Case: 1:07-cv-00497 Document #: 117 Filed: 10/08/09 Page 1 of 12 PageID #:1192

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DAVID R. MARKIN,
Plaintiff,
v.
CHEBEMMA, INC., MARK HUNT,
DIVISION STATE, LLC, and JOHN
TERZAKIS
Defendant.

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Case No. 07 C 0497

DEFENDANT DIVISION STATE LLC’S ANSWER
TO PLAINTIFF’S SECOND AMENDED COMPLAINT
Defendant, Division State LCC (“Division State”), by its attorneys, for its Answer to
Plaintiff’s Second Amended Complaint states:
PARTIES
1.
Florida.

Plaintiff Markin is citizen of the state of Florida who resides in Palm Beach,

RESPONSE: On information and belief, Division State admits the allegations in Paragraph 1.
2.
Defendant Chebemma is an Illinois corporation with its principal place of
business in Chicago, Illinois that was involuntarily dissolved on January 11, 2008.
RESPONSE: On information and belief, Division State admits the allegations in Paragraph 2.
3.

Defendant Hunt, an individual, is a citizen and resident of the state of Illinois.

RESPONSE: On information and belief, Division State admits the allegations in Paragraph 3.
4.

Defendant Terzakis, an individual, is a citizen and resident of the state of Illinois.

RESPONSE: On information and belief, Division State admits the allegations in Paragraph 4.
5.
Defendant Division State is an Illinois limited liability company. The members of
Division State are M Division State LLC (an Illinois limited liability company whose sole

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member is defendant Hunt), Crown Investment Fund (an Illinois general partnership), James A.
Star, Dan Drexler, and Aaron Rappaport. On information and belief, the partners of the Crown
Investment Fund, James A. Star, Dan Drexler and Aaron Rappaport are all citizens of the state of
Illinois, or are not citizens of the state of Florida.
RESPONSE: Division State admits the allegations in Paragraph 5.
JURISDICTION AND VENUE
6.
The Court has jurisdiction over this action pursuant to 28 U.S.C. § 1332 as the
parties are citizens of different states and the matter in controversy, exclusive of interest and
costs, exceeds the sum of Seventy-Five Thousand Dollars ($75,000.00).
RESPONSE: Division State admits the allegations in Paragraph 6.
7.
Venue is proper pursuant to 28 U.S.C. § 1391(a) as a substantial part of the events
or omissions giving rise to the claim occurred in the Northern District of Illinois.
RESPONSE: Division State admits the allegations in Paragraph 7.
COUNT I
(CONSPIRACY TO DEFRAUD)
Markin and Terzakis Purchase the Property:
To the extent the headings in this Complaint require an answer, Division State denies the
allegations in the headings.
8.

Plaintiff incorporates by reference Paragraphs 1-7 as Paragraph 8 of Count I.

RESPONSE: Division State incorporates by reference its responses to Paragraphs 1-7 as though
fully set forth herein.
9.
In September 1999, Markin and Terzakis entered into a joint venture in
connection with the purchase and development of 1163-67 North State Street, Chicago, Illinois,
which, at that time, included an unfinished two-story, vacant commercial building (the
“Property”). Terzakis held a 51 percent interest in the Property through an entity he owned and
controlled, State & Division L.L.C. (“State LLC”), while Markin owned the other 49 percent.
Terzakis and State LLC are collectively referred to as “Terzakis.”
RESPONSE: Division State has no knowledge of the allegations in Paragraph 9 as Division
State was not in existence at that time. Further answering, Division State states that by assigning

