933 Van Buren Condominium Assoc. v. West Van Buren, LLC

FOURTH DIVISION
September 8, 2016
2016 IL App (1st) 143490
No. 1-14-3490
933 VAN BUREN CONDOMINIUM ASSOCIATION, ) Appeal from the
an Illinois Not-for-Profit Corporation, ) Circuit Court of
) Cook County.
Plaintiff, )
)
v. )
)
WEST VAN BUREN, LLC, an Illinois Limited Liability )
Company; GLENN RUTLEDGE, an Individual; )
ROGER K. MANKEDICK, an Individual; ROSEMARY )
GODEK, an Individual; LENNAR CHICAGO, INC., )
Successor by Merger to Concord Homes, Inc., d/b/a )
Lennar; ILLINOIS ROOF CONSULTING ASSOCIATES, )
INC., an Illinois Corporation; and TOTAL ROOFING )
AND CONSTRUCTION SERVICES, INC., )
)
Defendants )
________________________________________________) No. 11 L 8267
(West Van Buren, LLC, an Illinois Limited Liability )
Company, Counterplaintiff-Appellant and Cross-Appellee; )
Total Roofing and Construction Services, Inc., and Illinois )
Roof Consulting Associates, Inc., an Illinois Corporation, )
Counterdefendants-Appellees and Cross-Appellants). )
)
)
)
)
)
)
) The Honorable
) Judge Eileen O’Neill Burke,
) Judge Presiding.
_____________________________________________________________________________
JUSTICE HOWSE delivered the judgment of the court, with opinion.
Presiding Justice Ellis and Justice McBride concurred in the judgment and opinion.
1-14-3490
OPINION
¶1 Real estate developer-appellant West Van Buren, LLC (WVB), hired two roofing
contractors, Illinois Roof Consulting Associates, Inc. (IRCA), and Total Roofing & Construction
Services, Inc. (Total), to perform roofing work on a condominium building it was constructing in
Chicago. After the building was completed and had been turned over to the condominium home
owner’s association, 933 West Van Buren Condominium Association (HOA), the HOA
discovered that the condominium roof was leaking and subsequently filed a lawsuit against
WVB.
¶2 WVB filed counterclaims against IRCA and Total arguing that they had a duty to defend
and indemnify WVB pursuant to their respective contracts, and that they breached this duty by
refusing to defend and indemnify WVB against the HOA’s claims. Total filed a claim for
contribution against IRCA and WVB. Following a settlement between the HOA and WVB, all
that remained pending before the trial court were claims the developer and contractors filed
against each other. The trial court granted IRCA’s and Total’s motions for summary judgment on
WVB’s indemnification counterclaims, finding that IRCA and Total did not have a duty to
defend or indemnify WVB for the HOA’s underlying claims pursuant to their contractual
agreements. WVB timely filed this appeal from those rulings. Total also filed a cross-appeal
challenging the trial court’s dismissal of its claim for contribution; however, Total did not make
any argument on appeal regarding its cross-appeal. For the reasons that follow, we reverse that
part of trial court’s ruling that found IRCA and Total had no duty to defend WVB against the
HOA’s claims of breach of warranty and breach of the implied warranty of habitability under the
indemnity provisions of their respective contracts, and remand this matter to the trial court for
further proceedings consistent with this opinion. We affirm the trial court’s dismissal of WVB’s
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counterclaims against IRCA and Total with respect to IRCA’s and Total’s duties to indemnify
WVB against fraud claims alleged by the HOA. Finally, Total did not raise any arguments on
appeal regarding its cross-appeal of the dismissal of its counterclaims for contribution, thus
waiving those claims. Therefore, we affirm the dismissal of those claims.
¶3 I. Background
¶4 The record shows that in 2002, WVB caused a condominium building to be constructed
at 933 West Van Buren Street in Chicago, Illinois, on property that WVB owned. WVB hired
numerous contractors to perform the construction work, including IRCA to provide roof
consulting services and Total to perform the actual roof installation work.
¶5 The contract between WVB and IRCA, dated November 15, 2001, discusses the
parameters of the work to be performed by IRCA. The contract contains a provision regarding
indemnity, which requires IRCA to indemnify WVB from claims that may result from any act,
omission, or neglect whether the loss was caused by the negligence of any other person or party,
which under the plain language of the contract could include IRCA. Specifically, it states:
“INDEMNITY
[IRCA] shall, at its own cost and expense, defend,
indemnify and save harmless [WVB] and its agents,
representatives, officers and employees from any and all loss,
claims, liabilities, obligation suits or actions of any kind or
character *** and from any and all expense (including costs and
attorneys fees) arising from any injury, death or damage which
may be sustained, incurred or received by any person *** or
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property and which may directly or indirectly result from the
following:
A. Any act, omission, neglect or misconduct of
[IRCA] or any employee or agent of [IRCA] in connection
with the performance of any covenant, term or provision of
this Agreement, irrespective of whether such loss, claim,
liability, obligation, suit, action and/or expense was
actually or allegedly caused wholly or in part from the
negligence of any other person or party.
***
C. Any failure, neglect, act or omission on the part
of [IRCA] or any employee or agent of [IRCA] with regard
to any law, requirement, ordinance or regulation or any
governmental authority.”
