Illinois Appellate Ct Awards Homeowner Punitive Damages for Association’s Breach of Fiduciary Duty

Illinois Appellate Court decision (July 24, 2014)

(Filed under Supreme Court Rule 23- may only be cited as precedent under limited circumstances allowed under Rule 23(e)(1))

In this case, an elderly homeowner suffered water damage to the interior of her condominium unit from a cause that she contended the association was responsible for. After the association repeatedly ignored her requests to remediate the water infiltration issue along with resulting mold issues and repair the damage, the owner was forced to incur expenses on her own account to remediate the problems and make the repairs. She then sued the association for breach of its fiduciary duty by failing to provide proper care, upkeep, replacement and improvement and sought damages for the expenses she incurred, interest, costs, attorney fees, and punitive damages.

The trial court ruled that the association showed an indifference to the owner’s needs and awarded her a judgment for damages that included $12,000 in punitive damages for attorney fees and $10,000 in punitive damages. The association appealed contending that the trial court’s damage awards were improper and , in particular contended that the trial court’s determination that the association’s breach of fiduciary rose to a level that would allow punitive damages was incorrect and constituted an abuse of discretion.

The appellate court affirmed the trial court’s decision in its entirety and stated that, while the association’s behavior may not have been motivated by an “evil motive”, it was egregious, willful, and done with “reckless indifference” to the rights of the owner, to whom the association owed a fiduciary duty. The evidence showed a pattern of neglect and a reckless indifference by the association in repeatedly ignoring requests to inspect and repair the property and deny the owner reimbursement after she hired repair people to remediate the conditions and repair the damage to her unit. Even after the owner was forced to hire an attorney and incur additional expenses, the association continued to refuse to reimburse the owner. As a result, the trial court was also correct in considering the award of attorney fees in the calculation of the amount of punitive damages it awarded.

In response to the association’s efforts to get the appellate court to rule that the association’s conduct was protected by the “business judgment rule” the court stated that the business judgment rule is designed to protect directors who have been careful and diligent in their duties and who make “honest mistakes of judgment.” In this case, the association was neither diligent nor careful in performing its duties. It simply failed to do its job — and that conduct is not protected by the business judgment rule.

See case decision: Schuh_v._Plaza_Des_Plaines_Condo._Ass’n_2014_IL_App_(1st)_131999-U_(Ill._App._2014)1