Mandile v. Basta

2023 IL App (2d) 220329-U

• Court: Appellate Court of Illinois
• Decided: September 25, 2023
• Docket: 2-22-0329
• Status: Unpublished

Opinion

2023 IL App (2d) 220329-U No. 2-22-0329 Order filed September 25, 2023

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 ______________________________________________________________________________

CARMINE MANDILE and MARIA ) Appeal from the Circuit Court MANDILE, ) of McHenry County. ) Plaintiffs-Appellees, ) ) v. ) No. 17-CH-703 ) VICTOR BASTA, THE BASTA’S ) CORPORATION, ADELAIDE REAL ) ESTATE LLC, SALWA BASTA, and ) NABIL BASTA, ) ) Defendants-Appellants ) ) Honorable (Unknown Owners and Non-record ) Michael J. Chmiel, Claimants, Defendants). ) Judge, Presiding. ______________________________________________________________________________

JUSTICE SCHOSTOK delivered the judgment of the court. Justices Hutchinson and Jorgensen concurred in the judgment.

ORDER

Held: The trial court erred in (1) awarding the plaintiffs summary judgment because there remain outstanding questions of material fact; (2) placing the mortgaged property in receivership; (3) awarding pre-receivership rents to the plaintiffs; (4) awarding the plaintiffs damages; (5) denying without a hearing the defendants’ motion for discovery sanctions.

¶1 This appeal arises out of a foreclosure action filed by the plaintiffs, Carmine and Maria

Mandile, against the defendants, Victor Basta, The Basta’s Corporation, Adelaide Real Estate 2023 IL App (2d) 220329-U

LLC, and Salwa and Nabil Basta. The plaintiffs sold a commercial property to the defendants and

provided financing. In response to the foreclosure action, the defendants raised affirmative

defenses and counterclaims that, among other things, sounded in fraud. The parties filed cross-

motions for summary judgment. The circuit court of McHenry County awarded summary

judgment to the plaintiffs. The defendants appeal from the trial court’s award of summary

judgment and other related orders. We reverse and remand for additional proceedings.

¶2 I. BACKGROUND

¶3 The following facts are taken from the record and presented in the light most favorable to

the defendants. See Boldini v. Owens Corning, 318 Ill. App. 3d 1167, 1170 (2001) (in ruling on a

motion for summary judgment, all evidence is viewed in the light most favorable to the

nonmovant). The plaintiffs owned and operated property at 2160 Lake Cook Road in Algonquin

from 1999 until 2016. The property consisted of the primary restaurant tenant (Mandiles

restaurant) and three smaller tenant spaces. Prior to August 2016, two of the smaller spaces had

been rented to a dry cleaner and a beauty salon. On August 1, 2016, the plaintiffs entered into a

lease agreement with Leslie Blanken for a video gaming café to fill the third tenant space at the

property. The rent for the Blanken café was to be $2,400 per month. The lease agreement between

the plaintiffs and Blanken was conditioned upon Blanken obtaining a liquor license. If a liquor

license was denied to Blanken, the lease afforded Blanken the opportunity to void the lease.

Blanken did not intend to have a kitchen in her café but instead would purchase all of the food

served in the café from Mandiles restaurant.

¶4 On September 28, 2016, the plaintiffs entered into a contract with defendants to sell the

defendants the restaurant business and the property for $1.375 million. During the negotiations

prior to entering the contract, the defendants were informed that the third tenant space had been

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rented at the rate of $2,400 per month. Maria Mandile informed the defendants that the new tenant

would provide $100,000 of catering business annually to Mandiles restaurant.

¶5 On October 25, 2016, the Village of Algonquin denied Blanken’s liquor license

application. Michael Mandile, the plaintiffs’ son, was present at the hearing where Blanken’s

liquor license application was denied. Following the denial of the application, Michael and

Blanken exchanged emails. Michael emailed that “I can say with a possibility if we change [the]

plan we can get it done.” Blanken responded:

“However the gaming is part of our model . . . if we redo our concept, they want us to have

a full kitchen in order to get a liquor license and that will totally defeat our purpose of

working with Mandile’s and all of a sudden we are a competitor. It was supposed to offer

entertainment to draw people to that side of town and be beneficial to both of us. Not to

mention they will never agree on gaming for that space because all of a sudden it’s to [sic]

small? The size has never changed from our initial discussions nor has our concept. So,

the bottom line is they flipped on us and completely f*** us over.”

