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BCWC LLC v. Reading Rock

October 10, 2007

BCWC LLC AND MMWC LLC, PLAINTIFFS,
v.
READING ROCK, INC., DEFENDANT,
READING ROCK, INC. DEFENDANT/COUNTER-PLAINTIFF,
v.
BCWC LLC AND MMWC LLC PLAINTIFFS/COUNTER-DEFENDANTS.



The opinion of the court was delivered by: Judge Marvin E. Aspen

MEMORANDUM OPINION AND ORDER

Plaintiffs, BCWC LLC and MMWC LLC ("Land Trust"), move to dismiss Defendant, Reading Rock Inc.'s ("Reading Rock"), counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. Reading Rock has made three counterclaims: (1) fraudulent inducement relating to representations allegedly made by the Land Trust prior to the execution of the lease ("Count I"); (2) constructive eviction as a result of the building not meeting code requirements of the City of West Chicago ("Count II"); and, in the alternative, (3) rescission of the contract based on the alleged fraudulent misrepresentation ("Count III"). In response, the Land Trust argues that all claims should be dismissed due to specific terms in the lease. In addition, the Land Trust contends that Count II should be dismissed because the alleged conduct took place prior to execution of the lease and because Reading Rock did not vacate the property in a reasonable amount of time.

For the reasons stated below, we deny the Land Trust's motion to dismiss.

STANDARD OF REVIEW

When ruling on a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), we must accept all factual allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Moranski v. Gen. Motors Corp., 433 F.3d 537, 539 (7th Cir. 2005). Dismissal is warranted only when no facts in support of the plaintiff's claim would entitle her to relief, Lee v. City of Chicago, 330 F.3d 456, 459 (7th Cir. 2003), though "[f]actual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombley, 127 S.Ct. 1955, 1965 (2007). Furthermore, a copy of any written instrument that is an exhibit to a complaint is considered to be a part of the pleadings, Fed. R. Civ. P. 10(c), and as a general principle, when a written instrument contradicts allegations in the complaint to which it is attached, the exhibit trumps the allegations. Graue Mill Dev. Corp. v. Colonial Bank & Trust Co., 927 F.2d 988, 991 (7th Cir. 1999).*fn1

BACKGROUND

According to the counter-complaint, Reading Rock is an Ohio corporation engaged in the business of manufacturing and supplying masonry products. The Land Trust, BCWC LLC and MMWC LLC, are Illinois limited liability companies and hold commercial property at 1401 Harvester Street, West Chicago, Illinois ("Premises") under a Trust Agreement. On July 1, 2004, the Land Trust entered into a lease agreement ("Lease") as Lessor with Reading Rock, as Lessee, for the Premises to be used for storing masonry products. Prior to entering into the Lease, in May 2004 agents of the Land Trust represented to Reading Rock that the premises were available for immediate occupancy. However, the City of West Chicago told the Land Trust on at least seven prior occasions between 1992 and 2001 that there were numerous building and fire code violations, and that repairs needed to be made to the parking lot, which the Land Trust failed to fix. Furthermore, on April 18, 2001, the City of West Chicago wrote a letter to the Land Trust stating that no one could occupy the property until a Certificate of Occupancy is issued, which would require a satisfactory application and approval. These code violations and the Certificate of Occupancy requirement were never disclosed to Reading Rock.

After commencement of the Lease, the West Chicago Fire Protection District inspected the Premises and found more than five serious problems. The premises were still uninhabitable as of November 2004 when Reading Rock submitted its Application of Special Use Permit to the City of West Chicago, which it resubmitted in December 2004. On or about December 20, 2004, the City of West Chicago informed Reading Rock that the Application was incomplete. On December 28, 2004, the City required Reading Rock that it was required to install perimeter and parking lot landscaping on the Premises.

In December 2004, Reading Rock asked that the Lease be mutually terminated because these problems made it impossible or impracticable for Reading Rock to occupy the Premises. The Land Trust denied the request. In January 2005 the City of West Chicago inspected the Premises again and identified seven problems. Despite being unable to occupy the premises, Reading Rock made lease payments from July 2004 through February 2005. In October 2006, the Land Trust terminated the Lease and sold the Premises to a third party.

The Land Trust filed suit to recover unpaid rent and other incidental damages. In response, Reading Rock makes three counterclaims: fraudulent inducement, constructive eviction, or in the alternative, rescission of the contract.*fn2 The Land Trust has moved to dismiss these counterclaims.

ANALYSIS

I. Fraudulent Inducement Claim

In Count I, Reading Rock claims that it entered into the lease based on the fraudulent misrepresentations of the Land Trust. In order for a misrepresentation to constitute fraud, Rolling Rock must establish that there was: "'[1] a representation in the form of a material fact; [2] made for the purpose of inducing a party to act; [3] it must be false and known by the party making it to be false, or not actually believed by him, on reasonable grounds, to be true; and [4] the party to whom it is made must be ignorant of its falsity, must reasonably believe it to be true, must act thereon to his damage, and in so acting must rely on the truth of the statement.'" Tower Investors, LLC v. 111 East Chestnut Consultants, Inc., 371 Ill. App. 3d 1019, 1030-31, 864 N.E.2d 927, 939 (1st Dist. 2007) (quoting James v. Lifeline Mobile Medics, 341 Ill. App. 3d 451, 456, 792 N.E.2d 461, 465 (4th Dist. 2003)).*fn3 To satisfy the reliance element of a fraud claim, a plaintiff must show that she was justified in relying on the misrepresentation. Davis v. G/N. Mortgage Corp., 396 F.3d 869, 882 (7th Cir. 2005) (citing Soules v. Gen. Motors Corp., 79 Ill. 2d 282, 402 N.E.2d 599, 601 (Ill. 1980)).

At issue is whether Reading Rock could have justifiably relied on the truth of the alleged misrepresentations in light of Section 2 of the ...


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