Kopley Group v. Sheridan Edgewater ( 2007 )

FIFTH DIVISION
September 7, 2007
No. 1-06-1373
KOPLEY GROUP V., L.P., an Illinois Limited Partnership, ) Appeal from the
as Beneficiary Under Chicago Title and Trust Company ) Circuit Court of
Trust No. 1106522, dated November 4, 1998, and THE ) Cook County
KOPLEY GROUP, INC., an Illinois Corporation, )
)
Plaintiffs-Appellants, )
)
v. )
)
SHERIDAN EDGEWATER PROPERTIES, LTD., ) Honorable
VRANAS AND ASSOCIATES, LTD., an Illinois ) Paddy H. McNamara,
Corporation, a/k/a Vranas and Chioros Realty Group, Inc., ) Judge Presiding.
WILLIAM P. VRANAS, Individually, MICHAEL M. )
CHIOROS, Individually, and JOHN P. VRANAS, )
Individually, )
)
Defendants-Appellees. )
JUSTICE GALLAGHER delivered the opinion of the court:
Plaintiffs, Kopley Group V., L.P., an Illinois limited partnership, as beneficiary under
Chicago Title and Trust Company Trust No. 1106522, dated November 4, 1998, and The Kopley
Group, Inc., an Illinois corporation, appeal from an order of the circuit court of Cook County
granting summary judgment in favor of defendants, Sheridan Edgewater Properties, Ltd., Vranas
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& Associates, Ltd., an Illinois corporation, a/k/a Vranas & Chioros Realty Group, Inc., William P.
Vranas, individually, Michael M. Chioros, individually, and John P. Vranas, individually. We
affirm in part, reverse in part, and remand.
BACKGROUND
This case involves the sale and purchase of real property commonly known as 5200 North
Sheridan Road in Chicago (the property) and allegations of misrepresentation, fraud and breach of
contract. The property consists of an eight-story apartment building with 223 dwelling units and
first-floor commercial space. The seller of the property is defendant Sheridan Edgewater
Properties, Ltd. (the Seller).
In 1996, the City of Chicago (the city) had an ordinance requiring routine inspections of
the exterior facade on high-rise buildings (the Chicago facade ordinance). Chicago Municipal
Code §13– 196–35. (eff. January 10, 1996). Reports of such inspections were to be filed with the
city, describing any repair work that was necessary. The Seller had followed that program and
had retained Crest Consulting Engineers, P.C. (Crest), to conduct inspections of the property in
1996 and 1997. Both times, Crest generated an exterior facade report and a descriptive letter to
be attached to the standard city form, the latter of which was entitled “Report on Ongoing
Inspection and Repair Program of Exterior Walls and Enclosures.” Both were stamped
“accepted” and signed by the city.
The report prepared in 1997 (for the 1996 inspection) by Crest was dated May 28, 1997
(the 1997 Crest report). The Seller filed the 1997 Crest report with the city approximately one
month later, on June 25, 1997.
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The report prepared in 1998 (for the 1997 inspection) by Crest was dated March 25, 1998
(the 1998 Crest report). The 1998 Crest report noted, among other things, that shifting brick
lintels were “imminently hazardous.” The Seller undertook these repairs of the “imminently
hazardous” conditions in March 1998. The repairs were performed by Gulf Construction for
substantial sums of money. The Seller filed the 1998 Crest report with the city on November 13,
1998, approximately eight months after the report was originally prepared and after all of the
issues had been addressed. Ten days later, on November 23, 1998, the Seller sent the city a letter
informing it that all conditions noted in the 1998 Crest report had been corrected.
In the spring or early summer of 1998, K. Nicholas Kopley (Mr. Kopley) saw an
advertisement in the Chicago Tribune newspaper for the sale of the property. Mr. Kopley is a
sophisticated owner and purchaser of rental real estate. He first started acquiring residential real
estate in 1992. In 1995, Mr. Kopley formed Kopley Group, Inc., which would serve as general
partner in limited partnerships that owned rental properties. Mr. Kopley serves as president and
principal shareholder of The Kopley Group, Inc.
By 1998, Kopley Group, Inc., was the general partner in four limited partnerships that
owned and managed six separate rental properties. One of the buildings was in excess of four
stories.
After Mr. Kopley saw the advertisement for the property, he contacted a broker who
requested information on the property on Mr. Kopley's behalf. Subsequently, defendant Vranas &
Associates, Ltd. (Vranas & Associates), in its capacity as a real estate broker for Sheridan
Edgewater Properties, Ltd., sent a letter to Mr. Kopley stating that informational materials
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relating to building and financial information regarding the property were available and would be
furnished subject to Mr. Kopley executing a confidentiality agreement. At the time, the other
three defendants, William P. Vranas, Michael M. Chioros, and John P. Vranas, were individual
brokers who also had an ownership interest in the property. Defendant William P. Vranas was
president of the Seller and executed the contract on the Seller's behalf. Defendant John P. Vranas
also acted as a property manager of the property. The real estate brokers shall be referred to
collectively as “the Brokers” or individually by name, where applicable.
