No. 1-15-1846 Fifth Division March 24, 2017 ______________________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

FIRST DISTRICT

______________________________________________________________________________

)

SIENA AT OLD ORCHARD CONDOMINIUM )

ASSOCIATION, an Illinois Not-for-Profit Corporation, )

and THE BOARD OF DIRECTORS OF THE SIENA )

AT OLD ORCHARD CONDOMINIUM )

ASSOCIATION, )

) Appeal from the Circuit Court Plaintiffs-Appellants and Cross-Appellees, ) of Cook County. ) v. ) No. 13 L 8154 ) SIENA AT OLD ORCHARD, L.L.C., an Illinois Limited ) The Honorable Liability Company; LENNAR CHICAGO, INC., an ) Patrick J. Sherlock, Illinois Corporation; and LARRY KEER, Individually, ) Judge Presiding. )

Defendants-Appellees )

)

(Siena at Old Orchard, L.L.C.; and Lennar Chicago, Inc., )

Cross-Appellants). )

)

_____________________________________________________________________________

PRESIDING JUSTICE GORDON delivered the judgment of the court, with opinion. Justices Lampkin and Reyes concurred in the judgment and opinion.

OPINION

¶1 The instant appeal arises from a dispute over construction defects discovered at a

condominium complex in Skokie, Illinois. Plaintiffs, Siena at Old Orchard Condominium

Association and its board of directors (collectively, the Association), filed suit against the

developer, Siena at Old Orchard, L.L.C.; the developer’s management company, Lennar No. 1-15-1846

Chicago, Inc. (collectively, the developers); and Larry Keer, the president of the

Association’s initial board of directors. Defendants filed a motion to dismiss the complaint,

claiming that the Association had failed to follow the mandatory arbitration requirements

contained in the Association’s declaration, resulting in waiver of their claims. The trial court

granted the motion to dismiss, finding that the Association had waived all claims by failing to

abide by the declaration’s requirements. The Association appeals the trial court’s dismissal of

its complaint. The developers cross-appeal, claiming that the trial court did not award them

all of the attorney fees and costs to which they were entitled. For the reasons that follow, we

reverse.

¶2 BACKGROUND

¶3 I. Complaint

¶4 A. Allegations

¶5 On July 17, 2013, the Association filed an eight-count complaint against defendants. The

complaint alleges that Siena at Old Orchard, L.L.C., was the developer of Siena at Old

Orchard Condominium, a residential condominium complex located in Skokie, and that

Lennar Chicago, Inc., was the developer’s manager. The Association was established on July

24, 2006, and from its formation until March 2007, it was governed by a board of directors

appointed by the developer. In March 2007, control of the Association was transferred from

the initial developer-appointed board to a board of directors elected from the unit owner

membership. Larry Keer was the president of the Association’s board of directors on July 18,

2008.

¶6 The complaint alleges that “the common elements of the building are experiencing

numerous latent defects in the construction of the common areas for the Association, namely

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water leaks are entering the interior of the building.” The complaint further alleges that the

exterior walls were constructed “without the required flashing and weeps” and were also

“undergoing severe cracking and deterioration.” Finally, the complaint alleges that “an

improper water proofing system was utilized.”

¶7 The complaint alleges that after the turnover, some of the unit owners retained a

consultant to investigate the cause of water infiltration problems that were being experienced.

During the course of his investigation, “the consultant performed several tests and made

exploratory investigations into the common elements of the building to determine the causes

of the leaks.” The consultant issued a report to the Association in May 2010, identifying

“defective” portions of the property, including the asphalt paving, the exterior masonry walls,

the masonry expansion joints, and balcony deck membranes. The complaint further alleges

that “[t]his is the first time that the post developer Board became aware that there [were]

defects at the Association that were attributable to the developer’s defective development of

the Association.” These construction defects were “affecting the structural integrity of the

building and its common elements.” Furthermore, the complaint alleges, “the manner in

which several portions of the building were installed and constructed is contrary to the

architectural drawings and specifications prepared for the Association building.”

¶8 The complaint alleges that prior to the turnover, the developer and the initial board had

actual knowledge of the construction defects in the common elements, but that “[t]he unit

owner controlled board did not have knowledge of these construction defects until after” the

May 2010 report by the Association’s consultant. However, despite having knowledge of the

construction defects, the developer and the initial board “failed to inform the post developer

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Board of the fact that the defective conditions at the Association were caused by the

defective development, design and construction of the Condominium.”

¶9 The complaint set forth eight counts. Counts I through IV were applicable to the

developers, while counts V through VIII were aimed at Keer. Count I was for breach of

fiduciary duty and alleged that the initial developer-appointed board breached its fiduciary

duty to the unit owners by failing to properly investigate the complex, failing to ask the

developer to remedy the defects, and “otherwise fail[ing] to protect the interests of the

Association’s members,” which the complaint alleged were intentional acts done “for the

purpose of increasing and maximizing the Developer’s profits in the development and sale of

the Complex and units in the Association and to avoid its share of assessment responsibility

for reserves and repairs, all to the detriment of the owners in the Association.”

¶ 10 Count II was for breach of contract and alleged that the developer failed to construct the

condominium complex according to the terms set forth in the purchase agreement. Count III

was for breach of the implied warranty of habitability and count IV was for breach of the

implied warranty of good workmanship and materials. All of the counts directed at the

developers sought damages “in an amount equal to the total cost of repair or replacement of

the aforesaid defects,” which the complaint alleged “is believed to be in excess of

$500,000.00.”

¶ 11 Counts V through VIII were directed at Keer, who was the president of the Association

on July 18, 2008, when he executed a release 1 “that indicated that the Association was

releasing its claims against the developer purportedly on behalf of the Association.”

However, the complaint alleged that Keer did not have the authority to sign documents on

1 Two of the counts refer to a release executed on July 18, 2008, while the other two counts refer to a release executed on October 30, 2008.

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behalf of the Association without the approval of the majority of the board, which he did not

have at the time of the signing of the release. Accordingly, the complaint set forth two counts

for breach of fiduciary duty and two counts of constructive fraud.

¶ 12 B. Declaration of Condominium Ownership

¶ 13 Attached to the complaint was the declaration of condominium ownership for Siena at

Old Orchard Condominium, recorded on July 24, 2006. Article 12 of the declaration was

entitled “Dispute Resolution,” and contained five sections. Section 12.01 was entitled

“Consensus for Action by the Condominium Association” and provided that, “[e]xcept as

provided in this Section, the Condominium Association may not commence a legal

proceeding or an action under this Article without the affirmative vote of at least seventy-five

percent (75%) of the Voting Members.” Section 12.01 further provided that “[p]rior to the

Condominium Association or any member commencing any proceeding to which

Declarant[2] is a Party, including but not limited to an alleged defect of any improvement,

Declarant shall have the right to be heard by the members, or the particular member, and to

access, inspect, correct the condition of, or redesign any portion of any improvement as to

which a defect is alleged or otherwise correct the alleged dispute.”

¶ 14 Section 12.02 was entitled “Alternative Method for Resolving Disputes” and provided, in

full:

“Declarant, its officers, directors[,] employees and agents; the Condominium

Association, its officers, directors and committee members; all Persons subject to this

Declaration; and any Person not otherwise subject to this Declaration who agrees to

submit to this Article (each such entity being referred to as a ‘Bound Party’) agree to

2 “Declarant” was the developer, according to the declaration’s definitions section.

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encourage the amicable resolution of disputes, without the emotional and financial

costs of litigation. Accordingly, each Bound Party covenants and agrees to submit

those Claims, grievances or disputes described in Section 12.03 (collectively,

‘Claims’) to the procedures set forth in Section 12.04.”

¶ 15 The “Claims” referred to in section 12.02 of the declaration were set forth in section

12.03, which was entitled “Claims.” Section 12.03 provided, in relevant part:

“[A]ll claims between any of the Bound Parties regardless of how the same might

have arisen or on what it might be based, including but not limited to Claims (a)

arising out of or relating to the interpretation, application or enforcement of the

provisions of the Act, this Declaration, the By-Laws and reasonable rules and

regulations adopted by the Board or the rights, obligations and duties of any bound

Party under the provisions of the Act, this Declaration, the By-Laws and reasonable

rules and regulations adopted by the Board, (b) relating to the design or construction

of improvements; or (c) based upon any statements, representations, promises,

warranties, or other communications made by or on behalf of any bound Party shall

be subject to the provisions of Section 12.04.”

