Cohen v. 175 East Delaware Homeowners Association , 2024 IL App (1st) 230516-U ( 2024 )

2024 IL App (1st) 230516-UFIRST DISTRICT,
FIRST DIVISION
May 28, 2024
No. 1-23-0516
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
_____________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
_____________________________________________________________________________
PAT COHEN, )
)
Appeal from the
Plaintiff-Appellant, )
Circuit Court of
v. )
Cook County, Illinois.
)
175 EAST DELAWARE PLACE HOMEOWNERS )
No. 18 CH 01983
ASSOCIATION, BOARD OF MANAGERS OF )
THE 175 EAST DELAWARE PLACE )
Honorable
HOMEOWNERS ASSOCIATION, and BARRY )
Allen P. Walker,
BOWEN, )
Judge Presiding.
)
Defendants-Appellees. )
_____________________________________________________________________________
JUSTICE COGHLAN delivered the judgment of the court.
Presiding Justice Fitzgerald Smith and Justice Lavin concurred in the judgment.
ORDER
¶1 Held: (1) Condominium association’s secret ballot procedures complied with the
Condominium Property Act. (2) Condominium board breached fiduciary duty of
candor by implementing policy regarding voting eligibility of unit owners who
owned their units via land trust without notifying those owners of new procedures
they were required to follow to have their votes counted. (3) Where a candidate for
the board received sufficient votes to be seated but died on the day of the election,
the board’s decision to deem him elected and to leave his seat vacant was protected
under the business judgment rule.
No. 1-23-0516
¶2 Plaintiff Pat Cohen brought an action against 175 East Delaware Place Homeowners
Association (the Association), the Board of Managers of the Association (the Board), and Barry
Bowen (President of the Board), alleging fraud in the 2017 and 2019 Board elections. In 2017,
Cohen was not elected to the Board after a decisive vote in her favor was invalidated. In 2019,
one of the 24 winning candidates was a deceased individual, with Cohen receiving the 25th-
highest number of votes. The Association did not give Cohen the position and instead left it
vacant.
¶3 Cohen brought the instant action seeking a declaratory judgment that the Association’s
secret ballot procedures were in violation of section 18(b)(10) of the Condominium Property Act
(Act) (765 ILCS 605/18(b)(10) (West 2020)) and seeking damages for breach of fiduciary duty.
Following a bench trial, judgment was entered in favor of defendants. For the reasons that
follow, we affirm in part, reverse in part, and remand.
¶4 BACKGROUND
¶5 The Association consists of 703 units in the John Hancock Tower in Chicago and is
administered by a board of directors consisting of 48 unit owners. Board members serve two-
year terms, staggered so that 24 Board members are elected every year.
¶6 In 2011, the Board adopted the following “Procedures for the Election of the Board of
Directors” (Election Rules):
• The “Voting Member” for each unit is “the natural person most recently designated by
the Unit Owner as such and registered with the Management Office on a signed and dated
form called a ‘Voting Member Form.’ ”
• Each year, the Association retains a certified public accounting (CPA) firm to function as
Election Judges. Their duties include tabulating the ballots and “confirm[ing] the validity
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of each Ballot by comparison with the Voting Member Form on file for that Voting
Member.”
• The Association also appoints an Election Committee comprised of non-Board members
who supervise the tabulation of the ballots. If the Election Judges determine that a ballot
“may be invalid,” they refer it to the Election Committee, which is tasked with deciding
“any issue referred to them by the Management or by the Election Judges pertaining to a
Ballot, candidate eligibility, voter eligibility, voter intent, or any other matter relating to
the conduct of the election.” The Committee’s decisions are “final and binding.”
• Elections use a secret ballot voting system, whereby a portion of each ballot is removed
after tabulation to conceal the identity of the owner who submitted the ballot. The
remaining portion of the ballot reveals only the votes cast and the owner’s voting
percentage.
¶7 The Board has hired accountant Brad Kovach and his firm Picker & Associates to serve
as Election Judges for “many years.”
