APPEAL from the Circuit Court of Cook County; the Hon. PAUL F.
ELWARD, Judge, presiding.
MR. PRESIDING JUSTICE SULLIVAN DELIVERED THE OPINION OF THE COURT: Mr. PRESIDING JUSTICE SULLIVAN delivered the opinion of the court:
This is an appeal from an order sustaining a motion to dismiss an amended complaint in a libel action.
The amended complaint preliminarily alleges that plaintiffs were engaged in the purchase of real estate for resale at a profit; that during the years 1974 to 1976 they purchased homes, at open auction or by sealed bid, from the Department of Housing and Urban Development (HUD); that these homes had been foreclosed or abandoned and required repair and rehabilitation; that after they had rehabilitated the homes, they were offered to the public for sale; and that they made a profit of less than 10% on a total investment of $850,000 in these homes.
It is also alleged that defendants "maliciously and with a reckless disregard for truth" published and caused to be distributed a press release "containing false and defamatory statements" which implied that plaintiffs were thieves, since they were referred to in the press release as "rip-off speculators"; that the term "rip-off" was known and accepted in the community as "an act of stealing," which is also the dictionary definition of the term; that the press release was intended to charge that the homes being sold by plaintiffs were not rehabilitated; that people who bought them "would be saddled with building code violations, and major repairs; and that if plaintiffs did even minor repairs, they had done so illegally and without city permits."
Defendants filed a motion to strike and dismiss, stating (1) that the statements complained of were protected speech under the United States and Illinois constitutions; (2) that there were no allegations as to what statements in the press releases were false; (3) that not only was there a failure to allege malice with particularity, but also the amended complaint did not contain language sufficient to establish malice; (4) that the statements were not defamatory as a matter of law nor libellous per se, and special damages were not pleaded to establish libel per quod.
The amended complaint sets forth the press release as follows:
"HUD `loses' $1 million to Speculator Homeowners Get RIPPED OFF!
This report is based on a sample of 40 properties out of 66 in the City of Chicago that Theodore J. Bruck, et al., purchased for the Conteco Co. at HUD sealed-bid sales of its houusing [sic] inventory. The sales took place between August 1974 and May 1976. Bruck and friends also bought 35 properties in the suburbs at these sales.
HUD conducted these sales as a means of reducing its inventory of abandoned houses, and `to provide needed low-cost housing to the people' [sic]. In newspaper ads for the sales, which preceeded [sic] each sale, HUD indicated that the houses contained city code violations. HUD set a base price for the houses, and bidders could offer as much or as little above this price as they liked. The base price was an indicator of the condition of the house; Conteco often paid twice the base price for properties. Conteco didn't mind paying more because it was assured of making high profits on the resale of the houses. In fact Conteco did reap a half million dollars in profits.
What Happened to the Rehab?
Out of 40 houses that we title-searched there are only 11 electrical permits on file with the city of Chicago Department of Buildings. Not one construction-plumbing permit was issued to anyone for these houses! One electrical permit was issued after the house was resold, indicating that Conteco did not pay for the work.
Two houses stand out as `super rip-offs'. Bruck bought one, at 6352 S. Laflin in West Englewood, for $100.01. This house had minimal electrical work on it before it was resold (a maximum of $100.00 worth.) This house was abandoned for 2 1/2 years before Bruck sold it for $19,000 (see interview).
The other bargain bonanza is at 5310 S. Bishop in New City. This house was abandoned for at least one year before Bruck bought it for $500.01 and resold it for $19,000. This house had no electrical or construction permit.
The properties are located throughout the south and west side neighborhoods of the city. Communities with the highest numbers of Conteco rehab-specials are West Englewood, Auburn Gresham and Roseland.
The Bruck-Conteco purchases averaged $9,000. Their average profit was $14,000. If these houses were in such good condition (needing no rehab) when HUD held them, they should not have been sold to a speculator, but directly to an individual. They could have been sold for less and HUD could have recovered more dollars. If the houses did need work, the people who bought them from Bruck were saddled with code violations ...