Kleczek v. Jorgensen

• Decision Date: 10 April 2002
• Docket Number: No. 4-01-0295.,4-01-0295.
• Parties: David J. KLECZEK and Patricia F. Kleczek, Plaintiffs-Appellees and Cross-Appellants, v. Robert JORGENSEN, Jr., and Anne Marie Jorgensen, Individually and d/b/a Jorgensen Homes, Defendants-Appellants and Cross-Appellees.
• Court: United States Appellate Court of Illinois

767 N.E.2d 913

328 Ill. App.3d 1012

263 Ill.Dec. 187

David J. KLECZEK and Patricia F. Kleczek, Plaintiffs-Appellees and Cross-Appellants, v. Robert JORGENSEN, Jr., and Anne Marie Jorgensen, Individually and d/b/a Jorgensen Homes, Defendants-Appellants and Cross-Appellees.

No. 4-01-0295.

Appellate Court of Illinois, Fourth District.

April 10, 2002.

Gordon W. Gates (argued), Gates, Wise & Schlossser, P.C., Springfield, for Robert Jorgensen, Jr.

Brett K. Gorman (argued), Melinda S. Madison, Schmiedeskamp, Robertson, Neu & Mitchell, Quincy, for David J. Kleczek.

Justice APPLETON delivered the opinion of the court:

Plaintiffs, David J. and Patricia F. Kleczek, sued defendants, Robert Jorgensen, Jr., and Anne Marie Jorgensen, for allegedly inducing them, through fraudulent misrepresentations, to buy a house and for breaching express and implied warranties. After a bench trial, the trial court entered a judgment in plaintiffs' favor on their claims of common-law fraud, statutory fraud under the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 through 12 (West 1996)), and breach of the implied warranty of habitability. The court also declared a rescission of the contract and ordered defendants to refund the purchase price. The court granted plaintiffs' prayer for attorney fees under the Consumer Fraud Act but denied their prayer for punitive damages and their motion for prejudgment interest.

Afterward, some third parties offered to buy the house from plaintiffs. Defendants had not yet refunded the purchase price. The trial court granted plaintiffs' petition to modify the judgment to allow them to sell the house, but refused to modify the judgment to award them money damages equal to the difference between the rescission amount and the sale price. To recover those money damages, the trial court said, plaintiffs would have to amend their complaint and present evidence in a new trial. Plaintiffs never did so.

Defendants appealed, arguing the trial court erred by (1) entering a judgment against them under the Consumer Fraud Act and (2) awarding plaintiffs their attorney fees. They do not challenge the trial court's finding of a breach of the implied warranty of habitability. Plaintiffs cross-appealed, arguing that the trial court erred in (1) denying punitive damages, (2) denying prejudgment interest, and (3) refusing to modify the judgment so as to award them the difference between the rescission amount and the sale price. We affirm in part, vacate in part, and remand for further proceedings.

I. BACKGROUND

In July 1994, defendant Robert Jorgensen (Jorgensen) and his wife, defendant Anne Marie Jorgensen (Anne Marie), purchased a 42-acre parcel of real estate in Pike County, Illinois. Defendants had been in the business of building new houses under the name "Jorgensen Homes." They subdivided the parcel into nine lots and called the subdivision "Deer Run Estates," intending to make it a housing development. In an effort to lure buyers for the lots and houses, Jorgensen placed a "For Sale" sign near the entrance of the subdivision.

In August 1995, Jorgensen began building a house on lot number 2 (Deer Run No. 2). According to Jorgensen, when construction of Deer Run No. 2 began, he and his wife intended to make the house their primary residence. Jorgensen installed much of the plumbing himself, although he had no plumbing license. On May 7,1996, two plumbing inspectors from the Illinois Department of Public Health (Department), Robert Schafer (Schafer) and John Popov, came to Deer Run No. 2, looked at the plumbing, verbally identified for Jorgensen some of the plumbing defects, and told him that if he were building the house for sale, a licensed plumber would have to install the rest of the plumbing. At this time they gave him nothing in writing.

Plaintiff David Kleczek visited Deer Run Estates on May 15, 1996. He met with Jorgensen at Deer Run No. 2 and asked him if the house were for sale. (Construction of the house was almost complete.) Jorgensen said yes and, according to Kleczek, gave him a "spec sheet" outlining the house's features. Jorgensen denied giving the "spec sheet" to Kleczek and testified that the "spec sheet" had been created for an open house that defendants held or intended to hold at Deer Run No. 2 in March 1996. The "spec sheet" said that the house had a "1[-][y]ear [w]orkmanship [g]uarantee."

