Taghert v. Wesley

Case Date: 09/30/2003
Court: 1st District Appellate
Docket No: 1-01-3554,1-02-1087, 1-02-1227 cons.

FIFTH DIVISION
SEPTEMBER 30, 2003




Nos. 1-01-3554, 1-02-1087 and 1-02-1227 ( Consolidated)

FRANCIS TAGHERT,

               Plaintiff-Appellee,

v.

WALTER WESLEY and NAT OZMON,
President and Director of 1440 Lake Shore
Condominium Association

               Defendants-Appellants.

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APPEAL FROM THE
CIRCUIT COURT OD
COOK COUNTY

 

 

HONORABLE
AMANDA S. TONEY
JUDGE   PRESIDING

PRESIDING JUSTICE CAMPBELL delivered the opinion of the court:

This is a consolidated appeal. Plaintiff, Francis Taghert, filed a complaint under theIllinois Condominium Property Act (765 ILCS 605/19 (West 2000)), against defendants, WalterWesley and Nat Ozmon, the President and Director of 1440 Lake Shore CondominiumAssociation, respectively, for failure to provide a requested inspection of CondominiumAssociation financial documents. The trial court ordered defendants to produce the documentsfor inspection, entered sanctions against defendants, and awarded plaintiff attorney fees and costs. Defendants appeal from the various orders of the circuit court of Cook County denying motionsto dismiss, motions to enter judgment on the pleadings, and from sanctions and awards enteredagainst them. We affirm.

BACKGROUND

The record reveals the following relevant facts. Plaintiff, Francis Taghert, is an owner of acondominium unit in 1440 N. Lake Shore Drive, and operated as the 1440 Lake ShoreCondominium Association (LSCA). Walter Wesley was president of the board of directors of theLSCA from June 1997, until June 2000. Nat Ozmon has been a board member and vice-presidentof the board of directors of the LSCA since June 1997.

On August 12, 1999, plaintiff sent a written petition to the LSCA Directors requestingcertain condominium records from the Board, to wit, the "budgetary files of the LSCA financecommittee." Wesley responded to plaintiff via letter dated August 27, 1999, that plaintiff couldobtain the information requested by attending a meeting of the finance committee.

Thereafter, on August 27, 1999, plaintiff filed a complaint, pro se, naming as defendants, Wesley and Ozmon, alleging misfeasance in the process of determining special assessments andrequesting punitive damages and fees.

In his initial complaint, plaintiff alleged that defendants failed to adhere to the provisionsof the Declaration of Condominium and its bylaws, and to Section 19 of Illinois CondominiumProperty Act (Condominium Property Act), in making the records of the Association available forexamination and review (765 ILCS 605/19 (West 2000). Plaintiff alleged that defendants failed tocomply with his requests to review the budgetary files of the LSCA Finance Committee for the1999/2000 budget. Plaintiff sought compensatory damages in the amount of $1, and punitivedamages in the amount of $3,000, to be distributed to a Chicago charity at the court's direction,and associated court fees.

The trial court permitted plaintiff to amend his complaint four times. In his fourthamended complaint, dated March 19, 2001, plaintiff alleged that the insurer of LCSA, St. PaulFire and Marine Insurance Company (St. Paul), by and through its manager Brad Smith andcounsel, Daniel M. Extrom, wrongly failed to pay plaintiff an arbitration award in the amount$400, for attorney fees and $1 for nominal damages, associated with the arbitration of plaintiff'scomplaint for request for documents.(1) Defendants rejected the arbitration award as their statutoryright.

The trial court entered an order on June 1, 2001, denying defendants' April 9, 2001,motion for judgment on the pleadings. The trial court granted in part and denied in partdefendants' section 2-615 motion to dismiss plaintiff's fourth amended complaint with prejudicefor failing to state a cause of action, striking certain paragraphs of plaintiff's fourth amendedcomplaint.

Plaintiff filed a fifth amended complaint on June 13, 2001, adding counts sounding inconspiracy and misappropriation in connection with defendants' budgetary decisions in 1999-2000. A pre-trial settlement conference commenced on July 13, 2001. At the onset of theconference, plaintiff made a settlement demand of $3001. The trial court restated plaintiff'sposition as plaintiff having asked the Board for information regarding the preparation of the 1999-2000 budget. Defense counsel maintained that plaintiff had never requested this information in hiscomplaint, and failed to request records with specificity. At the end of the hearing, the trial courtdenied defendants' motion to dismiss plaintiff's complaint or to grant judgment in favor ofdefendants on the pleadings.

On September 24, 2001, a hearing commenced in open court. The trial court inquired ofthe parties why they had failed to supply plaintiff with the documents he requested, then, suasponte, entered an order compelling defendants' production of the "files of the FinanceCommittee." On October 1, 2001, defendants advised the court that no such files existed, andfiled affidavits to that effect. Nevertheless, the trial court entered an order finding defendants incontempt of court and assessed fines in the amount of $500 per day until defendants producedsuch documents.

