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Factual and Procedural Background

This action arises from the sale of a house by the defendants, Leon A. and Raphaela Bobola, to the plaintiffs, George A. Russow and others. The plaintiffs sought rescission of the deed and punitive damages, alleging fraudulent misrepresentation and concealment of material information regarding water and flooding conditions affecting the property. The plaintiffs purchased the house after multiple visits arranged by Glenshire, Inc., a real estate agency whose president, Harold Dato, was named as broker in the listing agreement. After purchase, the plaintiffs experienced repeated flooding in the basement and garage. Glenshire, Inc. was dismissed as a party defendant prior to trial for failure to state a cause of action. The trial court, presiding without a jury, found for the remaining defendants at the close of the plaintiffs’ evidence. The plaintiffs appealed from both the dismissal of Glenshire and the judgment against the Bobolas, also contending errors in denial of leave to amend and exclusion of testimony regarding attorneys fees and expenses.

Legal Issues Presented

  1. Whether the evidence presented by the plaintiffs was sufficient to overcome a motion to dismiss at the close of their evidence on the claim of fraudulent misrepresentation and concealment by the Bobolas regarding flooding and drainage conditions of the house.
  2. Whether Glenshire, Inc. and its president Harold Dato were properly dismissed as defendants for lack of sufficient evidence of fraud or agency relationship.
  3. Whether the trial court abused its discretion in denying the plaintiffs leave to amend their complaint late in the proceedings.
  4. Whether punitive damages and attorneys fees were properly denied by the trial court.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
City of West Frankfort v. Fullop, 6 Ill.2d 609 (1955) Standard for ruling on motion to dismiss: evidence and reasonable inferences must be viewed in the light most favorable to the plaintiff; dismissal improper if substantial evidence supports allegations. Applied to determine that dismissal of plaintiffs’ fraud claim at close of their evidence was improper because substantial evidence existed.
Majewski v. Galling, 17 Ill.2d 92 (1959) Definition of fraud includes acts, omissions, concealments involving breach of duty causing damage. Used to frame the scope of fraudulent conduct alleged, including concealment and misrepresentation.
People v. Gilmore, 345 Ill. 28 (1931); Citizens Savings Loan Ass'n v. Fischer, 67 Ill. App.2d 315 (1966) Fraud may be by single act or combination, including suppression of truth, falsehood, silence, or conduct. Supported the court’s analysis that concealment and silence combined with deceptive acts can constitute fraud.
Forest Preserve Dist. v. Christopher, 321 Ill. App. 91 (1943); Leonard v. Springer, 197 Ill. 532 (1902); Kohl v. Lindley, 39 Ill. 195 (1866) Silence plus deceptive conduct or suppression of material facts constitutes active concealment and fraud. Applied to hold that the Bobolas’ failure to disclose flooding and painting over water marks was active concealment requiring reversal of dismissal.
Hustad v. Cerny, 321 Ill. 354 (1926); Halla v. Chicago Title Trust Co., 412 Ill. 39 (1952) Duty of inquiry does not extend to latent defects not readily apparent on inspection. Supported the conclusion that flooding problems were not discoverable by ordinary inspection, so nondisclosure was fraudulent.
Industrial Nat. Gas Co. v. Sunflower Nat. Gas. Co., 330 Ill. App. 343 (1947); Pritchard v. Wilcox, 314 Ill. App. 132 (1942) Relief for fraud may include rescission or damages if rescission impractical. Guided the court’s statement that if fraud is found, equitable relief including damages may be granted.
Brockob Const. Co. v. Trust Co. of Chicago, 6 Ill. App.2d 565 (1955) Trial court discretion in denying late motions to reinstate parties. Upheld denial of plaintiffs’ motion to reinstate Glenshire as defendant on day of trial after lengthy delay.
Pierce v. Carpentier, 20 Ill.2d 526 (1960) Motion to dismiss admits well-pleaded facts but not conclusions unsupported by specific factual allegations. Applied to affirm dismissal of Glenshire due to failure to allege agency relationship with specific facts.
Ritter v. Ritter, 381 Ill. 549 (1943); Boss v. Coe Inv. Co., 45 Ill. App.2d 417 (1964); House of Vision, Inc. v. Hiyane, 42 Ill.2d 45 (1969) Attorneys fees are not recoverable absent statute; punitive damages award does not include attorneys fees and expenses as separate elements. Supported affirmance of denial of attorneys fees and refusal to admit evidence thereof.

