Wolinsky v. Kadison

• Decision Date: 30 March 1983
• Docket Number: No. 81-335,81-335
• Court: United States Appellate Court of Illinois
• Parties: , 70 Ill.Dec. 277 Debra Rae WOLINSKY, Plaintiff-Appellant, v. Joseph L. KADISON, Stanley K. Feinberg, David Lefkovits, Edward Targ, Dennis A. Bell, all individually and as Board of Directors of Ambassador House Condominium Association, Ambassador House Condominium Association, Andra Addis, Eugene Matanky & Associates, Inc., an Illinois corporation, and Eugene Matanky & Associates Management Corporation, an Illinois corporation, Defendants-Appellees.

Page 151

449 N.E.2d 151

114 Ill.App.3d 527, 70 Ill.Dec. 277

Debra Rae WOLINSKY, Plaintiff-Appellant, v. Joseph L. KADISON, Stanley K. Feinberg, David Lefkovits Edward Targ, Dennis A. Bell, all individually and as Board of Directors of Ambassador House Condominium Association Ambassador House Condominium Association, Andra Addis Eugene Matanky & Associates, Inc., an Illinois corporation and Eugene Matanky & Associates Management Corporation, an Illinois corporation, Defendants-Appellees.

No. 81-335.

Appellate Court of Illinois, First District, Third Division.

March 30, 1983.

Rehearing Denied May 26, 1983.

The Law Firm of Martin E. Litwin, Chicago (Alan Michael Katz, Chicago, of counsel), for plaintiff-appellant.

Robert Marc Chemers, Pretzel, Stouffer, Nolan & Rooney, Chartered, Chicago (Robert Marc Chemers and Joseph B. Lederleintner, Chicago, of counsel), for defendants-appellees.

RIZZI, Justice:

In a three-count amended complaint, plaintiff, Debra Rae Wolinsky, sought damages from defendants, the Ambassador House Condominium Association, its Board of Directors individually and as the Board, Eugene Matanky & Associates, Inc., and Eugene Matanky & Associates Management Corporation, the companies employed to manage the condominium, and Andra Addis, an employee of the management companies. All defendants except Eugene Matanky & Associates, Inc., moved to dismiss the complaint for failure to state a cause of action. The trial court dismissed the complaint. We affirm in part and reverse and remand in part.

In count I of her amended complaint, plaintiff alleged that she owned unit 4D in the Ambassador House Condominium and that she was a member in good standing of the association. She further alleged that in late August 1978, she contracted to purchase unit 21F in the same condominium, and in early September she contracted to sell unit 4D. In late September, the board notified plaintiff that it was exercising its right of first refusal with regard to unit 21F, and the seller of unit 21F then terminated its contract with plaintiff. Plaintiff also alleged that the board had knowledge of the contents of the association's bylaws and that in exercising its right of first refusal, the board acted without the affirmative vote of two-thirds of the total ownership of the common elements as required under the bylaws.

Count II of plaintiff's complaint is predicated upon a violation of the Chicago condominium ordinance which provides, inter alia : "No person shall be denied the right to purchase or lease a unit because of race, religion, sex, sexual preference, marital status or national origin." Municipal Code of Chicago 1978, ch. 100.2, par. 100.2-4. Plaintiff alleged that defendants violated the ordinance because the board exercised the right of first refusal on the basis of the condominium management's report to the board that plaintiff is an unmarried female who would occupy unit 21F with her children.

In count III, plaintiff realleged most of the allegations of count I and further alleged that defendants acted with wilful and wanton disregard for the bylaws of the condominium association. Plaintiff attached to the complaint a copy of her contract with the owner of unit 21F and a copy of the association's bylaws.

In determining whether a motion to dismiss a complaint was properly allowed, well-pleaded facts and reasonable inferences which can be drawn therefrom must be accepted as true. Panorama of Homes, Inc. v. Catholic Foreign Mission Society, Inc., 84 Ill.App.3d 142, 145, 39 Ill.Dec. 513, 516, 404 N.E.2d 1104, 1107 (1980). The complaint should not be dismissed for failure to state a cause of action unless it clearly appears that no set of facts could be proved under the pleadings which would entitle plaintiff to relief. Saldana v. American Mutual Corporation, 97 Ill.App.3d 334, 336, 52 Ill.Dec. 651, 653, 422 N.E.2d 860, 862 (1981). Plaintiff argues that the dismissal of her complaint was improper because her complaint stated a cause of action for (1) unreasonable restraint on alienation; (2) violation of the bylaws of the condominium association, which she characterizes as a breach of fiduciary duty; (3) violation of the antidiscrimination section of the Chicago condominium ordinance; and (4) wilful and wanton misconduct.

