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Goldberg v. 401 North Wabash Venture LLC

United States District Court, Seventh Circuit

May 31, 2013

JACQUELINE GOLDBERG, Plaintiff,
v.
401 NORTH WABASH VENTURE LLC and TRUMP CHICAGO MANAGING MEMBER LLC, Defendants.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, District Judge.

Plaintiff Jacqueline Goldberg ("Ms. Goldberg") filed a five-count Amended Complaint against Defendants 401 North Wabash Venture LLC and Trump Chicago Managing Member, LLC (collectively, "Defendants" or "Trump Defendants"). (R. 48, Amend. Compl.) In her Amended Complaint, Ms. Goldberg alleged the following: violation of the Illinois Condominium Act, 765 ILCS 605/1 et seq. (Count I); violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/1 et seq. (Count II); violation of the Federal Interstate Land Sales Full Disclosure Act, 15 U.S.C. §§ 1701 et. seq. (Count III); violation of the Illinois Securities Law (Count IV); and breach of contract (Count V). (R. 48.) On October 16, 2012, the Court granted summary judgment in favor of Defendants on Count IV. (R. 170.) The Court granted Defendants' motions to strike Ms. Goldberg's jury demand as to Count I and Count V. (R. 201; R. 298.) The Court, therefore, presided over a jury trial on Counts II and III from May 13, 2013 through May 22, 2013. On May 23, 2013, the jury returned a verdict in favor of Defendants on both Count II and Count III. The Court now addresses Counts I and V based upon the evidence presented during the trial. For the following reasons, the Court finds in favor of Defendants on both Counts I and V.

BACKGROUND

In August of 2006, Ms. Goldberg entered into two agreements with Defendant 401 North Wabash Venture LLC to purchase two hotel condominium units ("HCUs") - Units 2238 and 2240 - in the Trump International Hotel & Tower Chicago ("Trump Tower"). At that time, Defendants had not yet built the Trump Tower HCUs. The first agreement, dated August 2, 2006, related to Unit 2238 and had a total purchase price of $1, 239, 500.00. The second agreement, dated August 8, 2006, related to Unit 2240 and had a total purchase price of $971, 687.00. Each purchase agreement contained materially identical provisions, and the Court will refer to the agreements collectively as the "Purchase Agreements."

At the time Ms. Goldberg signed her Purchase Agreements, she received certain documents related to the HCUs, including the Property Report, which included the Declaration, [1] and amendments to the Property Report. The Declaration contained a definition of the Common Elements - the areas and facilities in which the HCU owners would share an interest. When Ms. Goldberg signed her Purchase Agreements in August 2006, the definition of Common Elements included ballrooms, meeting rooms, function rooms and laundry facilities. Based on this definition of Common Elements, Ms. Goldberg would own a certain percentage - determined by the relative size of her HCUs - of those facilities.

The definition of Common Elements changed when Defendants issued the Fourth Amendment to the Property Report in October 2007, before Ms. Goldberg closed on the HCUs but after she had paid $516, 457.40 in earnest money deposits. Specifically, in the Fourth Amendment Defendants removed the ballrooms, meeting rooms, and function rooms from the Common Elements. Sometime in 2009, Ms. Goldberg decided not to close on her HCUs, allegedly based on the removal of these facilities from the Common Elements. Ms. Goldberg bases her claims on a theory that, in August of 2006 when she signed her Purchase Agreements, Defendants knew that they ultimately would remove these facilities from the Common Elements, yet included them in the Common Elements temporarily to induce her to sign her Purchase Agreements. Notably, the Purchase Agreements included a provision - Section 4(a) - which gave Defendants the "the right, in [their] sole and absolute discretion, to modify" the Property Report, Declaration, and other documents relating to the HCUs. (Defs.' Exs. 539 & 540, Pls.' Ex. 60(A) & 60(B), Purchase Agreements at § 4(a).)

The jury trial lasted approximately one and a half weeks. During the trial, each party admitted numerous exhibits, including the Purchase Agreements, the Property Report, and the First, Second, Third, and Fourth Amendments to the Property Report. Additionally, the following witnesses testified:

•Charles Reiss - former Executive Vice President for Development for the Trump Organization
• Donald Trump, Sr. - Chairman and President of the Trump Organization
• Robert Shearer - a real estate agent representing the Trump Organization in selling HCUs in the Trump Tower
• Andrew Weiss (via deposition designations) - Executive Vice President of Construction for the Trump Organization
• James Petrus - Chief Operating Officer of the Trump Organization's hotel collection
• Jill Cremer - former Vice President of Development for the Trump Organization
• Robert Levin - Ms. Goldberg's expert
• Jacqueline Goldberg - the Plaintiff
• Terry Vogue - Ms. Goldberg's real estate broker
• Robert Brenton Howie - Defendants' expert

The Court carefully evaluated the demeanor and credibility of each witness who testified during the trial, including body language, tone of voice, facial expressions, mannerisms, and other indicative factors.

