15th Place Condominium Association v. South Campus Development Team, LLC

2014 IL App (1st) 122292
Nos. 1-12-2292 and 1-12-2301, Consolidated
Opinion filed June 26, 2014
FOURTH DIVISION
______________________________________________________________________________
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
______________________________________________________________________________
15TH PLACE CONDOMINIUM ASSOCIATION, ) Appeal from the
) Circuit Court of
Plaintiff-Appellant, ) Cook County.
)
v. )
)
SOUTH CAMPUS DEVELOPMENT TEAM, )
LLC, )
)
Defendant and )
Third-Party Plaintiff- )
Appellant )
) No. 08 L 9839
)
(FITZGERALD ASSOCIATES )
ARCHITECTS P.C., and )
LINN-MATHES, INC., )
) Honorable
Third-Party Defendants- ) Raymond W. Mitchell,
Appellees). ) Judge Presiding.
PRESIDING JUSTICE HOWSE delivered the judgment of the court, with opinion.
Justices McBride and Palmer concurred in the judgment and opinion.
OPINION
¶1 In this case, third-party plaintiff-appellant South Campus Development Team (SCDT)
appeals the trial court's order that dismissed with prejudice its third-party claims against third-
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party defendants Fitzgerald Associates Architects P.C. (Fitzgerald) and Linn-Mathes, Inc. (Linn-
Mathes), on the grounds that the claims are time-barred. The third-party complaint contains
claims of breach of contract, breach of the implied warranty of good workmanship, implied
indemnity and express indemnity. The implied warranty of good workmanship and the express
indemnity claims are only applicable to Linn-Mathes. In order to make a ruling in this appeal,
we must determine three issues: (1) whether a cause of action accrual provision is enforceable to
bar a third-party complaint against one of the contracting parties; (2) whether the trial court
improperly resolved a disputed issue of fact when it ruled on a motion to dismiss; and (3)
whether the 4-year limitations period applicable to construction-related activities (735 ILCS
5/13-214(a) (West 2008)) or the 10-year statute of limitations period applicable to written
contracts (735 ILCS 5/13-206 (West 2008)) applies to a general contractor's written promise to
indemnify an owner against claims of defects in construction.
¶2 For the reasons that follow, we affirm that part of the trial court's order enforcing the
accrual agreements and dismissing the breach of contract and implied indemnity claims as time-
barred. We reverse the trial court's judgment dismissing the express indemnity claim against
Linn-Mathes and remand this case for further proceedings on that claim because we find the 10-
year limitations period for written contracts is applicable.
¶3 I. BACKGROUND
¶4 A. The Underlying Cause of Action
¶5 SCDT was the developer of two adjacent condominium towers located at 811 and 833
West 15th Place in Chicago, Illinois (the project). SCDT contracted with Fitzgerald for
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architectural services and with Linn-Mathes to be the general contractor for the project. Both
contracts contain a cause of action accrual provision which states that all causes of action against
Fitzgerald and Linn-Mathes are to accrue when substantial completion of the project is achieved.
The terms of both contracts state how the date of substantial completion is determined.
¶6 The SCDT/Fitzgerald contract provides that Fitzgerald as the architect is to have the sole
and exclusive responsibility to determine the date of substantial completion. Section 2.6.12 of
the SCDT/Fitzgerald contract states:
"The Architect shall make site visits to determine the date
or dates of Substantial Completion and the date of final
completion, and may issue a final Certificate for Payment upon
compliance with the requirements of the Contract Documents."
¶7 Similarly, section 4.2.9 of the SCDT/Linn-Mathes contract contains the following
provisions relating to dates of substantial completion:
"The Architect will conduct inspections to determine the
date or dates of Substantial completion and the date of final
completion, will receive and forward to the Owner, for the Owner's
review and records, written warranties and related documents
require [sic] by the Contract and assembled by the Contractor, and
will issue a final Certificate for Payment upon compliance with the
requirements of the Contract Documents."
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Further, section 9.8.4 the SCDT/Linn-Mathes contract states: "When the Work or designated
portion thereof is substantially complete, the Architect will prepare a Certificate of Substantial
completion which shall establish the date of Substantial completion[]***." The SCDT/Linn-
Mathes contract defines substantial completion in section 9.8.1 as follows:
"Substantial Completion is the stage in the progress of the
Work when the Work or designated portion thereof is sufficiently
complete in accordance with the Contract Documents so that the
Owner can occupy or Utilize the Work for its intended use."
