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Board of Managers of Weathersfield Condominium Association v. Schaumburg Limited Partnership

September 30, 1999

THE BOARD OF MANAGERS OF WEATHERSFIELD CONDOMINIUM ASSOCIATION AND WEATHERSFIELD CONDOMINIUM ASSOCIATION, AN ILLINOIS NOT-FOR-PROFIT CORPORATION, PLAINTIFFS-APPELLANTS,
v.
SCHAUMBURG LIMITED PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP, INLAND REAL ESTATE INVESTMENT CORPORATION, LASALLE NATIONAL BANK AS TRUSTEE UNDER TRUST NUMBER 102964 DATED AUGUST 1, 1980, PERRY POSTON AND CHARLES ANDREA, DEFENDANTS-APPELLEES.



The opinion of the court was delivered by: Justice Quinn

Appeal from the Circuit Court of Cook County Honorable David Lichtenstein, Judge Presiding.

OPINION AS MODIFIED AFTER DENIAL OF PETITION OF REHEARING

Plaintiffs, the board of managers of Weathersfield Condominium Association and Weathersfield Condominium Association, appeal from the trial court's grant of a motion to strike and dismiss plaintiffs' fourth amended complaint pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1996)) in favor of defendants, Schaumburg Limited Partnership, Inland Real Estate Investment Corporation, LaSalle National Bank and Charles Andrea. Plaintiffs contend on appeal that: (1) the trial court erred in holding that plaintiffs' fourth amended complaint failed to set forth sufficient facts to state a cause of action that defendants breached their fiduciary duty to plaintiffs; (2) the trial court erred in finding that the holding in Maercker Point Villas Condominium Ass'n v. Szymski, 275 Ill. App. 3d 481, 655 N.E.2d 1192 (1995), and section 22 of the Illinois Condominium Property Act (765 ILCS 605/22 (West 1996)), taken together, would constitute an inequitable and unconstitutional taking of defendants' property; (3) the individual board members owed a fiduciary duty to plaintiffs; (4) plaintiffs adequately pled damages; and (5) plaintiffs' fourth amended complaint sufficiently set forth a cause of action under the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1996)). For the following reasons, we reverse.

On December 29, 1980, the Weathersfield Condominium Association (the Association), an Illinois not-for-profit corporation located in Schaumburg, was established by the recording of a "Declaration of Condominium Ownership and Bylaws, Easements, Restrictions and Covenants" (the Declaration), for the purpose of providing residential condominium units. The property consisted of a 136-unit apartment complex. After the condominium declaration was recorded in 1980, the property continued to be operated as an apartment complex.

At the time the condominium declaration was recorded, legal title to the property was held by defendant LaSalle National Bank (LaSalle) as trustee for the Association. In 1985, LaSalle sold the property in its entirety to defendant Schaumburg Limited Partnership (Schaumburg), an Illinois limited partnership. Defendant Inland Real Estate Investment Corporation (Inland) was the corporate general partner of Schaumburg Limited Partnership. The property continued to be operated as an apartment complex until 1992.

In 1992, Schaumburg and Inland began the marketing and sale of individual condominium units to home buyers. On November 6, 1993, a turnover meeting was held at which control of the Association was transferred from defendants to a board of managers elected from unit ownership.

Plaintiffs filed their original complaint, alleging that, at the time of the turnover, the Association had $26,541.17 in capital reserves. Plaintiffs also alleged that, at the time of turnover, the roofing system required major replacement at a cost exceeding $400,000 and that inadequate maintenance was performed on the roofs and parking lots, which required repairs at a cost of $100,000.

Plaintiffs eventually filed their fourth amended complaint. Counts I, II and III of plaintiffs' complaint, against Inland, Schaumburg and LaSalle, respectively, alleged that each defendant owed plaintiffs a fiduciary duty to budget, collect and set aside reasonable reserves for capital expenditures and deferred maintenance for the repair or replacement of common elements, including the roofing system and parking areas, and that each defendant failed to establish reasonable reserves for the replacement of capital improvements.

Counts IV and V, against Perry Poston and Charles Andrea, respectively, alleged that as individual board members, each had a duty to conduct and attend regular board meetings for the purpose of determining the amount of appropriate reserves for the Association and to take into consideration the repair and replacement cost. Plaintiffs also alleged that, as individual board members, Poston and Andrea each failed to establish reasonable reserves for the replacement of capital improvements and failed to perform adequate maintenance on the common areas of the Association, including the roofs and parking areas.

Count VI, against defendants Inland and Schaumburg, alleged that they failed to establish reasonable reserves and failed to inform potential purchasers of the condominium units that the reserves were insufficient in relationship to the remaining useful life of the capital improvements in violation of section 2 of Consumer Fraud and Deceptive Business Practices Act. 815 ILCS 505/2 (West 1996).

In their motion to dismiss, defendants argued that: (1) plaintiffs' allegations failed to demonstrate that defendants owed a fiduciary duty to plaintiffs, to current unit owners or to the Association; (2) as a matter of law, defendants did not have a duty to assess a particular amount to establish a certain desirable level of reserves; (3) whatever duty defendants may have had under section 9(c)(2) of the Illinois Condominium Property Act commenced only with the initial sale of condominium units to persons other than the developer; (4) the Declaration required only an initial funding of reserves from amounts paid by initial purchasers of units from the developer at closing; and (5) plaintiffs' complaint showed that it would be inequitable to allow current owners or the Association to recover for defendants' alleged failure to accumulate reserves.

Defendants' motion to dismiss further argued that plaintiffs failed to state a cause of action establishing a duty on the part of defendants Schaumburg and Inland to inform purchasers of the alleged insufficiency of reserves to pay for expected repairs or replacements.

Finally, defendants' motion to dismiss also alleged that each count of plaintiffs' complaint failed to allege any injury or damage to plaintiffs.

The trial court granted defendants' motion to strike and dismiss counts I, II, III and VI of plaintiffs' fourth amended complaint. The trial court found that Maercker was binding on the court in that defendants owed a fiduciary duty to plaintiffs; however, because plaintiffs did not exercise their right to rescind their contract under section 22 of the Condominium Property Act (765 ILCS 605/22 (West 1996)) relating to disclosures at the time of sale, to allow plaintiffs to assert damages for its former owners' alleged failure to assess and collect ...


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