¶6 The contract between WVB and Total, dated July 18, 2002, discusses the parameters of
the work to be performed by Total. The contract between WVB and Total includes an indemnity
provision that is not as broad as the provision in the IRCA contract, but that requires Total to
indemnify WVB from any claims resulting from the failure or neglect of the employees or agents
of Total. Specifically, it states:
“INDEMNITY
A. To the fullest extent permitted by law, [Total] shall
defend, indemnify and save harmless [WVB] and Lender (as
hereinafter defined), their respective affiliates, and each of their
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respective partners, directors, officers, shareholders, agents,
employees, consultants, successors in interest and anyone else
acting for or on behalf of them (collectively, the ‘Indemnities’)
from and against all damages, costs, liabilities, claims, loss and
expense (including without limitation, attorneys’ fees) arising out
of or in connection with:
(I) Any act, omission, neglect or misconduct of
[Total] or any employee or agent of [Total] in connection
with the Work or performance of any covenant, term or
provision of the Contract Documents;
(II) Any failure, neglect, act or omission on the part
of [Total] or any employee or agent of [Total] in
connection with any law, requirement, ordinance or
regulation of any governmental authority;
***
F. All indemnities provided in this Agreement shall survive
termination of this Agreement.”
The contract between WVB and Total also contained the following provision:
“I. Notwithstanding anything in the Contract Documents to
the contrary, [WVB] shall have no responsibility or obligation in
connection with safety or the construction means, methods,
techniques or procedures in connection with the Work or the acts
or omissions of [Total], any other contractors, subcontractors,
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materialmen or others or any of their agents or employees or others
performing the Work.”
¶7 The condominium building was constructed, containing 10 floors and 180 condominium
units, which WVB sold to individual purchasers during and after construction via separate
individual purchase contracts. Turnover of the condominium building to the unit-owner elected
board, the HOA, occurred on August 22, 2003. In 2006, attorneys for the HOA wrote a letter to
the attorneys for WVB and reported water leaking from the roof into common areas and
individual units.
¶8 On August 8, 2011, the HOA filed a complaint against WVB as the developer of the
condominium project; Lennar Chicago, Inc., f/d/b/a Summit Development Corporation, d/b/a
Lennar Chicago, as the general contractor allegedly hired by the developer for purposes of
selling the units; Glenn Rutledge, Roger Mankedick and Rosemary Godek as the individual
employees of Lennar and members of the HOA until it was turned over to the HOA; IRCA as the
roof consultant; and Total as the roof contractor.
¶9 In its complaint, the HOA alleged that it notified WVB of the defects now at issue in the
lawsuit, but that WVB refused to remedy the problems. The HOA alleged: “[a]s a result of
[WVB’s] refusal to remedy the defects in the roofing system, 933 Van Buren continued to
experience water infiltration” and individual unit owners purportedly sustained damages to
personal property, causing the HOA to spend $309,000 to fix the water infiltration issues. All of
these facts are incorporated into every claim in the complaint.
¶ 10 The original complaint contained the following counts: count I: “Breach of Warranty–
West Van Buren”; count II: “Consumer Fraud Pursuant to 815 ILCS 505/10a–West Van Buren”;
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count III: “Breach of Fiduciary Duty–Rutledge, Mankedick & Godek”; count IV: “Fraud”; and
count V: “Breach of Implied Warranty of Habitability.”
¶ 11 Count I, “Breach of Warranty” against WVB, contains the following allegations that are
relevant here:
“45. Each contract contained a Limited Warranty Statement
wherein [WVB] warranted against any defects in material and
workmanship in the common elements of the Condo Building.
46. [WVB] breached their Condominium Purchase
Agreements with individual Unit owners by failing to complete the
scope of its contract including, but not limited to:
(a) the failure to properly install the roofing system;
and
(b) the failure to correct the defective roofing
system;
47. In addition, [WVB] breached the Warranty by, among
other things:
(a) failing to disclose all material, hidden and latent
defects that existed prior to the execution of the
Condominium Purchase Agreements;
(b) fraudulently covering up hidden and latent
defects.”
¶ 12 Count II, “Consumer Fraud Pursuant to 815 ILCS 505/10a,” and count IV, “Fraud,” both
allege claims arising out of WVB’s knowledge of defects and failure to disclose the defects in
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the roof to the HOA and individual unit purchasers. Both count II and count IV list a number of
representations that were falsely made to the purchasers as well as a number of facts that were
concealed from the purchasers. Both counts conclude that “As a result of [WVB’s] intentional
misrepresentations and concealments and the reliance upon those misrepresentations, 933 Van
Buren has suffered damages in excess of $300,000.00 in costs to remediate the defective roofing
system.”
¶ 13 Count V, “Breach of Implied Warranty of Habitability,” contains the following
allegations that are relevant here:
“75. [WVB] was the identified developer of the Condo
Building.
***
77. IRCA provided the specifications for the deck
waterproofing and roofing that was found to be defective.
78. [Total] provided roofing services on the Project and
was involved with the installations of the roofing system at the
Condo Building.
79. [WVB], Lennar, IRCA, and [Total] constructed the
property with defects which caused water infiltration into common
areas of the Condo Building as well as individual Units—a)
[WVB] was the identified developer on the Project. [WVB] was
responsible for delivering a new residential condominium building
free of any defects. [WVB] instead delivered a defective building;
b) Lennar was the general contractor on the Project. As such,
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Lennar was responsible for the installation of the roofing system
and its component parts that were defective; c) IRCA was
responsible for the specifications for the deck waterproofing and
roofing. The plans provided by IRCA were insufficient to prevent
water infiltration into the Condo Building; and d) [Total] failed to
properly install sections of the roof which resulted in water
infiltration into the Condo Building.”