On May 22, 1996, plaintiffs and defendants signed a contract, whereby defendants agreed to buy Deer Run No. 2 from plaintiffs. The contract was a form document that Anne Marie had obtained, and it stated:

"[P]rior to the execution of this instrument[,] neither [seller] nor [seller's] agent has received any notice issued by any city, village[,] or other government authority of a dwelling code violation in the dwelling structure upon the premises herein described."

Prior to the execution of the contract, defendants never told plaintiffs of the plumbing inspectors' visit. According to Jorgensen, he first mentioned the inspectors' visit on June 15, 1996, when he told Patricia Kleczek that the plumbing inspectors had been to the house and that as a consequence some of the plumbing needed to be changed. Patricia Kleczek testified, however, that she was unaware that the Department had "been involved" until April 29, 1997, several months after the closing, when Schafer reinspected the plumbing at plaintiffs' request.

On June 27, 1996, Jorgensen received a certified letter from the Department memorializing the inspectors' visit of May 5, 1996, and providing a detailed list of the repairs that needed to be made. He did not disclose this letter to the Kleczeks. Instead, he hired a licensed plumber, who, according to Jorgensen, installed the rest of the plumbing and corrected all of the defects that the Department listed in its June 27 letter. The closing occurred on July 26, 1996, for a total purchase price of $182,300.

Over the next several months, the plumbing sprang some minor leaks and then some major leaks, causing water damage to the interior of the house. Plaintiffs discovered that one of the toilets was fed by a hot-water line instead of a cold-water line, and they testified that a strong odor of sewage emanated from the basement. They also noticed cracks in interior walls. They told Jorgensen of these defects (except for the cracks in the walls) and demanded that he repair them in accordance with his "1[-][y]ear [w]orkmanship [g]uarantee." Initially Jorgensen made some repairs, but in February 1997 he refused to make any more repairs.

In April 1997, plaintiffs asked the Department to inspect the plumbing. Schafer returned to Deer Run No. 2 and informed plaintiffs that he had been there before and had notified Jorgensen of plumbing defects. Schafer found that many of the plumbing defects that he noted earlier had been corrected, but he found additional plumbing defects. After the reinspection, plaintiffs hired a plumber to correct the defects.

On July 25,1997, plaintiffs filed an initial complaint against defendants for breach of contract. Plaintiffs amended their complaint several times. The parties completed discovery on a fifth-amended complaint, which alleged the following: (1) breach of the implied warranty of habitability, (2) violation of the Consumer Fraud Act, (3) common-law fraud, and (4) breach of express warranty. In their prayer for relief, plaintiffs requested rescission of the contract to purchase Deer Run No. 2, assessment of attorney fees and costs, and punitive damages under the Consumer Fraud Act.

On January 18, 2000, after a bench trial, the trial court entered a partial judgment in plaintiffs' favor on the breach of the implied warranty of habitability, the Consumer Fraud Act, and common-law fraud. Specifically, the court found that defendants had violated the Consumer Fraud Act by (1) falsely representing that they had received no notice of any violations of the plumbing code and (2) making a warranty and then disavowing it. The court granted rescission of the purchase contract, ordering plaintiffs, within 30 days, to quitclaim Deer Run No. 2 back to defendants in exchange for $182,300 and entering a money judgment in favor of plaintiffs in the amount of $4,216.11 for plumbing repairs. The court afterward denied punitive damages and prejudgment interest but awarded plaintiffs $38,896.05 in attorney fees and costs.

The order of rescission was never implemented. On July 24, 2000, Dan and Anita Mefford (Meffords) offered to buy Deer Run No. 2 from plaintiffs. Plaintiffs petitioned the court for a modification of the judgment to allow them to sell the house to the Meffords for $135,000 and for an award of the difference between the rescission amount, $182,300, and the sale price, $135,000. Defendants had no objection to the proposed sale.

The trial court granted plaintiffs' petition to modify the judgment so as to allow the sale but denied their request to summarily award them the difference between the rescission amount and the sale price. Instead, the trial court allowed plaintiffs, if they wished, to file a sixth-amended complaint by a certain date and to "reopen [the] evidence." Plaintiffs closed the sale of the property to the Meffords but never filed a sixth-amended complaint. Accordingly, the trial court entered its final judgment on March 8, 2001, incorporating the terms of its previous dispositive orders.

In summary, the trial court found in favor of plaintiffs on count I (breach of the implied warranty of habitability), count II (violation of the Consumer Fraud Act), and count III (common-law fraud) of the fifth-amended complaint. The court awarded plaintiffs $4,216.11 for plumbing repairs and $38,896.05 in "fees and litigation expenses" but denied punitive damages and prejudgment interest.

This appeal and cross-appeal followed.

II. ANALYSIS

A. Consumer Fraud Act

Essentially, defendants make two arguments against the...