Butler v. Harris
13 N.E.3d 380
Ill. App. Ct.2014Background
- Robert and Elizabeth Butler bought a house in Oct. 2008; about six months later the county notified them the septic system violated codes after neighbor complaints. Plaintiffs sued sellers Mark Harris and Lisa Bohnenstiehl for common-law fraud and for violation of the Residential Real Property Disclosure Act (Disclosure Act).
- Plaintiffs alleged sellers had failed to disclose septic problems on the statutory disclosure form; defendants had checked “No” to knowledge of septic defects but added a handwritten note that the ejector pump had backed up twice in the past.
- Prior to closing plaintiffs obtained a home inspection and a separate septic inspection; the septic inspector reported only minor items and that the system “looked ok.” Plaintiffs also submitted a pre-offer list of defects (including the septic system) and purchased the house ‘‘as is’’ at a reduced price.
- After moving in plaintiffs experienced water intrusion and paid $3,275 to repair and bring the system into code compliance; neighbors and county inspectors testified about drainage and discharge placement issues after plaintiffs altered a common road area.
- At bench trial the court found for defendants on the fraud count but for plaintiffs on the Disclosure Act and awarded $12,000 (including attorney fees). On appeal the court addressed the proper standard of proof under the Disclosure Act and whether sellers knowingly violated the Act.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper standard of proof for a Disclosure Act violation | Butler: preponderance of the evidence (trial court applied this) | Harris: clear and convincing required because Act alters common-law fraud standards | Court: clear and convincing standard applies; trial court erred by using preponderance |
| Whether defendants knowingly violated the Disclosure Act | Butler: sellers knew of septic defects and failed to disclose them | Harris: sellers disclosed prior ejector pump backup, plaintiffs got inspections, negotiated "as is" sale and reduced price | Court: plaintiffs failed to prove knowing nondisclosure under either standard; judgment for plaintiffs on Count II reversed |
| Whether defendants committed common-law fraud | Butler: sellers intentionally concealed material septic defects to induce sale | Harris: no knowledge of defects; home and septic inspectors found no material defects; no reasonable reliance | Court: trial court’s finding for defendants on fraud affirmed; plaintiffs did not prove fraud by clear and convincing evidence |
| Entitlement to attorney fees under the Disclosure Act | Butler: prevailing party (they argued) should get fees awarded below | Harris: fees not warranted where plaintiffs failed to prove knowing violation; alternatively, prevailing party rule could allow fee recovery by seller if buyer’s claim meritless | Court: fee award reversed because plaintiffs did not establish knowing violation; neither side awarded fees on remand and each party must bear own fees (suit was not meritless so no fee award to seller) |
Key Cases Cited
- Hogan v. Adams, 333 Ill. App. 3d 141 (interpretation of statutory standard of review)
- Hawkins v. Hawkins, 102 Ill. App. 3d 1037 (statute construed as changing common law only to extent warranted)
- Brown Specialty Co. v. Allphin, 75 Ill. App. 3d 845 (fraud requires clear and convincing proof)
- Fox v. Heimann, 375 Ill. App. 3d 35 (discussion of Consumer Fraud Act standards)
- Provenzale v. Forister, 318 Ill. App. 3d 869 (distinguishing Consumer Fraud Act applicability to private residential sellers)
- Connick v. Suzuki Motor Co., 174 Ill. 2d 482 (elements of fraud and reliance)
- Park v. Sohn, 89 Ill. 2d 453 (seller’s knowledge or deliberate concealment essential for fraud)
- Avery v. State Farm Mut. Auto. Ins. Co., 216 Ill. 2d 100 (fraud standard requires clear and convincing evidence)
- Miller v. Bizzell, 311 Ill. App. 3d 971 (Disclosure Act attorney-fee provision applies to prevailing party; seller fees only if buyer’s claim meritless)
- Eychaner v. Gross, 202 Ill. 2d 228 (bench-trial factual findings not reversed unless against manifest weight of evidence)