Kai v. Board of Directors of Spring Hill Building 1 Condominium Ass'n , 2020 IL App (2d) 190642 ( 2020 )

2020 IL App (2d) 190642No. 2-19-0642
Opinion filed June 3, 2020
IN THE
APPELLATE COURT OF ILLINOIS
SECOND DISTRICT
KATIE KAI; BAOHUA XUE; ) Appeal from the Circuit Court
MILIN P. PATEL; ARTI D. PATEL; ) of Du Page County.
MACIEJ LABOWICZ; EVA LABOWICZ; )
VSA PROPERTIES LLC; EVERYOUNG, )
LLC-SERIES 1; EVERYOUNG, LLC-SERIES )
2; EVERYOUNG, LLC-SERIES 3; )
EVERYOUNG, LLC-SERIES 4; )
EVERYOUNG, LLC-SERIES 5; )
EVERYOUNG, LLC-SERIES 6; )
EVERYOUNG, LLC-SERIES 7; NEWPORT )
HOMES PENSION PLAN; MITUL RAO; )
NISHABEN RAO; HEMAL RAO; SHITAL )
RAO; DAVID YU; JANE LEE; CHARLENE )
M. ROMBERG REVOCABLE LIVING )
TRUST; DENNIS KRULL; RENATA )
MAJEWSKI; GRAZYNA KIELCZESKA; )
BRIAN PRZYBYLSKI; BOGUSLAW )
PRZYBYLSKI; and MAUREEN JORDAN, ))
)
Plaintiffs, )
)
v. ) No.18-CH-960
)
BOARD OF DIRECTORS OF SPRING HILL )
BUILDING 1 CONDOMINIUM )
ASSOCIATION, INC.; BOARD OF )
DIRECTORS OF SPRING HILL )
BUILDING 4 CONDOMINIUM )
ASSOCIATION, INC.; BOARD OF )
DIRECTORS OF SPRING HILL BUILDING ) 5
CONDOMINIUM ASSOCIATION, INC.; )
BOARD OF DIRECTORS OF SPRING )
HILL BUILDING 6 CONDOMINIUM )
ASSOCIATION, INC.; SPRING HILL )
CONDOMINIUMS MASTER )
2020 IL App (2d) 190642ASSOCIATION, INC.; MOSAIC )
SPRINGHILL, LLC; DAVID I. DRESDNER; )
SHERWOOD E. BLITSTEIN; RICHARD )
BLATT; and MOSAIC BEVERLY FMC, LLC,)
)
Defendants-Appellees ) Honorable
) Paul M. Fullerton,
(Maureen Jordan, Plaintiff-Appellant). ) Judge, Presiding.
JUSTICE SCHOSTOK delivered the judgment of the court, with opinion.
Justices Zenoff and Jorgensen concurred in the judgment and opinion.
OPINION
¶ 1 This case centers on the forced bulk sale of condominium units under section 15 of the
Condominium Property Act (Act) (765 ILCS 605/15 (West 2018)). The plaintiffs—all individual
unit owners—filed suit, contending among other things that the defendants breached their fiduciary
duties toward the plaintiffs. The trial court dismissed their claims, ruling that the procedures in
section 15 constituted the sole remedy available to the plaintiffs, regardless of any breach of
fiduciary duty by the defendants. The correctness of that determination is the focus of this appeal.
¶2 I. BACKGROUND
¶ 3 The following facts are drawn from undisputed facts in the record and the allegations of the
second amended complaint (complaint). Because this is an appeal from the dismissal of that
complaint, we take the facts alleged therein as true. See Wallace v. Smyth, 203 Ill. 2d 441, 447
(2002).
¶ 4 The Spring Hill condominium complex is located in Roselle. It consists of six buildings
(numbered 1 through 6), each of which has more than four units. Each building is governed by a
condominium association that acts through a five-person board elected by the unit owners in that
association. The associations in turn belong to a single master association for the complex. The
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2020 IL App (2d) 190642plaintiff Maureen Jordan owned two units in the complex: one in building 1 and one in building 6.
All of the remaining plaintiffs owned units in buildings 1, 4, 5, or 6.
