Daycare owners say they lost control of operations by real estate agent

By Andrea Dearden | Apr 11, 2012

Part owners of an Edwardsville daycare say they lost control of the facility after allegedly being scammed by a real estate agent.

Part owners of an Edwardsville daycare say they lost control of the facility after allegedly being scammed by a real estate agent.

Angelica L. and Laurence J. McAteer filed a lawsuit March 28 in Madison County Circuit Court against Sharon Pratt and River Bend Properties Inc., doing business as Re/Max River Bend.

In January 2010, the McAteers say they started scouting buildings with plans of opening a daycare. When they found a property they thought would work, the couple says they contacted the Re/Max real estate agent on the sign, Dennis E. Dugan. The McAteers say they later learned Dugan was the listing agent and the owner of the property.

The McAteers say the property in the Ginger Creek subdivision proved unsuitable, so they asked Dugan to show them other possibilities. The couple says Dugan showed them two buildings on Rottingham Court that were also allegedly owned by Dugan and Re/Max River Bend -- a fact they say the agent did not disclose.

The couple says Dugan was fully aware of their intent to open a daycare facility in the existing buildings by April 2010 but say the agent hid the fact that the property they were interested in wasn't zoned for that type of commercial use.

Without any knowledge of the agent-owner situation of the Rottingham property or the zoning issues, the McAteers say they signed two lease agreements with Children's Academy LLC listed as the tenant. Shortly after signing the leases on the two buildings, the McAteers claim a city employee informed them their buildings were not zoned to allow operation of a daycare.

The McAteers allege the owner, Dugan, wouldn't allow them to cancel the leases so they hired a lawyer to resolve the zoning problem. However, they say that process took several months, during which time the McAteers say they made lease payments despite being unable to use the properties for income.

When the McAteers found themselves needing more money to complete the renovation of the buildings, they say Dugan offered to invest in the daycare in exchange for his name being listed as 51% owner of the Children's Academy. The McAteers say they reluctantly signed the operating agreement in September 2010 but the minority ownership left them without control of the company's finances. The couple claims they were a $2000 insurance payment away from opening the center but Dugan, now the majority owner, refused to pay it and instead allegedly wanted to wait to open both buildings together.

Thereafter, the McAteers allege Dugan refused to spend any more money on the daycare facility unless they agreed to raise his ownership in the company to 80%. The McAteers say they declined the offer and Dugan then failed to pay the rent on the properties, a payment that was intended for himself and Re/Max River Bend.

In October 2010, the McAteers say they received a letter of default from Dugan, on behalf of Re/Max River Bend, stating the lease would be terminated unless the rent was made current within ten days. As majority owner, Dugan was the only authorized person with access to make such a payment and instead allegedly changed the locks on the doors to the building, according to the complaint.

The lease was then subsequently terminated by Re/Max River Bend, leaving ownership of Children's Academy to Dugan and Re/Max River Bend.

The McAteers claim Dugan created another company in November 2010 called the Academy for Kids LLC for the purpose of operating a daycare. The company's address is reportedly listed as Rottingham Court, Edwardsville.

Dugan and Pratt, owners of Re/Max River Bend, are accused of violating Illinois' Real Estate License Act for serving as a dual agent in the lease of the property. The McAteers are also suing the defendants for fraud, breach of fiduciary duty, negligence and negligent misrepresentation. They seek more than $350,000 in damages and court costs.

Attorney Hrant "Hud" Norsigian Jr. of O'Fallon represents the McAteers. They ask for a jury trial.

Madison County Circuit Court Case No. 12-L-384

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