Pearl v. Waibel

NO. 4-97-0348

IN THE APPELLATE COURT

OF ILLINOIS

FOURTH DISTRICT

JOHN P. PEARL,                          )   Appeal from

Plaintiff-Appellant,          )   Circuit Court of

and                           )   Peoria County

JOHN P. PEARL & ASSOCIATES, LTD., and   )   No. 93L11

JOHN P. PEARL, as Trustee under Trust   )

Agreement dated May 24, 1976, and known )   

as THE PEARL ENTERPRISES LAND           )   

TRUST/PARTNERSHIP AGREEMENT,            )   

Plaintiffs,                   )

         v.                            )   Honorable

WILLIAM WAIBEL,                         )   John A. Barra,

Defendant-Appellee.           )   Judge Presiding.

_________________________________________________________________

JUSTICE KNECHT delivered the opinion of the court:

On July 9, 1996, plaintiffs John P. Pearl, individually and as a trustee, and John P. Pearl & Associates filed a fourth- amended complaint in the circuit court of Peoria County against William Waibel, alleging fraud in the sale of land.  The trial court dismissed the com­plaint with prejudice, ruling the fourth- amend­ed com­plaint failed to relate back to the origi­nal complaint and thus violated the statute of limitations.  Plain­tiffs filed a motion pursuant to Supreme Court Rule 304(a) (155 Ill. 2d R. 304(a)), requesting the trial court find no just rea­son for de­laying the appeal of the dismissal of his claims against Waibel with preju­dice.  The trial court granted plaintiffs' motion, and Pearl appealed.  On appeal, Pearl con­tends the trial court erred in finding the fourth-amended com­plaint did not relate back to the original complaint.  We agree and reverse.

On January 7, 1993, plaintiffs filed a complaint against Waibel and Cullinan Properties, Ltd. (Cullinan Proper­ties).  According to the complaint, in approximately 1989, Pearl began actively considering possible sites for an office building for John P. Pearl & Associates.  In the years before his search, Waibel repeatedly urged Pearl to purchase his property (Waibel property).  Plaintiffs entered an oral agreement with Cullinan Properties, through either or both Diane Cullinan and Larry We­ber, to act as plaintiffs' broker in this search.  When Pearl indicated to Waibel plaintiffs' interest in purchasing the Waibel property, Pearl learned Waibel had entered into a listing agree­ment with Cullinan Properties.  Waibel was aware of plaintiffs' needs through his agent, Cullinan Properties.  

Waibel knew of the material defects in the Waibel prop­erty, i.e. , the property was covered with fill from the construc­tion of Route 6, the fill made the property more expensive than usual for construction of an office building, and thus it was unsuitable for an office site.  Neither Waibel nor Cullinan Prop­erties informed plaintiffs of this defect prior to closing.  

The complaint further alleged plaintiffs submitted an offer for the Waibel property through Cullinan Properties on June 10, 1989.  Five days later, Waibel accepted plaintiffs' offer via Cullinan Properties.  From that point on, Cullinan Properties served as the broker and agent for both Waibel and plaintiffs in the sale of the property.  On January 9, 1990, Waibel con­veyed the property to Pearl, as trustee for the Pearl Enter­prises Land Trust/Partnership Agreement.  In or about April 1991, plain­tiffs learned for the first time the fill on the property made it more costly for development.   

The original complaint contained three counts:  (1) fraud, (2) breach of fiduciary duty, and (3) negligent misrepre­sentation.  In count I, plaintiffs contended they relied on Waibel to provide material information regarding the suitability of the property as an office site and he intentionally failed to dis­close the property was covered with fill.  In count II, plain­tiffs alleged Cullinan Properties breached its duty to discover and provide plaintiffs with the material information regarding the Waibel property.  In count III, plaintiffs alleged Cullinan Prop­erties, aware of plaintiffs' specific needs, represented the Waibel property was suited for those needs.  

Cullinan Properties moved to dismiss the complaint, arguing counts II and III failed to state a cause of action.  The trial court granted its motion on April 30, 1993, and granted plaintiffs leave to replead.  Waibel filed a motion to dismiss count I of the original complaint.  The record pro­vides no indi­cation on how Waibel's motion was resolved, whether with an order or a voluntary dismissal.

On June 1, 1993, plaintiffs filed their first-amended com­plaint against Waibel and Cullinan Properties.  According to the first-amended complaint, plaintiffs and Cullinan Properties en­tered into an oral agreement Cullinan Properties would act as plaintiffs' broker and agent in finding an office site.  Pearl learned Waibel entered into a listing agreement with Cullinan Properties.  The listing agreement between Waibel and Cullinan Properties terminated on December 1, 1988.  Waibel knew through his agent Cullinan Properties of plaintiffs' specific needs.  

