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Penn v. Gerig

October 4, 2002

DONALD PENN AND NORMA PENN, PLAINTIFFS-APPELLANTS,
v.
BECKY GERIG; HUNDMAN REALTY, INC.; AND THOMAS MALONEY, D/B/A COLDWELL BANKER HEART OF AMERICA REALTY, DEFENDANTS, AND ROGER A. HEERDT AND DENISE HEERDT, DEFENDANTS-APPELLEES.



Appeal from Circuit Court of McLean County No. 00L92 Honorable John P. Freese, Elizabeth A. Robb, Judges Presiding.

The opinion of the court was delivered by: Justice Knecht

After discovering certain defects in their recently purchased home, plaintiff home buyers filed a cause of action against defendant home sellers. Count III of plaintiffs' complaint alleged noncompliance with the Residential Real Property Disclosure Act (Act) (765 ILCS 77/1 through 99 (West 1996)) and count X alleged common-law fraud. The trial court dismissed count III with prejudice, due to the running of the one-year statute of limitations. 765 ILCS 77/60 (West 1996). On plain-tiffs' motion, the trial court also dismissed count X without prejudice. The trial court then granted defendants' motion for sanctions and ordered plaintiffs to reimburse defendants $4,330 for attorney fees. Plaintiffs appeal the trial court's order dismissing count III with prejudice and the order granting defendants' motion for sanctions. We affirm.

I. BACKGROUND

In the fall of 1997, defendants, Roger and Denise Heerdt, listed their Bloomington, Illinois, home for sale with a local realtor. On September 8, 1997, defendants completed a residential real property disclosure report in accordance with the Act. 765 ILCS 77/35 (West 1996). Defendants disclosed they were aware of "material defects in the basement or foundation (including cracks or bulges)." Defendants further explained their answer in the appropriate blank on the disclosure form and stated: "crack in foundatio on south side of house" and "small settling cracks on walls throughout."

Around October 17, 1997, plaintiffs, Donald and Norma Penn, entered into negotiations with defendants for the purchase of defendants' home. On October 18, 1997, plaintiffs signed a purchase agreement and they also signed the disclosure report in which defendants disclosed the forementioned defects. On November 28, 1997, defendants delivered possession of the residence to plaintiffs. The instrument of conveyance of the residential real property was recorded on December 4, 1997.

On May 16, 2000, plaintiffs filed a nine-count complaint against five parties: Becky Gerig, Hundman Realty, Inc., Thomas Maloney (doing business as Coldwell Banker Heart of America Realty), Roger A. Heerdt, and Denise Heerdt. This appeal involves only those counts of the complaint directed toward the Heerdts. In count III, plaintiffs alleged defendants violated the Act because they "falsely and intentionally filled out the [r]esidential [r]eal [p]roperty [r]eport in an incorrect manner so as to deceive and mislead the [plaintiffs] and others as to the true condition of the home." Plaintiffs complained of undisclosed defects in the home's sewer system, roof, and foundation, which cost them $17,900 to correct.

On June 12, 2000, defendants filed a motion to dismiss count III, alleging it was barred by the applicable one-year statute of limitations. 765 ILCS 77/60 (West 1996). Defendants argued the complaint was filed nearly 2 1/2 years after the accrual of the cause of action as set forth in the Act. Defendants also argue they disclosed all known defects in the disclosure report prior to plaintiffs' purchase of the home, so even if the discovery rule applied to the Act, it would not toll the running of the limitations period in this case. On June 16, the trial court granted plaintiffs' motion for leave to file count X against defendants, alleging common-law fraud. On August 9, 2000, a hearing was held on defendants' motion to dismiss count III. The trial court granted the motion and dismissed count III with prejudice due to the expiration of the statute of limitations.

On August 21, 2000, defendants filed a motion to dismiss count X. On November 16, 2000, plaintiffs filed a motion for voluntary dismissal of count III. On November 22, 2000, the trial court granted defendants' motion to dismiss count X and, noting its earlier dismissal of count III with prejudice, denied plaintiffs' motion for voluntary dismissal of count III. On December 11, the trial court entered an order dismissing, without prejudice, all other counts of plaintiffs' complaint (against other defendants) and withdrawing all pending discovery requests.