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two different definitions to the term “Terzakis” (in the preliminary matter before Paragraph 1 and
also in Paragraph 9), the Complaint creates confusion; moreover, the phrasing of Paragraph 9
creates an ambiguity as to whether Markin is alleging (a) that John Terzakis owned 51% of State
& Division L.L.C. and Markin owned the other 49% of State & Division L.L.C., or (b) that John
Terzakis owned 100% of State & Division L.L.C. which in turn owned 49% of the Property and
Markin owned the other 49% of the Property. For purposes of this Answer, Division State
assumes that Paragraph 9 was intended to allege (b) and not (a), and Division State construes the
Complaint to define the term “Terzakis” to mean only John Terzakis individually.
10.
At all relevant times, title to the Property was held in a land trust with the
Parkway Bank and Trust Company (the “Parkway Land Trust”) in which Markin and Terzakis,
owned the beneficial interest.
RESPONSE: Division State admits that at the time Chebemma acquired the beneficial interest
in the Property, the Property was held in a land trust with the Parkway Bank and Trust Company,
and that the land trust has been in existence ever sense.

Division State lacks sufficient

knowledge to admit or deny whether Markin and Terzakis owned a beneficial interest in the
Parkway Land Trust.

Division State denies all allegations of Paragraph 10 not expressly

admitted.
The Failed Attempt to Sell the Property to Hunt:
To the extent the headings in this Complaint require an answer, Division State denies the
allegations in the headings.
11.
In 2003, the Property was still without tenants. During this period, negotiations
took place with defendant Hunt, a Chicago based real estate developer concerning the sale of the
Property.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 11 as Division
State was not in existence at this time.

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12.
In May 2003, Hunt, through an entity he owns and controls, M Development,
LLC (“M Development”)), Markin and Terzakis entered into an agreement (the “May 2003
Purchase Agreement”) for M Development to buy the Property for $6,743,000 to be paid as
follows: $1 million at closing; $1,660,000 promissory note in Markin’s favor to be paid with
interest in two years; and the assumption of the sellers’ existing mortgage. May 2003 Purchase
Agreement, attached as Exhibit A.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 12 as Division
State was not in existence at this time.
13.
In or about August 2003, Terzakis informed Markin’s attorney, Wayne R.
Hannah, Jr., that Hunt had concluded that the purchase terms of the May 2003 Purchase
Agreement were excessive (in favor of Markin and Terzakis) and that Hunt would not proceed
upon the terms set forth in the May 2003 Agreement.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 13 as Division
State was not in existence at this time.
Terzakis and Hunt Conspire to have Terzakis Obtain the Property without
Markin’s Knowledge:
To the extent the headings in this Complaint require an answer, Division State denies the
allegations in the headings.
14.
Prior to September 24, 2003, Terzakis entered into an oral agreement with Hunt to
combine, for the purpose of accomplishing by concerted action through unlawful means, the
transfer of Markin’s beneficial interest in the Property to Terzakis for terms that Markin would
not have otherwise accepted if he had known of the existence of Terzakis’s and Hunt’s
conspiracy.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 14 as Division
State was not in existence at this time.
15.
In order to accomplish this unlawful purpose, Hunt and Terzakis committed the
following overt acts:
a. Created a new entity, defendant Chebemma;
b. Terzakis represented to Markin that Hunt owned 100 percent of and controlled
Chebemma and intentionally concealed from Markin that Terzakis, in fact, was
Chebemma’s sole and/or controlling shareholder;

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c. Caused Hunt to be made Chebemma’s President, Secretary and Treasurer in
order to create the appearance that Chebemma was owned by Hunt;
d. Terzakis falsely represented to Markin that to sell the Property to Hunt, Markin
would have to accept materially different, and less beneficial terms, than those
set forth in the May 2003 Purchase Agreement;
e. Caused Hunt to execute on Chebemma’s behalf as President, a September 24,
2003 “Agreement for Purchase of Real Estate and Related Property” (the
“September 2003 Purchase Agreement”) for the sale of the beneficial interest
in the Property to defendant Chebemma on terms that were substantially less
favorable to Markin. Hunt signed the September 2003 Purchase Agreement as
Chebemma’s President in order to create the false impression that he (and not
Terzakis) was Chebemma’s true owner.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 15 as Division
State was not in existence at this time.
16.
In reliance upon the false statements and other wrongful overt acts by Terzakis
and Hunt set forth in Paragraph 15 above, Markin agreed to sell his interest in the Property to
Chebemma.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 16 as Division
State was not in existence at this time.
17.
Under the September Purchase Agreement, Markin agreed to accept less money at
the time of closing and assumed a greater risk of future payment pursuant to a promissory note
called for under that agreement. September 2003 Purchase Agreement, attached as Exhibit B
hereto.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 17 as Division
State was not in existence at this time.
18.
Following the execution of the September 2003 Purchase Agreement, the parties
entered into four Amendments whereby Chebemma obtained several extensions of the closing
date. At no time during this period did Terzakis or Hunt disclose to Markin that Terzakis owned
all, or even part of Chebemma.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 18 as Division
State was not in existence at this time.

