McCormick 106, LLC v. Capra

2022 IL App (2d) 210166-UNo. 2-21-0166
Order filed November 23, 2022
NOTICE: This order was filed under Supreme Court Rule 23(b) and is not precedent
except in the limited circumstances allowed under Rule 23(e)(1).
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
______________________________________________________________________________
McCORMICK 106, LLC, ) Appeal from the Circuit Court
) of Winnebago County.
Plaintiff-Appellee, )
)
v. ) No. 19-CH-164
)
LOUIS CAPRA; LOUIS CAPRA & )
ASSOCIATES, LLC; THE ALPINE )
CONDOMINIUM OWNER’S )
ASSOCIATION; MIDWEST COMMUNITY )
BANK; CITY OF ROCKFORD; )
ROCKFORD STOP-N-GO; UNKNOWN )
OWNERS and NON- RECORD )
CLAIMANTS, )
)
Defendants )
) Honorable
(Louis Capra and Louis Capra & Associates, ) Donna R. Honzel,
LLC, Defendants-Appellants). ) Judge, Presiding.
______________________________________________________________________________
PRESIDING JUSTICE BRENNAN delivered the judgment of the court.
Justices Jorgensen and Schostok concurred in the judgment.
ORDER
¶1 Held: Mortgagor of nonresidential real estate defaulted on mortgage contract by failing
to make final payment on due date. Mortgagor’s allegations failed to allege material
breach, thus the trial court did not err when it appointed a receiver over his
objection. The receiver did not owe mortgagor a fiduciary duty, thus the trial court
did not err when it denied the request to remove the receiver and granted the
2022 IL App (2d) 210166-Ureceiver’s motion to dismiss the third-party complaint against him. Because the
alleged breaches were not material, the trial court did not err when it granted
summary judgment for mortgagee. Further, the trial court did not abuse its
discretion when it confirmed the judicial sale of properties. Affirmed.
¶2 In this mortgage foreclosure proceeding, the mortgagors, Louis Capra and Louis Capra &
Associates, LLC 1 (Capra), appeal numerous rulings entered in the trial court: (1) an order placing
McCormick 106, LLC, the mortgagee, in possession of the real property and appointing a receiver;
(2) an order denying Capra’s request to remove the receiver and dismissing his third-party
complaint against the receiver; (3) an order granting McCormick 106 summary judgment; and
(4) an order confirming the judicial sale of the remaining properties. For the reasons that follow,
we affirm all of the challenged orders.
¶3 I. BACKGROUND
¶4 In 2008, Capra executed a real estate mortgage contract with Northwest Bank of Rockford
to purchase six parcels of nonresidential real property, which were secured by a blanket mortgage.
McCormick 106 acquired the contract in May 2018 and filed a complaint for foreclosure in March
2019.
¶5 A. The Foreclosure Complaint
¶6 The foreclosure complaint listed five properties (the sixth was sold prior to the filing of the
complaint): (1) 3208 South Alpine Road (South Alpine), (2) 5811-5861 Forest Hills Road (Forest
Hills), (3) 3392-3430 Lonergan Drive (Lonergan), (4) 4815 Creekview Road (Creekview 1), and
1
McCormick 106 states that Louis Capra is the sole member of Louis Capra & Associates,
LLC. It is unclear from the record whether there are any other members of Louis Capra &
Associates, LLC, and the appellant’s brief simply refers to appellants collectively as “Capra.” We
do the same.
-2-
2022 IL App (2d) 210166-U(5) 4830 and 4836 Creekview Road (Creekview 2). McCormick 106 attached to the complaint
copies of the original September 2008 mortgage contract with Northwest Bank of Rockford; the
November 25, 2017, renewal notes; and the assignment of mortgage to McCormick 106. Loan No.
19798 (Note A) was for the principal amount of $4,800,000. Loan No. 19799 (Note B) was for the
principal amount of $2,105,499.38. Notes A and B both had a maturity date of January 5, 2019.
The notes each provided that an “Event of Default” would occur if “Borrower fails to make any
payment when due under this Note.” The payment terms for Note A were as follows:
“Borrower will pay this loan in 12 regular payments of $28,060.00 each and one irregular
last payment estimated at $4,731.669.94. Borrower’s first payment is due January 6, 2018,
and all subsequent payments are due on the same day of each month after that. Borrower’s
final payment will be due on January 5, 2019, and will be for all principal and all accrued
interest not yet paid. Payments include principal and interest. Unless otherwise agreed or
required by applicable law, payments will be applied first to any unpaid collection costs;
then to any late charges; then to any escrow or reserve account payments as required under
any mortgage, deed of trust, or other security instrument or security agreement securing
this Note; then to any accrued unpaid interest; and then to principal. ***.”
Note A provided, under the heading “HISTORY OF CHANGE IN TERMS”:
“This note originally dated 9/25/08 in the amount of $4,140,720 with a maturity date of
09/25/13; references all extensions, modifications, renewals, and substitutions of such
promissory note and a related mortgage of even date in the amount of $7,668,000 and
recorded as document #200800846589 in the county of Winnebago, IL. The note was
subsequently modified and amended as follows: modified to an amount of $6,464,000 and
extended to a new maturity date of 9/25/15, [extended on multiple occasions], and extended
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2022 IL App (2d) 210166-Uto a new maturity date of 11/25/17. This note is now being extended to a new maturity date
of 1/5/19 and modified to a new loan amount of $4,800,000. Prior secondary accrued
interest on the existing note #19798 through November 25, 2017 in the amount of
$83,673.45 is herein transferred to Note #19799, and will [be] due and payable under the
amended terms and conditions of that note (19799) renewal dated November 25, 2017.”
The payment terms for Note B were as follows:
“Borrower will pay this loan in one principal payment of $2,105,499.38 plus interest on
January 5, 2019. The payment due on January 5, 2019, will be for all principal and all
accrued interest not yet paid. Payments include principal and interest. Unless otherwise
agreed or required by applicable law, payments will be applied first to any unpaid
collection costs; then to any late charges; then to any escrow or reserve account payments
as required under any mortgage, deed of trust, or other security instrument or security
agreement securing this Note; then to any accrued unpaid interest; and then to principal.