On August 12, 1998, Mr. Kopley executed the confidentiality agreement. At some point,
Mr. Kopley toured the property and wanted to buy it. Mr. Kopley made some preliminary calls to
see if there were investors interested in the property.
On or about September 3, 1998, Mr. Kopley made an offer that was not accepted. In late
September 1998, Mr. Kopley learned from his broker that a previously accepted offer might not
be going through. Mr. Kopley resubmitted an offer.
On September 24, 1998, the previous purchaser(s) cancelled their September 14, 1998,
contract because the condition of the premises was not acceptable to them, based upon “their
inspection of the Premises, and their review of the documents and other materials disclosed to
them.”
On October 15, 1998, the parties in the instant case entered into a written real estate sales
contract for the property for a sales price of $7,525,000. Mr. Kopley signed the contract.
Mr. Kopley prepared a confidential private offering memorandum, dated October 20,
1998, to solicit investors in the limited partnership that would be the beneficial owner of the
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property, Kopley Group V., L.P, a plaintiff in this case. The other plaintiff, The Kopley Group,
Inc., is the general partner of Kopley Group V., L.P. We shall refer to both plaintiffs collectively
as “the Buyer,” where applicable. Mr. Kopley, at all times, acted on behalf of the Buyer in the
purchase of the property. The Buyer's initial cash investment in the property was $1,500,000.
Mr. Kopley personally contributed $300,000 of the initial capital.
In the confidential private offering memorandum, the Buyer states as follows: “An
examination of the files and permit files of the Building Department of the City Of Chicago does
not reflect any building code violations other than those cited in Exhibit 'A' of this
Memorandum.”1
At some point prior to closing, in order to obtain financing, The Kopley Group, Inc.,
prepared a “General Property Inspection” report that noted that the “the building was constructed
in 1926" and stated that “the structure is in good condition with no sign of major structural
flaws.”2 The Buyer further represented that there were no outstanding building code violations on
record.
The real estate contract (the contract) contained a rider that was attached and made a part
of the contract. The rider provided, in pertinent part, as follows:
1
None of the parties have discussed the contents of “Exhibit A.”
2
The Buyer's brief does not refer to this report. The report is contained in the record as an
attachment to the Brokers' motion for summary judgment and is referred to by the Sellers here.
The actual date of the inspection, however, is not provided in the Seller's brief or in the document
contained in the record.
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“R-1 SELLER'S REPRESENTATIONS AND WARRANTIES: Seller
represents and warrants:
***
6. To the knowledge of Seller there are no:
***
B. Outstanding unfulfilled requirements or recommendations of any
insurance company or inspection or rating bureau concerning the Premises for any
repair or alteration therefor.
***
R-2 INSPECTION: Purchaser shall have the right to inspect and approve
the Real Estate for the period of fifteen (15) business *** days from and after the
date of execution hereof ('Due Diligence Period'). In the event Purchaser
determines in its sole discretion, the Real Estate and improvements are not
satisfactory, Purchaser shall have the right to terminate this Agreement by serving
written notice of termination on Seller on or before the expiration of the Due
Diligence Period. If Purchaser does not terminate this Agreement pursuant to this
paragraph, Purchaser will be deemed to have waived any objections to the Real
Estate and improvements and this Agreement shall continue in full force and effect.
If Purchaser terminates this Agreement pursuant to this paragraph, the earnest
money shall be returned to Purchaser.
Purchaser agrees that it will be acquiring the property and improvements
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AS IS and that the Purchaser's sole remedy relative to the condition of the
premises, environmental matters and structural matters are [sic] set forth in Rider
R-2 and R-3 herein. All other warranties, expressed and implied are disclaimed.
R-3 ENVIRONMENTAL and STRUCTURAL: Purchaser shall within
twenty (20) business days of this Agreement complete and approve all
environmental and structural reports at Purchaser's sole cost and expense. In the
event Purchaser determines that the structural or environmental report is not
acceptable then this Agreement shall be null and void and all earnest monies shall
be returned to Purchaser.
***
R-6 FINANCIAL INFORMATION: Seller agrees to furnish financial
information on the property for the last three years and current year, current leases
and any other documents Purchaser may reasonably require to perform its Due
Diligence.”
The contract and the rider were both drafted by the Buyer's attorney.
