A.P. Properties, Inc. v. Mitchell Rattner

¶ 1 Plaintiff, A. P. Properties, Inc., filed a complaint against defendants, Mitchell Rattner and

Mariann Weiss, for tortious interference with prospective economic advantage (tortious

interference). The trial court dismissed the complaint, without prejudice, for failure to state a cause

of action (see 735 ILCS 5/2-615 (West 2010)). Plaintiff then filed an amended complaint that

alleged the same facts as did the original complaint but sounded in unjust enrichment. The trial court

dismissed the complaint, with prejudice, for failure to state a cause of action. Plaintiff appeals,

arguing that the trial court erred in (1) dismissing the original complaint; and (2) dismissing the

amended complaint. We affirm.

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¶ 2 Plaintiff's original complaint alleged as follows. Plaintiff has long participated in annual taxsale

auctions, at which it competes with other "tax buyers” to acquire tax-sale certificates. In a few

cases, the owner does not pay the delinquent taxes, and the tax buyer obtains a tax deed to the

property. Plaintiff acquires only a few such tax deeds each year despite purchasing hundreds of

certificates. Defendants regularly purchase tax-delinquent properties just before the expiration of

the period of redemption so that they can obtain real estate at less than fair-market value from owners

who are in imminent danger of losing title.

¶ 3 The complaint continued as follows. In August 2007, defendants purchased real property in

Gurnee less than 48 hours before the redemption period expired; in April 2008, defendants purchased

real property in Ingleside and paid the delinquent taxes about two weeks before the redemption

period expired. At the time of each purchase, plaintiff had held a tax-sale certificate to the property

and had petitioned for a tax deed. Defendants' actions were the sole reason that plaintiff did not

obtain a tax deed to either property. The public policy of Illinois is to protect the rights of those who

purchase real estate that is sold for delinquent taxes, and the legislature has created an indemnity

fund to compensate those who lose their interests in real property that is sold for delinquent taxes

(see 35 ILCS 200/21-295 et seq. (West 2010)). The fund is supported by tax buyers such as plaintiff

and benefits the public and the governmental bodies that receive revenues from the tax-sale process.

¶ 4 Plaintiff's complaint alleged that plaintiff had had valid business relationships with Lake

County and with the owners of the Gurnee and Ingleside properties; that plaintiff had had a

reasonable expectancy that these relationships could provide plaintiff substantial profits on its

investments; that defendants had known of these relationships and expectancies; and that defendants,

instead of participating in the tax-sale process, had deprived plaintiff of the tax deeds that it

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otherwise would have obtained, thus interfering with plaintiff's business relationships and denying

plaintiff its prospective economic advantage.

¶ 5 Defendants moved to dismiss the complaint, contending (as pertinent here) that it was legally

insufficient because it failed to allege any facts to show that plaintiff had ever had a valid business

relationship with either the county or a property owner. The trial court granted the motion but

allowed plaintiff to file an amended complaint. Plaintiff filed an amended complaint that realleged

the facts in the original complaint but sought recovery for unjust enrichment. The amended

complaint did not seek recovery for tortious interference and did not refer to the original complaint.

Defendants moved to dismiss the amended complaint for failing to state a cause of action. The trial

court granted the motion. Defendants moved for sanctions (see Ill. S. Ct. R. 137 (eff. Feb. 1, 1994)).

The trial court denied the motion. Plaintiff appealed.

¶ 6 On appeal, plaintiff argues first that the trial court erred in holding that its original complaint

failed to state a claim for tortious interference. Defendants respond in part that plaintiff forfeited its

claim by filing an amended complaint that did not replead the claim for tortious interference—and,

indeed, did not refer to the original complaint at all. We agree with defendants.

¶ 7 The rule is well settled that "a party who files an amended pleading waives any objection to

the trial court's ruling on the former complaints.” Boatmen's National Bank of Belleville v. Direct

Lines, Inc., 167 Ill. 2d 88, 99 (1995); see also Foxcroft Townhome Owners Ass'n v. Hoffman Rosner

Corp., 96 Ill. 2d 150, 153 (1983); Bonhomme v. St. James, 407 Ill. App. 3d 1080, 1083 (2011). To

preserve review of the dismissal of the complaint, plaintiff could have stood on the complaint and

obtained an order dismissing it with prejudice (see Boatmen's National Bank, 167 Ill. 2d at 99) or

incorporated the claim for tortious interference into its amended complaint (see Bonhomme, 407 Ill.