***.”
Note B provided, under the heading “HISTORY OF CHANGE IN TERMS”:
“This note originally dated 9/25/08 in the amount of $3,527,280 with a maturity date of
11/25/13; references all extensions, modifications, renewals, and substitutions of such
promissory note and a related mortgage of even date in the amount of $7,668,000 and
recorded as document #200800846589 in the county of Winnebago, IL. The note was
subsequently modified and amended as follows: modified to an amount of $930,146.93
and extended to a new maturity date of 9/25/15, [extended on multiple occasions], and
extended to a new maturity date of 11/25/17. This note is now being extended to a new
maturity date of 1/5/18 and modified to a new loan amount of $2,105,499.38. Prior
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2022 IL App (2d) 210166-Usecondary accrued interest on the existing note #19799 through November 25, 2017 in the
amount of $12,013.75, along with the transferred accrued interest from note #19798
through November, 25, 2017 in the amount of $83,673.45, will be due and payable under
the amended terms and conditions of the note renewal dated November 25, 2017.”
¶7 According to the complaint, Capra purchased the properties from Northwest Bank in 2008
in exchange for a promissory note secured by a mortgage. Capra then executed two renewal notes
with Northwest Bank in 2017. The original amount of indebtedness, including subsequent
advances, was $7,668,000. The notes matured on January 5, 2019, at which time Capra had failed
to make the payments due. McCormick 106 filed suit to foreclose the subject mortgage, for a
personal deficiency, and for attorney’s fees, costs, and expenses.
¶8 B. The Petition to Appoint Receiver
¶9 McCormick 106 filed an amended petition to appoint receiver pursuant to section 15-1704
of the Illinois Mortgage Foreclosure Law (IMFL) (735 ILCS 5/15-1704 (West 2018)). The
amended petition was verified by Timothy Cathey, Vice President of McCormick 106, and asserted
that Capra owed a principal balance of $2,587,760 on Note A and $2,105,499.38 on Note B,
respectively, plus accrued interest, default interest, escrow deficiency, late fees, and attorney’s fees
and costs. McCormick 106 asserted that it was entitled to an order appointing a receiver because
Capra had failed to make the payment due on the date the notes matured.
¶ 10 Capra filed an objection to that petition arguing, inter alia, there was good cause to deny
the petition in that
“there are imminent transactions pending which would resolve any alleged deficiencies in
the subject mortgages. If a receiver were to be allowed at this juncture, the appointment of
a receiver would only impose additional procedural hurdles for the completion of the sale
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2022 IL App (2d) 210166-Uof property and for the financing. In addition, the appointment of a receiver would result
in significant expense, which would only reduce the amount of funds available to pay any
lien holders (such as Plaintiff claims to be), and is counterproductive to payment of the
claimed debt.”
Capra also argued that he was entitled to retain possession of the properties upon the same terms
and conditions as the proposed receiver and that the proposed receiver was not appropriate.
Further, McCormick 106 was not a lienholder as to a portion of one of the subject properties.
¶ 11 C. Capra’s Affirmative Defenses and Answer
¶ 12 Capra next filed an answer to the complaint in which he admitted (1) the original note was
in the amount of $7,668,000, and (2) he did not pay the sums of $2,587,760 and $2,105,499.38,
respectively, on January 5, 2019. Capra generally denied the remaining allegations in the
complaint. The answer incorporated several affirmative defenses.
¶ 13 In the affirmative defenses, Capra alleged improper clouding of title and void mortgage—
counts the trial court later struck and which are not at issue here—and various breaches of contract.
The breach-of-contract claims alleged that McCormick 106 (1) failed to apply certain payments
toward indebtedness as required by the notes, (2) improperly used payments by Capra to pay real
estate taxes, (3) improperly held funds ($102,021 and $18,688) without applying them to
indebtedness, (4) failed to apply certain payments toward taxes and insurance, and (5) failed to
apply $65,346.72 (of the $2,165,346.72 received from the sale of one of the properties) toward
indebtedness. Capra asserted these breaches were material and justified his nonperformance, thus
McCormick 106 had no legal basis on which to foreclose. Capra did not allege that McCormick
106 intended to convert funds paid.
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2022 IL App (2d) 210166-U¶ 14 Following argument on the petition to appoint receiver, the trial court entered an order
appointing a receiver (Eric Janssen of Chicago Real Estate Resources (CRER)) on June 3, 2019.
The court concluded that McCormick 106 had met its burden of showing a reasonable probability
of prevailing at a final hearing of the cause and that Capra failed to show good cause as to why the
receiver should not be appointed. The court enumerated the receiver’s various specific duties and
restrictions, as well as “all the duties, responsibilities and powers enumerated in the Illinois
Mortgage Foreclosure Law (735 ILCS 5/15-1101 et seq.) along with other duties and obligations
under Illinois law.”
¶ 15 D. Properties Sold During the Litigation
¶ 16 On June 4, 2019, Capra filed a Chapter 11 bankruptcy petition in federal court. Pursuant to
an order in the bankruptcy court, the trial court subsequently entered an order allowing the sale of
two of the properties (Creekview 1 and Creekview 2). In addition, the Lonergan property was later
sold pursuant to a receiver sale authorized by the court, with the South Alpine and Forest Hill
properties remaining in receivership.
¶ 17 E. The Motion to Remove the Receiver
¶ 18 Capra filed a motion to remove the receiver on May 26, 2020, and also sought leave to file
a third-party complaint against him. The trial court granted leave to file, and Capra filed a third-
party complaint on June 15, 2020. In these filings, Capra asserted that the receiver “is obligated to
act in the best interest of the mortgagor,” “first and foremost” (emphasis added), pursuant to
section 15-1704 of the IMFL in that the receiver owed Capra a fiduciary duty. Capra alleged the
receiver violated his duties by: (1) listing McCormick 106 as a “client” in his Broker Opinion of
Value reports, (2) failing to provide reports to Capra prior to February 2020, (3) intentionally
failing to actively market the properties between July 2019 and March 31, 2020, resulting in three
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2022 IL App (2d) 210166-Uadditional vacancies in the Forest Hills property and 1 additional vacancy in the Lonergan
property, (4) failing to respond to multiple inquiries from a real estate agent about the Lonergan
property, and (5) seeking input from McCormick 106 regarding, inter alia, insurance coverage and
when to market the properties.
