D'Attomo v. Baumbeck

• Decision Date: 30 June 2015
• Docket Number: No. 2–14–0865.,2–14–0865.
• Citation: 36 N.E.3d 892
• Parties: Peter L. D'ATTOMO and Kathleen T. D'Attomo, Plaintiffs–Appellants, v. Thomas H. BAUMBECK, Individually and in His Capacity as Trustee of the Thomas H. Baumbeck Trust Under an Agreement Dated July 6, 1995; The Museum Square Condominium Association; and The Board of Directors of the Museum Square Condominium Association, Defendants–Appellees.
• Court: United States Appellate Court of Illinois

36 N.E.3d 892

Peter L. D'ATTOMO and Kathleen T. D'Attomo, Plaintiffs–Appellants

v.Thomas H. BAUMBECK, Individually and in His Capacity as Trustee of the Thomas H. Baumbeck Trust Under an Agreement Dated July 6, 1995; The Museum Square Condominium Association; and The Board of Directors of the Museum Square Condominium Association, Defendants–Appellees.

No. 2–14–0865.

Appellate Court of Illinois, Second District.

June 30, 2015.

John J. D'Attomo, Carlson Partners, Ltd., Lombard, and Jason A. Doran, Dickson & Hasenbalg, Aurora, for appellants.

Damon M. Fisch, Hartnett Fisch, Naperville, for appellee Thomas H. Baumbeck.

Christopher E. Ralph, Kovitz Shifrin Nesbit, P.C., Buffalo Grove, for other appellees.

OPINION

Justice HUDSON

delivered the judgment of the court, with opinion.

¶ 1 Plaintiffs, Peter L. D'Attomo and Kathleen T. D'Attomo, appeal from a judgment of the circuit court of Du Page County dismissing their six-count complaint against Thomas H. Baumbeck, individually and in his capacity as trustee of the Thomas H. Baumbeck Trust under an agreement dated July 6, 1995; the Museum Square Condominium Association; and the Board of Directors of the Museum Square Condominium Association. For the reasons set forth below, we dismiss the appeal in part, affirm in part, reverse in part, and remand this matter for further proceedings.

¶ 2 I. BACKGROUND

¶ 3 This appeal arises out of a dispute concerning the sale of a condominium unit. Plaintiffs, the purchasers of the condominium unit, claim that limitations on the rental of the property were not disclosed to them prior to the closing. Plaintiffs filed their complaint on October 15, 2013. We take the following facts from plaintiffs' complaint and the exhibits appended thereto. The Museum Square Condominium (Condominium) is a residential condominium development consisting of 56 units, located at 131 West Adelaide Street, Elmhurst, Illinois. The Museum Square Condominium Association (Association) is the governing body of the Condominium. The board of directors of the Association (Board) is responsible for directing and managing the affairs of the Association. At all relevant times prior to June 21, 2013, the Thomas H. Baumbeck Trust under an agreement dated July 6, 1995 (Trust), was the legal owner of Unit 305 (Unit) in the Condominium. Thomas H. Baumbeck is the trustee of the Trust.¹

¶ 4 For several years prior to June 2013, plaintiffs were actively seeking to purchase a condominium unit in Elmhurst. Plaintiffs intended to reside in the condominium unit after they retired and sold their existing residence. Prior to such time, plaintiffs intended to lease the condominium unit while simultaneously maintaining their existing residence. On or about April 28, 2013, plaintiffs and the Trust, acting through Baumbeck, entered into a written real estate sales contract (Contract) whereby plaintiffs agreed to purchase the Unit from the Trust. On May 7, 2013, plaintiffs, through their attorney, Samuel J. Macaluso, requested that the Trust provide “written notice to Buyer's attorney of any changes in [the] condominium documents.” Further, on May 16, 2013, during the attorney-review period, plaintiffs, through Macaluso, requested that the Trust provide them with a comprehensive “22.1 Disclosure” (see 765 ILCS 605/22.1 (West 2012)

), including the Condominium's declaration, bylaws, 2013 budget, 2012 financial statements, and 2012 and 2013 minutes of the meetings of the Board.

¶ 5 On May 22, 2013, an employee in the office of counsel for the Trust sent to Macaluso via email a copy of a condominium declaration dated June 14, 2002 (2002 Declaration). The 2002 Declaration expressly permitted the lease of units in the Condominium. Specifically, paragraph 7 of the 2002 Declaration provided in relevant part that “[a]ny Unit Owner shall have the right to lease, or permit a subsequent sublease or assignment of all (but not less than all) of his Unit upon such terms and conditions as the Unit Owner may deem acceptable, except that no Unit shall be leased, subleased or assigned for transient or hotel purposes.”

