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

Illinois is certainly no stranger to the Condo Craze, a quick Google search for blogs on the topic in Illinois should put to rest any notions to the contrary.   There are plenty of interesting and responsible resources on the topic... and the law regarding the issues involved in condominium matters continues to grow.

A case touching on those matters and construction and development as well as architecture is the feature today.  Kirkpatrick v. Strosberg, Doc. Nos. 2-06-0724 and 02-06-0731 consolidated (April 16, 2008, 2^nd Dist.)

The plaintiffs were individuals who contracted to purchase luxury condominium units in Glen Ellyn.  The developer built the units and the plaintiff's moved in.

Some of the measurements of the completed luxury units did not turn out to comport exactly with the finished condos.  For example, depending upon the method in which one measures the square footage of the units, the units did not meet the advertised square footage, additionally, because alterations were necessary towards the end of the project, the ceilings on the top floor units measured eight feet, six inches and not nine feet as advertised in the original brochures.  One of the unit owners spent extra money having his bathroom reconfigured after the initial plans failed to put the pipes in the right places, and another owner measured his cabinetry installation in accordance with the nine foot specs and not the eight feet, six inch specifications.

The owners sued the developer for violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, common-law fraud, and breach of contract.

There was a bench-trial on the matter and the trial court made findings in favor of the plaintiffs for the breach of contract claims, the common-law fraud and the consumer fraud claims involving the ceiling heights, but not the square footage issues.  The court also found that due to the nature of the contracts and the evidence presented by the plaintiffs there was damage, but the plaintiffs' evidence was insufficient and thus awarded only nominal damages of $100 each.  For the plaintiff with the bathroom plans, the court found fault at 50% with the plaintiff's architect, who was the plaintiff's agent, and at 50% with the developer, and thus reduced the damage award of $31,730 by half.  The court found the cabinet plaintiff's claims were barred by language in a rider to the contract by which the seller eschewed liability for improvements made by the buyer:

• "Seller shall not be required to review Buyer's architectural plans for the Buyer's improvements, and Seller shall not oversee Buyer's work on the premises. Seller makes no warranty whatsoever to Buyer that the premises and its components are complete or compatible with the Buyer's improvements. Buyers understand that all dimensions on the Seller's plans and specifications are approximate and subject to modification for actual field conditions. Field measurement is required to conform dimensions prior to ordering materials."

The trial court also awarded $83,000 to the plaintiffs in attorneys fees and $300,000 in punitive damages.

The appellate court upheld the trial court's determination that the square footage of the units, when measured properly, was not contradicted by any of the plaintiffs' evidence.  The court also upheld the $100 damage award finding that the plaintiffs' expert appraiser had taken cost approximations regarding damages from housing prices as they existed seven years after the actual date of sale for the units.

The court's statement of the black-letter law regarding the proper calculation of damages in a dispute over the breach of contract for the sale of real estate is familiar:

• "Damages, in a breach of contract for the sale of real estate, are calculated by the difference between the fair market value of the real estate on the day of the breach and the sale price contracted for by the purchasers."

The appellate then upheld the nominal damages award, finding again that there was no credible evidence on the matter given the appraiser's failure to estimate from the time of the sale and not the market value at the time of the case.  The court struck the $300,000 in punitive damages, citing a 1^st District opinion holding that nominal damages cannot provide a basis for awarding punitive damages.  The court also upheld the trial court's determination that the plaintiff and the defendants were 50% mutually responsible for the cost of the repair to the bathroom; affirmed the cabinetry decision; and awarded the attorneys fees.

Of additional note to appellate practitioners is the court's enforcement of Rule 341(e)(7) granting the defendants' motion to strike portions of the plaintiffs' reply brief, where the brief raised arguments in the reply that were not raised in their initial brief.

For designers: the court stood by the Architect's method of measuring the square footage of the condominiums as the distance from the outside wall to half of the demising wall rather than the plaintiffs' appraiser's "paint-to-paint" method of measuring from the inside wall to the inside wall.

The actual relief in this case would likely have been substantial had the appraiser computed comparable sales in accordance with the proper measure for damages.

• Email This
• Print
• Comments
• Trackbacks

The Moorman Doctrine has been applied to those providing professional services since Anderson Electric, Inc., v. Ledbetter Erection Corp. 115 Ill. 2d 146 (1986).