¶ 14 The second amended complaint and the third amended complaint, filed October 17, 2012
and November 11, 2013, respectively, contained the same counts as the original complaint and
an additional count, count VI: “Negligence IRCA.” The second and third amended complaints
also contain all the allegations laid out above that were contained in the original complaint.
¶ 15 Attached to the complaints is an expert report from R.J.K. Engineering relating to the
defects in the roof that led to the water infiltration. The report states that the section of the roof
below the patio pavers “was never flooded with Type IV hot asphalt and roof gravel was never
installed over it.” The report goes on to note that “the roof system was never completed under the
patio concrete pavers and top layer of fiberglass was never coated with hot asphalt.
Consequently, any water that accumulated over the roof membrane for a long period of time had
caused water bleeding through the existing roof membrane and has caused water presence
throughout entire area under the patio.” The HOA also attached to the complaint a report from
Architectural Consulting Group, Ltd., which tested samples of the roof and reported that its
“[r]eview of the samples disclosed minimal inter-ply mopping at various points between the
roofing felts.”
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¶ 16 On October 3, 2011, WVB filed a one-count counterclaim against both IRCA and Total
seeking indemnification from IRCA and Total and alleging that IRCA and Total were
responsible for the defects in the roof for which it was being sued. The counterclaim attached the
contracts WVB entered into with IRCA and Total. With respect to the first count in WVB’s
counterclaim against IRCA, WVB states:
“9. Pursuant to the contract between WVB and IRCA,
IRCA was required to provide its roof consulting work in
connection with the construction of the Building in a good and
workmanlike manner with the degree of skill and expertise
expected of all similar roofing consultants.
10. [The HOA’s] complaint seeks to hold WVB liable for
defects in the design and/or construction of the roof and the
Building, which allegedly caused water intrusion and other
damages to the Building and personal property within.
11. WVB denies that it breached any duty which it may be
found to have owed [the HOA], and denies that it has any liability
of fault for the damages claims in [the HOA’s] complaint.”
WVB then cites the indemnity provisions contained in the contract between WVB and IRCA and
goes on to claim:
“13. In the event WVB is found liable to [the HOA] on the
claims in its Complaint, any such liability is due to the defective
nature of the roof consulting services provided by IRCA, which
constitutes a breach of contract between WVB and IRCA, and for
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which IRCA is required to indemnify WVB to the extent of any
judgment entered against WVB plus attorney fees, costs, and
expenses incurred by WVB in defending this matter.”
With respect to the first count in WVB’s counterclaim against Total, WVB similarly states:
“16. Pursuant to the contract between [Total] and WVB,
[Total] was required to provide roof installation work in
connection with the construction of the Building in a good and
workmanlike manner free from defects and with the degree of skill
and expertise expected of roofers.
17. [The HOA’s] complaint seeks to hold WVB liable for
defects in the design and/or construction of the roof and the
Building, which allegedly caused water intrusion and other
damages to the Building and personal property within.
18. WVB denies that it breached any duty which it may be
found to have owed [the HOA], and denies that it has any liability
of fault for the damages claims in [the HOA’s] complaint.”
WVB then cites the indemnity provisions contained in the contract between WVB and Total and
goes on to claim:
“20. In the event WVB is found liable to [the HOA] on the
claims in its Complaint, any such liability is due to the defective
nature of the roofing work provided by [Total], which constitutes a
breach of contract between WVB and [Total], and for which
[Total] is required to indemnify WVB to the extent of any
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judgment entered against WVB plus attorney fees, costs, and
expenses incurred by WVB in defending this matter.”
¶ 17 On the same date, October 3, 2011, WVB moved to dismiss all claims asserted against it
by the HOA in a combined section 2-619.1 motion pursuant to the Code of Civil Procedure
(Code) (735 ILCS 5/2-619.1 (West 2010)). Rather than ruling immediately, the circuit court
allowed limited written and oral discovery while WVB’s motion remained pending.
¶ 18 On June 29, 2012, Total filed a counterclaim against WVB and IRCA, which sought
contribution pursuant to the Joint Tortfeasor Contribution Act (Contribution Act). 740 ILCS
100/3 (West 2012). On October 17, 2012, the circuit court dismissed Total’s contribution claims,
finding that the HOA did not seek damages for a tort against Total to which the Contribution Act
would apply since the HOA only sought contract-based economic loss damages.
¶ 19 On October 18, 2012, following limited discovery, WVB refiled its motion to dismiss the
HOA’s second amended complaint as a section 2-615 motion, and the circuit court held three
hearings on that motion to dismiss. First, the circuit court dismissed count V (breach of the
implied warranty of habitability) against WVB with prejudice because that warranty had been
validly waived in the individual unit purchase contracts. After continuing the hearing for a
second day, the HOA moved to reconsider the dismissal of count V against WVB. At the next
hearing, the court granted the HOA’s motion to reconsider in part, converting its dismissal of
count V to one without prejudice. The court then dismissed without prejudice count I (breach of
express warranty) and the two fraud counts against WVB, finding that they were insufficiently
plead. At the final hearing, the court reinstated its dismissal with prejudice of count V,
confirming that the disclaimer of the implied warranty of habitability in the unit purchaser
contracts barred that claim entirely.
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¶ 20 On November 25, 2013, the HOA filed its third amended complaint, which reasserted all
the claims that has previously been filed: count I: “Breach of Warranty–West Van Buren”; count
II: “Consumer Fraud Pursuant to 815 ILCS 505/10a–West Van Buren”; count III: “Breach of
Fiduciary Duty–Rutledge, Mankedick & Godek”; count IV: “Fraud”; count V: “Breach of
Implied Warranty of Habitability”; and count VI: “Negligence IRCA.”