Weber and Cullinan informed plaintiffs another company was expected to make an offer on the property very soon and they solicited plaintiffs to make an offer on the Waibel property.  A listing prepared by Cullinan Properties with the Peoria County board of realtors indicated the property was being farmed.  In June 1989, Cullinan informed plaintiffs they had no time to have the property appraised because unless plaintiffs purchased it quick­ly, "out-of-town buyers" would purchase the Waibel property with­in a few days.  Cullinan urged plaintiffs to make an immedi­ate offer, without an appraisal or investigation from anyone other than Cullinan Properties.  Plaintiffs received an envi­ron­mental disclosure document from Waibel on or about November 30, 1989, indicating the property was "unimproved farm land" and no "land­fill" existed on the property.

Count I of the first-amended complaint repeated the allegations of fraud against Waibel, alleging an intentional failure to disclose.  Counts II and III alleged a breach of fidu­ciary duty and negligent misrepresentation, respectively, against Cullinan Properties.  Count III maintained Cullinan Properties represented to plaintiffs the Waibel property was suited to plaintiffs' needs for an office site.  

On April 21, 1994, the trial court granted plaintiffs' motion for a voluntary dismissal.  The trial court ordered all claims against Cullinan Properties and Waibel dismissed without prejudice (735 ILCS 5/2-1009 (West 1994)).  

Plaintiffs filed a second-amended complaint on May 11, 1994, against Waibel.  We note although Cullinan Properties was listed as a defendant at the top of the complaint, the allega­tions of the second-amended complaint were directed solely at Waibel.  Count I sought rescission of the contract, whereas count II sought damages.  Counts I and II of the second-amended com­plaint made no new allegations of fact relevant to this ap­peal.  On September 30, 1994, however, the trial court granted plain­tiffs leave to file count III of their second-amended com­plaint.  Count III alleged negligent misrepresentation and con­cealment against Waibel.  Count III included the following alle­gation:  

"At all relevant times Defendant was guilty of one or more of the following negligent misrepresentations and/or concealments:  *** (c) Indicating through its agents that the property was suitable for commercial develop­ment without additional cost."  

The trial court struck counts I and II with leave to amend for plaintiffs' failure to allege a misrepresentation or silence combined with active concealment.  Citing Tan v. Boyke , 156 Ill. App. 3d 49, 58-59, 508 N.E.2d 390, 396 (1987), the trial court struck count III with leave to amend for plaintiffs' fail­ure to allege Waibel was "in the business of supplying informa­tion for the guidance of others in their business transaction."

On September 27, 1995, plaintiffs filed a response to Waibel's request to admit facts and to his interrogatories cor­re­spond­ing to re­quest to admit facts.  In the first, Pearl denied plaintiffs' claims of fraud were solely based on Waibel's si­lence.  In the latter, Pearl explained Waibel's statement the property was tillable conveyed to him the property was in its natu­ral state.  Waibel's agents, who rep­re­sent­ed the Waibel prop­erty was suitable for the develop­ment of an office building, confirmed Pearl's impression, thus concealing the presence of fill and leading Pearl to be­lieve no fill existed.  

Plaintiffs' third-amended complaint, filed November 17, 1995, as the second-amended complaint, alleged counts for re­scis­sion, damages, and negligent misrepresentation and conceal­ment against Waibel.  According to counts I and II of the third-amend­ed com­plaint, Waibel and his agents represented the 49 acres consti­tut­ing the Waibel property were "tillable and therefore in the same natural state and condition as other property in the area."  Count III alleged Waibel was guilty of one or more of the follow­ing misrepresentations:

"(a) Describing the property as tillable;

(b) Representing that the property was not

covered with fill material which altered its

natural state;

(c) Holding the property out as being in its

natural tillable condition;

(d) Indicating through his agents that the

property was suitable for commercial develop-

ment with­out addi­tional cost."

On June 18, 1996, the trial court struck counts I and II of the complaint without prejudice for plaintiffs' failure to plead the facts of what misrepresentations were made, when they were made, who made them, and to whom they were made with suffi­cient particularity.  The trial court, however, dismissed with prejudice count III, because plaintiffs again failed to allege Waibel was in the business of supplying information for the guid­ance of others in business transactions and the trial court found plaintiffs unable to plead such facts.  