¶8 The 2017 Election and the Disputed Bernstein Ballot
¶9 Cohen served on the Board from 2015 to 2017 and ran for re-election in 2017. On
October 17, 2017, the evening of the election, Cohen delivered approximately 25 ballots to the
room where the ballots were being tabulated, as was her usual practice. She gave the ballots to
Kovach and then stayed to observe the tabulation process. Also present in the room were the
members of the Election Committee and David Sugar, counsel for the Association. At one point,
Cohen attempted to stand behind Kovach to see the screen of the laptop that he was using to
tabulate the votes. Sugar told her to “move back and sit down” because she was “not permitted”
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to “look at the ballots that [Kovach] is working on.” Cohen testified that she moved back as
directed and remained in the room for ten to fifteen minutes more before leaving.
¶ 10 One of the ballots delivered by Cohen was that of Gary Bernstein, who purchased Unit
8103 in 2007 and has resided there ever since. The record owner of the unit is a land trust of
whom Bernstein is the sole beneficiary. In 2011, Bernstein signed and submitted a Voting
Member Form listing himself as both the owner and the voting member for his unit.
¶ 11 Kovach testified that, when processing each ballot, he consults a spreadsheet of unit
owners and voting members provided to him by the Association. If the signatory is not the owner
of the unit, he will “double check” with Sugar “to verify that it’s good” before counting the vote.
For Unit 8103, the spreadsheet lists the “Verified Owner (HOA) (DEED)” as “BankFinancial,
FSB, as Trustee u/ta dated May 16, 2007 and known as Trust No. 010929.” The “Owner” of the
unit is listed as Gary Bernstein, as is the “VM” (Voting Member).
¶ 12 Upon noticing that the signatory on the Bernstein ballot was not the same as the verified
unit owner, Kovach brought the ballot to Sugar’s attention. Sugar testified that he had “no idea”
whom Bernstein had voted for and denied being instructed to “tank any particular candidate’s
victory.” He consulted the Recorder of Deeds website and found “no hint” as to whether
Bernstein was the beneficial owner of the unit. On examination by Cohen’s counsel, Sugar
conceded that the property deed provides that Bernstein is the person to whom tax bills are to be
sent, and the Cook County Assessor’s Office site states that Bernstein resides in the unit.
¶ 13 Sugar brought Bernstein’s ballot to the Election Committee and told them, “The signature
on the ballot is from a natural person. The owner on the list says it’s a land trust. We have no
information as to who the beneficial owner of the land trust is. *** [U]nder these circumstances,
I don’t think the vote can be counted.” Pursuant to Sugar’s suggestion, the Committee
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invalidated the ballot. Neither Sugar nor the Committee attempted to contact Bernstein to clarify
whether he was the beneficial owner of the trust.
¶ 14 The next day, the election results were released, with Cohen narrowly missing being
seated on the Board. It is undisputed that she would have been seated if Bernstein’s vote for her
had not been invalidated.
¶ 15 At trial, Jennie Kobzarev, the Association’s property manager, testified that it was her
understanding that if a unit is owned by a land trust, the trustee (not the beneficial owner) has the
sole power to delegate the voting rights for the unit. Similarly, Sugar testified that the Voting
Member Form filled out by Bernstein “has the same problem as the ballot filled out by Gary
Bernstein. Gary Bernstein is not the record owner of the unit, and we have nothing from the land
trustee to tell us that he has authority to complete a ballot or complete a Voting Member
Designation.” His testimony was consistent with an October 18, 2016 email he sent to Kovach
and Kobzarev stating: “There is no way to establish the identity of the true owner (the ‘beneficial
owner’) of units owned by land trusts through public records. Without written confirmation of
beneficial ownership from the land trustee, ballots and Voting Member Designations signed by
the purported owner cannot be honored.”
¶ 16 Kobzarev further testified that the Association sends out an annual Notice of Election
packet that includes a Voting Member Form and reminds unit owners of the option to provide or
update said form. The packet does not inform individuals who own their units through a trust of
the procedure they must follow to be designated as voting members.
¶ 17 The 2019 Election and the Death of Stefan Edlis
¶ 18 Cohen ran for the Board again in 2019. On the morning of the election, October 15, 2019,
one of the other candidates named Stefan Edlis died. His wife informed Kobzarev of his death in
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the early afternoon, and Kobzarev relayed the news to Sugar. According to Kobzarev, 85 to 90%
of the votes had already been cast prior to election day.
