Alliance Prop. Mgmt., Ltd. v. Forest Villa of Countryside Condo. Ass'n

• Decision Date: 24 December 2015
• Docket Number: No. 1–15–0169.,1–15–0169.
• Citation: 47 N.E.3d 1142
• Parties: ALLIANCE PROPERTY MANAGEMENT, LTD., an Illinois Corporation, Plaintiff–Appellant, v. FOREST VILLA OF COUNTRYSIDE CONDOMINIUM ASSOCIATION, an Illinois Not–For–Profit Corporation, Defendant–Appellee.
• Court: United States Appellate Court of Illinois

47 N.E.3d 1142

ALLIANCE PROPERTY MANAGEMENT, LTD., an Illinois Corporation, Plaintiff–Appellant

v.FOREST VILLA OF COUNTRYSIDE CONDOMINIUM ASSOCIATION, an Illinois Not–For–Profit Corporation, Defendant–Appellee.

No. 1–15–0169.

Appellate Court of Illinois, First District, Fourth Division.

Dec. 24, 2015.

Andrea Hoeflich, of Law Office of Andrea Hoeflich, Woodridge, for appellant.

Gabriella R. Comstock, of Keough & Moody, P.C., Naperville, for appellee.

OPINION

Justice COBBS

delivered the judgment of the court, with opinion.

¶ 1 Following a bench trial, plaintiff Alliance Property Management (Alliance) appeals the July 31, 2014, order entered by the circuit court of Cook County, which denied Alliance's breach of contract claim. The trial court found that defendant Forest Villa of Countryside Condominium Association (Forest Villa) lacked authority to enter into the contract and therefore it was void. On appeal, Alliance argues that the trial court erred in “rescinding” the contract as a void agreement¹ because the error in its formation was a mutual mistake of fact, which rendered it voidable, not void. Alliance further contends that the contract is enforceable because defendant ratified the contract. In addition, Alliance asserts that defendant waived compliance of its governing documents; liquidated damages are not unjust enrichment; and defendant improperly terminated the agreement. For the following reasons, we affirm the judgment of the circuit court.

¶ 2 BACKGROUND

¶ 3 Forest Villa is a condominium association and not-for-profit corporation located in Countryside, Illinois. It was established pursuant to the Illinois Condominium Property Act (765 ILCS 605/1 et seq.

(West 2012)) and the General Not for Profit Corporation Act of 1986 (805 ILCS 105/101.01 (West 2012) ). The Declaration of Condominium Ownership and the bylaws were recorded with the Cook County recorder of deeds on December 15, 1999. Among other provisions regarding the administration of Forest Villa, the bylaws contain a provision which states that the board of directors (Board) has the power “[t]o engage the services of a manager or managing agent who shall manage and operate the Property and the Common Elements thereof, upon such terms and for such compensation and with such authority as the Board may approve provided, that no management agreement may run for a period of beyond two years.”

¶ 4 Alliance is a real estate management company owned and operated by Chris Skourlis, a licensed professional property manager. Skourlis has managed condominiums for more than 20 years and at the time this action was commenced, Alliance managed approximately 30 buildings.

¶ 5 On May 27, 2008, Forest Villa, through its Board, entered into a 36–month “Condominium Association Management Agreement” (Agreement) with Alliance. The Agreement was to run from July 15, 2008, to July 15, 2011, and was signed by the officers of Forest Villa's Board at that time: Richard Bartz (president), Margaret Peterson (secretary) and, Lynne Mazzone (treasurer). In the Agreement, the board purported to have full authority to act on behalf of the association and hire Alliance. It provides, “[i]n consideration of the mutual terms, covenants, and conditions set forth herein below, the Board of Directors, having full authority and acting on behalf of the Association, hereby appoints [Alliance] as its, agent, and [Alliance] hereby accepts that appointment in mutual agreement.”

¶ 6 Under the Agreement, Forest Villa would compensate Alliance for management services for the condominium. In addition to the day-to-day management of the building, Alliance was to prepare financial reports, organize general association meetings, oversee Board elections, and perform periodic inspections of the property. The Agreement further provided that Alliance would “guide and assist the Board Members in their fiduciary duties and obligations” and “[a]ssist in the administration of the provisions of the Declaration, Articles of Incorporation, By-laws, Rules and Regulations and policies of the Association.” Additionally, Alliance expressly assumed a fiduciary relationship with Forest Villa. The Agreement states:

“[Alliance] accepts the relationship of trust and confidence established between itself, the Board of Directors, and the Association by virtue of entering in this Agreement. [Alliance] covenants to furnish its best skill and judgment and to cooperate in furthering the interests of the Association.