¶ 19 The receiver filed a motion to dismiss the third-party complaint pursuant to section 2-615
of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2020)) and a response in
opposition to the motion to remove the receiver. The receiver argued that he complied with all
orders of the court in its order appointing him and that a receiver does not owe a mortgagor a
fiduciary duty under section 15-1704 of the IMFL.
¶ 20 Following argument on the motions, the trial court entered a written order on October 26,
2020, granting the receiver’s motion to dismiss the third-party complaint and denying Capra’s
motion to remove the receiver. The court explained that a receiver is an officer of the court and
not a fiduciary or agent of the mortgagor. Accordingly, a receiver’s actions are judged under a
“prudent person” standard. 735 ILCS 5/15-1704(c) (West 2018). Moreover, Capra had filed a
bankruptcy petition on June 4, 2019, which operated as a stay pursuant to 11 U.S.C. § 362 (2018).
The stay remained in place until September 3, 2019. The trial court further explained that
subsection 15-1704(h) “allows for removal of the Receiver on ‘good cause shown’ ” and that
“good cause” requires more than a mortgagor’s “disagreement with the manner in which the
Receiver performed his job.” To show good cause, the receiver must have “acted outside the
court’s order appointing him, indicative of some sort of malfeasance or bad faith, and which
actually causes harm to the estate.”
¶ 21 In sum, the court found that Capra’s allegations failed to show that the receiver was not
acting prudently or that he was not following the court’s orders, thus Capra did not show good
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2022 IL App (2d) 210166-Ucause for removal. As for the third-party complaint, the court concluded that Capra failed to state
a cause of action in that the IMFL does not provide for direct suits by mortgagors against receivers.
Instead, the only remedies available to a mortgagor against a receiver under the IMFL are
(1) contempt of court proceedings or (2) removal pursuant to subsection 15-1704(h).
¶ 22 F. Summary Judgment
¶ 23 McCormick 106 filed a motion for summary judgment pursuant to section 2-1005 of the
Code (735 ILCS 5/2-1005(c) (West 2020)) on February 18, 2020, and Capra filed a response in
opposition on June 25, 2020. In his response, Capra argued that McCormick 106 materially
breached the contract in several respects, thus precluding entry of summary judgment. Capra
reasserted the breach-of-contract claims in his affirmative defenses, adding additional allegations
that McCormick 106 improperly charged Capra additional “additional ‘secondary interest’ of
$95,687.23” and that its conduct caused Capra to incur a penalty of $609.92 for late payment of
real estate taxes for one of the properties. In sum, he contended that McCormick 106 breached the
mortgage contract by overcharging Capra by more than $150,000 and holding more than $100,000
in a separate account, causing damages in excess of $300,000. As a result, he claims he was
discharged from performing his obligations under the underlying mortgage contract.
¶ 24 The trial court granted McCormick 106’s motion in a July 23, 2020, order.
¶ 25 G. Motion to Confirm the Judicial Sale
¶ 26 Finally, a judicial sale for the South Alpine and Forest Hills properties was held on October
6, 2020. McCormick 106 was the highest bidder for each. On December 3, 2020, McCormick 106
filed a motion requesting the trial court to confirm the judicial sales and enter a deficiency
judgment against Capra. Capra filed a response in opposition to the motion.
-9-
2022 IL App (2d) 210166-U¶ 27 In his response, Capra highlighted a number of email exchanges between the receiver and
Cathey (an agent of McCormick 106). First, in June 2019, shortly after Capra filed his bankruptcy
case, Cathey emailed the receiver: “In short, I think you just maintain the status quo and make
whatever critical repairs are necessary to preserve/secure the collateral.” Capra noted that Cathey
did not discuss leasing vacant units.
¶ 28 Next, on August 12, 2019, the receiver emailed Cathey, “We received an inquiry this
morning regarding leasing spaces at Alpine Plaza. Before I respond, what can we do here?” and
followed up, “Do you want us to lease anything?” The same day, Cathey replied, “Let’s wait to
see the outcome of the Lift of Stay motion. It should be heard tomorrow. Once we have stay lifted
we can make a decision about leasing up or marketing ‘as is.’ ”
¶ 29 Next, on August 15, 2019, Cathey emailed the receiver, “The bankruptcy judge punted a
ruling on the Lift of Stay Motion until 9/3. Still think we stand down for now. Have there been
much activity relative to interest in new leases or just this one inquiry?” The receiver replied,
“There have been a couple of inquiries but not much. Of course, we are not actively marketing the
vacant spaces for lease so that is not surprising.”
¶ 30 Next, in an August 28, 2019, response to an inquiry by a co-worker (“Where are we on
leasing prospects? Or are we waiting?”), Cathey replied, in relevant part, “The bankruptcy judge
should rule on our Motion for Lift of Stay next Tuesday. I suspect it will be granted. We will
immediately need to market the properties for sale. I’m open to discussion about entertaining new
leases but I’m more focused on monetizing the collateral.” The receiver was sent a carbon copy.
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2022 IL App (2d) 210166-UAndrew Werner 2 replied, “We will await the Tuesday decision and then perhaps discuss marketing
buildings after that.”
¶ 31 Capra also opined that an email from an attorney representing the receiver indicated that
an interested renter left messages with the receiver requesting a tour of one of the properties, but
the receiver did not respond to those messages until prompted by Capra’s attorney. According to
Capra, these correspondences showed that McCormick 106 instructed the receiver not to lease the
subject properties purposely to devalue them, to deprive him of rental income, and to limit the pool
of potential purchasers to cash purchasers, thus reducing the fair, competitive bidding and
maximizing the potential deficiency judgment it could collect against Capra. The response
emphasized that the properties were sold for $490,000 and $1,245,000, respectively. In contrast,
the properties had been listed by the receiver for sale for $750,000 and $1,750,000, respectively.
¶ 32 McCormick 106 filed a reply addressing Capra’s arguments. The trial court rejected
Capra’s request to deny confirmation of the judicial sale, finding “absolutely no evidence that the
plaintiffs deliberately instructed the receiver not to lease at all” and characterized the appraisal
valuations as “hypothetical,” noting that market conditions had changed since the appraisal. The
court granted McCormick 106’s motion on February 26, 2021, confirming the judicial sales and
entering a deficiency judgment against Capra for $2,517,677.68.
¶ 33 Capra timely appealed.