Blanken never re-entered the café after her application for a liquor license was denied.

¶6 On November 29, 2016, the plaintiffs and defendants signed a purchase and mortgage

agreement. The defendants executed a promissory note for $1 million. The mortgage agreement

required the defendants to make monthly payments of $6,326 until December 1, 2023. The

plaintiffs and some of the defendants also signed a collateral assignment of rents. One of the

tenants listed in the assignment was Blanken’s café.

¶7 On December 7, 2016, Blanken informed the defendants that she was terminating her lease

because her café had not been approved for a liquor license.

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¶8 The defendants continued making their monthly mortgage payments to the plaintiffs until

they learned that Michael Mandile had been present at the hearing where Algonquin had denied

Blanken’s application for a liquor license. The defendants stopped making payments as of July 1,

2017.

¶9 On September 20, 2017, the plaintiffs filed a complaint to foreclose the mortgage on the

property. On October 27, 2017, they filed a petition for the appointment of a receiver for the

property.

¶ 10 On November 2, 2017, the defendants filed their answer and raised several affirmative

defenses. The defendants asserted that the plaintiffs knew that Blanken was not going to proceed

with her lease, but they withheld that material information from them. Alternatively, the

defendants argued that the purchase agreement should be invalidated on the basis of mistake

because they would not have purchased the property had they known that Blanken was not going

to be a tenant.

¶ 11 On November 21, 2017, the plaintiffs filed an amended complaint.

¶ 12 On April 4, 2018, the trial court appointed a receiver. The rents that were paid by the other

tenants at the property were paid over to the receiver.

¶ 13 On March 19, 2020, the parties filed cross-motions for summary judgment.

¶ 14 On April 16, 2021, the trial court granted the plaintiffs’ motion for summary judgment and

entered an order for judgment of foreclosure and sale. The trial court denied the defendants’

motion for summary judgment. The trial court found that the “case simply involves a commercial

foreclosure of modest demographics, with a singular piece of real estate and three leaseholds, and

allegations of misrepresentations concerning one of the leaseholds.” The trial court explained that

“[t]he terms of that arrangement were transparent, available to the [d]efendants through their due

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diligence, and not hidden from them.” The trial court concluded that the “record of th[e] case was

devoid of facts sufficient to grant the [d]efendants the relief they seek” as “nothing of substance”

supported their allegations against the plaintiffs. The defendants thereafter filed a timely notice of

appeal.

¶ 15 On October 16, 2021, the parties entered into an agreement under which the plaintiffs

received a deed in lieu of foreclosure for the property and the defendants released any claim to the

property and no longer sought return of the property. Following the execution of that agreement,

the only remaining issue was as to damages.

¶ 16 On March 30, 2022, this court dismissed the defendants’ appeal for lack of jurisdiction

because the trial court had not entered a final order calculating the damages owed to the plaintiffs.

Mandile v. Basta, No. 2-21-0240 (2022) (unpublished order under Supreme Court Rule 23). On

August 31, 2022, the trial court entered a final order as to damages. The defendants filed a timely

notice of appeal from that order.

¶ 17 II. ANALYSIS

¶ 18 A. Trial Court’s Award of Summary Judgment to the Plaintiffs

¶ 19 On appeal, the defendants argue that the trial court erred in granting summary judgment in

favor of the plaintiffs. Specifically, the defendants argue that the trial court ignored the existence

of a material question of fact and made an impermissible finding of fact in favor of the plaintiffs.

The defendants contend that the trial court erred in determining that they should have uncovered

any false statement by the plaintiffs in their due diligence, rather than concluding that the plaintiffs

should not have made a false statement in the first place.

¶ 20 The purpose of a motion for summary judgment is to determine whether a genuine issue of

triable fact exists (People ex rel. Barsanti v. Scarpelli, 371 Ill. App. 3d 226, 231 (2007)), and such

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a motion should be granted only when “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 judgment as a matter of law” (735 ILCS 5/2-1005(c) (West 2022)). An

order granting summary judgment should be reversed if the evidence shows that a genuine issue

of material fact exists or if the judgment is incorrect as a matter of law. Clausen v. Carroll, 291

Ill. App. 3d 530, 536 (1997). We review de novo the trial court’s grant of a motion for summary

judgment. AUI Construction Group, LLC v. Vaessen, 2016 IL App (2d) 160009, ¶ 16.

