Sterdjevich v. RMK Management Corp.

• Decision Date: 08 September 2003
• Docket Number: No. 1-00-3952.,1-00-3952.
• Citation: 796 N.E.2d 1146,343 Ill. App.3d 1,277 Ill.Dec. 780
• Parties: Frank STERDJEVICH and Tracy Green, Indiv. and on Behalf of All Others Similarly Situated, Plaintiffs-Appellees and Cross-Appellant, v. RMK MANAGEMENT CORPORATION, Arplace Limited Partnership, Draper and Kramer, Incorporated, Rescorp Realty, Incorporated, and NHP Management Company, Defendants-Appellants and Cross-Appellees.
• Court: United States Appellate Court of Illinois

796 N.E.2d 1146

343 Ill. App.3d 1

277 Ill.Dec. 780

Frank STERDJEVICH and Tracy Green, Indiv. and on Behalf of All Others Similarly Situated, Plaintiffs-Appellees and Cross-Appellant, v. RMK MANAGEMENT CORPORATION, Arplace Limited Partnership, Draper and Kramer, Incorporated, Rescorp Realty, Incorporated, and NHP Management Company, Defendants-Appellants and Cross-Appellees.

No. 1-00-3952.

Appellate Court of Illinois, First District, First Division.

September 8, 2003.

Jeffrey M. Friedman and Brian R. Holman, Friedman & Holman, Chicago, for Appellees and Cross-Appellant.

Robert J. Zaideman, Zaideman & Esrig, P.C., Chicago, for Appellants and Cross-Appellees.

Presiding Justice GORDON delivered the opinion of the court:

The instant suit arises from a dispute between plaintiffs Frank Sterdjevich (Sterdjevich) and Tracy Green (Green) and defendants NHP Management Corporation (NHP) and Rescorp Realty, Inc. (Rescorp), stemming from gas utility charges that defendants allegedly billed to plaintiffs in violation of the Tenant Utility Payment Disclosure Act (Act) (765 ILCS 740/1 et seq. (West 1996)) and in breach of their respective lease agreements. On appeal, defendants NHP and Rescorp contend that the trial court erred in denying their motions for sanctions against plaintiff Sterdjevich, who, they assert, knowingly made false material allegations in his pleadings. NHP, alone, further asserts that the trial court erred in denying its motions for attorney fees and other expenses incurred during litigation of the instant case to which it would have been entitled under the express provisions of the operative lease. In his cross-appeal, plaintiff Sterdjevich alleges that the trial court erred in granting NHP's motion for summary judgment with respect to his second amended complaint. For the reasons that follow, we affirm the trial court's judgment with respect to summary judgment and the denial of attorney fees and other litigation expenses, and reverse with respect to sanctions.

BACKGROUND

In March 1995, plaintiffs Sterdjevich and Green filed a class-action¹ complaint on behalf of themselves and as representatives of the other tenants of the building located at 200 Arlington Place in Arlington Heights, Illinois (200 Arlington Place), against RMK Management Corporation (RMK) and Arplace Limited Partnership (Arplace).² The complaint alleged that RMK and Arplace breached their respective lease agreements, violated the Illinois Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 1996)) and violated the Act when they assessed a monthly gas utility charge to tenants at 200 Arlington Place without providing an assessment formula for master metered utilities. Thereafter, in March 1996, plaintiffs filed a first amended complaint wherein they named additional defendants, including Draper & Kramer, Incorporated (Draper & Kramer),³ Rescorp and NHP. With respect to Rescorp and NHP, plaintiffs made the following allegations which are relevant to the instant appeal: (1) that defendants "breach[ed] lease agreements entered into with the tenants at 200 Arlington Place, by assessing tenants a monthly `gas charge' in violation of the terms of the lease and in violation of Illinois law"; (2) that defendants committed deceptive practices by failing to disclose that tenants would be required to pay a monthly gas charge; and (3) that the leases executed between defendants and plaintiffs contained a provision which provided that tenants would be responsible only for payment of individually metered utility charges.

Prior to filing their first amended complaint, plaintiffs filed a motion stating the reasons why they sought leave to amend. In the motion, plaintiffs asserted that they deposed Kate Wojciechowski, the manager of 200 Arlington Place, and that she testified that Rescorp and NHP "engaged in the practice of charging tenants for Gas Charges despite explicit lease provisions and Illinois law prohibiting same." In support of this contention, plaintiffs attached to their motion an excerpt from Wojciechowski's deposition, wherein she stated that Rescorp and NHP constructed 200 Arlington Place and that Rescorp subsequently managed the building from 1987 until 1989. NHP then took over management duties until 1991. In the excerpted portion of the deposition, Wojciechowski further stated that she worked as an assistant manager for NHP, and testified that NHP used the same leases as those utilized by other managing companies in the building, which contained the following provision, hereinafter identified as Paragraph 7:

"7. UTILITIES: Unless otherwise agreed in writing, if the Apartment is individually metered, payment to the utility company or authorized metering agency of the applicable charges for gas, electricity or water consumed by Tenant in the Apartment, including, if applicable, current use for electrical heating, ventilation, air conditioning, hot water, etc. shall be Tenant's sole responsibility."