¶ 34 II. ANALYSIS
2
Werner sent this response from a CRER email address and appears to be an associate of
Janssen, the receiver.
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2022 IL App (2d) 210166-U¶ 35 At issue in this appeal is whether (1) the trial court erred in placing McCormick 106 in
possession of the real estate and appointing a receiver, (2) the trial court erred in denying Capra’s
motion to remove the receiver and granting the receiver’s motion to dismiss Capra’s third-party
complaint, (3) the trial court erred in granting McCormick 106’s motion for summary judgment,
and (4) the trial court abused its discretion when it confirmed the judicial sales of the remaining
properties.
¶ 36 As explained in the following analysis, we hold that Capra’s allegations contained in his
affirmative defenses were insufficient to show that McCormick 106 materially breached the
mortgage contract in that no reasonable person would conclude the alleged breaches were material.
Accordingly, the trial court did not err when it placed McCormick 106 in possession of the real
estate, appointed a receiver, and granted McCormick 106’s motion for summary judgment.
Moreover, Capra failed to state a claim against the receiver and failed to demonstrate good cause
to remove the receiver because he failed to argue that the receiver violated any duty owed to Capra.
Finally, the trial court did not abuse its discretion when it confirmed the judicial sale of the
remaining properties because Capra’s allegation that McCormick 106 chilled the bidding process
is without merit.
¶ 37 A. The Trial Court Did Not Err When It Appointed a Receiver
¶ 38 We begin by considering whether the trial court erred when it placed McCormick 106 in
possession of the properties and appointed a receiver. Prior to the entry of a judgment of
foreclosure, a mortgagee of non-residential real estate shall, upon request, be placed in possession
of the real estate if (1) mortgagee is so authorized by the terms of the mortgage or other written
instrument, (2) the court is satisfied that there is a reasonable probability that the mortgagee will
prevail on a final hearing of the cause, and (3) the mortgagor fails to object and show good cause.
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2022 IL App (2d) 210166-U735 ILCS 5/15-1701(b)(2) (West 2018). “Whenever a mortgagee entitled to possession so
requests, the court shall appoint a receiver.” (Emphasis added.) Id. § 15-1702(a).
¶ 39 The reasonable probability determination is reviewed de novo where, as here, there was no
evidentiary hearing. Bank of America, N.A. v. 108 N. State Retail LLC, 401 Ill. App. 3d 158, 165
(2010). A proven default establishes a reasonable probability of success in a mortgage foreclosure
action under the IMFL. Id. at 166. “Whether a default in fact exists will typically turn on the
interpretation of documentary evidence—a non-discretionary function.” Id. Further, “good cause”
is not defined in the IMFL, but in the case of nonresidential property, the mortgagee presumptively
has the right of possession. Forest Preserve District of Cook County v. Royalty Properties, LLC,
2018 IL App (1st) 181323, ¶ 24.
¶ 40 Capra argues that the trial court erred in finding that McCormick 106 had a reasonable
probability of success. He contends McCormick 106 materially breached the mortgage contract,
citing Rohr Burg Motors, Inc. v. Kulbarsh, 2014 IL App (1st) 131664, ¶ 57, for the proposition
that McCormick 106’s material breach justified Capra’s undisputed breach. He also asserts that
his filing a verified denial of liability can negate his asserted default. Importantly, Capra admitted
the factual allegations underlying the foreclosure complaint: he owed money under the contract
and failed to pay in full on the due date. The notes provide that failure to make any payment when
due constitutes an event of default, and Capra does not contest that he signed the notes. Capra also
acknowledges that affirmative defenses admit the legal sufficiency of the plaintiff’s cause of
action. See Vroegh v. J & M Forklift, 165 Ill. 2d 523, 530 (1995); Federal National Mortgage
Association v. Altamirano, 2020 IL App (2d) 190198, ¶ 21. He filed seven affirmative defenses to
the foreclosure complaint and thus acknowledges that McCormick 106’s cause of action—Capra’s
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2022 IL App (2d) 210166-Udefault on the mortgage—was legally sufficient. Under these circumstances, Capra’s inconsistent
filing of a verified denial of liability is irrelevant.
¶ 41 Capra nevertheless contends that an evidentiary hearing was required to decide the matter,
citing Olympic Federal v. Witney Development Co., 113 Ill. App. 3d 981, 986 (1983), and Brown
County State Bank v. Kendrick, 140 Ill. App. 3d 538, 540 (1986), for the proposition that his
affirmative defenses on file were sufficient to defeat McCormick 106’s foreclosure complaint.
Essentially, Capra contends that uncontested allegations of default cannot establish a reasonable
probability of success if a mortgagor presents affirmative defenses to the foreclosure. He insists
that an evidentiary hearing is required to determine whether the affirmative defenses might defeat
the foreclosure complaint.
¶ 42 In Olympic Federal, a mortgagee filed a complaint for foreclosure and moved to be placed
in possession. The mortgagor moved to strike the motion to be placed in possession, arguing it was
legally insufficient. The trial court denied the motion to strike and denied the mortgagor’s request
to respond to or answer the foreclosure complaint. The appellate court considered whether the trial
court’s denial of the mortgagor’s request—thereby depriving the mortgagor of an opportunity to
respond to the substantive factual allegations—was an abuse of discretion under Illinois Supreme
Court Rule 183, which gives the trial court discretion to extend filing deadlines. Olympic Federal,
113 Ill. App. 3d at 986-89. It reasoned that denying the mortgagor an opportunity to deny the
substance of the factual allegations was an abuse of discretion. Id. at 987, 989. Olympic Federal
is readily distinguishable: here, Capra admitted the underlying factual allegations that he borrowed
money and failed to tender payment on the due date.
¶ 43 In Kendrick, a mortgagor similarly appealed from an order placing the plaintiff mortgagee
in possession of mortgaged real estate. Like in Olympic Federal, the mortgagor initially filed a
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2022 IL App (2d) 210166-Umotion to strike the foreclosure complaint, which the trial court denied. Unlike in Olympic Federal,
the mortgagor then filed a sworn denial of the mortgagee’s request for possession, and the trial
court conducted an evidentiary hearing, at which the mortgagor presented no evidence. The court
granted the mortgagee’s request and placed it in possession. On appeal, the appellate court
affirmed, noting that “[the] plaintiff alleged and proved a default on all notes secured by the
mortgages” and “defendants do not contest the fact of default.” Kendrick, 140 Ill. App. 3d 538,
540 (1986).