The Buyer, whose first bid had been rejected, was aware that the Sellers had entered into
an earlier sales contract with another entity and that it did not close. The Buyer asked why the
prior deal had fallen through. Defendant-broker Michael M. Chioros (Chioros), who was senior
vice president of Vranas & Associates, answered that the previous buyer had attempted to
renegotiate the entire contract. In his affidavit dated September 20, 2005, Mr. Kopley stated that
Chioros “never mentioned that the deal was terminated by the buyer because the conditions at the
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building were unacceptable to the buyer.” Earlier, however, at his deposition on May 20, 2004,
Mr. Kopley had testified that Chioros had told him that the sewer work and tuckpointing were
items that he recalled were an issue with the previous buyer. Moreover, on October 23, 1998,
pursuant to its due diligence review, the Buyer sent a letter to Chioros. In the letter, the Buyers
requested, among other things, “existing building code violation[s],” “any available engineering
reports/studies,” and “Bid/Estimates for work scheduled or performed regarding a)sewer repairs
[and] b) facade/tuckpointing.” Thus, it appears that the Buyers made some of these requests in
response to Chioros' representations that facade problems existed at the Property that were being
corrected. The Buyer's attorney, however, later testified that he was told by Chioros that the
exterior problems were minor.
The Buyer obtained extensions of time to complete its due diligence. The Buyer sent
letters requesting extensions on November 3 and November 6, 1998. The November 3 request
was made to allow the Buyer to, among other things, review the engineering report regarding
tuckpointing and the facade and to confirm completion of all exterior work. The November 6
letter requested an additional 14 days, up to and including November 17, 1998, for the
environmental contingency, as well as “confirmation of completion of the sewer work and the
scheduled tuckpointing/facade work.” Mr. Kopley, however, later admitted that he requested the
extension for the actual purpose of obtaining additional time to acquire financing. The Buyer
apparently did not have the building inspected by an architect or engineer at that time. As noted
earlier: (1) during this period, the Seller filed the 1998 Crest report with the city on November 13,
1998, and (2) 10 days later, on November 23, 1998, the Seller sent the city a letter informing it
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that all conditions noted in the 1998 Crest report had been corrected.
Although it is undisputed that the 1998 Crest report was referred to in the November 23,
1998, letter that the Seller sent to the city, the Buyer has asserted that this date was after the
Buyer's due diligence period had expired. In any event, in its letter to the city, the Sellers stated
that all conditions noted in the 1998 Crest report had been corrected.
Apparently, the Seller referred to the engineering report in materials sent to the Buyer, but
the Buyer contends that it thought the reference was to a different document, namely, a quote of
$4,300 for labor and materials from Stamatiou Construction Company, dated October 6, 1998
(Stamatiou quote). The Stamatiou quote calls for the repair of eight items, including:
“East elevation cracked vertical patch masonry
Vertical crack in masonry east elevation
Spiral in limestone accent band
Crack in limestone ledge in northwest corner
Vertical crack in limestone accent band
Cracked limestone and cracked patches
Shifted brick lintel
Loose duct work on north elevation.”
It is undisputed that the Buyer received a copy of the Stamatiou quote.
Significantly, the items that needed work according to the 1998 Crest report were the
same items listed in the Stamatiou quote. Moreover, the defects for which the Buyer was cited by
the city involved the walls of the property bowing away from the frame of the building; defects
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that were not present in either the 1997 or 1998 Crest report.
The parties agree, however, that it is disputed whether the 1998 Crest report was sent. It
is undisputed that the Seller had included a Crest report as an attachment in the real estate
contract involving the earlier deal that had fallen through, although it is unclear whether the 1997
Crest report or the 1998 Crest report or both were attached. The transaction between the parties
closed on February 12, 1999.
The Buyer, which alleges that it was unaware of the Chicago facade ordinance, did not
have the building inspected in 1999, nor in 2000, and did not provide the city with the required
reports. In 2001, the Buyer was informed by the city that it had not submitted an inspection
report for 1999 and was cited by the city with building violations relating to structural defects at
the property. The defects involved the walls of the property bowing away from the frame of the
building; defects that were not present in either the 1997 or 1998 Crest report. The Buyer
subsequently hired an architect, Klaus Koch, of Scheckerman Koch, in 2001 to carry out a city
inspection. Koch performed an inspection “from afar,” which means he used binoculars or
visually inspected the property from street level. Koch issued a report saying the “building was
safe with a repair and maintenance program.” The report included facade sketches indicating
areas that needed to be repaired. Mr. Kopley testified that the Buyer did not do the repairs at the
time and chose to wait until a critical examination was due in 2002.3
3
As defendants note, the failure to submit the annual report when due triggers the
requirement that a critical examination report be filed within six months of the due date of the
missing report. Chicago Municipal Code §13–196–035 (eff. January 10, 1996).
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In the spring of 2002, the Buyer hired a contractor to begin to do some of the work
identified by Koch in his report and to begin the critical examination. In July 2002, the Buyer
received a “stop work” order from the city because it was doing the work without a permit.
