{ "id": 5389188, "name": "THE CITY OF CHICAGO, Plaintiff, v. IAN KIDEYS et al., Defendants-Appellants (Darlena Williams Burnett, Receiver-Appellee)", "name_abbreviation": "City of Chicago v. Kideys", "decision_date": "1993-05-07", "docket_number": "No. 1-92-0402", "first_page": "1077", "last_page": "1084", "citations": [ { "type": "official", "cite": "246 Ill. App. 3d 1077" } ], "court": { "name_abbreviation": "Ill. App. Ct.", "id": 8837, "name": "Illinois Appellate Court" }, "jurisdiction": { "id": 29, "name_long": "Illinois", "name": "Ill." }, "cites_to": [ { "cite": "389 N.E.2d 182", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "70 Ill. App. 3d 1039", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5574965 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/70/1039-01" ] }, { "cite": "130 Ill. App. 356", "category": "reporters:state", "reporter": "Ill. App.", "case_ids": [ 2528548 ], "weight": 2, "pin_cites": [ { "page": "368" } ], "opinion_index": 0, "case_paths": [ "/ill-app/130/0356-01" ] }, { "cite": "208 U.S. 360", "category": "reporters:federal", "reporter": "U.S.", "case_ids": [ 3641626 ], "weight": 9, "pin_cites": [ { "page": "375" }, { "page": "535" }, { "page": "411" }, { "page": "376" }, { "page": "535" }, { "page": "411" } ], "opinion_index": 0, "case_paths": [ "/us/208/0360-01" ] }, { "cite": "487 N.E.2d 772", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "139 Ill. App. 3d 985", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 3568583 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/139/0985-01" ] }, { "cite": "391 N.E.2d 108", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "72 Ill. App. 3d 744", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5584887 ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/72/0744-01" ] }, { "cite": "255 N.E.2d 908", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "44 Ill. 2d 284", "category": "reporters:state", "reporter": "Ill. 2d", "case_ids": [ 2888164 ], "weight": 3, "pin_cites": [ { "page": "293" }, { "page": "292" } ], "opinion_index": 0, "case_paths": [ "/ill-2d/44/0284-01" ] }, { "cite": "388 N.E.2d 1357", "category": "reporters:state_regional", "reporter": "N.E.2d", "opinion_index": 0 }, { "cite": "71 Ill. App. 3d 112", "category": "reporters:state", "reporter": "Ill. App. 3d", "case_ids": [ 5582623 ], "pin_cites": [ { "page": "114" } ], "opinion_index": 0, "case_paths": [ "/ill-app-3d/71/0112-01" ] } ], "analysis": { "cardinality": 730, "char_count": 15985, "ocr_confidence": 0.778, "pagerank": { "raw": 4.649177199357383e-08, "percentile": 0.291906207659211 }, "sha256": "c0707559c6ca4fce62193d51097f7e0f7b0b1d1e9fe557bbcf6006ce98844db1", "simhash": "1:046b2c84bc3654ab", "word_count": 2602 }, "last_updated": "2023-07-14T16:15:27.018701+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [], "parties": [ "THE CITY OF CHICAGO, Plaintiff, v. IAN KIDEYS et al., Defendants-Appellants (Darlena Williams Burnett, Receiver-Appellee)." ], "opinions": [ { "text": "JUSTICE EGAN\ndelivered the opinion of the court:\nThe City of Chicago (the City) filed an action against Ian Kideys, the owner of 4006 West Potomac in Chicago (the property), and his mortgagee, Chrysler First Business Credit Corporation (Chrysler), to enforce the municipal building code. The court appointed a receiver, Darlena Williams Burnett, and she petitioned the court for fees and expenses. The trial judge found Chrysler personally liable for Burnett\u2019s fees and expenses, and entered a judgment against Chrysler for $4,914.70. Chrysler does not dispute the amount of fees and expenses charged or the fact that Burnett is entitled to be paid but asserts that it cannot be held personally liable.\nOn June 6, 1991, the City filed a complaint against Kideys, Chrysler, and several other parties not relevant to this appeal. This complaint alleged many building code violations which the City asserted made the property unsafe for the tenants still living there and dangerous to the community. Citing sections 11 \u2014 31\u20141 and 11\u2014 31 \u2014 2 of the Illinois Municipal Code (Ill. Rev. Stat. 1991, ch. 24, pars. 11 \u2014 31\u20141, 11 \u2014 31\u20142), the City requested the imposition of fines against Kideys, injunctive relief requiring Kideys to correct the multiple building code violations, and the appointment of a receiver for the property \u201cwith the full powers of receivership including the right to issue and sell receivers certificates.\u201d Later in the trial court proceedings, the attorney for the City indicated that Kideys was \u201cabsent from the state.\u201d\nOn July 12, 1991, Chrysler moved for a protective order. The motion asserts that Chrysler neither owns nor controls the property, but has a recorded mortgage on the property. Although Chrysler never filed any motion requesting possession or attempting to initiate a foreclosure and asserts that it never requested possession in any manner, on November 20 or 21, 1991, the trial judge entered an order giving Chrysler immediate possession of the property. The order was prepared by the City\u2019s attorney, was signed by the judge, and was stamped with the judge\u2019s stamp November 21, 1991. It states that a hearing regarding this order was held November 20, 1991. There is no transcript of the November 20 hearing in the record.