Court Opinion

ID: 3148012
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:40:38.950817+00
Date Added: 2024-06-11T11:55:20.950320
License: Public Domain

ILLINOIS OFFICIAL REPORTS
                                        Appellate Court

                Seth v. Aqua at Lakeshore East, LLC, 2012 IL App (1st) 120438

Appellate Court            VIJAY SETH, NIRMAL SETH, SHIVA VALLABHAPURAPU-SETH,
Caption                    ASHEESH SETH, GURDIP SINGH, KULWINDER K. SAINI,
                           RADHIKA REDDY, CHENNA GUNDA, SANJAY A. BHATIA,
                           ANURADHA RAO, RAVI GUDAMEDA, MEETA YADAVA, NIRUP
                           KRISHNAMURTHY, RICHARD PODRAZA, SUSAN PODRAZA and
                           CASEY JAGIELNICK, Plaintiffs-Appellees, v. AQUA AT
                           LAKESHORE EAST, LLC, Defendant-Appellant.

District & No.             First District, Third Division
                           Docket No. 1-12-0438

Filed                      September 26, 2012
Rehearing denied           October 29, 2012

Held                       The developer of a condominium project satisfied its obligation pursuant
(Note: This syllabus       to plaintiffs’ purchase agreements to provide plaintiffs with the
constitutes no part of     “condominium documents,” including the recorded condominium
the opinion of the court   association declaration, by providing plaintiffs with the 61-page
but has been prepared      association declaration, since plaintiffs’ actual knowledge of the
by the Reporter of         unrecorded declaration was “the functional equivalent of recording” and
Decisions for the          satisfied the requirements of section 22 of the Condominium Property
convenience of the         Act.
reader.)

Decision Under             Appeal from the Circuit Court of Cook County, No. 10-CH-04483; the
Review                     Hon. Kathleen M. Pantle, Judge, presiding.
Judgment                   Reversed and remanded.

Counsel on                 Katten & Temple LLP, of Chicago (Jeffrey R. Tone and Nancy A.
Appeal                     Temple, of counsel), for appellant.

                           Keogh Law, Ltd., of Chicago (Keith J. Keogh and Timothy J. Sostrin, of
                           counsel), for appellees.

Panel                      JUSTICE STEELE delivered the judgment of the court, with opinion.
                           Presiding Justice Salone and Justice Sterba concurred in the judgment
                           and opinion.

                                             OPINION

¶1          Defendant, Aqua at Lakeshore East, LLC (Aqua), appeals from an order of the circuit
        court of Cook County granting partial summary judgment to plaintiffs, Vijay Seth, Nirmal
        Seth, Shiva Vallabhapurapu-Seth, Asheesh Seth, Gurdip Singh, Kulwinder K. Saini, Radhika
        Reddy, Chenna Gunda, Sanjay A. Bhatia, Anuradha Rao, Ravi Gudameda, Meeta Yadava,
        Nirup Krishnamurthy, Richard Podraza, Susan Podraza, and Casey Jagielnick (plaintiffs).
        The trial judge ruled plaintiffs were entitled to rescind purchase agreements related to a
        prospective condominium development because the developer failed to provide them with
        a recorded declaration. For the following reasons, we disagree, reverse the judgment, and
        remand the case to the circuit court for further proceedings.

¶2                                         BACKGROUND
¶3          The record on appeal discloses the following facts. Aqua is the seller of condominium
        units plaintiffs contracted to purchase as part of a luxury real estate development located on
        28 acres northeast of Millennium Park in Chicago, Illinois. The development was to include
        a high-end hotel, which would offer condominium residents additional amenities not
        available in most residential towers.
¶4          Plaintiffs signed their respective purchase agreements on various dates in August,
        September, October and December 2006, and July 2007. Plaintiffs made earnest money
        deposits ranging between $39,169 and $73,730, depending on the purchase price of each
        respective unit. The deposits were to be held in segregated, interest-bearing escrow accounts.
¶5          The purchase agreements state that the developer anticipated accepting title to the
        property in December 2006, and estimated construction would be completed on or about
        December 2010, although closings might occur before the latter date. The purchase
        agreements also provided that, prior to closing, the seller would cause to be recorded, in

