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Napcor Corporation v. Jp Morgan Chase Bank

November 19, 2010


Appeal from the Circuit Court of Kane County. No. 99--MR--407 Honorable Judith M. Brawka, Judge, Presiding.

The opinion of the court was delivered by: Justice Hutchinson

JUSTICE HUTCHINSON delivered the opinion of the court: Defendant, JP Morgan Chase Bank, NA, appeals from a $1,201,158.05 judgment entered on a jury verdict in favor of plaintiff, Napcor Corporation, to which defendant was found liable for fraudulent misrepresentation in the sale of an industrial building to plaintiff. Defendant raises two issues on appeal: (1) whether a judgment notwithstanding the verdict should be entered in its favor; and (2) whether defendant is entitled to a new trial because the verdict was against the manifest weight of the evidence. In support of the second contention, defendant argues that the trial court erred by excluding evidence that plaintiff had agreed to accept the building in its "as is" condition; the trial court erred by refusing to give defendant's jury instruction stating that plaintiff had the burden of proving each element of its claim by clear and convincing evidence; and the amount of the judgment was against the manifest weight of the evidence. We affirm.


In 1992, defendant was the trustee of a 72,047-square-foot commercial building (the building) located at 1600 Mountain Street in Aurora. Howard Preis worked in defendant's trust department and was responsible for managing defendant's portfolio of real estate assets held in trust. Preis was also responsible for the upkeep and maintenance of defendant's trust properties, and in 1992, he took over the management of the building. At that time, the building was being leased to Bender Glick, a manufacturing company. The building, however, was not generating any net income and was listed for sale after the roof was fixed. Plaintiff is a holding company that currently maintains title and ownership of the building.

To prepare the building for sale, the building's broker, Paine/Wetzel, provided Preis with an inspection report, which noted that the "roof construction is absorbing water and showing up as leakage" and concluded that the existing roof must be torn off and replaced rather than recovered with a new roof structure. Preis received bids from various roofing contractors who suggested different methods of repairing the roof. After reviewing and evaluating the bids, Preis sent to the members of the trust a letter recommending that the current roof be replaced with "roofing over the existing roof with a modified bitumen application." Preis then accepted the bid of Prewitt Construction, which completed the roof work with the assistance of Glen Prentice. During his deposition, Prentice testified that he told Preis that the existing roof should be torn off, but Preis told him that removing the damaged roof was not within the budget and instructed him to install a new roof over the existing roof. Prentice further testified that he advised Preis that installing a new roof over the existing roof, as opposed to tearing off the old roof, would leave the roof susceptible to wind uplift. Prentice testified that, once the roof work was completed in August 1994, it was impossible to tell what was under the new roof, i.e., whether the previous roof was torn off or covered.

Shortly after the roof work was completed, Paine/Wetzel sent a letter to Preis advising him that the roof continued to leak. Paine/Wetzel sent an additional letter in September 1995 advising of a "major roof leak" that was detected when the building was shown to a prospective client. Defendant then switched its real estate firm and hired Frain, Camins, & Swartchild (FCS) to market the building for sale. Preis met with FCS agent Kirk Armour to discuss the building and its features. Armour asked Preis if he thought the roof was a tear-off, and Preis responded that he thought it was. Preis approved the listing sheet prepared by Armour that included the comment "New roof in 1994 (tear off)." At trial, Preis testified that the phrase "tear off" had no particular meaning to him and that he did not believe that it was a misrepresentation.

In late 1995, plaintiff was looking for an industrial space to be utilized by a related entity named Oasis Industries, Inc. Oasis Industries manufactured whirlpool baths and had outgrown the space it had previously occupied. Plaintiff's president, William Jahnke, was advised by a real estate agent that the building was on the market. In May 1996, plaintiff submitted an offer for the building, and defendant tendered a counteroffer of $1.309 million and provided a contract. Paragraph 10(e) of that contract provided in relevant part:

"[Plaintiff] hereby represents, that they [sic] have fully examined the real estate described herein and the building improvements thereon and that [plaintiff] knows and is satisfied with the physical condition thereof in all respects and [plaintiff] declares that [plaintiff] is accepting the real estate in its 'AS IS' Condition. [Plaintiff] agrees and admits that no representations or statements have at any time been made by [defendant] or its agents as to the physical condition or state of repair or the environmental condition of said real estate in any respect, which have not been expressed in this contract." (Emphasis added.)

