Sgariglia v. Am. Int'l Relocation Servs.

MELINDA SGARIGLIA, Plaintiff, v. AMERICAN INTERNATIONAL RELOCATION SERVICES, LLC d/b/a AIRES, NICHOLAS GONRING, and KELSEY GONRING, Defendants.

No. 19-cv-5684

United States District Court, N.D. Illinois, Eastern Division

September 16, 2021

MEMORANDUM OPINION AND ORDER

Robert M Dow, Jr. United States District Judge

Plaintiff Melinda Sgariglia (“Plaintiff”) brings suit against Defendant American International Relocation Services LLC d/b/a AIRES (“AIRES”) for fraudulent concealment (Count III) and against Defendants Nicholas and Kelsey Gonring (the “Gonrings”) for violation of Illinois' Residential Real Property Disclosure Act, 765 ILCS 77/1 et seq. (“Disclosure Act”) (Count I) and fraudulent concealment (Count II). Currently before the Court is AIRES' motion to dismiss Count III for failure to state a claim [96].^[1] For the following reasons AIRES' motion to dismiss [96] is denied. This case is set for telephonic status hearing on 9/29/21 at 9:15 a.m Participants should use the Court's toll-free, call-in number 877-336-1829 and passcode 6963747. Counsel are directed to file a joint status report by no later than 9/24/21 that includes (a) a proposed schedule for any discovery that remains to be completed; (b) a statement in regard to any settlement discussions and/or any mutual request for a referral to the assigned Magistrate Judge for a settlement conference; and (c) a proposed schedule for briefing of Defendant Gorr's motion for summary judgment.

I. Background

This diversity action arises out of the sale of a condominium unit located at 2726 West Cortez in Chicago, Illinois (the “Building”). The Building includes 3 units and is governed by a condominium association called 2726 W. Cortez Avenue Condominiums (“Condo Association”). At issue here is Unit 1 (the “Unit”). The Gonrings purchased the Unit in May 2016. The Unit was listed for sale on May 21, 2018 for $475, 000.

On June 8, 2019, AIRES signed a Condominium Real Estate Purchase and Sale Contract (“Sales Contract”) accepting Plaintiff's offer to purchase the Unit for $510, 000. Although the Sales Contract and a subsequent addendum to the contract both list AIRES as the Seller, see [44] at 2-3, according to the Complaint, the Gonrings were the owners of the Unit as of the date those documents were executed, id. at 2.

Attached to the Sales Contract is a Residential Real Property Disclosure Report signed by the Gonrings (“RRPDR”). In it, they check the box “no” in response to questions concerning whether they are aware of certain defects, including “leaks or material defects in the roof, ceilings, or chimney” and defects “in the walls, windows, doors or floors.” [44] at 2. Plaintiff also received a Sellers Property Disclosure Statement (“Sellers Disclosure”). See id. at 3. The Sellers Disclosure, which is on AIRES letterhead, is signed by the Gonrings as “Sellers.” Id. at 23-29. In response to the question, “Are you aware of any past or present water leakage in the house or other structures?, ” the Gonrings checked “Yes” and wrote “Unit 3 had leaks on West facing windows … HOA sealed building to resolve Unit 3 leak.” Id. at 24. In response to the question, “Are you aware of any past or present movement, shifting, deterioration or other problems with walls, foundations or other structural components, ” the Gonrings checked “No.” Id. Plaintiff relied on the representations contained in the RRPDR and the Sellers Disclosure and proceeded with the purchase of the Unit. Id. at 3.

On June 14, 2018, Plaintiff's attorney, Thomas Hawbecker (“Hawbecker”), sent an attorney review letter to Sarah Wilkins (“Wilkins”), see [44] at 31-34, an attorney who held herself out to be representing the “Seller, ” AIRES. Id. at 35. In paragraph 8, Hawbecker requests: “Please verify that the Condo Association has not experienced any instances of water (interior or exterior) leaking into the Property and/or any water damage during Seller's ownership of the Property. If there have been any such occurrences, please provide dates, locations, damage and repairs made.” Id. at 32. In paragraph 9, Hawbecker asks “Seller” to represent and warrant “Sellers have not made any insurance claims within the last 5 years.” Id.

On June 18, 2018, Wilkins responded. She stated, in part, that “[a]s a third-party corporate relocation company, Seller is unable to make verifications regarding whether the Property has experienced water leaking or water damage, ” or “representations or warranties regarding whether insurance claims have been made against the Property.” [44] at 36.