The fourth-amended complaint, filed on July 9, 1996, alleged two counts against Waibel.  Count I requested rescission, while count II requested damages.  According to the complaint, Waibel retained Cullinan Properties as his agent for the purpose of selling the Waibel property.  Waibel knew the property had been covered with fill, because he had made an agreement with the State of Illinois for that purpose and had been compensated.  At all times Waibel knew the fill rendered the property unsuitable for commercial development as contemplated by Pearl, because the costs of development increased greatly, and he represented the property was suited for plaintiffs' purpose.  Waibel furnished an appraisal report and represented Pearl could rely upon it as an accurate depiction of the property.  

The complaint also alleged Waibel made the following misrepresentations via his agent, Cullinan Properties, and its employees, Larry Weber, Richard Field, and Diane Cullinan.  Diane Cullinan, when presenting Waibel's appraisal to Pearl, told Pearl he need not get an appraisal because the one she presented "tells you everything you need to know about the property."  In April through June 1989, Weber, Field, and Diane Cullinan made the following misrepresentations to Pearl, Eugene Retzer, Michael Bartley, Lynn Miles, and other John P. Pearl & Associates employ­ees:  (1) the property was "ideal" for future commercial develop­ment; (2) the property was suitable for Pearl's commercial devel­opment; and (3) the property would be an appropriate site for Pearl's office complex.  Weber, Field, and Cullinan informed Pearl other competitors would make offers if Pearl did not act before June 15, 1989.  In August 1989, agents of Waibel, includ­ing Cullinan and Field, repeated the misrepresentations regarding the Waibel property for commercial development to Pearl and Retzer.

On July 15, 1996, Waibel filed a motion to dismiss the fourth-amended complaint.  Waibel argued the following:  (1) plaintiffs failed to plead facts with sufficient particularity; (2) the complaint contained vague allegations and innuendo; (3) plaintiffs' allegations were contradictory; (4) plaintiffs failed to allege specific facts to establish "what role agency play[ed] in this case"; (5) fraud is not a necessary or probable inference from the alleged facts; (6) opinion cannot form the basis of fraud; (7) Waibel could not have known the specific use intended for the property; and (8) plaintiffs' new allegations were barred by the five-year statute of limitations.  The trial court ini­tially denied defendant's motion.  On December 4, 1996, however, the trial court found the fourth-amended complaint failed to re­late back to the original complaint.  The trial court concluded the original complaint was based upon Waibel's silence, whereas the latter was based on active misrepresentation by Waibel or his alleged agents.

"Plaintiffs['] pleading of silence does not direct the defendant's attention to facts that form the basis of the amended claim.  The original complaint did not afford the defendant all the information necessary for him to prepare a defense to the subsequent amended claim.  Rather, the original com­plaint directed the defendant in the opposite direction.  Now after several years and the passing of the statute of limitations, plain­tiffs direct the defendant to active misrep­resentation rather than silence."

The trial court dismissed the case pursuant to section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 1994)).  On February 28, 1997, Waibel filed a motion for sanc­tions.  On April 8, 1997, plaintiffs filed a motion pursuant to Rule 304(a), al­leging Waibel's motion rendered the appeal filed on February 27, 1997, premature.  Plaintiffs requested a Rule 304(a) finding.  The trial court allowed plaintiffs' motion and found no just reason to delay enforcement or appeal of the order dismissing the suit on April 15, 1997.  Plaintiffs filed timely notice of appeal on April 18, 1997.

On appeal, plaintiffs allege "[t]his is and has always been a claim of misrepresentation in the sale of an identified tract of land during a specific time period."  Plaintiffs argue each of their pleadings alleged Waibel had knowledge of the fill and its effect on the property.  The concealment, coupled with misrepre­senta­tions, represented the property was suited for the commercial use intended by Pearl.  Pearl notes the focus in the fourth-amended complaint is primarily on the misrepresentations, while in the original complaint the focus was on the concealment with the deceptive statements.  Pearl maintains, however, the original complaint contained allegations of deceptive statements.

In Illinois, the statute of limitations for a claim of common law fraud is five years.   Gilbert Brothers, Inc. v. Gil­bert , 258 Ill. App. 3d 395, 400, 630 N.E.2d 189, 193 (1994).  Section 2-616(b) of the Code permits the rela­tion back of an amend­ed complaint to avoid the statute of limita­tions if two mandates are satisfied:  (1) the plaintiff timely filed the orig­inal com­plaint and (2) the original and amended pleadings indi­cate the cause of action asserted in an amended pleading grew from the same trans­action or occurrence set up in the original pleading.  735 ILCS 5/2-616(b) (West 1994); Boatmen's National Bank v. Direct Lines, Inc. , 167 Ill. 2d 88, 101-02, 656 N.E. 2d 1101, 1107 (1995).  In deciding wheth­er a claim re­lates back under our practice act, the focus is on identifying the occur­rence or transaction that is the basis of a claim, grounded upon the be­lief that if a defendant has been alerted to the oc­currence or trans­action, "he can pre­pare to meet the plaintiff's claim, what­ever theory it may be based on."   Zeh v. Wheeler , 111 Ill. 2d 266, 279, 489 N.E.2d 1342, 1348 (1986).  Section 2-616(b) is remedial in nature and should be liberally construed by the courts in favor of hearing the merits of a plaintiff's claim.   Bryson v. News America Publi­cations, Inc. , 174 Ill. 2d 77, 106, 672 N.E.2d 1207, 1223 (1996).  