¶5 The defendant Mosaic Spring Hill, LLC (MSH), was controlled, directly or indirectly, by
the defendants, David Dresdner, Sherwood Blitstein, and Richard Blatt. Over a few years, MSH
purchased a number of the units at the complex. As of October 2018, MSH owned all of the units
in buildings 2 and 3. It also owned more than 75% of the units in buildings 4, 5, and 6, and a
majority of the units in building 1. With this majority interest, MSH elected Dresdner, Blitstein,
and Blatt (the Defendant Board Members) to the boards of each building’s association as well as
the master association, enabling them to exercise a controlling vote on each association’s board.
Dresdner was the president of the association boards for buildings 1, 4, 5, and 6, and the master
association. Those boards (Defendant Boards) were all named as defendants herein.
¶ 6 Under section 15 of the Act, if a sufficient majority of the unit owners in an association votes
in favor of a bulk sale of all of the units, the majority may force such a sale. The minority owners
are entitled to receive the value of their interests in the property but must sell their units as provided
in the bulk sale contract. The provisions of section 15 are intended to prevent holdout unit owners
from blocking a sale favored by the majority of owners.
Ҥ 15. Sale of property.
(a) Unless a greater percentage is provided for in the declaration or bylaws, *** not
less than 75% where the property contains 4 or more units may, by affirmative vote at a
meeting of unit owners duly called for such purpose, elect to sell the property. Such action
shall be binding upon all unit owners, and it shall thereupon become the duty of every unit
owner to execute and deliver such instruments and to perform all acts as in manner and
form may be necessary to effect such sale, provided, however, that any unit owner who did
not vote in favor of such action and who has filed written objection thereto with the
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2020 IL App (2d) 190642manager or board of managers within 20 days after the date of the meeting at which such
sale was approved shall be entitled to receive from the proceeds of such sale an amount
equivalent to the greater of: (i) the value of his or her interest, as determined by a fair
appraisal, less the amount of any unpaid assessments or charges due and owing from such
unit owner or (ii) the outstanding balance of any bona fide debt secured by the objecting
unit owner’s interest which was incurred by such unit owner in connection with the
acquisition or refinance of the unit owner’s interest, less the amount of any unpaid
assessments or charges due and owing from such unit owner. The objecting unit owner is
also entitled to receive from the proceeds of a sale under this Section reimbursement for
reasonable relocation costs ***.
(b) If there is a disagreement as to the value of the interest of a unit owner who did
not vote in favor of the sale of the property, that unit owner shall have a right to designate
an expert in appraisal or property valuation to represent him, in which case, the prospective
purchaser of the property shall designate an expert in appraisal or property valuation to
represent him, and both of these experts shall mutually designate a third expert in appraisal
or property valuation. The 3 experts shall constitute a panel to determine by vote of at least
2 of the members of the panel, the value of that unit owner’s interest in the property.” 765
ILCS 605/15 (West 2018).
¶ 7 In late 2017, the Defendant Board Members decided to acquire the remaining units that MSH
did not own through a bulk sale to the defendant, Mosaic Beverly FMC, LLC—an entity that they
also controlled. In preparation for this sale, they used their positions on the Defendant Boards to
approve the use of association funds to pay for the services of lawyers and appraisers. They also
could suppress dissent and block other potential buyers from being considered.
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2020 IL App (2d) 190642¶ 8 In June 2018, the Defendant Boards notified all unit owners of a July 9 meeting for each
building for the purpose of approving a bulk sale of all units. A copy of a sale contract identifying
Mosaic Beverly as the buyer was attached to the notices. Under the contract, owners of one-
bedroom units would receive $83,475, an amount substantially less than the sale price for
comparable units in Spring Hill in 2016. The contract explicitly favored the defendants in several
respects. For instance, the contract did not require MSH to actually transfer its units, providing
that, if the buyer or any of its affiliates owned a unit, it could elect not to actually transfer the unit
and instead the ownership interest of that unit would simply be deemed to have been transferred
at closing “for purposes of calculating the unit ownership of the Association transferred.”
(Presumably, this provision was intended to minimize any transfer taxes and avoid other ordinary
consequences of unit ownership transfer. Moreover, as the units owned by MSH would not actually
be sold, the low price being paid by the affiliated buyer would not matter to MSH.) Further, the
buyer retained sole discretion to elect not to proceed with the sale and terminate the contract,
making the obligation to proceed with the sale one-sided. The contract also included other terms
that served the defendants’ interests at the expense of minority unit owners, including a purported
release of personal liability for association board members. The overall effect of the contract was
to oust the minority unit owners on terms favoring the defendants.
¶ 9 The July 9 meetings, which were controlled by the Defendant Board Members, were cursory.