¶ 44 Unlike the mortgagor in Olympic Federal, Capra had the opportunity to deny the substance
of the underlying factual allegations. Like the mortgagor in Kendrick, Capra does not contest the
underlying factual allegation that he failed to pay the amount due under the contract on the date
the money became due. To the contrary, he admits the validity of the notes, his failure to make the
required payments on the due date, and the legal sufficiency of the complaint. Thus, he concedes
that he defaulted, though he contends that, ultimately, he could defeat the foreclosure.
¶ 45 To the extent that his affirmative defenses could defeat the foreclosure, it does not
necessarily follow that, where a mortgagor concedes the facts that establish a default, a
mortgagee’s pleading viable affirmative defenses renders the mortgagee’s probability of success
unreasonable. That the mortgagee presumptively has the right to possession in the case of
nonresidential property (Royalty Properties, LLC, 2018 IL App (1st) 181323, ¶ 24) makes such a
rule dubious, and Capra offers no authority that establishes one. We therefore adhere to the
principle that a proven default establishes a reasonable probability of success. 108 N. State Retail
LLC, 401 Ill. App. 3d at 166.
¶ 46 The trial court held argument on McCormick 106’s motion on May 22, 2019. McCormick
106 had not filed a response to Capra’s affirmative defenses prior to the hearing, and no evidence
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2022 IL App (2d) 210166-Uwas presented. Capra insists that the trial court was required to hold an evidentiary hearing to
determine whether his affirmative defenses had merit and, failing to do so, the court lacked
authority to place McCormick 106 in possession. We disagree. McCormick 106’s factual
allegations, admitted by Capra and supported with documentary evidence, were sufficient to
establish a reasonable probability of success in that Capra defaulted. 108 N. State Retail LLC, 401
Ill. App. 3d at 166.
¶ 47 Moreover, for the reasons outlined in our summary judgment analysis, Capra’s affirmative
defenses were inadequate. Even if his allegations were proved, Capra failed to allege facts that
could have justified his non-performance and defeated the foreclosure action. Thus, the trial court
did not err when it concluded that McCormick 106 had a reasonable probability of success, placed
McCormick 106 in possession, and appointed a receiver.
¶ 48 B. The Trial Court Did Not Err When It Denied Capra’s Motion to
Remove the Receiver and Granted the Receiver’s Motion to Dismiss
¶ 49 Next, Capra argues that the trial court improperly dismissed his third-party complaint
against the receiver and his motion to remove the receiver. The receiver moved to dismiss the
third-party complaint pursuant to section 2-615 of the Code and filed an objection to the motion
to remove the receiver. On appeal, Capra contends that the trial court failed to adequately address
his claim that the receiver purposely failed to engage in leasing activities, thereby devaluing the
properties and depriving Capra of potential rental income.
¶ 50 A motion to dismiss pursuant to section 2-615 challenges the legal sufficiency of a
pleading. 735 ILCS 5/2-615 (West 2020); In re Application for a Tax Deed, 2021 IL 126150, ¶ 17.
A reviewing court accepts as true all well-pleaded facts and any reasonable inferences arising
therefrom. We review the pleadings in the light most favorable to the nonmovant to determine if
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2022 IL App (2d) 210166-Uthey state a cause of action or, alternatively, if they clearly show the nonmovant could not recover
under any set of facts. Id. A trial court’s ruling on the motion is reviewed de novo. Id.¶ 51 “The court may remove a receiver upon a showing of good cause.” 735 ILCS 5/15-1704(h)
(West 2020). There mere imposition of procedural hurdles in using property does not constitute
good cause for removing or declining to appoint a receiver under section 15-1704 of the IMFL.
See CenterPoint Properties Trust v. Olde Prairie Block Owner, LLC, 398 Ill. App. 3d 388, 396
(2010) (“While we do not dispute defendant’s assertion that the appointment of a receiver likely
imposes additional procedural hurdles for defendant in its efforts to develop, refinance or sell the
property, we do not find that such potential impediments are sufficient to overcome the statutory
presumption in favor of placing the mortgagee in possession.”). As with a ruling on a motion to
appoint a receiver, which also calls for a “good cause” inquiry, we review the trial court’s ruling
on the motion to remove the receiver de novo in the absence of an evidentiary hearing. 108 N. State
Retail LLC, 401 Ill. App. 3d at 165.
¶ 52 The IMFL imposes various duties on receivers managing mortgaged real estate, including
a duty to “manage the mortgaged real estate as would a prudent person, taking into account the
effect of the receiver’s management on the interest of the mortgagor.” 735 ILCS 5/15-1704(c)
(West 2020). Moreover, the IMFL provides that a receiver:
“(1) shall maintain the existing casualty and liability insurance required in accordance with
the mortgage or applicable to the real estate and other property subject to the mortgage at
the time the receiver took possession;
(2) shall use reasonable efforts to maintain the real estate and other property subject to the
mortgage in at least as good condition as existed at the time the receiver took possession,
excepting reasonable wear and tear and damage by any casualty;
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2022 IL App (2d) 210166-U(2.5) shall accept all rental payments from an occupant of the mortgaged property, and any
payments from a third party or any rental assistance program in support of an occupant’s
housing;
(3) shall apply receipts to payment of ordinary operating expenses, including royalties,
rents and other expenses of management;
(4) shall pay any shared or common expense assessments due to any association of owners
of interests in real estate to the extent that such assessments are or may become a lien
against the mortgaged real estate;
(5) may pay the amounts due under any mortgage if the mortgagee thereof is not a party in
the foreclosure;
(6) may carry such additional casualty and liability insurance as is reasonably available and
reasonable as to amounts and risks covered;
(7) may make other repairs and improvements necessary to comply with building, housing,
and other similar codes or with existing contractual obligations affecting the mortgaged
real estate;
(8) may hold receipts as reserves reasonably required for the foregoing purposes; and
(9) may take such other actions as may be reasonably necessary to conserve the mortgaged
real estate and other property subject to the mortgage, or as otherwise authorized by the
court.” Id.Capra argues that these statutory duties are “in the nature of a fiduciary obligation,” thus a receiver
owes a mortgagor a fiduciary duty. “A fiduciary relationship imposes a general duty on the
fiduciary to refrain from ‘seeking a selfish benefit during the relationship.’ ” Neade v. Portes, 193
Ill. 2d 433, 440 (2000).