On October 9, 2001, plaintiff filed a motion for judgment on the pleadings arguing that bydefendants' statements through counsel in open court, defendants admitted that the Boardpossessed documents relating to the 1999-2000 budget. Plaintiff alleged a contradiction betweendefendants' affidavits and the admission of defendants and of defense counsel. Plaintiff assertedthat he had a witness, Don Rosenbaum, Co-Chairman of the Finance Committee during theformation of the 1999-2000 budget, who would testify that condominium budgets were oftenassembled without working sheets and were based on prior budgets. Plaintiff asserted thatWesley had tampered with the budget and inserted a special assessment without approval of theBoard, and that Ozmon assented. Plaintiff also cited the following exchange:

"THE COURT: Do you have papers or receipts or anythingthat were used by the Board condo, its managers etc. in preparing abudget for 99/00?

MR. OZMON: Well, certainly there are papers.

THE COURT: Certainly there are papers.

MR. OZMON: Certainly there are papers, just as your honorsaid."

On November 16, 2001, the trial court granted plaintiff's motion for judgment on thepleadings. The trial court noted that "Defendant Wesley refused to provide the documents citingthe fact that plaintiff failed to make a proper request for the documents." On December 18, 2001,the trial court entered judgment in favor of plaintiff and against defendants in the amount of$2,274.34. Defendants' motions to reconsider these orders were denied on April 4, 2002, andApril 17, 2002, respectively.

Defendants filed their timely notices of appeal of the above described orders of the trialcourt on October 3, 2001, and April 17, 2002. On October 26, 2001, this court granteddefendants' motion to stay the trial court's contempt order, denied waiver of bond, and denieddefendants' motion to stay further proceedings in the trial court.

OPINION

Initially, defendants contest their standing to be sued under section 19(e) of theCondominium Property Act. Section 19(e) provides that the condominium board is the properparty from which to request documents and from whom a complaining party may receive costsand fees. 765 ILCS 605/19(e) (West 2000). Defendants argue that plaintiff incorrectly filed hisaction against Wesley and Ozmon in their individual capacity and as board members of the LSCA,rather than against the LSCA Defendants' contention is without merit. The record shows thatplaintiff properly filed his complaint against defendants individually and in their capacity asmembers of the LCSA Board of directors. 735 ILCS 5/2-209.1 (West 2002).

Next, defendants contend that the trial court erred in entering various orders denying theirmotions to dismiss plaintiff's case for failure to state a claim, and motions for judgment on thepleadings. Defendants argue that plaintiff failed to comply with the procedures set forth in theCondominium Property Act regarding the inspection of association records. In particular,defendants contend that plaintiff failed to state a "proper purpose" for inspecting condominiumdocuments.

Section 19 of the Condominium Property Act provides in pertinent part as follows:

"19(a) The board of managers of every association shall keep andmaintain the following records, or true and complete copies ofthese records, at the association's principal office:

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(9) the books and records of account for the association'scurrent and 10 immediately fiscal years, including but notlimited to itemized and detailed records of all receipts andexpenditures.

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19(e) Except as otherwise provided in subsection (g) of thisSection any member of an association shall have the right toinspect, examine and make copies of the records described insubdivisions (6), (7), (8), and (9) of subsection (a) of this Section inperson or by agent, at any reasonable time or times but only for aproper purpose, at the association's principal office. In order toexercise this right, a member must submit a written request, to theassociation's board of managers or its authorized agent, stating withparticularity the records sought to be examined and a properpurpose for the request. Subject to the provisions of subsection (g)of this Section, failure of an association's board of managers tomake available all records so requested within 30 business days ofreceipt of the member's written request shall be deemed a denial; ** * "

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In an action to compel examination of records described insubdivisions (6), (7), (8), and (9) of subsection (a) of this Section,the burden of proof is upon the member to establish that themember's request is based on a proper purpose. Any member whoprevails in an enforcement action to compel examination of recordsdescribed in subdivisions (6), (7), (8), and (9) of subsection (a) ofthis Section shall be entitled to recover reasonable attorney's feesand costs from the association only if the court finds that the boardof directors acted in bad faith in denying the member's request." 765 ILCS 605/19 (West 2000).

There is a veritable dearth of case law in the state of Illinois interpreting section 19 of theCondominium Property Act and its provision directing the inspection of documents.

The Condominium Property Act itself is only forty-years old, first established by law in1963. The Condominium Property Act originally derived the rights enunciated in section 19, vesting rights of condominium unit owners to inspect the books and records of the association,from the statutory law of corporations.

It has long been established in Illinois that a shareholder in a corporation has the right toexamine the records, books and papers of the corporation after stating a "proper purpose." Stonev. Kellogg, 165 Ill.192, 46 N.E.222 (1896); Weigel v. O'Connor, 57 Ill. App. 3d 1017, 373N.E.2d 421 (1978); Hagen v. Distributed Solutions, Inc., 328 Ill. App. 3d 132, 764 N.E.2d 1141(2002). A proper purpose is shown when a shareholder has an honest motive, is acting in goodfaith, and is not proceeding for vexatious or speculative reasons. However the purpose must be"lawful in character and not contrary to the interests of the corporation." Sawers v. AmericanPhenolic Corp., 404 Ill. 440, 89 N.E.2d 374 (1949). "A proper purpose is one that seeks toprotect the interests of the corporation and as well as the interests of shareholder seeking theinformation." Weigel, 57 Ill. App. 3d at 1025.

