Case: 1:07-cv-00497 Document #: 101 Filed: 08/06/09 Page 1 of 15 PageID #:1037

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

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No. 07 C 0497

SECOND AMENDED COMPLAINT
Plaintiff DAVID MARKIN (“Markin”), for his Second Amended Complaint against
defendants CHEBEMMA INC. (“Chebemma”), MARK HUNT (“Hunt”), DIVISION STATE,
LLC (“Division State”), and JOHN TERZAKIS (“TERZAKIS”), states as follows:
PARTIES
1.

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

Florida.
2.

Defendant Chebemma is an Illinois corporation with its principal place of

business in Chicago, Illinois that was involuntarily dissolved on January 11, 2008.
3.

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

4.

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

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
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

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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.
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).
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.
COUNT I
(CONSPIRACY TO DEFRAUD)
Markin and Terzakis Purchase the Property:
8.

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

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.”
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.

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The Failed Attempt to Sell the Property to Hunt:
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.
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.
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.
Terzakis and Hunt Conspire to have Terzakis Obtain the Property without
Markin’s Knowledge:
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.
15.

In order to accomplish this unlawful purpose, Hunt and Terzakis committed the

following overt acts:
a. Created a new entity, defendant Chebemma;

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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;
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.
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.
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.
18.

Following the execution of the September 2003 Purchase Agreement, the parties

entered into four Amendments whereby Chebemma obtained several extensions of the closing
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date. At no time during this period did Terzakis or Hunt disclose to Markin that Terzakis owned
all, or even part of Chebemma.
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.
20.

In connection with the purchase, Markin’s and Terzakis’s beneficial interest in

Parkway Land Trust was transferred to Chebemma.
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.
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:
22.

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

owing to Markin.
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”).
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
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conference in the Federal Litigation without informing the Court that Markin’s former business
partner, Terzakis, was Chebemma’s true owner.
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.
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
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.
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.

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28.

Markin reasonably relied upon the truth of the various representations and

omissions of material fact made to him.
29.

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

30.

Hunt’s and Terzakis’s conduct was willful and wanton and done in total and

reckless disregard of Markin’s rights.
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.
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.
WHEREFORE, David Markin respectfully prays that this Court enter a judgment in his
favor and against defendants Chebemma, Inc., John Terzakis, Mark Hunt, and Division State
LLC, jointly and severally, for compensatory damages in an amount in excess of $2 million, for
a constructive trust upon Markin’s 49 percent beneficial interest in the Property held by Division
State LLC, plus punitive damages in an amount in excess of $2 million, prejudgment interest,
costs, and any other relief this Court deems just and appropriate.

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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.

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.
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.
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.
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.
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.
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.
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.
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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.
WHEREFORE, David Markin respectfully prays that this Court enter a judgment in his
favor and against defendants Mark Hunt, and Division State LLC, jointly and severally, for
compensatory damages in an amount in excess of $2 million, for a constructive trust upon
Markin’s 49 percent beneficial interest in the Property currently held by Division State LLC,
plus punitive damages in an amount in excess of $2 million, prejudgment interest, costs, and any
other relief this Court deems just and appropriate.

COUNT III
(WRONGFUL DISTRIBUTION AGAINST CHEBEMMA AND TERZAKIS)
42.

Plaintiff incorporates by reference Paragraphs 1-41 as Paragraph 42 of Count III.

43.

In or about June 2007, Terzakis and Hunt caused the beneficial interest in the

Property to be “sold” by Chebemma to Division State.
44.

Certain documents produced during the course of the Federal Litigation indicate

that Chebemma received approximately $4.9 million in exchange for its beneficial interest in the
Property.
45.

At all relevant times, Markin was a creditor of Chebemma who was owed in

excess of $2,385,000 (the principal amount of the Note).
46.

At all relevant times, Chebemma owed Markin a fiduciary duty not to render itself

insolvent through the distribution of its assets, directly or indirectly, to its shareholders, officer or
directors.
47.

As of June 2007, Terzakis was Chebemma’s sole shareholder, officer and

director.
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48.

On information and belief, Terzakis caused the monies that were disbursed to

Chebemma in June 2007 to be distributed, directly or indirectly, to Terzakis or to entities that
Terzakis owned and controlled.
49.

On information and belief, Chebemma was insolvent at the time Terzakis caused

the distributions, and therefore, Terzakis breached his fiduciary duty to Markin through
disbursing those funds which should have been held in trust for the benefit of Chebemma’s
creditors.
50.

Alternatively, if Chebemma was not insolvent at the time of the distributions,

Terzakis violated the Illinois Business Corporation Act (805 ILCS 5/8.65 and 805 ILCS 5/9.10)
by rendering Chebemma assetless and insolvent.
51.

Chebemma’s and Terzakis’s wrongful distribution constituted a breach of the

fiduciary duty and/or statutory duty owed to Markin.
52.

As a direct and proximate result of defendants Chebemma’s and Terzakis’s

conduct, Markin has suffered significant damages.
53.

Chebemma’s and Terzakis’s conduct was willful and wanton and done in total

and reckless disregard of Markin’s rights.
WHEREFORE, David Markin respectfully prays this Court enter a judgment in his favor
and against defendants Chebemma Inc. and John Terzakis, jointly and severally, for
compensatory damages in an amount in excess of $2 million, plus punitive damages in an
amount in excess of $2 million, prejudgment interest, costs, and any other relief this Court deems
just and appropriate.

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COUNT IV
(IN THE ALTERNATIVE:
BREACH OF PROMISSORY NOTE AGAINST CHEBEMMA)
54.

Plaintiff incorporates by reference Paragraphs 1-7 as Paragraph 54 of Count IV.

55.

Count IV, pursuant to Rule 8(d)(2) is alleged in the alternative.