\nOn November 21, 1991, Chrysler orally requested that a receiver be appointed for the property and named a particular person it wanted to serve as receiver. This motion was denied, and the trial judge instead appointed Burnett. Chrysler contends that it objected to Burnett\u2019s appointment, but has not placed a transcript of the November 21 hearing in the record. In the order appointing a receiver, Burnett was authorized to issue receiver\u2019s certificates for $2,000. Chrysler agreed to and did purchase these certificates.\nBurnett filed a preliminary report on December 3, 1991, outlining the actions she had taken regarding the property and recommending that the receivership continue. On December 6, she filed an interim report. She had taken extensive action to clean the building, and had used all of the $2,000 as well as $994.70 of her own funds to pay for the removal of tenants and the cleaning and boarding up of the building. The report explains that as of December 5, 1991, the building was vacant, locked, and boarded up, no longer causing any health hazard. Burnett also filed a detailed listing of the time and money she had spent securing the building. At the end of the report, she requested an order directing \u201cthe defendant\u201d to reimburse her $944.70. Chrysler does not dispute that Burnett spent the $2,000 she received for the receiver\u2019s certificates on expenses.\nOn December 9 or 10, 1991, the trial judge entered an order, prepared by the City, granting Burnett leave to file additional receiver\u2019s certificates and giving Chrysler time to answer Burnett\u2019s receiver\u2019s certificates request. The order lists the hearing date as December 9, but is stamped December 10, 1991, with the judge\u2019s stamp.\nOn December 10, 1991, Burnett\u2019s attorney filed his appearance and filed Burnett\u2019s petition for \u201cReceiver\u2019s Fees.\u201d This petition requests reimbursement of the $994.70 plus fees for the 53 hours she expended and the hours her attorney expended, for a total of $4,914.70. The petition does not mention receiver\u2019s certificates. Chrysler answered this petition on December 18, 1991, arguing that Burnett was indeed entitled to $4,914.70, and could secure a lien against the property for this amount under section 11 \u2014 31\u20142 (Ill. Rev. Stat. 1991, ch. 24, par. 11 \u2014 31\u20142), but could not hold Chrysler personally liable for the amount.\nAlso on December 18, the trial judge held a hearing on Burnett\u2019s petition. Chrysler\u2019s attorneys argued that they were not trying to keep Burnett from receiving compensation, but were \u201cjust asking for what the statute allows.\u201d The judge explained that Burnett did \u201can amazing job\u201d by securing the building in only 10 days, and that her \u201cextraordinary efforts\u201d saved Chrysler money and protected its interest. He stated that, when Chrysler asked for appointment of its chosen receiver, it was invoking the court\u2019s equitable powers and therefore must be ready to do equity itself. The judge noted, \u201cequity has been given to Chrysler\u201d and found \u201c[its] actions to be somewhat unusual when [it] asked for an appointment of a receiver to do a specific job [but] *** expect[s] someone to work without fees.\u201d He ordered Chrysler to pay Burnett $4,914.70.\nChrysler filed its notice of appeal and filed a brief in this court. Burnett has not filed a brief or an appearance, however. We gave her until September 9, 1992, to file a brief, and ordered that we would decide the case without oral argument and on the appellant\u2019s brief alone if she did not do so. She did not subsequently file either an appearance or a brief.\nAlthough no appellee\u2019s brief has been filed, we are not precluded from reviewing the case. Due to the importance and uniqueness of the issue presented, we elect to consider this case on the merits. See City of Springfield, v. Ushman (1979), 71 Ill. App. 3d 112, 114, 388 N.E.2d 1357.\nChrysler argues that a receiver appointed in a building code violation case must look to the rents or other income from the property or must request authorization to issue receiver\u2019s certificates to cover his fees and expenses. Support for this argument is found in section 11 \u2014 31\u20142' of the Municipal Code (Ill. Rev. Stat. 1991, ch. 24, par. 11 \u2014 31\u20142). This section provides that, if a judge orders the appointment of a receiver for a building, \u201csuch receiver may use the rents and issues of such property toward maintenance, repair and rehabilitation of the property *** and the court may further authorize the receiver to recover the cost of such maintenance *** by the issuance and sale of notes or receiver\u2019s certificates.