For example, the meeting for building 1 was adjourned immediately after being called to order,
when the Defendant Board Members realized that the sale did not have the support of 75% of the
unit owners. The board refused to allow any discussion of the proposed sale, hold an actual vote,
or allow a non-MSH board member to videotape the meeting. The other three meetings consisted
solely of the vote, without allowing discussion of the sale contract or any other matters. Because
MSH owned more than 75% of the units in buildings 4, 5, and 6, the bulk sale
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2020 IL App (2d) 190642of those buildings was approved. Within 20 days, all of the plaintiff unit owners except Jordan
submitted written objections to the sale.
¶ 10 The plaintiffs filed suit in late July 2018, claiming breach of fiduciary duty, fraud, and civil
conspiracy, and seeking an injunction to prevent the sale as well as rescission of the bulk sale
contract. They filed an amended complaint in September 2018. The defendants moved to dismiss
on a variety of grounds. The trial court granted the defendants’ motions and dismissed the amended
complaint without prejudice.
¶ 11 In October 2018, the plaintiffs filed their second amended complaint. It contained four counts
at issue here: count I, alleging breach of fiduciary duty; count II, constructive fraud(based on the
same facts as count I); count III, rescission; and count IV, civil conspiracy (alleging the agreement
of the defendants and the buyer under the bulk sale contracts to deprive the plaintiffs of the fair
value of their interests). The plaintiffs did not assert any claim that the defendants were not
complying section 15 of the Act.
¶ 12 The defendants moved to dismiss the complaint pursuant to section 2-619 of the Code of Civil
Procedure (Code) (735 ILCS 5/2-619 (West 2018)), arguing that the plaintiffs could not assert a
claim for breach of fiduciary duty (or the related claims in the other counts) because the procedure
in section 15 of the Act was the sole remedy available to minority unit owners in the event of a
bulk sale, regardless of whether there was any breach of fiduciary duty in the transaction. After
briefing and oral argument, the trial court agreed and granted the defendants’ motion to dismiss.
However, the trial court held the case open to allow it to monitor the defendants’ compliance with
the appraisal process outlined in section 15(b), on the ground that the plaintiffs could still possibly
assert claims under the Act. In April 2019, the appraisers issued a report stating that the fair value
of the plaintiffs’ one-bedroom units was either $105,000 or $115,000, depending on condition. On
June 20, 2019, the trial court ruled that the appraisers’ report would
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2020 IL App (2d) 190642stand. The order entered that day disposed of other pending matters and stated that, “[a]ll claims
and matters having been disposed of, this order is final and appealable.” Jordan filed a timely
appeal from the trial court’s December 2018 and June 2019 orders. She was the only plaintiff to
appeal.
¶ 13 II. ANALYSIS
¶ 14 Although Jordan appealed from the trial court’s orders of December 2018 (dismissing the
entire complaint) and June 2019 (closing the case), she now clarifies that she challenges only the
dismissal of the first four counts of the complaint.1 Thus, we confine our analysis to the trial court’s
dismissal of those four claims pursuant to section 2-619 of the Code.
¶ 15 A. Dismissal of Counts I, II, and IV
¶ 16 Under section 2-619 of the Code, claims can be dismissed if they are “barred by other
affirmative matter avoiding the legal effect of or defeating the claim.” 735 ILCS 5/2-619(a)(9)
(West 2018). “A motion to dismiss under section 2-619 admits well-pleaded facts but does not
admit conclusions of law and conclusory factual allegations unsupported by allegations of specific
facts alleged in the complaint.” McIntosh v. Walgreens Boots Alliance, Inc., 2019 IL 123626,
¶ 16. “The propriety of a dismissal under section 2-619(a)(9) of the Code presents a question of
law that we review de novo.” Id. ¶ 17.
¶ 17 The trial court dismissed counts I, II, and IV of the complaint pursuant to section 2-619 of the
Code because it concluded that section 15 of the Act provided the sole remedy against
1 The defendants filed various motions to dismiss the appeal that were disposed of by
separate orders. As a result of those orders, the Defendant Boards for buildings 1, 4, and 5 were
dismissed from this appeal. The remaining appellees include MSH, the Defendant Board Members,
the Defendant Board of building 6, the master association, and Mosaic Beverly.