¶ 21 Shortly thereafter, and before any responsive pleadings to the third amended complaint
had been filed, the HOA agreed to voluntarily dismiss its claims against WVB as part of a
settlement agreement, and on February 20, 2014, a “Stipulation of Dismissal with Prejudice” was
entered. A settlement payment was made to the HOA on behalf of WVB, Lennar and the
individual defendants without allocation. The HOA’s third amended complaint therefore
remained pending against IRCA and Total. On October 20, 2014, the HOA’s third amended
complaint was dismissed for want of prosecution.
¶ 22 On February 21, 2014, WVB filed a motion for partial summary judgment on counts I
and II of its counterclaim against IRCA and Total. IRCA and Total responded to WVB’s partial
motion for summary judgment and also filed cross-motions for summary against WVB.
¶ 23 On August 11, 2014, the circuit court denied WVB’s partial motion for summary
judgment and granted IRCA’s and Total’s motions for summary judgment “relating to
indemnification pursuant to the individual agreements.” In that written order, the circuit court
judge made the following comments:
“[I]t is apparent to this Court that the [HOA] sought to recover
against [WVB] for its failure to disclose the latent defects in the
roofing system which permitted water to infiltrate the building,
causing damage. Further, [the HOA’s] fraud claims arise not out of
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any physical act undertaken by [WVB], but again by [WVB’s]
alleged concealment through omission of their knowledge and
existence of certain defects in the roofing system. Thus, it is
evident that [WVB’s] damages arise out of its dealings with [the
HOA] and only tangentially relate to the arguments between
[WVB], IRCA, and Total. Further, even if the relevant damages
were somehow attributable to [WVB’s] individual agreements with
IRCA and Total, it is apparent that the [Construction Contract
Indemnification for Negligence Act] precludes [WVB’s] recovery
for its damages, including the asserted costs and attorneys’ fees.
740 ILCS 35/1.”
The circuit court found that the Construction Contract Indemnification for Negligence Act (Act)
(740 ILCS 35/1 et seq. (West 2012)) “clearly applies to the agreements considered herein” as
they were for construction. The court found that the indemnification provisions in WVB’s
contracts with IRCA and Total “can still be enforceable *** under the Illinois Contribution Act”
but since no claims remained pending against WVB, and because the HOA’s “claims against
[WVB] stem from the alleged individual conduct of [WVB], and not together with any action by
Total, or IRCA, recovery by [WVB] under the Joint Tortfeasors Contribution Act is
inappropriate. Rather, it would appear that [WVB’s] claims are better suited under breach of
contract theory as to the workmanship or warranty of Total, and IRCA. Such claims are currently
not before the court, and therefore warrant no consideration.”
¶ 24 WVB timely appealed the circuit court’s ruling on its partial motion for summary
judgment. Total cross-appealed the dismissal of its counter-complaint against WVB and IRCA,
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which argued that the HOA’s claim of implied warranty of habitability gives rise to a cause of
action for joint tortfeasor contribution.
¶ 25 II. Analysis
¶ 26 WVB appeals the circuit court’s entry of summary judgment in favor of IRCA and Total
and against WVB on WVB’s counterclaims. Summary judgment is appropriate when there are
no genuine issues of material fact and the moving party is entitled to judgment as a matter of
law. Outboard Marine Corp. v. Liberty Mutual Insurance Co., 154 Ill. 2d 90, 102 (1992).
Summary judgment is a drastic measure and should only be granted if the movant’s right to
judgment is clear and free from doubt. Id. Where a reasonable person could draw divergent
inferences from undisputed facts, summary judgment should be denied. Id. We may affirm a trial
court’s grant of summary judgment on any basis apparent in the record, regardless of whether the
trial court relied on that basis or whether the court’s reasoning was correct. Harlin v. Sears
Roebuck & Co., 369 Ill. App. 3d 27, 31-32 (2006). In appeals from summary judgment rulings,
we conduct a de novo review. Outboard Marine Corp.,154 Ill. 2d at 102.
¶ 27 WVB argues that the trial court erred in denying its partial motion for summary judgment
because “IRCA and Total breached their contractual duties to defend and indemnify WVB
against [the HOA’s] claims” where WVB proved the existence of contracts between the parties,
both of which contained indemnification provisions, a breach of those contracts where IRCA and
Total refused to defend and indemnify WVB, and damages in the amount that it cost WVB to
defend against the HOA’s claims and pay a settlement agreement with the HOA. WVB also
argues that the trial court erred in finding that the HOA’s claims arose out of its dealing with
WVB, rather than IRCA or Total, where WVB took no part in any of the work on the
condominium building, where IRCA was responsible for the specifications of the roof
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construction and Total was responsible for the actual construction of the roof, and where the
HOA’s claims necessarily required proof that Total and IRCA performed “shoddy” work on the
roof. WVB argues that the HOA’s allegations relating to WVB’s concealment of the problems
with the roof were “mere surplusage irrelevant to the [HOA’s] claims for breaches of express
and implied warranties, and the circuit court should not have relied on those allegations in
determining whether the [HOA’s] claims triggered IRCA’s and Total’s duties to defend and
indemnify.” WVB further argues that the trial court erred in finding, in the alternative, that
WVB’s indemnity claims were barred under the Act (740 ILCS 35/1 (West 2012)), where the
HOA never claimed that WVB’s negligence caused the water damage and where the underlying
cases did not involve any claims of personal injury. Last, WVB argues that even if the trial court
was correct in denying its partial motion for summary judgment as to the indemnification claims,
WVB also asserted breach of contract claims against IRCA and Total for the defective work they
performed on the roof, and the trial court judge never addressed those claims.
