Update on Bills Altering the Condominium Property Act

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The two bills we've been tracking regarding the Condominium Property Act have had some modifications in the past few weeks.

 

On April 28, 2008, HB 5037 had a second amendment introduced which modifies the proposed changes to grant greater rights for notice regarding the owners of the condominium properties found to be in "distress."  The first amendment to the bill updated and clarified different provisions regarding the nature of distressed properties and elaborated on findings regarding "distress."

 

On April 18, 2008, HB 5189 was completely modified by a second amendment that modifies the rules concerning governing boards clarifying the rules on leasing units and also inserts a grandfather clause for unit owners who may be leasing at the time the governing board may enact rules regarding leasing.  The clause would allow the leasing unit owner to continue leasing until they sell the unit.

The Illinois Drainage Act - A Farmer's Approach

Thumbnail image for Sluice_Gate.JPGIllinois farmers are a tough bunch.  So it's not surprising that as a pro se defendant and appellant, farmer Peter Schultz, was instrumental in allowing the court to deliver one of the nine cases in existence dealing with the Illinois Drainage Act (70 ILCS 605/1 et seq.) 


This act is important to anyone developing a parcel of land and many contractors.  It establishes the Drainage Districts in the State and also governs taxation and contracting and bidding on projects with the Districts.  It provides the process by which determinations regarding drainage from one parcel to the next are made, along with establishing a procedure for adjudicating issues involving drainage.

In Halpin v. Schultz, Doc. No. 3-06-0767 (3rd Dist.) the appellate court was faced with a trial court's decision granting Mr. Schultz' neighbors the right to enter onto his land and install new drainage tiles.  The neighboring farm wanted to extend their drainage tiles beyond their property, connect them to Schultz' and thereby, arguably, change the course of drainage on their property.  Schultz argued that the tiles between the property were never connected, and shouldn't be connected.  This is important given that, in addition to excess water, many toxins from pesticides and sewage from livestock also end up in being transported through these types of tiles and can effect the quality of groundwater in the area and the growth of crops.

At trial, the plaintiffs did not introduce any evidence comporting with the Drainage Act's requirements that a dominant landowner seeking to extend and replace tiles on a subservient landowners property show that the tiles would then drain at an exit point off the property of the subservient landowner.  In other words, if the neighbors wanted to drain in the direction of Schultz' property, they were required to show that they would be draining "through" Schultz' property and that the water would exit into a proper ditch or culvert beyond Schultz' property.  They failed to introduce any evidence to that effect and the appellate court reversed the trial court's decision outright.

Additionally, the court noted the severe constitutional implications involved in letting one private land owner assert rights with regard to another individual's lands. 

  • "The law does not favor the expropriation of private property for the public good without just compensation.  Even less attractive is the expropriation of private property for the private benefit of an adjoining property owner."

The judgment of the trial court was reversed.

Justice Holdridge dissented asserting that a different standard of review should be applied and framed the issue of this case, not as one addressing the interpretation of the Drainage Act, but of one regarding the trial court's determination of the evidence in competing testimony and felt that the trial judge did not create reversible error in his determination regarding the course of the natural drainage of the properties at issue.

Holdridge saw this case as a question of whether certain new improvements on portions of the neighbors land, namely the creation of a two-acre pond and the development of a housing division on a portion of the property had created a new "natural" flow of water where water that may previously not have traveled over Shultz' land.  However, addressing these questions under the act would require more time and effort than the plaintiffs may want to put into this matter.  And, without an attorney, perhaps Shultz was unequipped to properly raise these issues.

Developments, ponds, and farms aside, the act of construction on open land can raise a host of issues that, if not properly considered at the time of construction, can lead to a mess of litigation, which can be a headache, unless, of course, you know how to farm.