Court's Reasoning and Analysis

The court analyzed the sufficiency of the plaintiffs’ evidence in the light most favorable to them, concluding that the trial court erred in granting the defendants' motion to dismiss at the close of the plaintiffs' case. The court emphasized that fraud encompasses not only affirmative misrepresentations but also active concealment through silence combined with deceptive conduct. The Bobolas’ failure to disclose prior flooding incidents, coupled with their washing and painting over water marks, constituted active concealment that misled the plaintiffs and materially affected their decision to purchase the house. The court rejected the trial court’s view that the statements about drainage were mere opinion and that the plaintiffs relied solely on their own judgment.

Conversely, the court found no sufficient evidence to hold Harold Dato or Glenshire, Inc. liable for fraud, as no statements or active concealment regarding flooding or drainage were attributable to them, and the alleged agency relationship was not sufficiently pleaded. The court also found that the trial court did not abuse its discretion in denying late amendment and reinstatement motions due to delay and lack of merit.

Regarding punitive damages and attorneys fees, the court affirmed the trial court’s dismissal of the claim for willful and wanton misconduct and rejection of attorneys fees evidence, noting the absence of any statute authorizing such fees and that punitive damages awards do not include attorneys fees as separate recoverable elements.

Holding and Implications

The appellate court affirmed in part, reversed in part, and remanded.

The court affirmed the dismissal of Glenshire, Inc., and Harold Dato, as well as the dismissal of Count II (willful and wanton misconduct) and the denial of attorneys fees and punitive damages. However, it reversed the dismissal of the plaintiffs’ complaint against Leon A. and Raphaela Bobola at the close of all plaintiffs’ evidence, finding sufficient evidence of active concealment to proceed. The cause was remanded for further proceedings consistent with the opinion.

The decision directly affects the parties by allowing the fraud claim against the Bobolas to continue, but does not establish new precedent beyond applying established principles of fraud and concealment. No broader legal implications beyond the facts of this case are discussed.

GEORGE A. RUSSOW et al., Plaintiffs-Appellants, v. LEON A. BOBOLA et al., Defendants-Appellees.

Mr. JUSTICE SEIDENFELD delivered the opinion of the court:

This action arises from the sale of a house by the defendant Bobolas to the plaintiff Russows. The plaintiffs seek rescission of the deed and punitive damages, alleging that the defendants fraudulently misrepresented and concealed material information of water and flooding conditions in connection with the sale.

In September of 1967 the Russows went to the office of Glenshire, Inc. seeking to purchase a home, and were taken to the Bobola home by Glenshire employee Barbara Wiggins, formerly Barbara Swanson. The listing agreement for the sale of this house named Harold Dato, the president of Glenshire, Inc., as the broker. After five visits to the home, plaintiffs purchased it. Since then the basement and garage have flooded to depths of 30 to 50 inches on ten occasions.

Glenshire, Inc., alleged with Dato to be the agent of the Bobolas, was dismissed as a party defendant some five months prior to trial on the ground that no cause of action was stated against it. The trial court hearing the case without a jury found for the remaining defendants at the close of the plaintiffs' evidence. Plaintiffs appeal from both orders. They also contend that the court erred in denying them leave to amend and in disallowing testimony concerning their attorneys fees and expenses.