¶ 21 A mortgagee may foreclose on its interest in real property upon default of a condition in

the instrument. PNC BANK, N.A. v. Zubel, 2014 IL App (1st) 130976, ¶ 18. To establish a prima

facie case of foreclosure in accordance with section 15-1504, a plaintiff is required to introduce

evidence of the mortgage and promissory note, at which time the burden of proof shifts to the

defendant to prove any affirmative defenses. Bank of America, N.A. v. Adeyiga, 2014 IL App (1st)

131252, ¶ 67.

¶ 22 An affirmative defense is one in which defendant gives color to his opponent’s claim but

asserts a new matter which defeats an apparent right in the plaintiff. Raprager v. Allstate Insurance

Co., 183 Ill. App. 3d 847, 854 (1989). In reviewing the sufficiency of an affirmative defense, this

court disregards any conclusions of fact or law not supported by allegations of specific fact.

Northbrook Bank & Trust Co. v. 2120 Division Ltd. Liability Co., 2015 IL App (1st) 133426, ¶ 15.

¶ 23 The affirmative defense of fraudulent misrepresentation requires that a plaintiff allege that

(1) defendant made a false statement of material fact; (2) known or believed to be false by the

defendant; (3) intent by the defendant to induce the other party to act; (4) action by plaintiff in

reliance on the truth of the statement; and (5) damage to the plaintiff resulting from such reliance.

Roe v. Jewish Children’s Bureau, 339 Ill. App. 3d 119, 131 (2003). A claim for fraud must allege

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with specificity and particularity facts from which fraud is the necessary or probable inference,

including what misrepresentations were made, when they were made, who made the

misrepresentations, and to whom they were made. Connick v. Suzuki Motor Co., 174 Ill. 2d 482,

496-97 (1996).

¶ 24 The defendants’ allegations sufficiently raise the affirmative defense of fraudulent

misrepresentation. The defendants’ allegations of fraud are premised on that the plaintiffs knew

that Blanken would not be continuing with her lease after Algonquin denied her application for a

liquor license, but they continued to represent to the defendants that she would. This

misrepresentation was material because Maria Mandile had told the defendants that Blanken’s café

would be purchasing its food from the restaurant that the defendants were purchasing. As such,

that would generate $100,000 in revenue for the defendants, which would exceed the amount of

the defendants’ annual mortgage payments.

¶ 25 The defendants allege that the plaintiffs knowingly deceived the defendants so that the

defendants would proceed with the purchase of the commercial lot which was less valuable than

advertised because it was not going to be fully leased. The defendants relied on these

representations as they proceeded with the purchase of the commercial property.

¶ 26 The plaintiffs insist that the defendants’ reliance was not justifiable because they could

have discovered everything they needed to through their due diligence of reviewing all of the

documents connected to the sale, including Blanken’s lease. They also argue that they could have

learned of Algonquin’s denial of Blanken’s liquor application because it is a matter of public

record.

¶ 27 Although the question of whether a plaintiff's reliance was reasonable is usually a question

of fact, where it is apparent from the undisputed facts that only one conclusion can be drawn, the

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question becomes one for the court. Kopley Group V., L.P. v. Sheridan Edgewater Properties,

Ltd., 376 Ill. App. 3d 1006, 1018 (2007). In order to determine whether there was justifiable

reliance on the part of a plaintiff, “it is necessary to consider all of the facts within a plaintiff's

actual knowledge as well as those that he could have discovered by the exercise of ordinary

prudence.” Neptuno Treuhand-Und Verwaltungsgesellschaft Mbh v. Arbor, 295 Ill. App. 3d 567,

575 (1998). A person may not enter a transaction with his eyes closed to available information

and then charge that he has been deceived by another. Kopley, 376 Ill. App. 3d at 1018. “If ample

opportunity existed to discover the truth, then reliance is not justified.” Neptuno, 295 Ill. App. 3d

at 575. If a plaintiff’s reliance is unreasonable in light of the information available, the loss is

considered the plaintiff’s own responsibility. Kopley, 376 Ill. App. 3d at 1019.