The Buyer, in December 2002 or January 2003, hired a licensed architect and engineer,
Tim Thompson of Construction Resource, Inc., to perform inspections. Thompson prepared a
portion of the 2003 critical report. Thompson later testified that, although he noticed some
similar types of problems in 2003, he could not say if they were the same areas that were repaired
in 1998. He did not know when the conditions he reported in his 2003 critical report first became
visibly obvious and was not sure if they would have been visible in 1998. The alleged problem
with the inner wall was not detectable in 2003 until a portion of the brick was removed and the
wall was opened. Thompson testified that it was the type of problem that happens over time, as
the result of metal corroding. Thompson also testified that he found evidence that the facade had
been repaired in various places over the past 10 years.
In 2003, the Buyer retained Wiss Janney to complete the critical examination. Wiss
Janney found no imminently hazardous conditions. The Buyer ultimately repaired the building in
2003.
On May 27, 2003, the Buyers filed a five-count complaint. Count I alleged breach of
contract against the Seller. Count II alleged fraudulent misrepresentation against the Seller and
the Brokers. Count III alleged negligent misrepresentation against the Seller and the Brokers.
Count IV alleged violations of the Real Estate License Act of 1983 (225 ILCS 454/1 et seq.
(West 1996)) against the Brokers. Count V alleged violations of the Consumer Fraud and
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Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2002)) against the Seller and the
Brokers. On December 1, 2005, the trial court granted summary judgment in favor of defendants
on all counts. The trial court subsequently denied the Buyer's motion for reconsideration. This
appeal followed.
ANALYSIS
Our standard of review of an order granting summary judgment is de novo. Horwitz v.
Holabird & Root, 212 Ill. 2d 1, 8, 816 N.E.2d 272, 276 (2004). Although a plaintiff is not
required to prove its case at summary judgment stage, it nonetheless must present a factual basis
that would arguably entitle it to judgment in its favor. Connor v. Merrill Lynch Realty, Inc., 220
Ill. App. 3d 522, 528, 581 N.E.2d 196, 200 (1991). Summary judgment is properly granted where
the pleadings, depositions, admissions, affidavits and exhibits on file, when viewed in the light
most favorable to the nonmoving party, show that there is no genuine issue of material fact and
that the movant is entitled to judgment as a matter of law. Petrovich v. Share Health Plan of
Illinois, Inc., 188 Ill. 2d 17, 30-31, 719 N.E.2d 756, 764 (1999). Although summary judgment
can aid in the expeditious disposition of a lawsuit, it is a drastic measure and should be allowed
only “ 'when the right of the moving party is clear and free from doubt.' ” Morris v. Margulis, 197
Ill. 2d 28, 35, 754 N.E.2d 314, 318 (2001), quoting Purtill v. Hess, 111 Ill. 2d 229, 240, 489
N.E.2d 867, 871 (1986). Applying this standard of review, we shall address each count of the
Buyer's complaint.
Count I. Breach of Contract
The construction, interpretation, or legal effect of a contract presents a question of law
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that we review de novo. Avery v. State Farm Mutual Automobile Insurance Co., 216 Ill. 2d 100,
129, 835 N.E.2d 801, 821 (2005). To succeed on a claim for breach of contract, a plaintiff must
plead and prove the existence of a contract, the performance of its conditions by the plaintiff, a
breach by the defendant, and damages as a result of the breach. Associated Underwriters of
America Agency, Inc. v. McCarthy, 356 Ill. App. 3d 1010, 1019, 826 N.E.2d 1160, 1168 (2005).
While this court need not defer to the trial court's decision, we agree with the trial court's analysis
here. The trial court correctly concluded that any damages sustained by the Buyers were not
caused by any alleged breach of the Seller.
The Buyer first contended that the Seller breached the contract by failing to provide a
copy of the 1998 Crest report. As the trial court correctly noted, nowhere within the agreement
did the Seller agree to provide that report. The contract is silent as to the Seller's production of
engineering reports. The only provision in the contract that deals with the Seller's production of
documents is R-6 and concerns “Financial Information,” not engineering reports.
Assuming arguendo that the failure to provide the 1998 Crest report constituted a breach,
any damages sustained by the Buyer were not the result of its not receiving that report. Although
the 1998 Crest report noted that shifted brick lintels could be considered imminently hazardous,
the report further noted that Crest “found the exterior masonry to be in good condition.” There is
nothing in the 1998 Crest report that would inform either the Buyer or the Seller of the repairs for
which the Buyer now seeks damages.
As the trial court correctly noted, nothing in the 1998 Crest report “informed [the Seller]
of the major structural issue.” The Buyer claims, however, that the real problem was underneath
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the facade and the connection between the facade and the building's main structure was bad. The
Buyer asserts that the Seller was aware of that problem because the Crest report told of shifted
lintels. But the Buyer was also aware of the shifted brick lintel because the need for the repair of
that condition was one of the eight contained in the Stamatiou quote, a copy of which the Buyer
undisputedly did receive.
