Glazer v. Private Residences at Ont. Place Condo. Ass'n
| Docket Number | 1-21-0156 |
| Decision Date | 18 February 2022 |
| Citation | 2022 IL App (1st) 210156,205 N.E.3d 163,461 Ill.Dec. 666 |
| Parties | Gerald GLAZER, Julius Cherry, and Mark Silverberg, Individually and Derivatively on Behalf of the Private Residences at Ontario Place Condominium Association, Plaintiffs-Appellants, v. The PRIVATE RESIDENCES AT ONTARIO PLACE CONDOMINIUM ASSOCIATION, an Illinois Not-For-Profit Corporation, and Its Board of Managers, Ellen Gutiontov, Jason Bischoff, Michael Lane, Samantha Lane, and Malek Abdulsamad, Individually and Collectively, Defendants-Appellees. |
| Court | United States Appellate Court of Illinois |
David A. Cerda, of Chicago, and Emry James Allen (pro hac vice), of Elk Grove, California, for appellants.
Howard S. Dakoff and Jason B. Hirsh, of Levenfeld Pearlstein, LLC, of Chicago, for appellee.
¶ 1 The plaintiffs in this case are condominium unit owners who sued their condo association and board of managers, alleging that the association and board were required to disclose information to them and obtain their approval before investigating and negotiating a proposed bulk sale of condo units and, in failing to do so, had violated sections 15 and 19 of the Condominium Property Act (Act) ( 765 ILCS 605/15, 19 (West 2020)) and breached the common law fiduciary duties of disclosure, candor, and loyalty owed to unit owners. The circuit court granted defendants’ motion to dismiss, and plaintiffs have appealed. For the following reasons, we affirm.
¶ 3 This action stems from the attempted, but ultimately unsuccessful, bulk sale of the condominium property located at 10 East Ontario Street in Chicago, Illinois, also known as the Private Residences at Ontario Place, a Condominium (Ontario Place), to Strategic Properties of North America (SPNA). Ontario Place is comprised of 467 residential units, 3 commercial units, and approximately 521 parking units. There is a condominium association (the Association) to which all unit owners belong. Plaintiffs—Gerald Glazer, Julius Cherry, and Mark Silverberg—each own at least one unit at Ontario Place and are thus members of the Association.
¶ 4 On July 9, 2020, plaintiffs filed their initial verified complaint for declaratory and other relief against the Association and its board of managers (the Board)—Ellen Gutiontov, Jason Bischoff, Michael Lane, Samantha Lane, and Malek Abdulsamad—(collectively, defendants). In it, plaintiffs alleged that defendants had received a letter of intent from SPNA, dated February 26, 2020, "for the purchase of approximately 467 Units along with the common elements of the [Association] as part of the bulk sale of the [Association] property pursuant to section 15 of the Illinois Condominium Act and the Chicago Condominium ordinance."
¶ 5 In count I, plaintiffs sought several declarations, including ones stating that (1) pursuant to section 18.4 of the Act (id. § 18.4), the power and authority to pursue a bulk sale of the condominium units is reserved to the unit owners and not to the Board; (2) pursuant to article III, section 7, of the Association bylaws and section 18(b)(13) of the Act (id. § 18(b)(13)), the Board and Association are not permitted to pursue a bulk sale of the condominium units without an affirmative vote of two-thirds of the unit owners; and (3) the Board's "fiduciary obligation of disclosure, candor and loyalty" owed to the unit owners in connection with a bulk sale of the condominium units is not limited to sharing the information delineated in section 19 of the Act "but extends to all information in the possession or control of the [Board]" that a unit owner "may reasonably find useful to provide guidance or insight in considering a prospective bulk sale of units."
¶ 6 In count II, for breach of fiduciary duty, plaintiffs asked that defendants be restrained and enjoined from pursuing a bulk sale of Ontario Place without complying with the requirements of article III, section 7, of the bylaws and section 18(b)(13) of the Act and from ever pursuing a bulk sale with SPNA or any affiliate of SPNA. They asked the circuit court to enter judgment against the Board and its members, individually and collectively, for $25,575 in fees and costs "wrongfully expended or incurred" by the Association in pursuit of the bulk sale of Ontario Place to SPNA. Finally, in count III, plaintiffs asked for an accounting "of all funds expended in furtherance of the unauthorized transaction with SPNA."