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19.
Shortly after the consummation of the sale of the Property in mid-August 2004 to
Chebemma, Chebemma, as required by the September 2003 Purchase Agreement, executed and
delivered the Promissory Note (the “Note”). In furtherance of their conspiracy, Hunt signed the
Note on Chebemma’s behalf. Note, attached as Exhibit C.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 19 as Division
State was not in existence at this time.
20.
In connection with the purchase, Markin’s and Terzakis’s beneficial interest in
Parkway Land Trust was transferred to Chebemma.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 20 as Division
State was not in existence at this time.
21.
During the period between August 2004 and September 2006, Markin received
from Chebemma quarterly interest payments under the Note of approximately $13,000 each. At
no time during this period did Terzakis or Hunt disclose to Markin that Terzakis owned all, or
even part of Chebemma.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 21 as Division
State was not in existence at this time.
Hunt and Terzakis Continue their Conspiracy in the Federal Litigation to Conceal
Terzakis’s Interest in Chebemma and Terzakis and Hunt Hide from Markin the
Transfer of the Property to the Hunt Controlled Division State:
To the extent the headings in this Complaint require an answer, Division State denies the
allegations in the headings.
22.

In September 2006, the total amount of the Note, $2,385,000, became due and

owing to Markin.
RESPONSE: The allegations in Paragraph 22 are legal conclusions to which no answer is
required.

To the extent that the allegations require an answer, Division State denies the

allegations in Paragraph 22.
23.
On January 25, 2007, Markin filed the instant lawsuit in the United States District
Court for the Northern District of Illinois against Chebemma for breach of the Note (the “Federal
Litigation”).