Moreover, as the Seller points out, Crest merely “conducted a visual examination of the
exterior facade.” Crest “reviewed the building from the roof, the court yards and the surrounding
grounds.” Therefore, the Buyer could have learned every fact contained in the 1998 Crest report
by simply looking at the building.
Indeed, Mr. Kopley looked at the building several times. If the building had shifted lintels,
they were open and obvious for any architect or engineer to observe. Nonetheless, the Buyer
admits it “did not have the building inspected by an architect or engineer at the time.”
The Buyer has also alleged that the Seller breached the contract by “transferring the
property to the buyer with known structural defects and imminently hazardous conditions.”
Again, as the trial court correctly noted, “nowhere within the agreement does the Seller warrant
that there are no known structural defects and/or imminently hazardous conditions.” To the
contrary,
Provision R-2 provides, in relevant part:
“Purchaser agrees that it will be acquiring the property and improvements
AS IS and that the Purchaser's sole remedy relative to the condition of the
premises, environmental matters and structural matters are [sic] set forth in Rider
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R-2 and R-3 herein. All other warranties, expressed and implied are disclaimed.”
This provision reveals that the Seller explicitly disclaimed any warranties with respect to the
structural condition of the property.
The Buyer also attempts to rely on another section of the agreement to support its breach
of contract claim. Provision R-1 (6)(B) of the contract provides that: “To the knowledge of
Seller there are no * * * [o]utstanding unfulfilled requirements or recommendations of any * * *
inspection or rating bureau concerning the Premises for any repair[.]” Again, as the trial court
correctly noted, the only evidence provided by the Buyer regarding any outstanding
recommendations concerning the property that were not completed is the 1998 Crest report,
which found “a few areas of wall distress in need of repair.” The Buyer has not alleged that the
failure to repair “a few areas of wall distress” caused the damages of which it complains. The
Buyer's attorney stated that it is his belief that these specific items were indeed repaired by
Stamatiou.
Notably, the contract provides that the Seller “agrees that it will be acquiring the property
and improvement AS IS.” This court has explained that “[t]he term 'as is' is generally understood
to mean that the buyer is purchasing goods in their present condition with whatever faults they
may possess.” Pelc v. Simmons, 249 Ill. App. 3d 852, 856, 620 N.E.2d 12, 14 (1993); Lake
Bluff Heating & Air Conditioning Supply, Inc. v. Harris Trust & Savings Bank, 117 Ill. App. 3d
284, 292, 452 N.E.2d 1361, 1367 (1983). The term “as is” is similar to terms such as “with all
faults” or “in its present condition” and implies that the seller is relieved of any further obligation
to reimburse for loss or damage because of the condition of the goods. Pelc v. Simmons, 249 Ill.
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App. 3d at 856, 620 N.E.2d at 14; Lake Bluff Heating & Air Conditioning Supply, Inc. v. Harris
Trust & Savings Bank, 117 Ill. App. 3d at 292, 452 N.E.2d at 1367. Contracts for the sale of
real property often contain an “as is” provision. See, e.g., Van Gessel v. Folds, 210 Ill. App. 3d
403, 569 N.E.2d 141 (1991); Lake Bluff Heating & Air Conditioning Supply, Inc. v. Harris Trust
& Savings Bank, 117 Ill. App. 3d 284, 452 N.E.2d 1361 (1983); Schoeneweis v. Herrin, 110 Ill.
App. 3d 800, 443 N.E.2d 36 (1982); Century Display Manufacturing Corp. v. D. R. Wager
Construction Co., 71 Ill. 2d 428, 376 N.E.2d 993 (1978). As with the sale of other goods, when
a real estate contract contains an “as is” provision, it means that the purchaser agrees to take the
property in its existing condition with whatever faults it may possess and implies that the seller is
relieved of any further obligation to reimburse for loss or damage because of the property's
condition.
The Buyer knew it was purchasing an older building to which facade work had been done
in the past. The Buyer was given unfettered freedom to inspect any portion of the building. The
Buyer was even given additional time to do so on the stated grounds that more time was needed
for inspection, i.e., to “ review the engineering report regarding tuckpointing and the facade and
to confirm completion of all exterior work” and again for “confirmation of completion of the
sewer work and the scheduled tuckpointing/facade work.”
An “as is” provision in a real estate contract is controlling so long as it was both expected
and bargained for. Van Gessel v. Folds, 210 Ill. App. 3d 403, 569 N.E.2d 141 (1991). That was
the case here. Thus, we agree with the Seller that the Buyer's breach of contract claim fails as a
matter of law because of the presence of the “AS IS” provision in the contract. The trial court
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correctly granted summary judgment in favor of defendants on count I.
Counts II and III: Fraudulent and Negligent Misrepresentation
The Buyer also alleged that all defendants either negligently or fraudulently misrepresented
the structural condition of the building. The Buyer alleged both commission and omission, i.e.,
affirmative misrepresentation and misrepresentation by concealment.