On December 21, 2000, plaintiffs filed a notice of appeal of the trial court's order dismissing count III with prejudice. On January 8, 2001, defendants filed a motion for sanctions against plaintiffs and their attorney, Jack Vieley. On February 2, 2001, defendants filed a motion to dismiss plaintiffs' appeal, which was granted by this court on February 16, 2001. The trial court heard defendants' motion for sanctions on February 28, 2001, and took the matter under advisement. On March 6, 2001, the trial court entered an order granting defendants' motion for sanctions, and on March 7, 2001, plaintiffs filed a notice of appeal. On March 20, 2001, the mandate from this court dismissing plaintiffs' December 21, 2000, appeal (Penn v. Gerig, No. 4-00-1081 (February 16, 2001) (unpublished order of dismissal)) was filed with the circuit clerk of McLean County. On March 21, 2001, plaintiffs filed a second-amended notice of appeal. We note defendants have filed with this court a motion for sanctions pursuant to Supreme Court Rule 375 (155 Ill. 2d R. 375(b)), which we will consider as part of this case.

II. ANALYSIS

On review we consider three issues: (1) whether the discovery rule should be applied to the Residential Real Property Disclosure Act to toll the running of the one-year statute of limitations period until a time the plaintiffs knew or reasonably should have known of their injury; (2) whether the trial court erred in granting defendants' motion for sanctions; and (3) whether this court should grant defendants' motion for sanctions pursuant to Supreme Court Rule 375 (155 Ill. 2d R. 375(b)).

A. Statute of Limitations

Whether the discovery rule is applicable to the Act is an issue of first impression in Illinois. The limitations period set forth in the Act states: "No action for violation of this Act may be commenced later than one year from the earlier of the date of possession, date of occupancy, or date of recording of an instrument of conveyance of the residential real property." 765 ILCS 77/60 (West 1996). The primary rule of statutory construction is to ascertain and give effect to the true intent of the statute. If the statutory language is clear, the language should be given effect without further aids of construction. Miller v. Bizzell, 311 Ill. App. 3d 971, 974, 726 N.E.2d 175, 177 (2000).

The discovery rule has been applied in many situations to alleviate the sometimes "harsh results" of a literal application of statutes of limitation. In effect, the discovery rule delays the commencement of the relevant statute of limitations until the plaintiff "'knows or reasonably should know that he has been injured and that his injury was wrongfully caused.'" Hermitage Corp. v. Contractors Adjustment Co., 166 Ill. 2d 72, 77, 651 N.E.2d 1132, 1135 (1995), quoting Jackson Jordan, Inc. v. Leydig, Voit & Mayer, 158 Ill. 2d 240, 249, 633 N.E.2d 627, 630-31 (1994). The discovery rule will not be applied given a contrary indication of legislative intent. Hermitage, 166 Ill. 2d at 78, 651 N.E.2d at 1135.

In this case, the legislature has spoken in clear and unambiguous terms. Only three very specific events will trigger the running of the one-year statute of limitations for causes of action brought under the Act: the date of possession, the date of occupancy, or the date of the recording of an instrument of conveyance. 765 ILCS 77/60 (West 1996). None of these events are related to the discovery of potential defects in the home. In fact, we conclude the clear and unambiguous language chosen by the legislature contravenes the application of the discovery rule to the limitations period of the Act. First, the legislature chose a very short, one-year statute of limitations. This period, albeit short, gives the home buyer some protections not previously enjoyed under the somewhat harsh, common-law doctrine of caveat emptor, while protecting sellers against potential unlimited liability under the Act if a buyer discovers a defect many years after the purchase of a home. The application of the discovery rule would render meaningless the legislature's choice of the three specific triggering events as well as the short, one-year limitations period.

If we examine the statute further, we also find the legislature not only chose three specific triggering events, it specifies the limitations period will begin "from the earlier of the date of possession, date of occupancy, or date of recording." (Emphasis added.) 765 ILCS 77/60 (West 1996). According to this clear and unambiguous language, the limitations period may begin to run even before the home buyer occupies a residential property and has the chance to discover undisclosed defects in the home. For example, if a home buyer delays occupancy of a residence for whatever reason, but the deed is recorded prior to occupancy, the statute of limitations begins to run when the deed is recorded. Because the legislature has chosen three specific triggers that provide a bright-line test for determining the exact date of the beginning of the limitations period and because these triggers have nothing to do with the home buyer's actual discovery of defects in the home, we find the application of the discovery rule to the Act would be contrary to legislative intent.

The running of the short, one-year limitations period of the Act does not, however, leave a home buyer without a remedy if she feels she has been deceived by a home seller who has fraudulently concealed latent defects. Section 45 of the Act states: "This Act is not intended to limit or modify any obligation to disclose created by any other statute or that may exist in common law in order to avoid fraud, misrepresentation, or deceit in the transaction." 765 ILCS 77/45 (West 1996). Therefore, because an aggrieved home buyer has remedies available in addition to those created by the Act, a strict application of the one-year limitations period set forth in the Act does not lead to the "harsh results" that initially prompted courts to create the discovery rule and prompted the legislature to codify the discovery rule in certain statutory causes of action.

Accordingly, we affirm the trial court's December 11, 2000, order dismissing with prejudice count ...


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