¶8 In April 2005, after a number of condominium units were sold, SCDT turned over control
of the condominiums to its owners and the 15th Place Condominium Association (the
Association). Following the turnover, the board of directors of the Association discovered
numerous design and workmanship defects related to the balconies, masonry, and garage. The
Association hired an engineering company that confirmed the presence of design and
workmanship defects, and the Association filed a lawsuit against SCDT on September 4, 2008.
The complaint included claims of breach of the implied warranty of fitness and habitability,
breach of fiduciary duty, and negligence. The complaint alleged that SCDT knew or should have
known that the defects existed; SCDT failed to have any of the defects fixed; and SCDT failed to
disclose the defects to buyers.
¶9 B. Third-Party Action
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¶ 10 On March 9, 2009, SCDT entered into a written tolling agreement with Fitzgerald and
Linn-Mathes that tolled "any and all claims or causes of action" between the parties that "had not
expired as of the date of this [tolling] Agreement."
¶ 11 On June 21, 2011, SCDT filed a third-party complaint against Fitzgerald and Linn-
Mathes. The third-party complaint alleged claims for breach of contract and, alternatively,
implied indemnity against Fitzgerald, and claims for breach of contract, breach of implied
warranty of good workmanship, express indemnity and, alternatively, implied indemnity against
Linn-Mathes.
¶ 12 C. Motions to Dismiss
¶ 13 On July 27, 2011, Fitzgerald filed a motion to dismiss the third-party complaint pursuant
to section 2-619.1 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-619.1 (West 2008)).
In its motion, Fitzgerald argued that SCDT's third-party complaint was time-barred or, in the
alternative, SCDT's implied indemnity claim had to be dismissed for failing to state a cause of
action pursuant to section 2-615 of the Code. 735 ILCS 5/2-615 (West 2008). Fitzgerald argued
in the motion that all causes of action SCDT had against it accrued on the date of substantial
completion, which occurred on May 16, 2003 for the first tower and on October 11, 2004 for the
second tower. Applying those accrual dates to the four-year statute of limitations applicable to
construction-related activity (735 ILCS 5/13-214(a) (West 2008)), Fitzgerald argued that SCDT's
claims against it were time-barred because Fitzgerald and SCDT did not enter into the tolling
agreement until March 9, 2009, which was more than four years following the latest possible
date on which substantial completion could have occurred, October 11, 2004. Fitzgerald
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attached to its motion to dismiss an affidavit of Michael DeRouin, president of Fitzgerald and
project manager of Fitzgerald at the time of the development project, stating that substantial
completion had occurred on May 16, 2003 and October 11, 2004. The affidavit incorporated a
letter and a certificate of substantial completion, which indicated the same dates of substantial
completion, May 16, 2003 and October 11, 2004, respectively.
¶ 14 On December 5, 2011, Linn-Mathes also filed a motion to dismiss pursuant to section 2-
619(a)(5) of the Code (735 ILCS 5/2-619(a)(5) (West 2008)), or in the alternative, to dismiss
pursuant to section 2-615 of the Code (735 ILCS 5/2-615 (West 2008)). Linn-Mathes also
argued that under the provisions of the cause of action accrual agreement any claims SCDT had
against it accrued on the date of substantial completion which occurred in May 2003 and October
2004. As such, Linn-Mathes argued: (1) the claims against it were barred by the four-year
statute of limitations applicable to construction matters (735 ILCS 5/13-214(a) (West 2008)) and,
as a result, all claims were time-barred when it entered into the cause of action tolling agreement
in 2009; (2) SCDT failed to verify the third-party complaint; and (3) the claims alleged against
Linn-Mathes failed to state a cause of action. Linn-Mathes also attached to its motion the
affidavit of Michael DeRouin, which was identical to the affidavit attached to Fitzgerald's
motion to dismiss.
¶ 15 On December 27, 2011, SCDT filed its response. SCDT disputed the date of substantial
completion and argued that the date of substantial completion occurred in 2006. SCDT attached
the affidavit of Vincent Forgione to its response. In the affidavit, Forgione testifies that he "has
not been able to locate certificates of substantial completion for Phase I and Phase II of the
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Project," but that based on his "experience" and "SCDT's schedule of contractor draw payments,"
"[b]ecause substantial completion typically occurs after the general contractor has completed the
majority of the work, based on the contractor draw schedule, substantial completion most likely
occurred in early 2006." SCDT also argued that it was unreasonable to interpret the contract to
apply the contract accrual agreement to the implied indemnity claims because the limitation
period applicable to the implied indemnity claims could expire before SCDT even knew it had a
claim for implied indemnity. SCDT also argued that the express indemnity claim against Linn-
Mathes was subject to the 10-year statute of limitations applicable to written contracts.
