Legal Case Studies November 2013 | Illinois Association of REALTORS®

Legal Case Studies November 2013

Prepared for IAR members by legal counsel for the Illinois Association of REALTORS®:

Ban on using hand-held cell phones while driving takes effect January 1, 2014. Most Illinois REALTORS® spend many hours in their cars during their work day. An amendment to the Illinois Vehicle Code may make that work more difficult.  Section 12.610.2 already prohibited emailing and texting while driving and now bans all uses of an electronic communication device as of January 1, 2014.  The ban does not include global positioning systems or navigation systems or devices that are physically or electronically integrated into a motor vehicle.  There are also a number of exceptions, including use in an emergency, while parked on the shoulder of a roadway, or while stopped due to normal traffic being obstructed and the vehicle is in neutral or park.  Hands-free or voice–operated devices, including the use of a headset, are not included in the ban, as are communication devices that can be operated by pressing a single button to initiate or terminate a voice communication.  For example, an iPhone user can active the “Siri” voice command feature to make phone calls or send emails by pressing and holding the round button at the bottom of the device.  Other types of phones have similar voice-activated capabilities and can be used while driving if nothing more than a push of one button is needed.  Drivers will need to make sure their phones do not lock while on the road, as having to enter a password would violate the new law. 

Wind turbine found to be a nuisance in quiet neighborhood. The Supreme Court of Nevada upheld an injunction against the construction of a wind turbine in Sowers v. Forest Hills Subdivision, 294 P.3d 427 (2013).  Homeowner Sowers informed his subdivision neighbors that he planned to construct a wind turbine on his property.  The neighbors filed a complaint in court claiming that the proposed wind turbine would be a nuisance because it would generate constant noise and obstruct the views of neighboring properties.  A nuisance is defined in Nevada as anything which is injurious to health, or indecent and offensive to the senses, or an obstruction to the free use of property, so as to interfere with the comfortable enjoyment of life or property.  Interference with one’s use and enjoyment of land must be both substantial (a normal person would regard it as definitively offensive, seriously annoying or intolerable) and unreasonable (the gravity of the harm outweighs the social value of the activity alleged to cause the harm). 

A “nuisance at law” is a nuisance at all times in any circumstances.  A nuisance in fact is a situation that becomes a nuisance by reasons of circumstances and surroundings.  In this case, the court found the proposed wind turbine was a nuisance in fact because (1) it would produce noise equal to the hum on a nearby highway in a very quiet residential neighborhood; (2) it would diminish property values in the neighborhood; (3) it would produce shadow flicker; and (4) its 75-foot height would constitute a sizeable obstacle overshadowing other properties.  Generally, a land owner has no right to light, air or view that might be obstructed by another’s use of property, but in this case the court found that evidence of noise and other factors allowed consideration of aesthetics.  Homeowner Sowers was enjoined from constructing his proposed wind turbine. 

There are a number of pending cases in Illinois alleging that proposed or existing wind turbines are nuisances.  Illinois defines nuisance in a manner similar to that in Nevada, but Illinois courts have yet to rule directly on wind turbines.  They have generally ruled that adjacent land owners have no right to light or a view. 

Breach of warranty of habitability does not require defect so severe as to force homeowner to vacate premises. In re Estate of Krpan, 2013 IL App (2d) 121424 (Sept. 12, 2013), involved a claim by a home buyer against a deceased seller’s estate that various latent defects were not disclosed at the time of sale, including problems with a skylight, defects in a deck finish, furnace and roof problems, and deteriorating interior paint.  The estate’s administrator argued that the implied warranty of habitability applies only to defects so severe that they make a residence uninhabitable.  The appellate court disagreed with the administrator and held that the implied warranty of habitability protects the buyer against latent defects by providing a warranty that the house is reasonably fit to use as a residence.  It found no precedent suggesting that covered defects must be so severe as to drive the residents to vacate the structure despite normal steps to correct the damage.  “Such a warranty would be remarkably limited:  short of a significant gas leak or the like, at least some residents may tolerate even serious defects for at least a time,” the court remarked.  The court did note that claimed interior paint defects were less likely to relate to habitability than other claimed defects like those involving the roof and windows, but those were issues for the trial court. 

Lessor can’t rely on statements from individual to substantiate his authority to sign lease on behalf of company. In Cove Management v. AFLAC, Inc., 2013 IL App (1st) 120884 (March 8, 2013), an individual (Galgano) signed an office lease with the plaintiff.  The lease agreement listed plaintiff as the lessor, listed AFLAC as the tenant, and listed Galgano as the guarantor.  Galgano signed his own name under “lessee” and “guarantor.”  He did not indicate on the page that he was signing on behalf of AFLAC.  Galgano was a “Regional Sales Coordinator” for AFLAC.  His business card was designed in AFLAC’s colors and stated that he was an “Independent Associate Representing AFLAC.”  Galgano’s contracts with AFLAC, however, specifically prohibited him from renting office space without express written authorization from a designated officer.  AFLAC argued that Galgano was an independent contractor with no authority to bind the company.  The plaintiff argued that Galgano was an agent of AFLAC with “apparent authority” to bind the company. 