The elements for negligent misrepresentation and fraudulent misrepresentation that a
plaintiff must plead and prove are quite similar. Board of Education of the City of Chicago v. A,
C & S, Inc., 131 Ill. 2d 428, 452, 546 N.E.2d 580, 591 (1989). The Illinois Supreme Court has
“formulated the elements in a fraudulent misrepresentation as: (1) a false statement of material
fact, (2) knowledge or belief of the falsity by the party making it, (3) intention to induce the other
party to act, (4) action by the other party in reliance on the truth of the statements, and (5)
damage to the other party resulting from such reliance.” A, C & S, Inc., 131 Ill. 2d at 452, 546
N.E.2d at 591; see also Soules v. General Motors Corp., 79 Ill. 2d 282, 286, 402 N.E.2d 599,
601 (1980).
Negligent misrepresentation has essentially the same elements as fraudulent
misrepresentation, with the exception of the defendant's mental state. A, C & S, Inc., 131 Ill. 2d
at 452, 546 N.E.2d at 591. The difference is that, in the case of negligent misrepresentation, the
defendant need not know that the statement is false. A, C & S, Inc., 131 Ill. 2d at 452, 546
N.E.2d at 591. That is, the defendant's own carelessness or negligence in ascertaining the truth of
the statement will suffice for a cause of action. A, C & S, Inc., 131 Ill. 2d at 452, 546 N.E.2d at
591. Nonetheless, in negligent misrepresentation actions, a successful plaintiff must plead and
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prove that the defendant owes a duty to the plaintiff to communicate accurate information. A, C &
S, Inc., 131 Ill. 2d at 452, 546 N.E.2d at 591; see also Lyons v. Christ Episcopal Church, 71 Ill.
App. 3d 257, 389 N.E.2d 623 (1979) (holding that a seller's real estate broker has no duty to a
prospective buyer to independently substantiate the seller's representations unless the real estate
broker is aware of facts indicating that a seller's representation is false). We believe that the
Buyer here cannot prove negligent misrepresentation on the part of defendants, under the facts of
the instant case, involving a sophisticated real estate purchaser and a real estate contract
containing, among other things, an “AS IS” provision, because the Buyer has failed to show that
defendants had a duty to the Buyer.
As to intentional misrepresentation, the Buyer contends that defendants intentionally
concealed the 1998 Crest report because it contained an opinion that the shifting lintels were
“imminently hazardous.” The Buyer asserts that the statement that the shifting lintels were
imminently hazardous would have caught the attention of any buyer regardless of its engineering
expertise. But, as we have already noted, the Buyer was aware of the shifting lintels. It is
undisputed that the Sellers provided the Stamatiou quote regarding repair of the shifting lintels.
In any event, in both negligent and fraudulent misrepresentation cases, the reliance by the
plaintiff must be justified, i. e., he must have had a right to rely. Soules v. General Motors Corp.,
79 Ill. 2d 282, 286, 402 N.E.2d 599, 601 (1980); see also Neptuno Treuhand-Und
Verwaltungsgesellschaft Mbh v. Arbor, 295 Ill. App. 3d 567, 575, 692 N.E.2d 812, 818 (1998)
(“no recovery for fraudulent misrepresentation, fraudulent concealment or negligent
misrepresentation is possible unless plaintiffs can prove justifiable reliance, i.e., that any reliance
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was reasonable). The trial court concluded that any reliance on the part of the Buyer under the
facts of the instant case was not justified. We agree.
Although the question of whether a plaintiff's reliance was reasonable is usually a question
of fact, where it is apparent from the undisputed facts that only one conclusion can be drawn, the
question becomes one for the court. Doe v. Dilling, 371 Ill. App. 3d 151, 174, 861 N.E.2d 1052,
1070 (2006); see also Neptuno, 295 Ill. App. 3d at 575, 692 N.E.2d 812, 819. In order to
determine whether there was justifiable reliance on the part of a plaintiff, “it is necessary to
consider all of the facts within a plaintiff's actual knowledge as well as those that he could have
discovered by the exercise of ordinary prudence.” Neptuno, 295 Ill. App. 3d at 575, 692 N.E.2d
at 818. “ '[A] person may not enter into a transaction with his eyes closed to available
information and then charge that he has been deceived by another.' [Citation.]. ” D.S.A Finance
Corp. v. County of Cook, 345 Ill. App. 3d 554, 561, 801 N.E.2d 1075, 1081 (2003). “If ample
opportunity existed to discover the truth, then reliance is not justified.” Neptuno, 295 Ill. App. 3d
at 575, 692 N.E.2d at 818; accord Doe v. Dilling, 371 Ill. App. 3d at 174, 861 N.E.2d at 1070. If
a plaintiff's reliance is unreasonable in light of the information available, the loss is considered the
plaintiff's own responsibility. D.S.A Finance Corp., 345 Ill. App. 3d at 561, 801 N.E.2d at 1081.
