with the Eminent Domain Act.  Finally, the court refused to overturn FPD’s acquisition on the grounds that FPD had not followed its own code in purchasing the property, holding that, “[C]ourts may not adjudicate actions brought to overrule decisions of a legislative body based upon that legislative body’s alleged failure to follow self-imposed requirements.”  

Post Authored by Paul Keller, Ancel Glink


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