Court Opinion

ID: 4355154
Source: CourtListenerOpinion
Date Created: 2018-12-28 23:05:01.488292+00
Date Added: 2024-06-11T14:46:14.569841
License: Public Domain

2018 IL App (1st) 182133
                                              No. 1-18-2133
                                                                      Fourth Division
                                                                   December 27, 2018
     ______________________________________________________________________________

                                         IN THE

                             APPELLATE COURT OF ILLINOIS

                                     FIRST DISTRICT

     ______________________________________________________________________________

                                                              )

     SIENA AT OLD ORCHARD CONDOMINIUM                         )

     ASSOCIATION and THE BOARD OF DIRECTORS OF                )

     THE SIENA AT OLD ORCHARD CONDOMINIUM                     )

     ASSOCIATION,                                             )

                                                              ) Appeal from the Circuit Court
             Plaintiffs-Appellees,                            ) of Cook County.
                                                              )
     v.                                                       ) No. 18 L 2670
                                                              )
     SIENA AT OLD ORCHARD, L.L.C.; LENNAR                     ) The Honorable
     CHICAGO, INC.; and LARRY KEER, Individually,             ) Patrick J. Sherlock,
                                                              ) Judge Presiding.
             Defendants                                       )

                                                              )

     (Siena at Old Orchard, L.L.C.; and Lennar Chicago, Inc., )

             Defendants-Appellants).                          )

                                                              )

     ______________________________________________________________________________

                JUSTICE GORDON delivered the judgment of the court, with opinion. 

                Presiding Justice McBride and Justice Reyes concurred in the judgment and opinion.

                                                OPINION

¶1         The instant appeal arises from a dispute over whether the condominium declaration for

        the Siena at Old Orchard Condominium requires the parties—the condominium association,

        the developer, and the management company—to submit disputes to mediation and then, if

        not settled, to arbitration rather than filing suit in the circuit court. We previously addressed

        the validity of an amendment to the declaration that removed the arbitration requirement,
     No. 1-18-2133

         finding the amendment to be effective. Siena at Old Orchard Condominium Ass’n v. Siena at

         Old Orchard, L.L.C., 2017 IL App (1st) 151846. The issue that arises on this appeal is

         whether that amendment is retroactive, given that the date of the events that gave rise to the

         complaint in the instant case arose prior to the effective date of the amendment. The trial

         court found that, based on our prior opinion, the amendment was retroactive such that the

         process of mediation and then arbitration of the instant dispute was not required. For the

         reasons that follow, we reverse the trial court and find that the preamended version of the

         declaration governs the instant dispute.

¶2                                            BACKGROUND

¶3           As noted, the instant case previously came before us in Siena at Old Orchard

         Condominium Ass’n v. Siena at Old Orchard, L.L.C., 2017 IL App (1st) 151846. We

         provided a detailed recitation of the allegations of the complaint in our prior opinion, and

         repeat here only those facts relevant to the issues present in this appeal. On July 17, 2013,

         plaintiffs, Siena at Old Orchard Condominium Association and its board of directors

         (collectively, the Association) filed an eight-count complaint against defendants, Siena at Old

         Orchard, L.L.C., and Lennar Chicago, Inc. (collectively, the developers). 1 The complaint

         alleges that Siena at Old Orchard, L.L.C., was the developer of Siena at Old Orchard

         Condominium, a residential condominium complex located in Skokie, and that Lennar

         Chicago, Inc., was the developer’s manager. The Association was established on July 24,

         2006, and from its formation until March 2007, it was governed by a board of directors

         appointed by the developer. In March 2007, control of the Association was transferred from

             1
               The complaint also named as a defendant Larry Keer, the president of the Association’s initial
     board of directors. However, the counts aimed at him are not at issue on appeal and Keer is not a party to
     the instant appeal.
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     No. 1-18-2133

        the initial developer-appointed board to a board of directors elected by the unit owner

        membership. Larry Keer was the president of the Association’s board of directors on July 18,

        2008.