At the trial, testimony established that during the twenty-five months that the Bobolas owned the house, it had twice flooded approximately thirty inches. Glenshire employees were informed in both instances, and Harold Dato may have had personal knowledge of one such incident. However, no mention of the floods was made during the five times plaintiffs visited the house prior to the consummation of the sale. In fact, shortly before the sale, the Bobolas had washed off and painted over all of the water marks left by the floods. While plaintiffs never inquired whether the house flooded, they did ask whether the drain outside the garage was adequate. Mr. Russow says Mr. Bobola answered that it was; while Mrs. Russow says Bobola answered that it was not, but that there was another large sewer across the way, and that there was talk that more sewers would be installed.

• 1 In ruling on the motion to dismiss at the close of the plaintiffs' evidence, the evidence presented, together with all reasonable inferences, must be considered in the light most favorable to the plaintiffs, and if there is any substantial evidence tending to prove the plaintiffs' allegations, the motion must be denied. City of West Frankfort v. Fullop (1955), 6 Ill.2d 609, 617.

• 2, 3 Fraud has been said to comprise anything calculated to deceive, including all acts, omissions and concealments involving a breach of legal or equitable duty, trust or confidence resulting in damage to another ( Majewski v. Galling (1959), 17 Ill.2d 92, 99.) This deception may consist of a single act or combination of circumstances, suppression of truth or suggestion of what is false, direct falsehood or innuendo, speech or silence, look or gesture. People v. Gilmore (1931), 345 Ill. 28, 46; Citizens Savings Loan Ass'n v. Fischer (1966), 67 Ill. App.2d 315, 322.

The trial court found that there was insufficient evidence on which to base an action for misrepresentation against any of the defendants. It appears from his remarks at the time the decision was rendered that the court felt that the only affirmative statement of whether or not the drain was adequate was actually an expression of opinion rather than fact and that the plaintiffs relied on their own judgment when they purchased the home rather than upon any statement or silence by the defendants.

• 4-6 We cannot agree that this is a proper assessment of the involvement of the Bobolas. What is determinative as to the Bobolas is not merely what they said, but what was left unsaid under the particular combination of circumstances in the record. While silence in a business transaction does not generally amount to fraud, mere silence is quite different from concealment. Silence accompanied by deceptive conduct or suppression of material facts results in active concealment, and it then beomes the duty of a person to speak. In such case, if a party to a contract of sale does not disclose the whole truth, having the requisite intent to deceive, this amounts to fraud equally with an affirmative falsehood. ( Forest Preserve Dist. v. Christopher (1943), 321 Ill. App. 91, 105, 106; Leonard v. Springer (1902), 197 Ill. 532, 538; Kohl v. Lindley (1866), 39 Ill. 195, 201.) The Bobolas not only failed to tell the plaintiffs that the house had flooded twice, but washed and painted away all water marks which were visible after the floods, thus leaving no indication that the house had problems of this nature. This conduct tended to mislead the plaintiffs and substantially affected their power to make a knowledgeable judgment in purchasing the house. In addition, the statement by Bobola, in answer to a question by Mrs. Russow as to the reasons for the sale, that he would be moving to the East after he had qualified for a bonus at his place of employment, when in fact he admitted that he at no time intended to go to New York, seemed also calculated to deceive the purchasers. Moreover, Bobola's answer as to the adequacy of the drain indicated that the drainage system was adequate, when in fact he knew the drainage to be inadequate by reason of the two floods he had experienced. While it is true that the plaintiffs had a duty of inquiry regarding the premises and are chargeable with all knowledge which an examination conducted with ordinary care would provide, the matter undisclosed here is of such a nature that it would not be readily apparent from an inspection of the property. (See Hustad v. Cerny (1926), 321 Ill. 354, 359; Halla v. Chicago Title Trust Co. (1952), 412 Ill. 39, 46.) There is sufficient evidence of active concealment by the Bobolas to require reversal of the trial court's order granting their motion to dismiss at the close of the plaintiff's evidence.

