Burke v. 401 N. Wabash Venture, LLC

• Decision Date: 10 April 2013
• Docket Number: No. 11–3208.,11–3208.
• Citation: 714 F.3d 501
• Parties: Michael BURKE, Plaintiff–Appellant, v. 401 N. WABASH VENTURE, LLC, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

714 F.3d 501

Michael BURKE, Plaintiff–Appellant,

v.401 N. WABASH VENTURE, LLC, Defendant–Appellee.

No. 11–3208.

United States Court of Appeals, Seventh Circuit.

Argued Nov. 26, 2012.

Decided April 10, 2013.

Thomas F. Courtney, Jr., Thomas F. Courtney & Associates PC, Palos Heights, IL, John S. Xydakis (argued), Forest Park, IL, for Plaintiff–Appellant.

Stephen Novack (argued), Novack & Macey LLP, Chicago, IL, for Defendant–Appellee.

Before ROVNER, WILLIAMS, and TINDER, Circuit Judges.

WILLIAMS, Circuit Judge.

Michael Burke signed a contract to purchase a condominium unit and two parking spaces in the Trump International Hotel & Tower in downtown Chicago for about $2.2 million. Burke made two earnest payments totaling 20% of the purchase price. When it came time to close, however, Burke refused to pay. He filed this lawsuit after the developer declined to refund his earnest money. Burke maintains that the developer made a material change when it placed parking on the Trump Tower's sixth floor. But the documents he signed demonstrate that Burke was on notice that the use of the sixth floor for parking was always a possibility. Burke also argues on appeal that the agreement he signed was unenforceable from the start, but the agreement is not void for lack of mutuality as the developer had an obligation to act in good faith to convey the condominium to him. Nor is the contract unenforceable due to a penalty clause, because the contract did not give the developer the option to choose between actual or liquidated damages. For these reasons, we affirm the district court's dismissal of Burke's second amended complaint.

I. BACKGROUND

On December 31, 2006, when the real estate market was still strong, Michael Burke, a citizen of Ireland, signed a contract with 401 N. Wabash Venture, LLC, the developer for the Trump International Hotel & Tower in Chicago, to buy a condominium unit and two parking spaces in the Trump Tower. The total purchase price was $2,282,130, which included $150,000 for the parking spaces. Burke deposited $456,426 in earnest money, an amount equal to 20% of the purchase price.

Before he signed the purchase agreement, Burke received a copy of the initial Trump Tower Property Report that was dated September 24, 2003. The Property Report stated that the development would contain an “undetermined number of unit parking spaces within the above-ground facilities that the Developer currently intends will be located on some floors three (3) through twelve (12)....” The developer later set a closing date of August 7, 2008. On August 6, the developer gave Burke a copy of the condominium's Declaration and Special Amendment to the Covenants, Conditions, and Restrictions (CCR's). The Special Amendment stated that the sixth floor would be used for parking spaces.

Burke did not close on the unit, asserting that the use of the sixth floor for parking lowered the value of his investment and increased the amount of maintenance fees he would be required to pay. Burke sought to rescind the contract. He asked the developer to refund his earnest money, but it refused. Burke then filed this lawsuit, styling it as a class action.

The developer moved to dismiss Burke's suit for failure to state a claim upon which relief could be granted. After the district court dismissed Burke's original complaint, Burke amended his complaint twice. The second amended complaint contained sixteen counts. The district court struck five counts, it granted the developer's motion to dismiss for failure to state a claim on nine counts, and Burke voluntarily dismissed two counts. In light of its conclusion that the complaint failed to state any claims for relief, the court did not reach the issue of class certification. Burke appeals.

II. ANALYSIS

We review dismissals under Federal Rule of Civil Procedure 12(b)(6) de novo. Citadel Group Ltd. v. Wash. Reg'l Med. Ctr., 692 F.3d 580, 591 (7th Cir.2012). In doing so here, we construe the amended complaint in the light most favorable to Burke, accept Burke's well-pleaded facts as true, and draw all reasonable inferences in Burke's favor. See Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009); McReynolds v. Merrill Lynch & Co., 694 F.3d 873, 879 (7th Cir.2012). To survive a motion to dismiss, the complaint must contain enough facts to state a claim for relief that is plausible on its face. Citadel Group, 692 F.3d at 591.

