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Chiurato v. Dayton Estates Dam & Water Co.

Court of Appeals of Illinois, Third District

July 6, 2017

JOHN CHIURATO, DENNIS CORBIN, and MICHELE CIONI, Plaintiffs-Appellants,
v.
DAYTON ESTATES DAM & WATER COMPANY, an Illinois not-for-profit Corporation; JOSEPH NAVARRO; WENDY NAVARRO; ROBERT POTUSNA; THOMAS GROSS; KAY GROSS; KEVIN CLEARY; JANICE CLEARY; KEN BRUNS; SUSAN BRUNS; DREW FERRACUTI; LISA FERRACUTI; MARGARET NEVIN; ROBERT NEVIN; FRANK LESS; SUE LESS; RYAN REYNOLDS; ELIZABETH REYNOLDS; TOM MARATEA; LISA MARATEA; JOHN POLEN; LYNN POLEN; LINOLA TOTEL; DON & MICHELLE VRTIS; MAURICE & SUE JOHNSON; LAWRENCE POWELL; ARMELLA OLSEN; DWAYNE DAVIS; ARTURO & RUTH THOMAS; HENDRICK & LAVERNE DeGELDER; ROBERT & DIANE SOLBERG; SCOTT & MELISSA TRAVI; TERRY & JONI ANDERSON; KEITH & PAT SEVERSON; LUKE & KATHY CARUSO; WILLIAM AHLFIELD; CHRISTOPHER ANDREE and CHARISSA ANDREE, Defendants, (Dayton Estates Dam & Water Company, Joseph Navarro, Robert Potusna, Thomas Gross, Kevin Cleary, Ken Bruns, Drew Ferracuti, Margaret Nevin, Frank Less, Ryan Reynolds, Tom Maratea, and John Polen, Defendants-Appellees).

         Appeal from the Circuit Court of the 13th Judicial Circuit, La Salle County, Illinois. Circuit No. 09-CH-161 Honorable Robert C. Marsaglia, Judge, Presiding.

          JUSTICE LYTTON delivered the judgment of the court, with opinion. Justices O'Brien and Wright concurred in the judgment and opinion.

          OPINION

          LYTTON JUSTICE.

         ¶ 1 Plaintiffs John Chiurato, Dennis Corbin, and Michele Cioni are homeowners in a residential community known as Dayton Estates. Defendant, Dayton Estates Dam & Water Company, is a not-for-profit corporation created in part for the purpose of maintaining a dam and lake that previously existed in the subdivision. In August 2007, the dam failed, and the lake emptied. Plaintiffs filed a complaint seeking declaratory judgment and alleging breach of contract against the company and the members of the board-Joseph Navarro, Robert Potusna, Thomas Gross, Kevin Cleary, Ken Bruns, Drew Ferracuti, Margaret Nevin, Frank Less, Ryan Reynolds, Tom Maratea, and John Polen-for failing to rebuild the dam.[1]

         ¶ 2 Defendants moved for summary judgment, alleging that Dayton Estates Dam & Water Company is not a homeowners association operating a common interest community under section 9-102(c) of the Forcible Entry and Detainer Act (Act) (735 ILCS 5/9-102(c) (West 2014)) and moved to dismiss plaintiffs' breach of contract claim against the company. The individual board members also filed motions for summary judgment seeking dismissal of the breach of contract claims. The trial court granted summary judgment on the declaratory judgment counts and dismissed plaintiffs' breach of contract claims against the company and the individual board members with prejudice. We affirm.

         ¶ 3 BACKGROUND

         ¶ 4 Dayton Estates is a residential community in Dayton Township near Ottawa. The community consists of two subdivisions, Dayton Estates and Dayton Estates West. In June 1973, the First National Bank of Ottawa, as trustee, and developer Walter Scherer, Jr., recorded a plat and declaration of covenants and restrictions for Dayton Estates subdivision. The covenant noted that it was the desire of the developer to create a community of country homes and set forth certain restrictions as to the use of each lot, and included common restrictions, such as no additional buildings or fences without written approval from the developer or his agent. The developer also reserved the right to flood portions of lots 10 through 14 to create a lake that would be available for use by all the lot owners.

