Home / Market Trends / Affordability / Illinois Court Rules on Property Taxes & Eminent Domain
Print This Post Print This Post

Illinois Court Rules on Property Taxes & Eminent Domain

The Illinois Supreme Court recently reversed the Third District’s holding in MB Fin. Bank, N.A. v. Brophy, wherein the District Court previously concluded that a property owner (MB Financial Bank) was entitled to a refund for monies it paid for property taxes on land which the government successfully seized in eminent domain proceedings. MB Fin. Bank, N.A. v. Brophy, 2023 IL 128252 (September 21, 2023).

In reversing the lower court, the Illinois Supreme Court explicitly overturned City of Chicago v. McCausland, which establish a contrary precedent in May 1942.

In City of Chicago v. McCausland, on February 17, 1926, the city of Chicago filed a petition under the provisions of an act concerning local improvements to ascertain the just compensation to be paid for taking certain parcels of land owned by Henry G. Wells, together with other real estate, for the purpose of opening and widening a street in the city of Chicago, and to ascertain what property would be benefited by such improvement. The verified report of the commissioners appointed by the court to investigate and report the amount of just compensation was filed May 26, 1926, and upon said cause being tried the court found the amount of just compensation to be paid to the property owners on January 30, 1928. The cause was continued from time-to-time pending other proceedings, to ascertain the just compensation and benefits to other parts of the land along the line of said improvement until June 30, 1929, when the final judgment was entered fixing just compensation for the Wells property.

By way of history, MB Financial owned a “low-income apartment complex known as Evergreen Terrace” which became the subject of eminent domain proceedings initiated by the City of Joliet (the “City”) in October 2005. After 12 years of litigation, the City prevailed and obtained fee-simple title to the property in August 2017. MB Financial continued to pay property taxes (without formal protest) and operate the apartment complex throughout the condemnation proceedings.

In 2018, MB Financial filed a tax objection complaint against the treasurer of Will County (“Brophy”) seeking a refund of more than $6 million in property taxes it paid between October 2005 and August 2017. Claiming the $6 million was an over payment under Section 20-175(a) of the Property Tax Code, MB Financial argued that the City became the owner of the property retroactive to the date it filed its condemnation action and therefore was responsible for paying the property taxes. The City successfully moved to dismiss the complaint, but MB Financial appealed to the Third District and obtained a favorable ruling as to the tax refund it sought. The City appealed that ruling to the Illinois Supreme Court.

As the basis for the tax refund, MB Financial relied heavily on the Illinois Supreme Court’s holding in McCausland which established two main principles: Firstly, McCausland established that “the right to title vests as of the date compensation is paid [for the government taking]” and “the title acquired ‘relates back’ to the time the condemnation action was filed.” Secondly, McCausland established that “the value of the property in a condemnation proceeding is fixed as of the time the condemnation action was filed.”

On appeal, the Illinois Supreme Court explained that McCausland was no longer good law. The Court explained that intervening cases since McCausland established that a “property is deemed taken in an eminent domain proceeding … on the date the government deposits the compensation award to the property owner and [thereby, on that date] acquires the title and right to possess the property.” This was a significant change in the law and essentially eliminated the relation back rule set out in McCausland. The reason for the change was to allow the original property owner to enjoy any valuation gains between the filing date of the condemnation proceedings and the adjudication date as not to violate a one’s property rights and the prohibition on takings without fair compensation as laid out in the Fifth Amendment of the Constitution.

Citing Section 9-175 of the Property Tax Code, the Court explained that an “owner of property on January 1 in any year” is liable for the taxes of that year. The Court elaborated that “ownership” means one has “control and the right to enjoy the benefits of the property” which MB Financial had and did throughout the condemnation proceedings. The Court concluded that “filing the condemnation complaint in 2005 was not a taking” because MB Financial “remained the owners of the property until 2017,” and “enjoyed the continued use of their property,” including profits generated by the apartment complex and “the same governmental services provided to all property owners in the City.”

The Court explained that “overruling precedent is appropriate ‘when the intervening development of the law has ‘removed or weakened the conception underpinnings from the prior decision, or where the later law has rendered the decision irreconcilable with competing legal doctrines of policies.’” The Court concluded that was the case and officially overruled McCausland.

About Author: Robert Deisinger

Robert J. Deisinger is Senior Litigation Associate for Diaz Anselmo & Associates P.A. in the firm's Naperville, Illinois office. Deisinger practices in the area of mortgage foreclosure. He is a graduate of Northern Illinois University (2002) and Michigan State University College of Law (2005), where he was an editor of the Michigan State Law Review. He is licensed to practice in the State of Illinois and admitted to the bars of the United States District Courts for the Northern, Central, and Southern Districts of Illinois. Prior to joining Anselmo Lindberg & Associates LLC, Mr. Deisinger focused his practice in default litigation and appellate advocacy. He is a member of the Illinois State Bar Association. He may be reached by phone at (630) 453-6960 or email [email protected].

Check Also

Improving Affordability Fueled by Moderate Decline in Home Prices

"Our 2024 housing forecast reveals the green shoots we've been waiting to see in the housing market and should give buyers some optimism after a grueling few years," said Danielle Hale, Chief Economist for Realtor.com. "Moves of necessity are likely to drive home sales in 2024."