Poulet v. HFO, LLC

• Decision Date: 30 September 2004
• Docket Number: No. 1-03-2109.,1-03-2109.
• Citation: 353 Ill. App.3d 82,288 Ill.Dec. 404,817 N.E.2d 1054
• Parties: Louis B. POULET and Holly Geraci, Individually and as Representative of a Class of All Current and Former Owners of Union Square Condominium Association, Plaintiffs-Appellants, v. H.F.O., L.L.C. and Spectrum-Hubbard Limited Partnership, Defendants-Appellees (Jerald Lasky, Murray Peretz and Union Square Condominium Association, Defendants).
• Court: United States Appellate Court of Illinois

817 N.E.2d 1054

353 Ill. App.3d 82

288 Ill.Dec. 404

Louis B. POULET and Holly Geraci, Individually and as Representative of a Class of All Current and Former Owners of Union Square Condominium Association, Plaintiffs-Appellants, v. H.F.O., L.L.C. and Spectrum-Hubbard Limited Partnership, Defendants-Appellees (Jerald Lasky, Murray Peretz and Union Square Condominium Association, Defendants).

No. 1-03-2109.

Appellate Court of Illinois, First District, Second Division.

September 30, 2004.

Rehearing Denied November 1, 2004.

John Bernard Cashion, Chicago, for Appellants.

Meckler, Bulger & Tilson (Bruce R. Meckler, Christopher E. Kentra, James G. Argionis, of counsel), Chicago, for Appellees.

Presiding Justice BURKE delivered the opinion of the court:

Plaintiffs Louis Poulet (Poulet) and Holly Geraci (Geraci), owners of individual units in Union Square Condominiums (Union Square), appeal from an order of the circuit court dismissing with prejudice (1) count II of Poulet's second amended complaint (based on a claim of conversion) and count III (based on a claim of common law constructive fraud) and (2) Geraci's complaint, in its entirety, against defendants H.F.O., L.L.C. (H.F.O.) and Spectrum-Hubbard Limited Partnership (Spectrum),¹ as well as (3) the trial court's denial of their motion to reconsider. On appeal, plaintiffs contend that: (1) the trial court erred in dismissing Poulet's counts for conversion and common law constructive fraud with prejudice for lack of standing pursuant to section 2-619(a)(9) of the Illinois Code of Civil Procedure (Code) (735 ILCS 5/2-619(a)(9) (West 2002)); (2) the trial court abused its discretion in dismissing Geraci's complaint with prejudice pursuant to section 2-619(a)(3) of the Code (735 ILCS 5/2-619(a)(3) (West 2002)) on the basis that there was "another action pending between the same parties for the same cause"; (3) the trial court erred in dismissing both Poulet and Geraci's count I, in which they alleged a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 2000)) (hereinafter "consumer fraud count"), based on the statute of limitations; and (4) their right to bring an action for common law fraud or wilful misconduct may not be impaired by the declarations, by-laws or other regulations which have the effect of exculpating such conduct. For the reasons set forth below, we affirm.

STATEMENT OF FACTS

On November 5, 2001, Todd Cameron, Poulet, Deepak Agrawal, Michael Petrushansky, Tamara and Thomas Crawford, Adam and Samantha Stolberg, Gregg and Michelle Schwartz and Raymond DeVos (collectively the "Cameron plaintiffs") filed a complaint in the trial court seeking monetary damages on behalf of themselves and all past and present owners of the condominium units in Union Square located at 333 West Hubbard Street in Chicago. The Cameron plaintiffs' complaint was filed through their attorney, Peter Geraci, who also owned a condominium unit at Union Square. The Cameron plaintiffs' complaint, which we mention only briefly here,² contained various claims of breach of fiduciary duty, fraud and/or certain "construction defects" against H.F.O., the developer of the condominiums; Spectrum, the manager of H.F.O.; Jerald Laskey, president of H.F.O. and officer of Spectrum; Spectrum Real Estate Services, Inc. (Spectrum Real Estate), a corporation which marketed and sold the condominiums; Murray Peretz, a partner at H.F.O., partner at Spectrum and officer of Spectrum Real Estate; Exelon Thermal Technologies, Inc. (Exelon), a corporation that contracted with the developer to install and supply Union Square's heating and cooling equipment; and Merger Construction Services, Inc. (Merger), a company that rehabilitated and constructed the condominium units. The Cameron plaintiffs also filed a petition for a temporary restraining order to stop the above named defendants from negotiating with the president of the board of managers of Union Square's condominium association (Association) and to stop the Association from releasing the developer from liability without the consent of all the unit owners, but this petition was subsequently denied.