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App. 3d at 1083). By choosing neither option, plaintiff forfeited any argument on appeal that the

trial court erred in dismissing its original complaint.

¶ 8 Plaintiff contends that the forfeiture rule is inapplicable because the case never proceeded

to trial and the same facts underlay both the original complaint for tortious interference and the

amended complaint for unjust enrichment. However, nothing in the case law restricts the forfeiture

rule in this manner. Marek v. O.B. Gyne Specialists II, S.C., 319 Ill. App. 3d 690, 702 (2001), which

plaintiff cites, addresses only when an amended complaint relates back to the original complaint so

as to avoid the statute of limitations (see 735 ILCS 5/2-616(b) (West 2010)). That is a separate

matter entirely.

¶ 9 Zurich Insurance Co. v. Baxter International, Inc., 275 Ill. App. 3d 30 (1995), which plaintiff

also cites, is also distinguishable. There, the plaintiff sought a declaratory judgment on whether it

had a duty to defend or indemnify the defendant drug company against claims by numerous third

parties (injured claimants). The trial court refused to entertain the complaint, explaining that the

failure to join the claimants deprived it of jurisdiction. The plaintiff filed a second complaint that

realleged the same facts and legal theories but attempted to solve the jurisdictional problem by

invoking the doctrine of representation or proceeding as a class action. The trial court also rejected

this approach. (Our opinion does not state whether the court formally dismissed either complaint

without prejudice.) The plaintiff then filed a third amended complaint that attempted to address the

trial court's jurisdictional concerns by joining some of the injured claimants. The defendant moved

to stay the action on the ground that the defendant had filed a more comprehensive action against

the plaintiff in California (see 735 ILCS 5/2-619(a)(3) (West 1994)). The trial court granted the

motion. Zurich, 275 Ill. App. 3d at 33-34.

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¶ 10 After various procedural vicissitudes, we entertained an appeal in which the plaintiff argued,

in part, that the trial court had erred in its rulings on the jurisdictional issue and on whether a class

action was permissible. The defendant argued that the plaintiff had forfeited these issues by failing

to reallege them in its amended complaints. We disagreed, holding that forfeiture did not apply

under the circumstances. We noted that the issues that the plaintiff sought to raise concerned only

procedural matters and that the amended complaints incorporated both the factual allegations and

the substantive legal theories of the original complaint. Thus, unlike in Foxcroft, the plaintiff could

not have avoided forfeiture simply by phrasing its amended complaints more broadly. Also, unlike

in Foxcroft, the amended complaints' omissions did not restrict the substantive points at issue or

force the trial court to speculate about which legal theories or claims the plaintiff intended to advance

at trial. Id. at 36. That is not the situation here. Plaintiff completely abandoned one substantive

theory of recovery and chose a different one, even though it could simply have incorporated the first

theory into a two-count amended complaint. Having told the trial court that it would not resuscitate

its claim for tortious interference, plaintiff may not do so here. Therefore, we consider the only issue

properly before us: whether the trial court erred in dismissing plaintiff's claim for unjust enrichment.

¶ 11 The trial court dismissed the amended complaint for failure to state a claim upon which relief

could be granted. See 735 ILCS 5/2-615 (West 2010). Our review is de novo. Sherman v. Township

High School District 214, 404 Ill. App. 3d 1101, 1107 (2010). We ask whether the complaint's wellpleaded

allegations, construed in the light most favorable to plaintiff, are sufficient to state a cause

of action upon which relief may be granted. Vitro v. Mihelcic, 209 Ill. 2d 76, 81 (2004). To state

a claim for unjust enrichment, a complaint must allege that the defendant has unjustly retained a

benefit to the plaintiff's detriment and that the defendant's retention of the benefit violates the

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fundamental principles of justice, equity, and good conscience. HPI Health Care Services, Inc. v.

Mt. Vernon Hospital, Inc., 131 Ill. 2d 145, 160 (1989). For the reasons that follow, we hold that the

amended complaint does not meet this standard.