HB 2094 - Slowed Down

We've blogged at length about HB 2094 and the reintroduction of the Structural Work Act.  The action deadline for the bill has been extended to May 9.  It is likely, now that the fervor has died down that the bill is being held as a playing chip between differing factions in the House for getting some other legislation passed. 

Kirkpatrick v. Strosberg

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, 2nd 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 1st 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.

Loman v. Freeman, and The Issue of Bailments


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.

The Blawg Review #156 at Virtually Blind

Blawg Review, "The Carnival of Law Bloggers" has come out with its latest issue:  Blawg Review #156 - This review is dedicated to all things legal and virtual.

The author of this review, Benjamin Duranske of Virtually Blind, does a great job with his Q & A format in covering recent posts from around the legal blogging world regarding issues touching the law and virtual world (especially in defining the "virtual world").


Legal Fees In a Construction Dispute?... You're Not Alone.

John Parnass over at Washington Construction Law, an excellent Washington State Construction Law resource, is reporting on this article from the Law Blog of the Wall Street Journal.  The Donald is suing his attorneys over the fees they billed in representing him in a construction matter.

Great quotes from Trump regarding the underlying dispute and legal case over the breach of the earth-moving contract in the construction of a Golf Course:

"I have a Ph.D. in legal fees. I know when fees are fair and when they are not."

"Ninety percent of the conversations I had ... were about legal fees, not the case,"

"We won the case because I'm a great witness."

Whether or not they've got their own TV Show, clients should work with attorneys to establish a beneficial fee structure and ensure that they're getting value for their money.

A Contractor's Guide to Construction in Michigan

Just a quick update.  The good people over at the Michigan Construction Law Update have posted this entry regarding a recently published "Contractor's Guide to Michigan Construction Law."  Several of the authors for the guide are also authors for the MI Construction Law Update.  The guide is available for download from the Associated General Contractors of Michigan's website here.

HB 2094 - The 1907 Edition

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As we continue to follow HB 2094, we are pleased to present the 1907 edition of the Structural Work Act.  We'd like to thank our friends over at the Cook County Law Library for having an in-tact copy of the 1908 Code.  The spine of the book can be seen to the left.

As you can see, not much is different between the HB 2094 proposed act and the 1907 version.  Except the penalties.  It used to be that the penalty for violation could cost an architect $25 to $200, now it would be a "petty offense."

In one of the cases that established the "good faith" exception to the exclusionary rule exercised for 4th Amendment violations (United States v. Leon, 468 US 897 (1985)), Justice Blackmun delivered a concurring opinion addressing decisions based on  empirical data and offered some guidance regarding how the law should approach its own determinations when they are premised on empirical evidence:

    "As the Court's opinion in this case makes clear, the Court has narrowed the scope of the exclusionary rule because of an empirical judgment that the rule has little appreciable effect in cases where officers act in objectively reasonable reliance on search warrants. Because I share the view that the exclusionary rule is not a constitutionally compelled corollary of the Fourth Amendment itself, I see no way to avoid making an empirical judgment of this sort, and I am satisfied that the Court has made the correct one on the information before it. Like all courts, we face institutional limitations on our ability to gather information about "legislative facts," and the exclusionary rule itself has exacerbated the shortage of hard data concerning the behavior of police officers in the absence of such a rule. Nonetheless, we cannot escape the responsibility to decide the question before us, however imperfect our information may be, and I am prepared to join the Court on the information now at hand.
    "What must be stressed, however, is that any empirical judgment about the effect of the exclusionary rule in a particular class of cases necessarily is a provisional one. By their very nature, the assumptions on which we proceed today cannot be cast in stone. To the contrary, they now will be tested in the real world of state and federal law enforcement, and this Court will attend to the results. If it should emerge from experience that, contrary to our expectations, the good-faith exception to the exclusionary rule results in a material change in police compliance with the Fourth Amendment, we shall have to reconsider what we have undertaken here. The logic of a decision that rests on untested predictions about police conduct demands no less."

