Bruck v. Cincotta

• Decision Date: 09 December 1977
• Docket Number: No. 77-635,77-635
• Parties: , 13 Ill.Dec. 782 Theodore J. BRUCK and Conteco, Inc., Plaintiffs-Appellants, v. Gale CINCOTTA and Marie Bryan, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 874

371 N.E.2d 874

56 Ill.App.3d 260, 13 Ill.Dec. 782

Theodore J. BRUCK and Conteco, Inc., Plaintiffs-Appellants, v. Gale CINCOTTA and Marie Bryan, Defendants-Appellees.

No. 77-635.

Appellate Court of Illinois, First District, Fifth Division.

Dec. 9, 1977.

Supplemental Opinion On Denial of Rehearing Jan. 27, 1978.

[13 Ill.Dec. 783] Eugene Lieberman, Chicago, for plaintiffs-appellants.

William P. Wilen, Miriam N. Geraghty, Arnold S. Rosenberg, Chicago, for Bryan.

Jeffrey M. Shaman, Chicago, for Cincotta.

SULLIVAN, Presiding Justice.

This is an appeal from an order sustaining a motion to dismiss an amended complaint in a libel action.

The amended complaint preliminarily alleges that plaintiffs were engaged in the purchase of real estate for resale at a profit; that during the years 1974 to 1976 they purchased homes, at open auction or by sealed bid, from the Department of Housing and Urban Development (HUD); that these homes had been foreclosed or abandoned It is also alleged that defendants "maliciously and with a reckless disregard for truth" published and caused to be distributed a press release "containing false and defamatory statements" which implied that plaintiffs were thieves, since they were referred to in the press release as "rip-off speculators"; that the term "rip-off" was known and accepted in the community as "an act of stealing," which is also the dictionary definition of the term; that the press release was intended to charge that the homes being sold by plaintiffs were not rehabilitated; that people who bought them "would be saddled with building code violations, and major repairs; and that if plaintiffs did even minor repairs, they had done so illegally and without city permits."

[13 Ill.Dec. 784] and required repair and rehabilitation; that after they had rehabilitated the homes, they were offered to the public for sale; and that they made a profit of less than 10% On a total investment of $850,000 in these homes.

Defendants filed a motion to strike and dismiss, stating (1) that the statements complained of were protected speech under the United States and Illinois Constitutions; (2) that there were no allegations as to what statements in the press releases were false; (3) that not only was there a failure to allege malice with particularity, but also the amended complaint did not contain language sufficient to establish malice; (4) that the statements were not defamatory as a matter of law nor libellous per se, and special damages were not pleaded to establish libel per quod.

The amended complaint sets forth the press release as follows:

"HUD 'loses' $1 million to Speculator Homeowners Get RIPPED OFF!

This report is based on a sample of 40 properties out of 66 in the City of Chicago that Theodore J. Bruck, et al., purchased for the Conteco Co. at HUD sealed-bid sales of its houusing (sic) inventory. The sales took place between August 1974 and May 1976. Bruck and friends also bought 35 properties in the suburbs at these sales.

HUD conducted these sales as a means of reducing its inventory of abandoned houses, and 'to provide needed low-cost housing to the people' (sic). In newspaper ads for the sales, which preceeded (sic) each sale, HUD indicated that the houses contained city code violations. HUD set a base price for the houses, and bidders could offer as much or as little above this price as they liked. The base price was an indicator of the condition of the house; Conteco often paid twice the base price for properties. Conteco didn't mind paying more because it was assured of making high profits on the resale of the houses. In fact Conteco did reap a half million dollars in profits.

What Happened to the Rehab?

Out of 40 houses that we title-searched there are only 11 electrical permits on file with the city of Chicago Department of Buildings. Not one construction-plumbing permit was issued to anyone for these houses! One electrical permit was issued after the house was resold, indicating that Conteco did not pay for the work.

Two houses stand out as 'super rip-offs'. Bruck bought one, at 6352 S. Laflin in West Englewood, for $100.01. This house had minimal electrical work on it before it was resold (a maximum of $100.00 worth.) This house was abandoned for 21/2 years before Bruck sold it for.$19,000 (see interview).

The other bargain bonanza is at 5310 S. Bishop in New City. This house was abandoned for at least one year before Bruck bought it for $500.01 and resold it for.$19,000. This house had no electrical or construction permit.

The properties are located throughout the south and west side neighborhoods of the city. Communities with the highest numbers of Conteco rehab-specials are West Englewood, Auburn Gresham and Roseland.