¶ 12 The well-pleaded facts in plaintiff's amended complaint are these. Two property owners

became delinquent in paying their taxes. Plaintiff obtained a tax certificate to each property and filed

a petition for a tax deed. Defendants purchased each property for less than its fair-market value

shortly before the end of the redemption period. As a result, plaintiff could not obtain a tax deed to

either property. The issue is whether these facts, and the reasonable inferences to be drawn from

them, show that defendants were unjustly enriched. We agree with defendants that they do not.

¶ 13 To explain our holding, we start by briefly reviewing the tax-sale process. Under the

Property Tax Code (Code) (35 ILCS 200/1-1 et seq. (West 2010)), if taxes on a given property

become delinquent, the county may apply for a judgment against and a sale of the property. See 35

ILCS 200/21-110, 21-115, 21-145, 21-180 (West 2010); A.P. Properties, Inc. v. Goshinsky, 186 Ill.

2d 524, 529 (1999). If the property owner does not pay the taxes first, the county may sell the

property to the highest bidder, who then becomes liable to the county for the amount bid. 35 ILCS

200/21-190, 21-205, 21-240, 21-260 (West 2010); Goshinsky, 186 Ill. 2d at 529. Once the sale is

judicially confirmed, the tax buyer receives a certificate of purchase. 35 ILCS 200/21-240, 21-

260(c); Goshinsky, 186 Ill. 2d at 529. However, although the tax buyer may petition for a tax deed,

any owner or person interested in the property (with an exception not pertinent here) has the right

to redeem. 35 ILCS 200/21-345(a) (West 2010). Upon a timely redemption, the county may refund

the tax buyer's payment, thereby releasing the tax buyer's claim on the property. 35 ILCS 200/21-

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390 (West 2010); Goshinsky, 186 Ill. 2d at 530. If the property is not redeemed, the county issues

the tax buyer a tax deed. 35 ILCS 200/22-40 (West 2010); Goshinsky, 186 Ill. 2d at 530.

¶ 14 As can be seen, a tax buyer's rights under the Code are limited, and they do not include

anything approaching an unqualified entitlement to a tax deed. Plaintiff's amended complaint freely

concedes that few of its tax-sale purchases culminate in the award of tax deeds. Moreover, the effect

of the tax-sale certificate itself is limited. The issuance of the certificate does not affect the

delinquent owner's legal or equitable title to the property. Phoenix Bond & Indemnity Co. v. Pappas,

194 Ill. 2d 99, 101 (2000). An owner or interested party may redeem the property within the

statutory period. In sum, "[w]hat a tax buyer acquires is a contingent right to possibly acquire title

in the future.” In re McKinney, 341 B.R. 892, 896 (Bankr. C.D. Ill. 2006).

¶ 15 The gravamen of plaintiff's amended complaint is that defendants unjustly enriched

themselves by taking advantage of the property owners' dire economic circumstances in order to

obtain the properties at bargain prices. According to plaintiff, defendants' retention of this benefit

is unjust and violates public policy. Plaintiff's arguments for why this is so, however, are not easy

to pin down. As plaintiff acknowledges, it can cite no authority holding that purchasing taxdelinquent

property shortly before the expiration of the redemption period violates any statute or

common-law rule. We add that our research has disclosed no authority remotely implying that such

conduct creates liability in tort. Notably, nothing in the Code prevents anyone from doing what

defendants did here. And, once defendants purchased either property, nothing in the Code prevented

them from redeeming the property. Plaintiff does not contend otherwise.

¶ 16 What plaintiff does argue is that the type of conduct that defendants engaged in is unjust

because "it harms and interrupts a statutorily approved process.” Plaintiff maintains that defendants

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retained a benefit that would otherwise have passed to plaintiff. Of course, the Code does create an

"approved process” and defendants did prevent plaintiff from obtaining title to the properties that

defendants bought. However, defendants' acts did nothing to subvert the "statutorily approved

process.” Instead, they were a normal incident of that process, and one that the legislature allowed.

As noted, the Code does not prohibit anyone from purchasing tax-delinquent property from an owner

who is willing to sell it. Plaintiff's assertion that defendants exploited the owners' straitened

circumstances in order to obtain their properties cheaply is notable only for its sheer chutzpah.