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2020 IL App (2d) 190642misconduct during a forced bulk sale of condominiums, regardless of whether that misconduct also
violated fiduciary duties. Although these counts assert different legal theories—breach of fiduciary
duty (count I), constructive fraud (count II), and civil conspiracy (count IV)—all of them depend on
the application of the law of fiduciary duty. Each claim thus raises the same legal question: was
section 15 intended to supplant all other causes of action, including those based on a breach of
fiduciary duty? The heart of Jordan’s appeal is her contention that the trial court answered this
question incorrectly.
¶ 18 The principles of statutory interpretation are well known. In construing a statute, our task is
to “ascertain and give effect to the legislature’s intent.” Lieb v. Judges’ Retirement System, 314
Ill. App. 3d 87, 92 (2000). The best indicator of the legislature’s intent is the plain language of the
statute. Lee v. John Deere Insurance Co., 208 Ill. 2d 38, 43 (2003). “When the statute’s language
is clear, it will be given effect without resort to other aids of statutory construction.” Id. “A court
may also consider the reason for the statute, the problems it seeks to remedy, the purposes to be
achieved, and the consequences of interpreting the statute one way or another.” Sperl v. Henry,
2018 IL 123132, ¶ 23. “One of the fundamental principles of statutory construction is to view all
provisions of an enactment as a whole,” and thus “words and phrases must be interpreted in light
of other relevant provisions of the statute.” J.S.A. v. M.H., 224 Ill. 2d 182, 197 (2007).
¶ 19 The recognition of fiduciary duties (and a cause of action for the breach of those duties) has
a centuries-long history in the common law. The defendants argue that, because section 15 of the
Act includes a procedure to determine a fair price for units subject to forced bulk sales and does
not explicitly mention fiduciary duties, neither such duties nor claims for their breach can apply to
bulk sales of condominiums. In essence, the defendants argue that the legislature intended the
statutory procedure in section 15 to displace common-law remedies. But this
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2020 IL App (2d) 190642argument is contrary to well-established principles governing the legislative abrogation of
common-law rules.
“Common-law rights and remedies remain in full force in this state unless expressly
repealed by the legislature or modified by court decision. [Citation.] A legislative intent to
alter or abrogate the common law must be plainly and clearly stated. [Citation.] As a
consequence, ‘Illinois courts have limited all manner of statutes in derogation of the
common law to their express language, in order to effect the least—rather than the most—
alteration in the common law.’ ” McIntosh, 2019 IL 123626, ¶ 30 (quoting Rush University
Medical Center v. Sessions, 2012 IL 112906, ¶ 16).
Here, section 15 expresses no legislative intent to alter the common law of fiduciary duties. Thus,
no such intent can be inferred from section 15. As further indication that the legislature did not
intend the Act to displace the common law of fiduciary duty, the Act itself imposes a fiduciary
duty on the members of the boards that govern condominium associations—a duty that they owe
to unit owners such as the plaintiffs. See 765 ILCS 605/18.4 (West 2018) (“In the performance of
their duties, the officers and members of the board *** shall exercise the care required of a
fiduciary of the unit owners.”). In light of section 18.4’s express imposition of fiduciary duties
upon association board members such as the Defendant Board Members, and section 15’s lack of
any explicit abrogation of those duties in a bulk sale, we conclude that the common law of fiduciary
duty “remain[s] in full force” and applies to the bulk sale of condominiums under section 15. See
McIntosh, 2019 IL 123626, ¶ 30.
¶ 20 The defendants argue that nothing in section 15 bars board members from owning a
majority of the units, voting in accordance with their own interests, or forcing a bulk sale if
sufficient votes favor that. But these are straw men—no one disputes these propositions. The
defendants also point out that section 15 does not explicitly prohibit majority owners from holding
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2020 IL App (2d) 190642an interest in the buyer during a bulk sale. But neither does section 15 contain any explicit approval
of such self-dealing; it is simply silent on the subject.
¶ 21 The defendants argue that certain aspects of section 15’s provisions for appraisals of
objectors’ units suggest that the legislature contemplated that the buyer in a bulk sale could be the
same as the majority owners, indicating that the legislature meant section 15’s appraisal process
to be the sole remedy even in such circumstances. Their reasoning on this point is somewhat
convoluted. They point out that under section 15(b) the buyer is entitled to appoint one of the
appraisers, despite the fact that the buyer might have no interest in how the objectors’ units are
appraised—the buyer might not necessarily have to pay more even if the appraisal is higher than
the per-unit sale price in the bulk sale contract, as the statute states that the increased price paid to
objectors will come from the “proceeds of the sale,” not necessarily out of the buyer’s pocket. The
defendants argue that the only reason the legislature would give the buyer a voice instead of the
majority owners (who could receive less of the sale proceeds if the appraisal results in a higher price
paid to objectors) is because the legislature contemplated that the two could be the same. As we
noted, however, we will not find that common-law rights have been abrogated unless the intent to
do so is clearly expressed (id.), and that standard is not met by this multilink chain of possibility.
