In a case of first impression, the Illinois Appellate Court for the First District recently held that the Illinois Unsafe Buildings Act, 65 ILCS 5/11-31-1 (the "Act") does not authorize a municipality to seek a money judgment for demolition expenses against the owner of a property by simply filing a motion in the same demolition action.
In so ruling, the Court found that the plain language of the Act only authorizes a municipality to affirmatively recover the amount of its lien for demolition expenses by either: (1) foreclosing on the lien and obtaining satisfaction through a judicial sale of the property; or (2) filing a separate civil action seeking a money judgment.
Because the municipality's "interpretation of the Act – allowing it to simply file a motion in order to impose personal liability – would impair the due process rights of those it seeks to hold personally liable for demolition costs," the Appellate Court reversed the ruling of the trial court.
A copy of the opinion is available at: Link to Opinion
As you may recall, the Illinois Unsafe Buildings Act specifies procedures municipalities may pursue to remedy dangerous and unsafe buildings within their borders and to recover the costs of any remedial action taken. Pursuant to the Act, on January 17, 2012, the City of Chicago ("City") filed suit seeking authority to demolish an allegedly dangerous and unsafe building ("Property") against the owner of the Property ("Borrower") and the mortgage lender ("Lender").
Prior to the demolition case, the Lender filed a mortgage foreclosure action. In June 2012, the judicial sale of the Property to the Lender was confirmed. Following the confirmation, a Government-Sponsored Enterprise ("GSE") became the certificate holder and acquired the Property. The City subsequently joined the GSE as a defendant in the demolition case and dismissed the Lender and Borrower.
The City never amended its complaint to include allegations against the GSE nor did it demand that the GSE remedy the dangerous and unsafe conditions at the Property. Nevertheless, the trial court entered an order of demolition ("Order") for the Property against the GSE on April 9, 2013.
The Order found that the conditions of the Property were beyond repair and that judgment in favor of the City seeking demolition authority was warranted. The Order stipulated that the City's demolition of the Property would "result in a statutory in rem lien that attached only to the subject parcel of real estate." The Order further provided that "[i]f the City seeks a personal judgment against any individual party to this action, it will proceed by separate motion directed to that party."
The trial court also made a finding pursuant to Illinois Supreme Court Rule 304(a) that there was no just reason to delay enforcement or appeal of the order and retained jurisdiction "for the purpose of ascertaining demolition costs for entry of a money judgment against the defendant owners, as defined by the applicable statutes and ordinances." Neither party appealed the Order.
On April 11, 2013, the GSE sold the Property to a third party ("Buyer"). The City never joined the Buyer as a defendant. The City demolished the Property nearly two and a half years later, on September 17, 2015, and recorded its lien for demolition costs against the Property in February 2016.
On March 29, 2016, the City filed a Motion to Ascertain Demolition and Other Costs ("Motion") seeking a personal money judgment against the GSE totaling $27,042 for demolition and litigation costs. The Motion did not cite any authority for entering the judgment against the GSE and did not attach any supporting evidence for the amount sought.
The GSE filed a response objecting to the entry of judgment arguing that: (1) personal liability for demolition costs was not authorized under the Act; (2) even if the Act applied, the City did not follow the required procedure to obtain a money judgment, which necessitated either foreclosure of the City's demolition lien or the filing of a separate civil action; and (3) the requested relief was unjust because the GSE did not cause the unsafe conditions at the Property and was not the owner when the Property was demolished and the City's lien was perfected.
In its reply, the City noted that the Court retained jurisdiction of the demolition case in the Order and argued that the Act authorizes a money judgment against the "owner or owners" of a demolished property. The City argued it could impose personal liability on the GSE for demolition costs even though it did not currently own the Property because it was an owner of the Property when the Order was entered. The City further argued that it could obtain a money judgment against the GSE via a motion in the demolition case and that it was not required to foreclose its demolition lien or pursue a separate civil action.
The trial court agreed with the City and entered a personal money judgment against the GSE. The trial court entered an order finding that "because the [d]emolition order was entered while [the GSE] was the owner of the property and because the statute does not provide for relief from liability upon transfer of the property, [the GSE] is liable for [d]emolition costs."
This appeal followed.
On appeal, the First District considered whether the Act authorizes a municipality to impose personal liability for demolition costs by filing a motion in the demolition case or whether those sought to be held personally liable for costs are entitled to greater procedural protections.
The Court found that the Act "does not anywhere provide for the filing of a motion by the municipality to obtain a money judgment against the 'owner or owners' in the amount of demolition costs. Rather, the Act's plain language requires the municipality, at its election, to pursue either foreclosure of its demolition lien or a separate civil action against those owners whom it seeks to hold personally liable."
Moreover, the First District found that allowing a municipality to simply file a motion to impose personal liability would impair the due process rights of those sought to be held personally liable for demolition costs. The Court noted that the City's attempt at imposing personal liability is "antithetical to the notice and opportunity to be heard that are the hallmarks of due process" because it does not afford a property owner with the opportunity to contest the legal and factual basis for or amount of its liability for demolition costs through motion practice, discovery or an evidentiary hearing.
The Court explained that the public policy favoring the expeditious demolition or repair of structures that pose hazards to public health and safety support an abbreviated in rem proceeding with a limited burden of proof. However, such proceedings are "not designed to resolve issues concerning which owner or owners of the property are responsible for the property's . . . condition and should therefore be liable for the demolition or repair costs." Thus, the Court found that such issues are more appropriately decided where the parties' claims may be fully litigated in a later proceeding for the enforcement of a municipality's lien as provided in the Act.
Notably, the First District declined to decide the issue of whether a municipality may impose personal liability for demolition costs on parties that did not cause a property's unsafe or hazardous conditions, or parties who owned a property prior to demolition, but who do not own the property either when it is demolished or when the municipality perfects its demolition lien, as it was unnecessary to resolve the appeal.
However, the Court noted that such parties are entitled to contest both the legal and factual basis for a municipality's claim if it elects to pursue foreclosure or a separate civil action for personal liability as provided in the Act.
Accordingly, the First District reversed the judgment of the trial court.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@MauriceWutscher.com
Admitted to practice law in Illinois
Alabama | California | Florida | Georgia | Illinois | Indiana | Maryland | Massachusetts | Michigan | New Jersey | New York | Ohio | Pennsylvania | Texas | Washington, DC | Wisconsin
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
and
The Consumer Financial Services Blog™
and
and
California Finance Law Developments