¶ 16 Fitzgerald filed a motion to strike the affidavit of Vincent Forgione, and Linn-Mathes
joined in Fitzgerald's motion. The motion argued that Forgione was not qualified to give the
opinions in the affidavit, that his use of the term "substantial completion" was improper because
his definition differed from the definition of "substantial completion" specifically contained
within the contracts, and that his opinions within the affidavit were irrelevant and immaterial to
the matters at issue.
¶ 17 D. Trial Court's Ruling
¶ 18 On March 8, 2012, the trial court initially denied Linn-Mathes' motion to dismiss, finding
that the private contract limitations period that the parties had agreed upon in their respective
contracts did not apply in this case because this was a third-party action. The court made a
similar ruling with respect to Fitzgerald's motion to dismiss and denied Fitzgerald's motion to
strike the affidavit of Vincent Forgione.
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¶ 19 On April 12, 2012, Fitzgerald filed a motion seeking interlocutory appeal pursuant to
Illinois Supreme Court Rule 308 (eff. Feb. 26, 2010) regarding the trial court's denial of the
motions to dismiss. On April 24, 2012, at the hearing for Fitzgerald's motion seeking
interlocutory appeal, the trial court sua sponte decided to consider Fitzgerald's motion as a
motion to reconsider and provided SCDT an opportunity to file a supplemental brief.
¶ 20 On June 20, 2012, the trial court entered a written order reconsidering its March 8, 2012
order, and made a finding that the private statute of limitations accrual period in the parties’
contracts applied to the third-party action. Therefore, because the court applied the four-year
statute of limitations applicable to construction-related matters to the third-party claims, and
determined that the date of substantial completion occurred on October 11, 2004 at the latest,
thus triggering the running of the statute of limitations, SCDT's third-party claims against Linn-
Mathes and Fitzgerald had to be dismissed with prejudice because they were time-barred.
Specifically, the court stated:
"After reconsideration, the Court finds that Guzman is inapposite.
Guzman addresses when the cause of action accrues for a claim of
indemnity. The contract at issue in this case expressly addresses
accrual. It states that causes of action between the parties accrue
upon the substantial completion of the work. The contractual
provision at issue contains no limiting language as to what causes
of action might be encompassed. This language is sufficiently
broad to include a claim for indemnity. In Guzman, the court was
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dealing with section 13-214 and interpreting how the discovery
rule applied as to third party indemnity claims. It found that the
discovery rule tolled the statute of limitation for indemnity action
because the third party claim could not be determined before
liability was established [on] the underlying claim. The
contractual provision at issue here expressly eliminates the effect
of the discovery rule. Instead of accruing at the point of discovery
as most causes of action in Illinois do, the parties in this case
pegged accrual of causes of action to the point of substantial
completion."
¶ 21 On July 9, 2012, the trial court modified its June 20, 2012 order to state that "there was
no just reason for delaying the appeal of this order pursuant to Illinois Supreme Court Rule
304(a)," and SCDT timely filed a notice of appeal.
¶ 22 II. ANALYSIS
¶ 23 In this appeal, we consider whether the trial court erred in dismissing SCDT's third-party
complaint against Linn-Mathes and Fitzgerald. Accordingly, we must determine: (1) whether the
trial court erred when it determined the accrual agreements in the SCDT/Linn-Mathes and
SCDT/Fitzgerald contracts are enforceable on third-party claims; (2) whether in ruling on the
motion to dismiss the trial court improperly resolved a disputed issue of fact when it determined
the dates of substantial completion; and (3) whether the 4-year limitations period applicable to
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construction-related activity or the 10-year limitations period applicable to written contracts
applies to an express indemnity agreement contained within a construction contract.
¶ 24 Our review of a section 2-619 motion to dismiss (735 ILCS 5/2-619 (West 2008)) is de
novo. Porter v. Decatur Memorial Hospital, 227 Ill. 2d 343, 352 (2008).