¶ 19 The next day, October 16, Picker & Associates sent the Board an election results letter
reflecting that Edlis placed in the top 24 candidates, while Cohen placed 25th. On Sugar’s
advice, the Board announced the tabulation of votes and left the 24th seat open pending a
decision on how to handle the situation. Later that day, Cohen sent an email to Kobzarev and
Bowen in which she argued that Edlis’ death made him ineligible to be seated on the Board, and
“[w]ithout Mr. Edlis being counted *** I received the 24th highest percentage of votes and
therefore, should have been (should be) legally seated on the board of directors.”
¶ 20 Subsequently, on November 14, 2019, Sugar provided the Board with a legal
memorandum in which he discussed different ways that other jurisdictions have handled similar
election disputes and recommended that Edlis be deemed elected but ineligible to serve since he
was deceased, leaving a vacancy on the Board. At the next Board meeting, following discussion
of Sugar’s opinion, the Board decided that it would follow his recommendation and that it would
leave Edlis’ seat vacant. Bowen testified that “[b]ecause of the large size of our Board, we’ve
never gone through the trouble and expense and administrative burden of conducting an election
to fill one vacant seat or two or even three.”
¶ 21 At trial, Kobzarev acknowledged that in 2013, Cohen made an objection to the eligibility
of certain Board candidates. On September 18, 2013, Kobzarev sent Cohen the following reply:
“If someone who is among the 24 highest vote-getters in the election is not legally
eligible to serve on the Board, that person is not (and cannot be) elected to the Board, and
the 25th highest vote-getter is elected to the Board. There is no vacancy to be filled by
Board appointment, as the ineligible candidate was never lawfully elected in the first
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place, so as to create a vacancy. *** [A]ny candidate who is not a unit owner on the day
of the election cannot and will not be elected to the Board at the annual meeting.”
¶ 22 Kobzarev testified that this letter was “cut and paste from advice [she] received from
David Sugar.” Asked whether a deceased individual was eligible to serve on the Board,
Kobzarev stated that she does not determine eligibility of candidates but defers to Sugar’s
judgment. Sugar testified that the 2013 letter “was written for a different purpose in a different
context and the focus is not how to resolve the situation that came up in 2019. It is really more to
say how can we avoid this problem, how do we deal with it prior to the election in terms of
vetting candidates.”
¶ 23 Sugar further testified that he did not at any time substitute his judgment for that of the
Board. He provided his analysis and a recommendation, after which the Board reached a
decision. No one on the Board directed him to arrive at a decision that excluded Cohen from
being seated. In researching the issue, Sugar found “very, very little in the way out there of
authority.” There was no relevant condominium law, and no law regarding elections where
people vote over a period of weeks rather than on a single day. He explained the reasoning
behind his recommendation as follows: “[T]here are people who voted in the 2019 election while
Mr. Edlis was alive. They voted for him two weeks before he died and that’s the candidate they
wanted. If they wanted Pat Cohen, they would have voted for Pat Cohen.” He acknowledged
that, although unit owners may cast their votes early, they can change their votes on the night of
the election.
¶ 24 The Instant Action
¶ 25 In her operative complaint1, filed on November 21, 2019, Cohen alleged that
1
Cohen filed her initial complaint on February 15, 2018 and amended her complaint after the
events of the 2019 election.
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¶ 26 the Association’s secret ballot procedures violated section 18(b)(10) of the Act (765 ILCS
605/18(b)(10) (West 2020)), which provides, in relevant part, that a condo association
“may, upon adoption of the appropriate rules by the board of managers, conduct elections
by secret ballot whereby the voting ballot is marked only with the percentage interest for
the unit and the vote itself, provided that the board further adopt rules to verify the status
of the unit owner issuing a proxy or casting a ballot; and further, that a candidate for
election to the board of managers or such candidate’s representative shall have the right
to be present at the counting of ballots at such election.”
¶ 27 Cohen alleged that “[a]s can be seen from the face of the [Association] Rules and from
the results of the 2017 election, the Board has not adopted rules for verifying the status of unit
owners to cast ballots” but instead employs “freewheeling discretion to arbitrarily decide which
votes to count” in a manner that “fundamentally works to disenfranchise Plaintiff.” Cohen
further alleged that she was denied a “meaningful right to be present” during the counting of
ballots because she was not permitted “a line-of-sight to view, inspect and make record of the
ballots as they are being counted.” She sought a declaratory judgment that the Board’s secret
ballot rule was “null and void” and an injunction against the use of secret ballots in Board
elections “until the Association adopts and follows reasonable safeguards” regarding the validity
of ballots and monitoring of the counting of ballots by candidates.
