known as white thirty seven which i think we can see from out from this court room last week as i just quinn mentioned this court issued the centerpoint opinion and asked that the parties to be prepared discuss it then and i am prepared discuss that case and and there are to point out that there are several ways that this case is different from not only center point but all of the other cases that the bank cites and its papers and in fact the other reported foreclosure cases that we've seen unlike centrepoint no one bank owned life travelers the key cases unlike those cases there in this case there receiver the first test is the bank has the burden to show that it has a reasonable probability of success on its underlying foreclosure action if it succeeds and meets that test then the burden shifts to the borrower to show good cause not to appoint the receiver and we're not in any way suggesting to change that law but as you read the cases almost all of the cases including centerpoint focus on the second element the lack of good cause or the question of good cause and  because in all of those cases there's really no question that the first element was meant to be that the bank established a reasonable probability by showing a payment default in this case there was no payment imbalance and the construction loan in this case required as a condition that the loan would have to remain in balance and what that means is that the the amount budgeted had to be sufficient had to be within the scope of the amount that was available under the law and so if it some point the budget for the project exceeded the amount of the loan then the loan would be out of balance our clients took over this project in two thousand and seven to to take over the project they eventually invested twenty million dollars that of their own money as well as their time and reputation to if this project substantially complete it in the earliest stages in two thousand and seven  our clients took over the project and he examined the work and they examined the budget and they noted that to prove to complete the project consistent with the city redevelopment agreement a development agreement the not only our clients were  clients it from the bank that visual funds would be needed and at that point the loan was technically out of balance despite that out of balance condition the bank continued to approve wor continue to approve change orders in fact continue to fund and in fact you know really almost as a partner with the developers added to the loan imbalance it wasn't good right we are you  our clients be obligated to repay but it is good that they were supporting the project but for the bank to support the project unknowingly go along with the program including the out of balance work later to pull the plug using that as a condition calls into question the legitimacy of the of that particular default but one of the traces let's go back in time and so when i was out of  point and the fact is your honor points out what they did not do is the form they did not at any stage with then that two and a half year period actually request that our client make the balancing deposit to put the loan back into balance and the reason they did not do that there's a there's a real reason and it's alleged in our verified pleadings that the bank never denied and that is because the parties were negotiating a loan modification after that meeting by the bank promising to get this done those discussions continued and they continued up until really just shortly before the bank filed its complaint then just as when they got it like to focus on the question that you asked about the need for the banks to make a request and that's a fundamental distinguishing factor in our case in an important point that the circuit court never addressed and that is before you get to our affirmative defenses which is an important part of our for our client to make a balancing to cause and they also are required to give our client ninety days to cure that condition it's not enough is the bank argues in its briefs that we were on notice there is no specifically to two provisions the first is seven point four d of the loan agreement which is record paid c three fifty which requires that the bank if there is an out of balance condition the bank can make a particular case but there are a couple of other responses first and that is first of all the letter agreements while they do use the language of that of default at no time do the letter agreements ever include the language that we the borrower was waiving the request period it makes a cross reference to the default under the only in the loan agreement specifically for acquires the ninety day period about how  scientists letters they knew that the parties were actively negotiating a loan modification that would remove the need to go get funds elsewhere and that's a key difference here because the parties continue to negotiate that loan modifications so when the bank or modified the obligation in the loan agreement and what would have happened if we're kind of going back in time to determine what would have happened had the bank provided the actual request that would have triggered  clients to know that no longer could they rely on the basic and their premises for a loan modification the longer that they hope that that there would be an agreement to put the law back in balance but at that point they would have to go out and find other investors and find other thirty years if you hundred know it and common sense would tell you to go out and get other funds if the bank wasn't at the same time giving you a term sheet with a loan modification that would put the bank back in balance that by december two thousand and eight they actually rose to the level of exchanging a term sheet so it wasn't