¶ 22 Moreover, there is a better explanation for why the legislature allowed the buyer to select one
of the appraisers. When there is no self-dealing involved, the majority owners and the minority
owners have the same interest—maximizing the price they will receive for their units— and
majority owners can be expected to refuse to agree to any price that is significantly lower than the
fair value of their units. In these circumstances, the market functions as it should to set the
appropriate price, and the buyer must be given a voice to protect its interests in that process. When
the majority owners and the buyer both seek a lower sale price, however, the market is distorted.
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2020 IL App (2d) 190642And when the minority owners cannot refuse to sell (as is ordinarily the case in a bulk sale under
section 15), that distortion can result in substantial unfairness. In these circumstances, the
availability of a cause of action for breach of fiduciary duty is especially important. For all of these
reasons, we reject the defendants’ argument that the language of section 15 evinces an intent to
abrogate the common law of fiduciary duty.
¶ 23 The defendants next argue that, even if they owed a fiduciary duty, we cannot determine the
proper scope of that duty because the record is incomplete. They note that, in some instances, the
fiduciary duties owed by condominium association board members can be affected by the terms of
the condominium declaration and the bylaws of the condominium association. See La Salle
National Trust, N.A. v. Board of Directors of the 1100 Lake Shore Drive Condominium, 287 Ill.
App. 3d 449, 454 (1997). Here, neither the bylaws nor the declaration was attached to the
complaint or appears in the record on appeal. The lack of these documents is immaterial, however,
as neither party has suggested that the scope of the defendants’ fiduciary duty was in fact altered in
any way by the terms of these documents. (Indeed, if the defendants wished to raise this argument,
they, not plaintiffs, would have the burden to support that argument with appropriate evidence.) The
current state of the record does not impede our analysis of the arguments actually raised in this
appeal.
¶ 24 The defendants also argue that the complaint merely alleges that they acted in their own self-
interest, which does not amount to a breach of fiduciary duty. To support this and other arguments,
they cite extensively to Hughes v. Cloonlara-Hughes Ltd. Partnership, 2016 IL App (2d) 150715-
U, an unpublished decision. The defendants’ citation to this case directly contravenes Illinois
Supreme Court Rule 23(e) (eff. Apr. 1, 2018), which states that such unpublished orders “may not
be cited by any party except to support contentions of double jeopardy, res judicata, collateral
estoppel or law of the case.” None of those exceptions applies
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2020 IL App (2d) 190642here. Supreme court rules are just that: rules. “The rules of court we have promulgated are not
aspirational. They are not suggestions. They have the force of law, and the presumption must be
that they will be obeyed and enforced as written.” Bright v. Dicke, 166 Ill. 2d 204, 210 (1995).
Accordingly, we disregard all portions of the defendants’ arguments based on Hughes.
¶ 25 Nor is there any force to their argument that, as a matter of law, mere self-interested behavior
cannot equal a breach of fiduciary duty. Generally speaking, the law assumes that certain principles
exist and are in operation—the law of gravity, say, or the principle that parties act in their own
economic self-interest—unless these principles are counteracted by some external force. However,
the imposition of a fiduciary duty is just such an external force that seeks to constrain the
maximization of one’s own interest at the expense of others. And, as we have held, condominium
association board members owe a fiduciary duty to other unit owners. See Boucher
v. 111 East Chestnut Condominium Ass’n, 2018 IL App (1st) 162233, ¶ 36 (condominium
association board members had “strict duties to treat the unit owners ‘with the utmost candor,
rectitude, care, loyalty, and good faith—in fact to treat [them] as well as [they] would treat
[themselves]’ ” (quoting Burdett v. Miller, 957 F.2d 1375, 1381 (7th Cir. 1992))). The fiduciary
duty owed by the defendants here required them to “exercise the highest degree of honesty and
good faith in [their] dealings ***, thereby prohibiting enhancement of [their] personal interests at
the expense of the interests of the enterprise” or other unit owners. See Hagshenas v. Gaylord,