In Meyer v. The Board of Managers of Harbor House Condominium Association, 221 Ill.App. 3d 742, 583 N.E.2d 14 (1991), this court addressed a plaintiff unit owner's request toinspect documents under the above quoted provision of the prior version of the CondominiumProperty Act. In its prior incarnation, section 19(a) specifically stated that the right of inspectionwas derived from the Not For Profit Corporation Act, permitting inspection of condominiumrecords by "members of a not-for-profit corporation pursuant to Section 107.75 for the GeneralNot For Profit Corporation Act of 1986." Ill. Rev. Stat. 1989, ch. 30, para. 319(a)(5). Section107.75 of the Not For Profit Corporation Act provided in pertinent part as follows:

"Each corporation shall keep correct and complete booksand records of account * * * ; and shall keep at its registered officeor principal office a record giving the names and addresses of itsmembers entitled to vote. All books and records of a corporationmay be inspected by any member entitled to vote, or that member'sagent or attorney, for any proper purpose at any reasonable time."(Ill. Rev. Stat 1989, ch. 32, par. 107.75).

The Meyer court thus examined the rights and burdens of a unit-owner in requesting an inspectionof records as those of a shareholder making such a request of a corporation. This court held thatwhere a unit owner asserted a good-faith fear of mismanagement of financial matters by theassociation, he established a proper purpose to inspect the records of the condominiumassociation's delinquency reports and itemized legal bills. Meyer, 221 Ill. App. 3d at 748.

In the present case, plaintiff requested an inspection of the records of the FinanceCommittee of the LCSA in order to ascertain the expenditures proposed for the 1999-2000budget year. The record shows that following lengthy proceedings, the trial court determined thatplaintiff submitted a request to inspect documents pursuant to section 19, that plaintiff stated aproper purpose in making such a request, and that defendants acted in bad faith in denyingplaintiff's request. Defendants' argument that plaintiff's request was inadequate as non-specific isunfounded. The record shows that both defendants and defense counsel admitted in the trial courtthat such documents existed and, in fact, were in defendants' possession.

Section 19 is clear as to plaintiff's right to an examination of the books and records of theassociation. We find that plaintiff has stated a proper purpose for the inspection of the financialdocuments specifically relating to the preparation of the fiscal year 1999-200 budget. Under thesecircumstances we cannot find that the trial court erred in entering judgment in favor of plaintiffand against defendants.

Defendants further object to the sanctions rendered against them after the trial court foundthem in contempt of court. On September 24, 2001, the trial court ordered defendants to producethe requested documents. Defendants refused, and the trial court found defendants in contemptof court and entered sanctions against defendants in the amount of $500 per day until such timethat defendants comply with the trial court's order.

The trial court is vested with inherent power to enforce its orders and preserve its dignityby the use of contempt proceedings. In re Marriage of Bonneau, 294 Ill. App. 3d 720, 691N.E.2d 123 (1998). It is within the discretion of the trial court to fashion appropriate remediesfor a party's contumacious behavior and this court will not reverse the contempt order of the trialcourt absent an abuse of such discretion. Shatkin Inv. Corp v. Connelly, 128 Ill. App. 3d 518,470 N.E.2d 1230 (1984). We find no abuse of discretion here.

Finally, defendants object to the award of attorney fees and costs to plaintiff.

Although plaintiff appears pro se on appeal, and appeared pro se for much of his activityat the trial court level, the record shows that plaintiff initially retained an attorney to represent himin his action and incurred attorneys fees. The trial court reviewed plaintiff's petition for fees andcosts presented by plaintiff and entered an award totaling $2,274.34. Under section 19(e) of TheAct , as quoted above, after a member prevails in an action to compel examination of records, themember is entitled to petition the court for attorney fees. This court has held that where aplaintiff succeeds in an action against a condominium association to compel disclosure of booksand records, the plaintiff is entitled to legal fees and the defendant association is not entitled toattorney fees for the defense of such an action. See Verni v. Imperial Manor of Oak ParkCondominium, Inc., 99 Ill. App. 3d 1062, 425 N.E.2d 1344 (1981).

An award of attorney fees and costs is within the discretion of the trial court and absent anabuse of discretion, this court may not reverse such an award. Kruse v. Kuntz, 288 Ill. App. 3d431, 683 N.E.2d 1185 (1996). In the present case, we cannot find that the trial court erred inentering an award in favor of plaintiff for $2,274.34.

We therefore affirm the judgment of the trial court.

Affirmed.

REID and HARTIGAN, JJ., concurring.

1. Plaintiff's collateral complaint against St. Paul was previously dismissed by the trialcourt pursuant to section 2-615 of the Code of Civil Procedure after a determination that St. Paulis not a proper party to plaintiff's case.