¶ 28 Cohen also sought damages for “Breach of Fiduciary Duty / Election Fraud” in regards to
the 2017 and 2019 elections. She alleged that the Association and the Board willfully violated
their fiduciary duties to her by disqualifying the Bernstein ballot in 2017, and by failing to
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disqualify Edlis and seat Cohen as the eligible candidate who received the 24th highest number
of votes in 2019.2
¶ 29 Following a four-day bench trial, the trial court entered judgment in favor of defendants
on all counts. The court found that no violation of section 18(b)(10) occurred, since the
Association “did in fact adopt and follow rules to verify the status of the unit owners” and
allowed Cohen to be present during the vote tabulation. The Act does not “require that the
candidate be allowed to inspect the votes or be close enough to read them.”
¶ 30 As for Cohen’s fiduciary duty claims, the court found that the Association did not owe
her any fiduciary duty, but the Board had a fiduciary duty “to ensure strict compliance with the
Act and its condominium instruments in conducting its elections.” Regarding the 2017 election,
the court found that the Board “adopted sufficient rules to verify the status of unit owners when
using a secret ballot” and “were in strict compliance with the Act and condominium
instruments.” The court additionally found that Kovach and Sugar testified credibly as to the
events on election night leading to the disqualification of Bernstein’s vote. Regarding the 2019
election, the court found the Board’s decision was protected under the business judgment rule
because “[p]laintiff has not presented evidence showing bad faith on the part of the [B]oard for
their reliance on their hired counsel in how to fill the vacancy left by Mr. Edlis’ death.”
¶ 31 ANALYSIS
¶ 32 We review a judgment after a bench trial under the manifest weight of the evidence
standard, giving deference to the trial court as the finder of fact, because it is in the best position
to observe the conduct and demeanor of the parties and witnesses. Archon Construction Co. v.
2
Cohen’s complaint also included a count against Sugar for aiding and abetting a breach of
fiduciary duty and a count for illegal electioneering against Board president Bowen. The trial court
granted summary judgment to Sugar on the former count, and judgment to Bowen on the latter count,
both of which are not contested on appeal.
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U.S. Shelter, L.L.C., 2017 IL App (1st) 153409, ¶ 26. However, “the construction of a statute is a
question of law that is reviewed de novo.” State Place Condominium Ass’n v. Magpayo, 2016 IL
App (1st) 140426, ¶ 20.
¶ 33 The Association’s Secret Ballot Procedures
¶ 34 Cohen argues that the Association’s secret ballot procedures failed to comply with
section 18(b)(10) of the Act, which requires adoption of “appropriate rules *** to verify the
status of the unit owner issuing a proxy or casting a ballot” and further provides that candidates
have “the right to be present at the counting of ballots.”
¶ 35 The record reflects that on April 25, 2011, the Board adopted Election Rules providing
that “[t]he Voting Member for each unit shall be the natural person most recently designated by
the Unit Owner as such and registered with the Management Office on a signed and dated form
called a ‘Voting Member Form.’ ” The Association requests a Voting Member Form from each
new unit owner and annually reminds each owner of the option to provide or update their form.
The information is compiled into a spreadsheet which is provided to the Election Judges to
reference when tabulating the votes. Under these facts, the trial court did not err in finding that
the Association adopted sufficient rules to verify the status of voters.
¶ 36 Cohen argues that the Election Rules are legally insufficient because they do not specify
any special verification procedures for unit owners who own their units through a land trust.
Kobzarev testified that the Association has a policy of requiring the land trustee to delegate the
voting rights for the unit. This policy was originally set forth in an October 18, 2016 email by
Sugar stating, “Without written confirmation of beneficial ownership from the land trustee,
ballots and Voting Member Designations signed by the purported owner cannot be honored.”
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However, this policy is not in the Election Rules and not communicated to unit owners in the
annual Notice of Election packet containing the Voting Member Form.
