Appeal from the Circuit Court of Cook County. The Honorable Lester D. Foreman, Judge Presiding.
The opinion of the court was delivered by: Justice Gordon
Plaintiff James P. Whitmer (Whitmer) filed a verified complaint and requested injunctive relief against his neighbors, defendants Lester and Judith Munson (the Munsons), alleging that the Munsons intentionally interfered with his contract to reconstruct a seawall and create a boat hoist and platform near his residence. The Munsons responded with a counterclaim and motion for preliminary injunction alleging that Whitmer's construction violated the covenants of the townhouse association to which they both belonged. After extensive litigation, the trial court determined that the Munsons were entitled to a preliminary injunction enjoining Whitmer from resuming construction. Whitmer subsequently dismissed his complaint alleging contract interference against the Munsons. The Munsons then moved for a permanent injunction to prohibit continued construction on Whitmer's property and also moved for a mandatory injunction requiring removal of the improvements made to Whitmer's property. The trial court granted the motion for a permanent injunction without opposition from Whitmer, but denied the Munsons' motion for a mandatory injunction requiring removal. The Munsons then filed a motion for sanctions against Whitmer pursuant to Supreme Court Rule 137 (134 Ill. 2d R. 137), which was denied by the trial court. The Munsons now appeal the trial court's order denying their motion for sanctions. On appeal, they contend that the trial court erred in failing to apply an objective standard in evaluating their sanctions motion and that the trial court failed to recognize that the litigation was caused by "baseless" allegations made by Whitmer. For the foregoing reasons, we reverse and remand.
The facts of this case, primarily gleaned from the lower court's findings, show that Whitmer purchased a townhouse in the development known as the River Cottages, located on the bank of the Chicago River, in September 1988. Whitmer was the first purchaser of property in the development. Prior to Whitmer's purchase, the developer/seller of the property created "proposed" restrictive covenants to govern the actions of the townhouse owners. Whitmer requested and the developer/seller agreed to modify the "proposed" covenants to allow Whitmer to erect a boat hoist along the seawall of his property without the consent of the other home owners, provided that approvals were obtained from authorities having jurisdiction over the Chicago River. Further, the restrictive covenants, as altered to accommodate Whitmer, contained drawings that depicted the type of hoist Whitmer had permission to build, and the drawings further specified that the hoist should be " low-profile." Finally, the restrictive covenants provided that developer/seller could modify the restrictions "for any *** reasons deemed by Developer to be in the best interest of property owners."
In December 1989, the Munsons purchased their River Cottage relying on the restrictive covenants as they existed in 1988, as modified to accommodate Whitmer. In that same month, the restrictive covenants were further amended (the 1989 Amendment) pursuant to the developer's determination that the modification was "in the best interests of property owners." The new amendment provided in relevant part:
"No wall or fences of any height shall be constructed on any lot until after the height, type, design and approximate location therefor shall have been approved in writing by the Committee [the unit owners]."
The parties do not dispute that construction of the boat hoist, seawall and platform in question was governed by this later amendment, which superceded the earlier modification made in 1988.
In October 1993, Whitmer entered into a contract to reconstruct the seawall on his property and to construct a new boat hoist and platform. The plans submitted with the applications for permits, however, did not include the boat hoist. Consequently, Whitmer did not obtain the requisite permits to build the boat hoist from "authorities having jurisdiction over the Chicago River waterway" as was required by the restrictive covenants. Whitmer also did not tell the contractors building the seawall and boat hoist that such permits were required under the controlling restrictive covenants. Moreover, he did not disclose his plans for the boat hoist to his neighbors, the Munsons, and did not receive any approval from the townhouse association "committee" as was required by the later, 1989 Amendment.
In 1994, the Munsons began contacting various agencies, such as the City of Chicago department of buildings, the mayor's office and the Metropolitan Water Reclamation District, as well as their River Cottage neighbors, attempting to halt Whitmer's construction on the grounds that he did not have the requisite permits and was in violation of the restrictive covenants. In April 1994, in response to the Munsons' conduct, Whitmer filed a verified complaint seeking to enjoin the Munsons from intentionally interfering with his construction contract.
In his verified complaint, Whitmer alleged that he obtained permits for reconstruction of the seawall and for the boat hoist from the City of Chicago, Illinois Department of Transportation and the Army Corps of Engineers. He also alleged that drawings specifically outlining the work to be done were submitted to the agencies. In addition, Whitmer pled that the work contemplated was authorized by the restrictive covenants.