¶ 16 Section 12.04, which was entitled “Mandatory Procedures,” set forth the procedure the

parties agreed to follow in the event a claim arose. Specifically, section 12.04(a) was entitled

“Notice” and provided:

“As a condition precedent to seeking any action or remedy, a Bound Party having a

Claim (‘Claimant’) against any other Bound Party (’Respondent’) (the Claimant and

the Respondent referred to herein being individually, as a ‘Party,’ or, collectively, as

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the ‘Parties’) shall notify each Respondent in writing (the ‘Notice’), stating plainly

and concisely:

(i) the nature of the Claim, including the defect or default, if any, in detail and the

Persons involved and the Respondent’s role in the Claim;

(ii) the legal basis of the Claim (i.e., the specific authority out of which the Claim

arises);

(iii) the proposed remedy;

(iv) any evidence that depicts the nature and cause of the Claim and the nature

and extent of repairs necessary to remedy the Claim, including expert reports,

photographs and videotapes; and

(v) the fact that Claimant will meet with Respondent to discuss in good faith ways

to resolve the claim.

Notices given to Respondent pursuant to this Section shall be deemed sufficient if

personally delivered, delivered by commercial messenger service, or mailed by

registered or certified mail, postage prepaid, return receipt requested to the last known

address of the Respondent as it appears on the records of the Condominium

Association on the date of mailing.”

¶ 17 Section 12.04(b), entitled “Claims Involving Declarant,” provided additional rights for

the Declarant developer. These provisions included that: “Claimant agrees to permit

Declarant and its agents to perform inspections and tests and to make all repairs and

replacements deemed necessary by Declarant to respond to the claim,” and “Declarant or

Condominium Association, as the case may be, shall have not less than 35 days nor more

than 90 days from receipt of the Notice (the ‘Cure Period’) to cure as provided herein or to

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otherwise respond to the Claimant in the event that the Declarant determines that no default

has occurred and/or default exists.” The provision provided that “Declarant shall have the

right, but not the obligation, to take action during the Cure Period and/or respond to any

notice received from Claimant.”

¶ 18 Section 12.04(b)(iv), entitled “Dispute Resolution,” then provided:

“Any dispute (whether contract, warranty, tort, statutory or otherwise) including, but

not limited to (a) any and all controversies, disputes or claims arising under, or related

to, the Purchase Agreement, the Unit, or any dealings between the Declarant and

Owner ***, (b) any controversy, dispute or claim arising by virtue of any

representations, promises or warranties alleged to have been made by Declarant or

Declarant’s representative, and (c) any personal injury or property damage alleged to

have been sustained by Purchaser on the Property (hereinafter individually and

collectively referred to as ‘disputes’ or ‘Claims’), shall first be submitted to mediation

and, if not settled during mediation, shall thereafter be submitted to binding

arbitration as provided in Paragraphs 12.04(c) and 12.04(d) below and as provided by

the Federal Arbitration Act (

et seq.) or applicable state law

relating to arbitration and not by or in a court of law.”

¶ 19 Section 12.04(c), entitled “Negotiation and Mediation,” provided under subsection (ii), in

relevant part, “If the Parties do not resolve the Claim within 90 days after the date of the

Notice and the Cure Period has expired (or within such other period as may be agreed upon

by the Parties) (‘Termination of Negotiations’), either Party shall have 30 days from the date

of Termination of Negotiations to submit the claim to mediation.” Subsection (iii) stated that

“[i]f a Claimant does not submit the Claim to mediation within such time, or does not appear

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for the mediation, then the Claimant shall be deemed to have waived the Claim, and the

Respondent shall be released and discharged from any and all liability to Claimant on

account of such Claim.”

¶ 20 Section 12.04(e), entitled, “Costs and Expenses” provided, in full,

“Except as otherwise provided under subparagraph 12.04(b) above, each Party shall

bear its own costs and expenses, including attorney’s fees, for any mediation and

arbitration. Notwithstanding the foregoing, if a Party unsuccessfully contests the

validity or scope of arbitration in a court of law, the non-contesting Party shall be

awarded reasonable attorneys fees and expenses incurred in defending such a contest.

In addition, if a Party fails to abide by the terms of a mediation settlement or

arbitration award, the other Party shall be awarded reasonable attorneys fees and

expenses incurred in enforcing such a settlement or award.”

¶ 21 Section 12.05, entitled “Amendment of Article,” stated in full, “Without express prior

written consent of Declarant, this Article may not be amended for a period of twenty years

from the effective date of this Declaration.”

¶ 22 Attached as an exhibit to the declaration was the Association’s bylaws. Section 5.10 of

the bylaws provided that, “[e]xcept as otherwise expressly provided herein or in the

Declaration, any action may be taken upon the affirmative vote of a majority of the Directors

present at a meeting at which a quorum is present.” Furthermore, section 8.01 discussed

authority for the execution of instruments:

“EXECUTION OF INSTRUMENTS: The Board may authorize any officer or

officers, agent or agents of the Condominium Association, in addition to the officers

so authorized by these By-Laws, to enter into any contract or execute and deliver any

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instrument (including amendments to the Declaration or these By-Laws which must

be executed by the Condominium Association) in the name of and on behalf of the

Condominium Association and such authority may be general or confined to specific

instances. In the absence of any such authorization by the Board, any such contract or

instrument shall be executed by the President or a Vice President and attested to by

the Secretary or an Assistant Secretary of the Condominium Association.”

¶ 23 Finally, included within the declaration is a document entitled “Amendment of the

Declaration of Condominium Ownership for Siena Old Orchard Condominium Association.”

Pursuant to the amendment, Article 12 of the declaration was deleted in its entirety. The

amendment stated: “[T]he following Amendment has been approved by the affirmative vote

of Voting Members having no less than sixty-seven percent (67%) of the owners as

evidenced by the Certification attached hereto ***.” The document was signed by the

president of the Association and dated August 14, 2011.

¶ 24 C. Real Estate Purchase Agreement

¶ 25 Also attached to the complaint was the “Real Estate Purchase Agreement” for the

purchase of a unit within the condominium building, executed by the developer and Larry

and Theresia Keer, 3 dated June 24, 2006. The agreement contains a section entitled, “Seller’s

Limited Warranty/Waiver of Implied Warranty of Habitability.” The language stated, in all

capital letters, “seller hereby disclaims and purchaser hereby waives the implied warranty of

habitability described above.” The agreement further stated, “if a dispute arises with seller

and if a dispute arises with seller and the dispute results in a lawsuit, purchaser will not be

able to rely on the implied warranty of habitability described above as a basis for suing the

3 The record does not disclose Theresia Keer’s relationship to defendant Keer, but we presume she is his spouse.

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seller.” In an addendum to the agreement, a clause was added that stated, “Purchasers agree

that in consideration for Seller providing Purchaser with Limited Warranties, Purchaser will

accept the Limited Warranties as a substitute for the Implied Warranty of Habitability.” The

addendum additionally stated, in all capital letters: “if a dispute arises with seller and the

dispute results in a lawsuit, purchaser will not be able to rely on the implied warranty of

habitability described above as a basis for suing the seller. Purchaser may, however, rely on

the limited warranties made by seller to purchaser.” Larry Keer’s and Theresia Keer’s initials

are located under both of these sections. The document is followed by a document entitled,

“Siena Condominium Unit Warranty.” Though the document failed to identify the parties, the

agreement provided the purchaser with a limited warranty of one year after the closing date.

Section 8 of the agreement required the parties to submit all claims to mediation and binding

arbitration. The warranty is not dated or signed.