In response to plaintiff's argument that she stated a cause of action for unreasonable restraint on alienation, defendants first contend that plaintiff lacks standing to complain about the board's exercise of the right of first refusal. Defendants maintain that the restraint on alienation here only involved the rights of the owner of unit 21F to sell that property and that as a prospective purchaser, plaintiff had no interest in unit 21F. We disagree.

In determining whether a party has standing, the primary focus is upon the personal stake in the outcome of the controversy of the person seeking adjudication of a particular issue. Weihl v. Dixon, 56 Ill.App.3d 251, 253, 13 Ill.Dec. 789, 791, 371 N.E.2d 881, 883 (1977). Thus, the person seeking to invoke the jurisdiction of the court must have some real interest in the cause of action. Weihl, 56 Ill.App.3d at 253-54, 13 Ill.Dec. at 791, 371 N.E.2d at 883. The standing doctrine is not meant to preclude a valid controversy from being litigated, but rather, to preclude persons having no interest in the controversy from bringing suit. Commonwealth Edison Co. v. Community Unit School District No. 200, Du Page County, 44 Ill.App.3d 665, 670, 3 Ill.Dec. 290, 293, 358 N.E.2d 688, 691 (1976). Where the person most directly affected actually has no interest in the controversy, courts have been more liberal in allowing persons indirectly affected to bring suit. Commonwealth Edison, 44 Ill.App.3d at 670, 3 Ill.Dec. at 293, 358 N.E.2d at 691.

Here, plaintiff has a substantial, real interest because she was unable to purchase the unit for which she had contracted. Moreover, the seller of unit 21F, the party who, according to defendants, would have standing to bring an action for unreasonable restraint on alienation, actually has no interest here since under the condominium declaration, the association as purchaser would be bound to the same terms as plaintiff proposed. Under these circumstances, we believe that plaintiff alleged facts which indicate sufficient interest to withstand a motion to dismiss.

Defendants next turn to the substance of plaintiff's action for unreasonable restraint on alienation, and they argue that the right of first refusal exercised here is a reasonable restraint. Plaintiff contends that a right of first refusal is an unreasonable restraint on alienation when exercised, as it was here, to exclude current members of the association. In other words, plaintiff argues that the restraint here is unreasonable as applied. We believe that plaintiff adequately stated a cause of action under this theory.

A board must exercise a right of first refusal reasonably upon consideration of the prospective purchaser's qualifications in light of the economic and social reasons which justify the restraint itself. See Logan v. 3750 North Lake Shore Drive, Inc., 17 Ill.App.3d 584, 590, 308 N.E.2d 278, 283 (1974). Thus, a requirement that the right of first refusal be exercised reasonably must be implied. See Mowatt v. 1540 Lake Shore Drive Corp., 385 F.2d 135, 137 (7th Cir.1967). The criteria for testing the reasonableness of an exercise of this power by a condominium association are (1) whether the reason for exercising the right of first refusal is rationally related to the protection, preservation or proper operation of the property and the purposes of the association as set forth in its governing instruments and (2) whether the power was exercised in a fair and nondiscriminatory manner. See Laguna Royale Owners Association v. Darger, 119 Cal.App.3d 670, 174 Cal.Rptr. 136, 144 (Cal.App.1981).

Defendants argue that plaintiff's membership in the association does not "confer greater rights" on plaintiff, and that plaintiff stepped out of her role as a member of the association and acted merely as a member of the public when she decided to purchase unit 21F. We find no merit in either contention. Moreover, even if we were persuaded by defendants' arguments, the reasonableness requirement still applies to defendants' actions. Since plaintiff alleged her membership in the association and the board's exercise of a right of first refusal on the unit she had contracted to purchase, we conclude that plaintiff's complaint stated a cause of action for unreasonable restraint on alienation.

Next, plaintiff argues that her complaint was improperly dismissed since it stated a cause of action for violation of the bylaws of the association, which she characterizes as a breach of fiduciary duty. Plaintiff contends that defendants breached their fiduciary duty when they exercised a right of first refusal without first obtaining the requisite affirmative vote of the ownership. Article I, section 6 of the bylaws provides:

The affirmative vote of not less than two-thirds ( 2/3) of the total ownership of the Common Elements is required in order to approve any of the following proposed action: (1) merger or consolidation of the Association; (2) sale, lease, exchange, mortgage, pledge or other disposition of all, or substantially all of the property and assets of the Association; and (3) the purchase or sale of land or Units on behalf of all Unit Owners.

Defendants argue that the bylaws do not specifically refer to the right of first refusal, and therefore they are inapplicable here. According to defendants, the association's rights and powers emanate from the recorded declaration of condominium ownership. Paragraph 19B of the declaration details the notice procedures regarding "sale, leasing or other alienation" and then provides:

During the period of twenty (20) days following receipt by the Board of such written notice, the Board, on behalf of all...