  We read section 2-616(b) in accordance with the policy underlying the statute of limitations, giving defendant opportu­nity to investigate while evidence is still available.  So long as defendant's attention has been directed to the facts forming the basis of the claim against him within the prescribed time, he will not be prejudiced.   Steinberg v. Dunseth , 276 Ill. App. 3d 1038, 1044-45, 658 N.E.2d 1239, 1245 (1995).  The Supreme Court of Illinois in Wolf v. Meister-Neiberg, Inc. , 143 Ill. 2d 44, 47, 570 N.E.2d 327, 329 (1991), noted the Code is to be liberally con­strued when no prejudice to a defendant is shown.   Brooks v. Essex Crane Rental Corp. , 233 Ill. App. 3d 736, 744, 599 N.E.2d 111, 115 (1992) .  In Wolf , the orig­inal plead­ing con­tained an in­correct loca­tion of the accident at is­sue.  A later plead­ing, untimely filed, changed the loca­tion.   Wolf , 143 Ill. 2d at 45-46, 570 N.E.2d at 328.  The defen­dants, however, conced­ed notice of the correct loca­tion, and the court noted deposition testimony and docu­ments produced in response to pro­duction re­quests provid­ed defen­dants this no­tice.  The court de­ter­mined where the de­fen­dants had no­tice, even from outside the pleadings, of the cor­rect loca­tion prior to the expi­ration of the statute of limi­ta­tions, no preju­dice re­sulted and the amend­ment related back.   Wolf , 143 Ill. 2d at 46, 47-48, 570 N.E.2d at 328-29.  The fifth dis­trict de­ter­mined the Wolf deci­sion per­mits rela­tion back when defendant was alert­ed to the actual transac­tion or occur­rence prior to the expira­tion of the statute of limitations.   Weber v. Cueto , 253 Ill. App. 3d 509, 521, 624 N.E.2d 442, 451 (1993).

Waibel concedes the original complaint was timely filed, but he contends the same occurrence or transaction rule precludes a plaintiff from introducing new specific facts on liability after the statute of limitations expired.  In support of his contention, Waibel cites entire cases stating relevant law, similar to the language used by this court above.  See Bryson , 174 Ill. 2d at 108, 672 N.E.2d at 1224; Boatmen's , 167 Ill. 2d at 101-03, 656 N.E.2d at 1107-08; Zeh , 111 Ill. 2d at 279, 489 N.E.2d at 1345; Doherty v. Cummins-Allison Corp. , 256 Ill. App. 3d 624, 628 N.E.2d 731 (1993); Weber , 253 Ill. App. 3d at 516, 624 N.E.2d at 448; Smetzer v. County of La Salle , 53 Ill. App. 3d 741, 368 N.E.2d 933 (1977).  None states what defen­dant alleg­es.  

According to the case law, what is important is defendant's attention be directed to the facts within the pre­scribed time.   Boatmen's , 167 Ill. 2d at 102, 656 N.E.2d at 1107; Zeh , 111 Ill. 2d at 273, 489 N.E.2d at 1345; Steinberg , 276 Ill. App. 3d at 1044-45, 658 N.E.2d at 1245; Weber , 253 Ill. App. 3d at 516, 624 N.E.2d at 448.  Although plaintiffs' original com­plaint may not have survived a motion for lack of specificity, it certainly directed Waibel's attention to the facts within the prescribed time period.  The original complaint indicated plain­tiffs were seeking to hold Waibel liable for his conduct during the sale of the Waibel property.  Plaintiffs highlighted the alleged concealment by Waibel, as well as a misrepresentation by Cullinan Properties, alleged to be Waibel's agent.  Later time­ly filed com­plaints and discovery focused Waibel's attention on the pur­ported agency relationship and misrepresentations.  De­spite Waibel's con­ten­tions, Waibel's attention clearly was di­rected to the commu­nica­tions and conduct of him­self and his al­leged agents sur­rounding the sale of the property.