¶ 26 D. Releases

¶ 27 Additionally attached to the complaint are the two releases referred to in counts V

through VIII of the complaint against Keer. The Association, represented by Keer, and the

developer executed the documents on July 18, 2008, and October 30, 2008. According to the

releases, which contained identical language, “[t]he Association *** made various claims

against the Developer including, among other things, the ‘Items’ on the Punch list attached

hereto as Exhibit A,” which included problems such as broken concrete in the parking lot and

improper placement of the wood trim in the hallways, 4 and “[t]he parties desire to resolve the

4 “Exhibit A” was identical in both releases, except that in the exhibit attached to the October 30, 2008, release, there was an additional item that provided that, “[a]s a result of [water-seepage issues due to the pitch of the garage floor], the elevator system control sustained $20,734 of damage.” The “status” of this item provided that “[the developer] has reimbursed the [Association] for the cost of the repairs.” We note that the $20,734 listed as the amount of damage is also the precise amount the developer agreed to pay in the July 18, 2008, release.

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claims made by the Association and any and all other future claims or causes of action.”

Accordingly, the developer agreed to pay the Association $20,734 in the July 18, 2008,

release and agreed to pay $7,779.53 in the October 30, 2008, release. In exchange, the

Association agreed to release and discharge the developer from:

“any and all claims, causes of action, or liabilities whosoever, known or unknown,

asserted or unasserted, whether arising out of contract, tort, or otherwise, in law or in

equity arising, accruing, or based on any action or inaction of any such parties,

including, without limitation, any claim for construction defects in connection with

the construction of the improvements which are part of the Condominium, the

administration of the Association prior to the turnover of control to a board of

directors elected by the unit owners and the payment of assessments, charges or other

amounts whatsoever due to the Association from the Developer.”

¶ 28 The developer agreed to release the Association from “any and all claims and causes of

action or liabilities whatsoever, known or unknown, asserted or unasserted, whether rising

out of contract, tort, or otherwise in law or in equity, arising, accruing, or based on any action

of the Association or its directors, officers, or agents.” Defendant Lennar Chicago, Inc.,

through its vice president, Glenn V. Richmond, signed the releases on behalf of the

developer, while defendant Larry M. Keer signed on behalf of the Association.

¶ 29 II. Motions to Dismiss

¶ 30 On August 28, 2013, Keer filed a motion to dismiss the Association’s complaint pursuant

to section 2-619 of the Code of Civil Procedure (Code) (735 ILCS 5/2-619 (West 2012)). On

October 9, 2013, the developers filed a motion to dismiss the Association’s complaint

pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 2012)). These two motions

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contained identical arguments despite the fact they were seeking dismissal pursuant to

different sections of the Code. The developers and Keer argued article 12 of the declaration

deprived the court of jurisdiction and required the parties to submit the dispute to arbitration.

In response, the Association argued that, prior to filing this lawsuit, the board amended

article 12 to delete the article in its entirety. On February 13, 2014, the trial court granted the

motions to dismiss and dismissed the Association’s complaint without prejudice. The court

relied on section 12.05 of the declaration, which required express written consent from the

developer prior to an amendment of the declaration, to find that the amendment removing

article 12 was not valid.

¶ 31 On February 26, 2014, the Association filed a motion to reconsider the trial’s order,

based on an error in the court’s previous application of existing law. The Association argued

that the amendment removing article 12 was proper pursuant to section 27(a)(i) of the

Condominium Property Act (Act) (765 ILCS 605/27(a)(i) (West 2012)), which provides that

the “only” basis for amendment to a declaration is “upon the affirmative vote of 2/3 of those

voting” and that “in no event shall the condominium instruments require more than a three-

quarters vote of unit owners.” The Association argued that pursuant to the Act, section 12.05,

which required the developer’s consent prior to an amendment, was invalid. The Association

also argued that section 32 of the Act should be interpreted to permit mandatory arbitration

only in matters below $10,000 in dispute and, since the instant dispute had a higher value, the

mandatory arbitration requirement in article 12 was invalid. In response, the developers

argued that the Association waived these arguments by failing to bring this law to the court’s

attention during the pendency of the motions to dismiss.

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¶ 32 On May 8, 2014, the trial court granted the Association’s motion to reconsider, based on

an error in the court’s previous application of existing law. 5 The trial court held that section

27 of the Act invalidated section 12.05 of the declaration, since the only means to amend a

declaration was through a 2/3 vote and section 12.05 sought to impose an additional

requirement, namely, the developer’s consent to the amendment. As such, the board’s vote to

amend and delete article 12 of the declaration was proper, and the parties were not required

to submit the claim to arbitration. However, the court rejected the Association’s argument

under section 32 of the Act. The court found that section 32 cannot be interpreted to permit

mandatory arbitration only in disputes involving less than $10,000, as this interpretation was

unsupported by case law and contrary to the plain meaning of the Act. The court also found

this interpretation of section 32 violated the Illinois public policy favoring the enforcement of

arbitration and mediation agreements.

¶ 33 III. Amended Complaint and Motion to Dismiss

¶ 34 On May 29, 2014, the Association filed an amended complaint, and defendants again

filed motions to dismiss the amended complaint, with Keer filing a motion to dismiss under

section 2-619 of the Code and the developers filing a combined motion to dismiss under

section 2-619.1 of the Code (735 ILCS 5/2-619.1 (West 2012)). While the motions to dismiss

were pending, the Association sought leave to file a second amended complaint, claiming

that the section 2-615 portion of the developers’ motion to dismiss raised pleading

deficiencies that the Association sought to amend through the filing of a second amended

complaint; the Association claimed that “[a]llowing this amendment would permit the

5 Although the trial court stated that the motion was based on an error in the previous application of the law, the trial court had not previously applied section 27 or section 32 of the Act granting the motions to dismiss.

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hearing of all issues raised, both 2-615 and 2-619, issues, at one time and prevent duplicative

pleadings and motion practice.”

¶ 35 The Association was granted leave to file a second amended complaint, and it filed its

second amended complaint on September 10, 2014. The second amended complaint included

allegations regarding the board’s amendment to delete article 12 of the declaration, which

required the parties to submit all claims to arbitration and mediation. These allegations

included that the amendment occurred on August 14, 2011, and was properly recorded with

the Recorder of Deeds’ Office of Cook County. The amended complaint also alleged that,

prior to this amendment, the Association had not sent notice pursuant to section 12.04(a) of

the declaration to trigger the mediation and arbitration requirements.

¶ 36 On September 24, 2014, the developers filed a combined motion to dismiss the

Association’s second amended complaint pursuant to section 2-619.1 of the Code. 6 The

developers claimed that prior to the amendment of article 12 of the declaration, the

Association sent a letter to the developer that constituted notice to trigger the mediation and

arbitration process required by the declaration. The developer argued that, pursuant to section

12.04(c), the Association waived its claims by failing to submit the claims to mediation

within the allotted time requirement. The developers also claimed the releases executed by

Keer extinguished the cause of action. Further, as to count I for breach of fiduciary duty, the

developers argued the count was not sufficiently pled.

¶ 37 The letter, which was attached to the motion to dismiss, was dated August 13, 2010, and

signed by an attorney representing the Association. The letter indicated that it had been sent

6 The record does not show that Keer filed a new motion to dismiss after the filing of the second amended complaint. However, since the second amended complaint sought to remedy only the pleading deficiencies raised by the developers’ section 2-615 motion, Keer’s section 2-619 motion would have remained pending.

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via email and that its subject was “Re: Claim against Developer: Siena at Old Orchard

Condominium Association.” The letter stated, in full:

“Please be advised that I represent the Above referenced condominium

association relative to its *** claim against the developer for certain construction

defects. Attached please find a transition study outlining, in detai[l] the construction

and design deficiencies. Also please find[] [a] ‘bid comparison’ sheet setting forth

bids for correcting some of the work.

The Association intends on scheduling the work *** in the next two weeks.

Accordingly, in order to avoid a claim by the Developer of spoliation of evidence,

you are hereby advised that your representatives may inspect/test/photograph the area

to be repaired so that evidence may be secured for upcoming litigation. Please contact

the undersigned prior to August 30, 2010 in order to avail yourself this opportunity.”

In response to the motion to dismiss, the Association claimed that the letter acted only to

prevent spoliation and did not conform to the notice requirements under section 12.04(a). As

such, the letter did not trigger the mediation and arbitration requirement.