A. No Material Change

Burke argues that after he and the developer signed the purchase agreement, the developer made a material change to the Property Report, and that it did so without the approval of 75% of the Trump Tower owners. So he maintains that he is entitled to a remedy under section 22 of the Illinois Condominium Property Act, 765 Ill. Comp. Stat. 605/22, or under a common law breach of contract theory.

The Illinois Condominium Property Act requires that, with respect to the initial sale of any condominium unit, the seller must make certain disclosures and provide copies of certain documents to the prospective purchaser including the declaration, bylaws of the association, the projected operating budget for the condominium unit, and the unit's floor plan. 765 Ill. Comp. Stat. 605/22(a)-(e). The parties use the term “Property Report” to refer collectively to the documents that the seller must disclose to the buyer in section 22, as do we.

In reviewing Burke's claim, we first note that the district court properly considered the Property Report in ruling on the motion to dismiss even though Burke had not attached the Property Report to his complaint. In general, a court may only consider the plaintiff's complaint when ruling on a Rule 12(b)(6) motion. Rosenblum v. Travelbyus.com Ltd., 299 F.3d 657, 661 (7th Cir.2002). However, Federal Rule of Procedure 10(c) provides that “[a] copy of any written instrument which is an exhibit to a pleading is a part thereof for all purposes.” We have concluded that this rule includes a limited class of attachments to motions to dismiss pursuant to Rule 12(b)(6). Rosenblum, 299 F.3d at 661. “ ‘[D]ocuments attached to a motion to dismiss are considered part of the pleadings if they are referred to in the plaintiff's complaint and are central to his claim.’ ” McCready v. eBay, Inc., 453 F.3d 882, 891 (7th Cir.2006) (quoting 188 LLC v. Trinity Indus., Inc., 300 F.3d 730, 735 (7th Cir.2002)) (additional quotation omitted). These documents may be considered by a district court in ruling on the motion to dismiss without converting the motion into a motion for summary judgment. Id. The court “ ‘is not bound to accept the pleader's allegations as to the effect of the exhibit, but can independently examine the document and form its own conclusions as to the proper construction and meaning to be given the material.’ ” Rosenblum, 299 F.3d at 661 (quoting 5 Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure: Civil 2d, § 1327 at 766 (1990)).

Here, Burke's complaint makes repeated reference to the Property Report, and the Property Report is central to his claims that the developer violated the Illinois Condominium Property Act and breached a contract. He alleges that the developer made a material change to the information in the Property Report, and that it did so without sufficient buyer approval. The Property Report is clearly central to these claims, and the district court was right to consider it.

In addition to requiring the disclosure of certain documents, section 22 of the Condominium Act also provides:

All of the information required by this Section which is available at the time shall be furnished to the prospective buyer before execution of the contract for sale. Thereafter, no changes or amendments may be made in any of the items furnished to the prospective buyer which would materially affect the rights of the buyer or the value of the unit without obtaining the approval of at least 75% of the buyers then owning interest in the condominium. If all of the information is not available at the time of execution of the contract for sale, then the contract shall be voidable at option of the buyer at any time up until 5 days after the last item of required information is furnished to the prospective buyer, or until the closing of the sale, whichever is earlier. Failure on the part of the seller to make full disclosure as required by this Section shall entitle the buyer to rescind the contract for sale at any time before the closing of the contract and to receive a refund of all deposit moneys paid with interest thereon at the rate then in effect for interest on judgments.

765 Ill. Comp. Stat. 605/22.

Burke maintains that the developer made a change or amendment to the information in the Property Report that affected him without obtaining approval of at least 75% of the buyers. The developer responds that rescission for a violation of the disclosure obligation is the only remedy provided to a buyer under section 22, yet Burke does not allege that the developer failed to make full disclosure about any matter required by section 22. The parties do not point us to any Illinois state court decision squarely answering whether the Condominium Act contains a private right of action or remedy when a buyer alleges that the developer made a material change without 75% approval. Cf. Luster v. Jones, 70 Ill.App.3d 1019, 27 Ill.Dec. 66, 388 N.E.2d 1029, 1033 (1979) (ruling that rescission due to seller's failure to disclose is a remedy for the prospective buyer only prior to closing, not after); Goldberg v. 401 N. Wabash Venture, LLC, 2010 WL 1655089, at *6 (N.D.Ill.2010) (concluding that Illinois Condominium Act does not include an implied private right of action for violation of section 22's amendment provision).

We need not predict whether the Supreme Court of Illinois would find that Burke has an available remedy because there was no material change. Cf. Allstate Ins. Co. v. Menards, Inc., 285 F.3d 630,...