         ¶ 5 The declaration was amended in March 1974 to change the contour flood line and again in April 1975 to include the creation of a not-for-profit corporation known as "Dayton Estates Dam & Water Company." Specifically, the second amendment to the declaration stated that the owners of each lot in Dayton Estates:

"shall automatically be and become a member of the not-for-profit corporation known as Dayton Estates Dam & Water Company which corporation has been established by the Developer for the purpose of maintaining the dam which forms the lake on the Westerly side of the subdivision and for owning and operating any centralized system that may in the future be constructed for the furnishing of water to all of the lots in the subdivision and in the companion subdivision on the westerly side of said lake known as Dayton Estates West. Each member of said not-for-profit corporation shall be subject to assessment for a pro-rata share of such expenses that might be incurred by said corporation for such purpose."

         ¶ 6 On May 8, 1975, the developer and the trustee recorded a declaration of covenants and restrictions for Dayton Estates West that contained the same covenants and restrictions as those in the Dayton Estates declaration. It reserved the right to flood a portion of lots 10 through 14 for the lake and provided membership in the dam and water company to each lot owner in Dayton Estates West.

         ¶ 7 Three weeks later, Dayton Estate Dam and Water Company was created by articles of incorporation. The articles of incorporation were filed with the Secretary of State on May 28, 1975, and recorded in the county recorder's office on June 4, 1975. According to paragraph 5 of the articles of incorporation, the purpose of the company was:

"(a) maintenance of a dam across the stream known as Sunnybrook Creek *** situated between the Subdivisions known as Dayton Estates and Dayton Estates West.
(b) The construction and installation of a centralized system for the furnishing of water to all lots in Dayton Estates and Dayton Estates West ***.
(c) To hold the legal title to that strip of real estate situated immediately between the aforesaid subdivisions known as Dayton Estates and Dayton Estates West, and such other real estate as may be required to fulfill the purposes of the corporation."

         Paragraph 7 also provided that the owner of each lot was subject to assessment, as specified in the bylaws, for expenses incurred for the corporate purpose. Finally, the articles stated that "the obligation of maintaining the dam specified in Paragraph 5(a) hereof, and power to access the members specified in Paragraph 7, may not be altered or deleted by amendment *** without consent of the County Board." The articles of incorporation were signed by Walter Scherer, Jr., Walter Scherer, Sr., and Margaret Scherer, who also named themselves as the board of directors.

         ¶ 8 Bylaws were adopted by the company in accordance with state law. The bylaws, as adopted, describe the governing body and provide the date for annual membership meetings for election of directors and the transaction of business. Annual meetings are set on the second Monday in March of each year. The bylaws also give the board of directors the power to manage the company and authorize assessments on the members. The bylaws may be amended by the board of directors.

         ¶ 9 From 1976 to 1986, the annual report filed by the company with the Secretary of State required a brief statement as to the corporate purpose. The report generally indicated that the purpose of the company was to maintain a dam and lake for private recreation. Beginning in 1987, the Secretary of State amended the form to include "yes" or "no" answers to whether the company was a condominium association, a cooperative housing association, or a homeowners association operating a common interest community as defined in section 9-102 of the Code of Civil Procedure (Code) (735 ILCS 5/1-101 et seq. (West 2008)). The first year, the company responded by answering "no" to all three questions. Beginning in 1988, the officers checked "yes" to the third question, indicating that the company was a homeowners association operating a common interest community.

         ¶ 10 On September 15, 1992, a document was recorded in the county recorder of deeds office entitled, "Appointment of Successor Developer." The document appointed and designated the board of directors of the Dayton Estate Dam & Water Company as the successor to the developer under the declaration of covenants and restrictions of the subdivision recorded in 1975. In a related lawsuit filed seven months later, the Dayton Estates Dam & Water Company filed a complaint against Dayton Estates West lot owners, Maurice and Sue Johnson, to enforce a 10-foot setback requirement contained in the declaration of covenants and restrictions. In October 1993, the trial court entered a default judgment in the company's favor, ordering defendants to remove their utility building from within 10 feet of the boundary of their lot.

         ¶ 11 As early as 1997, issues with the dam and the need for repairs were discussed by board members and reviewed at annual meetings. However, a vote was never brought before the board or its membership, and no company action was taken. After the dam failed in August 2007, the company explored financing options for repairing or replacing the dam. An emergency annual meeting was held on August 30, 2007. At that meeting, eight members were elected to the board, including plaintiffs Chiurato and Cioni. Chiurato was appointed as president, and Cioni was appointed as vice president. Repairs to the dam were the central topic discussed at the meeting. A committee was formed to contact ...


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