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     accordance with the Illinois Condominium Property Act (Act) (765 ILCS 605/1 et seq. (West
     2006)), the declaration of condominium ownership and of easements, restrictions, covenants
     and bylaws for the Aqua at Lakeshore East Condominium Association (Association), as well
     as the plat showing the building and purchased unit at issue. The purchase agreements further
     required the purchasers to acknowledge receipt of the “condominium documents,” which the
     agreement defined as: (1) the floor plan of the purchased unit; (2) a master association
     declaration; (3) the Association declaration, including the Association bylaws; (4) an
     estimated operating budget for the property and estimated monthly assessments for the
     Association; (5) a copy of the heating cost disclosure statement; and (6) the City of Chicago
     property report (Property Report) for the property.1 The agreements then provide in part:
             “Seller reserves the right to make any changes in the Condominium Documents and
         Plans (as hereinafter defined) permitted by law, subject to the provisions of section 22
         of the Act. To the extent that section 22 of the Act requires Purchaser’s approval of
         certain changes in the Condominium Documents or Plans, Purchaser’s sole remedy in the
         event of Purchaser’s non-approval of such changes shall be to the rescind this Agreement
         within the time and in the manner provided by the Act.”
     Each plaintiff initialed the acknowledgment in his or her respective agreement.
¶6       The 61-page Association declaration provided to purchasers contained, among other
     things, the Association bylaws, a description of the common elements, and the percentage
     ownership of the common elements. The Association declaration refers several times to the
     plat of survey as an exhibit to the declaration. However, the plat was not included as an
     exhibit to the Association declaration. Instead, a preliminary plat based on architectural
     drawings was included in the Property Report.
¶7       The Property Report states that the developer planned to submit the project to the
     provisions of the Act by recording the declaration in the form provided as an exhibit to the
     report. The Property Report also states the purchases of the units were subject to the terms
     of the Association declaration and bylaws. The report further states the final declaration and
     as-built surveys had not been completed and the developer could not guarantee there would
     be no material changes to the units. Moreover, the report reserved the right for the developer
     to change the plans to include greater or fewer units than indicated in the condominium
     documents.
¶8       Aqua recorded the Association declaration with the recorder of deeds’ office on
     September 10, 2009. The percentage ownership of the common elements is not identical to
     the percentages listed in the Association declarations provided to the plaintiffs in connection
     with their purchase agreements. The recorded declaration also includes seven units not
     identified in the Association declarations provided to the plaintiffs regarding their purchase
     agreements.

            1
              The Chicago Municipal Code requires that developers make property reports available to
     prospective purchasers. Chicago Municipal Code § 13-72-50 (amended May 4, 2011). The contents
     of the report are also specified by ordinance. Chicago Municipal Code § 13-72-20 (amended May
     4, 2011).

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¶9         On February 2, 2010, plaintiffs filed this lawsuit against Aqua, alleging that Aqua failed
       to provide them with a recorded declaration. Plaintiffs also allege that on November 5, 2008,
       Aqua informed them that the high-end hotel had terminated its contract to purchase the lower
       15 floors of the development, which plaintiffs claim would result in higher monthly
       assessments for condominium unit owners. Plaintiffs further allege that Aqua marketed the
       building as residential, but the project was legally classified as commercial, which created
       additional difficulties and costs for the plaintiffs. Plaintiffs seek to rescind their contracts
       under section 22 of the Act (765 ILCS 605/22 (West 2006)) and section 2 of the Illinois
       Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/2 (West 2006)).
       Plaintiffs also seek a declaratory judgment that the contracts are rescinded and allege breach
       of contract.
¶ 10       On January 25, 2011, plaintiffs filed a motion for partial summary judgment on count I
       of their complaint, which sought rescission of their contracts pursuant to section 22 of the
       Act (765 ILCS 605/22 (West 2006)). On March 23, 2011, Aqua filed its response and a
       cross-motion for partial summary judgment. On June 22, 2011, the circuit court entered a
       memorandum opinion and order granting partial summary judgment in favor of the plaintiffs.
       The trial judge ruled that section 22 of the Act required Aqua to provide plaintiffs with a
       copy of the recorded Association declaration, which Aqua failed to do. Accordingly, the trial
       judge concluded that plaintiffs were entitled to rescind their purchase agreements. The trial
       judge ordered Aqua to return the earnest money deposits “with interest thereon at the rate in
       effect for interest on judgments.”
¶ 11       On July 22, 2011, Aqua moved for reconsideration. On September 2, 2011, the circuit
       court denied the motion for reconsideration. Aqua then moved for a clarification regarding
       the calculation of interest. On January 6, 2012, the circuit court ruled a 9% interest rate
       would apply from the date plaintiffs demanded rescission, and ordered the parties to calculate
       the interest due. On January 20, 2012, the court entered orders stating the amounts due the
       respective plaintiffs and finding no just reason to delay enforcement or appeal of the partial
       summary judgment, pursuant to Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010). On
       February 10, 2012, Aqua filed a timely notice of appeal to this court.