Waibel notes, however, in the original and first-amend­ed complaints the only counts against him concerned his silence.  Waibel argues these counts did not provide him notice to investi­gate the facts in the fourth-amended complaint.  We disagree.  Although the allegations of misrepresentations occurred in other counts against Cullinan Properties, these counts were in the same complaints served on Waibel and against a party alleged to be Waibel's agent.

Waibel next argues, as did the defendants in Yette v. Casey's General Stores, Inc. , 263 Ill. App. 3d 422, 635 N.E.2d 1091 (1994), and Heyen v. Sanborn Manufacturing Co. , 223 Ill. App. 3d 307, 584 N.E.2d 841 (1991), he was not apprised the newly alleged conduct was the basis of the claim against him and thus the fourth-amended complaint does not relate back.  In Yette , the plaintiff's original complaint contained allegations he fell on an ice accumulation the defendant neglected to salt.  The amended complaint, filed after the statute of limitations expired, al­leged an unnatural accumulation of ice occurred on the sidewalk as a result of the building's design.   Yette , 263 Ill. App. 3d at 425, 635 N.E.2d at 1093.  This court held the amended pleadings contained conduct other than alleged in the original com­plaint and "for which defendant had no notice."   Yette , 263 Ill. App. 3d at 426, 635 N.E.2d at 1094.  

In Heyen , the plaintiff's original complaint alleged the defective nature of an air compressor.  The amended complaint charged the defendant with failing to inform plaintiff adequately of the air compressor's dangerous condition and failing to give the plaintiff notice of a recall.   Heyen , 223 Ill. App. 3d at 313, 584 N.E.2d at 842, 845.  This court held the allega­tions of the defective nature of the compressor did not suffi­ciently alert the defendant to a possible contention of its fail­ure to inform  or of knowledge of the dangerous condition.   Heyen , 223 Ill. App. 3d at 313, 584 N.E.2d at 845.

Despite Waibel's contentions, this case is dis­tin­guish­able.  In Yette and Heyen , there is no indication the atten­tion of the defendants was directed to the facts forming the basis of the latter claims.  In this case, as we have already determined, given the allegations in the timely filed pleadings and in dis­covery of an agen­cy rela­tion­ship and of mis­rep­re­sentations, Waibel's atten­tion was directed to the possibil­ity he may be charged with this con­duct.

Waibel further contends the fourth-amended complaint provided its first notice plaintiffs sought to hold him liable for misrepresentations in the appraisal report.  Waibel argues the mere presence of the report in discovery failed to provide him notice to investigate and preserve evidence.  We disagree with Waibel's contentions.  The existence of the appraisal report coupled with allegations of misrepresentations and concealment during the sale of the Waibel property should have alerted Waibel to investigate all communications with Pearl.  As Waibel's brief indicates, the appraisal report surfaced in discovery as a result of a request regarding communications between the parties.  Plaintiffs made allegations of statements referring to the land as tillable, a statement included in the appraisal report.  Given these facts, we find Waibel was sufficiently alerted to the fact the appraisal report, a written communication between the par­ties, may serve as evidence in a claim against him.

Waibel contends he was not on timely notice Pearl would seek to hold him vicariously liable for Cullinan Properties' misrepresentations.  That plaintiffs have changed their theory is not significant.   Steinberg , 276 Ill. App. 3d at 1046, 658 N.E.2d at 1246; Weber , 253 Ill. App. 3d at 516, 624 N.E.2d at 448; see also Zeh , 111 Ill. 2d at 279, 489 N.E.2d at 1348.  Waibel had timely notice of the alleged agency relationship and of the al­leged misrepresentations made by Cullinan Properties.  In addi­tion, the second- and third-amended complaints clearly estab­lished plaintiffs' intent to hold Waibel responsible for the actions of his purported agent.

From the original pleading against Waibel, the focus was placed upon his concealment of material facts relating to the Waibel property, while additional focus was placed on an alleged misrepresentation by Cullinan Properties, Waibel's purported agent.  Later timely pleadings focused more upon the misrep­re­sen­ta­tions by Cullinan Properties and Waibel in Waibel's lia­bili­ty to plain­tiffs.  Throughout the pleadings and discovery, Waibel's at­ten­tion was directed to facts and allegations con­tained in the fourth-amended complaint.  We conclude Waibel will not be preju­diced in prepar­ing his defense because of a slight change of fo­cus.  See Brooks , 233 Ill. App. 3d at 745, 599 N.E.2d at 116.

Reversed and remanded.

GREEN and STEIGMANN, JJ., concur.