¶ 37 Cohen argues that this policy may not be enforced unless it is formally adopted by the
Board at an open meeting. See 765 ILCS 605/18.4(h) (West 2020) (condominium board may
“adopt and amend rules *** after a meeting of the unit owners called for the specific purpose of
discussing the proposed rules”). More broadly, she argues that, in order for the Association to
validly conduct elections by secret ballot, all policies related to verification of unit owners must
be in writing and passed pursuant to section 18.4(h). We disagree. Section 18(b)(10) does not, on
its face, require the rules to address every contingency regarding voter eligibility. Such a
requirement would place an undue burden on condominium associations that is not supported by
the plain text of the statute. See USF Holland, Inc. v. Radogno, Cameli, & Hoag, P.C., 2014 IL
App (1st) 131727, ¶ 58 (we interpret statutes according to their plain language and will not
depart from that language by adding exceptions or conditions that conflict with the expressed
intent of the legislature).
¶ 38 Cohen next argues that her right to be present at the counting of ballots was violated
when she was “ordered to leave” the tabulation room. This is not supported by the record. After
Cohen delivered the ballots, she attempted to stand behind Kovach to see his laptop screen,
whereupon Sugar directed her to “move back and sit down” because she was “not permitted” to
“look at the ballots.” Cohen testified that she sat down approximately four feet away from
Kovach and remained in the room for 10 to 15 more minutes until Kovach said that he was done
tallying the ballots, at which point she thanked him and left. Kovach and Sugar both testified that
Cohen voluntarily left before tallying was complete. Despite the differing versions of events,
there was no testimony that Cohen was “ordered” to leave.
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¶ 39 Alternatively, Cohen argues that she was not granted a “meaningful” right to be present
because she was not permitted to view the screen of Kovach’s laptop on which he was tallying
the votes. We will not interpret a statute “in a manner that makes it meaningless.” Boucher v. 111
East Chestnut Condominium Ass’n, 2018 IL App (1st) 162233, ¶ 18. If all candidates were
allowed to see who voted for whom, the “secret” ballot procedure set forth in section 18(b)(10)
would cease to be “secret.” Here, Cohen was allowed to be present in close proximity to the
Election Judge to confirm that the votes were being tabulated and not altered or destroyed. We
find, as did the trial court, that this satisfies the requirements of section 18(b)(10).
¶ 40 Finally, Cohen contends that candidates have a right to be present “during all vote
challenges and recounts” and, in particular, that she had a right to be present when the validity of
the Bernstein vote was contested. She argues that, had she been present, she could have
confirmed his ownership of the unit, since she was the realtor who sold it to him in 2007. Section
18(b)(10) does not, on its face, specify that candidates have a right to be present during vote
challenges, and we will not read such a condition into the statute. USF Holland, Inc., 2014 IL
App (1st) 131727, ¶ 58. Accordingly, the trial court did not err in finding that the Association’s
secret ballot procedures were in compliance with section 18(b)(10) of the Act.
¶ 41 Whether the Association Owes Cohen a Fiduciary Duty
¶ 42 Cohen argues that the trial court erred in finding that the Association, as an entity, did not
owe her a fiduciary duty.
¶ 43 Section 18.4 of the Act (765 ILCS 605/18.4 (West 2018)) provides that “[i]n the
performance of their duties, the officers and members of the board, *** shall exercise the care
required of a fiduciary of the unit owners.” This fiduciary duty is owed by boards as well as their
individual members. LaSalle National Trust v. Board of Directors of the 1100 Lake Shore Drive
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Condominium, 287 Ill. App. 3d 449, 454 (1997). Each board member owes fiduciary duties to
unit owners “similar to the duties corporate directors owe to shareholders,” including a duty to
treat the unit owners “with the utmost candor, rectitude, care, loyalty, and good faith—in fact to
treat [them] as well as [he] would treat himself.” (Internal quotation marks omitted.) Boucher,
2018 IL App (1st) 162233, ¶¶ 35-36.
¶ 44 However, no provision in the Act imposes a fiduciary duty upon condominium
associations. In asserting that the Association owes her a duty, plaintiff relies on Boucher, 2018
IL App (1st) 162233, ¶ 54, in which the court held that “where individual board members breach
their fiduciary duties, any liability that may result due to the individual defendants’ breach may
extend to the association itself.” See also Wolinsky v. Kadison, 114 Ill. App. 3d 527, 533 (1983)
(breach of fiduciary duties by individual board members “will result in liability not only for the
association but also for the individuals themselves”). Boucher and Wolinsky do not stand for the
proposition that condominium associations have standalone fiduciary duties under the Act but,
rather, “that when a unit owner can show that some association employee or board member has
violated fiduciary duties, the unit owner may recover from the association.” Boucher, 2018 IL
App (1st) 162233, ¶ 54. Thus, any liability on the part of the Association would be contingent
upon whether the Board violated its fiduciary duties toward Cohen, which we now turn to
discuss.