[Alliance] agrees to furnish efficient business administration and supervision and to perform its responsibilities, both administrative and advisory, in the best and soundest manner consistent with the best interests of the Association Members and at the direction of the Board for the Association.”

¶ 7 The Agreement contained an automatic renewal provision whereby the contract would be renewed “for identical periods of time unless on or before sixty [60] days prior to the expiration of the initial term or any renewal period either party shall notify the other in writing that it elects to terminate this agreement.” In the event of a material breach by Alliance, Forest Villa could terminate the contract; however, it must provide written notice and allow Alliance 60 days to remedy the breach prior to termination. If these procedures are not followed, Forest Villa would be responsible for liquidated damages in the amount of the management fees for the remaining portion of the contract, which would be immediately due.

¶ 8 On March 2, 2010, prior to the Agreement's automatic renewal, Forest Villa renewed the contract and extended its terms to July 14, 2014. None of the contract terms were changed. Forest Villa's officers at that time, Bartz, Mazzone, and Mary Ann Mobley (treasurer), signed on behalf of Forest Villa and Skourlis signed on behalf of Alliance.

¶ 9 On July 27, 2011, just 13 days into the extended term, Forest Villa sent Alliance a letter informing it of material breaches to the contract. Alliance did not respond to the letter until September 19, 2011, at which time it requested a Bill of Particulars.

¶ 10 Forest Villa did not send additional evidence of the breaches to Alliance. Instead, it informed Alliance that it was terminating the contract as of October 31, 2011, because Alliance did not make an effort to cure the breaches. Subsequently, Forest Villa sent Alliance a letter explaining that it hired a different management company, which would start management on November 1, 2011.

¶ 11 Alliance filed a complaint against Forest Villa on January 23, 2012. It alleged that Forest Villa breached the Agreement when it terminated the contract without following one of the two cancellation procedures detailed in the Agreement. Specifically, Alliance contended that Forest Villa did not provide evidence of material breaches and did not allow Alliance 60 days to cure any breach before termination or notify it 60 days prior to a renewal period that it would terminate the contract. Forest Villa filed an answer and alleged five affirmative defenses, including that the contract was void ab initio, based on misrepresentation, and that it was unconscionable. In addition it alleged that there was a unilateral mistake of fact and, in the alternative, that there was a mutual mistake of fact.

¶ 12 The case proceeded to a bench trial at which several witnesses testified, including Jerome Miceli and Charles Plaia, both officers of Forest Villa at the time of trial, and Richard Bartz and Lynne Mazzone, both officers who signed the initial contract and the renewal. Skourlis, the owner of Alliance, also testified. Margaret Peterson, an officer who signed the initial Agreement, passed away prior to trial, however, her discovery deposition was admitted into evidence.

¶ 13 In her deposition, Margaret Peterson testified that she was employed as an accounting manager for the American Physicians Institute. At the time of the deposition, she was the treasurer for Forest Villa's Board. Prior to March 2013, she had been the Board's secretary from March 2011 to March 2013 and had been a Board member since 2008. She was on the board when the initial Agreement was signed, but not when it was renewed on March 2, 2010. She testified that she was not aware of the bylaws when she signed the initial Agreement for 36 months.

¶ 14 Miceli testified that he is a unit owner and worked for a trucking company in sales before he retired. He became a member of the Board in 2010. He testified that he did not review the Agreement when he joined the Board. He further testified that although he had seen the declaration, he was “not really” familiar with it or necessarily aware of all the terms of the declaration, the bylaws, the rules, or the Agreement. Miceli stated that he expected Alliance to guide him in making decisions. Charles Plaia, the Board's president at the time of trial, also testified. Plaia was retired, but had been a truck driver and warehouse employee prior to retirement. He became a Board member in March 2011, thus, he was not on the Board when the initial Agreement was executed or when it was renewed. He testified, however, that he reviewed the Agreement and Forest Villa's governing documents prior to becoming president, and was familiar with their terms. He also testified that he expected Alliance would guide him in making decisions.

¶ 15 Skourlis testified that he had been in the property management business for 22 years. He was the sole owner and operator of Alliance, which manages condominiums and townhome associations throughout three counties. Alliance formalizes its relationship with associations through a contract that Skourlis has been using for approximately 20 years. This contract allows an association to choose a 24, 36, or 48 month duration, with decreasing costs as the length of the contract increases. No one has ever alerted Skourlis that the contract violates state laws. Skourlis stated that he believed that Bartz, Mazzone, and...