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2022 IL App (2d) 210166-U¶ 53 Capra cites no authority to support the assertion that receivers owe mortgagors a fiduciary
duty, which is refuted by the text of the statute in that it enumerates specific duties but makes no
mention of any fiduciary duty. “The rule that the expression of one thing or one mode of action in
an enactment excludes any other, even though there be no negative words prohibiting it, has been
the settled law of this state since 1852.” People ex rel. Nelson v. Wiersema State Bank, 361 Ill. 75,
85 (1935); see also Bridgestone/Firestone, Inc. v. Aldridge, 179 Ill. 2d 141, 153-54 (1997) (“The
maxim is applied only when it appears to point to the intent of the legislature, not to defeat the
ascertained legislative intent. The rule may be overcome by a strong indication of legislative
intent.”). The legislature specified which duties a receiver owes and did not expressly impose any
freestanding fiduciary duty on receivers, suggesting the intent to limit a receiver’s duties. Further,
Capra does not point to evidence that strongly indicates the legislature intended to impose a
freestanding fiduciary duty. Capra’s assertion that the receiver owed him a fiduciary duty is thus
without merit.
¶ 54 A receiver is an officer of the court who secures and preserves the property for the benefit
of all concerned. In re Receivership of Grnacek, 2012 IL App (3d) 110181, ¶ 42 (citing People
ex rel. Scott v. Pintozzi, 50 Ill. 2d 115, 123 (1971)). Because Capra did not identify any actual
duties that the receiver violated, he failed to state a claim against the receiver and failed to establish
good cause to remove the receiver. Accordingly, the trial court did not err when it denied Capra’s
motion to remove the receiver and granted the receiver’s motion to dismiss the third-party
complaint.
¶ 55 D. The Trial Court Properly Rendered
Summary Judgment for McCormick 106
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2022 IL App (2d) 210166-U¶ 56 Capra next argues that the trial court erred when it granted McCormick 106’s motion for
summary judgment in that McCormick 106 materially breached the mortgage contract, thus
relieving Capra’s obligation to perform. Capra had alleged that McCormick 106 committed
multiple contractual breaches that cumulatively resulted in a material breach of contract.
Specifically, he asserted that McCormick 106 misallocated funds paid by Capra and charged
unauthorized interest, resulting in over $300,000 in damages. Capra challenges the trial court’s
conclusion that these allegations did not present triable issues of fact as to whether McCormick
106 materially breached the contract.
¶ 57 Summary judgment is proper “if the pleadings, depositions, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law.” 735 ILCS 5/2-1005(c) (West
2020). To determine whether there is a genuine issue of material fact,
“a court must construe the pleadings, depositions, admissions, and affidavits strictly against
the movant and liberally in favor of the opponent. A genuine issue of material fact
precluding summary judgment exists where the material facts are disputed or, if the
material facts are undisputed, reasonable persons might draw different inferences from the
undisputed facts. Summary judgment is a drastic means of disposing of litigation and,
therefore, should be granted only where the right of the moving party is clear and free from
doubt.” (Emphasis added.) Lewis v. Lead Industries Association, 2020 IL 124107, ¶ 15.
Accordingly, where no reasonable person would draw an inference from undisputed (or
immaterial) facts that is unfavorable to the movant, summary judgment shall be rendered. 735
ILCS 5/2-1005(c) (West 2020). We review de novo the trial court’s ruling. Lewis, 2020 IL 124107,
¶ 15.
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2022 IL App (2d) 210166-U¶ 58 As stated, a material breach by one party justifies non-performance by another. Rohr Burg
Motors, 2014 IL App (1st) 131664, ¶ 57. “A breach of contract is a non-performance of any
contractual duty of immediate performance*** and may take place by failure to perform acts
promised, by prevention or hindrance, or by repudiation.” Restatement (First) of Contracts § 312
(1932). “A material breach of contract constitutes the ‘failure to do an important or substantial
undertaking set forth in a contract.’ [Citation.]” LB Steel, LLC v. Carlo Steel Corp., 2018 IL App
(1st) 153501, ¶¶ 31, 38 (performance under airport canopy construction contract resulting in
defective welds that were “critical for the safety of the whole canopy[ ]” and required remediation
constituted a failure to perform a substantial undertaking). This question should be decided based
on the inherent justice of the matter. Rogers v. Balsley, 240 Ill. App. 3d 1005, 1010-11 (1993)
(holding that failure to strictly comply with contractual requirement to send notice to seller’s home
address was not material breach where seller had actual notice before deadline via their attorney).
¶ 59 The determination of materiality “ ‘involve[es] an inquiry into such matters as whether the
breach worked to defeat the bargained-for objective of the parties or caused disproportionate
prejudice to the non-breaching party, whether custom and usage considers such a breach to be
material, and whether the allowance of reciprocal non-performance by the non-breaching party
will result in his accrual of an unreasonable or unfair advantage.’ [Citation.]” Kel-Keef
Enterprises, Inc. v. Quality Components Corp., 316 Ill. App. 3d 998, 1016-17 (2000) (holding trial
court’s finding that failure to deliver subset of manufacturing blueprints owned by business that
sold replacement parts, in breach of implied warranty of title, was a material breach was supported
by evidence that the business became less competitive without the blueprints, which were “very
significant financially”). A breach may be material if it deprives the adverse party of a bargained-
for right, without which it would not have signed a contract. See Mayfair Construction Co. v.
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2022 IL App (2d) 210166-UWaveland Associates Phase I Ltd. Partnership, 249 Ill. App. 3d 188, 202 (1993) (holding that
refusal to submit disputes to third party designated by the contract was a material breach where
the aggrieved party offered testimony that it would not have signed the contract without the dispute
resolution provisions, which ensured work would proceed in a timely manner).
