Our panel of leading appellate attorneys reviews the two civil opinions handed down Thursday, September 21, 2023, by the Illinois Supreme Court. 

MB Financial Bank, N.A. v. Brophy, 2023 IL 128252

By Amelia Buragas, Illinois State University 

In MB Financial Bank, N.A. v. Brophy, the Illinois Supreme Court overruled the appellate court’s judgment holding that the City of Joliet owed more than $6 million in back property taxes to the former owner of a property subjected to condemnation proceedings. The unanimous opinion authored by Justice Cunningham, concluded that the plaintiff was not entitled to repayment of property taxes that were paid between the date the condemnation complaint was filed and the date the city took possession of the property because the property owner enjoyed the continued use of the property during that time. In reaching this conclusion, the Illinois Supreme Court overruled long-standing caselaw that the appellate court had relied on to reach a contrary result.

In 2005, the City of Joliet filed a condemnation complaint and sought to acquire ownership of an apartment complex through eminent domain. After 12 years of litigation, the City acquired title to the property in 2017. During the time the litigation was pending, the apartment complex remained in operation and the owner, MB Financial Bank, N.A., continued to pay property taxes without protest. In 2018, MB Financial filed a complaint seeking a refund of the property taxes it had paid between the date the City filed the condemnation complaint and the date the City acquired ownership of the property. 

The trial court dismissed the complaint pursuant to section 2-619 of the Code of Civil Procedure, finding that the plaintiffs lacked standing to bring the lawsuit because only the City could seek tax-exempt status. The trial court also concluded that the complaint was barred under the voluntary payment doctrine. Plaintiffs appealed and the appellate court affirmed in part and reversed in part. The appellate court first determined that the plaintiff was not seeking tax-exempt status, but rather was seeking a refund of overpaid taxes and, as a result, had standing. The appellate court then concluded that plaintiffs were entitled to a refund and that the property owner was not required to show that the tax was paid under protest. The Illinois Supreme Court then granted the defendants’ petition for leave to appeal.

The Illinois Supreme Court began its analysis by looking at section 9-175 of the Property Tax Code, which states that the “owner of property on January 1 in any year shall be liable for the taxes of that year.” The Court noted that the key elements for defining “ownership” were the “control and the right to enjoy the benefits of the property.” The Court observed that plaintiffs’ complaint did not allege that they were deprived of the right to enjoy the benefits of the property during the condemnation proceedings. The appellate court, in reaching the opposite conclusion, relied on a rule first articulated in City of Chicago v. McCausland, 379 Ill. 602 (1942). However, the Illinois Supreme Court concluded that reliance on McCausland was not well placed because it “is no longer good law.” The Court explained that McCausland was based on the proposition that a taking occurs when a property is subjected to condemnation proceedings and that the valuation of the property is fixed at the time the condemnation action is filed. Subsequent cases have clarified that property owners are entitled to have their property valued at the time compensation is paid and, as a result, the Illinois Supreme Court concluded that the legal rationale underlying McCausland “has thus been eliminated” and overruled it. With McCausland overruled, the Court then concluded that “it would be unreasonable to find that the plaintiffs are relieved from having to pay any of the property taxes” that accrued while the condemnation action was pending because they enjoyed the benefits of ownership during that period. As a result, the Illinois Supreme Court reversed the portion of the appellate court judgment finding that plaintiffs were entitled to repayment and affirmed the trial court’s judgment dismissing the plaintiffs’ complaint.

Clanton v. Oakbrook Healthcare Centre, Ltd., 2023 IL 1129067

By Michael T. Reagan, Law Offices of Michael T. Reagan

Plaintiff’s decedent, while a resident in a nursing facility, was injured when she fell several times. It is alleged that she died from her injuries. Plaintiff’s administrator of decedent’s Estate filed this action against the nursing facility and related entities asserting negligence, and making claims under the Survival Act and the Wrongful Death Act. Defendants’ motion to compel arbitration based upon such a provision in the contract for admission to the facility was denied by the circuit court. The denial of that motion was affirmed by the First District, though on a different and new argument, and is now affirmed by the unanimous Illinois Supreme Court. Justice O’Brien wrote for the Court. Justice Holder White did not participate.
 
The contract for admission provided that, with only inapplicable exceptions, “that all civil claims arising in any way out of this Agreement … shall be resolved exclusively through mandatory mediation and, if such mediation does not resolve the dispute, through binding arbitration … .”  The contract provided that punitive and treble damages, and any other damages greater than actual damages were barred. Of central importance to this opinion is the provision that the contract “shall terminate … immediately upon the resident’s death.”
 
In denying defendants’ motion to compel arbitration of the relevant counts, the circuit court held that the provision waiving entitlement to punitive or treble damages was substantively unconscionable because it “effectively limit[ed] plaintiff’s ability to recover attorney fees.” Defendants filed an interlocutory appeal under Rule 307(a)(1), in that an order granting or denying a motion to compel arbitration is injunctive in nature and therefore appealable under that rule.
 
In the appellate court, plaintiff renewed a number of its arguments made in the circuit court, but also raised, for the first time, that the arbitration clause terminated and became ineffective upon decedent’s death pursuant to that provision of the contract. The appellate court concluded that it was not precluded from considering that argument because an appellee may raise an issue not presented to the trial court to sustain a judgment, as long as the factual basis for that issue was before the trial court. The appellate court affirmed the circuit court’s denial of defendants’ motion to compel arbitration but for that different reason that the contract terminated upon death.  
 
In the Illinois Supreme Court, plaintiff renewed the argument made in the appellate court that the entire contract did not survive the decedent’s death and that therefore there was no contract to enforce. Since the termination-on-death clause was triggered before the claim was brought, the arbitration forum was not available to defendants. Defendants relied primarily upon Carter v. SSC Odin Operating Company, 2012 IL 113204. There, the Court held that plaintiff was not bound to arbitrate the wrongful death claim but was required to arbitrate the Survival Act claim because it accrued prior to death. Defendants relied upon that latter holding. Plaintiff responded that Carter did not bear upon this problem because Carter did not interpret a termination on death clause. The Illinois Supreme Court agreed.
 
The Illinois Supreme Court then turned its attention to Mason v. St, Vincent’s Home, Inc., 2022 IL App (4th) 210458, which decided the issue before the court in a manner contrary to the First District here. The Illinois Supreme Court held that “to the extent that Mason holds that all claims brought pursuant to the Survival Act , but brought after the decedent’s death, are subject to arbitration despite a termination on death clause, it is overruled.”
 
The Illinois Supreme Court then decided the dispute based upon conventional contract principles. “By the express terms of the contract, once the resident died, the contract ceased to exist, including the forum provision.” The Court noted that “defendants were the proponents of the contract,” and thus if they had wanted to exclude the arbitration clause from the operation of the termination on death clause, they were in a position to draft the contract in that manner, but did not. The Court concluded that for this action, brought after the resident’s death, “arbitration as a contractual forum was no longer an available option, even for alleged negligent conduct that occurred prior to (the resident’s) death.”