ANALYSIS

I. Illinois Condominium Act (Count I)

Ms. Goldberg alleges that the Defendants violated Section 22 of the Illinois Condominium Act by "fail[ing] to make full disclosure of the information contained in the October 2007 Property Reports and the Declaration of Condominium before Goldberg executed the Purchase Agreements." (Amend. Compl. ¶ 79.)

Under Section 22 of the Illinois Condominium Act ("Condo Act"):

In relation to the initial sale or offering for sale of any condominium unit, the seller must make full disclosure of, and provide copies to the prospective buyer of, the following information relative to the condominium project:
(a) the Declaration;
(b) the Bylaws of the association;
(c) a projected operating budget for the condominium unit to be sold to the prospective buyer, including full details concerning the estimated monthly payments for the condominium unit, estimated monthly charges for maintenance or management of the condominium property, and monthly charges for the use of recreational facilities; and
(d) a floor plan of the apartment to be purchased by the prospective buyer and the street address of the unit, if any, and if the unit has no unique street address, the street address of the project.

765 ILCS 605/22. This disclosure requirement seeks "to prevent prospective purchasers from buying a unit without being fully informed and satisfied with the financial stability of the condominium as well as the management and rules and regulations which affect the unit.'" Mikulecky v. Bart, 355 Ill.App.3d 1006, 1012, 292 Ill.Dec. 10, 825 N.E.2d 266 (Ill.App.Ct. 2004) (quoting Nikolopulos v. Balourdos, 245 Ill.App.3d 71, 77, 185 Ill.Dec. 278, 614 N.E.2d 412 (Ill.App.Ct. 1993)). "Failure on the part of the seller to make full disclosure as required by [the Condo Act] shall entitle the buyer to rescind the contract for sale at any time before the closing of the contract and to receive a refund of all deposit moneys paid with interest thereon at the rate then in effect for interest on judgments." 765 ILCS 605/22.

The Condo Act only requires a seller to provide "information... which is available at the time." 765 ILCS 605/22. "[I]f this information is not available at the time the contract for sale is executed, then the contract is voidable at the option of the buyer up until five days after the last item of required information is furnished to the prospective buyer, or until the closing of the sale, whichever is earlier." Borys v. Josada Builders, Inc., 110 Ill.App.3d 29, 30-31, 65 Ill.Dec. 749, 441 N.E.2d 1263 (Ill.App.Ct. 1982). Here, Ms. Goldberg received the Fourth Amendment to the Property Report in October of 2007. Under the Condo Act, if the information was "not available" to Defendants for disclosure in August of 2006 when she signed her Purchase Agreements, she could have voided the contract within five days of receiving the Fourth Amendment. 765 ILCS 605/22. She, however, did not attempt to exercise this right. Rather, she and Defendants reached an agreement on approximately June 3, 2009 not to proceed with the closings on her HCUs. (Amend. Compl. ¶ 74; Trial Tr. at 1549 lns. 15-25.) Ms. Goldberg, therefore, only prevails on her Condo Act claim if she has proven, by a preponderance of the evidence, that certain required information was available to Defendants before she signed her Purchase Agreements in August 2006 and yet Defendants did not disclose it at that time.

Significantly, Ms. Goldberg does not allege, and has not proven, that Defendants failed to provide her with the specific documents which the Condo Act requires a seller to disclose - the Declaration, the Bylaws, a projected operating budget, or a floor plan of the units she planned to purchased. 765 ILCS 605/22. Indeed, in entering into the Purchase Agreements, Plaintiff "acknowledge[d] that Seller delivered to [her] prior to [her] execution of this Purchase Agreement a copy of... all other items required by Section 22 of the [Condo] Act.... [She] acknowledges that [she] has had the opportunity to review [them]." (Purchase Agreements at § 4(a).) Instead, she argues that Defendants violated the Act by failing to make a "full disclosure of the information contained in the October 2007 Property Reports, " known as the Fourth Amendment. (Amend. Compl. ¶ 79.) The Condo Act, however, does not reach this type of conduct.

The Condo Act does not require the documents and information provided to a purchaser to be final. Rather, the Condo Act anticipates that a seller may change and amend the Declaration and other documents. The Condo Act's definition of "Declaration, " for example, specifically states that the term includes amendments to the Declaration that occur from time to time. 765 ILCS 605/2(a) (defining Declaration as "the instrument by which the property is submitted to the provisions of this Act, as hereinafter provided, and such declaration as from time to time amended"). The Condo Act also sets forth how amendments to declarations and bylaws become effective. 765 ILCS 605/17. Section 22 also only requires a "projected" operating budget containing "estimated" monthly payments and charges. 765 ILCS 605/22. Moreover, Section 22 itself contemplates that changes will be made to the documents a seller must disclose. Indeed, rather than forbidding changes, Section 22 sets forth requirements for how a seller may make changes which "would materially affect the rights of the buyer or the value of the unit." 765 ILCS 605/22. Specifically, Section 22 requires that the seller "obtain[] the approval of at least 75% of the buyers then owning interest in the condominium" before making a material change. Id. Ms. Goldberg's allegations here are not that Defendants failed to obtain sufficient approval to amend the Property Report and Declaration.[1] Rather, she claims that, at the time she signed her Purchase Agreements in August 2006, Defendants knew that they planned to remove certain facilities from the Common Elements, and, therefore, did not make the full disclosures required by Section 22 by stating otherwise.