¶ 12                                       DISCUSSION
¶ 13        On appeal, Aqua argues that the trial judge erred in granting partial summary judgment
       to the plaintiffs. Summary judgment is appropriate when “the pleadings, depositions, and
       admissions on file, together with the affidavits, if any, show that there is no genuine issue as
       to any material fact and that the moving party is entitled to a judgment as a matter of law.”
       735 ILCS 5/2-1005(c) (West 2010). The purpose of summary judgment is not to try a
       question of fact, but to determine whether a genuine issue of triable fact exists. Adams v.
       Northern Illinois Gas Co., 211 Ill. 2d 32, 42-43 (2004). In determining whether a question
       of fact exists, “a court must construe the pleadings, depositions, admissions, and affidavits
       strictly against the movant and liberally in favor of the opponent.” Williams v. Manchester,
       228 Ill. 2d 404, 417 (2008). Summary judgment is “a drastic means of disposing of
       litigation” and thus should only be awarded when the moving party’s right to judgment as

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       a matter of law is “clear and free from doubt.” Id. We review grants of summary judgment
       de novo. Id.
¶ 14       Count I of plaintiffs’ complaint sought rescission of their contracts pursuant to section
       22 of the Act, which provides in relevant part:
           “In relation to the initial sale or offering for sale of any condominium unit, the seller
           must make full disclosure of, and provide copies to the prospective buyer of, the
           following information relative to the condominium project:
               (a) the Declaration;
                                                  ***
               All of the information required by this Section which is available at the time shall be
           furnished to the prospective buyer before execution of the contract for sale. Thereafter,
           no changes or amendments may be made in any of the items furnished to the prospective
           buyer which would materially affect the rights of the buyer or the value of the unit
           without obtaining the approval of at least 75% of the buyers then owning interest in the
           condominium. If all of the information is not available at the time of execution of the
           contract for sale, then the contract shall be voidable at option of the buyer at any time up
           until 5 days after the last item of required information is furnished to the prospective
           buyer, or until the closing of the sale, whichever is earlier. Failure on the part of the seller
           to make full disclosure as required by this Section shall entitle the buyer to rescind the
           contract for sale at any time before the closing of the contract and to receive a refund of
           all deposit moneys paid with interest thereon at the rate then in effect for interest on
           judgments.
               A sale is not an initial sale for the purposes of this Section if there is not a bona fide
           transfer of the ownership and possession of the condominium unit for the purpose of
           occupancy of such unit as the result of the sale or if the sale was entered into for the
           purpose of avoiding the requirements of this Section. The buyer in the first bona fide sale
           of any condominium unit has the rights granted to buyers under this Section. If the buyer
           in any sale of a condominium unit asserts that such sale is the first bona fide sale of that
           unit, the seller has the burden of proving that his interest was acquired through a bona
           fide sale.” 765 ILCS 605/22 (West 2006).
       The Act defines the declaration as “the instrument by which the property is submitted to the
       provisions of this Act, as hereinafter provided, and such declaration as from time to time
       amended.” 765 ILCS 605/2(a) (West 2006). Property is submitted to the provisions of the
       Act by recording the declaration. 765 ILCS 605/3 (West 2006).
¶ 15       Here, the trial judge ruled that section 22 of the Act required Aqua to provide plaintiffs
       with a copy of the recorded Association declaration, which Aqua failed to do, thereby
       entitling plaintiffs to rescind their contracts. On appeal, Aqua contends that section 22 does
       not require the developer provide a recorded declaration. Aqua argues that the definition of
       a declaration is ambiguous and may be construed to refer to the document that gets recorded,
       rather than one already recorded. Aqua also notes that the legislature was able to clearly refer
       to a recorded declaration in the Act’s definition of “condominium instruments.” 765 ILCS
       605/2(l) (West 2006).