On June 22, 2018, Hawbecker reiterated his request for information concerning water leakage/damage and insurance claims. See [44] at 4. He asked Wilkins: “Please confirm the same with the prior owner as the seller has direct contact with the prior owner.” Id. at 39. On July 2, 2018, Wilkins responded. As to water leakage/damage, she stated: “[A]s a third-party corporate relocation company, Seller is unable to make verifications regarding whether the Property has experienced water leakage or water damage. However, Seller agrees to abide by the terms of the ‘Buyer's Duty to Inspect/Test' section of the AIRES addendum with respect to possible leaks, seepage, or water infiltration of the Property, as Seller would have no knowledge of such matters unless raised during the home inspection process when the information reported in the [RRPDR] or other homeowner provided disclosures makes no mention of water infiltration issues within the Property.” Id. at 39. As to insurance claims, Wilkins stated: “Seller reports that the homeowners made no claims against their homeowner's insurance within the last 5 years. As a third-party corporate relocation company that has never occupied the Property, Seller is unable to make representations or warranties regarding whether insurance claims have been made against the Property, as Seller would have no knowledge of such matters.” Id. at 40. Plaintiff alleges that she relied on these representations in deciding to proceed with the purchase of the Unit.

Prior to closing on the sale, Plaintiff was also provided with a disclosure statement from the Condo Association pursuant to 765 ILCS 605/22.1 (“22.1 Statement”), dated June 14, 2018 and signed by the association's President, John Gorr (“Gorr”). [44] at 4; 43-44. Gorr checked “no” in response to the question, “Are there any capital expenditures anticipated by the Association for the current or next two fiscal years that would require a special assessment and/or increase in the monthly assessment to the unit owners?” Id. at 43.

On July 25, 2018, the Gonrings conveyed the Unit to Plaintiff by Warranty Deed. Approximately six weeks later, on September 7, 2018, Gorr emailed Plaintiff: “I'm not sure what was communicated to you during closing but there has been a history of water intrusion to the building. This has occurred primarily in my unit from leaks through the split face block. The history of the water intrusion has been thoroughly documented over some years and was clearly communicated along the way to the other unit owners. We had the building sealed with elastomeric sealant a few months back so we're fairly confident that the water has stopped getting into the building. However, with the recent inspections on my place a few items have been brought up that have shed light on a new problem”-damage to his subfloor and mold behind the walls in Unit 3. [44] at 45-46.

Plaintiff demanded and received from Gorr documentation of the problem. The documents attached to the complaint show that in December 2017, Gorr informed Kelsey Gonring and other residents that there was water leakage and damage in his unit, particularly around windows and doors. See [44] at 48. Gorr stated that he thought the Building needed to be tuck-pointed at the third-floor level, that there was also a need to “[d]etermine if more tuck-pointing should be performed anywhere else, ” and a need to “[a]pply a warrantied sealant to the exterior at my level, at least, and potentially just seal the whole building.” Id. Gorr further wrote: “I've done everything I can over the years to repair on my own and it's just getting worse every year. At this point I believe it needs to become a building issue. To the best of my knowledge, it appears to me that the Condo documents would include this as a common element repair and would be paid for by the association.” Id.

Emails between residents continued in February and March 2018. In a February 20, 2018 email, Kelsey Gonring wrote that “likely, grinding/re-pointing and/or sealing the building will be necessary.” [44] at 50. She also claimed to be surprised about the extent of problem experienced by Gorr and accused Gorr of making the problem worse by not bringing it to the attention of the Condo Association and instead hiring his own contractors. See id. She further wrote that, as part of the Gonrings' purchase of the Unit, “we were given a signed document stating that no issues with any of the units had been raised with the HOA and no documented common element work had been done or was expected to be done in the next 2 years.” Id.

During the Gonrings' ownership of the Unit, the Condo Association received an ESI Investigative Report that was sent to Gorr on November 29, 2017. See [44] at 52-63. The Investigative Report opined that water infiltration was occurring “at various locations of the structure, but particularly at window and door openings, ” with the problem due to deficiencies in the “original construction of the building with the predominate issue being improper flashing at wall openings.” Id. at 54. The Condo Association made a claim on its insurance coverage, which was denied on November 30, 2017. See id. at 64-68.

The Condo Association...