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RESPONSE: Division State admits the allegations in Paragraph 23.
24.
In furtherance of Terzakis’s and Hunt’s conspiracy, Hunt continued to allow
himself be presented in the Federal Litigation as the owner of Chebemma throughout the course
of this litigation until such time as Markin, through various documents produced during the
discovery process, finally uncovered the fraud that Hunt and Terzakis had perpetrated. As part of
this rouse, Hunt even went so far as to personally participate in a Court supervised settlement
conference in the Federal Litigation without informing the Court that Markin’s former business
partner, Terzakis, was Chebemma’s true owner.
RESPONSE: Division State has no knowledge of the allegations in Paragraph 24 as Division
State was not in existence at this time.
25.
In June 2007, shortly after the settlement conference described in Paragraph 24
above, Hunt and Terzakis continued to conceal from Markin their wrongful conduct involving
the Property, by transferring the beneficial interest in the Property from the Terzakis controlled
Chebemma to the Hunt controlled Division State. In connection with that transfer, Terzakis and
Hunt acknowledged in writing in June 2007 the liability owed to Markin and consciously
determined not to disclose the transfer to Markin. In furtherance of their wrongful conduct, Hunt
and Terzakis induced ATG Trust Company not to disclose to Markin the transfer of the Property
to Division State so that Markin would not learn of their scheme.
RESPONSE: Division State admits the beneficial interest in the Property was transferred from
Chebemma to Division State. Further answering, Division State states that Paragraph 6(c) of the
Note attached as Exhibit C to Plaintiff’s Second Amended Complaint specifically states that
“Notwithstanding anything in this Note or the Collateral ABI to the contrary, . . . [Markin] agrees
that . . .[Chebemma] shall have the right to transfer or convey all or any portion of the Property
or any interest therein, to an entity owned or controlled, directly or indirectly, by Mark Hunt
and/or [Chebemma].” Division State denies all allegations in Paragraph 25 not expressly
admitted.
26.
As part of Terzakis’s and Hunt’s continuing effort to hide from Markin the nature
of their misconduct, including the transfer of the Property, Hunt again agreed to appear on
Chebemma’s behalf at a Court supervised settlement conference on April 16, 2008, although he
had no affiliation whatsoever at that time with Chebemma. At the last moment, Hunt claimed
that he had a scheduling conflict and could not appear and caused Chebemma’s litigation counsel
and Hunt’s personal counsel, Jeffrey Richman, to appear at the settlement conference. At no
time, did Hunt, Hunt’s counsel or Chebemma’s counsel disclose to Markin or to the Court the
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nature of the fraud that had been perpetrated on Markin, including Hunt’s and Terzakis’s transfer
of the Property to the Hunt controlled Division State.
RESPONSE: It does not appear that the allegations of Paragraph 26 are directed at Division
State. To the extent that the allegations in Paragraph 26 are directed at Division State, Division
State denies the allegations.
27.
Terzakis and Hunt knew or believed to be false the misrepresentations of material
fact that were made to Markin, either directly or indirectly, with the intent of inducing Markin to
agree to the sale of Markin’s beneficial interest in the Property on terms that Markin would not
have otherwise agreed to had he known the truth.
RESPONSE: It does not appear that the allegations of Paragraph 27 are directed at Division
State. To the extent that the allegations in Paragraph 27 are directed at Division State, Division
State denies the allegations.
28.
Markin reasonably relied upon the truth of the various representations and
omissions of material fact made to him.
RESPONSE: It does not appear that the allegations of Paragraph 28 are directed at Division
State. To the extent that the allegations in Paragraph 28 are directed at Division State, Division
State denies the allegations.
29.

Markin has suffered damage as a result of that reliance in excess of $2 million.

RESPONSE: It does not appear that the allegations of Paragraph 29 are directed at Division
State. To the extent that the allegations in Paragraph 29 are directed at Division State, Division
State denies the allegations.
30.
Hunt’s and Terzakis’s conduct was willful and wanton and done in total and
reckless disregard of Markin’s rights.
RESPONSE: It does not appear that the allegations of Paragraph 30 are directed at Division
State. To the extent that the allegations in Paragraph 30 are directed at Division State, Division
State denies the allegations.

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31.
At all relevant times, defendant Division State, with full knowledge of Terzakis’s
and Hunt’s fraud, has accepted the fruits of that fraud, including but not limited to taking
possession of a 49 percent beneficial interest in the Property that otherwise belongs to Markin.
RESPONSE: Division State admits that it received a transfer of 100% of the beneficial interest
in the Property, subject to Markin’s Collateral ABI (as defined in the Note attached as Exhibit C
to Plaintiff’s Second Amended Complaint) in the Property. Division State denies all other
allegations in Paragraph 31.
32.
As such, Division State is the constructive trustee for Markin of Markin’s 49
percent beneficial interest in the Property and the Court should declare a constructive trust on
Markin’s 49 percent beneficial interest in the Property held by Division State.
RESPONSE: The allegations in Paragraph 32 are legal conclusions to which no answer is
required.

To the extent that the allegations require an answer, Division State denies the

allegations in Paragraph 32.

COUNT II
(AIDING AND BETTING AGAINST DEFENDANTS HUNT AND DIVISION STATE)
33.

Plaintiff incorporates by reference Paragraphs 1-32 as Paragraph 33 of Count II.

RESPONSE: Division State incorporates by reference its responses to Paragraphs 1-32 as
though fully set forth herein.
34.
At all relevant times, Hunt, individually, and later as Manager of Division State,
knew that Terzakis engaged in fraudulent conduct for the purpose of depriving Markin of his 49
percent beneficial interest in the Property.
RESPONSE: Division State denies the allegations in Paragraph 34.
35.
At all relevant times, Hunt, individually, and later as Manager of Division State,
knew that Terzakis owed fiduciary duties to Markin, including the duty of utmost good faith and
undivided loyalty, in matters relating to the Property.
RESPONSE: Division State denies the allegations in Paragraph 35.