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¶ 16        Aqua further notes that the Act’s definitions apply “unless the context otherwise
       requires.” 765 ILCS 605/2 (West 2006). Aqua maintains that if the Act defines the
       declaration as the recorded instrument, that definition should not apply to section 22, which
       Aqua claims clearly applies to projects that have not yet been built. Aqua argues that,
       because a declaration must be recorded with the plat, a declaration cannot be recorded until
       the project is built. See 765 ILCS 605/5 (West 2006). Thus, Aqua notes that the trial judge’s
       interpretation would allow prospective buyers to rescind until the project is complete, which
       Aqua maintains would negatively affect financing for new condominium construction.
       Moreover, Aqua argues that the purpose of recording statutes is to give notice of the
       property’s status to the world and actual notice of the declaration to prospective purchasers
       is “the functional equivalent of recording” for purposes of this lawsuit. See Schaumburg
       State Bank v. Bank of Wheaton, 197 Ill. App. 3d 713, 720 (1990) (unrecorded amendment
       of declaration effective as to plaintiffs with actual notice thereof).
¶ 17        In this case, we need not decide whether the trial judge or Aqua has the superior
       interpretation of the Act. Even assuming arguendo that section 22 of the Act refers to a
       recorded declaration, plaintiffs’ actual knowledge of the unrecorded declaration under these
       circumstances constituted “the functional equivalent of recording” insofar as they were
       concerned. See id. In her order, the trial judge raised the possibility that the developer could
       change an unrecorded declaration at will, adversely and materially affecting a purchaser’s
       percentage of ownership. However, section 22 of the Act expressly provides that “no changes
       or amendments may be made in any of the items furnished to the prospective buyer which
       would materially affect the rights of the buyer or the value of the unit without obtaining the
       approval of at least 75% of the buyers then owning interest in the condominium.” 765 ILCS
       605/22 (West 2006). Having provided a declaration to a prospective buyer, the developer is
       not free to materially alter the instrument at will.
¶ 18        Section 22 of the Act has been described as a “truth in selling” provision, directed toward
       providing financial information for prospective buyers and protecting them from hidden
       long-term condominium management agreements entered into between project development
       and management groups which had the same principal parties. See Mikulecky v. Bart, 355
       Ill. App. 3d 1006, 1011 (2004). The provision of actual knowledge of an unrecorded
       declaration which cannot be altered other than pursuant to the Act is fully consistent with
       these statutory purposes. Thus, we conclude the trial judge erred in granting plaintiffs
       summary judgment on count I of their complaint.2

               2
                 Plaintiffs assert in their statement of facts that Aqua made material changes to the
       declaration before recording it. However, this was not the basis for the summary judgment and
       plaintiffs presented no argument thereon in their brief. Illinois Supreme Court Rule 341(h)(7) (eff.
       July 1, 2008) requires a clear statement of contentions with supporting citation of authorities and
       pages of the record relied upon. Ill-defined and insufficiently presented issues that do not satisfy the
       rule are considered forfeited. Gandy v. Kimbrough, 406 Ill. App. 3d 867, 875 (2010).

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¶ 19                                      CONCLUSION
¶ 20       In short, we conclude that the trial judge erred in granting plaintiffs summary judgment
       on count I of their complaint. Plaintiffs’ actual knowledge of the unrecorded declaration
       under these circumstances is “the functional equivalent of recording” satisfying the
       requirements of section 22 of the Act, even assuming arguendo that section requires a
       recorded declaration. Accordingly, for all of the aforementioned reasons, the judgment of the
       circuit court of Cook County is reversed and remanded for further proceedings consistent
       with this opinion.

¶ 21      Reversed and remanded.

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