just a pious hope there were actual discussions about terms of a loan modification of two thousand and eight and those discussions continued into two thousand and nine in even up to shortly a week or two before the bank filed its complaint the bank that the parties were continuing to try to close and finalize that loan modification and that's the key act we've never brought a claim based on their promise or claiming that the court should hold them to the promise for the loan modification we presented the evidence of the loan modification to again to describe them put in context why this was not material and why it was reasonable for us in the circumstances to rely on this negotiation and i go out and try to get other funds the other things directly in response to your question justice coleman is that when you look at the letter agreement and i have one i think it's the last one that of the bank points to which is the waiver of defenses of those language important one which above that in the paragraph above that that says that unless and only to the extent contained in a definitive written agreement for modification of the loan nothing in this agreement so paragraph three i shall constitute a modification or amendment of any loan documents and so you have this problem of a conflict where you have this letter that the bank is foisting on the developer say you have to sign this letter or when i get a funny money and it uses language of an event to fall but it has a cross reference to the loan agreement that says it's not in any way modifying the terms of the loan agreement and section eleven point one k of the loan agreement record c three eighty nine makes clear i'm sorry i say that wrong page page c three seventy five again has the specific bargain for a provision that says that when it describes the vents of default under the loan agreement it notes that a failure by depositors to deposit with the agent funds required to maintain the loans and balance but then it says except that in the case of the deposit required by section seven point four d such failure shall not constitute an event of default unless it is continued for a period of ninety days after the date of request  bank versus the one eighty one you know that third ten fifty three and the next case there's some similarities here it's where a sophisticated businessman found himself in financial straits there's something involved  with his wife to engage in some financing and he went to a draw and in and out in the bay rejected that would fund his his request and the bank told him that the only way they would provide him the money is if he signed a new promis did they did it when they file a motion to strike there the court was required to treat those allegations as true and so this is a situation where the presumption that's available under the illinois mortgage foreclosure law or instead of against the illinois code procedure and again in the court the cases that we've set out we haven't found a situation like this where the borrower not only alleges affirmative verified affirmative defenses and facts but the bank doesn't apply to those or deny them bank to prevail or establish reasonable probability of success and that is because there's no way in fact work on that those letter agreements could bar the fences that didn't exist at the time those letters were signed and we've identified at least two defenses that does not exist at the time the letters are so one is the latches defense and the other is the covenant of good faith and fair dealing and the  breach of the covenant of good faith and fair dealing in this case is significant and really for two reasons one is because under the law a party cannot wave a covenant of good faith and fair dealing and was done so explicitly court but it's so good that there are two points that one is it has to be weighed expressly here the there's nothing in the letter agreement to make any mention at all to the covenant of good faith and fair dealing and perhaps more importantly at the time the better agreements were signed the conduct giving rise to the covenant of good faith fair dealing hadn't yet occurred that was relatively late in the project involving the fourth floor tenant muvico and that you can't under state the importance of that particular tenant to this project it's a major tenet takes up many square feet on the fourth floor it was a tenant that our clients found early on in the project in fact one of the exhibits that record is again in that early meeting and in two thousand and seven when our clients noted the additional funds that would be needed one of the things that happened is the original tenant and they're all going to be pulled out and so under the redevelopment agreement we were required to was a i would argue that's a post hoc rationalization that was not alleged by the bank certainly not in the complaint and in fact though that actually supports the finding of bad faith here because there are other leases over at that project particular developers with those particular tenants to get them into project the bank all of that was fully disclosed to the bank and in fact we allege in our in our affirmative defenses that the fact that the bank approved those transactions is that this court would be able to craft a narrow opinion that is that is really limited to the particular facts in this case i suppose we make a rule twenty three absent a good one and it would be possible and then and in fact that your honor again there are facts that are that are unique to this case but in way we believe that the court the circuit court erred is because the court based its entire opinion on those letter agreements not taking into account of whether the bank actually under the agreement by giving the request as before you even get to the letter