¶ 38 Additionally, attached to Keer’s motion to dismiss was a letter sent by the Association to

Keer in his capacity as a unit owner on September 16, 2010, which he claimed was an

additional way that the Association gave him notice. The letter provided, in relevant part:

“[T]he purpose of this letter is to clarify facts regarding exterior building issues and

what led up to issues of payment for the required work. In the fall of 2009

management brought to Lennar’s attention that there were defects to the exterior of

the buildings. Two members of Lennar showed up and admitted that indeed it

appeared that there was unfinished work done by the contractors regarding the

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balconies. They said they would come back out the following summer (2010) to

discuss scheduling repairs, but would not admit to any other defects.

But on November 5, 2009 Lennar sent out an email to us (see attachment) and

again on August 24, 2010 a letter to our attorneys attaching a Release dated July 2008

and signed by the then Board President Larry Keer. In the Release, in return for

approximately $28,500 towards elevator and boiler repairs, Larry Keer signed a

Letter of Release that removed Lennar from any further work and held Lennar

harmless from further issues. As a result you will see from the attached

documentation, ‘Lennar respectively declines any responsibilities for any repairs to

the project.[’]

This was the first time the current Board ever heard or saw of the Release.

This Release becomes very significant, since in August 2010 the current Board

had a transition report completed where it was discovered that substantial work needs

to be done to both buildings, amounting to close to $900,000. The Board sought

Legal Council [sic], where it was learned that because of the Release signed by Larry

Keer, the Association would likely lose any lawsuit against the developer[.]

It should be emphasized that by simply walking around the North building one

could have seen cracked and crumbling masonry and unfinished balconies clearly

visible to anyone who took the time to look. With such knowledge nobody could

possibl[y] have signed the Release, which gave away the Association’s ability to seek

corrective action by Lennar.

Knowing that the suit by the Association would be dismissed, the only option

open to the Association would be to sue Larry Keer in the hope that the Directors and

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Officers insurance would kick in to pay for the error made by signing the Release in

the first place without having pertinent information regarding the repair costs.”

(Emphasis in original.)

¶ 39 On November 4, 2014, the parties came before the trial court for a hearing on the

developers’ motion to dismiss. The trial court found the letter drafted by the Association’s

attorney constituted notice under section 12.04(a) to initiate the mediation and arbitration

process as delineated in article 12 of the original declaration. The trial court also found that

the Association waived its claims by failing to submit the claims to mediation as required.

The trial court dismissed the Association’s second amended complaint with prejudice as to

all defendants. On March 3, 2015, the trial court denied the Association’s motion to

reconsider.

¶ 40 IV. Motion to Recover Costs and Attorney Fees

¶ 41 On December 4, 2014, the developers filed a motion to recover fees and costs and for

sanctions pursuant to section 12.04(e) of the declaration and Illinois Supreme Court Rule 137

(eff. July 1, 2013). The Association argued that section 12.04(e) did not apply due to the

amendment of the declaration on August 14, 2011. On March 3, 2015, the trial court held that

article 12 must be applied in its entirety. Pursuant to section 12.04(e), the developer was

entitled to recover fees and expenses it incurred in defending the validity of Article 12 of the

declaration.

¶ 42 On May 27, 2015, the trial court awarded the developers attorney fees in the amount of

$106,237.50 and costs in the amount of $700.50. The trial court found recoverable only those

fees associated with the defense of article 12 and the mandatory arbitration provisions as

proscribed under section 12.04(e). Thus, the court found that the developers could not

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recover for insurance related matters or for paralegal time that involved general office

overhead functions. The developers also could not recover for any matters simply deemed

“other tasks.” The court held that the large amounts of money claimed were warranted due to

the aggressive litigation tactics of the developers and the complexity of the legal issues

involved. The trial court additionally awarded defendant Keer attorney fees in the amount of

$22,904.50 and costs in the amount of $451.80. Because the trial court awarded fees under

section 12.04(e), the trial court denied the developers’ motion for sanctions under Illinois

Supreme Court Rule 137 (eff. July 1, 2013).

¶ 43 On June 26, 2015, the Association filed a notice of appeal and, on July 8, 2015, the

developers filed a notice of cross-appeal.

¶ 44 ANALYSIS

¶ 45 On appeal, the Association raises a number of ways in which it claims that the trial court

erred in dismissing its complaint: (1) that the letter sent by the Association’s attorney did not

constitute “notice” such that it triggered the dispute resolution procedure under article 12 of

the declaration; (2) that public policy voided the mandatory mediation and arbitration

requirements of article 12 of the declaration; (3) that the releases did not release the

Association’s claims; and (4) that the second amended complaint stated a cause of action for

breach of fiduciary duty. The Association also argues (5) that defendants were not entitled to

an award of attorney fees and costs. In their cross-appeal, the developers claim that the trial

court erred by (1) declining to award them certain fees and costs and (2) failing to rule on

their Rule 137 motion. The developers also claim that the trial court erred in finding that

section 27 of the Act invalidated section 12.05 of the declaration. We first consider the

19

No. 1-15-1846

parties’ arguments concerning the propriety of the dismissal of the complaint and then turn to

the consideration of the award of fees and costs.

¶ 46 I. Dismissal of the Complaint

¶ 47 In the case at bar, the trial court dismissed the Association’s initial complaint without

prejudice under section 2-615 of the Code, but then granted the Association’s motion to

reconsider, finding that section 12.05 of the declaration, which required the developer’s

consent to amend the declaration, was inconsistent with section 27 of the Act. After the

Association amended its complaint, the trial court dismissed the second amended complaint

under section 2-619 of the Code, finding that the Association had waived its claims by failing

to abide by the mandatory dispute resolution procedures triggered by its sending notice of its

claims to the developers. The trial court then denied the Association’s motion to reconsider,

which was based on a public policy argument concerning an amendment to the Act.

¶ 48 A section 2-615 motion to dismiss “tests the legal sufficiency of a complaint,” while a

section 2-619 motion to dismiss “admits the sufficiency of the complaint, but asserts

affirmative matter that defeats the claim.” Bjork v. O’Meara,

. “In

ruling on motions to dismiss pursuant to either section 2-615 or 2-619 of the Code, the trial

court must interpret all pleadings in the light most favorable to the nonmoving party” (Doe v.

Chicago Board of Education,

(2004)), and a cause of action should not

be dismissed under either section unless it is clearly apparent that no set of facts can be

proved that would entitle the plaintiff to relief (Pooh-Bah Enterprises, Inc. v. County of

Cook,

(2009) (section 2-615 motion); Feltmeier v. Feltmeier,

(2003) (section 2-619 motion)). Our review of a motion to dismiss under either

section is de novo (Carr v. Koch,

), and we may affirm the dismissal of

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No. 1-15-1846

a complaint on any ground that is apparent from the record (Golf v. Henderson,

(2007)). De novo consideration means we perform the same analysis that a trial

judge would perform. Khan v. BDO Seidman, LLP,

(2011).

Additionally, while the decision to grant or deny a motion to reconsider lies within the

discretion of the trial court, “ ‘where a motion to reconsider raises a question of whether the

trial court erred in its previous application of existing law, we review de novo the trial court’s

determinations of legal issues.’ ” TCF National Bank v. Richards,

(quoting JP Morgan Chase Bank v. Fankhauser,

(2008)).

¶ 49 A. Adequacy of Notice

¶ 50 The Association first takes issue with the trial court’s finding that the August 13, 2010,

letter from its counsel to the developers constituted “notice” so as to trigger the mandatory

dispute resolution procedures. “Because many of the facts are not disputed, and because

condominium declarations are covenants running with the land, we need only examine the

language of the declaration in this case, to the extent the language is unambiguous, to

determine whether the trial court acted properly.” Goldberg v. Astor Plaza Condominium

Ass’n,

. The construction of condominium declarations is a

question of law. Carl Sandburg Village Condominium Ass’n No. 1 v. Carl Sandburg Village

Condominium Homeowners’ Ass’n,

(1987). “ ‘The paramount rule for

the interpretation of covenants is to expound them so as to give effect as to the actual intent

of the parties as determined from the whole document construed in connection with the

circumstances surrounding its execution.’ ” Carney v. Donley,

(1994) (quoting Amoco Realty Co. v. Montalbano,

(1985)).