All defendants except Exelon collectively filed a motion to dismiss, claiming, inter alia, that the Cameron plaintiffs lacked standing to bring the above claims and that the complaint was "nothing more than a frivolous attempt to interfere with a settlement between the [Association] and the building's developer." The trial court granted defendants' motion to dismiss, in part, by dismissing with prejudice all counts based on breach of fiduciary duty, one count of fraud against Exelon and one count based on "construction defects" against H.F.O. and Merger, reasoning that these counts involved "an Association claim," and, thus, the Cameron plaintiffs lacked standing to bring them. As a result, Exelon and Merger were dismissed from the lawsuit.

On May 6, 2002, the Cameron plaintiffs filed an amended complaint, alleging "theft of funds," fraud and breach of contract against defendants H.F.O., Spectrum, Laskey, Spectrum Real Estate, Peretz and Merger. On June 4, defendants collectively filed a motion to dismiss all counts, arguing that, pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 2002)), the Cameron plaintiffs' claims failed to meet the requisite pleading requirements, and, pursuant to section 2-619(a)(9) of the Code (735 ILCS 5/2-619(a)(9) (West 2002)), the Cameron plaintiffs lacked standing to bring the claims because such claims were based on the Association's interests. Defendants also filed a motion to disqualify Peter Geraci as the Cameron plaintiffs' counsel, alleging, among other things, that he was an owner of a unit at Union Square, he had filed a lawsuit against several former board members of the Association, alleging that they had squandered the Association's funds, and he had personal knowledge of this case that would make him a material witness. The Cameron plaintiffs subsequently withdrew Peter Geraci as their attorney and substituted attorney John Cashion (Cashion) to represent them. On June 26, the Cameron plaintiffs filed a motion for leave to file a second amended complaint, which was denied by the trial court on July 2. On August 19, the trial court stated that the hearing on defendants' motion to dismiss would be set for September 12.

On August 21, Geraci (Peter Geraci's wife), through her attorney, Cashion (the same attorney used by the Cameron plaintiffs), filed a complaint, case No. 02 L 010724, individually and as a representative of a class of all current and former owners of units in Union Square, against defendants H.F.O., Lasky, Peretz and Spectrum, alleging claims of consumer fraud, conversion, common law constructive fraud and common law fraud. In her complaint, Geraci alleged the following general information: Union Square was composed of 217 dwelling units, some of which had been combined into single dwelling units and were first offered for sale in 1996; Geraci had purchased her units directly from the condominium developer; Geraci and her husband owned approximately three percent of the total ownership in Union Square; and the Association administered Union Square as an agent on behalf of the unit owners.

In support of her counts alleging conversion and common law constructive fraud claims, Geraci alleged the following: prior to the first election of the Association's board of managers (the first election), the unit owners paid money into a separate bank account, which was held in the Association's name; the Association did not own the funds in the Association's bank account, but rather, each plaintiff had a percentage of ownership interest in the funds; payments from the Association's account were to be made solely for maintenance and operating expenses of the condominium units; prior to the first election, H.F.O. held and exercised all of the rights, powers and privileges vested in the board of managers; prior to the first election, Lasky and Peretz directed that checks be delivered from the Association's account solely for the benefit of themselves, H.F.O. and Spectrum; the first election took place in November 1999; several of the Association's elected board members were employees or officers of H.F.O. who had purchased units in Union Square; after the first election, Lasky and Peretz, acting on behalf of H.F.O. and Spectrum, again directed that checks be delivered from the Association's account for the benefit of themselves, H.F.O. and Spectrum; there were no records showing the reasons these funds were paid from the Association's account; the unit owners demanded that the funds be returned, but no defendant complied with the demand; and defendants at all times owed a fiduciary duty³ that was breached when funds were taken from the Association's account.

In support of her counts based on consumer fraud and common law fraud, Geraci alleged that a property report, prepared at the direction of Lasky and Peretz and effective November 1, 1996, made false representations with respect to the common elements, landscaping, courtyard, fire suppression system, storage facilities and masonry repairs, which generated expenses to the unit owners; that statements in the first amendment to the property report were false; that the property report and amendments thereto made material representations and concealed certain facts resulting in the unit owners being required to pay additional assessments; and that the unit owners would not have purchased their unit had they known that they would be liable for the additional assessments.

With respect to the Cameron plaintiffs, on September 12, the trial court granted their motion for voluntary dismissal of certain individual plaintiffs, leaving only Poulet and Deepak Agrawal as plaintiffs named in the litigation. Also, on September 12, the trial court granted defendants' motion to...