• 7 Of course, this is not to say that the defendants are guilty of fraud, but only that there is sufficient evidence in the record to preclude a dismissal at this stage of the proceedings. Should the court then find these defendants guilty of fraudulent conduct, it must grant that relief necessary to do equity, which may include an award of damages if rescission is no longer practical under the circumstances of this case. See Industrial Nat. Gas Co. v. Sunflower Nat. Gas. Co. (1947), 330 Ill. App. 343, 361-362; Pritchard v. Wilcox (1942), 314 Ill. App. 132, 139.

• 8 In contrast, Harold Dato made no statement regarding the flooding or drainage of the house, and took no active steps to conceal the situation. There is controversy over whether he even knew water had entered the house. Plaintiffs have not presented sufficient evidence to require Dato to defend a charge of fraud.

• 9-12 Plaintiffs contend that the motion judge erred in dismissing Glenshire on the pleadings and also erred in refusing to reinstate it as a party defendant on the day of trial. We cannot agree with either contention. First, in our view the record does not present sufficient evidence to require Glenshire to defend a charge of fraud. No Glenshire employee made any statement as to flooding or drainage, and Barbara Wiggins' silence fell far short of active concealment. In any event, we cannot say that the trial court abused its discretion by denying the motion, when it was not made until more than five months after the order of dismissal was entered, and on the day of trial. ( Brockob Const. Co. v. Trust Co. of Chicago (1955), 6 Ill. App.2d 565, 570.) Nor can we say that the motion judge erred in dismissing Glenshire on the pleadings. A motion to dismiss admits facts well pleaded, but not conclusions of law or fact unsupported by allegations of specific facts upon which such conclusions rest. ( Pierce v. Carpentier (1960), 20 Ill.2d 526, 531.) Plaintiffs' second amended complaint states that the Bobolas contracted with Harold Dato and Glenshire to become Bobolas' agents in the sale of the house. But Exhibit A, attached to the complaint, sets forth the agency contract, and lists only Dato as the real estate broker. Glenshire's name is not present. Such complaint does not sufficiently allege an agency relationship between the Bobolas and Glenshire, and Glenshire was properly dismissed as a party defendant.

• 13 The court also did not abuse its discretion in denying the motion of the plaintiffs to amend as the case was called for trial and at the close of the plaintiffs' case. Again, the trial judge was acting within his discretion in denying the amendment because of the delay. Moreover, since we have found that Dato was not liable in fraud, the amendment charging that Glenshire was his agent would serve no purpose.

• 14, 15 We affirm that portion of the order of the court below which resulted in the dismissal of Count II of the amended complaint, which charged wilful and wanton misconduct. We find no basis in the record for awarding punitive damages against any defendant. Likewise, the court did not err in refusing to allow evidence of plaintiffs' attorneys fees and expenses and in denying their offer of proof in that regard. In the absence of any applicable statute, and none has been shown, there is no basis for the allowance of attorneys fees and costs in this litigation. When an award of punitive damages is authorized, expenses and attorneys fees may be considered in estimating the amount of damages but are not allowable in addition to the sum assessed as exemplary damages. (See Ritter v. Ritter (1943), 381 Ill. 549, 553-556; Boss v. Coe Inv. Co. (1964), 45 Ill. App.2d 417, 423, 424.) See also House of Vision, Inc. v. Hiyane (1969), 42 Ill.2d 45, 51.) Our conclusion that the record does not support exemplary damages precludes the assessment of attorneys fees and costs as an element of punitive damages.

That portion of the judgment below which dismisses the complaint as against the defendants, Harold E. Dato and Glenshire, Inc., is affirmed. That portion of the order below which dismisses the complaint as to Count II of the second amended complaint is also affirmed. The portion of the judgment which dismisses plaintiffs' complaint against the defendants Leon A. Bobola and Raphaela Bobola at the close of all of the evidence offered by the plaintiff is reversed. To this extent the cause is remanded for further proceedings consistent with this opinion.

Affirmed in part, reversed in part and remanded with directions.

MORAN, P.J., and ABRAHAMSON, J., concur.

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RUSSOW v. BOBOLA
(Jan 11, 1972)