The language of Section 22, however, does not reach the fraudulent-type conduct which Ms. Goldberg alleges. First, Section 22 requires "full disclosure" and does not include any conventional fraud language such as conceal, omit, or misrepresent. Second, Section 22 specifically identifies the "information" which a seller must disclose by listing four documents:

(a) the Declaration;
(b) the Bylaws of the association;
(c) a projected operating budget for the condominium unit to be sold to the prospective buyer, including full details concerning the estimated monthly payments for the condominium unit, estimated monthly charges for maintenance or management of the condominium property, and monthly charges for the use of recreational facilities; and
(d) a floor plan of the apartment to be purchased by the prospective buyer and the street address of the unit, if any, and if the unit has no unique street address, the street address of the project.

765 ILCS 605/22. Section 22 does not state what a seller must include in these documents. Section 4 of the Condo Act, however, explicitly states what the Declaration must contain. 765 ILCS 605/4. There is no indication from the plain language of the Condo Act - in Section 4, Section 22, or elsewhere - that the Declaration must alert the purchaser of whether the representations contained within it are final or if the seller contemplates any particular changes. Rather, as discussed above, the Condo Act anticipates that the Declaration may be amended and the budgets are merely estimates. Section 22, therefore, seems to require that sellers provide certain documents to a purchaser in time for her to make an informed decision and to provide the purchaser with a remedy if the seller fails to produce these documents. See, e.g., Mikulecky v. Bart, 355 Ill.App.3d 1006, 1011, 292 Ill.Dec. 10, 825 N.E.2d 266 (Ill.App.Ct. 2004) (stating that "Section 22 was designed to alleviate [certain] practices by requiring... the seller provide certain descriptive documents relative to the condominium"). The Court will not broadly interpret Section 22 as targeting the type of disclosure failures and misrepresentations which Ms. Goldberg alleges, relating to representations in the Declaration which Defendants allegedly planned to change, when there is no support in the language of the statute for such an interpretation. Indeed, other laws, such as the Illinois Consumer Fraud Act (815 ILCS 505/2), the Interstate Land Sales Full Disclosure Act (15 U.S.C. 1701 et seq. ), and the tort of negligent misrepresentation specifically target misrepresentations made to purchasers or other consumers. Ms. Goldberg's Condo Act claim, therefore, fails as a matter of law.

Even assuming that Section 22's "full disclosure" requirement prohibits a seller from disclosing information that it plans to subsequently change, as discussed below in Section 2(C)(3), Ms. Goldberg did not sufficiently adduce evidence at trial to prove, by a preponderance of the evidence, that Defendants knew in August 2006 that they would ultimately make the changes to the Common Elements reflected in the Fourth Amendment. The Court, therefore, finds in favor of Defendants on Count I.

II. Breach of Contract (Count V)

In Count V, Ms. Goldberg alleges that Defendant 401 North Wabash Venture LLC[2] breached the Purchase Agreements by failing to deliver her HCUs in the manner described in the version of the Property Report existing at the time she signed the Purchase Agreements. Specifically, she alleges that the Fourth Amendment to the Property Report, which Defendants issued over a year after she signed her Purchase Agreements, stripped her of a percentage ownership in the building's meeting/function rooms, ballrooms, storage areas and laundry facilities, and a full health club membership. The Court will address whether Defendants (1) breached the terms of the contract and/or (2) breached an implied covenant of good faith and fair dealing.

A. Legal Standard

Under Illinois law, a breach of contract claim requires the plaintiff to prove the following elements by a preponderance of the evidence: "(1) the existence of a valid and enforceable contract; (2) substantial performance by the plaintiff; (3) a breach by the defendant; and (4) resultant damages.'" Reger Dev., LLC v. Nat'l City Bank, 592 F.3d 759, 764 (7th Cir. 2010) (quoting W.W. Vincent & Co. v. First Colony Life Ins. Co., 351 Ill.App.3d 752, 286 Ill.Dec. 734, 814 N.E.2d 960, 967 (Ill.App.Ct. 2004)); see also Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 560 (7th Cir. 2012) (citing Assoc. Benefit Serv. v. Caremark RX, Inc., 493 F.3d 841, 849 (7th Cir. 2007); MC Baldwin Fin. Co. v. DiMaggio, Rosario & Veraja, LLC, 364 Ill.App.3d 6, 30, 300 Ill.Dec. 601, 845 N.E.2d 22, 30 (Ill.App.Ct. 2006)). Courts "do not look at any ...


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