January 2013 Legal Case Studies


January 2013 | D.R. Legal News

Legal Case Studies

Woman sues real estate agent for theft during open house. According to the Chicago Sun-Times, a Highland Park woman has filed suit in Cook County against a real estate agent and brokerage firm for “careless and negligent acts” during an open house, which led to the theft of $162,000 in jewelry stored in a walk-in closet. The police are still investigating the alleged incident. Regardless of whether it has any merit, the suit emphasizes the need for brokers to warn homeowners to take precautions, such as removing valuable items and storing them in a safe deposit box or a secure rental unit while their house is on the market.
Employers cautioned to adopt social media policies. The importance of having a written agreement or policy to clarify ownership of social media accounts was highlighted in a suit filed in New York by PhoneDog LLC against a former employee who continued to use a company Twitter account after leaving his job. According to Law360, a newswire service for business lawyers, the employee wrote product reviews and posted videos on the company’s blog and social media sites, gathering 17,000 followers on Twitter. When he left his job, the now-former employee changed the name of the Twitter account and continued to use it, along with its large following. The company argued that each follower was valuable to the company and that the loss of the Twitter feed caused it economic harm. A federal judge allowed the case to go forward, but it was subsequently settled in a confidential agreement. Had the company adopted a policy or executed an employee agreement as to who owned the Twitter account, litigation over its use after the employee left might have been avoided. REALTORS® using social media for work may be creating valuable contacts that should be protected like customer lists.
The date of execution of a contract is not necessarily the date of the contract. Asset Recovery Contracting, LLC v. Walsh Construction Company of Illinois, 2012 IL App (1st) 101226. In a case decided on November 1, 2012, an Illinois Appellate Court evaluated whether the date at the top of a contract or the date of execution was the effective date. In that case, an interior demolition subcontractor on an office tower redevelopment project argued that the date in 2004 on which it signed a subcontract with the general contractor was the effective date, even though the subcontract clearly stated at the top of the face of the document, “Date of Agreement:  September 12, 2003.”  The court explained that the law in Illinois was that a court initially looks to the language of the agreement alone and if it is unambiguous, then it interprets the agreement without resort to any extrinsic evidence, such as conversations or prior oral agreements. Applying this rule, the court held that the contract was not ambiguous:  (1) it clearly stated on its face that the date was September 2003; and (2) the subcontractor certified that it was fully familiar with all the terms of the contract. The date of the subcontract was a term of the contract, so by signing the agreement in 2004, the subcontractor adopted and ratified the effective date of September 2003. The court noted that contractual terms may be effective for a period before the contract is executed, so long as coverage is clear from the face of the contract. Consequently, to avoid controversies over the effective date of a contract, REALTORS® should always be sure that the terms are clear, especially if the contract contains a date at the beginning and dates at the signature lines.
Damages in breach of contract for sale of unbuilt condominium development too speculative. Martinez v. River Park Place, LLC, 2012 IL App (1st) 111478.Condominium developers in Elgin contracted to sell units prior to obtaining title to property from the city and commencing construction. By the time the project was ready to be started, the developers told the plaintiff purchasers that costs had increased and that the purchase prices needed to be raised by over $90,000. Plaintiffs did not agree to the increases, so developers terminated the purchase contracts pursuant to a provision providing for termination for any reason and limiting damages to the return of Plaintiffs’ earnest money. The court found that the liquidated damages provision was not valid and that the developers had breached their promise to sell the units to Plaintiffs. Generally, the measure of damages for this kind of breach of contract is the difference between the contract prices for the condominium units and the market prices at the time of the breach. Plaintiffs had the burden of proving fair market value on the date of the breach, but not only were there no actual sales on which to base market value, but construction had not even commenced. Consequently, the Court found that any conjecture as to the fair market value of the property was speculative and that Plaintiffs’ damages were limited to a return of their earnest money and nominal damages of $1 each, rather than damages equal to the difference between the contract prices for condominium units and market prices.
Notice to owners according to property tax records when applying for rezoning is not always enough. Musicus v. First Equity Group, LLC, 2012 IL App (3d) 120068 (November 26, 2012). When applying for a rezoning or other zoning request like a variance or special use, notice to nearby landowners is required under the Municipal Code. In addition to following the letter of the applicable statute, however, the constitutional requirements of procedural due process may require more diligence. To satisfy the requirements of procedural due process, the manner of giving notice must be reasonably calculated, under all of the circumstances, to apprise the interested parties of the pendency of the action and afford them an opportunity to present their objections. In this case, First Equity, the real estate developer and agent for the pharmacy CVS, sought to obtain rezoning and a special use permit for property on which CVS wanted to build a new store. That property was within 250 feet of its existing store, which CVS rented from the Plaintiff.  In the county assessor’s office, however, the existing store property’s owner was listed as “Osco 18-825, c/o Raphael J. Misicus #8691-01,” with an address of a CVS Pharmacy in Rhode Island. The property owner did not receive notice of the zoning hearing and did not attend. The court held that the plaintiff did not receive adequate notice of the hearing. Under the circumstances, the court found that by simply mailing notice to property owners at their addresses noted on the property tax records, First Equity’s efforts were not reasonably calculated to actually apprise plaintiff of the scheduled public hearing. As agent for CVS, “First Equity could have easily verified plaintiff’s home address as set forth in the lease” and it was insufficient to rely on property tax records that clearly indicated an address that was merely the location of another CVS property out of state. This case demonstrates the need to review property tax records when complying with notice requirements and to exercise that extra effort to ensure that all reasonable efforts are made to apprise interested parties.
Knowledge of buyer’s representative imputed to client. Casady v. Fehring, 360 S.W.3d 904 (Mo. Ct. App. 2012). In this case the purchasers of 24 acres filed a claim against the original owners to quiet title to two acres of land that they claimed was included in their purchase. The Casadys sold 26 acres to Claudia Jensen in 1997 and repurchased two of those acres in 2005. A survey was completed and the purchase completed, but unfortunately, the deeds in these transactions somehow were recorded in a “seemingly illogical” manner. After Jensen died, her property was put on the market and listed as approximately 24 acres. The stakes from the 2005 survey were still visible. The Fehrings contracted to buy the property. The agreement stated that the property was 24 acres and gave the buyers the right to survey the property, but they did not exercise that right. The Buyers’ representative also received a map of the property which indicated the two acres owned by the Casadys. By mistake, however, the deed delivered to the Fehrings contained a legal description for the entire 26 acres. The buyers claimed they were unaware of the prior sale and claimed all of the property. The Missouri Court of Appeals held that the buyers had notice of the Casadys’ purchase of the two acres and denied the Fehrings’ claim to the entire 26 acres for two reasons. First, although the deeds were recorded out of order, the Casady’s purchase was recorded, so the buyers had constructive notice of the 2005 purchase. Second, the court found that the buyers’ representative had a map clearly indicating the 24 acres purchased and had contacted the Casadys about the boundaries of the property; consequently, the court imputed the buyers’ representative’s knowledge of the prior purchase of two acres and ruled in favor of the Casadys. As this case illustrates, buyers may be deemed to have all of the information that their real estate agents have and such knowledge can work to their disadvantage. 