¶ 45 2017 Election
¶ 46 Cohen contends that the Board breached its fiduciary duties by (1) invalidating
Bernstein’s vote and (2) failing to inform unit owners who own their units through a land trust of
the procedures they need to follow to have their votes counted.
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¶ 47 “[A] board’s proper exercise of its fiduciary *** duty requires strict compliance with the
condominium declaration and bylaws.” Wolinsky, 114 Ill. App. 3d at 534. Cohen argues that
invalidating Bernstein’s vote violated the provision of the condominium declaration which
provides that “[t]he total number of votes *** shall be one hundred (100), and each Owner, or
group of Owners shall be entitled to the number of votes equal to the total of the percentage of
ownership in the Common Elements applicable to his or their Unit Ownership.” She argues that
because owners “shall” be entitled to a certain percentage of votes, the Association is “not
allowed” to invalidate votes “based solely on uncertainty as to whether the vote was legitimately
cast.” Contrary to Cohen’s argument, the provision she cites does not purport to prohibit the
Association from assessing the legitimacy of votes. The trial court did not err in finding that the
Board strictly complied with the condominium declaration and bylaws.
¶ 48 Moreover, under the facts of this case, the decision to invalidate Bernstein’s vote is
protected by the business judgment rule, under which “[a]bsent evidence of bad faith, fraud,
illegality, or gross overreaching, courts are not at liberty to interfere with the exercise of business
judgment of corporate directors.” (Internal quotation marks omitted.) Duffy v. Orlan Brook
Condominium Owners’ Ass’n, 2012 IL App (1st) 113577, ¶ 24. This rule “is intended to protect
directors who have been diligent and careful in performing their duties from being exposed to
liability from honest mistakes of judgment.” Id. Thus, it only applies to board members who
exercise due care in carrying out their duties. Goldberg v. Astor Plaza Condominium Ass’n, 2012
IL App (1st) 110620, ¶ 63. “One component of due care is that directors must inform themselves
of material facts necessary for them to properly exercise their business judgment.” Id. ¶ 64.
¶ 49 Here, Cohen did not present any evidence of bad faith, fraud, illegality, or gross
overreaching in invalidating Bernstein’s vote. The record reflects that Kovach observed that the
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signatory on the Bernstein ballot was not the verified owner of the unit and referred the ballot to
Sugar, as was his usual practice with such discrepancies. After searching public records, Sugar
could not confirm whether Bernstein was the beneficial owner and recommended invalidating
the vote. The Election Committee then decided to invalidate the vote. In keeping with the
Election Rules, which provide that the Committee’s decisions are “final and binding,” the Board
certified the election results. Under these facts, the Board properly exercised its business
judgment and is insulated from “liability from honest mistakes of judgment” (Duffy, 2012 IL
App (1st) 113577, ¶ 24).
¶ 50 Cohen argues that the Board failed to exercise due care because it did not “independently
investigate whether [Bernstein’s] vote should have counted.” Even if the Board had conducted
such an investigation, reversing the Committee’s decision would have violated the Election
Rules. Moreover, even if the Board had consulted Bernstein’s Voting Member Form on file, it
was filled out by Bernstein in his personal capacity and did not provide proof of his beneficial
ownership of the unit. Accordingly, we do not find the Board’s lack of an independent
investigation to be a breach of fiduciary duty.
¶ 51 Cohen next argues that the Board breached its fiduciary duty of “utmost candor”
(Boucher, 2018 IL App (1st) 162233, ¶ 56) to unit owners by failing to inform unit owners who
owned their units through a land trust of the procedures they needed to follow to have their votes
counted. Based upon Sugar’s advice, starting with the 2017 election, the Board enforced a policy
of requiring “the trustee for the trust [to] designate or indicate who has [the] voting rights for the
unit.” However, this policy was not communicated to unit owners prior to the 2017 election. On
the contrary, Bernstein testified that on September 9, 2020, he received an email from Kobzarev
informing him for the first time that since his unit was held in trust, he would only be eligible to
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vote if the trustee notified the Association that he was the voting member for the unit. Prior to
that email, he was not informed that his Voting Member Form was inadequate in any way.