¶ 25 A. Contract Accrual Agreements
¶ 26 We will first consider whether the contract accrual provisions apply to third-party claims
between the contracting parties. SCDT’s contracts with both Linn-Mathes and Fitzgerald
contain a cause of action accrual agreement that provides that all causes of action accrue on the
date of substantial completion of the project. The accrual agreement appears in both the
SCDT/Fitzgerald contract and the SCDT/Linn Mathes contract, with minor differences. SCDT
argues that the accrual provisions do not apply to third-party claims and that its third-party
claims against Linn-Mathes and Fitzgerald did not accrue until it was served with summons by
the plaintiff in the underlying case. See Guzman v. C.R. Epperson Construction, Inc., 196 Ill. 2d
391, 401 (2001). SCDT further argues it was unreasonable for the trial court to enforce the
accrual agreement contained in the contracts because enforcing the accrual agreement clauses
contained in the contracts at issue could result in a situation where the limitations period
applicable to implied indemnity claims would expire before an actual case of implied indemnity
had arisen. For the reasons that follow, we disagree with this argument and find that the trial
court properly enforced the contract accrual agreement provisions at issue here.
¶ 27 The relevant language in the SCDT/Fitzgerald contract states:
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"8.3 Causes of actions between the parties to this
Agreement pertaining to acts or failures to act shall be deemed to
have accrued and the applicable statutes of limitations shall
commence to run not later than either the date of Substantial
Completion for acts or failures to act occurring prior to Substantial
Completion, or the date of issuance of the final Certificate for
Payment for acts or failures to act occurring after Substantial
Completion."
The relevant language in the SCDT/Linn-Mathes contract states:
"As to acts or failures to act occurring prior to the relevant
date of substantial completion, any applicable statute of limitations
shall commence to run and any alleged cause of action shall be
deemed to have accrued in any and all events not later than such
date of Substantial Completion."
¶ 28 "It is well settled that a contractual limitation requiring suit to be brought within a
specific period of time is valid if reasonable even though the period provided by general statute
of limitations *** is longer." Florsheim v. Travelers Indemnity Co. of Illinois, 75 Ill. App. 3d
298, 303 (1979). A limitation period is enforceable even where it may bar a meritorious claim.
See id. at 304. Further, "'parties to a contract may agree upon a shortened contractual limitations
period to replace a statute of limitations, so long as it is reasonable.'" Federal Insurance Co. v.
Konstant Architecture Planning, Inc., 388 Ill. App. 3d 122, 126 (2009) (quoting Medrano v.
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Production Engineering Co., 332 Ill. App. 3d 562, 566 (2002)). Illinois public policy strongly
favors the freedom to contract. Stevens v. Rooks Pitts & Poust, 289 Ill. App. 3d 991, 998 (1997).
¶ 29 In Konstant Architecture Planning, Inc., the court upheld a contract clause regarding an
accrual time for all statutes of limitations that is nearly identical to the one at issue here. In
Konstant Architecture Planning, Inc., the accrual clause agreed upon by the parties stated:
"'Causes of action between the parties to this Agreement pertaining
to acts or failures to act shall be deemed to have accrued and the
applicable statute of limitations shall commence to run not later
than either the date of Substantial Completion, or the date of
issuance of the final Certificate for Payment for acts or failures to
act occurring after Substantial Completion.'" Konstant
Architecture Planning, Inc., 388 Ill. App. 3d at 124.
In construing these contract terms, the Konstant Architecture Planning, Inc. court noted that the
court's "primary objective is to give effect to the intent possessed by the parties at the time they
entered the agreement." Id. at 128. Accordingly, the Konstant Architecture Planning, Inc. court
found the above accrual clause to be clear and unambiguous in that the parties contracted to
create a date of accrual for all statutes of limitations that effectively eliminated the discovery
rule. Id.
¶ 30 Here, like in Konstant Architecture Planning, Inc., we find that the terms of accrual
agreement contained within both contracts were clear and unambiguous. Where there is no
ambiguity in the contract terms, the parties' intent must be drawn from the language of the
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written instrument itself. Quake Construction, Inc. v. American Airlines, Inc., 141 Ill. 2d 281,
288 (1990). SCDT, Linn-Mathes and Fitzgerald, who were sophisticated parties entering into
contracts involving more than $34 million in construction work, clearly intended to create an
accrual date for all statutes of limitations in an effort to limit liability and eliminate the effect of
the discovery rule. Had the parties intended to limit this clause in any way, they could have done
so. However, as plainly written, the clause applies to any and all claims. Thus, the plain
language of the clause in each contract makes it clear that the parties intended to limit potentially
unlimited liability and eliminate the discovery rule by creating a fixed accrual limitations date for
any and all causes of action, which began to run on the date of substantial completion.