¶ 28 As the Illinois Supreme Court long ago explained:

“The rule is well established that a party is not justified in relying on representations

made when he has ample opportunity to ascertain the truth of the representations

before he acts. When he is afforded the opportunity of knowing the truth of the

representations he is chargeable with knowledge; and if he does not avail himself

of the means of knowledge open to him he cannot be heard to say he was deceived

by misrepresentations.” Schmidt v. Landfield, 20 Ill. 2d 89, 94 (1960).

¶ 29 Here, even if the defendants had access to Blanken’s lease and were aware of the results of

the hearing on her application for a liquor license, they would not have known of the October 26,

2016, emails between Michael and Blanken that indicated Blanken did not intend to proceed with

the lease. As such, even by exercising due diligence, the defendants did not have the opportunity

to discover this material information that would have impacted their decision to purchase the

property. See Kopley, 376 Ill. App. 3d at 1018-19.

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¶ 30 Accordingly, the trial court erred in granting summary judgment as factual questions

remain regarding the defendants’ affirmative defense of fraudulent misrepresentation. We

therefore need not consider the defendants’ other affirmative defenses and alternate bases to deny

the plaintiffs’ motion for summary judgment.

¶ 31 In so ruling, we also reject the defendant’s argument that summary judgment should have

been granted in their favor. The plaintiffs do not concede that Maria Mandile represented to the

defendants that Blanken’s lease would generate $100,000 for Mandiles restaurant. Absent that

statement, there is a question of whether Blanken’s lease was material to the purchase of the

property. Further, the plaintiffs insist that they were not aware that Blanken intended to terminate

her lease. These questions of fact are to be resolved by the trier of fact, not on a motion for

summary judgment.

¶ 32 B. Trial Court’s Appointment of a Receiver

¶ 33 The defendants’ second contention on appeal is that the trial court erred in granting the

plaintiff’s motion for a receivership. Under section 15-1701(f) of the Foreclosure Law (735 ILCS

15-1701(f) (West 2022)), a receiver for mortgaged real estate may only be appointed “in

accordance with” that section by showing that the plaintiff is entitled to possession under

subsection 15-1701(b)(2) (id. § 15-1701(b)(2)). Pursuant to section 15-1701(b)(2), “in mortgage

foreclosure cases involving nonresidential real estate, a mortgagee is entitled to be placed in

possession of the property prior to the entry of a judgment of foreclosure upon request, provided

that the mortgagee shows (1) that the mortgage or other written instrument authorizes such

possession and (2) that there is a reasonable probability that the mortgagee will prevail on a final

hearing of the cause. However, if the mortgagor objects and demonstrates ‘good cause,’ the court

shall allow the mortgagor to remain in possession.” Bank of America v. 108 N. State Retail LLC,

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401 Ill. App. 3d 158, 164 (2010) (quoting 735 ILCS 5/15-1701(b)(2) (West 2006)). The

Foreclosure Law thus “creates a presumption in favor of the mortgagee’s right to possession of

nonresidential property during the pendency of a mortgage foreclosure proceeding [citations], and

a mortgagor can retain possession only if it can show ‘good cause’ for permitting it to do so.” Id.

¶ 34 We note that the Foreclosure Law uses the term “and” between the two prongs of section

15-1701(b)(2). 735 ILCS 5/15-1701(b)(2) (West 2020). While use of the word “and” between

two statutory elements generally indicates that both elements must be satisfied—that the statute

must be read conjunctively—our supreme court has recognized that “and” is often used

interchangeably with the generally disjunctive “or,” with the meaning being determined by

context. County of Du Page v. Illinois Labor Relations Board, 231 Ill. 2d 593, 606 (2008). Thus,

if reading “and” in a statute literally would create an inconsistency in the statute or render the sense

of the statute dubious, then the term “and” will be read as “or.” Martin v. Office of State’s Attorney

of Cook County, 2011 IL App (1st) 102718, ¶ 11.