The Bruck-Conteco purchases averaged $9,000. Their average profit was $14,000. If these houses were in such

[13 Ill.Dec. 785] good condition (needing no rehab) when HUD held them, they should not have been sold to a speculator, but directly to an individual. They could have been sold for less and HUD could have recovered more dollars. If the houses did need work, the people who bought them from Bruck were saddled with code violations and major repairs. If Bruck-Conteco did even minor repairs, he did so illegally i. e. without a city permit.

Who Fronts the Money?

Another major question is, who's supplying Bruck with the capital or credit to purchase the properties from HUD. Conteco's stated capital, from 1975 Annual Report, is only $10,000. In researching the sample houses, we found that neither Bruck's nor any of his associates' names appear in the title records. The records shows (sic) that the HUD owned properties transferred to a bank trust account. Twenty-seven of the title searched properties were in a trust account at the American National Bank and Trust Company (a member of the Mayor's Rehab Commission). Another trust account with 8 properties is with Ford City Bank. We have been advised by various banks that this type of 'land trust' is frequently used as collateral for loans from the same institution. In addition, they are used to hide the owner of the property from the public.

HUD recently discontinued the sealed-bid sales in favor of holding auction sales. The main difference is that $2,000 must be posted in escrow to guarantee that the property will be rehabilitated in six months. At the four auctions in May and June Bruck bought 86 more properties. We have estimated Bruck paid over $600,000 for these properties and had to put up another $172,000 in escrow. For the escrow a speculator can either put up cash or a letter of credit. At this time, HUD has refused to tell us what Bruck used. We have put in a Freedom of Information request to force HUD to reveal this. Our preliminary findings have shown that at least 2/3 Bruck's purchases in the auctions have again been put in trust with American National. American National which has done nothing to make the Mayor's Rehab Commission work (along with the other big banks) is providing a shelter and probably financing for this rip-off speculator. Meanwhile HUD would rather allow this speculator to make outrageous profits at the expense of our neighborhoods than rehab and/or sell the properties themselves."

Attached to the press release and included in the amended complaint was a chart which provided information as follows concerning each of 40 homes purchased by plaintiffs from HUD during 1974 through 1976: The address, the number of years abandoned, the date of purchase and amount paid to HUD, the date of resale and the amount received, the amount of electrical work performed, and plaintiff's gross profit. The chart shows that plaintiff paid $384,536.34 for the 40 homes, that it did only $1,915 of electrical work on them and eventually sold 36 of the homes for the total amount of $854,500 realizing a gross profit on those 36 of $495,017.73.

The order dismissing the action with prejudice stated: "The court further finds as a matter of law that any and all statements contained in the press release * * * are not defamatory."

OPINION

Defamatory writing is either libellous per se or per quod. (Cook v. East Shore Newspapers (1946), 327 Ill.App. 559, 64 N.E.2d 751.) A publication is libellous per se if it is false and so obviously and materially hurtful to the person aggrieved that proof of injurious character can be, and is, dispensed with. (Bontkowski v. Chicago Sun-Times (1969), 115 Ill.App.2d 229, 252 N.E.2d 689.) Words libellous per quod are also false, but require an innuendo to give them a libellous meaning and require evidence to show that as a matter of fact some substantial injury has followed from their use. (See Kirk v. Village of Hillcrest (1975),31 Ill.App.3d 1063, 335 N.E.2d 535; 33 A Ill.L. & Prac. Slander and Libel § 11 (1970).

A writing, to be libellous per se, must contain a false statement which imputes to the plaintiff any of the following offensive categories: (1) the commission of a crime; (2) the infection with a loathesome disease; (3) the unfitness or want of integrity in performing the duties of an office or employment; or (4) words which adversely reflect on a particular party's abilities in his business, trade or profession. Bontkowski v. Chicago Sun-Times; Whitby v. Associates Discount Corp. (1965), 59 Ill.App.2d 337, 207 N.E.2d 482.

Plaintiffs contend that three references in the press release fall within category (1). First, they argue that a crime was imputed by the following language: "If the houses did need work, the people who bought them from Bruck were saddled with code violations and major repairs. If Bruck-Conteco did even minor repairs, he did so illegally i. e. without a city permit." In order for words charging the commission of a crime to be libellous per se, the offense must be indictable, involve moral turpitude and be punishable by death or imprisonment rather than by a fine. Mitchell v. Peoria Journal-Star, Inc. (1966), 76...