¶ 28 A. WVB’s Counterclaims Against IRCA and Total
¶ 29 Preliminarily, we note that WVB argues on appeal that its “counterclaims are based [not
only] on the explicit defense and indemnity language in contracts with [Total] and IRCA, [but
also on] the existence of defective work, which constitutes an independent breach of contract.”
However, we find that independent breach of contract claims against IRCA and Total for
defective work were never before the trial court and, therefore, the only counterclaims WVB had
against IRCA and Total are counterclaims for the breach of the indemnification clauses in their
respective contracts.
¶ 30 First, we find WVB did not properly plead two causes of action. Pursuant to section 2-
603 of the Code (735 ILCS 5/2-603 (West 2012)), “[e]ach separate cause of action upon which a
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separate recovery might be had shall be stated in a separate count or counterclaim, as the case
may be and each count, counterclaim, defense or reply, shall be separately pleaded, designated
and numbered, and each shall be divided into paragraphs numbered consecutively, each
paragraph containing, as nearly as may be, a separate allegation.” Here, WVB only had one
counterclaim against IRCA and one counterclaim against Total in which WVB focused on the
breach of the indemnity provisions of the contracts.
¶ 31 Assuming arguendo defective work counterclaims were before the trial court, any breach
of contract claims for faulty construction work that WVB may have had against IRCA and/or
Total were time-barred when WVB filed its counterclaims. The breach of construction contract
claims is governed by the 4-year limitations period applicable to construction contracts rather
than the 10-year limitations period applicable to other written agreements. 735 ILCS 5/13-214(a)
(West 2012); 735 ILCS 5/13-206 (West 2012). WVB discovered the leaks in 2006 when it
received letters from the HOA about the leaking roof. Therefore, any alleged breach of contract
counterclaims are time-barred by the four-year statute of limitations applicable to construction-
related matters because they were not filed until 2011. 735 ILCS 5/13-214 (West 2012)
(“Actions based upon tort, contract or otherwise against any person for an act or omission of
such person in the design, planning, supervision, observation or management of construction, or
construction of an improvement to real property shall be commenced within 4 years from the
time the person bringing an action, or his or her privity, knew or should reasonably have known
of such act or omission.”). Accordingly, even if WVB’s counterclaims against IRCA and Total
could be interpreted as also including breach of contract claims for faulty work on the roof,
which we find they do not, those claims are time-barred and were properly dismissed.
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Accordingly, the only viable counterclaims before us are WVB’s counterclaims arising out of
breaches in its indemnification agreements with IRCA and Total.
¶ 32 B. Construction Contract Indemnification for Negligence Act
¶ 33 Before we can determine whether IRCA or Total had a duty to defend and indemnify
WVB pursuant to their respective indemnification agreements, we must first determine whether
those indemnification provisions were valid or whether they were void under the Act. The Act
states that construction contracts or agreements that promise to indemnify a party from its own
negligence are void:
“With respect to contracts or agreements, either public or private,
for the construction, alteration, repair or maintenance of a building,
structure, highway bridge, viaducts or other work dealing with
construction, or for any moving, demolition or excavation
connected therewith, every covenant, promise or agreement to
indemnify or hold harmless another person from that person’s own
negligence is void as against public policy and wholly
unenforceable.” 740 ILCS 35/1 (West 2012).
¶ 34 i. IRCA
¶ 35 The indemnification provision in the contract between WVB and IRCA states that IRCA
is responsible to indemnify WVB from claims which may result from any act, omission or
neglect where the loss or claim was caused by the negligence of any other person or party:
“INDEMNITY
[IRCA] shall, at its own cost and expense, defend,
indemnify and save harmless [WVB] and its agents,
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representatives, officers and employees from any and all loss,
claims, liabilities, obligation suits or actions of any kind or
character *** and from any and all expense (including costs and
attorneys fees) arising from any injury, death or damage which
may be sustained, incurred or received by any person *** or
property and which may directly or indirectly result from the
following:
A. Any act, omission, neglect or misconduct of
[IRCA] or any employee or agent of [IRCA] in connection
with the performance of any covenant, term or provision of
this Agreement, irrespective of whether such loss, claim,
liability, obligation, suit, action and/or expense was
actually or allegedly caused wholly or in part from the
negligence of any other person or party.”
¶ 36 While the clause in the WVB/IRCA contract could be construed as indemnifying WVB
from any party’s negligence, which could include the negligence of itself, we find that this does
not automatically require us to find the provision void under the Act as “the literal terms of a
contract are not necessarily dispositive on the issue of whether it is void under the Construction
Contract Indemnification for Negligence Act.” Liccardi v. Stolt Terminals, Inc., 178 Ill. 2d 540,
548-50 (1997). As a general principle of contract law, statutes and laws in existence at the time a
contract is executed are considered part of the contract. Braye v. Archer-Daniels-Midland Co.,
175 Ill. 2d 201, 217 (1997). It is presumed that parties contract with knowledge of the existing
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law. Id. Additionally, we recognize that a construction of a contract which renders the agreement
enforceable rather than void is preferred. Id.