¶4         The complaint alleges that the common elements of the building were experiencing

        problems with water infiltration, caused by improper construction including the exterior

        walls of the building, which were experiencing severe cracking and deterioration. The

        complaint alleges that after the turnover of the board of directors, some of the unit owners

        retained a consultant to investigate the cause of water infiltration problems that were being

        experienced. During the course of his investigation, “the consultant performed several tests

        and made exploratory investigations into the common elements of the building to determine

        the causes of the leaks.” The consultant issued a report to the Association in May 2010,

        identifying “defective” portions of the property, including the asphalt paving, the exterior

        masonry walls, the masonry expansion joints, and balcony deck membranes. The complaint

        further alleges that “[t]his is the first time that the post developer Board became aware that

        there [were] defects at the Association that were attributable to the developer’s defective

        development of the Association.” These construction defects were “affecting the structural

        integrity of the building and its common elements.” Furthermore, the complaint alleges, “the

        manner in which several portions of the building were installed and constructed is contrary to

        the architectural drawings and specifications prepared for the Association building.”

¶5         The complaint alleges that prior to the turnover, the developer and the initial board had

        actual knowledge of the construction defects in the common elements, but that “[t]he unit

        owner controlled board did not have knowledge of these construction defects until after” the

        May 2010 report by the Association’s consultant. However, despite having knowledge of the

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     No. 1-18-2133

        construction defects, the developer and the initial board “failed to inform the post developer

        Board of the fact that the defective conditions at the Association were caused by the

        defective development, design and construction of the Condominium.” The complaint set

        forth a total of eight counts, including breach of fiduciary duty, breach of contract, breach of

        the warranty of habitability, and breach of the implied warranty of good workmanship and

        materials.

¶6         Attached to the complaint was the declaration of condominium ownership for Siena at

        Old Orchard Condominium, recorded on July 24, 2006. Article 12 of the declaration was

        entitled “Dispute Resolution,” and contained five sections. Under section 12.02, the parties

        “covenant[ed] and agree[d] to submit those Claims, grievances or disputes described in

        Section 12.03 (collectively, ‘Claims’) to the procedures set forth in Section 12.04.” The

        “Claims” referred to in section 12.02 of the declaration were set forth in section 12.03, which

        was entitled “Claims.” Section 12.03 provided, in relevant part:

               “[A]ll claims between any of the Bound Parties regardless of how the same might

               have arisen or on what it might be based, including but not limited to Claims (a)

               arising out of or relating to the interpretation, application or enforcement of the

               provisions of the Act, this Declaration, the By-Laws and reasonable rules and

               regulations adopted by the Board or the rights, obligations and duties of any bound

               Party under the provisions of the Act, this Declaration, the By-Laws and reasonable

               rules and regulations adopted by the Board, (b) relating to the design or construction

               of improvements; or (c) based upon any statements, representations, promises,

               warranties, or other communications made by or on behalf of any bound Party shall

               be subject to the provisions of Section 12.04.”

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     No. 1-18-2133

¶7         Section 12.04 set forth the procedure the parties agreed to follow in the event a claim

        arose. As relevant to the instant appeal, section 12.04(b)(iv), entitled “Dispute Resolution,”

        provided:

               “Any dispute (whether contract, warranty, tort, statutory or otherwise) including, but

               not limited to (a) any and all controversies, disputes or claims arising under, or related

               to, the Purchase Agreement, the Unit, or any dealings between the Declarant and

               Owner ***, (b) any controversy, dispute or claim arising by virtue of any

               representations, promises or warranties alleged to have been made by Declarant or

               Declarant’s representative, and (c) any personal injury or property damage alleged to

               have been sustained by Purchaser on the Property (hereinafter individually and

               collectively referred to as ‘disputes’ or ‘Claims’), shall first be submitted to mediation

               and, if not settled during mediation, shall thereafter be submitted to binding

               arbitration as provided in Paragraphs 12.04(c) and 12.04(d) below and as provided by

               the Federal Arbitration Act (9 U.S.C. Section 1 et seq.) or applicable state law

               relating to arbitration and not by or in a court of law.”

¶8         Also included within the declaration was a document entitled “Amendment of the

        Declaration of Condominium Ownership for Siena Old Orchard Condominium Association.”

        Pursuant to the amendment, article 12 of the declaration was deleted in its entirety. The

        document was signed by the president of the Association and stated that “[t]his Amendment

        shall be effective upon recordation in the Office of the Recorder of Deeds of Cook County,

        Illinois”; the recordation date on the document was August 30, 2011.

