Appeal from the Circuit Court of Cook County. 97 L 1606 The Honorable Paddy H. McNamara, Judge Presiding.
The opinion of the court was delivered by: Presiding Justice Cohen
On June 6, 1997, plaintiff Barry Schrager filed a complaint alleging negligence and fraud against defendants North Community Bank, its president, Scott Yelvington, and its chairman and chief executive officer (CEO), Peter Fasseas. Defendants answered plaintiff's complaint and later moved for summary judgment. In considering defendants' motion for summary judgment, the trial court agreed with defendants' characterization of plaintiff's fraud count as alleging both fraudulent misrepresentation and fraudulent concealment of material fact. The trial court further agreed that plaintiff's negligence count alleged negligent misrepresentation. On October 20, 1999, the trial court granted defendants' motion for summary judgment on all claims.
On appeal, plaintiff alleges that the trial court erred in granting summary judgment where it determined that: (1) defendants' statements were opinions rather than representations of material fact; (2) defendants had no duty to disclose certain facts to plaintiff; and (3) plaintiff's reliance on defendants' statements was not justifiable as a matter of law.
For the reasons set forth below, we hold that questions of material fact sufficient to withstand summary judgment exist with respect to each of plaintiff's asserted errors. We therefore reverse the judgment of the trial court and remand this cause for further proceedings.
On March 11, 1993, as a prospective investor in the 1255 State Parkway Building Limited Partnership (1255 Partnership), a real estate venture of Jeffery E. Grossman and Donald Grauer, plaintiff Barry Schrager attended a meeting held at North Community Bank arranged by Grossman to introduce defendants Scott Yelvington and Peter Fasseas to Schrager. At the time, Yelvington was president of North Community Bank. Fasseas was the bank's chairman and CEO. Both Grossman and Grauer were present at the meeting. The meeting was held in Yelvington's office at the bank.
The record reflects that at the time of the meeting on March 11, North Community Bank held a $600,000 mortgage (of which $420,000 had been disbursed) on property owned by the 1255 Partnership. The note on that mortgage, executed on February 24, 1992, was guaranteed by both Grauer and Dr. Lawrence Metrick. Dr. Metrick was Grossman's daughter's father-in-law. At his deposition, Grossman testified that Metrick had contacted him by telephone and informed Grossman that Metrick was "getting cold feet" and wished to withdraw his guaranty. In search of a guarantor to replace Metrick, Grossman testified that in late 1992 he provided Schrager with a prospectus. The prospectus outlined Grossman's proposal that Grossman proposed that Schrager purchase a 50% share in the 1255 Partnership for $375,000, and agree to guarantee the note on the mortgage in place of Metrick.
The parties dispute both the nature of the March 11 meeting and the substance of the matters discussed at the meeting. Defendants claim that the meeting was simply a "social call," the purpose of which was merely to introduce Schrager to Yelvington and Fasseas. Defendants maintain that no matters of significant business import were discussed at the meeting. Schrager, however, claims that it was clearly understood among the parties that the purpose of the meeting was to discuss Schrager's potential investment in the 1255 Partnership.
Grossman testified at his deposition that when he contacted Yelvington to arrange the meeting, he informed Yelvington that Schrager was his (and Grauer's) "new partner." According to Schrager, Grossman also told Yelvington at the start of the March 11 meeting that Schrager was a prospective investor in the 1255 Partnership. Schrager stated at his deposition that during the March 11 meeting, "Yelvington asked me what I would like to know about [Grossman] or [Grauer]." Schrager testified that he replied, "anything you can tell me about [Grossman, Grauer] or the project." (Emphasis added.) Schrager testified that in response to his inquiry, Yelvington told him that Grossman and Grauer were "excellent real estate developers, very good customers of the bank, and very good business men [sic]." Bank chairman and CEO Peter Fasseas, who later joined the meeting, was asked the same question and gave a substantially similar answer. Fasseas added that he was "good friends" with Grossman and Grossman's wife.
At his deposition, Yelvington testified that he could not recall whether Schrager made any such inquiry at the March 11 meeting. *fn1 Yelvington further testified, however, that he knew at the time of the March 11 meeting that Grossman was bankrupt. In re Jeffrey E. Grossman, 92 B 1534 (filed January 23, 1992). Yelvington was also aware of the fact that the 1255 Partnership's account at the North Community Bank had been overdrawn at least 57 times during 1992, occasionally in amounts in excess of $10,000. Yelvington further testified that at the time of the March 11 meeting, he was aware that Grossman and Grauer's planned construction on the 1255 State Parkway premises could not proceed due to disputes both with the building's condominium association and, more significantly, with the relevant zoning authorities of the City of Chicago.
Schrager admitted in his deposition that after the March 11 meeting with Yelvington and Fasseas, he made no additional independent inquiry into the financial history of either Grossman or Grauer. Schrager further admitted that about three months prior to the March 11 meeting, he had begun investing approximately $850,000 in three other real estate ventures with Grossman and Grauer. In one of these prior ventures, Schrager retained an attorney to draft an agreement designed to "protect his interests." Schrager retained no attorney with respect to investing in any of Grossman and Grauer's ventures subsequent to the March 11 meeting. During his deposition, in response to counsel's question about whether Schrager had asked Grossman or Grauer if either had ever declared bankruptcy, Schrager replied: "They were portraying themselves as multi-millionaires. That would not even have occurred to me."
Plaintiff states that he relied upon defendants' responses to his inquiry in deciding both to become a guarantor on the 1255 Partnership loan in place of Metrick as well as to invest a total of more than $4 million in the 1255 Partnership and other real estate development deals with Grossman and Grauer.
Subsequent to the March 11 meeting, the $600,000 mortgage loan on the 1255 Partnership property was refinanced with another bank. As security, Schrager posted on behalf of the 1255 Partnership a letter of credit in the amount of $450,000, executed on December 10, 1993, concurrently with a new note on the refinanced loan. Grauer admitted in his deposition that there was an understanding, of which Grossman had made him aware, between Grossman and the North Community Bank to the effect that upon Schrager's posting of the letter of credit, the prior guarantee of Dr. Metrick on the original mortgage note would be cancelled or released. The record reflects that such a release did in fact occur.
According to Schrager, all properties in which he invested in reliance on the defendants' endorsement of Grossman and Grauer's business skills subsequently became worthless. On February 7, 1997, Schrager filed a complaint for damages in the circuit court of Cook County alleging a single count of negligence against defendants. Schrager then amended his complaint by adding a fraud count and sought damages totaling more than $4 million.
On June 28, 1999, defendants filed a motion for summary judgment. In their motion, defendants described Schrager's somewhat confusing amended complaint as setting forth both a negligence claim predicated on a theory of negligent misrepresentation and a fraud claim predicated on theories of fraudulent misrepresentation and fraudulent concealment of material fact. The court adopted defendants' characterization of plaintiff's amended complaint and granted defendants' motion for summary judgment. In so doing, the trial court held that: (1) defendants' statements to Schrager expressed non-actionable opinions rather than material facts; (2) no relationship existed between Schrager and defendants upon which a duty to disclose might be predicated; and (3) Schrager could not prove justifiable reliance on defendants' statements because he could have discovered the relevant financial information about Grossman and Grauer by asking them directly.
On appeal, Schrager argues that the trial court erred in granting defendants summary judgment because defendants' statements constituted representations of material fact rather than opinions. Schrager further claims that a relationship sufficient to trigger a duty to disclose existed between himself and defendants by virtue of defendants' "position of trust and influence." Finally, Schrager claims that whether his reliance on defendants' ...