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36.
Hunt, in his individual capacity and later in his capacity as the party in control of
the Manager of Division State, possessed full knowledge of Terzakis’s fraudulent conduct and
breaches of fiduciary duty to Markin and knowingly and substantially assisted Terzakis in that
fraudulent conduct and in those breaches.
RESPONSE: Division State denies the allegations in Paragraph 36.
37.
Hunt’s conduct relating to the transfer of the beneficial interest in the Property to
Division State was done for Division State’s benefit and, as such, is imputed to Division State.
RESPONSE: The allegations of Paragraph 37 derive from the allegations of Paragraphs 34-36,
which Division State has denied. Division State therefore denies the allegations of Paragraph 37.
In addition, the allegation concerning imputation is a legal conclusion to which no answer is
required.
38.
As a direct and proximate result of defendants Hunt’s and Division State’s
wrongful conduct in aiding and abetting Terzakis’s fraud and breaches of fiduciary duty, Markin
has suffered damages in excess of $2 million.
RESPONSE: Division State denies the allegations contained in paragraph 38.
39.
At all relevant times, defendant Division State, with full knowledge of Terzakis’s
wrongful conduct, has accepted the fruits of that wrongful conduct, including but not limited to
taking possession of a 49 percent interest in the Property that otherwise belongs to Markin.
RESPONSE: Division State admits that it received a transfer of 100% of the beneficial interest
in the Property, subject to Markin’s Collateral ABI (as defined in the Note attached as Exhibit C
to Plaintiff’s Second Amended Complaint) in the Property. Division State denies all other
allegations in Paragraph 39.
40.
As such, Division State is the constructive trustee for Markin of Markin’s 49
percent beneficial interest in the Property and the Court should declare a constructive trust on
Markin’s 49 percent beneficial interest in the Property held by Division State.
RESPONSE: The allegations in Paragraph 40 are legal conclusions to which no answer is
required.

To the extent that the allegations require an answer, Division State denies the

allegations in Paragraph 40.

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41.
Hunt’s and Division State’s conduct was willful and wanton and done in total and
reckless disregard of Markin’s rights.
RESPONSE: Division State denies the allegations contained in paragraph 41.
COUNT III
(WRONGFUL DISTRIBUTION AGAINST CHEBEMMA AND TERZAKIS)
42-53. ANSWER: Division State is not required to answer the allegations of Count III,
as the allegations in Count III are not directed at Division State.

To the extent that the

allegations in Paragraphs 42-53 are directed at Division State, Division State denies the
allegations.
COUNT IV
(IN THE ALTERNATIVE:
BREACH OF PROMISSORY NOTE AGAINST CHEBEMMA)
54-63. ANSWER: Division State is not required to answer the allegations of Count IV,
as the allegations in Count IV are not directed at Division State.

To the extent that the

allegations in Paragraphs 54-63 are directed at Division State, Division State denies the
allegations.
COUNT V
(IN THE ALTERNATIVE:
BREACH OF SETTLEMENT AGREEMENT AGAINST HUNT)
64-82. ANSWER: Division State is not required to answer the allegations of Count V, as
the allegations in Count V are not directed at Division State. To the extent that the allegations in
Paragraphs 64-82 are directed at Division State, Division State denies the allegations.

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JURY DEMAND
Division State LLC demands a jury on all issues that may be tried to a jury.
Dated: October 8, 2009

Respectfully submitted,
Division State LLC

Daniel Lynch (ARDC No. 6202499)
Avidan J. Stern (ARDC No. 6201978)
LYNCH & STERN LLP
150 S. Wacker Dr., Suite 2600
Chicago, IL 60606
(312) 346-8700
(312) 896-5883 (fax)

s/Avidan J. Stern
By One of Its Attorneys

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