The Doctrine has several exceptions but often forces parties to a contract for services to seek redress for damages they have incurred by suing on the terms of the contract rather than in tort.  The Moorman decision has long been a tool of attorneys representing construction clients for limiting the issues and available remedies of different parties to construction disputes.

In designing a building or performing work under contract on a structure, the doctrine often operates in limiting the manner in which a professional can be sued unless some error has resulted in damage to other property or personal injury or property damage resulting from a sudden and calamitous or dangerous occurrence.

In Loman v. Freeman, (Doc. No. 104289, April 17, 2008), the Illinois Supreme Court had occasion to visit the "sudden or dangerous" exception to the doctrine in the scintillating context of veterinary medicine... and, sadly, decided against addressing the merits of the topic in favor of a procedural rule that bars consideration of arguments not adequately defined or argued in the briefs.  In Loman, the plaintiffs' race-horse required surgery.  Plaintiffs claimed they only authorized the vet to perform two procedures, and that a third procedure performed by the vet, was unauthorized and did irreparable damage to the horse, rendering it unfit for racing.  Plaintiffs sued on two theories, one in negligence claiming that the vet performed unauthorized surgery on the animal, and secondly on a count of conversion, claiming that the unauthorized surgery amounted to an unauthorized assumption of the right to possession or ownership of the horse.  We are concerned only with the first claim in negligence.

The defendants claimed that the Moorman Doctrine applied and that the plaintiffs were barred from bringing suit in negligence.  The district court agreed and dismissed the plaintiffs' case, the appellate court reversed the matter stating that the unauthorized surgery amounted to a sudden and dangerous occurrence under the Moorman Doctrine's exception; the defendants appealed to the Illinois Supreme Court.

The Supreme Court noted that the application of the "sudden and dangerous" exception to the conduct of the professional and not to the failure of a product contracted for was an awkward one, also pointing out that the application of the exception to veterinary surgery under this sort of theory could lead to the absurd result that veterinary surgery would fall under the exception, but veterinary practices resulting in, for example, misdiagnosis, would not.  The Court then went on to state that it would not consider the issue since it was not adequately briefed.

In his dissent, Justice Freeman pointed out something we often see in economic loss cases --confusion -- with half the opinion of the majority referred to the count as one in negligence, and half the opinion referred to a "contractual" relationship between the parties.  In providing assistance Justice Freeman pointed to the possibility that the court could reclassify the action as a contractual issue of bailment and proceeded to discuss the law of bailments and their contractual nature along with the bailment theory's ability to provide negligence-theory based relief in the contractual setting.  The issue is particularly interesting in that Justice Freeman argued that under a bailment scenario, a professional contracting to perform services is held to "exercise the proper degree of care and diligence about the work" (Slip Op. at 22) and notes that "generally, the bailee will be liable for losses that are proximately the result of the bailee's own negligence."

"Under the bailment, the bailee has a duty to exercise the skill or knowledge pertaining to the "nature of the business... Bailees will be liable for losses that result from their negligence or, more precisely, for their failure to exercise the skill or knowledge pertaining to the nature of their business."  (Slip Op. 23-24).

Justice Freeman went on to state that addressing the claim at issue under the bailments theory would arguably resolve every issue in the case.

Unfortunately, the Court decided not to address the "sudden and calamitous" issue.  Additionally, failing to fully flesh out the dicta concerning applying the exception to the acts of a person and not to something happening with the product will doubtlessly need to be addressed at some point.

• Email This
• Print
• Comments
• Trackbacks

There's an interesting article in April's Architectural Record by Alec Applebaum concerning owner's rep work and the possibility of expanding the role of the designer to create new forms of business for an architect's firm.

Anybody undertaking a design-build arrangement will need to be familiar with rules about general contractors, safety and understand the significant liability risks associated with such a role.  In addition, undertaking owner's rep work could implicate a host of fiduciary responsibilities not considered.  Serious consideration regarding the qualifications and ability that is required to take on any expanded role is important.

We've had plenty of previous discussions about the types of liability a general contractor can face.  We have also been following a piece of legislation in the Illinois House of Representatives that would likely change the face of §414 liability cases.  In following these types of cases under Illinois law in the construction industry we have seen courts rule both ways when considering whether or not a GC undertook to control the work of its subcontractors.  