If the Supreme Court of the United States can recognize that empirical evidence can lead to the need to reconsider its own rules then, when:

"It is the intent of the General Assembly that this Act is to be liberally construed to effectuate its beneficial purpose of protecting persons engaging in occupations of working in and about construction, repairing, alteration, or removal of buildings, bridges, viaducts, and other structures. This liberal interpretation exists so as to provide workers with a safe place to work and to afford relief to injured workers."

a state legislature drafting a law designed for a purpose (Worker Safety) should also revisit its law with empirical evidence and determine if the standards set out in that law can accomplish that goal.  The point is exacerbated by the fact that Structural Work Act was in effect from 1907 to 1995.  There should be plenty of data out there to determine if the standards and rules set forth by this statute should be updated.

The real question then is, have methods, means and ability of contractors and construction trades to provide for safety changed such that the standards should be augmented?  Is it sound law that the physical requirements of structures under the act should just read as they did in 1907, given that the industry has advanced?  What about OSHA requirments? 

Liability and Assumption of Risk

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.

Who's Paying the Water Bill?


In American Multi-Cinema, Inc., v. MCL REC, LLC, et al. (N.D. of Illinois, Doc. No. 06 C 0063)  a lessee, AMC, filed for a declaratory judgment seeking a determination regarding its lease.  They want to know if the lease requires them to pay for the hot and cold water that runs in their portion of the building. (That's right... don't feel bad about having this dispute with your landlord every time the water bill arrives, apparently it doesn't matter if you're renting a garage space in Port Byron, or if you're running one of the nicest theaters in downtown Chicago, it's important to know who's paying for the water).

Under protest, AMC paid the balance of the water bill to its previous landlord prior to the sale of the property to a new landlord and then filed an action seeking a declaration regarding the duties imposed by its lease against the old landlord and brought in the new landlord after the sale was complete.  The two landlords then filed claims against each other regarding whether or not either of them owed money, indemnification, or a defense to each other concerning AMC's declaratory action.  They based these claims on their own sale agreement.  The end result of AMC's action will determine who foots the bill for the hot and cold water; AMC, or the current landlord.

The original landlord brought a motion for summary judgment on the cross-claim of the second landlord and the court rendered this opinion.  The court granted the original landlord's motion for summary judgment, in part with regard to the indemnification clause in the sale agreement, but held that there was a question of fact regarding when and what the parties knew about AMC's disputes and contentions over the water bill before, during, and after the sale.

As a practice pointer, make sure the due diligence is in order before you sign off on that asset purchase agreement.  Additionally, see the court's footnote 1, reminding the parties that under the Northern District's local rules, tabs and indexes of the exhibits (local rule 5.2(c)) need to be filed.  R. David Donoghue over at the Chicago IP Litigation Blog has also commented on the failure of many counsel to fully follow the lesser-known federal rules.

HB 2094 - Strict Liability in Construction Cases Update

Just a quick update on HB 2094, which we talked about here.  The bill has now been amended to reflect that the chief sponsor is Representative Fritchey.  Rep. Fritchey is also the representative who sponsored the Contractor Prompt Payment Act that went into effect last year.  The Judiciary Committee has recommended that the bill be passed, and various state agencies are now filing their own notes asserting that the bill will have little impact on State and Agency spending.  Many Illinois Construction lawyers are following this bill.  A simple Google search for "HB 2094 Illinois" shows that construction attorneys from all sides and lobbying groups operating for different interests all have something to say.  Interestingly, we have yet to see many scientific reports concerning the bill's preamble regarding construction safety.  If our readers have the studies concerning construction safety and net increases after the original version of this bill was repealed in 1995 we would like to report on them.  Additionally, if anyone has any information concerning the actual 1907 act and its text, it would be interesting to see how this act differs from the 1907 standards.

