Illinois Supreme Court Finds Property Taxes Due Regardless Of City S Eminent Domain Taking


Last month the Illinois Supreme Court reversed the Third District’s holding in MB Fin. Bank, N.A. v. Brophy[i], 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[ii], which establish a contrary precedent in May 1942.

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 twelve years of litigation, the City prevailed and obtained fee-simple title to the property in August 2017.[iii] 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.[iv] 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.”[v]

On appeal, the Illinois Supreme Court explained that McCausland was no longer good law.[vi] 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.[vii] 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.”[viii]

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.’ ”[ix] The Court concluded that was the case and officially overruled McCausland.

[i] The full citation is MB Fin. Bank, N.A. v. Brophy, 2021 IL App (3d) 200192-U, appeal allowed, 193 N.E.3d 27 (Ill. 2022), and aff’d in part, rev’d in part, 2023 IL 128252.

[ii] The full citation is City of Chicago v. McCausland, 379 Ill. 602, 603, 41 N.E.2d 745, 746 (1942), overruled by MB Fin. Bank, N.A. v. Brophy, 2023 IL 128252.

[iii] Brophy, 2023 IL 128252, ¶4. Future reference to this case is to this citation until indicated otherwise.

[iv] Brophy, 2023 IL 128252, ¶5. Future reference to this case is to this citation until indicated otherwise.

[v] Brophy, 2023 IL 128252, ¶17-18.

[vi] Brophy, 2023 IL 128252, ¶22. Future reference to or quotations from this case is to this citation until indicated otherwise.

[vii] Brophy, 2023 IL 128252, ¶16.

[viii] Brophy, 2023 IL 128252, ¶34.

[ix] Brophy, 2023 IL 128252, ¶30. Future reference to this case is to this citation.