agreements of the big the circuit court didn't address that question they can be addressed by this court as a matter of law and second the court again rejected it felt that the letter agreements applied  defense under the sun even if the defense didn't exist at the time whether agreements were written and so if there's ever a case where a party could show that the bank in the stamp was a reasonable probability it would be this one there  is an interesting question that this court really addressed more directly in the center point case we didn't explicitly raise it which is it though going to your point just square which is what does the court need to do does there need to be an evidentiary hearing  allegations is true ultimately we'll have a fight over whether we prevail but the question that really is facing this court facing the circuit court is would those defenses of proof defeat the bank's case and defeat the reasonable probability of again the standard that this court held in center point and then mellon bank before was that the reasonable probability test is made it is satisfied if there is a proven default and your honour's we've argue why we think in this case it's far from a proven default and in fact the defenses that we've raised would defeat the bank's case your honor i'm mindful and i appreciate that you've given us time but i'll move on to the question of  well as most of the other cases that have been issued in this space relate to good cause and that is because there are many cases where there are facts like these where there's a reasonable argument to fight that the reasonable probability test but  also challenge to a good cause and presented evidence including affidavits showing that in this particular case the bank's chosen receiver that there was good cause not to a point that the chosen to see and hear on if i may party struggled with the fact that many of the cases were in the negative you know that if they that there were cases that showed circumstances where there wasn't good cause but there's not a lot of guidance about what is good cause here is we read through cent point and the other cases we believe that what emerges is a multi factor test and that there's the there is guidance for the tickets for the series that certainly we're not advocating in any way to shift the burden to the bank we understand that the borrower in every case has the burden to show good cause but there are multiple ways we would submit that of our work could show good cause and why the borrower in this case did show good cause one is one factor is the fact of it or point to it center point that wasn't established center point which is does the appointment of the receiver interfere with the commitment for the financing from other lenders now in this case your honor limited as i am to the record before they i can't address the details with respect to that point other than to say that in this particular case because  bank acted prematurely because the bank brought the foreclosure action before giving the ninety day period you had your grace and skepticism about the chances to get that money it's in the day actually it had the bank provided the buy the project at that time and but i agree that as the court articulated in centrepoint that that is a factor the court should consider and that's a strong factor that that would be because there might be enough in a particular case to be good cause enough itself here if there's not that evidence of a formal commitment or a full kind of look at the court required center point there are additional factors that we think tak not sufficient to overcome the presumption but it could be a relevant factor in fact in centrepoint that evidence was lacking here there's substantial evidence that it's a different very different case from center point where you have a thriving  obviously you know we believe that they those were taken to lightly by the bank and taken too lightly by the receiver and not really fully considered by the circuit court we say for certain when you have a problem with everything if you're a bank you have to get an outside negotiations to represent both the landlord and the tenant and they've not resolve that conflict and that's a conflict that that doesn't need to exist there are certainly plenty of receivers that don't have that ticker and flag and the also mechanisms that they could have employed to eliminate that conflict but they didn't and they haven't so that's a that's a major factor and there's really strong and unrebutted evidence that those conflicts exist again the banks the responses those are common in the real estate industry and our response to that is they may be coming in the real estate industry but they're not common for receivers who are court appointed officers of the court second yet another factor your honor is this is a case obviously b richard ellis is a big sophisticated company but all the more shocking white that in this case they demonstrated on their own a complete lack of fundamental knowledge and preparation to take over the project before even getting to the exactly also the lack of preparation again is a significant factor when we were arguing before the circuit court objecting to the appointment of the receiver of the hearing on the twentieth of november we argue it's strongly that one of the things that the receiver would need to be prepared to produce is insurance not just the usual property casualty insurance but because this is an ongoing construction project and even though it's substantially complete there still is still a fair amount of construction going on with contractors and subcontractors on the job we noted that they the they needed to obtain what's called owner controlled insurance program that would provide coverage for those workers the receiver