Kenneth Michaels, Jr., Bauch & Michaels, LLC, Chicago
312-588-5000 | E-Mail Kenneth Michaels, Jr.
Association Had No Claim Against Former Attorney Because It Suffered No Damages
In Kim v. Hemingway House Condominium Ass’n, 2023 IL App (1st) 211115-U, the appellate court addressed summary judgment in favor of a former attorney of a condominium association for the second time.
Previously, the appellate court reversed the trial court’s entry of summary judgment for attorney Michael Kim on a counterclaim filed by a new board of directors of an association against the association’s former attorney because the new board had failed to authorize the defense of the lawsuit and the filing of the counterclaim. 2020 IL App (1st) 190603-U at ¶54. In the 2020 appeal, the appellate court found there was a genuine issue of material fact as to whether the new board properly voted to authorize the participation in litigation. The appellate court would not apply to condominium associations caselaw stating that corporate minutes are the sole record of lawful acts of a municipal corporate. 2020 IL App (1st) 190603-U at ¶34.
In May 2023, the appellate court affirmed the trial court’s grant of summary judgment for the attorney on all five counts because the condominium association could not show that it suffered damages when the prior board implemented a more expensive building repair option, which was more comprehensive and expected to last longer than the cheaper option desired by the current board. 2023 IL App (1st) 211115-U at ¶1.
The facts in this litigation over the years are voluminous. However, in a nutshell, the facts germane to the damages question are as follows. Hemingway House is a 29-story condominium building in Chicago consisting of 280 units. 2023 IL App (1st) 211115-U at ¶5. Beginning in the 2000s, the association began having substantial water infiltration problems related to defects in the building’s walls. 2023 IL App (1st) 211115-U at ¶8. In 2011, there essentially were two proposals for construction repairs. The higher cost option involved removing the brick veneer of the building and reconstructing the walls with a new veneer brick, new flashing, and a proper water management system. This option would have lower future maintenance costs. Less expensive solutions would still leave the building subject to water intrusion and would have higher maintenance costs. 2023 IL App (1st) 211115-U at ¶9.
An engineering firm was hired and estimated that the cheaper approach would cost $6,926,208 with an estimated 15-year maintenance cost of $2,653,138, for a total of $9,579,366 (Option 1). The more expensive approach would cost $9,392,773 with a 15-year maintenance cost of $115,735, for a total of $9,508,508 (Option 2). 2023 IL App (1st) 211115-U at ¶17.
After substantial maneuvering by the many unit owners dissenting and wanting the cheaper route, at a unit owners meeting there was a vote to approve the more expensive route, but only after removing any votes using “unofficial” board-approved proxies that were sent out immediately before the meeting. 2023 IL App (1st) 211115-U at ¶¶22, 27 – 28. Had the unofficial proxies been counted, then the vote to approve the more expensive repair project would have failed.
Additionally, there was a building court case brought by the City of Chicago in which a purportedly agreed order was entered to order going forward with the more expensive option. 2023 IL App (1st) 211115-U at ¶30. Ultimately, the more expensive repairs were performed at a total cost of approximately $10.2 million. New board members, who favored the cheaper option, were elected to the board. 2023 IL App (1st) 211115-U at ¶40. The attorney was fired and sued for fees totaling $22,118.40. 2023 IL App (1st) 211115-U at ¶41.
The condominium association counterclaimed against the attorney. Its third amended complaint alleged five counts: (1) breach of fiduciary duty; (2) aiding and abetting the board’s breach of fiduciary duty; (3) aiding and abetting a scheme to defraud unit owners; (4) civil conspiracy; and (5) an accounting. 2023 IL App (1st) 211115-U at ¶¶44 – 48. As noted above, the trial court eventually entered summary judgment against the association on its counterclaim, but this decision was reversed by the appellate court.
Upon remand, more discovery was conducted and new motions for summary judgment were filed and litigated. The trial court ultimately denied the association’s motion for partial summary judgment. 2023 IL App (1st) 211115-U at ¶¶61 – 64, 80 – 81. The trial court granted the attorney’s motion for summary judgment on several grounds, including that the association failed to have evidence of suffering any damages as to all five counts. 2023 IL App (1st) 211115-U at ¶¶66 – 74, and 82 – 88.
Exercising de novo review, the appellate court noted that regarding summary judgments, “[i]f the plaintiff fails to establish any element of the cause of action, summary judgment for the defendant is appropriate.” 2023 IL App (1st) 211115-U at ¶105, quoting Lewis v. Lead Industries Ass’n, 2020 IL 124107, ¶15, 178 N.E.3d 1046, 449 Ill.Dec. 195.
The appellate court did not review all the bases for entering summary judgment for the attorney. Instead, it focused on the damages issue. “The record is clear that [the association] suffered no cognizable injury or compensable damages from the implementation of Option 2.” 2023 IL App (1st) 211115-U at ¶107. The mere fact that Option 2 was more expensive did not create any injury because “it was more expensive for good reason: it was a more comprehensive solution — complete replacement of the building’s brick masonry — that was expected to be longer-lasting and require lower future maintenance costs than the more limited repairs under Option 1.” 2023 IL App (1st) 211115-U at ¶112. Furthermore, Option 1 would not eliminate the water intrusion problem and involved higher maintenance costs of the years. Id. The court emphasized that the association presented no evidence that Option 2 would not confer better results even though it was a higher cost. 2023 IL App (1st) 211115-U at ¶117.
Additionally, the appellate court noted that the association would enjoy a windfall under its actions because it received what it paid for: a higher quality resolution to their construction problem. “It is well-settled that compensatory damages should not put plaintiff in a better position than before the wrongful conduct, as it would result in an improper windfall.” 2023 IL App (1st) 211115-U at ¶118.
For more information about condominium law, see CONDOMINIUM LAW: GOVERNANCE, AUTHORITY, AND CONTROLLING DOCUMENTS (IICLE®, 2021). Online Library subscribers can view it for free by clicking here. If you don’t currently subscribe to the Online Library, visit www.iicle.com/subscriptions.