56.

On or about August 27, 2004, Chebemma executed a certain Promissory Note (the

“Note”) in favor of Markin in the principal amount of $2,385,000.00 (the “Principal Amount”).
Note, attached as Exhibit C.
57.

Pursuant to the terms of the Note, the unpaid Principal Amount accrues interest at

the annual rate of “prime, as published in the Wall Street Journal” (the “Interest Rate”).
58.

In addition, and pursuant to the terms of the Note, Chebemma agreed to make

quarterly interest payments to Markin of $13,200.00 beginning on October 1, 2004 and ending
September 1, 2006. Id. at ¶ 1(a).
59.

Pursuant to the terms of the Note, the unpaid balance of the Principal Amount

plus accrued interest was due and payable on September 30, 2006. Id. at ¶ 1(b).
60.

As of September 30, 2006, the total amount owed by Chebemma to Markin, upon

maturity of the Note, was $2,569,973, representing the Beginning Principal Amount
($2,385,000), plus the amount of interest owed ($303,773) less interest paid ($118,800).
61.

As of the date of this filing, Chebemma has failed to pay the amount due and

owing to Markin under the Note, and, as such, is in default pursuant to the terms of the Note.
62.

Pursuant to Paragraph 5 of the Note, interest is to accrue on the balance of the

unpaid Principal Amount subsequent to September 30, 2006 at a rate per annum equal to five
percent in excess of the Interest Rate.

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63.

Markin is entitled to judgment against Markin as of the date of filing in the total

amount of $2,569,973.00 plus accrued interest since September 30, 2006 on the unpaid Principal
Amount consistent with the terms of Paragraph 5 of the Note.
WHEREFORE, David Markin respectfully prays that this Court enter a judgment against
Chebemma Inc. in the amount of $2,569,973.00 plus accrued interest since September 30, 2006
on the unpaid Principal Amount consistent with the terms of Paragraph 5 of the Note, plus costs,
and any other relief this Court deems just and appropriate.

COUNT V
(IN THE ALTERNATIVE:
BREACH OF SETTLMENT AGREEMENT AGAINST HUNT)
64.

Plaintiff incorporates by reference Paragraphs 1-7 as Paragraph 64 of Count V.

65.

Count V, pursuant to Rule 8(d)(2) is alleged in the alternative.

66.

At all relevant times, Hunt has held himself out to Markin and to the Court as

President and sole owner of Chebemma.
67.

In or about August 2004, Chebemma purchased from Markin his 49 percent

beneficial interest in the Property.
68.

As part of the consideration for that sale, Chebemma executed the Note.

69.

Pursuant to the terms of the Note, Markin holds a collateral beneficial interest in

the Property and, the Property was conveyed from Chebemma to Division State in June 2007
without Markin’s consent.
70.

As written discovery proceeded in the Federal Litigation, Hunt, in or about

August 2008, informed Markin of his desire to meet with Markin without lawyers present in
order to reach a settlement of the dispute which is the subject of this litigation.
71.

In response, Markin agreed to meet with Hunt in New York, New York.
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72.

On or about September 3, 2008, Markin and Hunt met in New York to discuss the

settlement of this litigation.
73.

Although Hunt and Markin did not reach a settlement agreement at that time, the

parties continued to negotiate by telephone.
74.

On or about September 18, 2008, Hunt and Markin reached the following oral

settlement agreement concerning this dispute (the “Settlement Agreement”):
a. Hunt personally would be obligated to pay Markin $1 million upon the
execution of a written settlement agreement to be prepared by the parties’
respective counsel;
b. Markin’s claim and Chebemma’s counterclaim would be dismissed upon
Markin’s receipt of the $1 million payment; and
c. Within one year of execution of the written settlement agreement, Hunt
personally would be obligated to pay Markin $700,000 and Hunt would
provide reasonable security for that payment.
75.

At all relevant times, the parties understood and agreed that any payment

obligation under the Settlement Agreement would be Hunt’s personally as Chebemma is an
assetless entity.
76.

Hunt and Markin further agreed that a written settlement agreement to be

prepared by counsel was not intended to be a condition precedent to an enforceable settlement
agreement, but was to serve only as a memorialization of their oral settlement agreement.
77.

Thereafter, and as agreed between Hunt and Markin, the parties’ counsel engaged

in the process of memorializing the Settlement Agreement.

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78.

Before this process could be completed, and in or about December 2008, Hunt (by

his counsel) informed Markin (through his counsel) that Hunt was unable to and would not
perform his obligations under the Settlement Agreement.
79.

By Hunt’s actions and inactions, Hunt has unilaterally repudiated and materially

breached the Settlement Agreement.
80.

At all relevant times, Markin has complied with his contractual obligations under

the Settlement Agreement.
81.

Markin has demanded that Hunt comply with his obligations under the Settlement

Agreement, but Hunt has failed to do so.
82.

As a direct and proximate result of Hunt’s acts and omissions, Markin has

suffered damages in excess of $1,700,000.
WHEREFORE, David Markin respectfully prays this Court enter a judgment against
Mark Hunt, individually, in the amount of $1,700,000, plus prejudgment interest, costs, and any
other relief this Court deems just and appropriate.

/s/ Robert A. Chapman
One of the Attorneys for David R. Markin
Robert A. Chapman (6191210)
Julia R. Lissner (6294431)
CHAPMAN & SPINGOLA, LLP
77 West Wacker Drive
Suite 4800
Chicago, Illinois 60601
312/630-9202

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CERTIFICATE OF SERVICE
I, Robert A. Chapman, an attorney, hereby certify that on August 6, 2009, I caused a copy
of the foregoing to be served upon counsel of record via the Court’s electronic filing system.

/s/ Robert A. Chapman

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