¶ 35 We believe that the term “and” in section 15-1701(b)(2) of the Foreclosure law is properly

read in the conjunctive. Thus, to be allowed to gain possession of the defendants’ property through

a receivership, the plaintiffs had to establish both prongs of section 15-1701(b)(2). As discussed

earlier, there is a question of fact as to whether the defendants raised a valid defense of fraudulent

misrepresentation as to the plaintiffs’ complaint for foreclosure. Thus, we cannot say that the

plaintiffs satisfied the second prong of section 15-701(b)(2) that there was “a reasonable

probability” that they would prevail at trial on their complaint. The trial court therefore erred in

placing the property in receivership.

¶ 36 C. Rent Money Collected Prior to the Appointment of Receivership

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¶ 37 In January 2018, after the commencement of litigation, but prior to the appointment of a

receiver, the other two remaining tenants’ rent payments were placed in an escrow account. Those

payments were for January to March 2018. The receiver was appointed in April 2018. The trial

court subsequently granted the plaintiffs’ motion to allow the receiver to collect those rents. The

defendants contend that the trial court erred in ordering them to turn over pre-receivership rents to

the receiver.

¶ 38 Generally, a mortgagor/debtor, as the party in possession and owner of a statutory right of

redemption, is entitled to any rents generated from the property as long as the mortgagor retains

possession, without having to account for them to the mortgagee/lender. U.S. Bank National Ass’n

v. Randhurst Crossing LLC, 2018 IL App (1st) 170348, ¶ 48. The plaintiffs present no reason why

we should depart from that rule. Accordingly, we determine that the trial court erred in ordering

the pre-receivership rents be turned over to the receiver. See id.

¶ 39 D. Award of Damages

¶ 40 The defendants next argue that we should vacate the trial court’s award of damages as

arbitrary and not based on the evidence. As we have determined that summary judgment in the

plaintiffs’ favor was improper, any discussion of damages is necessarily premature. We therefore

need not address this issue. See Weber v. St. Paul Fire & Marine Insurance Co., 251 Ill. App. 3d

371, 372-73 (1993) (court will not address an issue that is premature and not ripe for adjudication).

¶ 41 E. Discovery Sanctions

¶ 42 The defendants’ final contention on appeal is that the trial court erred in not awarding them

sanctions for the plaintiffs’ discovery violations. Alternatively, due to those discovery violations,

the defendants argue that the trial court should have reduced the attorney fees that were awarded

to the plaintiffs.

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¶ 43 Over approximately 14 months in 2018 and 2019, the defendants filed three motions to

compel written discovery and for sanctions. The trial court did not address the first motion. The

trial court granted the second motion and awarded the defendants $2,000 in sanctions. The trial

court did not conduct a hearing on the third motion. Rather, on August 30, 2022, after we

remanded the cause for a ruling on damages, the trial court indicated that it had resolved the motion

in April 2021 when it granted the plaintiffs’ motion for summary judgment. The trial court

explained that it believed both parties were responsible for the delay.

¶ 44 Supreme Court Rule 219 specifies the consequences for a litigant’s refusal to comply with

the rules or court orders regarding discovery. Ill. S. Ct. R. 219 (eff. July 1, 2002). Supreme Court

Rule 219(c) empowers the trial court to enter sanctions, including monetary sanctions. Id. The

imposition of sanctions for the failure to comply with discovery lies in the trial court’s discretion.

Bill Marek’s The Competitive Edge, Inc. v. Mickelson Grp., Inc., 346 Ill. App. 3d 996, 1008,

(2004). The trial court’s decision in fashioning such a remedy will not be reversed absent a clear

abuse of discretion. Id.

¶ 45 The trial court’s determination that both parties were responsible for the discovery delays

is not supported by the record. Indeed, the trial court’s determination contradicts its earlier finding

that the defendants’ second motion to compel discovery and impose sanctions on the plaintiffs was

warranted. As the trial court made its finding without a hearing and after three years had passed

since the defendants filed their third motion to compel and for sanctions, we believe the appropriate

remedy is to remand this issue so the trial court can conduct a hearing on the defendants’ third

motion to compel and for sanctions.

¶ 46 III. CONCLUSION

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¶ 47 For the foregoing reasons, we reverse the trial court’s order (1) awarding summary

judgment to the plaintiffs; (2) placing the property in receivership; (3) awarding the plaintiffs pre-

receivership rents; (4) awarding the plaintiffs damages; and (5) denying the defendants’ third

motion to compel discovery and for sanctions.

¶ 48 Reversed and remanded with directions.

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