The winding main drive betrays the fallow lots of the Whispering Ridge Estates of Johnsburg subdivision, the subject of litigation between the Village, and the State Bank Group over uncompleted infrastructure improvements. (Photo by Gregory Harutunian/for Chronicle Media)

The Village of Johnsburg will have to wait until Feb. 18 to receive information on its order to compel discovery, as to the earnings of the State Bank Group, and further its litigation for the completion of infrastructure and amenity improvements at the Whispering Ridge Estates subdivision, which the bank owns and has not completed.

The Jan. 6 hearing brought both litigants to the bench, permitting the State Bank to file a response in 14 days, and a rebuttal by the village, seven days later, according to court documents, obtained by the McHenry Chronicle. It also attempts to strike an “affirmative defense” notion by the bank.

“Basically, the bank has indicated that they are not responsible for completing infrastructure and landscaping,” said Johnsburg’s village attorney Michael Snoron. “They took title of the 43 lots, telling the village it was to recoup outstanding liabilities. They have indicated a large loss in the millions.

“We requested their board’s minutes from an October 2013 meeting, which was received in severely redacted form. We simply want to know what was redacted, and they are indicating that it is not germane,” he said. “They have also indicated an affirmative defense, governed by federal banking laws. An analogy is a developer telling the village that we are stopping work due to its cost-prohibitive nature, and no longer responsible.”

Snoron also said the compel action is a precursor to obtaining depositions of bank officials regarding any documents that would verify and shed light on its contents.

At issue is the State Bank Group’s position that there was “no profit motive” and a monetary loss precluding any continued subdivision involvement and dedicated supplementary work. The bank also wants to quash any legal non-compliance enjoinments, while Johnsburg seeks to put the matter before a jury, for a determination.

“The other question was the letter of credit, which they had asked to be held, and not used, regarding the subdivision work,” he said. “Had their intent been known, other arrangements would have been made.”

The subdivision, located east of Johnsburg Road south of its intersection with Bay Road, is only occupied by a few residential homes.

An affidavit, filed by Village Administrator Claudett Peters, forwards Johnsburg’s position, outlining a meeting with the State Bank’s president, Steven Mitchell.

“About October 2009, I met with … Mitchell at the village and he represented to me that the bank has ‘taken over as owner’ of the Whispering Ridge Estates of Johnsburg subdivision. (He) asked the village not to draw on the letters of credit guaranteeing the infrastructure.

According to the document, the request was made so the bank could sell lots and raise funds to meet its obligations. The State Bank Group had acquired the Whispering Ridge Estates subdivision property from a defaulted developer, under a deed in lieu of foreclosure proceeding. It began selling 43, of the remaining 45 lots. At some point between August 2013, and the spring of 2014, bank officials stopped soliciting job bids for the remaining street curbing, resurfacing, and concrete work.

“I met with Michelle Toll, and Steve Mitchell … about May 6, 2014 … the issue of the letter of credit to secure improvements in such subdivision was discussed,” the affidavit continued. “Toll stated that according to the bank’s file, the bank did not have a letter of credit on file currently … Mitchell stated at such meeting that as far as he was concerned, they were done.

Mitchell explained that the bank had incurred a $3 million loss on the subdivision. The subdivision homeowner’s association incorporation filing, with the Illinois Secretary of State’s Office, identifies its president as Steven Mitchell, also president of the State Bank Group, and Michelle Toll, a senior vice president, as secretary.

Also shown is Terry McKenna, as the registered agent. McKenna is a partner with the Marengo-based law firm of Franks, Gerkin, and McKenna. State Rep. Jack Franks (D-Marengo) is the State Bank Group’s chairman and attorney. Snoron noted that McKenna is also representing the bank in the court proceedings.

“There was a huge 180-degree turn by the State Bank, with the last lot sold, and taking the position, of no longer having an interest,” Snoron said. “We just hope to wrap up the discovery portion … and present the matter to a jury over who will pay for the remaining improvements, or as the bank intimated, the village is responsible.”

In selling the lots, the State Bank Group authorized real estate listing sheets outlining the disputed amenities, which remain unfinished. A prior press release, from the Village of Johnsburg, said: “State Bank’s attorney and Chairman, Jack Franks, has maintained that the bank is not obligated to provide infrastructure improvements in the development because it did not have a ‘profit motive’ when it took over ownership of the development and therefore the taxpayers of the Village should bear the cost.”

Ethical tenets for elected officials specifically attached to a commercial enterprise and representing that entity against his constituency were raised, as portions of Johnsburg reside within Franks’ legislative district. Don Craven, general counsel for the Illinois Press Association, said there was no legal conflict, doing legal work, which obviously involves individuals, or municipalities, within the confines of that district.

Attempts for comment through Franks’ district office in Woodstock, and law office in Marengo, were not successful. A call for comment through the State Bank facility in Johnsburg, was also not successful.

— Johnsburg suit delayed while awaiting bank information —