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Kent Holland, Jr.
ConstructionRisk, LLC

A condominium association sued the developer and contractor that constructed and sold the condominium complex. Some of the condo units experienced water seepage and resulting damage. An expert determined that water was entering through exterior wall components. A contractor that was hired to solve the problem found that the coping leaked, the masonry lacked mortar, there was no flashing or drainage systems, the lintels and sill were not sealed, and the roofing systems were defective. The plaintiff alleged that the defects were concealed and could not have been discovered without performing extensive testing of the units or opening up the walls. They argued that the developer and contractor knowingly failed to comply with the plans and specifications, knowingly misrepresented the condition of the property and then concealed the defects. Defendants were successful in the trial court in getting summary judgment dismissing the case based on it being barred by the statute of limitations. This was reversed on appeal, with the court holding that under the fraudulent concealment doctrine, the plaintiff might be able to prove to the jury that the defendants schemed to defraud plaintiffs beginning with misrepresentations in the sales packet concerning the quality of construction and that this was designed and intended to operate after the construction defect cause of action arose to prevent its discovery. Instead of deciding that via summary judgment, a jury would need to evaluate the evidence and decide whether plaintiffs had been prevented by defendants’ actions from discovering both the problems as well as root of the problems earlier than they did.   Henderson Square Condominium Association v. Lab Townhouses, LLC, 2015 Illinois 118139 (2015).

The plaintiffs argued that the defendants knowingly misrepresented the condition of the property and then concealed the defects. The trial court found that the fraud exception to the statute of limitations did not apply because a fraudulent misrepresentation requires misrepresentation of a preexisting fact and does not encompass a promise to perform future conduct.

Under the applicable state law, the appellate court explained that if a defendant has fraudulently concealed the cause of action from the plaintiff, the action may be brought within five years from the date the plaintiff discovers he has a cause of action. The court noted that “generally the concealment necessary to toll the statute of limitations must consist of affirmative acts or representations calculated to lull or induce a plaintiff into delaying the filing of his claim or preventing him from discovering the claim.” The court stated that the defendants were mistaken in their contention that the affirmative acts that constitute the fraudulent concealment must always be subsequent to and can never be the same statements or omissions that form the basis of the cause of action.

Here, the plaintiffs alleged that the defendants “covered up” the deficiencies in brick and mortar so that they could not be found, and that they did this “for the purpose of realizing greater profits from the city contract.” Here, the court found that the allegations read in their most favorable light to the plaintiffs indicated a scheme to defraud the plaintiffs that began with the alleged misrepresentations in the packet and which was designed and intended to operate after the cause of action arose to prevent its discovery.   Based on all of this, the court held that a question of fact exists that precludes dismissal. If it can be shown that the plaintiffs did not know, and should not have known, that their injury was wrongfully caused more than five years before they filed their complaint in this action, the suit would be timely filed. That question of fact must be decided by a jury and not by a judge on a motion for summary judgment.

About the author: Article written by J. Kent Holland, Jr., a construction lawyer located in Tysons Corner, Virginia, with a national practice (formerly with Wickwire Gavin, P.C. and now with Construction Risk Counsel, PLLC) representing design professionals, contractors and project owners.  He is founder and president of a consulting firm, ConstructionRisk, LLC, providing consulting services to owners, design professionals, contractors and attorneys on construction projects.  He is publisher of ConstructionRisk.com Report and may be reached at Kent@ConstructionRisk.com or by calling 703-623-1932.  This article is published in ConstructionRisk.com Report, Vol. 18, No. 5 (June 2016).

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