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No. 1-15-1846

¶ 51 As an initial matter, the developers claim that this issue has been forfeited because the

Association did not raise it until it filed a motion to reconsider the order granting the

developers’ motion to dismiss. However, we note that the second amended complaint

contained an allegation that “prior to the Amendment of the Declaration on or about August

14, 2011, the Association did not provide to any defendant, or any other entity or person, a

notice that was in compliance with or pursuant to Section 12.04(1) of the original

Declaration.” Additionally, the developers argued that the Association had failed to comply

with the mandatory arbitration requirements in their motion to dismiss the Association’s

second amended complaint and, in response, the Association argued that the letter relied

upon by the developers did not comply with the declaration’s notice requirements so as to

trigger the arbitration process. Thus, we find no basis for the developers’ argument that this

issue has been forfeited on appeal and proceed to consider the merits of the Association’s

argument.

¶ 52 As noted, section 12.04 of the declaration, which was entitled “Mandatory Procedures,”

set forth the procedure the parties agreed to follow in the event a claim arose. Specifically,

section 12.04(a) was entitled “Notice” and provided:

“As a condition precedent to seeking any action or remedy, a Bound Party having a

Claim (‘Claimant’) against any other Bound Party (’Respondent’) (the Claimant and

the Respondent referred to herein being individually, as a ‘Party,’ or, collectively, as

the ‘Parties’) shall notify each Respondent in writing (the ‘Notice’), stating plainly

and concisely:

(i) the nature of the Claim, including the defect or default, if any, in detail and the

Persons involved and the Respondent’s role in the Claim;

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No. 1-15-1846

(ii) the legal basis of the Claim (i.e., the specific authority out of which the Claim

arises);

(iii) the proposed remedy;

(iv) any evidence that depicts the nature and cause of the Claim and the nature

and extent of repairs necessary to remedy the Claim, including expert reports,

photographs and videotapes; and

(v) the fact that Claimant will meet with Respondent to discuss in good faith ways

to resolve the claim.

Notices given to Respondent pursuant to this Section shall be deemed sufficient if

personally delivered, delivered by commercial messenger service, or mailed by

registered or certified mail, postage prepaid, return receipt requested to the last known

address of the Respondent as it appears on the records of the Condominium

Association on the date of mailing.”

Under section 12.04(c), “[i]f the Parties do not resolve the Claim within 90 days after the

date of the Notice and the Cure Period has expired (or within such other period as may be

agreed upon by the Parties) (‘Termination of Negotiations’), either Party shall have 30 days

from the date of Termination of Negotiations to submit the claim to mediation.”

Additionally, “[i]f a Claimant does not submit the Claim to mediation within such time, or

does not appear for the mediation, then the Claimant shall be deemed to have waived the

Claim, and the Respondent shall be released and discharged from any and all liability to

Claimant on account of such Claim.” Thus, if notice pursuant to section 12.04(a) was sent,

and the claim was not submitted to mediation within 30 days after the date of termination of

negotiations, the claim would be considered waived. In the case at bar, then, if a notice was

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No. 1-15-1846

sent that triggered the mandatory dispute resolution process, then the Association would be

deemed to have waived its claims against defendants, because there is no dispute in the

instant case that the Association’s claims against defendants were never submitted to

mediation.

¶ 53 In the case at bar, the developers argued, and the trial court agreed, that the Association

sent the developers notice pursuant to section 12.04(a) when the Association’s attorney sent

them a letter concerning the Association’s claims. The letter was dated August 13, 2010, and

was signed by an attorney representing the Association. The letter indicated that it had been

sent via email and that its subject was “Re: Claim against Developer: Siena at Old Orchard

Condominium Association.” The letter stated, in full:

“Please be advised that I represent the Above referenced condominium

association relative to its *** claim against the developer for certain construction

defects. Attached please find a transition study outlining, in detai[l] the construction

and design deficiencies. Also please find[] [a] ‘bid comparison’ sheet setting forth

bids for correcting some of the work.

The Association intends on scheduling the work *** in the next two weeks.

Accordingly, in order to avoid a claim by the Developer of spoliation of evidence,

you are hereby advised that your representatives may inspect/test/photograph the area

to be repaired so that evidence may be secured for upcoming litigation. Please contact

the undersigned prior to August 30, 2010 in order to avail yourself this opportunity.”

The Association argues that this letter was merely intended to prevent a spoliation of

evidence claim and was not “notice” that would trigger the mandatory dispute resolution

process.

24

No. 1-15-1846

¶ 54 “The rules of construction for contracts govern our interpretation of the covenants

contained in the declaration.” Forest Glen Community Homeowners Ass’n v. Bishof,

(2001); Stobe v. 842-848 West Bradley Place Condominium Ass’n,

. “The primary rule of interpretation is to give effect to the drafting

parties’ intent.” Stobe,

. “If the words in the contract are clear

and unambiguous, they must be given their plain, ordinary and popular meaning.” Thompson

v. Gordon,

(2011).

¶ 55 In the case at bar, there is no dispute that the letter sent by the attorney fails to satisfy a

number of the declaration’s requirements. First, the letter was sent via email, not “personally

delivered, delivered by commercial messenger service, or mailed by registered or certified

mail.” Additionally, the letter does not state “the fact that Claimant will meet with

Respondent to discuss in good faith ways to resolve the claim.” Finally, while the letter

makes reference to “upcoming litigation” and a “claim against the developer for certain

construction defects,” the letter does not state “the legal basis of the Claim (i.e., the specific

authority out of which the Claim arises).” The Association also claims that the letter failed to

set forth “the proposed remedy,” but we note that the letter indicated that the Association was

planning on scheduling the required work within two weeks, leading to the conclusion that

the proposed remedy was repair of the damaged areas.

¶ 56 The Association argues that the letter’s failure to satisfy all of section 12.04(a)’s

requirements means that the letter did not constitute “notice” so as to trigger the mandatory

dispute resolution process. By contrast, the developers argue that any deficiencies are

immaterial, since they received actual notice that there was a claim against them. The trial

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No. 1-15-1846

court found that the letter was sufficient to trigger the dispute resolution process. However,

we cannot agree with this conclusion.

¶ 57 As stated, there is no dispute that the letter does not satisfy a number of the requirements

of section 12.04(a). Thus, there is no basis for concluding that it is a “notice” under that

section. The developers’ arguments that “actual notice” excuses any noncompliance with

section 12.04(a) presupposes that the letter sent by the Association’s attorney is, in fact, a

notice under section 12.04(a); it is a circular argument. “The purpose of a contract’s notice

provision is to ensure that the notice was delivered and that the party was informed.” Denis

F. McKenna Co. v. Smith,

(1998). It is axiomatic that, in order for

notice to be sent, there must have been some type of “notice.” The developers’ argument

would turn the letter into section 12.04(a) “notice” through the simple fact that the

developers received it.

¶ 58 If the form of mailing was the sole way in which the letter failed to satisfy section

12.04(a), the developers’ argument would be more persuasive, since a provision concerning

the form of mailing is merely intended to ensure that the notice was delivered. Vole, Inc. v.

Georgacopoulos,

(1989) (“A provision requiring sending of

notice by registered mail is merely intended to insure delivery.”). However, that is not the

case. In the case at bar, there were a number of ways in which the letter failed to satisfy the

requirements for notice under section 12.04(a), and we do not agree with the developers that

these failures are “immaterial.”

¶ 59 For instance, the letter does not state “the legal basis of the Claim (i.e., the specific

authority out of which the Claim arises),” and does not state “the fact that Claimant will meet

with Respondent to discuss in good faith ways to resolve the claim.” The letter does not even

26

No. 1-15-1846

mention arbitration or mediation at all, nor does it refer to section 12.04(a). The specific,

detailed requirements of section 12.04(a) protect both parties. They protect the claimant both

by ensuring that a communication that complies with the requirements of the section will

undisputedly be considered notice to the respondent of a claim against it, and also by

ensuring that not every communication sent to the respondent will trigger the dispute

resolution procedures. They also protect the respondent by providing details concerning the

claim and offering the opportunity to remedy it before proceeding to mediation or arbitration.

The requirements of section 12.04(a) are clear and unambiguous. Thus, “they must be given

their plain, ordinary and popular meaning.” Thompson,

. Here, there is no

dispute that not all of the requirements of section 12.04(a) were satisfied. Consequently, the

letter sent to the developer cannot be considered a notice under that section and the trial court

erred in finding that it was.