Now we have another...  In Calderon v. Residential Homes of America, et al. No. 1-07-1470 (2008) we've been given another piece of information concerning what amounts to control under the §414.  In Calderon, the plaintiff was roofing and injured himself while carrying shingles up a ladder to a roofing job.  The defendant was the GC and had a contract that instructed its subs to review a manual regarding safety that was kept in the GC's office and had a site superintendent who went around the job daily to ensure work progress.  The testimony during depositions revealed that the GC's superintendent was not aware that the shingles were transported by ladder rather than by crane or conveyor, and that the superintendent was not instructing the subs regarding how to perform their work, but was reviewing the site for progress.  The court upheld the trial court's grant of summary judgment and found that the facts (which can be read here in the opinion) did not amount to "control" sufficient to establish liability under the §414 exceptions.

There are plenty of minutia to consider when assuming a new role.  Jumping into any unfamiliar type of business arrangement means assuming new risks that you should be prepared for.

• Email This
• Print
• Comments
• Trackbacks

In  West American Ins. Co., v. Trent Roofing, et al. (ILND, Doc. No. 06 C 1239) the evidence before the court was that the plaintiff's building burned when a roofer caught the place on fire with a torch.  The roofer performing the work was a man named Eller.  A man named Covelli had applied for permits in the name of a different entity called Trent Roofing.  Trent Roofing performed no work on the building.  No written contract existed between Trent Roofing and the plaintiff or any other party.  Trent also presented evidence that it never authorized Covelli to obtain permits under the Trent Roofing name.

The court found that no contractual duty existed between Trent and the plaintiff.

The interesting portion of the courts decision is at Slip Op. 5, where the court refutes the plaintiff's allegations that independent statutes such as OSHA regulations, the Illinois Roofing Industry act, and the City of Burbank's building and fire code, created some form of duty that Trent Roofing owed to the plaintiff.  Too often parties point to the existence of regulatory statutes, that give no right of private action to individuals, in an attempt to show that a duty exists or that some duty of care was breached.  Here, the court dismissed the claims that these statutes created a duty of care and granted Trent Roofing's Motion for Summary Judgment.

• Email This
• Print
• Comments
• Trackbacks

In MD Electrical Contractors, Inc., v. Fred Abrams (Il. Sup. Ct. 2008; Doc. No. 104000)  the plaintiff had sued under the theory of quantum meruit, stating that it had no contract with the defendant for electrical work performed on the defendant's home.  The defendant claimed that the Home Repair and Remodeling Act prohibited a suit by the plaintiff.  The circuit court had reasoned that quantum meruit was a legal theory that implied a contract where none existed.  Since the Home Repair and Remodeling Act was against the contract, and the subcontactor fell under it, the court could not imply a contract where the act would forbid such a contract.  The Appellate Court had disagreed and remanded the decision.  And now, the Supreme Court's decision has squarely stated that the act does not apply to subcontractors.

• The Home Repair and Remodeling Act applies only to those who contract directly with the Home Owner.

The court refused to address the intriguing issue of whether or not a sub-contractor could have any recourse in quantum meruit, or outside the Mechanic's Lien Statute.

In a strong-toned dissent, Justice Freeman points out that the complaint was insufficient on its face to offer the factual issues that the court relied upon in determining this matter.  The complaint asserts that MD Electrical was a sub-contractor, but there is no evidence of that fact anywhere in the record.  The dissent goes on to argue that the court did not have to reach the issue of the Home Repair and Remodeling Act's application to sub-contractors and should not have done so.

• Email This
• Print
• Comments
• Trackbacks

We've previously discussed the Illinois construction statute of repose (735 ILCS 5/13-214).  The benefits it conferred to design professionals and others by the statute's ten-year limitation cannot be underestimated. 

In Ryan v. Commonwealth Edison Company (Doc. No. 1-06-3309, 1^st Dist. Ill. App.) the Illinois first district appellate court has broken with itself and sided with the third district in asserting a "status/activity" distinction for claims that will be barred under the statute of repose.