Plaintiff was trying to take advantage of the exact same circumstances for the exact same end. The

owners decided that they would rather sell to defendants for something than forfeit the properties to

a tax buyer who would pay them nothing.

¶ 17 To the extent that public policy weighs in, it militates against prohibiting the sale of taxdelinquent

properties to willing purchasers before the redemption period expires. The Code's taxsale

provisions are intended "to enable owners to exercise their right of redemption *** at the lowest

possible cost.” Pappas, 194 Ill. 2d at 107. The goal of encouraging redemptions over forfeitures

is served by allowing property to pass from weak hands to stronger ones and by allowing owners to

bargain their way out of forfeitures. The mere fact that defendants chose to purchase the properties

rather than engage in the "statutory process,” as plaintiff chose, does not make defendants' acts

inconsistent with the Code, the intent of the legislature, or any principles of justice.

¶ 18 Although not directly on point, an opinion from a sister jurisdiction supports our decision to

favor redemptions over forfeitures. In Adams v. Thorp Credit, Inc., 452 N.W.2d 435 (Iowa 1990),

a tax buyer obtained a tax certificate to real property. Later, the property's mortgagee paid the

county treasurer what, at the time, was the correct statutory amount to redeem the property, and the

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treasurer issued it a certificate of redemption. However, the tax buyer then completed proper service

of her earlier notification of her intent to cut off the right of redemption; under the statute, this

required the mortgagee to pay certain extra costs in order to complete the redemption. The

mortgagee did not do so by the end of the redemption period, and the tax buyer demanded a tax deed.

The treasurer brought a declaratory judgment action to resolve the competing claims of the

mortgagee-redeemer and the tax buyer. Id. at 435-36.

¶ 19 The Iowa Supreme Court held for the mortgagee. The court noted that the statute at issue

stated, " 'A redemption is not complete until the costs are paid.' ” Id. at 436 (quoting Iowa Code §

447.13 (1987)). The court rejected the tax buyer's contention that this language invalidated the

redemption certificate. In doing so, the court relied heavily on "the well-established public policy

favoring redemption over forfeiture.” Id. Because the redemption certificate had been properly

issued, and only later developments had cast it into doubt, denying the mortgagee title would violate

"the well-established public policy favoring redemption over forfeiture.” Id.

¶ 20 We also choose our state's public policy favoring the redemption of tax-delinquent

properties. See Pappas, 194 Ill. 2d at 107. We reject plaintiff's request that we ignore our state's

public policy and instead stack the legal deck in favor of forfeiture over redemption.

¶ 21 Plaintiff maintains that defendants' conduct has harmed government entities and others who

would benefit from the receipt of tax-sale revenues or the enrichment of the statutory indemnity

fund. To the extent that this accusation is valid, it is the result of how our legislature has chosen to

set up the tax-sale and redemption process, and plaintiff's sympathy for counties and property

owners is properly directed to the General Assembly rather than to this court. In any event, as a

result of defendants' conduct, the county received the taxes that were due and the owners of the

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properties that defendants bought avoided forfeitures. Those facts do not support a claim of unjust

enrichment.

¶ 22 Although plaintiff did not preserve its argument that it stated a cause of action for tortious

interference, we note that the preceding analysis would establish that plaintiff did not plead that it

ever had a business relationship, contract, or reasonable expectancy of entering into a business

relationship with a third party. As a tax-sale purchaser, plaintiff acquired only the "contingent right

to possibly acquire title in the future” (McKinney, 341 B.R. at 896)—a possibility that the property

owner could frustrate at any time by exercising the right of redemption. Plaintiff's hope that it could

acquire tax-delinquent property falls far short of any reasonable expectation that it would do

so—even if, arguendo, the acquisition of a tax deed could be considered a business relationship with

either the defaulting taxpayer or the county.

¶ 23 Plaintiff's amended complaint did not state a claim upon which relief could be granted, and

the trial court thus did not err in dismissing it. Therefore, the judgment of the circuit court of Lake

County is affirmed.



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See: http://www.state.il.us/court/Opinions/AppellateCourt/2011/2ndDistrict/2110061.pdf

¶ 24 Affirmed.

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