¶ 37 In Braye, we emphasized that a contract should not be deemed illegal unless it is
expressly contrary to the law or public policy. Id. at 216. The law and the public policy of
Illinois permit and require that competent parties be free to contract with one another. Id.
Whether a contract violates public policy depends on the peculiar facts and circumstances of
each case, as well as the language of the contract itself. Id. In addition, “a construction of a
contract which renders the agreement enforceable rather than void is preferred.” Id. at 217.
¶ 38 Because there is nothing in the record to suggest that WVB construed the indemnification
provision as relieving it of liability for its own acts or omissions, “that paragraph did not
extinguish [WVB’s] incentive to exercise due care, and the primary purpose behind the
Construction Contract Indemnification for Negligence Act was not implicated.” Liccardi, 178 Ill.
2d at 550. Therefore, we will interpret the contract in a manner that renders the agreement
enforceable rather than void, and find that WVB did not expressly require that it be indemnified
for its own negligence. Accordingly, the indemnity clause is not void under the Act and can be
invoked by WVB to seek indemnification from IRCA for faulty roof work. See id.; Braye, 175
Ill. 2d at 217-18.
¶ 39 ii. Total
¶ 40 The indemnity provision in the contract between WVB and Total is different from the
indemnity provision found in the contract between WVB and IRCA because under the agreement
Total was required to indemnify WVB only from the negligence of Total employees and agents
(as opposed to the language in the IRCA contract, which requires indemnity from negligence,
regardless of origin):
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“A. To the fullest extent permitted by law, [Total] shall
defend, indemnify and save harmless [WVB] and Lender (as
hereinafter defined), their respective affiliates, and each of their
respective partners, directors, officers, shareholders, agents,
employees, consultants, successors in interest and anyone else
acting for or on behalf of them (collectively, the ‘Indemnities’)
from and against all damages, costs, liabilities, claims, loss and
expense (including without limitation, attorneys’ fees) arising out
of or in connection with:
(I) Any act, omission, neglect or misconduct of
[Total] or any employee or agent of [Total] in connection
with the Work or performance of any covenant, term or
provision of the Contract Documents[.]”
¶ 41 Based on our plain reading of the language in the indemnity provision between WVB and
Total, we find that the provision does not violate the Act as it does not allow WVB to seek
indemnification from Total based on its own negligence or wrongdoing. Buenz v. Frontline
Transportation Co., 227 Ill. 2d 302, 308 (2008) (the cardinal rule of contract interpretation is to
discern the parties’ intent from the contract language). Rather, the indemnification clause only
allows WVB to be indemnified for “any act, omission, neglect or misconduct of Total or any
employee or agent of Total” in connection with the work it was contracted to perform. Such
indemnification does not violate the Act. See 740 ILCS 35/1 (West 2012).
¶ 42 C. Duty to Defend and Indemnify
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¶ 43 We find that the indemnification clauses in the contracts between WVB and IRCA and
WVB and Total are not void under the Act, and are enforceable. We must now determine
whether IRCA and Total breached their duty to defend and indemnify WVB with respect to the
HOA’s underlying lawsuit pursuant to the respective indemnification clauses in their contracts.
An indemnity agreement is a contract and is subject to contract interpretation rules. Virginia
Surety Co. v. Northern Insurance Co. of New York, 224 Ill. 2d 550, 556 (2007). The cardinal rule
of contract interpretation is to discern the parties’ intent from the contract language. Buenz, 227
Ill. 2d at 308. Where the contract language is unambiguous, it should be given its plain and
ordinary meaning. Id. In interpreting a contract for indemnity, the courts must give the
agreement a fair and reasonable interpretation based upon a consideration of the agreement as a
whole. Allen v. International Harvester Co., 212 Ill. App. 3d 655, 658 (1991). “While the
indemnity provision must be strictly construed [citation], each case also depends upon the
language and facts of that particular case.” Id.
¶ 44 Preliminarily, Total argues, and IRCA joins in that argument, that the indemnification
clauses are subject to the four-year limitations period applicable to construction contracts. 735
ILCS 5/13-214(a) (West 2012). We disagree. WVB’s claims against Total and IRCA arise of out
written contractual indemnification clauses and, therefore, those claims are not time-barred as
they are subject to the 10-year statute of limitations clause applicable to written contracts. See
Travelers Casualty & Surety Co. v. Bowman, 229 Ill. 2d 461 (2008) (finding that 10-year statute
of limitations applied to claims arising out of a written indemnification clause); 15th Place
Condominium Ass’n v. South Campus Development Team, LLC, 2014 IL App (1st) 122292, ¶ 46
(holding that a written agreement to indemnify contained in a construction contract was not one
of the activities protected under the 4-year statute of limitations applicable to construction
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matters and was instead subject to the 10-year statute of limitations applicable to written
contracts). As such, WVB’s indemnification counterclaims against Total and IRCA are not time-
barred.
¶ 45 In the underlying action filed by the HOA, the HOA made the following allegations:
count I: “Breach of Warranty–West Van Buren”; count II: “Consumer Fraud Pursuant to 815
ILCS 505/10a–West Van Buren”; count III: “Breach of Fiduciary Duty–Rutledge, Mankedick &
Godek”; count IV: “Fraud”; count V: “Breach of Implied Warranty of Habitability”; and count
VI: “Negligence IRCA.”