¶9         On August 28, 2013, and on October 9, 2013, Keer and the developers, respectively, filed

        motions to dismiss the complaint pursuant to sections 2-615 and 2-619 of the Code of Civil

                                                      5

       No. 1-18-2133

           Procedure (Code) (735 ILCS 5/2-615, 2-619 (West 2012)), on the basis that article 12 of the

           declaration deprived the trial court of jurisdiction and required the parties to submit the

           dispute to arbitration. On February 13, 2014, the trial court granted the motions to dismiss

           without prejudice, finding that the amendment removing article 12 was not valid because the

           declaration required the developer’s express written consent prior to any amendments. On

           February 26, 2014, the Association filed a motion to reconsider, arguing that section 27(a)(i)

           of the Condominium Property Act (Act) (765 ILCS 605/27(a)(i) (West 2012)) rendered the

           provision requiring the developer’s consent invalid. On May 8, 2014, the trial court granted

           the motion to reconsider and found that the amendment was valid.

¶ 10           On May 29, 2014, the Association filed an amended complaint, followed by a second

           amended complaint on September 10, 2014, in which the Association added allegations that

           it had not sent any notices under the declaration that would have triggered the

           mediation/arbitration requirements. On September 24, 2014, the developers filed another

           motion to dismiss, claiming, inter alia, that the Association had sent a letter to the developer

           that constituted notice to trigger the mediation/arbitration process and had therefore waived

           its claims by failing to submit the claims to mediation within the allotted time requirement.

           On November 4, 2014, the trial court granted the motion to dismiss with prejudice, finding

           that the letter triggered the mediation/arbitration process as delineated in article 12 of the

           original declaration.

¶ 11           The Association appealed 2 and, on appeal, we reversed. In our analysis, we first set forth

           the issues raised by the Association on appeal and by the developers on their cross-appeal.

           Specifically, we noted that the Association was challenging the trial court’s finding that the

               2
                In addition to the Association’s appeal, we also considered a cross-appeal by the developers
       concerning the trial court’s award of attorney fees.
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       No. 1-18-2133

          letter sent by the Association’s attorney constituted “notice” such that it triggered the dispute

          resolution procedure under article 12 of the declaration and that the developers were

          challenging the trial court’s finding that section 27 of the Act invalidated the provision of the

          declaration requiring the developer’s consent to any amendments. Siena at Old Orchard,

          2017 IL App (1st) 151846, ¶ 45.

¶ 12         We began by considering whether the letter sent by the Association’s attorney constituted

          “notice” such that it triggered the dispute resolution process. We looked to the language of

          the declaration concerning the requirements for notice, and compared those requirements to

          the contents of the letter sent by the attorney. Upon doing so, we found that the letter did not

          satisfy the requirements for “notice” and, therefore, did not trigger the dispute resolution

          process. Thus, since the dispute resolution process was not triggered by the sending of a

          notice, the Association’s claims could not have been waived by its failure to submit the

          claims to mediation within the specified time period. Accordingly, we found that the trial

          court had erred in dismissing the complaint on this basis. Siena at Old Orchard, 2017 IL App

          (1st) 151846, ¶ 61.

¶ 13         After having concluded that the Association’s claims had not been waived, we proceeded

          to consider whether the amendment to the declaration was prohibited by the declaration’s

          requirement that the developer consent to any amendments. We noted that the trial court had

          found that the restriction on amendments conflicted with section 27 of the Act, rendering the

          restriction void. We looked to the language of the statute, including comparing it with other

          provisions within the Act, in order to determine whether section 27 prescribed the only way

          to amend declarations, and concluded that it did. Consequently, we found that the additional

          restriction on amendments was not permitted under the Act and that the Association was

                                                       7

       No. 1-18-2133

          permitted to amend the declaration to remove article 12. Siena at Old Orchard, 2017 IL App

          (1st) 151846, ¶ 71. Specifically, we found:

                 “As we have concluded, the plain and clear language of section 27(a) of the Act

                 provides the only method for amending the declaration and section 12.05 seeks to

                 impose alternate, more severe, restrictions. This is not permitted by the Act and,

                 accordingly, the trial court properly found that the amendment removing article 12 in

                 its entirety was valid. Since the amendment was valid, the Association was not

                 required to submit its claims to mediation or arbitration prior to filing the instant

                 lawsuit.” Siena at Old Orchard, 2017 IL App (1st) 151846, ¶ 71.

¶ 14         We also considered whether releases signed by Keer provided an alternate basis for

          affirming the dismissal of the complaint and concluded that they did not. Accordingly, we

          reversed the trial court’s dismissal of the complaint. Siena at Old Orchard, 2017 IL App (1st)

          151846, ¶ 87.

