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Margaret Goldberg v. Astor Plaza Condominium Association

March 23, 2012

MARGARET GOLDBERG, PLAINTIFF-APPELLANT,
v.
ASTOR PLAZA CONDOMINIUM ASSOCIATION, DANIEL G. MOHEN, TRAVIS W. COCHRAN, GEETA KRISHNAMURTHI, AND WILLIAM S. LODER,
DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County. No. 06 CH 24682 Honorable Mary Mikva, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Robert E. Gordon

PRESIDING JUSTICE ROBERT E. GORDON delivered the judgment of the court, with opinion.

Justices Garcia and Palmer concurred in the judgment and opinion.

OPINION

¶ 1 This appeal arises from a dispute between plaintiff Margaret Goldberg (Margaret) and defendants Astor Plaza Condominium Association (Association) and its board of directors in their individual capacities: Daniel Mohen, Travis Cochran, Geeta Krishnamurthi, and William Loder (collectively, the board).

¶ 2 BACKGROUND

¶ 3 I. Events Prior to Lawsuit

¶ 4 We begin by relating the background of the parties, which is set out in each party's brief and is uncontradicted by the other party. In her brief, Margaret states the following. Astor Plaza is an eight-unit condominium building located in Chicago. Margaret owns one of the units, and four of the others are owned by defendants Mohen, Cochran, Krishnamurthi, and Loder; the remaining three units are owned by Paula Krasny, Mark Karno, and David Drew. Margaret first moved into the building in 1983.

¶ 5 In 2005, Margaret expressed a number of concerns about the operation of the Association. As she testified at trial, she was concerned about a lack of communication among the unit owners and about problems with the internal and external structure of the units that needed to be addressed, including problems with windows and balconies, a lack of maintenance in the common areas, and the absence of reserves for the Association. Margaret was also concerned because board meetings were occurring but she was not provided notice or minutes of the meetings. The unit owners met to discuss Margaret's concerns and afterward, the manager came to inspect her windows.

¶ 6 In March 2006, a meeting was scheduled to elect a new board of directors, and the new board consisted of the individuals named as defendants in the instant case. The board had a few informal gatherings shortly after the election but did not hold another meeting until September 2006, when a meeting was scheduled to discuss proposed improvements. The project was expected to cost approximately $450,000. Since the Association did not have sufficient funds in its reserves, the material distributed to the unit owners proposed that the Association seek a bank loan to fund the project which would be guaranteed by the unit owners. The other unit owners approved the financing, but Margaret was concerned that she could end up responsible for other unit owners' shares of the cost, so she filed a complaint on November 14, 2006.

¶ 7 In its brief, the Association adds the following facts. At the beginning of 2005, the board consisted of three unit owners but during 2005, the three board members resigned from the board or moved, leaving a period with no board management until the March 2006 election of the new board. Prior to the disintegration of the old board, Margaret had expressed a number of concerns before the board, and she renewed her grievances after the election of the new board.

¶ 8 One of the grievances raised by Margaret involved the replacement of her bay window, which she asked the Association to pay for. In response, the new board considered adopting a policy in which the Association would pay for bay windows while the unit owners would remain responsible for all other windows. However, prior to making a final decision, the board consulted with its attorneys, Keough & Moody, P.C. (K&M). In September 2006, K&M informed the board that article XIV, section 2(l), of the Association's declaration required all unit owners to maintain, repair, and replace all of the windows in their units. Consequently, the board informed Margaret that she would have to pay for the replacement of her bay window.

¶ 9 Margaret did not accept the board's decision and also objected to the board's renovation project. Margaret's attorney argued that article V, section 2, of the declaration prohibited the board from financing the renovation with an Association loan. In response, K&M opined that article V, section 2, applied only to unit owner loans and not to Association loans.

¶ 10 In order to respond to Margaret's complaints, the board authorized K&M to share its legal opinions with Margaret's attorney and K&M sent Margaret's attorney a letter on October 10, 2006, in which it explained its understanding that the Association had the authority to borrow money and that Margaret was responsible for maintaining, repairing, and replacing her own windows pursuant to the declaration. Margaret continued to object, and K&M sent another letter to Margaret's counsel on November 1, 2006, again stating the board's position. On November 6, 2006, a motion to increase the monthly assessments for the building renovation project was passed by a vote of all of the Association membership 7 to 1, with Margaret providing the only vote against the project. On November 14, 2006, Margaret filed her initial complaint.

¶ 11 II. Complaint

¶ 12 Margaret's complaint was amended several times during the pendency of the instant action, with the final complaint being the third amended complaint, filed on June 6, 2008. That complaint, including an amendment adding three additional counts that was filed on April 20, 2009, contained a total of 14 counts. The complaint included a "prefatory" section stating that counts I, II, IV, and VI of the complaint had been dismissed either due to mootness or pursuant to section 2-615 of the Code of Civil Procedure (Code) (735 ILCS 5/2-615 (West 2008)) but that Margaret was including them "solely for purposes of preserving her objections for appeal." The prefatory section also noted that Margaret had named Karno, Krasny, and Drew as defendants solely for purposes of count XI.

¶ 13 The counts at issue in the case at bar are counts VII, VIII, X, and XIII, so we relate only the allegations relevant to those counts.