¶ 52 “A court may hold fiduciaries liable for failure to disclose information to their
principals.” Boucher, 2018 IL App (1st) 162233, ¶ 36. Moreover, the record does not reflect that
the Board relied on the advice of counsel or otherwise made a rational exercise of business
judgment in failing to disclose its policy regarding units held in trust to Bernstein and other
affected owners prior to the 2017 election. In other words, it is not that the Board discussed the
matter and reached an honest judgment as to what information should be provided to unit owners
in light of Sugar’s 2016 email and the procedures developed therefrom; rather, the Board failed
to make any judgment at all due to “inexcusable unawareness or inattention” (Davis v. Dyson,
387 Ill. App. 3d 676, 696 (2008) (internal quotation marks omitted)). Accordingly, we find that
the Board’s failure to disclose this information to unit owners was a violation of its fiduciary
duties under the Act.
¶ 53 2019 Election
¶ 54 Cohen argues that the Board violated its fiduciary duties by finding that Edlis was elected
to the Board in 2019 and leaving his seat vacant rather than seating her.
¶ 55 The trial court found the Board’s decision was protected under the business judgment
rule because Cohen failed to present evidence showing bad faith on the part of the Board for
their reliance on their hired counsel in how to proceed after Edlis’ death. Cohen argues that the
Board “could not have relied upon” Sugar’s advice, because it decided to seat Edlis “weeks
before” Sugar issued his November 14, 2019 memorandum recommending that Edlis be deemed
elected. This misstates the record. On October 16, 2019, the day after the election, Picker &
Associates sent the Board a letter with the results of the vote tabulation, reflecting that Edlis was
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among the top 24 receivers of votes, while Cohen was 25th. The letter did not purport to decide
any issues of candidate eligibility or state who should be seated on the Board. According to
Bowen, the Board did not make any “final decisions” based upon this letter, but “announced the
winners *** on a preliminary basis with the full knowledge that Mr. Edlis’ situation was going to
require further research.” The Board did not make a decision until after Sugar had issued his
memorandum and they had “full opportunity to question Mr. Sugar and satisfy themselves as to
the *** proper way to proceed.” Based on this testimony, the trial court properly found that the
Board relied on Sugar’s advice in exercising their business judgment.
¶ 56 Cohen argues this case is analogous to Palm v. 2800 Lake Shore Drive Condominium
Ass’n, 2014 IL App (1st) 111290, ¶¶ 116-17, in which we held that the business judgment rule
did not protect a condominium board where the evidence was insufficient to show that the board
acted upon advice of counsel in transferring surplus income to a reserve account. The board
president testified that she thought the practice was based on advice of counsel but had “no idea”
whether the purported advice was in writing or when it had been made. Cohen’s reliance on
Palm is unavailing, since Bowen’s testimony regarding Sugar’s written memorandum and the
Board’s reliance thereon was clear.
¶ 57 Cohen additionally argues that Sugar’s recommendation to the Board was substantively
incorrect, particularly in light of his contrary recommendation in 2013. As Sugar explained at
trial, he was unable to find any authority precisely on point. As a result, he examined analogous
authority in different jurisdictions to allow the Board to make an informed decision while
acknowledging that either position was potentially subject to challenge. In light of the
uncertainty in this area of law, the fact that Cohen would have reached a conclusion more
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No. 1-23-0516
favorable to herself does not render the Board’s contrary decision a breach of fiduciary duty. See
Duffy, 2012 IL App (1st) 113577, ¶ 24.
¶ 58 CONCLUSION
¶ 59 For the foregoing reasons, we reverse the judgment of the trial court for defendants
insofar as we find that the Board breached its fiduciary duty of candor in the 2017 election by
failing to inform unit owners who owned their units via land trust of the procedures they would
need to follow to have their votes counted. We remand the cause to the trial court for further
proceedings to determine the proper grant of relief on that issue. We affirm the judgment of the
trial court in all other aspects.
¶ 60 Affirmed in part, reversed in part, and remanded.
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