The Statute of Repose and Mine Subsidence


In Ambrosia Land Investments, LLC, v. Peabody Coal Company (7th Circ., Doc. No. 07-1945) the Seventh Circuit tackled the fascinating question of whether or not the Illinois Construction Statute of Repose applied to a coal mine.  While we may not think this would be interesting to everyone, the construction statute of repose is actually a fun topic, and the 7th Circuit did a great job of covering the topic.

Along with a poignant discussion of the relevant Illinois case law regarding the statute, the court held that a coal mine on a piece of property would constitute an "improvement to real property for statute of repose purposes."  The court went on to find that the former mine owner was being sued as an owner of the mine and not as a party engaging in construction-related activities, so the plaintiff's case for damages to its property from mine subsidence did not fall under the activities covered by the statute.


IL House Bill 2094 - From Adoption to Structural Safety


Here's a treat.  HB 2094 was introduced back in February of 2007 as a bill pertaining to the confidentiality of records and persons under the Adoption Act.  It sat in the House Rules Committee from April 27 of 2007 until April 8, 2008. 

On April 8, 2008, it was revived, cleverly, and an amendment was proposed striking the entirety of the bill and inserting what appears as a wholly new proposed bill regarding requirements for safety during construction.  The requirements will undoubtedly be interpreted as providing for strict liability against those found to have violated the act, they also confer a private right of action to people injured and a right for any attorney to enforce the act and receive fees if the Attorney General's office does not act promptly.  The act appears to contain provisions that pertain to just about everyone who could possibly be involved in a construction project.  Of note to Illinois Architects, and anyone drafting plans is Section 8 of the amendment:

  • "It shall be the duty of all architects or draftsmen engaged in preparing plans, specifications or drawings to be used in the erection, repairing, altering or removing of any building or structure within the terms and provisions of this Act to provide in such plans, specifications  and drawings for all the permanent structural features or requirements specified in this Act; and any failure on the part  of any such architect or draftsman to perform such duty, shall be a petty offense."

Importantly, this is an attempt, by its own admission, to reintroduce the Structural Work Act which was repealed in 1995.  The legislature had attempted to introduce the act in 2001, and our readers will have no trouble comparing the provisions of that bill, with all its clauses, to sections which are similar to this new attempt to bring back the Structural Work Act.

There are multiple articles and analysis comparing the shift in the law and the liability of different parties to construction efforts after the repeal of the original Structural Work Act.  Most notably, the shift created a fairer system allowing for comparative fault to be assessed by a finder of fact, and brought liability back to common law standards under §§ 414 and 343 of the restatement of torts.. forcing individuals to actually prove that those they were suing had some form of notice which provided a duty of care that was breached resulting in a plaintiff's injury.  Under the proposed act, Illinois law would again fall back into the category of states creating duties and responsibilities for construction entities where none may have existed.

Additionally, what does the "failure to act promptly" provision mean?  Could attorneys get into the business of policing construction sites for violations of the act, suing and recouping costs and fees?

If the real purpose of the act is to provide greater safety at construction sites and in planning, why confer a private right of action to those injured where fair and balanced methods of determining fault and damages exist under the common law and through other statutes?

Construction Regulation Statutes Do Not Inherently Create a Duty of Care

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.

The Home Repair and Remodeling Act Does Not Apply to Subcontractors

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.

Statutes of Repose and a Duty to Maintain

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, 1st 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?

Coverage for a Breach of Contract Action Under Illinois Law?

In Cincinnati Insurance Company v. Taylor Morley, Inc., (Doc. No. 06-cv-1035-MJR, S.D. Il, 2008) the Southern District of Illinois has issued a coverage opinion reaffirming the substantive Illinois law.   Construction defects alleged by a buyer against a builder and claims by buyers against a builder for diminished property values because of the builders failure to fulfill its contract and construct a "championship golf course" around which their homes were to have been built, are not afforded coverage under a CGL policy. 

Mechanic's Liens, Mechanic's Liens

    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, 1st 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.