Illinois Construction Law Blog : Illinois Construction Lawyer & Attorney : Foran Glennon Palandech & Ponzi Law Firm : Chicago IL

For those of you faced with any attempt by a plaintiff to claim that the implied warranty of habitability can be extended to a design professional, relief has been afforded.   This recent order authored by The Honorable Dennis J. Burke offers some profound insight regarding such a fallible argument.

In the opinion, Judge Burke addresses the contention that an exception to the judicially created doctrine of the implied warranty of habitability can involve design professionals. The exception, briefly stated, is that the case of Minton v. Richards, 116 Ill.App.3d 852, allowed a cause of action against a subcontractor who built part of the structure once, when the builder-developer was insolvent, and that this should create an exception which would allow for a suit against design professionals when no relief can be had against a builder-developer.

The opinion obliterates the argument and correctly holds that the doctrine cannot be extended in such a manner.

Obviously, other courts may disagree with the conclusion but they are unlikely to given the unassailable reasoning.

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In Linhart, (1^st Dist. Doc. No. 1-07-2712) the plaintiffs were the purchasers of four connected townhomes, pictured via satellite from Google at the left. The townhomes shared a common foundation and adjoining walls. Plaintiffs sued the developer individually, his construction company, and two other entities for fraud, breach of the implied warranty of habitability, and consumer fraud.

The evidence showed that the developer was aware of cracks in the foundation of the homes prior to their sale, that a village inspector had told the developer about the cracks and the need for an engineer and the developer did nothing about the problems, that there had been no follow-up soil testing on the property after the engineering company recommended it to the developer, and that developer and his son had denied that the cracks were a problem when asked by the plaintiff’s prior to purchasing. The developer’s son told the plaintiffs that the cracks were normal and the natural result of settling and even made the comment, “it’s not like the house is going to sink or anything.”… which was before the house started to sink.

Faced with this evidence, the jury found the defendants guilty of fraud for making the false statements about what they knew to the purchasers. The appellate court found that this determination was reasonable and upheld the verdict noting:

The jury heard evidence sufficient to conclude that defendants knew these statements were false at the time they were made because a village inspector informed them that the foundation was sinking and they should consult an engineer. C.J. Johnson testified that he was aware of the cracks prior to October 1997. Preconstruction soil testing was conducted in the area and revealed significant water content. The company retained by Carriageway to conduct the preconstruction soil testing recommended further testing, especially in the lower areas of the subdivision. C.J. Johnson testified that when construction on the foundation began at the property in question he added stone to the soil because of the soil conditions, but never ordered soil testing at that specific location. A rational jury could find that defendants' statements to plaintiffs were to reassure them and assuage their concerns so that they would proceed with the purchase of the townhomes.

Plaintiffs each testified that they relied on those statements and purchased the homes. The damage to the foundation and the structure of the building was established by plaintiffs' testimony regarding all of the defects now prevalent in their homes. Plaintiffs had three experts testify to the damage and the cost of repairs. Moreover, defendants did not contest that the structure is damaged, but provided their own expert to estimate the cost of repairs.

The jury also found for the plaintiff’s on the implied warranty of habitability. The defendants objected to the fact that the term “latent” had not been included in the jury instruction, however, because the trial court had noted that the defects were latent, the appellate court found that the failure to include the term “latent” with the term “defect” in the jury instruction was harmless error and did not merit reversal of the jury’s verdict.

The jury also awarded $1,380,781 in damages based on the testimony of plaintiff’s expert that the homes were uninhabitable and would need to be demolished and rebuilt at that cost. Defendants objected to this valuation method and argued that the proper method for such a catastrophic loss would be the difference in value rather than the cost of repair, but the appellate court found that the defendants failed to introduce proper evidence of the diminution in value and could not raise the issue on appeal when they had failed to present evidence of the loss at trial.

The jury’s verdict was affirmed.

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Here’s another for your files on the Illinois Consumer Fraud Act and Deceptive Business Practices Act (815 ILCS 505/1 et seq.) and its application in matters relative to the Construction Industry in Illinois.

The Kunkels hired PK to build a new roof for their home. The contract price plus extras came to $5,623. After the contract was entered into, PK never furnished the Kunkels with the required: “Home repair: Know Your Consumer Rights” pamphlet that the Illinois Attorney General’s Office publishes for contractors to give to home-owners pursuant to the Illinois Home Repair and Remodeling Act (815 ILCS 513/1 et seq.).

To their surprise, the Kunkel’s new roof leaked. They requested that PK fix the problem several times. PK came out and attempted repairs, but the repairs did not alleviate the leaking. The Kunkels documented the leaks and their conversations with PK. They even took pictures of the pots and pans they used to catch the water.

Finally, the Kunkels filed suit in court alleging breach of contract, warranty and breach of the consumer fraud act. The case went to trial and the Kunkels prevailed. The trial court found that PK breached the contract and warranty (the contract contained a provision for a five-year warranty) and awarded $6,725 to the Kunkels based on their estimator’s uncontradicted testimony that $6,725 would be cost of a new roof.

The circuit court also awarded $6,161.50 in attorneys’ fees based on the allegation that the failure to provide the pamphlet amounted to a violation of the consumer fraud act.

PK appealed and the appellate court upheld the award for $6,725. The appellate court struck down the attorneys fees – finding that the consumer fraud act required a “knowing” violation and that the Kunkels never introduced evidence that PK “knew” it was required to turn over a copy of the pamphlet. The court went on to address the issue of damages… stating that even if the failure to turn over the pamphlet did amount to a violation of the consumer fraud act, the violation Kunkels failed to produce any evidence that they were damaged in not receiving the pamphlet.

This reasoning is a far cry from many of the other cases we see where parties are presumed to know the law at the time of contracting. One could even go so far as to say that so long as a contractor hasn’t read the Home Repair and Remodeling Act, they could always use their ignorance and this case as an excuse to avoid liability any time liability is attached to a “knowing” violation of the statute… which is a little ridiculous. The damages issue is correct. The failure to turn over the pamphlet shouldn’t entitle anyone to a windfall. We weren’t talking about a windfall here though, we were talking about the $6,161.50 in attorneys’ fees the Kunkels had to expend on a full trial just to get the money back for their leaky roof.

Additionally, the lessons learned by those involved in litigation over small projects is a powerful one. Payments of $5,623 for the original roof, and $6,151.50 to the attorneys netted the home-owners $6,725… which they still have to collect and then apply to getting a new roof that doesn’t leak, leaving an unpaid balance … of $5,059.50. That’s hardly worth it.

The opinion can be found here.

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