either was arrogant or ignorant because the receiver said we'll have our insurance within a day or within days and they didn't happen at that time with our claim we offered to to provide an assignment of our existing policy to the receiver sent all the documents to the receivers council proposed night weeks earlier and it was finally done now again we understand that it's a complicated issue but the bank filed its but it's foreclosure action back in october they asked for the appointment of the receiver back in october they identify this particular receiver back in october certainly a sophisticated bank a sort of sophisticated receiver knew or should have known that this kind of insurance needed to be in hand an employee and they didn't have it done so as a result again evidence of who's really best to run the project our client ran the project for those nine weeks at the time when the project was opening over the holiday season of the busiest time of the year and you know without any detriment certainly to the bank we always fees but we've also pointed out here that there are problematic fees because there's there's double any of tension triple counting where the receivers only charging for time but then on top charging an additional management  firm they proposed to pass those on to the tenants even though the tenants are already paying an administrative fee again that goes down only with lack of knowledge but also firm up to the project so your honor in light of really both test the the  failure of the bank to show a reasonable probability because of the question of whether these defaults are really material actionable events of the fall plus the factor showing because we believe it should cause this court to far think we cover that at length and our brief the loan was originally made in march two thousand and seven in the fall of two thousand and seven there were bank that it was going to cost an extra twenty six million dollars over the proceeds adequate for the completion of the project the loan agreement had attached to it as exhibit easy a project budget which showed the project to be fully in balance namely with the loan and with equity investment by the bar over there would be sufficient funds to meet the construction expense the borrower specifically represented in sections through quite one m envy of the loan agreement that he had investigated other construction costs and that they were actually showing on this project budget but with the nine months of the moment they he was coming to the bank saying well it's going to be twenty six million dollars more now so i'm i'm sorry why do you think he thought long but that's what i'm going to go through right now the whole sequence the cover of what happened here agreement which was the loan of one hundred seventy three million his equity contribution and several other payments back and forth involving the c t a parsons but it was twenty six going to be twenty six more than the interest paid it caused by the  a positive agent cash in an amount which will place the loans of memes so i march twenty eighth specifically notify under the loan agreement they have a specific duty agreement except that in the case of a deposit required by section seven point four d such failure shall not constitute an event of default and that's a there's been continued for a period of ninety days after the data the default including the one is out of balance by twenty six million dollars it's appendix d to every of the significance of another vent of the fall is under twelve point one k of the when the ninety days is not cured but that's twenty six min no obligation someone's going to have to pay that still out there what happens between august two thousand and eight when they acknowledge that they haven't made the payment what happens at the party start the balance of both up to two thousand and eight and into two thousand and nine what was happening is they were talking the situation was getting worse the twenty six became third the thirty became thirty four budget by two thousand and nine it became forty two point six million dollars so you start working with somebody on a problem that's twenty six million dollars more than their investment in with them and several months eight or nine months contractors aren't of livia's the what's going on here they know that this developers having money problems and the contractor walked and there was a letter agreement by which the bank at the borrowers request agreed to pay the contractor directly to keep that contractor on the job but as all this was going on there were issues starting in the spring of zero nine with the leases as well movie called backed out of the lease the bank approved what happened the borrower came to us with a new proposal for a theatre that's one on which the borrowing had an interest but there were two other books on build out in expense went from five hundred eighty four thousand to two point six million hours so you're having only self dealing in the sense of being a tenant it's an increasing building pattern of  self dealing with these ballooning build out expenses for these tenants in which the borrower had an interest and it's the culmination of all that that led to august two thousand and nine when the last letter agreement was combination of everything that had been happening over the prior two years of a developer was proving his incompetence twenty six becomes thirty thirty becomes thirty four thirty four becomes forty two point six you lose confidence especially when you're confronted with the leases that show an increasing pattern of self dealing with pieces which show an increasing pattern of huge cost overruns you know what's happened here is these these these numbers we throw  right if you really have to put up this forty two point