¶ 14 Count VII was against the Association and concerned failure to maintain common elements. The complaint alleges that Margaret "has a balcony which is substantially rusted, a deteriorating window frame in the front bay window, and side window frames which are badly deteriorated in [Margaret's] apartment." The complaint further alleges that "[n]otwithstanding a long history of discussion with regard to these elements, however, and assurances from both the current and prior boards, [the Association] has sought to avoid any responsibility for [Margaret's] balcony and window frames by summarily excluding them from the building's historical and published definition of what constitutes a common element."

¶ 15 According to the complaint, the Association based its determination on article XIV, section 2, of the declaration, which provided that the duties of the board included paying for "tuckpointing, maintenance, decorating, repair, and replacement of the Common Elements (but not including the windows and glass doors appurtenant to the Unit, if any, *** which the Unit owners shall *** maintain and repair, except if necessitated by repairs to the Common Elements)."

The complaint alleges that the Declaration did not exclude the Association's responsibility to maintain the window frames, as opposed to the windows themselves, and that the problem arose from structural defects in the building itself and not from the windows.

¶ 16 The complaint further alleges that the board has paid for correcting such problems in the past when they occurred in the units of board members and that the Association had assessed all of the unit owners previously in order to pay for repairs to balconies. Furthermore, the complaint alleges that board member Loder, purportedly on behalf of the board, had repeatedly promised Margaret that the window frame would be repaired.

¶ 17 Count VIII of the complaint is against the Association for relief pursuant to section 112.50 of the General Not For Profit Corporation Act of 1986 (Not For Profit Act) (805 ILCS 105/112.50 (West 2008)). The complaint alleges that based on all of the conduct set forth in the complaint, "the defendants have acted in a manner that is oppressive with regard to [Margaret's] interest in the building, in dereliction of the obligations imposed upon them by the governing documents, in bad faith and in an arbitrary, overbearing and heavy-handed manner, and in a manner likely to result in unnecessary waste, gross over-reaching, and expense that will need to be wrongfully borne by [Margaret]." Specifically, Margaret pointed to (1) the segregation of classes of unit ownership based on whether the unit owner was a board member, (2) the refusal of the board to complete the work required on Margaret's windows and balcony, and (3) the board's invalid and unenforceable procurement of financing for the renovation project. Accordingly, Margaret sought the appointment of a receiver to manage the business and affairs of the Association.

¶ 18 Count X was against the Association and sought relief under section 19 of the Condominium Property Act (Condominium Act) (765 ILCS 605/19 (West 2008)) for failure to keep, maintain, and produce minutes of meetings. The complaint alleges that the board has never produced minutes of meetings held in 2005, and that the board has met a number of times without notice to the unit owners and without producing minutes of those meetings.

¶ 19 Count XIII was directed at the individual defendants and sought relief pursuant to section 103.20 of the Not For Profit Act (805 ILCS 105/103.20 (West 2008)). The complaint alleges that the individual defendants conspired to negotiate a financial agreement for the renovation project "which ran contrary to that initially disclosed to the unit owners, for a greater sum of money than that approved by the unit owners, and for additional work not contemplated by the original project or approved by the unit owners." The complaint further alleges that defendants knew prior to the vote on the project that the financing was not permitted under the Association's governing documents and therefore misrepresented the nature of the project. The complaint also alleges that the individual defendants secured an additional $100,000 line of credit that was largely used to pay their personal legal expenses and not for general building expenses as represented.

¶ 20 III. Motion to Compel

¶ 21 One of defendants' defenses to the complaint was that they had relied on the advice of counsel and on March 11, 2010, the trial court considered Margaret's fourth motion to compel concerning that defense. The motion to compel requested the entry of an order compelling defendants to produce the documents listed in their privilege log since defendants had placed reliance on counsel at issue. At the hearing on the motion, Margaret's counsel pointed to the privilege log submitted by defendants and noted that the privilege log was over 300 pages, involving at least 1,000 pages of documents. The privilege log did not identify the specific subject matter for which the privilege was being asserted and Margaret's counsel asserted that "I have no idea, looking at that, whether what this involves is one of the subject matters for which there has been a waiver in this case." The court denied the motion, telling Margaret's counsel to take the depositions of defendants' former attorneys as planned and "[s]ee what they say." The court stated that it would reconsider the motion if necessary after the deposition but that it would not "deal with 'what if.' " After the depositions, Margaret filed another motion, but the trial court again denied the motion to compel.

¶ 22 IV. Trial

ΒΆ 23 On September 29, 2010, following a bench trial, the trial court entered its judgment in a written opinion. The court made a number of findings of fact applicable to all counts: (1) that the Association's bylaws stated that the windows and interior surfaces of units are to be maintained, repaired, and replaced by the unit owners; (2) that "the Condominium's Declaration provides that in the event of any question of interpretation or application of the Declaration or by-laws, the determination thereof by the Board shall be final and binding"; (3) that "the Condominium's Declaration provides that the members of the Board shall not be liable to the unit owners for any mistake of judgment or any acts or omissions made in good faith"; (4) that the construction project was properly classified as a renovation; (5) that "the Board had the power to enter into the renovation loan with Harris Bank and signed the loan agreement in good faith reliant on legal advice from the Board's attorney"; (6) that "the Board had legal authority and power to spend the loan proceeds to renovate the building and did so in good faith reliant on legal advice"; (7) that "the Board had the power to increase the assessment to repay the ...


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