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Ruiz v. Cal-Ful Condominium Assocation

Court of Appeals of Illinois, First District, Sixth Division

September 20, 2019

GONZALO RUIZ, and DINA RUIZ, Plaintiffs-Appellants,
CAL-FUL CONDOMINIUM ASSOCATION, an Illinois Not-for-Profit Corporation, CALIFORNIA COMMONS RESIDENTIAL CONDOMINIUM ASSOCIATION, an Illinois Not-for-Profit Dissolved Corporation, MARIA ARCOS, RACHEL OWENS, and OMAR R. CASTRO, Defendants Cal-Ful Condominium Association, Maria Arcos, Rachel Owens, and Omar R. Castro, Defendants-Appellees.

          Appeal from the Circuit Court of Cook County. No. 13 CH 20579 Honorable Anna H. Demacopoulos, Judge Presiding.

          Attorneys for Appellants Marty Schwartz and Tyler Manic, of Schain, Banks, Kenny & Schwartz, of Chicago, for appellants.

          Attorneys for Appellees David T. Brown and Lucas Sun, of Kaufman Dolowich & Voluck, LLP, of Chicago, for appellees.

          JUSTICE CUNNINGHAM delivered the judgment of the court, with opinion. Justices Connors and Harris concurred in the judgment and opinion.



         ¶ 1 This case arises out of a dispute between two condominium unit owners and the condominium board of directors regarding the directors' exercise of their fiduciary duty. Plaintiffs-appellants Gonzalo and Dina Ruiz, the unit owners, appeal the circuit court of Cook County's dismissal of certain counts of their complaint against defendant-appellee Cal-Ful Condominium Association and the court's entry of summary judgment in favor of codefendants-appellees Maria Arcos, Rachel Owens, and Omar R. Castro, members of the condominium board of directors.

         ¶ 2 On appeal, the Ruizes argue that the court erred in granting summary judgment for the directors based on the directors' defense of equitable estoppel. The Ruizes further argue that the court erred in dismissing count II of their complaint, seeking attorney fees from the Cal-Ful Condominium Association for the failure to state a claim.

         ¶ 3 Finding that the Ruizes were not estopped from bringing their breach of fiduciary duty claim as a matter of law, but that they did not state a claim for attorney fees, we affirm the circuit court of Cook County in part, reverse in part, and remand for further proceedings.

         ¶ 4 I. BACKGROUND

         ¶ 5 The following facts are taken from the Ruizes' third amended complaint. Gonzalo purchased the buildings located at 2353-63 North California Avenue and 2757 West Fullerton Avenue in Chicago in 1985. In 1994, Gonzalo, as the developer, converted the buildings into two condominium associations, one commercial and one residential. The commercial association had 3 units, while the residential association had 10. In December 1994, the Ruizes recorded declarations identifying California Commons Commercial Condominiums (CCC) and California Commons Residential Condominiums (CCR) as the associations for the commercial and residential properties, respectively. (CCR was incorporated; CCC was not.) The Ruizes were the beneficiaries of a land trust that owned the three commercial units.

         ¶ 6 In 2001, CCR was involuntarily dissolved for failing to file annual reports with the Illinois Secretary of State. Rather than reinstate the dissolved association, the Ruizes incorporated the Cal-Full Condominium Association[1] (CFCA). On paper, CFCA served as the association only for the residential condominiums, while CCC served as the association for the commercial units. In practice, however, CFCA acted as an association for both the residential and commercial units in the following ways: (1) there was only one board of directors for both associations, and unit owners voted for directors without distinguishing between the two associations, (2) the associations did not have separate unit owner meetings, (3) the associations shared a budget and bank accounts, (4) the directors collected and commingled assessments from the owners of both the residential and commercial units, and (5) there was one insurance policy for the building.

         ¶ 7 Gonzalo served on the board of directors of CFCA until 2006. In 2007, Maria Arcos, Rachel Owens, and Omar R. Castro (collectively, directors) joined the board of directors and remained on the board until 2014. All three owned residential units in the building.

         ¶ 8 In 2007, the Ruizes altered the first page of the 1994 CCR declaration, which was originally captioned "The California Commons Residential Condominiums" to read "The Cal/Ful Condominiums Association, Residential and Commercial." The Ruizes recorded the 2007 declaration with the recorder of deeds against the commercial units. Significantly, none of the substantive terms of the 1994 CCR declaration were changed; the legal description of the property in the 2007 declaration includes only a description of the residential units. According to the Ruizes, they made this alteration to comply with certain requirements promulgated by the United States Department of Housing and Urban Development, so that it would continue to provide mortgage loans to residential condominium purchasers at the building.

         ¶ 9 Also in 2007, Gonzalo asked Arcos to distribute a notice to all unit owners that referred to the "California Fullerton Condominium Association" as including "13 condominiums of which 10 are residential and 3 are commercial."

         ¶ 10 Based on the 2007 notice and declaration as well as the Ruizes' own representations, the directors managed, controlled, and made expenditures for both the commercial and residential associations between 2007 and 2014. In other words, they believed the association of which they were directors-CFCA-governed both the commercial and residential units.

         ¶ 11 In January 2011, a fire occurred, causing damage to both commercial and residential units in the buildings. As noted supra ¶ 6, both the residential and commercial units shared a single policy of property insurance issued by Travelers Insurance Company of America (Travelers). In February 2012, Travelers provided the directors with an estimate of damages that it would cover for the loss under the policy. That estimate allocated $51, 500 to repair the damages to the common elements of the commercial units. The directors approved the estimate and agreed to settle the claim for that amount. Shortly after the fire, the directors authorized the demolition of the commercial units.

         ¶ 12 This litigation commenced in September 2013, when Gonzalo filed his first complaint against only "Cal-Full Condominium Association, " seeking to compel the production of books and records. In both his first complaint and his verified amended complaint, filed in August 2014, Gonzalo asserted that the "Cal-Full Condominium Association" was governed by the 2007 declaration. It was not until the filing of his second amended complaint in August 2015 that Gonzalo acknowledged that there were two condominium associations, although he continued to maintain that they operated as one ...

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