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Beard v. Gress





APPEAL from the Circuit Court of Vermilion County; the Hon. CARL A. LUND, Judge, presiding.


The principal question in this case is whether a real estate broker representing sellers is liable to buyers under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (Ill. Rev. Stat. 1979, ch. 121 1/2, par. 261 et seq.) for an innocent misrepresentation, relied upon by the buyers, as to the interest rate in a mortgage which encumbered the premises sold and was assumed by the buyers. Although the wording of the act creates some confusion, we hold that such a broker is liable.

On March 28, 1979, plaintiffs, Ronald Beard and Nellie Beard, filed suit in the circuit court of Vermilion County against defendants, F. Dale Gress, Dorothy Gress, and their real estate broker, Ray Madsen, d/b/a Ray Madsen & Associates, seeking monetary damages from a transaction whereby plaintiffs purchased real estate from defendants Gress. Pursuant to the motion of defendant Madsen asserting that counts IV and VI, directed solely against him, did not state a cause of action, the circuit court dismissed those counts. Plaintiffs have appealed. We have jurisdiction because of the court's findings pursuant to Supreme Court Rule 304(a). 73 Ill.2d R. 304(a).

Counts IV and VI alleged defendant Madsen to be a real estate broker for defendants Gress and to have negligently made misstatements concerning (1) the rate of interest on the mortgage encumbering the premises, which was assumed by plaintiffs, and (2) the length of time during which the property had been listed for sale. Plaintiffs claimed to have relied to their detriment upon these statements and sought monetary damages. Count IV merely sought relief at common law for inaccurate statements negligently made by a real estate broker. Count VI incorporated by reference all of the allegations of count IV but also alleged certain statutory violations which we later describe in detail.

• 1 There is little dispute that count IV was properly dismissed. At common law, a real estate broker is presumably liable for his material misstatements as to matters concerning a sale of realty only if he knows or should have known of the inaccuracy. (Lyons v. Christ Episcopal Church (1979), 71 Ill. App.3d 257, 389 N.E.2d 623.) Although count IV states that Madsen negligently made the statements in issue, it does not state that he knew or should have known of their falsity.

Count VI referred to both the Consumer Fraud Act and the Uniform Deceptive Trade Practices Act, hereinafter called the Uniform Act (Ill. Rev. Stat. 1979, ch. 121 1/2, par. 311 et seq.). The two acts are related in that section 2 of the Consumer Fraud Act (Ill. Rev. Stat. 1979, ch. 121 1/2, par. 262) states in part that "the use or employment of any practice described in Section 2 of the [Uniform Act] in the conduct of any trade or commerce are hereby declared unlawful."

The allegations of count VI referring to either of the two acts are contained in the following paragraphs of that count:

"14. Defendant Ray Madsen committed a deceptive trade practice as defined by Chapter 121 1/2 § 312 Ill. Rev. Stats., in that he did publish and with intent to sell as heretofore alleged, make a public statement that the mortgage assumable under defendant F. Dale Gress and Dorothy Gress name was at the rate of interest of 7 1/2%, and that said statement constitutes an unfair and deceptive practice in that it was a misrepresentation of a material fact made with the intent that potential buyers would rely on said statement as defined by Chapter 121 1/2 § 262.

15. Defendant Ray Madsen represented or caused to be represented a material fact to-wit: that the residence of defendants Gress was listed for sale on or about January, 1979, with intent that others rely on said misrepresentations of such material fact, and that said representation constitutes an unfair and deceptive trade practice in violation of Chapter 121 1/2 § 312, and § 262, Ill. Rev. Stats. in that said statement tends to cause confusion among buyers."

• 2 We dispose of paragraph 15 of count VI summarily. The relief sought by the count is money damages. Regardless of whether a misrepresentation as to the length of time property has been listed for sale might give rise to a ground for rescission of a contract for sale or a sale, we do not see how such a misrepresentation can give rise to a claim for money damages. No allegations of the count answer the question. The count does not allege that because of the misrepresentation, the buyers were deceived into believing they would obtain any greater value than they received. We conclude that this paragraph does not of itself set forth a cause of action nor give aid to any other paragraphs of the count in doing so.

On the other hand, if purchasers are misled into believing that the interest rate upon a mortgage they are to assume is lower than it turns out to be, they are clearly damaged thereby. This is the theory of paragraph 14. Accordingly, we must determine whether it in combination with the rest of the count does set forth a statutory violation creating a cause of action for money damages.

Only injunctive relief is available under the Uniform Act itself. (Ill. Rev. Stat. 1979, ch. 121 1/2, par. 313.) Furthermore, the act, itself, has been held to be applicable only to transactions involving goods and services. (Steinberg v. Chicago Medical School (1977), 69 Ill.2d 320, 371 N.E.2d 634.) The transaction here involved a sale of real estate rather than goods, and Madsen furnished no services for plaintiffs. Thus, the reference in paragraph 14 to section 2 of that act (Ill. Rev. Stat. 1979, ch. 121 1/2, par. 312) is significant only if that paragraph alleges "use of employment" by defendant Madsen of a "practice described in section 2" of that act "in the conduct of any trade or commerce." If so, a cause of action would thus be stated under section 2 of the Consumer Fraud Act. Section 10a(a) of that act (Ill. Rev. Stat. 1979, ch. 121 1/2, par. 270(a)) permits the trial court, in its discretion, to award monetary damages for a violation thereof. Section 1(f) of that act states:

"(f) The terms `trade' and `commerce' mean the advertising, offering for sale, sale, or distribution of any services and any property, tangible or intangible, real, personal or mixed, and any other article, commodity, or thing of value wherever situated, and shall include any trade or commerce directly or indirectly affecting the people of this State." (Emphasis added.) Ill. Rev. Stat. 1979, ch. 121 1/2, par. 261(f).

Section 2 of the Uniform Act (the act which itself is only applicable to transactions involving goods and services) contains 12 subsections setting forth acts constituting prohibited trade practices. The first 10 subsections refer to a manner of furnishing goods or services. Subsection 11 concerns the making of "false or misleading statements of fact concerning the reasons for, existence of or amounts of price reductions" and thus has no relevance to any conduct alleged here. Subsection 12 states that a person commits a deceptive practice when he "engages in any other conduct which similarly creates a likelihood of confusion or of misunderstanding." The misstatement of the interest rate attributed to Madsen would be "conduct" which creates "a likelihood * * * of misunderstanding." Thus, the question arises as to whether such conduct prohibited under the Uniform Act when done in a transaction involving goods or services becomes a violation under the Consumer Fraud Act when done in regard to a real ...

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