The court was confronted with the issue of whether Com Ed's duty to maintain a transformer that exploded and injured the plaintiff was separate and apart from its installation work and therefore, not subject to the statute of repose.  The court found that Com Ed's status as an installer and any claims that arose from the installation might fall under the statute of repose, but made a determination that since Com Ed had a duty to maintain the equipment (derived from its capacity as the power supplier and not its status as the installer) the statute would not apply.

• Now that we have a definite split, we could see the Illinois Supreme Court address the "status/activity" distinction.  More importantly, because the court made the determination regarding Com Ed's duty in this case, we should be alert for more judicial determinations of ongoing duty.  Will the decision only apply to utility companies supplying services which necessitate a duty to maintain equipment?  Even apart from any undertaking to maintain structures/equipment after installation?  Even when the duty has been contracted or left in the hands of some other entity like a municipality?

• Email This
• Print
• Comments
• Trackbacks

    It's not often that we get a 97 page opinion from an appellate court, even more rare is the occasion that any such opinion would be of interest to the industry.  This week, we were happy to find both in Cordeck Sales, Inc., v. Construction Systems, Inc., et al., (Doc. No. 1-06-3702, 1^st Dist).

    In Cordeck, a developer had gone belly-up on a multi-million dollar condo development.  Multiple mechanics liens were filed by the various entities involved in the construction for work performed, the lender filed a claim to foreclose its mortgage, and a receiver had been appointed to sell the individual units and collect the proceeds into a pot from which the resolved disputes would be compensated.  The opinion doesn't go too far in creating any substantively new nuances to the statute that Representative George Scully has called "a patchwork of quilts...of patches put on this quilt over the past hundred years" (Slip op. at 44).  Some clarifications and holdings are still important.  Of interest are:

• A reminder that the dates of the contracts are the attachment dates for the liens of contractors and subs.  They will be instrumental in establishing the priority of liens against third parties and other claimants.
• The date of recordation for a mortgage will establish the date of a mortgage for the determination of priority in the scheme of liens and claims against third parties.
• Construction Managers can have liens, even on contracts prior to the 2004 and 2006 amendments to the Act.
• Amendments to a recorded lien for amounts of work done over time past the date of the first recorded lien can still affect the assertions of rights against the owner, but may not have affect as to the right in priority or assertions against third parties.
• Fees earned on a project are not inherently "unalienable."

Of note to many practitioners:

• If a deponent is claiming a fifth-amendment right against self incrimination in answer to questions, the determination regarding the propriety of such an assertion will be made on a question by question basis in the trial court.

• Email This
• Print
• Comments
• Trackbacks

Here's a reminder from the Northern District of Illinois Bankruptcy Court.  In Vancil v. Tres Amigos (docket #06-71254) the owner of a property, Tres Amigos, was looking to extinguish liens filed by two subcontractors of Vancil.  Tres Amigos brought the action to extinguish the liens where the two subs had not properly served Tres Amigos with their 90 day notices under the Illinois Mechanic's Lien Act.

A problem arose when the Court noted the Tres Amigos had never made one of the subs a party to the action and that it failed to assert a claim against the other sub, which was a co-defendant.  The Court pointed out the Tres Amigos would likely have prevailed on its claim, had it not failed to properly plead actions for which relief could be granted against the subcontractors.

• The lesson learned here:  Make sure all your ducks are in a row before time, effort and money are spent asking the Court for relief that cannot be granted.

• Email This
• Print
• Comments
• Trackbacks

    In an eminent domain case, Marseilles Hydro Power, LLC v. Marseilles Land and Water Co., arising under the Federal Power Act, and involving the interesting issue of deed construction and proper drafting, the Seventh Circuit has laid out some interesting points regarding deed construction premised on prior recordings and conveyances, along with an affirmation of the eminent domain standards applicable to the Federal Power Act.

• Email This
• Print
• Comments
• Trackbacks

©    Maintaining the copyright in a design can give an architect or engineer another tool in ensuring payment and completion of the contract.  The right to come in and take back the designs or to seek an injunction has teeth and copyright is a limited issue in most standard form contracts.  While disputes based on the licenses and the copyright terms of the contract carry meat, the A/E might consider registering their plans with the US Copyright Office prior to turning them over to other parties.