\u201d (Ill. Rev. Stat. 1991, ch. 24, par. 11 \u2014 31\u20142.) Further, \u201csuch notes or certificates *** shall be freely transferable, and when sold or transferred by the receiver *** shall be a first lien upon the real estate and the rents and issues thereof, and shall be superior to *** all prior existing liens and encumbrances, except taxes.\u201d (Ill. Rev. Stat. 1991, ch. 24, par. 11 \u2014 31\u20142.) Chrysler asks us to interpret this statute as precluding the imposition of personal liability on mortgagees for receiver\u2019s expenses. The interpretation of the statute regarding mortgagee personal liability presents a question of first impression.\nSection 11 \u2014 31\u20142 was amended in 1965 to allow for receiver\u2019s liens to have priority over other nontax liens. Although there is little case law construing this section, its constitutionality was discussed in Community Renewal Foundation, Inc. v. Chicago Title & Trust Co. (1970), 44 Ill. 2d 284, 255 N.E.2d 908. In Community Renewal, a potential receiver\u2019s certificates purchaser argued that the certificates could not gain priority over existing liens without unconstitutionally impairing the obligation of contracts. The supreme court disagreed; it held that section 11 \u2014 31\u20142 was a valid exercise of the police power. The Community Renewal court explained the need for suitable housing in cities, and determined that the legislature intended to encourage rehabilitation of slum dwellings by allowing a receiver to finance such rehabilitation with receiver\u2019s certificates. The court explained, \u201c[t]he imposition of a first lien on the equity of the real estate impresses us as being a reasonable means to make the certificates marketable and rehabilitation of concerned housing feasible.\u201d (Community Renewal, 44 Ill. 2d at 293.) The court recognized that section 11 \u2014 31\u20142 subordinates a mortgagee\u2019s rights by making its lien lower in priority than a receiver\u2019s lien, but explained that this interference \u201cmay not be said to be so unreasonable or oppressive\u201d when balanced against the great need to make the receiver\u2019s certificates marketable. Community Renewal, 44 Ill. 2d at 292.\nWe find that the statute allows Burnett to recover her costs and fees from rent monies or from receiver\u2019s liens, if authorized. Since there obviously are no rent payments present to offset Burnett\u2019s expenses, consistent with Community Renewal she is welcome to request the right to issue receiver\u2019s certificates that will subordinate Chrysler\u2019s lien. In fact, the trial judge apparently gave Burnett this authorization in his December 9 or 10 order granting her leave to file receiver\u2019s certificates. Nonetheless, she did not issue those additional certificates, but instead obtained a judgment against Chrysler.\nWe do not believe that the statute allows the imposition of personal liability under these circumstances. (See generally Village of Arlington Heights v. American National Bank & Trust Co. (1979), 72 Ill. App. 3d 744, 391 N.E.2d 108 (refusing to allow a receiver to take action not authorized by section 11 \u2014 31\u20142).) Reading the plain and unambiguous language of section 11 \u2014 31\u20142, we refuse to infer a legislative intent to hold mortgagees personally liable. (See Illinois Housing Development Authority v. La Salle National Bank (1985), 139 Ill. App. 3d 985, 487 N.E.2d 772.) In section 11\u2014 31 \u2014 1, involving demolition of slum buildings, the legislature specifically provided that building owners may be personally liable, under certain circumstances, for demolition costs. (Ill. Rev. Stat. 1991, ch. 24, par. 11 \u2014 31\u20141.) No such provision authorizing personal liability of any party appears in section 11 \u2014 31\u20142. The intent of the legislature in enacting and amending section 11 \u2014 31\u20142, as outlined in Community Renewal, was to make receiver\u2019s certificates more marketable and thus increase urban renewal. This intent is satisfied by the priority status given the receiver\u2019s certificate liens, and when balanced against mortgagee rights, this result is constitutional. When a mortgagee becomes personally liable for the receiver\u2019s expenses, however, the infringement on its rights is much greater than that envisioned by the legislature or authorized in Community Renewal. Therefore, we hold that a mortgagee cannot be held personally liable for receiver\u2019s expenses under section 11 \u2014 31\u20142.\nNonetheless, there are common law rules holding parties such as mortgagees personally liable for receiver\u2019s expenses under certain circumstances, and the trial judge may have been applying these rules when he ordered Chrysler to pay for Burnett\u2019s services.