199 Ill. App. 3d 60, 71 (1990); see also Prignano v. Prignano, 405 Ill. App. 3d 801, 812 (2010).
¶ 26 Here, the complaint alleged more than mere self-interested behavior. The plaintiffs
alleged that the dual interests of the Defendant Board Members in both the majority unit owner
MSH and the buyer Mosaic Beverly created a conflict of interest and led them to breach their
fiduciary duties toward other unit owners. The complaint further alleged that the defendants used
their control of the Defendant Boards to effectuate bulk sales to a buyer that they also controlled,
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2020 IL App (2d) 190642on terms that disadvantaged the plaintiffs in favor of the defendants. We have no difficulty in
concluding that, if proven, these allegations could amount to a breach of the defendants’ fiduciary
duties.
¶ 27 The defendants argue that, as a matter of law, if they owed any fiduciary duty at all it was
limited by their obligations under section 15, and thus the plaintiffs’ concession that they complied
with section 15 operates as a bar to any claim for a breach of fiduciary duty. But section 15does
not purport to rewrite the common law of fiduciary duty: as we have noted, section 15 does not
itself mention fiduciary duty and thus cannot be read to place limits on the common-law scope of
that duty (McIntosh, 2019 IL 123626, ¶ 30). Accordingly, we reject the defendants’ argument that
their sole fiduciary duty was to comply with section 15 and that they were free to disregard the
common-law duties of fidelity, loyalty, and care.
¶ 28 The defendants argue that, even if Jordan can assert a claim for breach of fiduciary duty, their
actions are protected under the “business judgment rule.” That rule is intended “to protect directors
who have been careful and diligent in performing their duties from being subjected to liability
from honest mistakes of judgment.” Palm v. 2800 Lake Shore Drive Condominium Ass’n, 2014
IL App (1st) 111290, ¶ 111. As the defendants concede, however, the rule applies only “[a]bsent
evidence of bad faith, fraud, illegality, or gross overreaching.” (Internal quotation marks omitted.)
Id. Here, the plaintiffs alleged that the defendants engaged in exactly such bad faith and fraud, and
their allegations must be taken as true at this stage of the case (McIntosh, 2019 IL 123626, ¶ 16).
Thus, the business judgment rule does not support the dismissal of the complaint.
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2020 IL App (2d) 190642¶ 29 The final substantive argument the defendants raise2 is that allowing the claims of a plaintiff
like Jordan (who did not file a timely objection under section 15 to the bulk sale) to proceed would
encourage “end-runs” around the objection/appraisal procedure set out in the Act. This argument
overlooks the fact that the defendants’ alleged self-dealing itself is not contemplated by section 15.
If a bulk sale of condominiums does not involve violations of fiduciary duty like the self-dealing
alleged here, section 15’s procedures would remain the sole remedy available to unit owners.
Although the defendants suggest that unit owners might raise frivolous claims of breaches of
fiduciary duty, the cost and uncertainty of litigation—especially when compared to the relatively
low-cost and prompt appraisal procedure contained in section 15—should deter such claims.
¶ 30 We therefore reverse the trial court’s dismissal of count I, the claim for breach of fiduciary
duty. The defendants’ arguments regarding the claims for constructive fraud (count II) and civil
conspiracy (count IV) rest on their arguments against count I, as they argue that neither of these
claims can stand because the foundation—a breach of fiduciary duty—is lacking. Our rejection of
this argument likewise disposes of the basis for the dismissal of counts II and IV. Having reversed
the dismissal of counts I, II, and IV, we turn to the remaining count at issue in this appeal, Jordan’s
request for rescission.
¶ 31 B. Dismissal of Count III―Rescission
2
The defendants also raise numerous arguments about whether certain specific acts alleged
in the complaint can constitute breaches of their fiduciary duties, but such arguments are best
addressed on remand. Given that Jordan is the sole remaining plaintiff, she may wish to amend her
complaint to tailor its scope. At that point, the defendants can better determine which arguments
they wish to raise in response.
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2020 IL App (2d) 190642¶ 32 Count III of the complaint sought to rescind the bulk sale contracts. The trial court dismissed
the count, holding that this remedy was not available as a matter of law. On appeal, Jordan argues
that the trial court erred and that count III should be reinstated.
¶ 33 Rescission is “the cancelling of a contract so as to restore the parties to their initial status.”
