Appellate court reverses $5.3 million judgment against Hawthorn Woods
A $5.3 million judgment against Hawthorn Woods that capped a five-year legal dispute has been reversed and vacated by a higher court.
The recent finding by the Second District Appellate Court stemmed from a 2012 agreement between the village and PML Development LLC involving 62 acres bordered by Fairfield Road to the west, Midlothian Road on the east, Kruger Road on the south and the Legend Knoll subdivision on the north.
The agreement allowed PML to accept fill materials, grade the property and then donate it to the village for future development. Grading was to have been completed by Dec. 31, 2015, but before the deadline, PML sued the village in Lake County circuit court for breach of contract.
Among other things, the company contended the village delayed the project to incorporate details of a proposed municipal complex that weren't negotiated in the initial agreement.
The village made a counterclaim of breach of contract by PML, saying in part the company failed to grade and compact the property in accordance with the design criteria for a municipal campus.
The case was decided in November 2020 with the lower court ordering the village to pay $5.3 million as well as legal fees estimated at about $2 million.
The village appealed in April 2021, saying that because PML breached the contract, it should not have been awarded any damages. The company filed a cross appeal, arguing the $5.3 million damage award wasn't enough.
In an 18-page ruling, the three-judge appellate panel on June 29 agreed both parties had breached the contract and that neither was entitled to damages.
The appellate panel found the lower court erred by excusing PML from its contractual obligations because the village had "breached first" and said the company should not have been awarded damages.
The appellate panel said the finding is supported by a case heard by the Illinois Supreme Court in 1917, which held that neither party can recover damages if both are in default.
As the entire judgment was vacated, the village also is off the hook for the legal fees.
"The village is very pleased with the appellate court ruling," said Pam Newton, chief operating officer.
In its ruling, the appellate court found issues with both sides. It agreed, for example, the village did not have a plan until 13 months after the agreement was reached and limited the work area in the interim.
The agreement also called for PML to transfer the property "free and clear" to the village without encumbrances. But as of the summer of 2017, the unpaid taxes were $436,021.
"However, the trial court declined to enter a money judgment against
PML, observing that the village may have caused PML's inability to pay the taxes," according to the appellate ruling.
PML breached the contract by not paying the property taxes, the appellate court found. As one breach is enough to prevent a party from recovering damages, the appellate panel said it did not need to address the other breaches found by the lower court.
Joseph Cohen, a partner with Chicago-based Fox Rothschild LLP, which represented PML, said he has been authorized to appeal to the Illinois Supreme Court.
"The interesting aspect from our point of view is that the appellate court still held the village was the first to breach and materially breached (the agreement) but allowed them to walk away from it," he said.
Grading was completed in December 2018. One of the three parcels eventually was acquired by a tax scavenger, and the entire site remains undeveloped. The village does not own the property and officials have not recently discussed any potential use on the site, according to Newton.
"Any proposed future uses other than the current open space would be vetted in a publicly involved process," she said.