She could not say whether Rescorp also used leases containing a provision similar to Paragraph 7. Wojciechowski averred that Draper & Kramer took over management of 200 Arlington Place in May 1992 and continued in that capacity until December 1992. She averred that Draper & Kramer included language in its lease such as that set forth in Paragraph 7. Although not included in the excerpted testimony provided by plaintiffs, Wojciechowski testified in her deposition that she executed a lease with Rescorp for a unit at 200 Arlington Place for the period of April 19, 1991, through May 31, 1992. Notably, nowhere in the deposition excerpt provided by plaintiffs did Wojociechowski state, as plaintiffs represented, that NHP and Rescorp charged tenants for gas utilities.

On May 26, 1996, defense counsel wrote a letter to plaintiffs' counsel regarding the allegations made in the first amended complaint. In the letter, defense counsel advised that the leases actually used by Rescorp and NHP were materially different from the leases used by the other management agencies, upon which plaintiffs' complaint was based. Defense counsel indicated that the NHP and Rescorp leases "spell out how that charge [utility charge] will be assessed." With the letter, defense counsel provided copies of the 1991 lease executed between Sterdjevich and NHP, as well as the form lease utilized by Rescorp for 200 Arlington Place. Finally, defense counsel advised plaintiffs that it would be filing a motion to dismiss the complaint in the event that plaintiffs decided to proceed with their suit in light of the information provided and would also seek attorney fees because the pleading filed was "baseless." Plaintiffs chose to proceed, and on May 31, 1996, NHP and Rescorp filed a motion to dismiss the first amended complaint. In that motion, defendants contended that dismissal of plaintiffs' first amended complaint was warranted because plaintiffs failed to allege that they entered into a lease agreement with either of the defendants and failed to provide the written instrument upon which their claim was based.

On August 8, 1996, plaintiffs filed their "Response to Defendants Rescorp Reality, Inc. and NHP Management Company's Motion to Dismiss." In that response, plaintiffs asserted that they filed their first amended complaint "[b]ased on Wojciechowski's testimony in which she stated that NHP committed the same practices as the original defendants (RMK and Arplace) with respect to assessing gas charges, and that she did not know whether Rescorp committed such practices." Plaintiffs also argued that defendants' motion to dismiss did not raise adequate pleading defects because "the mere fact that the plaintiffs have not attached a copy of the leases which forms the basis of their allegations against defendant Rescorp and NHP is inconsequential since the leases are or were within the custody and control of the defendants." Plaintiffs went on to assert that "defendants NHP and Rescorp have not produced the leases which their agent admitted exist." Plaintiffs also reiterated that Wojciechowski's deposition supported the facts in their complaint because she stated that NHP entered into leases, which were similar to those of other management companies, "in which gas charges were assessed in violation of the terms of the lease, * * * the Consumer Fraud Act, and * * * [the Act]."

Defendants, in turn, filed a reply in support of their motion to dismiss wherein they reasserted that the first amended complaint was deficient because it did not allege that plaintiffs were involved in a landlord/tenant relationship with defendants and did not have, as an attachment, a copy of the leases upon which the complaint was based. Defendants also pointed out that copies of the subject leases were turned over to plaintiffs with defendants' May 26, 1996, letter, and in support, attached copies of the letter as well as the subject leases to their reply memorandum. On September 17, 1996, the trial court granted defendants' motion to dismiss and allowed plaintiffs 28 days to file an amended complaint.

On October 15, 1996, plaintiff Sterdjevich filed his second amended complaint, which did not include Rescorp as a defendant but did name NHP. Notably, the second amended complaint was brought by Sterdjevich only and eliminated Green as a putative class representative.⁴ In count IV of the complaint, plaintiff alleged that he entered into a lease agreement with NHP on December 12, 1991, for a term commencing on January 5, 1992, and continuing through January 31, 1993. With respect to gas utility charges, the lease stated that gas utilities would be master metered for all apartments and that tenants would be charged monthly for their gas usage at a rate proportional to the charges incurred for the entire building based on a ratio between the space leased by the tenant and the total space in the building. Plaintiff alleged in the complaint that the lease did not provide a...