2014 IL App (2d) 130858
Ill. App. Ct.2014Background
- Cannonball developed a shopping center; LaSalle Bank held a mortgage on the property, excluding anchor tracts later sold to Home Depot, Target, and Kohl's.
- Cannonball and anchors entered into an OEA granting easements and covenants running with the land for parking, driveways, and common areas.
- Yorkville issued SSA taxes to fund improvements; purchase and development agreements created reimbursement and lien rights for Home Depot.
- Purchase agreement 22(h) provides reimbursement from Cannonball and a lien on Cannonball’s land if SSA tax reimbursements are not paid; these rights run with the land.
- Development agreement 12.1 and 12.4 establish a lien; 12.4 makes the lien subordinate to first mortgage, but does not extinguish Home Depot’s rights.
- Bank of America foreclosed; trial court held Home Depot’s reimbursement rights and SSA lien rights did not run with the land and were terminated; on appeal, court reversed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Do Home Depot's tax reimbursement and lien rights run with the land? | Home Depot: covenants run with land via purchase and development agreements. | Bank of America: covenants are personal, not binding on successors. | Yes, they run with the land. |
| Do the covenants touch and concern the land? | Covenants affect use and value of land; they touch and concern the land. | Covenants are purely financial and do not touch the land. | They touch and concern the land. |
| Is there privity of estate between Home Depot and Bank of America? | Privity exists via purchase, OEA, and development agreements. | No relevant privity affecting the mortgage. | Privity of estate exists; covenants bind successors. |
| Are Home Depot’s covenants extinguished by foreclosure or subordinate to first mortgage? | Covenants run with land and survive foreclosures; not extinguished by subordination. | Foreclosure extinguishes inferior/subordinate rights. | Not extinguished; run with land and bind purchaser. |
| Does section 12.4 of the development agreement extinguish Home Depot’s rights? | No extinguishment; language shows only lower priority, not extinguishment. | Section 12.4 implies extinguishment or priority shift. | No extinguishment; rights remain subordinated but survive. |
Key Cases Cited
- Streams Sports Club, Ltd. v. Richmond, 99 Ill. 2d 182 (1983) (touches and concerns land when benefits flow with land plan)
- United States Fidelity & Guaranty Co. v. Old Orchard Plaza Ltd. Partnership, 284 Ill. App. 3d 765 (1996) (covenant affecting land value may run with the land)
- C-B Realty & Trading Corp. v. Chicago & North Western Ry. Co., 198 Ill. App. 3d 926 (1990) (taxes and related covenants can run with the land)
- McAnelly v. Graves, 126 Ill. App. 3d 528 (1984) (burden and benefit of covenants affecting land run with land)
- Pembrook Condominium Ass’n-One v. North Shore Trust & Savings, 2013 IL App (2d) 130288 (2013) (liens and covenants collateral to land impact foreclosures)
- Freeman v. State Life Insurance Co., 308 Ill. App. 127 (1941) (restrictive agreements recorded after mortgage may not bind mortgagee)
- Aames Capital Corp. v. Interstate Bank of Oak Forest, 315 Ill. App. 3d 700 (2000) (mortgage priority and covenants running with land)