six million to finish the project that's forty two point six million up both the total amount of the loan and you lost countenance in the developer for the reasons i've gone through that's why a receiver needs to be in your point was made about the cost of the receiver the numbers are fifty thousand dollars it's peanuts compared to what's involved here in this cost overrun and it was in excel or it cost over thousand and ten this was first disclosed in the summer of two thousand and seven there's never been one iota of any evidence or any promise or commitment or plan by the power to make that good i think this case is probably a basically summarized by mr reese as this post august twenty fifth a series of events with the movie called theater or failure to approve really were  allegations that there should be a loan modification and i think if you wrote their counted claim beginning with paragraph  thereafter referring to october two thousand and eight the bank of free discussed terms for a loan modification paragraph fifteen at some point in time and early two thousand namely connection with its report of promises to modify the construction law modification that we could be held the bridge where there is no signed right that's been established law in illinois for most twenty years of the credit agreement act was first passed and we felt that we should not and with a limited discretion under the new provisions of the on a mortgage foreclosure while there were other this court would also be making the same review of the documents i don't know of a standard maybe an order however i think though they were signed by his wife in other words the bank took some affirmative action to create the directs here in the bank and that create addressed the dress as a function of the borrowers own mismanagement of the project and the a formal request the formal request was never made the point about the where where the bank now is trying to justify the receiver by these increasing loan imbalances the bank is acting as if it had no idea what was going on the verified undeniable facts in the record are that the borrowers repeatedly in regularly apprised the bank every step of the way including having monthly meetings including at the bank's request paying the john buck company twenty five thousand dollars a month coming out of our client's pocket to consult and advise the bank about what was going on in this project including giving the bank monthly pro as the bank knowing full well what was going on approved that work at any time the bank could have decided not to approve the work and the latches defense your honor that i didn't really discuss in my opening remarks it is really right on point here when a party said senates rights and the other party changed its position in response that's what latches it is it's a fact based defense here the ba right but the fact that they didn't is significant and would you be in a different i don't know that whether it's one or ten the point is that at the time that they were signing the letters one week the letters were subject to the letter agreement which required the formal request and so the reality here is what the letters do really it is a practical matter the parties acknowledge that there is a loan and it's but what's leaving out there is what's going to happen at the time they were negotiating a modification so there was no need and it wouldn't be reasonable to expect that my client would go out in the face of that and get other financing it was reasonable that they would continue to work with the bank on a loan modification when finally just before the bank filed the case it became clear and the bank said we're not doing any lo modification at that point but the bank should have done this it should have sent a letter say ok now we're making the request under the under eleven point caveat rayment you have ninety days and if we didn't satisfy that want to balance within ninety days then they would have between here your position that they should have come or they could have i'm not saying that they should have in fact i don't think they should have because here everybody knew what needed to be done to get the project done in compliance with the city redevelopment in partnership with the bag if that and there are two ways to put the loan in balance one is to make a payment the other is to adjust the budget and the parties that didn't do that but they all along the way again for the bank now to come in and act like there really is nothing in the record that supports this assertion that that this project was ballooning out of control with in stead the reason that the costs all of the cost of reproval costs that were approved by the bank and that the bank agreed to fun also your honor along that line there's absolutely nothing in the record other than the bank own self serving statement about this report itself dealing the banks certainly didn't go legit in the complaint and in fact they insisted they didn't need to this again is an to have to stick to the record the thought of one modification and and one reason that fails is because again the discussions of the loan modification predated the defenses that we're talking about you know so those were happening long before they're not in extra complete linked  as they were in the cases that he cites the failure on or just on the standard of review i think both in mellon bank and in centrepoint this court addressed a set of writ of review and it's been over in this particular case that's not to say that there couldn't  be a foreclosure case or a receivership case where the court does have an evidentiary hearing does make credibility fine exhibits perhaps in that case it could be appropriate to apply a differential standard of review but that didn't happen here the court made