The emphasized provision of this paragraph was not allowed into evidence because the trial court granted a motion in limine by plaintiff. The contract also provided a 30-day due diligence period. Jahnke inspected and photographed the roof and found no evidence that the roof leaked. He did not, however, retain an additional roofing inspector, claiming that he relied on defendant's representation that the previous roof had been torn off. During the due diligence period, Preis also presented Jahnke with the manufacturer's warranty for the roof, which Jahnke presumed was valid.

The sale of the building from defendant to plaintiff was completed in August 1996. After moving into the building, plaintiff began to experience minor roof leaks, and in March 1998, an entire section of the roof blew off during a storm. In June 1998, another section of the roof similarly blew off. A third "blow off" occurred in April 1999, but it was smaller than the first two. The blown-off areas were initially covered by blue tarps, and permanent repairs were not done until a month or two after the second section blew off. According to Jahnke, in the 10 years since the repairs, the roof continued to leak when seams opened up, and at the time of trial, approximately 20% of the roof had exhibited leaks or deterioration. At trial, plaintiff presented evidence that it had spent $25,158.05 in repairs to the roof since the first damage occurred. Jahnke retained three roofing consultants to determine how the damage occurred: Ryan Barrows of MacBrady Associates; Thomas Gruebnau of Illinois Roofing Consultants; and Rene Dupuis of Structural Research, Inc. In its 1998 report, MacBrady estimated the cost of repairing the roof at $63,000.

Barrows was subsequently retained as plaintiff's expert witness. During trial, Barrows testified that sections of the roof would not have blown off had the original roof been torn off prior to the installation of the new roof. Barrows also testified that he recognized the standard definition of "tear off" as the removal of an existing roof down to the structural element and the subsequent application of a new roof over that deck. Barrows testified that he performed nine test cuts in the gypsum deck and then weighed the samples when they were wet and after they had dried out. He also performed electrical-capacity and radioactive-isotope testing to determine the level of moisture in the gypsum deck. Barrows testified that he found that more than 80% of the roof exceeded the maximum allowable 20% moisture level. He concluded that the gypsum deck needed to be replaced and estimated that the cost of replacing the roof and the deck was $2,189,730. Finally, Barrows testified that the new roof was not installed pursuant to the manufacturer's specifications.

Defendant retained Ray Norton, a certified roof consultant, as its expert witness. Norton based his opinions on the reports submitted by Illinois Roofing Consultants and Structural Research, Inc., and on his inspection of the roof, which was conducted in 2006. Norton testified at trial that it was apparent to him that the roof was not a tear-off because there were gravel stops and the flashing from the original roof caused bulges in the "re-roof." Norton testified that, based on his estimation, approximately 5% of the total ceiling showed signs of water penetration. Norton further testified that a tear-off roof replacement was unnecessary because the underlying gypsum deck had to be repaired in only a few small spots. However, Norton agreed that the failure to tear off the existing roof violated the manufacturer's specifications for the new roof.

With respect to the manufacturer's warranty of the roof, Preis testified that he had represented to plaintiff that the warranty for the building was valid. He also testified that he understood that the warranty would be void if the roof was not installed pursuant to the manufacturer's specifications.

At the close of the case, defendant submitted to the trial court a proposed jury instruction pursuant to Illinois Pattern Jury Instructions, Civil, No. 800.02B (Illinois Pattern Jury Instructions, Civil, No. 800.02B (2006) (hereinafter, IPI Civil 2006)), which required plaintiff to prove all of the elements of its fraud case by clear and convincing evidence. Plaintiff submitted a jury instruction pursuant to IPI Civil (2006) No. 800.02A, which required plaintiff to prove only the first two elements ...

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