Horan v. Blowitz, 13 Ill. 2d 126, 132 (1958). It is an equitable remedy that is available “where
there has been some fraud in the making of a contract, such as an untrue statement or the
concealment of a material fact, or where one party enters into a contract reasonably relying on the
other party’s innocent misrepresentation of a material fact.” Illinois State Bar Ass’n Mutual
Insurance Co. v. Coregis Insurance Co., 355 Ill. App. 3d 156, 165 (2004). As our supreme court
has noted, “[i]t has long been the settled law in this jurisdiction” that, where it appears that “the
confidential relation[ship] has been abused, the contract or transaction will be set aside, even
though it is such that it would not be disturbed had no fiduciary relation existed.” Moehling v.
W.E. O’Neil Construction Co., 20 Ill. 2d 255, 266-67 (1960). Jordan argues that, because she
has alleged that the defendants breached a fiduciary duty and that the bulk sale contract involved
a constructive fraud by virtue of the defendants’ self-dealing, her claim for rescission should be
permitted to proceed.
¶ 34 The defendants argue that, even if rescission were available as a potential remedy at the start
of this litigation, it is no longer available given that the bulk sales have gone to closing. They note
that more than a year has passed since the closings took place, and many of the plaintiffs who were
forced to sell likely have used the proceeds for a new home or other expenses. In light of this
passage of time, they argue, it would be inequitable to allow rescission of any of the contracts now.
¶ 35 We agree with Jordan that, as a general matter, the remedy of rescission is potentially available
even in the context of a bulk sale. Rescission is merely one of a number of equitable
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2020 IL App (2d) 190642remedies that might be available when a fiduciary duty is breached (depending on the facts of the
case at hand). See id. As we have held, section 15 of the Act does not indicate a legislative intent
to curtail the common law of fiduciary duty where, as here, the underlying transaction involved
self-dealing or other serious violations of fiduciary duty. Thus, common-law remedies for such
violations—including rescission, injunctive relief, and other equitable relief—are not off- -
limits simply because the transaction is a bulk sale of condominiums. As our supreme court has
stated, even transactions that ordinarily would be accepted may be set aside if they involve abuses
of the relationship of trust that forms the basis for the imposition of a fiduciary duty. Id. Thus, the
trial court erred in holding that rescission was unavailable as a matter of law.
¶ 36 Nevertheless, the defendants are also correct that, in this case, the passage of time makes
rescission less equitable, in that it could upset the settled expectations of other plaintiffs (and even
innocent third parties, if any of the units acquired through the bulk sale have been resold to such).
Moreover, we note that Jordan seeks punitive damages in this suit. Such damages are potentially
available when a transaction involved a breach of fiduciary duty (Martin v. Heinold Commodities,
Inc., 163 Ill. 2d 33, 81 (1994); see also Gearhart v. Gearhart, 2020 IL App (1st) 190042, ¶ 152)),
and they can be an appropriate avenue of relief when restoring the parties to their initial positions
is not possible or advisable (Martin, 163 Ill. 2d at 65-66). For all of these reasons, we decline to
reverse the trial court’s dismissal of count III.
¶ 37 III. CONCLUSION
¶ 38 The judgment of the circuit court of Du Page County is affirmed as to the dismissal of count
III. As to counts I, II, and IV, the judgment is reversed and the case is remanded for further
proceedings consistent with this decision.
¶ 39 Affirmed in part and reversed in part.
¶ 40 Cause remanded.
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2020 IL App (2d) 190642- 17 -
2020 IL App (2d) 190642No. 2-19-0642
Cite as: Kai v. Board of Directors of Spring Hill Building 1
Condominium Ass’n, 2020 IL App (2d) 190642Decision Under Review: Appeal from the Circuit Court of Du Page County, No. 18-CH-
960; the Hon. Paul M. Fullerton, Judge, presiding.
Attorneys John L. Quinn, of Churchill, Quinn, Richtman & Hamilton, Ltd.,
for of Grayslake, for appellant.
Appellant:
Attorneys James D. Wilson and Jeffrey M. Schieber, of Taft Stettinius &
for Hollister LLP, of Chicago, for appellees Mosaic Springhill,
Appellee: LLC, and Mosaic Beverly FMC, LLC, of Chicago.
Matthew J. Goldberg and Britany Fijolek, of Richman, Goldberg
& Gorham, LLC, of St. Charles, for other appellees.
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