¶ 46 i. Fraud Claims
¶ 47 With respect to the HOA’s fraud claims against WVB, we find that those claims against
WVB fall outside the scope of the plain language of the indemnification clauses between WVB
and Total and WVB and IRCA because those claims arise out of WVB’s alleged intentional
misconduct for allegedly concealing construction defects from the buyers of the condominium
units. Therefore, because these claims arose out of the alleged tortious conduct of WVB, rather
than damage for construction defects, IRCA and Total did not breach their contract by refusing
to defend WVB against those claims. Count II, “Consumer Fraud Pursuant to 815 ILCS
505/10a,” and count IV, “Fraud,” both allege claims arising out of WVB’s failure to disclose the
defects in the roof to the HOA and individual unit purchasers. Both count II and count IV list a
number of representations that were falsely made to the purchasers as well as a number of facts
that were concealed from the purchasers. Both counts conclude: “As a result of [WVB’s]
intentional misrepresentations and concealments and the reliance upon those misrepresentations,
933 Van Buren has suffered damages in excess of $300,000.00 in costs to remediate the
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defective roofing system.” (Emphasis added.) As such, the HOA’s fraud claims against WVB
arise out of alleged intentional conduct rather than any negligent conduct.
¶ 48 The indemnification clause between WVB and Total does not require Total to defend
WVB for any claims arising in part or in total from WVB’s negligence or wrongdoing; rather, it
only provides a duty to defend where Total or its agents are negligent or engage in wrongdoing.
The foundation of the HOA’s fraud claims require a showing that WVB knew of the roof defects
and WVB concealed the defects from the homeowners. As such, Total did not breach the
indemnification agreement with WVB when it refused to defend WVB against the HOA’s fraud
claims as those claims fell outside the scope of the indemnification provision. Buenz, 227 Ill. 2d
at 308 (the cardinal rule of contract interpretation is to discern the parties’ intent from the
contract language).
¶ 49 Similarly, the indemnification clause between WVB and IRCA required IRCA to defend,
indemnify and hold harmless WVB “from any and all expense (including costs and attorneys
fees) arising from any injury, death or damage which may be sustained, incurred or received by
any person *** or property and which may directly or indirectly result from the following: ***
Any act, omission, neglect or misconduct of [IRCA] or any employee or agent of [IRCA] in
connection with the performance of any covenant, term or provision of this Agreement,
irrespective of whether such loss, claim, liability, obligation, suit, action and/or expense was
actually or allegedly caused wholly or in part from the negligence of any other person or party.”
As such, IRCA only agreed to defend and indemnity WVB for its own acts or omissions or
damages that occurred as a result of another party’s negligence. Because the HOA’s fraud claims
allege that WVB intentionally made misrepresentations and intentionally concealed information
from purchasers, IRCA did not breach the indemnification agreement with WVB when it refused
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to defend WVB against the HOA’s fraud claims as those claims fell outside the scope of the
indemnification provision. Buenz, 227 Ill. 2d at 308 (the cardinal rule of contract interpretation is
to discern the parties’ intent from the contract language).
¶ 50 ii. Warranty Claims
¶ 51 With respect to the HOA’s breach of warranty and breach of the implied warranty of
habitability claims against WVB, we find that those claims triggered IRCA’s and Total’s duties
to defend. Jandrisits v. Village of River Grove, 283 Ill. App. 3d 152, 158 (1996) (“the existence
of a duty to defend a complaint arising from an indemnity agreement is determined solely from
the allegations of the complaint and the agreement”). The HOA’s breach of warranty claim
against WVB, in relevant part, alleges that the defects in the roof construction are the cause of
their damages and their reason for filing the lawsuit:
“45. Each contract contained a Limited Warranty Statement
wherein [WVB] warranted against any defects in material and
workmanship in the common elements of the Condo Building.
46. [WVB] breached their Condominium Purchase
Agreements with individual Unit owners by failing to complete the
scope of its contract including, but not limited to:
(a) the failure to properly install the roofing system;
and
(b) the failure to correct the defective roofing
system[.]”
¶ 52 The HOA’s breach of the implied warranty of habitability claim against WVB, in
relevant part, alleges:
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“75. [WVB] was the identified developer of the Condo
Building.
***
77. IRCA provided the specifications for the deck
waterproofing and roofing that was found to be defective.
78. [Total] provided roofing services on the Project and
was involved with the installations of the roofing system at the
Condo Building.
79. [WVB], Lennar, IRCA, and [Total] constructed the
property with defects which caused water infiltration into common
areas of the Condo Building as well as individual Units—a)
[WVB] was the indentified developer on the Project. [WVB] was
responsible for delivering a new residential condominium building
free of any defects. [WVB] instead delivered a defective building;
b) Lennar was the general contractor on the Project. As such,
Lennar was responsible for the installation of the roofing system
and its component parts that were defective; c) IRCA was
responsible for the specifications for the deck waterproofing and
roofing. The plans provided by IRCA were insufficient to prevent
water infiltration into the Condo Building; and d) [Total] failed to
properly install sections of the roof which resulted in water
infiltration into the Condo Building.”
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We find that these allegations, which arise out of faulty work on the roof, fall within the scope of
both indemnification clauses, thus triggering IRCA’s and Total’s duties to defend with respect to
these claims.
¶ 53 WVB’s contract with Total provides that Total will defend, indemnify and save harmless
WVB from any acts, omissions, neglect, or misconduct by Total or any employee or agent of
Total that results in damages, costs, liabilities, claims, losses, and expenses in connection with
the work Total was contracted to do. As such, because it is undisputed that Total was contracted
to perform the work on the roof, it follows that the HOA’s claim for breach of warranty and
breach of the implied warranty of habitability arising out of faulty work on the roof falls within
the scope of the indemnification agreement that WVB entered into with Total.