¶ 60 Capra did not dispute McCormick 106’s claim that Capra defaulted on the notes by failing
to make payments on their maturity dates. The claim was supported by copies of the promissory
notes attached to the complaint, which matured on January 5, 2019; and by the verified petition to
appoint receiver, which asserted that, at the time of the default, Capra owed approximately $4.7
million in principal and failed to pay the loan in full. Rather, Capra filed affirmative defenses that
he asserts were sufficient to establish that McCormick 106 materially breached the mortgage
contract, thus precluding foreclosure. In support that the breaches were material, Capra argues,
“The foregoing breaches defeat the bargained-for objective of the financing—it is
not the objective to allow the lender to overreach to recover excess funds from the
borrower, yet that is what occurred. It is not the objective to create financial hurdles which
prevent the borrower to pay down the principal, yet that is what occurred. It is not the
objective to cause an inaccurate payoff figure for the loan in favor of the lender, yet that is
what occurred.
What occurred resulted in a disproportionate prejudice to Capra, as McCormick has
been, and is, in the position of power, McCormick controlled the decision to issue partial
releases, thus controlling whether or not Capra could sell any of the collateral. Capra had
no bargaining authority with McCormick, and McCormick dictated the terms under which
it would issue a release to the Riverside Apartments.
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2022 IL App (2d) 210166-UEven after this litigation was filed, McCormick continued with its conduct,
misappropriating sales proceeds from the Creekview Property sale to unsubstantiated
‘secondary interest.’ ”
In sum, Capra asserted that McCormick 106 misused upwards of $200,000 in funds that were not
applied to indebtedness and caused damages in excess of $300,000.
¶ 61 First, Capra’s assertion that he suffered upwards of $300,000 is fanciful. While he claims
McCormick 106 misallocated funds, this is not tantamount to a permanent deprivation. Capra does,
to some extent, claim there is a permanent deprivation, consisting of a $609.92 tax penalty and an
improper charge of “additional ‘secondary interest’ ” totaling $95,687.23. With respect to the sums
he alleged McCormick 106 misallocated and held in escrow—slightly more than $200,000—there
is no corresponding assertion that McCormick 106 intended to convert those funds. In any event,
damages resulting from mere misallocation would almost certainly be much lower than the amount
misallocated, and significantly less than the purchase price. C.f. InsureOne Independent Insurance
Agency, LLC v. Hallberg, 2012 IL App (1st) 092385, ¶ 44 (holding that sixteen-month delay in
making final payments in asset purchase agreement was not material where trial court found the
delay was attributable to the complexity of calculating amount due and underpaying constituted
less than 1% of whole purchase price).
¶ 62 To accept Capra’s contention that McCormick 106’s alleged breaches were material, a trier
of fact would need to conclude that some level of damages between approximately $100,000 and
$300,000 justified Capra’s failure to pay approximately $4.7 million when the notes matured. The
high-end figure represents about 6.4% of the amount of unpaid principal at the time of his alleged
default, and 4% of the original principal amount. In his reply brief, Capra asserts, without citing
specific authority, that his ability to pay the remaining balance in full on the maturity date of the
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2022 IL App (2d) 210166-Unotes was irrelevant to whether McCormick 106’s alleged breaches were material. We disagree.
Capra’s shortcoming of over $4 million is highly relevant.
¶ 63 Capra does not claim that the alleged misuse of funds interfered with his use of the real
property under the contract or otherwise affected his business. Instead, he argues that he suffered
prejudice in that “McCormick has been, and is, in the position of power,” that “McCormick
controlled the decision to issue partial releases, thus controlling whether or not Capra could sell
any of the collateral,” and that “Capra had no bargaining authority with McCormick, and
McCormick dictated the terms under which it would issue a release to the Riverside Apartments.”
Essentially, Capra’s argument is that he was prejudiced because McCormick 106 exercised its
contractual rights in an arm’s-length, commercial transaction, which has no merit.
¶ 64 Capra also fails to support with any specificity his assertion that McCormick 106’s
breaches defeated any bargained-for objectives. Instead, he merely reiterates that McCormick
106’s alleged breaches were not bargained-for objectives. His argument is that McCormick 106
materially breached the contract because it breached the contract. This tautology forfeits the
argument. See Ill. S. Ct. R. 341(h)(7) (eff. Oct. 1, 2020) (“The appellant’s brief *** shall contain
the contentions of the appellant and the reasons therefor”). Moreover, Capra does not argue that
the alleged breaches are considered to be material by way of custom or usage (Kel-Keef
Enterprises, 316 Ill. App. 3d at 1016-17), resulted in an unfair advantage accruing to McCormick
106 (id.), or deprived Capra of a significant bargained-for right, without which he would not have
signed the contract (Mayfair Construction, 249 Ill. App. 3d at 202).
¶ 65 Capra failed to allege sufficient facts to create a genuine issue as to whether McCormick
106 materially breached the contract. Capra did not contest the assertion that he owed
approximately $4.7 million in principal on the date the notes matured, nor did he assert that he was
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2022 IL App (2d) 210166-Uready and able to pay the remaining balance in full but for McCormick 106’s alleged breaches.
The allegation that upwards of $200,000 in funds had not been applied to indebtedness as required
by the contract was unaccompanied by any allegation of conversion. There is nothing in the record
to suggest that McCormick 106 would have retained those funds had Capra tendered full or near-
full payment for the remainder due.
¶ 66 No reasonable person would conclude that the alleged misallocation of funds and excessive
interest charge, in light of the substantial unpaid balance, constitutes a failure to perform an
important or substantial contractual undertaking sufficient to excuse Capra from tendering
payment on the date the notes matured. See LB Steel, LLC v. Carlo Steel Corp., 2018 IL App (1st)
153501, ¶ 31. Relieving Capra of his obligation to pay would be inherently unjust. See Rogers,
240 Ill. App. 3d at 1010-11. Accordingly, no reasonable person would find that McCormick 106
materially breached the contract. Stated differently, Capra’s claim that his affirmative defenses
raised a genuine issue of material fact as to whether McCormick 106 materially breached is not
reasonable. Even if Capra proves McCormick 106 breached the contract and caused him upwards
of $300,000 in damages, it would be unreasonable to conclude that the breaches in any way
contributed to Capra coming up $4.7 million short at the time his notes were due, or otherwise
justified his failure to pay off the remaining principal on the due date. Capra’s bare assertion that
his ability to pay the loan in full on the due date is “irrelevant” has no merit.
