Three companies say $4.5 million was too much to pay for a Belleville apartment complex.
Freedom Manager, Tornomon Godokaisha and Mieka Corporation say they relied on misleading information Malj Investments and its owners supplied to them when the companies agreed to purchase the apartments.
The three companies filed a lawsuit May 4 in St. Clair County Circuit Court against Malj Investments and owners Doug and Susan Von Alst.
Before purchasing the Freedom Drive apartment complex, the plaintiffs asked for various information, including a history of gross monthly rents received, a history of occupancy, information that would allow them to evaluate tenant stability, information regarding whether tenants were stable in their rent and the extent to which the defendants had to take legal action to evict tenants, the complaint says.
From there, the plaintiffs used the information to determine a purchase price, according to court records.
At least seven days before purchasing the property, the three companies were to receive copies of all current rent rolls including tenants' names, space occupied, commencement date of lease, options, actual collections, rental concessions and security deposits.
Malj Investments and the Von Alsts sent two rent rolls to the plaintiffs – one on May 8, 2008, and another on May 27.
After examining the rent rolls, the companies closed on the sale on May 30, 2008, the suit states.
However, after buying the property, Freedom Manager, Tornomon and Mieka found numerous pieces of information on the rent rolls and other information provided to them that was incorrect, according to the complaint.
For example, the May 8, 2008, rent roll stated that only one apartment was vacant, with the exception of six other apartments that were vacant due to fire damage. The second rent roll indicated that by May 27, eight additional units were vacant, the suit states.
Neither of these representations were true, though, as the plaintiffs learned after closing that there were 29 additional vacancies.
The defendants told the plaintiffs there would be only 12 vacant units in June, but there were 29, the plaintiffs say.
In their May rent rolls, Malj Investments and the Von Alsts claimed the gross monthly rents for that month were $43,736, when in fact they were $40,022, according to the complaint.
In addition, gross monthly rents had dropped from $52,749 in March to $40,022 in June, the suit states. The plaintiffs say they were not informed of the drop.
Contrary to representations the defendants made about tenants, two tenants were both $825 in arrears on a lease where their monthly rent was $550, the complaint says.
Malj Investments and the Von Alsts told the plaintiffs they were not required to evict many tenants. However, after the closing, the plaintiffs learned the defendants filed 16 eviction lawsuits in 2006 and 19 in 2007, according to court documents.
"The representations were made for the purpose of inducing Plaintiffs to act, specifically to induce Plaintiffs Tornomon and Mieka to purchase the property for $4,500,000," the suit states. "Had Plaintiffs known the truth they would not have purchased the property or would have demanded a lower price."
As a result of the defendants' misrepresentations, the plaintiffs say they paid a price well in excess of the fair market value, lost anticipated gross rents, lost anticipated profits, incurred expenses in mitigating its losses and lost value in the property.
In the six-count suit, the plaintiffs are seeking compensatory damages in excess of $300,000 and unspecified punitive damages, plus costs.
George E. Marron III and John F.X. McCord of Knapp, Ohl, Green and Marron in Edwardsville will be representing them.
St. Clair County Circuit Court case number: 09-L-225.