¶ 54 Similarly, we find that under the plain language of the indemnity provision between
WVB and IRCA, IRCA had a duty to defend and indemnify WVB with respect to the negligence
and breach of the implied warranty of habitability claims filed by the HOA. The indemnification
clause clearly states that IRCA will “defend, indemnify and save harmless” WVB “from any and
all expense (including costs and attorneys fees) arising from any injury, death or damage which
may be sustained, incurred or received by any person *** or property and which may directly or
indirectly result from the following: *** Any act, omission, neglect or misconduct of [IRCA] or
any employee or agent of [IRCA] in connection with the performance of any covenant, term or
provision of this Agreement, irrespective of whether such loss, claim, liability, obligation, suit,
action and/or expense was actually or allegedly caused wholly or in part from the negligence of
any other person or party.” The HOA’s claims of negligence and breach of the implied warranty
of habitability clearly fall within this provision as the claims arise out of the faulty work done on
the roof.
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¶ 55 We recognize that Total argues at some length that WVB’s counterclaims against it are
time-barred under the two-year limitations period in section 13-204(c) of the Code (735 ILCS
5/13-204(c) (West 2012)), a limitations statute that it argues was not addressed in 15th Place
Condominium, LLC, 2014 IL App (1st) 122292. However, section 13-204(c) applies to tort
contribution claims arising out of implied indemnity. See 735 ILCS 5/13-204(c) (West 2012).
Here, like in 15th Place Condominium, WVB’s counterclaims against Total arise out of breach
of contract, and specifically the breach of a written indemnification clause in a contract. As such,
the statute of limitations applicable to WVB’s counterclaims for indemnification is the 10-year
statute of limitations period applicable to written contracts. See 735 ILCS 5/13-206 (West 2012)
(“Except as provided in Section 2-725 of the ‘Uniform Commercial Code’, actions on bonds,
promissory notes, bills of exchange, written leases, written contracts, or other evidences of
indebtedness in writing and actions brought under the Illinois Wage Payment and Collection Act
shall be commenced within 10 years next after the cause of action accrued ***.”).
¶ 56 Although we recognize IRCA’s argument that all of the counts in the HOA’s complaints
incorporate all the facts alleged in the factual background of the complaints, which include facts
pertaining to WVB’s alleged concealment of the latent defects from the unit owners, we find this
carries little weight given that facts regarding any alleged concealment are not necessary to prove
the warranty claims. We would further point out that the facts regarding concealment are also
incorporated into the negligence claims against IRCA, and, again, are not necessary to prove a
claim of negligence against IRCA.
¶ 57 Also, while the trial court did not consider the claim for the breach of implied warranty of
habitability because it was not pending at the time of the summary judgment ruling, we note that
claim was only dismissed after WVB had attorneys defend against the claim and file motions to
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have it dismissed pursuant to the unit owners’ agreements. The duty to defend is triggered by the
allegations in the complaint, regardless of whether those claims may be dismissed later.
Jandrisits, 283 Ill. App. 3d at 158 (“the existence of a duty to defend a complaint arising from an
indemnity agreement is determined solely from the allegations of the complaint and the
agreement” (emphasis added)). Therefore, we find Total had a duty to indemnify WVB against
those claims.
¶ 58 Further, we find that Total’s argument that the implied warranty of habitability is a tort
claim has no merit. Our supreme court found that the warranty of habitability arises out of
contract law: “we hold that included in the contracts, both oral and written, governing the
tenancies of the defendants in the multiple unit dwellings occupied by them, is an implied
warranty of habitability which is fulfilled by substantial compliance with the pertinent provisions
of the Chicago building code.” Jack Spring, Inc. v. Little, 50 Ill. 2d 351, 366 (1972). The implied
warranty of habitability has been expanded to include owners who contract for the purchase of
homes as well as tenants. 1324 W. Pratt Condominium Ass’n v. Platt Construction Group, Inc.,
404 Ill. App. 3d 611, 616 (2010). Total has not cited any cases showing that the implied warranty
of habitability is a tort, and we cannot find any. Thus, we find Total’s claim to be meritless; the
claim at issue in this case, based on the implied warranty of habitability, is a contract claim and
Total is obligated to defend and indemnify WVB under its contract.
¶ 59 Last, while WVB argues that where there is a duty to indemnify one claim in the HOA’s
complaints, there is a duty to defend all of the HOA’s claims, WVB relies on case law
interpreting insurance contracts and insurance companies. When dealing with indemnification
clauses between noninsurers, our courts do not apply laws that govern insurance contracts. Ervin
v. Sears, Roebuck & Co., 127 Ill. App. 3d 982, 989-90 (1984) (unlike insurance policies, which
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are subject to a general rule of liberal construction in favor of the insured, indemnity agreements
are sufficiently disfavored that they must be strictly construed). Accordingly, we find that Total
breached its indemnification agreement with WVB when it refused to defend WVB against the
HOA’s claims for breach of warranty and breach of the implied warranty of habitability.
¶ 60 III. Conclusion
¶ 61 For the reasons above, we reverse the dismissal of the counterclaims for indemnity
against Total and IRCA with respect to the HOA’s breach of warranty and breach of implied
warranty of habitability claims, and we remand this matter to the trial court to calculate the sum
required to indemnify WVB from those claims only. We affirm the judgment of the trial court in
all other respects.
¶ 62 Affirmed in part and reversed in part; case remanded.
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