Upon the filing of Whitmer's complaint, the Munsons filed a verified counterclaim seeking to preliminarily and permanently enjoin Whitmer from further construction on the grounds that his construction project was proceeding without the requisite permits and that "the boat hoist and appurtenant structures" being built did not comport with the guidelines set forth in the controlling restrictive covenants. The Munsons also asked the court to order Whitmer to remove all structural components of the boat hoist, which included vertical supports, a concrete platform and a 14-foot portion of sea wall. The Munsons also contemporaneously filed a motion which, in addition to seeking a preliminary injunction to halt construction of the seawall and boat hoist, asked for a temporary restraining order pending resolution of the issues in court.
In May 1994, Whitmer filed a response to the Munsons' motion for preliminary injunction, which he designated as his "Verified Answer to Motion for Preliminary Injunction." In his response, Whitmer admitted that he was bound by the restrictive covenants, denied the allegation that he did not have permits to build the boat hoist, and then admitted that he was currently seeking permits from various government agencies to construct the boat hoist. In that verified response, Whitmer also advanced the affirmative defense of laches, asserting that the Munsons were aware of the construction and alleged cause of action for more than six weeks before filing their motion for a preliminary injunction. Whitmer also filed his opposition to the Munsons' request for a temporary restraining order pending resolution of the preliminary injunction motion. The trial court thereupon entered the temporary restraining order prohibiting continued construction on Whitmer's property pending a hearing to determine the request for preliminary injunction.
In June 1994, Whitmer filed a motion requesting that the court deny the Munsons' motion for a preliminary injunction or, in the alternative, that the hearing in progress be stayed pending submission of a revised permit application, on the grounds that the basis for injunctive relief no longer existed. In support of this motion, Whitmer stated that, although he was not conceding that the boat hoist he planned to install violated the restrictive covenants, he would voluntarily remove the main pole of the boat hoist installed on his property. Whitmer also volunteered to provide the Munsons with "copies of the amended application for a boat hoist and committ[ed] not to permit any construction of the boat joist [sic] without permits."
The Munsons countered by filing a response to Whitmer's motion, and also moved for sanctions against Whitmer pursuant to Supreme Court Rule 137. 134 Ill. 2d R. 137. In that response, the Munsons contended that Whitmer's motion impliedly demonstrated that he did not possess the requisite permits as he pled in his original complaint and that his election to remove the boat hoist constituted an admission by conduct that the boat hoist was violative of the restrictive covenants. The Munsons urged that sanctions should be imposed upon Whitmer because his pleadings were not well grounded in fact or law insofar as Whitmer filed a complaint against the Munsons alleging that he had the requisite permits and that his construction project did not violate the restrictive covenants when he knew that: (a) the permit applications submitted to authorities omitted the boat hoist; (b) his contractors were unaware that permits were required under the restrictive covenants; (c) the Munsons were unaware of the plans for the boat hoist; (d) work was stopped on his construction project because he did not have the requisite permits; and (e) he filed applications for permits after commencing the cause of action against the Munsons.
In addition, the Munsons contended that Whitmer was aware that his boat hoist violated the restrictive covenants because Whitmer prepared a document in his own defense, for signature by a River Cottage neighbor, which stated on its face that the hoist, in fact, violated the restrictive covenants. The document stated: "I approve and have no objection to James Whitmer/365 N. Canal installing a Levitator boat hoist behind his home. I understand it deviates from the drawings in the restrictive covenants of the River Cottages." Whitmer thereupon withdrew his motion to deny the preliminary injunction, in which he volunteered to remove the boat hoist, and the trial court took the Munsons' motion for sanctions under advisement.
Thereafter, the Munsons were granted leave to amend their counterclaim. In their amended counterclaim, the Munsons realleged that Whitmer commenced construction of the boat hoist without the requisite permits and that construction of the boat hoist violated the restrictive covenants insofar as it did not comply with the permit requirements or the drawings depicting an allowable boat hoist. The Munsons then alleged (for the first time) that construction of the concrete seawall and platform on Whitmer's property was also violative of the 1989 amendment to the restrictive covenants because the construction proceeded without written approval from the committee.
Whitmer thereupon filed a response entitled "Amended Verified Answer to Motion for Preliminary Injunction." In that response, Whitmer purported to raise the ...