As the Illinois Supreme Court long ago explained:
“The rule is well established that a party is not justified in relying on
representations made when he has ample opportunity to ascertain the truth of the
representations before he acts. When he is afforded the opportunity of knowing the
truth of the representations he is chargeable with knowledge; and if he does not
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avail himself of the means of knowledge open to him he cannot be heard to say he
was deceived by misrepresentations.” Schmidt v. Landfield, 20 Ill. 2d 89, 94, 169
N.E.2d 229, 232 (1960).
In the instant case, the material facts are admitted by the Buyer. The Buyer agreed to take the
property “AS IS.” Indeed, the Buyer specifically took upon itself the obligation of assessing the
structural integrity of the property.” Moreover, Mr. Kopley even admitted that under the
pretense of needing more time to conduct inspections, the Buyer obtained additional time while
never intending to conduct inspections. Thus, the Buyer had ample opportunity to discover
whether the building was in good condition or whether it had major structural flaws.4
The Buyer also cites to a statement by defendants that the prior offer on the property did
not go through because of minor tuckpointing issues. Again, there is no evidence that this
statement was erroneous. As to Chioros' statement to the Buyer's attorney that the Buyer would
not have any problems with the building, this statement is not a statement of fact but, rather, an
opinion. Chioros additionally made a general comment that “you realize that it is an older
building, and there's always things to take care of.”
4
It is not absolutely clear whether the Buyer ever did conduct an actual inspection before
closing on the property. As noted earlier, in order to obtain financing, at some point prior to
closing, the Buyer did prepare a “General Property Inspection” report. In any event, because the
Buyer did an inspection or represented that it did one, the Buyer knew or should have known, by
February 12, 1999, the condition of the building as well as the matters appearing in the public
records.
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In sum, the trial court correctly concluded that the Buyer cannot prove reasonable
reliance. Thus, the trial court properly granted summary judgment in favor of defendants on
counts II and III of the Buyer's complaint.
Count IV: Statutory Violation of Real Estate License Act of 1983
The Buyer alleged in count IV of its complaint that the Brokers violated the Real Estate
License Act of 1983 (225 ILCS 455/1 et seq. (West 1996)).5 The trial court granted summary
judgment in favor of the Brokers based on the statute of limitations.
What is before this court on review is the circuit court's judgment, not the reasoning the
court employed. Canada Life Assurance Co. v. Salwan, 353 Ill. App. 3d 74, 79, 817 N.E.2d
1021, 1026 (2004). “As a reviewing court, we can sustain the decision of the circuit court on any
grounds that are called for by the record regardless of whether the circuit court relied on the
grounds and regardless of whether the circuit court's reasoning was sound.” Canada Life
Assurance Co., 353 Ill. App. 3d at 79, 817 N.E.2d at 1026.
As this court has noted, the legislature amended the Real Estate License Act of 1983,
effective January 1, 1986, to provide that “ '[n]othing in this Act shall be construed to grant to any
person a private right of action for damages or to enforce the provisions of this Act or the rules
and regulations issued under this Act.' [Citation.] ” Stefani v. Baird & Warner, Inc., 157 Ill. App.
3d 167, 174, 510 N.E.2d 65, 70 (1987) (holding that potential purchasers' alleged cause of action
pursuant to the Real Estate License Act was barred and properly dismissed). We do note,
however, that the legislature subsequently enacted Public Act 91-245, effective December 31,
5
This is the version of the statute that was in effect at the time.
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1999, which restored the private right of action. Pub. Act 91-245, Art, 15, §15-5, eff. December
31, 1999 (codified at 225 ILCS 454/15-5 (West 2000)).6 We conclude that, in the present case,
summary judgment was properly granted in the Brokers' favor as to count IV because the Real
Estate License Act that was in effect during the relevant time period did not provide for a private
right of action.
Count V: Violation of Consumer Fraud Act
Count V of the Buyer's complaint alleged violations of the Consumer Fraud and
Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 2002)) (the Consumer Fraud
Act). The trial court granted summary judgment to defendants on count V based upon its being
time barred.
The statute of limitations for an action under the Consumer Fraud Act is three years and
begins to run when the cause of action accrues. 815 ILCS 505/10a(e) (West 2002). A cause of
action not filed within the statute of limitations is time barred. 815 ILCS 505/10a(e) (West 2002).
As the trial court noted, the Buyer completed the closing on the sale transaction for the property
on February 12, 1999, yet did not file its complaint until May 2003, which was after the expiration
6
Section 15-5(c) of the Real Estate License Act of 2000 now provides as follows:
“(c) This Article 15 may serve as a basis for private rights of action and defenses by
sellers, buyers, landlords, tenants, real estate brokers, and real estate salespersons. The private
rights of action, however, do not extend to the provisions of any other Articles of this Act.” 225
ILCS 454/15–5 (West 2000).