¶ 15         On April 25, 2018, the Association filed a third amended complaint, which added counts

          of unjust enrichment against the developers and against Keer. On May 31, 2018, the

          developers filed a combined motion to dismiss the third amended complaint pursuant to

          section 2-619.1 of the Code (735 ILCS 5/2-619.1 (West 2016)), arguing that the amendment

          had no effect on the applicability of the arbitration requirement because the dispute between

          the parties arose no later than August 2010, a year prior to the amendment. To the extent that

          our opinion could be read to suggest otherwise, the developers argued that such a holding

          was in conflict with a subsequently-issued United States Supreme Court opinion in Kindred

          Nursing Centers Limited Partnership v. Clark, 581 U.S. ___, 137 S. Ct. 1421 (2017), and

                                                        8

       No. 1-18-2133

          that section 27 of the Act could not be “used as a tool to strip the arbitration provisions in the

          Declaration from controlling in this dispute.”

¶ 16         On September 12, 2018, the trial court entered an order denying the developers’ motion

          to dismiss the third amended complaint. In its analysis, the court interpreted our prior opinion

          as implicitly finding that the amendment of the declaration would apply retroactively.

¶ 17                                            ANALYSIS

¶ 18         On appeal, we are asked to consider one issue: whether the amendment to the declaration,

          which removed the alternative dispute resolution procedure, applies to the Association’s

          claims in the instant case, which admittedly occurred prior to the effective date of the

          amendment. While this court normally has jurisdiction to consider only final orders of the

          trial court (see Ill. S. Ct. R. 301 (eff. Feb. 1, 1994)), Supreme Court Rule 307 provides for the

          appealability of certain types of interlocutory orders. See Ill. S. Ct. R. 307 (eff. Nov. 1,

          2017). Specifically, Rule 307(a) provides that an interlocutory order “granting, modifying,

          refusing, dissolving, or refusing to dissolve or modify an injunction” is appealable as of right.

          Ill. S. Ct. R. 307(a)(1) (eff. Nov. 1, 2017). An order denying a motion to dismiss a complaint

          on the basis of an arbitration clause has been found to be an order denying an injunction for

          purposes of Rule 307. See, e.g., Ward v. Hilliard, 2018 IL App (5th) 180214, ¶ 16; Zurich

          American Insurance Co. v. Personnel Staffing Group, LLC, 2018 IL App (1st) 172281, ¶ 10;

          Midland Funding, LLC v. Raney, 2018 IL App (5th) 160479, ¶ 1. Accordingly, we have

          jurisdiction to consider the present appeal.

¶ 19         In the case at bar, both the trial court below and the Association on appeal primarily rely

          on the claim that we decided this question in the prior appeal. The Association thus claims

          that our prior opinion was the law of the case such that further litigation of the issue is

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        No. 1-18-2133

           barred. “Under the law-of-the-case doctrine, generally, a rule established as controlling in a

           particular case will continue to be the law of the case, as long as the facts remain the same.”

           People v. Patterson, 154 Ill. 2d 414, 468 (1992); Krautsack v. Anderson, 223 Ill. 2d 541, 552

           (2006). “The doctrine applies to questions of law and fact and encompasses a court’s explicit

           decisions, as well as those decisions made by necessary implication.” American Service

           Insurance Co. v. China Ocean Shipping Co. (Americas) Inc., 2014 IL App (1st) 121895, ¶

           17. However, “a ruling will not be binding in a subsequent stage of litigation when different

           issues are involved, different parties are involved, or the underlying facts have changed.”

           American Service Insurance, 2014 IL App (1st) 121895, ¶ 17.

¶ 20	         We agree with the developers that our prior opinion did not decide the question present in

           the instant appeal. Both parties pick and choose selective quotes from our opinion in support

           of their interpretations of the decision, and we do not fully agree with either party’s

           interpretation. However, the simple fact remains that this was not the question presented to

           this court on the prior appeal. The trial court, at that point, had dismissed the complaint

           because it had found that the letter sent by the Association’s attorney had triggered the

           dispute resolution process and that the Association had failed to comply with that process,

           thereby waiving its claims. See Siena at Old Orchard, 2017 IL App (1st) 151846, ¶ 50. This

           was the first question considered, and decided, by this court. See Siena at Old Orchard, 2017