        Having the protection of the registered copyright allows for the statutory provisions of US Copyright law to be used as well as seeking the remedy under the contract and can offer the added benefit of allowing the A/E to seek to recoup statutory damages as well as legal fees.  A short primer is available from the office, and the limited fee, especially on designs that may be used multiple times can offer an added assurance that payment in full will occur.  

• Email This
• Print
• Comments
• Trackbacks

The new ConsensusDOCS forms were published late last year and will be the subject of the ABA Construction Industry Forum's 2008 Fall Meeting.  With all the buzz we thought it would be pertinent to sit down and read these documents.  This posting is one of many expected to come regarding the new ConsensusDOCS.

            The language implying a fiduciary duty hasn't changed much over the years and is often described by the courts as a "relationship of trust and confidence" between parties.  With that definition entrenched in case law we thought it a bit peculiar that the normal contracting relationship between an architect and an owner would be particularly described as one of "trust and confidence" in ConsensusDOCS 240 section 2.2. 

In the construction setting, plaintiff's with claims have been seeking to impose a fiduciary relationship in one form or another on contractors and architects to gain more damages and a heightened standard of care for some time.  Thankfully, many courts have often struck down the concept of parties contracting for construction services as entering into a fiduciary relationship thus allowing plaintiff's to bring causes of action outside the normal breach of contract claim or based on a heightened standard of care.  (See, 262 F. Supp. 2d 1004; 812 F. Supp. 72)

With the concept of "trust and confidence" and its implication of a fiduciary relationship in mind, it's odd that the ConsensusDOCS Guidebook from October 31, 2007, would explicitly delineate that the contracting parties should not be agreeing to a heightened standard of care:

• "Standard of Care (Section 2.1): A definition of the standard of care applicable to architectural and engineering services performed under this Agreement is not included in this Agreement (previous additions of AGC contracts did include such a definition). The drafters of the new Consensus documents determined that it would be better for the design professionals to be held to a standard imposed on them by their own profession, rather than one defined by this Agreement.

• "Contractors and Owners should not modify this Agreement by adding language that would hold any design professional to a standard of care that is above that which is customary and normal for design professionals in the same time and location, because that might result in the unintended consequence of voiding errors and omissions coverage available to the respective design professionals."

 
But then go on to say that the A/E is accepting a relationship of trust and confidence in Section 2.1 of document 240:

 

• "Relationship of the Parties (Section 2.2): This provision requires the Architect/Engineer (A/E) to accept the relationship of trust and confidence in exercising its skill and judgment in furthering the interests of the Owner and expressly affirms the A/E's representation that it possesses the requisite skill, expertise, and licensing to perform the required services. The new language is preferable, but it should be noted that it was not included in the previous AGC 240 Owner-Designer professional Agreement, no longer published."

       It is also a bit boggling that understanding the implication of the "trust and confidence" language, that no other provision in the document would specifically state that nothing in the contract should be construed as creating a fiduciary relationship between the parties.  Perhaps the authors just thought such a provision unnecessary given the lack of case law supporting a fiduciary relationship in such a setting.  But why then be specific as to the language of "trust and confidence" between the parties?  Why not just state that the parties agree to "good faith and fair dealing" or accept a "contractual relationship for the provision of A/E services"?  And, even if a standard of care is not affected by the language, could "trust and confidence" through its fiduciary implications mean that there are now added duties that the A/E must be aware of?

• Email This
• Print
• Comments
• Trackbacks

            For those out-of-state contractors, architects, and builders working on projects in some other place for Illinois' residents, there are some interesting lessons in the Fourth District's Isringhausen v. Prime Contractors and Associates, Inc., opinion regarding keeping yourselves from being subjected to Illinois law.

            It should come as no surprise that a Florida company working on building a house in Florida that was contacted and did no business in Illinois was not subject to Illinois jurisdiction.  But, what if the Florida contractor was advertising here in Illinois, or had made a few trips to Illinois to complete the contract?  What if the escrow or some other portion of the contract were to be completed in Illinois so that the contractor, although minimally, were availing itself of Illinois law?  It would be wise to work out the full details for out-of-state construction both for owners in Illinois and contractors elsewhere, lest the parties find themselves in costly litigation hundreds or even thousands of miles away.

• Email This
• Print
• Comments
• Trackbacks