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of the three-year time period. Thus, the complaint was time barred.
The Buyer argues, however, that its cause of action did not accrue until the concealment
of the defects of the property was discovered, allegedly in January 2003, and, therefore, the
limitations period was tolled by the discovery rule. The discovery rule applies to actions brought
under the Consumer Fraud Act. See Hermitage Corp. v. Contractors Adjustment Co., 166 Ill. 2d
72, 79, 651 N.E.2d 1132, 1136 (1995). The court trial rejected the Buyer's argument and
concluded that, had the Buyer exercised reasonable diligence in completing the required property
inspection in 1999, it would have discovered the construction defect (assuming the defects existed
at the time).
The Illinois Supreme Court has explained the discovery rule, along with the requirement
of diligent inquiry, as follows:
“The statute starts to run when a person knows or reasonably should know of his
injury and also knows or reasonably should know that it was wrongfully caused. At
that point the burden is upon the injured person to inquire further as to the
existence of a cause of action.” (Emphasis added.) Witherell v. Weimer, 85 Ill. 2d
146, 156, 421 N.E.2d 869, 874 (1981).
Accord Knox College v. Celotex Corp., 88 Ill. 2d 407, 416, 430 N.E.2d 976, 980 (1981).
The trial court in the instant case decided that the point at which the requirement of diligent
inquiry occurred was a point sooner than the point where the Buyer here allegedly knew of the
injury. In essence, the trial court decided that had the Buyer exercised reasonable diligence, in the
first instance, in 1999, by complying with Chicago facade ordinance that required property
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inspections, the Buyer would have known of its injury in 1999.7 Thus, the trial court decided that
the Buyer should have known of the injury in 1999 (assuming arguendo that the structural defects
discovered in 2003 actually existed in 1999).
As the Buyer notes, there is no authority for the proposition that a plaintiff's failure to
comply with an ordinance automatically means that the plaintiff is bound by whatever knowledge
might have been learned from such compliance. We have not located a case defining the phrase
“should have known” as being equivalent to the situation where a person would have known or
could have known had he made diligent inquiry. While the Buyer should have complied with the
law in 1999 and had the building inspected, the fact remains that the Buyer did not. The
allegation remains that the Buyer did not have knowledge of the injury until 2003. Thus, the
Buyer had not yet reached the point discussed in Witherell whereby it was required to “inquire
further as to the existence of a cause of action.” We conclude that the trial court erred in granting
summary judgment on count V on the basis that it was time barred. We express no opinion on
whether summary judgment may be appropriate on other grounds, as those issues were not
decided by the trial court and were not presented in this appeal.
The Buyer also contends that the trial court erred in denying its motion for
reconsideration. We disagree. The Buyer does not dispute that it raised new matters in its
7
Again, this presumes that the defect was present in 1999, an allegation the Buyer must
still prove in order to succeed on the merits. Indeed, although it is the 1998 Crest report that the
Buyer alleges proves defendants' knowledge of said defects, this report does not mention the
major structural defects of which the Buyer now complains.
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motion for reconsideration. As this court recently explained: “Where new issues are raised for the
first time in a motion to reconsider or supplement thereto, and where there is a reasonable
explanation for why the additional issues were not raised at the original hearing, the trial court
has the discretion to address them.” (Emphasis added.) O'Casek v. Childrens Home & Aid Society
of Illinois, No. 4–06–0344, slip op. at 12 (June 25, 2007), 8 citing Delgatto v. Brandon
Associates, Ltd., 131 Ill. 2d 183, 195, 545 N.E.2d 689, 695 (1989). The Buyer asserts that “in
order to confront what [it] believed were new issues, [the Buyer] attached affidavits.
Defendants responded to the Buyer's motion for reconsideration and convinced the trial
court that the Buyer's motion did not meet the standard for reconsideration. Defendants noted
that the Buyer was not attempting to bring to the trial court's attention newly discovered evidence
that was unavailable at the time of the original hearing or changes in existing law or purported
errors in the application of the law by the court. The Buyer has failed to convince this court that
the trial court abused its discretion in deciding not to consider the additional evidence, which was
not “newly discovered” evidence. The Buyer has failed to show that the trial court erroneously
denied the motion to reconsider.
In accordance with the foregoing, we affirm the judgment of the circuit court of Cook
County granting summary judgment in favor of defendants on counts I, II, III, and IV of plaintiff's
complaint. We reverse the judgment of the circuit court of Cook County granting summary
judgment in favor of defendants as to count V. We remand this matter to the trial court for
further proceedings consistent with this opinion.
8
We granted the Buyer's motion for leave to cite O'Casek as additional authority.
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Affirmed in part and reversed in part; cause remanded.
O'BRIEN and O'MARA FROSSARD, JJ., concur.
26