           IL App (1st) 151846, ¶¶ 49-61. Since the dispute resolution process had not been triggered,

           we proceeded to consider the developers’ argument that the amendment to the declaration,

           removing the mandatory mediation/arbitration requirements, was ineffective given the

           declaration’s requirement that the developer consent to any amendments. See Siena at Old

           Orchard, 2017 IL App (1st) 151846, ¶ 63. We therefore considered the language of section

                                                       10 

        No. 1-18-2133

            27 of the Act and its effect on the declaration and concluded that the restriction on

            amendments violated the Act and that the Association was permitted to amend the

            declaration without the developer’s consent. See Siena at Old Orchard, 2017 IL App (1st)

            151846, ¶¶ 62-71. 3 We did not make any rulings on the retroactive application of the

            amendment, nor were we asked to do so. 4 Accordingly, we cannot find anything in our prior

            opinion that would answer the question presented by the instant case and proceed to consider

            the retroactivity question on its merits.

¶ 21            Condominium declarations are covenants running with the land. LaSalle National Trust,

            N.A. v. Board of Directors of the 1100 Lake Shore Drive Condominium, 287 Ill. App. 3d 449,

            455 (1997). “A covenant is a contract to which the ordinary rules of contract construction

            apply.” Chiurato v. Dayton Estates Dam & Water Co., 2017 IL App (3d) 160102, ¶ 28; Xinos

            v. Village of Oak Brook, 298 Ill. App. 3d 520, 524 (1998). “In interpreting a covenant, the

            goal of the court is to give effect to the actual intent of the parties when the covenant was

            made.” Neufairfield Homeowners Ass’n v. Wagner, 2015 IL App (3d) 140775, ¶ 16.

¶ 22	           In the case at bar, there is no dispute that, as alleged in the complaint, the Association

            became aware of its claims against the developers after the May 2010 report commissioned

            by the members of the Association, in which the consultant identified a number of alleged

            construction defects. There is also no dispute that the initial version of the declaration,

            recorded in July 2006, provided for mandatory mediation first, then arbitration if the matter

                3
                   We then considered whether certain releases executed by Keer provided an alternate basis for
        dismissal. See Siena at Old Orchard, 2017 IL App (1st) 151846, ¶¶ 72-83. However, this issue is not
        before us on the instant appeal.
                 4
                   In the briefing on the prior appeal, the closest the parties came to this argument was the
        developers’ argument that the Association’s claims had already been waived by its noncompliance with
        the terms of the provision after it had been triggered by the time the amendment became effective. Thus,
        this argument was still in the context of determining whether the process had been “triggered” and, given
        that we determined that it had not, would not have required us to analyze any issues of retroactivity.
                                                           11 

       No. 1-18-2133

           was not resolved. Finally, there is no dispute that the amendment removing the

           mediation/arbitration requirement was recorded on August 30, 2011, and that the amendment

           stated that it “shall be effective upon recordation in the Office of the Recorder of Deeds of

           Cook County, Illinois.” Thus, there is no dispute that, when the Association’s cause of action

           arose, 5 the version of the declaration then in effect was the preamendment version, which

           contained the mediation/arbitration requirement. It follows, then, that the dispute resolution

           procedure set forth in the version of the declaration that was in effect at the time would

           govern the resolution of the claim—in other words, since the mediation/arbitration

           requirement was still in effect at the time, it would apply. We note that the amendment itself

           did not provide for retroactive application, even though it would have been permitted under

           the terms of the Act. See 765 ILCS 605/17(a) (West 2010) (“An amendment of the

           declaration or bylaws shall be deemed effective upon recordation unless the amendment sets

           forth a different effective date.”). Accordingly, we must presume that the Association was

           aware that its amendment would only apply to future disputes. Consequently, we reverse the

           trial court’s judgment and find that the instant dispute is subject to the preamended version of

           the declaration.

¶ 23                                            CONCLUSION

¶ 24           For the reasons set forth above, since the Association’s cause of action arose prior to the

           amendment of the declaration, and since the amendment affected only future disputes, the

           present dispute was governed by the preamended version of the declaration and, therefore,

           was subject to the mandatory mediation/arbitration requirements.

¶ 25           Reversed.

               5
                 We note that the Association does not challenge the developers’ use of the May 2010 report as
       the relevant date for purposes of determining when its cause of action arose.
                                                          12