Appellate Court Refuses Jurisdiction Over Order Quashing Lis Pendens

The Westin North Shore is a hotel in the northern suburbs of Chicago. The hotel was used as collateral for a multimillion dollar loan to the hotel owner. Five Mile Capital Westin had a subordinate interest in the loan. After the owner defaulted on his payments, Berkadia National Mortgage was named as special servicer of the hotel.

Berkadia got an offer to buy the hotel. But because the market for hotel properties fell, the offer did not cover the amount of the loan. If Berkadia accepted the offer, Five Mile Capital would be left with big losses.

So Five Mile Capital sued Berkadia, and asked the trial court for an injunction to stop the sale. Five Mile also recorded a lis pendens [formal notice that property title is disputed] on the property. Berkadia asked the trial court to dismiss the complaint and to lift the lis pendens. The trial court refused to dismiss the complaint, but did quash the lis pendens. The trial court also treated plaintiff’s position as a request for a preliminary injunction against the sale of the property. Then the trial court denied the preliminary injunction.

Five Mile appealed the denial of the preliminary injunction and the order quashing the lis pendens. Five Mile went to the appellate court under the rule allowing appeals of preliminary injunctions even before there is a ruling on the entire case. [Illinois Supreme Court Rule 307 allows appeals of certain interlocutory orders, including denials of preliminary injunctions.] So the first question was: Did the appellate court have jurisdiction to review the order that quashed the lis pendens? It would, if the order to quash were a preliminary injunction; it would not if the order to quash were a more typical interlocutory order.

The First District Illinois Appellate Court ruled it did not have jurisdiction to review the order to quash before the entire case was final because quashing a lis pendens is not a preliminary injunction. Here’s how the appellate court explained it.

As with an order quashing a discovery subpoena, an order quashing a lis pendens is simply an administrative order that deals with how the case proceeds before the court, and it can be issued by any court without resorting to its equitable powers. It then follows that, similarly to a discovery order, an order quashing a lis pendens is not an interlocutory order that is appealable under Rule 307(a)(1). We accordingly lack jurisdiction over that portion of the circuit court’s order.

In the end, the trial court’s ruling denying the preliminary injunction [not preventing the sale] was affirmed. Read the whole opinion, Five Mile Capital Westin v. Bekadia Commercial Mortgage, 2012 IL App (1st) 122812 (12/24/12), by clicking here.