An agent’s authority may be either actual or apparent.  Actual authority may be either express or implied.  Express authority is granted explicitly by the principal to the agent (clearly not present in this case).  Implied authority is proven circumstantially by evidence of the agent’s position (also not proven in this case).  Apparent authority, by contrast, is authority imposed by a court in equity.  It is defined as authority that the principal knowingly permits the agent to assume or which he holds his agent out as possessing.  It is authority that “a reasonably prudent man, exercising diligence and discretion, in view of the principal’s conduct, would naturally suppose the agent to possess.”  Consequently, the authority must be based on the words and acts of the principal and cannot be based on anything the purported agent says or does.  A third person cannot blindly trust the agent’s statements, but must use reasonable diligence and prudence to ascertain whether the agent is acting and dealing within the scope of his powers. 

In this case, the plaintiff had only the words and actions of Galgano to support his authority.  Galgano’s business card and oral representations were insufficient evidence of his authority to bind AFLAC to a lease.  Further, there was no evidence that the plaintiff made any effort to determine whether Galgano was an agent acting within the scope his authority.  The court held that Galgano was not acting under apparent authority and, therefore, AFLAC could not be held liable under the lease. 

Court reformed Executor’s Deed as to reservation of mineral rights after 48 years. In Department of Natural Resources v. Waide, 2013 IL App (5th) 120340 (July 17, 2013), an Illinois appellate court reformed an executor’s deed made in 1960, eliminating the ownership of mineral rights claimed by numerous heirs of a woman named Edith Warren.  Before she died, Edith had sold an option to buy her Marion County property, including three-fourths of the mineral rights, to the Illinois Department of Natural Resources (DNR).  The contract noted that one quarter of the mineral rights had previously been severed and sold to a royalty company.  The executor’s warranty deed was supposed to convey all the right, title and interest of Edith in the property to DNR; however, the conveyance language contained a phrase that caused a controversy.  While the deed conveyed the “surface and ¾ of all oil, gas and other minerals” in the property, it also contained the phrase “except an undivided ¼ of the oil and gas” at the end of the legal description.  Edith’s heirs argued that one fourth of the mineral rights were retained in the estate and passed to them.  DNR argued that the additional phrase was a mistake. 
The court stated that to reform a deed, a plaintiff must prove both a mutual mistake and the existence of an alternate agreement.  In this case, DNR proved both elements.  The court first looked at the option contract and found that Edith clearly had agreed to convey the property and the remaining three-fourths interest in the mineral rights.  A probate court also approved the executor’s conveying all rights, title and interest in the property so that any reservation of any interest in mineral rights would have violated that court’s order.  Finally, the executor did not list any interests in mineral rights in her final report and took no steps to transfer any such rights to the heirs.  The court concluded that the phrase in the deed that appeared to reserve one fourth of the mineral rights was a mistake and that the option agreement between Edith and DNR included all of the mineral rights Edith owned at that time.  Even though 48 years had passed, the government agency had no notice that there was an issue with its title and was not time-barred from obtaining equitable relief from the court in the form of reforming the deed to reflect the parties’ intentions. 

A voidable deed is not necessarily a void deed. In City of Virginia v. Mitchell, 2013 IL App (4th) 120629 (June 28, 2013), the city brought an action against a defendant, alleging he was a property owner liable for failing to register a vacant building and maintaining a nuisance.  The defendant contended that he was not the property owner during the period alleged in the city’s complaint and produced a quitclaim deed he had executed in favor of Luke Swan.  Swan testified at trial, authenticated the deed, and stated that he had accepted the deed.  The city asserted, however, that the defendant still owned the property because the quitclaim deed was void for several reasons:  it contained an inaccurate street address (stating “Rd.” instead of “St.”), the notary’s date was dated the day before the date above the grantor’s signature, and it recited consideration of $500 when in fact no consideration was paid. 
Citing the Illinois Conveyances Act and judicial opinions, the appellate court stated that a deed needs only four minimum requirements to pass title.  It needs (1) to specify the estate to be conveyed; (2) to be in writing; (3) to be signed by the grantor who is neither under duress, a minor, nor of an unsound mind; and (4) to be delivered to and accepted by the grantee.  In this case, the deed to Swan met these minimum requirements.  Although the property was located at 220 East Beardstown Street, not Road, the property was adequately identified since there was no East Beardstown Road in the city and the parcel number on the deed adequately corresponded to the parcel number for 220 East Beardstown Street.  The quitclaim deed was in writing and it contained Luke Swan’s signature acknowledging receipt of the property.  Consequently, the deed was facially valid—the alleged defects as to the dates and lack of consideration did not render the deed void, only possibly voidable.  However, only a party claiming an interest in title to property may request that a deed be found voidable and until it has been set aside by a court, even a voidable deed passes title and is good against everyone, including the grantor.  Thus, for purposes of the city’s attempt to enforce its vacant building ordinance, defendant did not own the property during the period in question.  

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