¶ 7 On August 4, 2020, plaintiffs filed a motion for a temporary restraining order (TRO) and preliminary injunction, explaining that the Board had sent a voting package related to the proposed sale of Ontario Place to the unit owners on July 30, 2020, and asked the circuit court to intervene in "the improper and unauthorized voting" that was set to commence on August 4, 2020, and continue until August 18, 2020. Plaintiffs asked the court to enter an order restraining and enjoining defendants, until further order of the court, from pursuing a bulk sale to SPNA or any other potential purchaser.
¶ 8 On August 7, 2020, the circuit court denied the motion for injunctive relief, finding that the Board was "not required to obtain the authority of the unit owners" before engaging in preliminary negotiations for a bulk sale of Ontario Place or before submitting the terms of a purchase and sale agreement for the bulk sale to the unit owners by either article III, section 7 of the Association bylaws or by section 18(b)(13)(iii) of the Act.
¶ 9 We affirmed the circuit court's denial of the TRO on interlocutory appeal. In doing so, we noted that the only thing that could be enjoined was a vote on the actual offer, which the parties agreed was required under the Act before the bulk sale could be completed. Glazer v. Private Residences at Ontario Place Condominium Ass'n , No. 1-20-0861 (2020) (). We agreed with the circuit court that plaintiffs had failed to show a likelihood of success on the merits and were thus not entitled to the relief they sought. Id.
¶ 10 On August 18, 2020, the unit owners voted on the proposed bulk sale of Ontario Place to SPNA. The votes of the unit owners in favor of the sale were insufficient to approve the sale. The votes were 74.04% in favor and 22.42% against. A vote of 85% in favor was required to approve the bulk sale under Chicago's municipal code. Chicago Municipal Code § 13-72-085 (added Sept. 18, 2019).
¶ 11 Plaintiffs filed their first amended complaint on September 8, 2020. In it, they acknowledged that the Board had held the vote of the unit owners and that the bulk sale had not been approved. Plaintiffs realleged their counts for declaratory relief (count I) and breach of fiduciary duty (count II), clarifying that these counts were alleged by plaintiffs individually. The amended complaint added count III, a claim of breach of fiduciary duty brought "derivatively on behalf of the Condominium Association." In count IV, plaintiffs sought an accounting, both individually and derivatively.
¶ 12 By agreed order entered on September 23, 2020, plaintiffs were permitted to file a second amended complaint instanter to add an allegation that the Board failed to provide plaintiffs with an appraisal pursuant to section 15 of the Act.
¶ 13 Defendants moved to dismiss pursuant to section 2-619.1 of the Code of Civil Procedure (Code) ( 735 ILCS 5/2-619.1 (West 2020) ). They argued both that plaintiffs had failed to state a claim (see id. § 2-615) because their claim for declaratory relief was moot, improper, and based on an erroneous interpretation of the Act; defendants had no duty to disclose an appraisal or letter of intent; and dismissal was required under the business judgment rule. Defendants also argued that plaintiffs’ complaint suffered from an affirmative defect because plaintiffs had received all the information required by the Act (see id. § 2-619(a)(9)).
¶ 14 On January 15, 2021, the circuit court granted defendants’ motion to dismiss the second amended complaint with prejudice. The court found that (1) plaintiffs were not entitled to a declaration about the Board's past conduct or hypothetical future actions, (2) plaintiffs were not entitled to a declaration that defendants violated the Association bylaws or the Act as a matter of law, (3) the Board had no fiduciary obligation to provide plaintiffs with information about the investigation or negotiation of the sale, (4) plaintiffs failed to allege any breach of a fiduciary duty by the Board, and (5) plaintiffs were not entitled to an accounting where no breach of fiduciary duty was properly alleged.
¶ 15 This appeal follows.
¶ 17 Plaintiffs timely filed their notice of appeal from the court's dismissal of their complaint on February 16, 2021. We have jurisdiction pursuant to Illinois Supreme Court Rule 301 (eff. Feb. 1, 1994) and Rule 303 (eff. July 1, 2017), governing appeals from final judgments entered by the circuit court in civil cases.
¶ 19 On appeal, plaintiffs argue that the circuit court erred in dismissing their complaint because (1) the Board was required by the Act to obtain approval of the unit owners before initiating or engaging in acts in anticipation of a bulk sale of the property, (2) the Board violated the Act and its common law fiduciary duty by failing to provide plaintiffs with the letter of intent and the appraisal, (3) plaintiffs were entitled to declaratory relief, and (4) if any of these claims were incorrectly dismissed, plaintiffs and the Association have claims for breach of fiduciary duty and an accounting. We review the grant of a motion to dismiss de novo. Zander v. Carlson , 2020 IL 125691, ¶ 18, 450 Ill.Dec. 502, 181 N.E.3d 854.
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