¶ 67 Viewing the documents on file liberally in Capra’s favor, we nevertheless conclude that
Capra was on a trajectory to default regardless of McCormick 106’s alleged breaches. Capra
borrowed $7,668,000 under the contract, inclusive of future increases, beginning in September
2008. In November 2017, Capra executed two renewal notes for principal amounts of $4,800,000
and $2,105,499.38, respectively. At the time of default, Capra still owed $2,587,760 and
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2022 IL App (2d) 210166-U$2,105,499.38 in principal, respectively, plus accrued interest and other costs, but tendered no
payment on the maturity date of the notes. The trial court did not err when it determined that Capra
raised no genuine issue of material fact as to whether McCormick 106 materially breached the
contract, and that McCormick 106 was entitled to judgment as a matter of law.
¶ 68 E. The Trial Court Did Not Abuse Its Discretion
When It Confirmed the Judicial Sale
¶ 69 Last, Capra argues that the trial court erred when it confirmed the October 6, 2020, judicial
sale of the South Alpine and Forest Hills properties. Upon entry of a judgment of foreclosure, the
subject real estate shall be sold at a judicial sale. 735 ILCS 5/15-1507(a) (West 2020). After the
sale, the court shall, upon motion, conduct a hearing to confirm the sale. Id. § 1508(b). The court
shall then enter an order confirming the sale “[u]nless the court finds that (i) a notice required in
accordance with subsection (c) of Section 15-1507 was not given, (ii) the terms of sale were
unconscionable, (iii) the sale was conducted fraudulently, or (iv) justice was otherwise not done.”
Id.
¶ 70 A court’s decision to confirm a judicial sale under the IMFL is reviewed for an abuse of
discretion. Household Bank, FSB v. Lewis, 229 Ill. 2d 173, 178 (2008). This is true even in the
absence of an evidentiary hearing. See Deutsche Bank National v. Burtley, 371 Ill. App. 3d 1, 6
(2006) (“The Illinois General Assembly did not*** intend to require an extended evidentiary
hearing after each sheriff’s sale. [Citation.] While the provision provides for a hearing, the extent
of the hearing afforded a mortgagor is left to the sound discretion of the circuit court. [Citation.]”).
A trial court abuses its discretion if its ruling is arbitrary, fanciful, or unreasonable. Brown v.
Illinois State Police, 2021 IL 126153, ¶ 49. The party opposing confirmation carries the burden of
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2022 IL App (2d) 210166-Uproving sufficient grounds to disapprove the sale exist. CitiMortgage Inc. v. Lewis, 2014 IL App
(1st) 131272, ¶ 31.
¶ 71 Capra argues that the trial court confirmed the judicial sales in error. He reiterates his
arguments in the trial court, arguing that McCormick 106 instructed the receiver not to lease the
subject properties purposely to devalue them, to deprive him of rental income, and to limit the pool
of potential purchasers to cash purchasers, thus reducing the fair, competitive bidding and
maximizing the potential deficiency judgment it could collect against Capra.
¶ 72 McCormick 106 responds that the December 2018 appraisals were unreliable. First, the
South Alpine appraisal was based on a hypothetical condition and an extraordinary assumption
regarding the condition of the interior. Second, the Forest Hills appraisal indicated that there were
11 fully-occupied units, whereas the receiver’s initial report indicated that there were 10 units with
2 vacancies. Indeed, Capra concedes that those appraisals are irrelevant to his argument.
¶ 73 Instead, Capra urges this court to consider the difference between the receiver’s October
2020 listing prices and McCormick 106’s bids at the judicial sale. He acknowledges that property
sold at a forced sale does not bring its full value, and that inadequacy of price is an insufficient
ground to set aside a judicial sale. See Lyons Savings & Loan Association v. Gash Associates, 189
Ill. App. 3d 684, 688-89 (1989). He nevertheless contends that the communications between
Cathey and the receiver demonstrate injustice in the process. McCormick 106 explains that the
June 2019 and August 2019 correspondences between Cathey and the receiver occurred while the
automatic stay in the bankruptcy litigation was in place; thus, they do not suggest any fraud or
collusion. Capra does not respond to this argument.
¶ 74 We conclude that Capra’s assertions have no merit. Each of the correspondences involving
Cathey took place while the bankruptcy stay was in place, as McCormick 106 points out, and
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2022 IL App (2d) 210166-UMcCormick 106 was constrained by that stay from exercising control over the properties as it was
not a bankruptcy trustee. See 11 U.S.C. § 362(a)(4) (2018) (“Except as provided in subsection (b)
of this section, a petition filed under section 301, 302, or 303 of this title*** operates as a stay,
applicable to all entities, of*** any act to obtain possession of property of the estate or of property
from the estate or to exercise control over property of the estate” (emphases added)); id.§ 363(b)(1) (authorizing a trustee, “after notice and a hearing, [to] use, sell, or lease, other than in
the ordinary course of business, property of the estate”); id. § 323 (“The trustee in a case under
this title is the representative of the estate”). Many of the statements Capra highlights specifically
mentioned the bankruptcy stay. They no more support an inference that Cathey wanted to chill
bidding than that Cathey wanted to ensure compliance with the bankruptcy stay. To the contrary,
Cathey actually acknowledged that the receiver was obligated to affirmatively market the
properties for sale once the stay was lifted (“The bankruptcy judge should rule on our Motion for
Lift of Stay next Tuesday. I suspect it will be granted. We will immediately need to market the
properties for sale.” (Emphasis added)).
¶ 75 Further, we observe that, although a receiver has the statutory power to secure tenants and
execute leases (735 ILCS 5/15-1704(b)(2) (West 2018)) and a statutory duty to accept all rental
payments (id. § 15-1704(c)(2.5)), a receiver has no statutory duty to secure tenants and execute
leases (see id. § 15-1704(c)). The lack of a duty on the part of a receiver to secure new tenants
arguably rebuts the assertion that discouraging a receiver from doing so is unjust. At any rate,
Capra does not support his implied contention that more vacancies necessarily reduces the value
or desirability of nonresidential real property, which is sometimes purchased for redevelopment.
¶ 76 The trial court thus did not abuse its discretion when it confirmed the judicial sale of the
remaining properties.
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2022 IL App (2d) 210166-U¶ 77 III. CONCLUSION
¶ 78 For the reasons stated, we affirm the judgment of the circuit court of Winnebago County.
¶ 79 Affirmed.
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