\nThe general common law rule is that a receiver must look to the income or res of the property for his expenses and fees. This rule was outlined by the United States Supreme Court in Atlantic Trust Co. v. Chapman (1908), 208 U.S. 360, 52 L. Ed. 528, 28 S. Ct. 406. In Atlantic Trust, a mortgagee requested the appointment of a receiver to run a mortgaged company. The court of appeals required the mortgagee to pay the receiver\u2019s expenses and fees, because the money from the foreclosure of the company was inadequate to cover his expenses. The Supreme Court reversed, holding that the mortgagee could not be personally liable under these circumstances. The Court recognized that where a receiver is appointed through fraud or acts on false assurances, the parties responsible may be personally liable for the receiver\u2019s expenses. In this case, however, the general rule that \u201c[t]he liabilities which [a receiver] incurs are liabilities chargeable upon the property *** and not liabilities of the parties\u201d applied where there was no fraud or unfair action on the part of the mortgagee. (Atlantic Trust, 208 U.S. at 375, 52 L. Ed. at 535, 28 S. Ct. at 411.) The Atlantic Trust Court explained: \u201cThe mere inadequacy of the property or fund to meet such [receiver] expenses constitutes in itself no reason why liability should be fastened upon the [mortgagee], who has been guilty of no irregularity.\u201d 208 U.S. at 376, 52 L. Ed. at 535, 28 S. Ct. at 411.\nThe Illinois Appellate Court reached the same conclusion in 1906, while the court of appeals\u2019 opinion in Atlantic Trust was on appeal to the Supreme Court. The Illinois court, in McLean v. Gillespie (1906), 130 Ill. App. 356, chose not to follow the Atlantic Trust court of appeals. The McLean court refused to hold a mortgagee personally liable for receiver\u2019s expenses where the funds from foreclosure of the mortgage were insufficient to pay the receiver\u2019s costs and fees. The court explained that receivers have the right to \u201clook to the income first, and second to the res,\u201d and further can hold the party who requested their appointment personally liable if that party acted in bad faith by requesting their services. In the absence of some bad faith, however, to hold the mortgagee personally liable \u201cwould be unjust, inequitable and unjustifiable either in principle or by legal authority.\u201d (McLean, 130 Ill. App. at 368.) This general rule was applied more recently in Rosenblatt v. Michigan Avenue National Bank (1979), 70 Ill. App. 3d 1039, 389 N.E.2d 182.\nIn light of this precedent, we hold that the judgment against Chrysler must be reversed in the absence of any evidence showing bad faith on the part of Chrysler. Chrysler maintains that it did object to the appointment of Burnett and that it did not request or take possession of the property. Whether it did object and did take possession of the property are not relevant to the issue before us. Any failure to object to Burnett\u2019s appointment or assumption of possession would not constitute bad faith on the part of Chrysler.\nThe trial judge stressed the excellent job done by Burnett and the benefit that her services provided to Chrysler. Nonetheless, under Atlantic Trust and McLean, her recourse is through the property itself. There is no evidence here, in contrast to Atlantic Trust and McLean, that the proceeds from a foreclosure would be insufficient to cover Burnett\u2019s expenses. Yet, the inadequacy of the res in those cases was not enough to hold mortgagees personally liable. Further, there is no evidence of bad faith or fraud here. Thus, Burnett\u2019s claim for fees does not fit into any exception to the common law rule that a receiver must look to the property for payment.\nWe judge that the proper way for Burnett to be compensated for her services is either to issue receiver\u2019s certificates under section 11\u2014 31 \u2014 2, or to place a lien against the property under Illinois common law. She may not obtain reimbursement or payment simply by requesting a personal judgment against Chrysler. For these reasons, we hold that the judge erred in entering judgment against Chrysler.\nThe judgment of the circuit court is reversed.\nJudgment reversed.\nMcNAMARA, P.J., and GIANNIS, J., concur.", "type": "majority", "author": "JUSTICE EGAN" } ], "attorneys": [ "Baker & McKenzie, of Chicago (Sidney M. Kaplan and Victor M. Grimm, of counsel), for appellant Chrysler First Business Credit Corporation.", "No brief filed for appellee." ], "corrections": "", "head_matter": "THE CITY OF CHICAGO, Plaintiff, v. IAN KIDEYS et al., Defendants-Appellants (Darlena Williams Burnett, Receiver-Appellee).\nFirst District (6th Division)\nNo. 1 \u2014 92\u20140402\nOpinion filed May 7, 1993.\nBaker & McKenzie, of Chicago (Sidney M. Kaplan and Victor M. Grimm, of counsel), for appellant Chrysler First Business Credit Corporation.\nNo brief filed for appellee." }, "file_name": "1077-01", "first_page_order": 1095, "last_page_order": 1102 }