¶ 60 Keer also argues that he received the required notice by virtue of a letter sent to all unit

owners by the Association’s board on September 16, 2010. While this was not a basis for the

trial court’s dismissal of the complaint, we may affirm the dismissal of a complaint on any

ground that is apparent from the record (Golf,

). The letter, which was

received by Keer in his capacity as a unit owner, provided, in relevant part:

“[T]he purpose of this letter is to clarify facts regarding exterior building issues and

what led up to issues of payment for the required work. In the fall of 2009

management brought to Lennar’s attention that there were defects to the exterior of

the buildings. Two members of Lennar showed up and admitted that indeed it

appeared that there was unfinished work done by the contractors regarding the

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No. 1-15-1846

balconies. They said they would come back out the following summer (2010) to

discuss scheduling repairs, but would not admit to any other defects.

But on November 5, 2009 Lennar sent out an email to us (see attachment) and

again on August 24, 2010 a letter to our attorneys attaching a Release dated July 2008

and signed by the then Board President Larry Keer. In the Release, in return for

approximately $28,500 towards elevator and boiler repairs, Larry Keer signed a

Letter of Release that removed Lennar from any further work and held Lennar

harmless from further issues. As a result you will see from the attached

documentation, ‘Lennar respectively declines any responsibilities for any repairs to

the project.[’]

This was the first time the current Board ever heard or saw of the Release.

This Release becomes very significant, since in August 2010 the current Board

had a transition report completed where it was discovered that substantial work needs

to be done to both buildings, amounting to close to $900,000. The Board sought

Legal Council [sic], where it was learned that because of the Release signed by Larry

Keer, the Association would likely lose any lawsuit against the developer[.]

It should be emphasized that by simply walking around the North building one

could have seen cracked and crumbling masonry and unfinished balconies clearly

visible to anyone who took the time to look. With such knowledge nobody could

possibl[y] have signed the Release, which gave away the Association’s ability to seek

corrective action by Lennar.

Knowing that the suit by the Association would be dismissed, the only option

open to the Association would be to sue Larry Keer in the hope that the Directors and

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No. 1-15-1846

Officers insurance would kick in to pay for the error made by signing the Release in

the first place without having pertinent information regarding the repair costs.”

(Emphasis in original.)

¶ 61 We cannot find that this letter constitutes notice such that the mandatory dispute

resolution process was triggered. As with the letter drafted by the Association’s attorney, this

letter does not satisfy all of section 12.04(a)’s requirements and therefore cannot be

considered notice under that section. Furthermore, the letter itself was not even directed at

Keer but was sent to all of the unit owners, and it was only in that capacity that Keer received

the letter. A finding that such a letter serves to trigger the mandatory dispute resolution

process would render section 12.04(a) effectively meaningless, since it would mean a

communication could be considered notice even if (1) it did not comply with the

declaration’s clearly specified requirements and (2) it was part of a mass communication to

all unit owners as opposed to a communication directed at the person against whom the claim

was going to be made. Accordingly, we do not find this letter serves as an alternative basis

for affirming the trial court’s finding that the Association had waived its claims against

defendants.

¶ 62 B. Validity of Amendment to Declaration

¶ 63 Since we have concluded that there was no notice sent under section 12.04(a), the

mandatory dispute resolution process was never triggered and the Association’s claims

against defendants were never waived for noncompliance with that process. However, the

Association would still be required to submit its claims to mediation and arbitration under

section 12.04(b)(iv) if not for the fact that, in 2011, the Association amended the declaration

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No. 1-15-1846

to remove article 12 in its entirety. The trial court found this was a valid amendment, a ruling

which the developers challenge in their cross-appeal.

¶ 64 The basis for the developers’ argument is that section 12.05 concerned the amendment of

article 12 and provided:

“AMENDMENT OF ARTICLE: Without the express prior written consent of

Declarant, this Article may not be amended for a period of twenty years from the

effective date of this Declaration.”

The developers claim that, because the amendment was done without their express prior

written consent, the amendment was invalid.

¶ 65 The trial court found that section 12.05’s restrictions on amending the declaration

conflicted with the terms of the Condominium Property Act, rendering the restrictions void.

In deciding a controversy concerning a condominium, “we must examine any relevant

provisions in the Condominium Property Act [citation], and the declaration or bylaws of the

condominium and construe them as a whole. [Citation.]” Goldberg,

. Further, the Act makes clear that “[a]ny provisions of a condominium

instrument that contains provisions inconsistent with the provisions of this Act are void as

against public policy and ineffective.” 765 ILCS 605/2.1 (West 2010).

¶ 66 In the case at bar, the trial court found that section 12.05 was inconsistent with section 27

of the Act, which provides, in relevant part:

“If there is any unit owner other than the developer, the condominium instruments

shall be amended only as follows:

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No. 1-15-1846

(i) upon the affirmative vote of 2/3 of those voting or upon the majority specified

by the condominium instruments, provided that in no event shall the condominium

instruments require more than a three-quarters vote of unit owners; and

(ii) with the approval of any mortgagees required under the provisions of the

condominium instruments.” 765 ILCS 605/27(a) (West 2010).

The trial court found that section 12.05 was invalid because “here[,] the Illinois legislature

has defined the only manner by which amendments to condominium declarations can be

accomplished—a 2/3, but not more than 3/4 vote of the condominium owners. Defendant has

inserted a term that is more onerous than the Act allows and requires the approval of the

declarant. The Act does not allow for such a provision.” We find the trial court’s reasoning,

and the Association’s arguments, persuasive.

¶ 67 “The fundamental objective of statutory construction is to ascertain and give effect to the

intent of the legislature.” 1010 Lake Shore Ass’n v. Deutsche Bank National Trust Co.,

(citing Bettis v. Marsaglia,

). “The most reliable

indicator of legislative intent is the statutory language, given its plain and ordinary meaning.”

1010 Lake Shore Ass’n,

(citing State Building Venture v. O’Donnell,

(2010)). “A reasonable construction must be given to each word, clause,

and sentence of a statute, and no term should be rendered superfluous.” 1010 Lake Shore

Ass’n,

(citing Slepicka v. Illinois Department of Public Health,

). “ ‘[W]hen statutory language is plain and certain the court is not free to give it

a different meaning.’ ” Kalkman v. Nedved,

(quoting In re

Estate of Hoehn,

(1992)). “[A] court may not depart from the plain

statutory language by reading into it exceptions, limitations, or conditions not expressed by

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No. 1-15-1846

the legislature.” Kalkman,

(citing In re Estate of Ellis,

(2009)).

¶ 68 In the case at bar, section 27 of the Act clearly provides that, “[i]f there is any unit owner

other than the developer, the condominium instruments shall be amended only as follows.”

(Emphasis added.) 765 ILCS 605/27(a) (West 2010). We agree with the trial court that this

language means that additional restrictions to the amendment process are not permitted. The

developers argue that this language is intended merely to distinguish between amendments to

the declaration, which are subject to a heightened threshold for amendments, and

amendments to bylaws or rules passed by an association’s board, which may be amended

with fewer votes. We do not find this argument persuasive at all. First, the language does not

require a heightened threshold but only permits it; section 27(a) requires the “affirmative

vote of 2/3 of those voting or upon the majority specified by the condominium instruments,”

up to a three-quarters requirement, meaning that a simple majority could be sufficient if the

condominium instrument so provides. 765 ILCS 605/27(a) (West 2010). Furthermore, had

the legislature intended simply to impose a heightened threshold for amending a declaration

without also prohibiting the imposition of more severe restrictions, it could have provided so

specifically. In fact, it did so several times in the Act, including within other subsections of

section 27. See, e.g., 765 ILCS 605/27(b)(1) (West 2010) (providing vote requirements for

correcting omissions or errors in condominium instruments “unless the Act or the

condominium instruments specifically provide for greater percentages or different

procedures”); 765 ILCS 605/15(a) (West 2010) (“Unless a greater percentage is provided for

in the declaration or bylaws,” setting forth minimum vote requirements for selling the

property); 765 ILCS 605/14.3 (West 2010) (“Unless the condominium instrument expressly

