On March 19, 1997, Jairath, as seller, and Bletnitsky, as buyer, entered into a real estate contract for sale of an apartment building located at 930 Ontario in Oak Park, Illinois, for a price of $3.1 million. The contract closed on June 4, 1997. Jairath represented to Bletnitsky that the building contained 21 apartments. Jairath’s real estate broker had told Bletnitsky that the building contained 21 units, and the real estate broker’s package also stated that the building contained 21 units.
While neither Jairath nor his realtor were shown to have stated expressly that all 21 units in the building were legally available to be converted to condos, Jairath’s real estate broker represented that the building was suitable for conversion into condominiums. Also, the real estate broker’s package provided “for condo developer, this opportunity provides an opportunity with substantial returns. See Real Estate Broker Package, Investment Property Description.”
Prior to the closing on June 4, 1997, Bletnitsky received a copy of an inspection report prepared by an agency of the Village of Oak Park. The report stated that an inspection had taken place May 27, 1997, and that the apartment building contained only 20 units. On May 30, 1999, Bletnitsky wrote a letter to Jairath and indicated that he had received and read the Oak Park inspection report. In this letter, Bletnitsky stated that the inspection uncovered several violations, listed each violation, and estimated the repair costs at $88,595.
Bletnitsky claims that he would not have paid $3.1 million dollars for the building had he known that it only contained 20 legal units. Bletnitsky claims that as a result of Jairath’s representation that the building contained 21 units, he sustained a loss of $100,000. An arbitration proceeding awarded Bletnitsky damages for misrepresentation.
Jairath filed for Chapter 7 bankruptcy. Bletnisky has filed to have the obligation on damages from the arbitration not be discharged in the bankruptcy because fraud was involved. Does Beltnisky have grounds for the obligation surviving Jairath’s bankruptcy? [In re Jairath, 259 BR 308 (ND Ill)]