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Fraud Enlarges Time to File

Seal_of_the_Supreme_Court_of_Illinois

Henderson Square Condo. Assoc’n v. LAB Townhomes, LLC et al.
Citation: 2015 IL 118139 Opinion Date: November 4, 2015

After LAB Townhomes, the developer of Henderson Square, made false sales claims, built shoddy units, and engaged in fraud and negligent conduct in order to sell units, the Condominium Association sued it under the Chicago Municipal Code’s prohibition on the use of material misrepresentations, as well as Illinois case and statutory law relating to breach of the implied warranty of habitability, fraud, and negligence.

Following an initial defeat in the Trial Court based on allegedly filing late, the Appellate Court and eventually the Illinois Supreme Court determined that the bad actions of the developer permitted a longer time-horizon for the Plaintiff condo owners to pursue their rights.

Facts

The Henderson Square Condominium Association sued the developer, LAB Townhomes, LLC, alleging:

  • Breach of implied warranty of habitability;
  • Fraud;
  • Negligence; and
  • Breach of the Chicago Municipal Code prohibition against material misrepresentation.

Procedural History

When the case was initially filed, the Trial Court in Cook County dismissed it with prejudice and found that:

The Plaintiffs failed to adequately plead Municipal Code violation
The Plaintiffs failed to adequately plead Breach of Fiduciary Duty

And that in any event both counts were time-barred.

The Illinois Appellate Court for the 1st District, 5th Division, reversed the dismissal. The Illinois Supreme Court affirmed that reversal.

Supreme Court Opinion

In its opinion affirming the Appellate Court, the Illinois Supreme Court found that the claims at issue were construction-related, and were therefore governed by limitation and repose facets of 735 ILCS 13-214 of the Code of Civil Procedure. Nonetheless the Court observed, the fraud exception of the Civil Practice Act applied to lengthen the repose period. In addition, the Court opined that issues of material fact remained unresolved with respect to misrepresentations and actions that could still support a finding of fraudulent concealment.

The Court also determined that the Defendants had been “more than silent” regarding insulation and funding of the reserves. Finally, the Court noted that the Chicago Municipal Code allows private parties to seek damages under its provisions and there were allegations that the Defendants had a fiduciary duty to budget for reasonable reserves in light of the (allegedly) known state of the latent defects.

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