32

No. 1-15-1846

provides for a greater percentage or different procedures,” setting a majority vote

requirement for authorization of a grant of an easement for cable television cable). It did not

do so with respect to section 27(a). Instead, it imposed a default threshold of a two-thirds

affirmative vote, as well as an absolute ceiling of a three-quarters affirmative vote and stated

that the declaration “shall be amended only” through this vote, along with the approval of any

necessary mortgagees. (Emphasis added.) 765 ILCS 605/27(a) (West 2010). Thus, the

language of the statute itself shows that the legislature specifically selected a range that it felt

appropriate and limited the restrictions for amendments to that range. Indeed, section 27

originally did not provide a ceiling but only required “the affirmative vote of 2/3 of those

voting or upon the majority specified by the condominium instruments.” Ill. Rev. Stat. 1983,

ch. 30, ¶ 327. Section 27 was amended in 1984 (Pub. Act 83-833, § 1 (eff. July 1, 1984)) to

impose a ceiling of a three-quarters vote requirement, which demonstrates the legislature’s

desire not to permit overly severe vote requirements. Ill. Rev. Stat. 1983, ch. 30, ¶ 327(a). As

noted, “ ‘[w]hen statutory language is plain and certain the court is not free to give it a

different meaning.’ ” Kalkman,

(quoting In re Estate of

Hoehn,

). Here, we find no basis for the developers’ argument that

section 27 was intended to mean something different than its plain language requires.

¶ 69 We are not persuaded by the developers’ arguments that “Illinois courts have upheld ***

similar additional requirements for amending a condominium declaration,” because none of

the cases cited by the developers has any application to the case at bar. First, in Streams

Sports Club, Ltd. v. Richmond,

(1983), there is no indication that there

was any issue as to whether the declaration’s requirements for amendments were valid under

section 27(a) of the Act; the only issue concerning an amendment was whether the proposed

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No. 1-15-1846

amendment itself complied with those requirements, a question that the supreme court did

not decide because it found that there was not enough information in the record. Moreover,

the “additional requirement” in that case was simply a requirement that the secretary of the

association’s board certify the amendment, which is a far cry from the type of additional

requirement the developer seeks to impose here.

¶ 70 Additionally, Schaffner v. 514 West Grant Place Condominium Ass’n,

(2001), the second case cited by the developer, required the court to consider

whether the proposed amendment was a scrivener’s error such that section 27(b)(2) applied

and did not involve section 27(a). In fact, section 27(a) would not have been applicable to

that case, since the proposed amendment involved the diminishment of the common

elements, which is governed by section 4(e) of the Act. See 765 ILCS 605/27(a) (West 1998)

(“Except to the extent authorized by other provisions of this Act, no amendment to the

condominium instrument shall change the boundaries of any unit or the undivided interest in

the common elements ***.”); 765 ILCS 605/4(e) (West 1998) (the percentages of ownership

interest in the common elements allocated to each unit “shall remain constant unless

otherwise provided in this Act or thereafter changed by agreement of all unit owners”). Thus,

the court did not interpret the language of section 27(a) to determine if the restrictions to the

amendments were permissible under that section. Similarly, the court in Picerno v. 1400

Museum Park Condominium Ass’n,

, was asked to consider a

proposed amendment that would diminish the unit owners’ interest in the common elements

and was not asked to interpret the language of section 27(a); that case does not even set forth

the declaration’s amendment procedures, but only makes reference to “certain paragraphs of

the declaration [that] require additional approval” (Picerno,

).

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No. 1-15-1846

These cases thus do not add support to the developers’ argument that additional restrictions

to the amendment process are permitted under the language of section 27(a).

¶ 71 We are similarly unpersuaded by the developers’ reliance on Scott v. York Woods

Community Ass’n,

(2002), a case they cite for a holding that 25- and 30­

year restrictions on amendments were presumptively valid. However, Scott did not involve

interpretation of the Act; indeed, it does not appear that there was even a condominium

involved, as the case involved “homeowners in a residential community” and the association

was a “Community Association.” 7 Scott,

. Furthermore, as pointed out

by the Association, the Scott court noted that “[a]lthough the amendment restrictions may

strike some people as unwise, the Association never identified any statute or other expression

of public policy that might bar them.” Scott,

. Here, by contrast, the

Act governs the condominium documents at issue and specifically provides that “[a]ny

provisions of a condominium instrument that contains provisions inconsistent with the

provisions of this Act are void as against public policy and ineffective.” 765 ILCS 605/2.1

(West 2010). As we have concluded, the plain and clear language of section 27(a) of the Act

provides the only method for amending the declaration and section 12.05 seeks to impose

alternate, more severe, restrictions. This is not permitted by the Act and, accordingly, the trial

court properly found that the amendment removing article 12 in its entirety was valid. Since

the amendment was valid, the Association was not required to submit its claims to mediation

or arbitration prior to filing the instant lawsuit.

7 We also note that the name of the community appears to have simply been “York Woods” (see Scott,

), which also lends support to the conclusion that the community was not a condominium, as the Act requires the name of the condominium to include the word “Condominium” or be followed by the words “a Condominium.” 765 ILCS 605/4(c) (West 2000).

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No. 1-15-1846

¶ 72 C. Scope of Releases

¶ 73 Our conclusion on the issues concerning article 12 of the declaration—that there was no

notice such that the mandatory dispute resolution process was triggered and that the

declaration was validly amended to remove that article—means that the Association’s

complaint should not have been dismissed based on noncompliance with the mandatory

dispute resolution process. However, as noted, we may affirm the dismissal of a complaint on

any ground that is apparent from the record. Golf,

. Accordingly, we

must consider the effect of the releases executed by Keer when he was the Association’s

president.

¶ 74 In the case at bar, the Association, represented by Keer, and the developer executed two

releases, one on July 18, 2008, and the other on October 30, 2008. According to the releases,

which contained identical language, “[t]he Association *** made various claims against the

Developer including, among other things, the ‘Items’ on the Punch list attached hereto as

Exhibit A,” which included problems such as broken concrete in the parking lot and

improper placement of the wood trim in the hallways, 8 and “[t]he parties desire to resolve the

claims made by the Association and any and all other future claims or causes of action.”

Accordingly, the developer agreed to pay the Association $20,734 in the July 18, 2008,

release and agreed to pay $7,779.53 in the October 30, 2008, release. In exchange, the

Association agreed to release and discharge the developer from:

8 As noted, “Exhibit A” was identical in both releases, except that in the exhibit attached to the October 30, 2008, release, there was an additional item that provided that, “[a]s a result of [water- seepage issues due to the pitch of the garage floor], the elevator system control sustained $20,734 of damage.” The “status” of this item provided that “[the developer] has reimbursed the [Association] for the cost of the repairs.” We note that the $20,734 listed as the amount of damage is also the precise amount the developer agreed to pay in the July 18, 2008, release.

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No. 1-15-1846

“any and all claims, causes of action, or liabilities whosoever, known or unknown,

asserted or unasserted, whether arising out of contract, tort, or otherwise, in law or in

equity arising, accruing, or based on any action or inaction of any such parties,

including, without limitation, any claim for construction defects in connection with

the construction of the improvements which are part of the Condominium, the

administration of the Association prior to the turnover of control to a board of

directors elected by the unit owners and the payment of assessments, charges or other

amounts whatsoever due to the Association from the Developer.”

¶ 75 The Association has raised two different arguments concerning the validity of the

releases throughout the instant litigation. First, in responding to the developers’ motion to

dismiss its second amended complaint, the Association argued that Keer did not have the

authority to execute the releases on behalf of the Association; this argument also serves as

the basis for the counts of the Association’s complaint that allege that Keer breached his

fiduciary duty to the Association. On appeal, however, the Association focuses on the scope

of the releases, arguing that the claims against the developers were not encompassed within

the language of the releases. The developers claim that this change of focus means that the

Association “does not contest” Keer’s authority to execute the releases on appeal. We find

this to be an overly restrictive characterization of the Association’s position, especially given

that the issue the developers claim is “not contest[ed]” serves as the basis for two counts of

the complaint. Accordingly, we consider both of the Association’s arguments concerning the

validity of the release.

¶ 76 A release “ ‘is the abandonment of a claim to the person against whom the claim

exists.’ ” Thornwood, Inc. v. Jenner & Block,

(2003) (quoting Hurd v.

