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09/21/95 MAERCKER POINT VILLAS CONDOMINIUM

September 21, 1995

MAERCKER POINT VILLAS CONDOMINIUM ASSOCIATION, AN ILLINOIS NOT-FOR-PROFIT CORPORATION, PLAINTIFF-APPELLEE,
v.
GREGORY SZYMSKI AND PARKWAY BANK TRUST COMPANY, AS TRUSTEE, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Du Page County. No. 92-L-1518. Honorable William E. Black, Judge Presiding.

The Honorable Justice Hutchinson delivered the opinion of the court: Inglis and Bowman, JJ., concur.

The opinion of the court was delivered by: Hutchinson

JUSTICE HUTCHINSON delivered the opinion of the court:

This appeal arises out of a lawsuit filed on July 27, 1992, by plaintiff, Maercker Point Villas Condominium Association, against developer, Parkway Bank Trust Company as Trustee under Trust No. 2473, and defendant, Gregory Szymski, for breach of fiduciary duty. Defendant admits that he is the beneficiary of the trust, is the specific individual entitled to the benefits of the trust, and was the specific person who contracted, constructed, advertised and sold the various units comprising the condominium association and its garage units.

Plaintiff contends that defendant breached his fiduciary duty to plaintiff by failing properly to fund reserves and pay a proportionate share of expenses during the time defendant controlled plaintiff's board of directors (the Board). Plaintiff relies on its Declaration of Condominium (Declaration) which states that "the Board shall establish and maintain a reasonable reserve for contingencies and replacements." The Declaration also requires the Board to maintain, repair, and replace common elements. The structures in the condominium association include a three story, 48-unit condominium building, a garage building with space for over 30 cars, and a farmhouse. At the time defendant relinquished control of the Board, there was only $7,000 in plaintiff's account. Plaintiff contends that as a result it was left underfunded for certain contingencies, repairs, and replacement projects.

On November 23, 1993, the trial court entered a partial summary judgment pursuant to section 2-1005(d) of the Illinois Code of Civil Procedure (see 735 ILCS 5/2-1005(d) (West 1992)) finding that defendant owed both a statutory duty and a common-law duty to "pay into the association's reserve fund, [his] share of the common elements costs and reserves for depreciate [sic ] on those units that the defendant owns and remain unsold." The trial court also determined that defendant breached his duty. The matter was continued for trial on the issue of damages.

On June 15, 1994, defendant sought leave to file a third-party complaint. He alleged that plaintiff was claiming as damages the period of time from the recording of the Declaration until the time defendant turned over control of the Board to the unit owners. Defendant alleged that other persons who had bought units prior to the turnover were obligated to pay that unit's pro rata share for assessments and reserves. Consequently, if defendant was required to pay increased assessments on those units, the unit owners would be unjustly enriched. The trial court, sua sponte, treated the motion as a motion in limine and limited plaintiff's recovery "to the periods of ownership of the units while the defendant held title to them and before they were sold to others." Defendant made a motion in limine seeking to bar certain testimony of plaintiff's expert (Leon). The trial court denied defendant's motion holding that "shortcomings in the source information relied upon [by] the expert witness goes to the weight of his testimony and not its admissibility."

On November 7, 1994, after a bench trial, plaintiff was awarded the sum of $70,965.56 plus costs. On December 28, 1994, defendant's post-trial motion was denied. Defendant has filed his timely notice of appeal from the trial court's orders of November 23, 1993, and November 7, 1994. No questions are raised on the pleadings.

On appeal, defendant contends that the trial court erred when it: (1) determined defendant had a common-law duty to fund a reserve account for plaintiff; (2) determined defendant's duty to fund a reserve account began when the Declaration is recorded; and (3) admitted plaintiff's expert testimony. We disagree, and we affirm.

Defendant argues that the Condominium Property Act (765 ILCS 605/1 et seq. (West 1992)) is purely a statutory creation, and prior to the statutory change of section 605/9 in 1990, there was no fiduciary duty to fund reserves (Ill. Rev. Stat. 1989, ch. 30, par. 309 (now codified as amended, at 765 ILCS 605/9 (West 1992))). Defendant further asserts that even after the statutory change, reserves were not required. Instead, defendant argues that the legislative change only mandated that boards of directors for condominium associations consider the necessity of reserves. Defendant also argues that his common-law duties in his relationship with plaintiff apply only to the construction and sale of the condominiums. Defendant concludes that the trial court erred in ruling that, as a matter of law, he had a duty to fund reserves prior to July 1, 1990.

We are convinced by the application of a simple, straight-forward definition of a fiduciary relationship to the facts in this case that defendant stood in such a relationship to plaintiff. "A fiduciary or confidential relationship exists where, by reason of friendship, agency, or business association and experience, trust and confidence are reposed by one person in another who, as a result, gains an influence and superiority over him." ( Melish v. Vogel (1975), 35 Ill. App. 3d 125, 136, 343 N.E.2d 17.) Once such a relationship exists in a corporate setting, a fiduciary has the duty "to act with utmost good faith and loyalty in managing the corporation" and is prohibited from enhancing his or her "own personal interests at the expense of corporate interests." ( Coduti v. Hellwig (1984), 127 Ill. App. 3d 279, 292, 82 Ill. Dec. 686, 469 N.E.2d 220.) Furthermore, a fiduciary "may not hinder or defeat the ability of the corporation to continue the business for which it was developed." ( Smith-Shrader Co. v. Smith (1985), 136 Ill. App. 3d 571, 577, 91 Ill. Dec. 1, 483 N.E.2d 283.) The trial court properly found that defendant had a fiduciary relationship with plaintiff.

It will be helpful to review the law applicable to condominiums. "Condominiums are creatures of statute. As such, condominiums are necessarily subject to the control and regulation of the legislature. Under these circumstances, the legislature is given broad discretion in its regulatory efforts, especially in fashioning remedies necessary to protect the interests of those persons involved." ( S & D Service, Inc. v. 915-925 W. Schubert Condominium Association (1985), 132 Ill. App. 3d 1019, 1024-25, 88 Ill. Dec. 163, 478 N.E.2d 478.) During the period of time relevant to this case, Illinois law provided:

"It shall be the duty of each unit owner to pay his proportionate share of the common expenses. It shall be the duty of the developer to pay a proportionate share of the common expenses for each unit which has not been sold by such developer. The proportionate share shall be in the same ratio as his percentage of ownership in the common elements set forth in the declaration." (765 ILCS 605/9(a) (West 1992).)

Common expenses were defined as "the proposed or actual expenses affecting the property, including reserves, if any, lawfully assessed by the Board of Managers of the Unit ...


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