¶ 6 On June 21, 2013, plaintiffs attended the closing for their purchase of the Unit. Also present at the closing were: Macaluso; the Trust's attorney; the closing agent for the title company; and Jill Bennis, the listing broker for the sale of the Unit. Plaintiffs' intention to lease the Unit during the first year of ownership was openly discussed at the closing, in the presence of the Trust's attorney. Moreover, at the closing, plaintiffs retained Bennis as the leasing broker to procure a tenant for the Unit. To this end, on or about July 10, 2013, plaintiffs entered into a lease agreement pursuant to which prospective tenants agreed to lease the Unit for a 12–month term commencing on August 1, 2013, at a rental rate of $2,600 per month.

¶ 7 Unbeknownst to plaintiffs prior to the closing, in or about 2010, the Board and the Association adopted an amendment to the 2002 Declaration (2010 Amendment) that, among other things, (1) precluded a unit owner in the Condominium from renting his or her unit unless such person owned and resided in the unit for a minimum of one year and (2) prohibited the rental of more than 10% of the units in the Condominium. (We refer to the foregoing provisions of the 2010 Amendment as the “Rental Limitations.”) Baumbeck was a member of the Board as well as vice president of the Association at all relevant times, and he personally voted against adopting the Rental Limitations in 2009 when they were proposed. Prior to the closing, the 2010 Amendment was not provided to plaintiffs and the Rental Limitations were not otherwise disclosed to plaintiffs. Rather, following the closing, plaintiffs discovered a binder of documents containing the 2010 Amendment. The binder was tendered to plaintiffs at the closing by the Trust's attorney after the purchase of the Unit was funded and all documents were signed. As a result of the Rental Limitations, plaintiffs were forced to terminate their lease with the prospective tenants and sell the Unit.

¶ 8 Counts I and II of the complaint were directed against Baumbeck in his capacity as trustee of the Trust. In count I, plaintiffs alleged a violation of section 22.1(a) of the Condominium Property Act (Act) ( 765 ILCS 605/22.1(a)

(West 2012)). Specifically, plaintiffs asserted as follows. Section 22.1(a) of the Act provides that, in connection with any resale of a condominium unit in Illinois, the seller must, upon demand, provide various documents to the prospective purchaser, including “[a] copy of the Declaration, by-laws, other condominium instruments and any rules and regulations.” On May 16, 2013, plaintiffs requested that Baumbeck provide them with a comprehensive “22.1 Disclosure,” including the Condominium's declaration and bylaws and the minutes of meetings of the Board. Furthermore, by letter dated May 7, 2013, plaintiffs expressly requested that Baumbeck provide them with “written notice * * * of any changes in [the] condominium documents.” Under section 22.1(a), Baumbeck had a duty to provide plaintiffs, as prospective purchasers, “with the current Condominium Declaration, Association Bylaws, and other rules and regulations affecting the * * * Unit prior to Closing.” Baumbeck breached this duty and violated the Act by failing to provide the aforementioned documents or to otherwise disclose the Rental Limitations prior to the closing.

¶ 9 Count II alleged that Baumbeck's failure to provide plaintiffs with the 2010 Amendment or to otherwise disclose the Rental Limitations prior to the closing constituted a breach of contract. In support of this count, plaintiffs alleged the following. Plaintiffs and Baumbeck entered into a valid and enforceable contract. Plaintiffs fully performed their obligations under the Contract. However, Baumbeck failed to provide plaintiffs with the 2010 Amendment or otherwise disclose the existence of the Rental Limitations prior to the closing. The failure to provide plaintiffs with the 2010 Amendment or otherwise disclose the Rental Limitations prior to the closing constituted a breach of the Contract.

¶ 10 Count II further alleged that every contract in Illinois contains an implied covenant of good faith and fair dealing. By entering into the Contract, Baumbeck impliedly promised that he would: (1) perform his contractual obligations in good faith, with proper motive, and not arbitrarily, capriciously, or in a manner inconsistent with the reasonable expectations of the parties; (2) in advance of the sale, make the disclosures required by the Contract and section 22.1(a) of the Act in a manner sufficient to apprise plaintiffs of the Rental Limitations and any other rules, regulations, or restrictions affecting the Unit; (3) refrain from conduct that would interfere with, frustrate, or preclude plaintiffs from obtaining ownership rights in the Unit consistent with the provisions of the Condominium declaration and bylaws provided to plaintiffs during the attorney-review period, including the right to lease the Unit during their first year of ownership; and (4) convey ownership of the Unit to plaintiffs free of undisclosed restrictions that would materially affect plaintiffs' use and enjoyment of the Unit, including the right to lease the Unit during their first year of ownership. In breach of the contractual obligations owed to plaintiffs under the Contract, Baumbeck failed to provide plaintiffs with a copy of the 2010 Amendment or otherwise disclose the Rental Limitations prior to the closing, but instead surreptitiously included the 2010 Amendment in a binder of documents delivered to plaintiffs for the first time after all documents were signed at the closing and after the transaction was funded. By denying plaintiffs any reasonable opportunity to discover the 2010 Amendment and the Rental Limitations prior to the closing, Baumbeck interfered with, frustrated, and precluded plaintiffs from obtaining...