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Wildman, Harrold, Allen & Dixon,

(1999)); Fuller Family Holdings,

LLC v. Northern Trust Co.,

(2007). It is a contract and is therefore

governed by contract law. Farm Credit Bank of St. Louis v. Whitlock,

(1991) (citing Polo National Bank v. Lester,

(1989)).

¶ 77 “A contract executed by a party that does not have authority is void ab initio.” Alliance

Property Management, Ltd. v. Forest Villa of Countryside Condominium Ass’n,

(citing Illinois State Bar Ass’n Mutual Insurance Co. v. Coregis Insurance

Co.,

(2004)). Such authority may be actual or apparent, and actual

authority may be either express or implied. Cove Management v. AFLAC, Inc.,

. “Express authority is actual authority granted explicitly by the principal to

the agent, while implied authority is actual authority proven circumstantially by evidence of

the agent’s position. [Citation.] Apparent authority, by contrast, is authority imposed by

equity. [Citation.]” Cove Management,

. “Generally, the

question of whether an agency relationship exists and the scope of the purported agent’s

authority are questions of fact.” Kaporovskiy v. Grecian Delight Foods, Inc.,

(2003).

¶ 78 With respect to condominiums, the unit owners’ association is responsible for the overall

administration of the condominium property through its duly elected board of managers. 765

ILCS 605/18.3 (West 2006). This board of managers “shall exercise for the association all

powers, duties and authority vested in the association by law or the condominium

instruments except for such powers, duties and authority reserved by law to the members of

the association.” 765 ILCS 605/18.4 (West 2006).

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¶ 79 In the case at bar, section 5.10 of the bylaws provides that, “[e]xcept as otherwise

expressly provided herein or in the Declaration, any action may be taken upon the affirmative

vote of a majority of the Directors present at a meeting at which a quorum is present.”

Furthermore, section 8.01 discusses authority for the execution of instruments:

“EXECUTION OF INSTRUMENTS: The Board may authorize any officer or

officers, agent or agents of the Condominium Association, in addition to the officers

so authorized by these By-Laws, to enter into any contract or execute and deliver any

instrument (including amendments to the Declaration or these By-Laws which must

be executed by the Condominium Association) in the name of and on behalf of the

Condominium Association and such authority may be general or confined to specific

instances. In the absence of any such authorization by the Board, any such contract or

instrument shall be executed by the President or a Vice President and attested to by

the Secretary or an Assistant Secretary of the Condominium Association.”

Thus, in order for there to be actual authority to execute the releases at issue, (1) the action

must have been approved by a majority of the directors at a meeting at which a quorum is

present or (2) the contract must have been executed by the Association’s president or vice

president and attested to by the secretary or an assistant secretary. Here, the complaint alleges

that at the time of the execution of the releases, Keer did not have the approval of a majority

of the board to execute the releases. Furthermore, while Keer was the president of the

Association at the time, an examination of the releases shows that they were executed by

Keer and by the developer’s representative; there is no attestation by the Association’s

secretary or assistant secretary. Thus, taking the facts alleged in the complaint as true, as we

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must when reviewing a motion to dismiss (Snyder v. Heidelberger,

),

under the terms of the bylaws, Keer had no actual authority to execute the releases.

¶ 80 Furthermore, Keer did not have apparent authority to execute the releases. Apparent

authority is the authority that a reasonably prudent person would naturally suppose the agent

to possess, given the words or conduct of the principal. State Security Insurance Co. v.

Burgos,

(1991). “It is a well-established precept of agency law that a

principal will be bound by the authority he appears to give to another, as well as that

authority which he actually gives.” (Emphasis in original.) Burgos,

(citing

Lynch v. Board of Education of Collinsville Community Unit District No. 10,

(1980)). Once the principal has created the appearance of authority, he is estopped from

denying it to the detriment of a third party. Burgos,

. To establish apparent

agency, the party alleging the existence of the agency must prove that (1) the principal or its

agent acted in a manner that would lead a reasonable person to believe that the individual

allegedly at fault was an employee or agent of the principal, (2) the principal had knowledge

of and acquiesced in the acts of the agent, and (3) the injured party acted in reliance upon the

conduct of the principal or its agent, consistent with ordinary care and prudence. Wilson v.

Edward Hospital,

. However, “[i]f [the third person] knows, or has

good reason for believing, that the acts exceed the agent’s powers or if such reasonable

inquiry as he is under the duty to make, would result in discovery of the true state of the

powers, and he fails to fulfill that duty, he cannot assert an apparent authority effective

against the principal.” (Internal quotation marks omitted.) Cove Management,

.

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¶ 81 In the case at bar, the bylaws were attached to the declaration, which was drafted by the

developers. Accordingly, the developers would have, or should have, been aware of the

provisions of the bylaws, including those provisions defining the authority to execute

contracts on the Association’s behalf. When the releases were signed by Keer alone, the

developers therefore should have known that he was acting outside the scope of his authority.

Given their knowledge of the bylaws, there can be no argument that the Association gave the

developers reason to believe that Keer had the authority to execute the releases. Thus, Keer

did not have apparent authority to execute the releases.

¶ 82 The developers argue that, even if Keer did not have actual or apparent authority, the

Association nonetheless ratified his signature by accepting the funds provided in exchange

for the releases. Even if an agent did not have authority to execute a release, it is possible for

the principal to be bound by the release if the principal later ratified it. Borsellino v. Putnam,

. “Ratification occurs when the principal learns of an

unauthorized transaction, then retains the benefits of the transaction or takes a position

inconsistent with nonaffirmation.” (Internal quotation marks omitted.) Cove Management,

.

¶ 83 In the case at bar, however, there is no indication that the Association was aware of the

releases at the time that it accepted any funds from the developers. Indeed, in its letter to the

unit owners, which Keer attached to his motion to dismiss, the Association’s board states:

“[O]n November 5, 2009 Lennar sent out an email to us (see attachment) and again on

August 24, 2010 a letter to our attorneys attaching a Release dated July 2008 and signed by

the then Board President Larry Keer. In the Release, in return for approximately $28,500

towards elevator and boiler repairs, Larry Keer signed a Letter of Release that removed

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Lennar from any further work and held Lennar harmless from further issues. As a result you

will see from the attached documentation, ‘Lennar respectively declines any responsibilities

for any repairs to the project.[’] This was the first time the current Board ever heard or saw of

the Release.” (Emphasis omitted.) Thus, according to this letter, the Association did not

become aware of the releases until over a year after their execution and so, at this early stage

of the proceedings, we cannot find that the Association ratified the releases. See Alliance

Property Management,

(finding no ratification where “the

Board did not have knowledge of the restriction in the bylaws during the relevant period”).

Since it is not clear as a matter of law that Keer had the authority to execute the releases, we

cannot find the releases to provide an alternate basis to affirm the trial court’s dismissal of

the Association’s second amended complaint. Accordingly, the trial court’s dismissal must

be reversed.

¶ 84 II. Attorney Fees and Sanctions

¶ 85 The parties also raise several issues concerning the trial court’s award of attorney fees.

Specifically, the Association argues that the trial court should not awarded attorney fees at

all, and if it did properly award some fees, it nevertheless awarded too much. By contrast, the

developers argue that the trial court should have awarded more and also argue that the trial

court should have considered their motion for Rule 137 sanctions. However, since we have

determined that the trial court erred in dismissing the Association’s second amended

complaint, we have no need to consider the arguments concerning attorney fees, as the case

remains active. Similarly, we have no need to consider the propriety of the trial court’s

decision concerning Rule 137 sanctions.

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¶ 86 CONCLUSION

¶ 87 For the reasons set forth above, the trial court erred in finding that the Association had

waived its claims against defendants by failing to follow the mandatory dispute resolution

procedures set forth in article 12 of the declaration. Furthermore, since that article was

subsequently amended, the Association could properly proceed directly to a lawsuit without

first seeking mediation or arbitration. Accordingly, we find that the trial court erred in

dismissing the Association’s second amended complaint. We further find that the releases

signed by Keer do not provide an alternate basis for affirming the trial court’s dismissal, as

the facts as alleged in the complaint show that Keer did not have the authority to execute the

releases.

¶ 88 Reversed.

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