¶ 31 SCDT argues that enforcing the accrual limitations clause in each of the contracts in this
case will violate public policy as it had been found to do so in "cases dealing with automobile
insurance policies that set the accrual date for uninsured or underinsured motorist claims at the
time the accident occurred" and "cases involving employee benefit plans that set the accrual date
at the date the claim for benefits was filed." While courts will not enforce an agreement that is
contrary to public policy, a contract should not be deemed illegal unless it is expressly contrary
to the law or public policy. American Country Insurance Co. v. Cline, 309 Ill. App. 3d 501, 506
(1999). The laws and public policy of the State of Illinois permit freedom of contracting
between competent parties. Id. In addition, construction of a contact that renders the agreement
enforceable rather than void is preferred. Id. at 507. As a result, the issue as to whether a
contract is contrary to public policy depends on the facts and circumstances of the case. Id.
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¶ 32 We do not find the public policy concerns recognized in uninsured/underinsured
automobile policy claims and employee benefits claims have any bearing in this case where
sophisticated parties contracted to and agreed to terms that trigger the running of all statutes of
limitations on the date of substantial completion.1 The cases cited by SCDT all involve contracts
between sophisticated and unsophisticated parties. Further, the terms of the contract at issue in
each of the cases cited by SCDT were not negotiated and agreed upon by both parties, rather they
were offered to the unsophisticated party in a take it or leave it manner. Here, as stated above,
the contract terms regarding the accrual date for all claims were bargained for and agreed upon
by sophisticated parties engaged in a multi-million dollar construction project. Accordingly, we
find no good reason to disturb these contract provisions that were bargained for by sophisticated
parties, and affirm the trial court's finding enforcing the contractual accrual date in both the
SCDT/Fitzgerald and SCDT/Linn-Mathes contracts.2
¶ 33 B. Date of Substantial Completion
1
Of note, none of the cases cited by SCDT state, or even suggest, that it is against public
policy for two sophisticated parties to agree to contract terms that eliminate the effect of the
discovery rule. In fact, as stated above, our courts have specifically found that this is permitted.
See Konstant Architecture Planning, Inc., 388 Ill. App. 3d at 126.
2
We also find that SCDT's reliance on Guzman in this argument misplaced, as the facts
of Guzman dealt with the application of the default statute of limitations, which incorporated the
discovery rule, and not a modified statute of limitations that sets a trigger date for all claims, like
the one we are presented with here.
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¶ 34 SCDT argues that the trial court erred in determining that substantial completion, the
contract trigger date for the running of any statute of limitations, occurred on May 16, 2003 and
October 11, 2004. SCDT argues that it submitted a rebuttal affidavit in its response to the
motion to dismiss and offered testimony that suggests that substantial completion occurred
sometime in early 2006, thereby creating a genuine issue of material fact as to the date of
substantial completion, i.e., the contract accrual date. If the cause of action accrued in 2006,
SCDT had viable breach of contract claims against Linn-Mathes and Fitzgerald at the time the
tolling agreement was signed in March 2009. As such, SCDT argues the trial court improperly
decided a material question of fact when it determined the date of substantial completion of the
two towers to be May 16, 2003 and October 11, 2004 respectively.
¶ 35 The purpose of a motion to dismiss under section 2-619 of the Code is to dispose of
issues of law and easily proved issues of fact at the outset of a case. Zedella v. Gibson, 165 Ill.
2d 181, 185 (1995); 735 ILCS 5/2-619(c) (West 2008). When ruling on a section 2-619 motion,
the court admits as true all well-pleaded facts and the legal sufficiency of the complaint. King v.
City of Chicago, 324 Ill. App. 3d 856, 859 (2001). If grounds for dismissal do not appear on the
face of the pleading attacked, the motion shall be supported by affidavit, and the nonmoving
party has the opportunity to file a counteraffidavit. 735 ILCS 5/2-619(c) (West 2008). The
relevant question is whether there exists a genuine issue of material fact precluding dismissal, or
absent an issue of material fact, whether dismissal is proper as a matter of law. Fuller Family
Holdings, LLC v. Northern Trust Co., 371 Ill. App. 3d 605, 613 (2007).
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¶ 36 Here, Fitzgerald and Linn-Mathes attached to their motions to dismiss the affidavit of
Michael DeRouin, the president of Fitzgerald and the project manager of Fitzgerald during the
development project. In his affidavit, DeRouin testifies that he was "directly responsible for the
architectural services provided" during the development project. Further, he testifies in his
affidavit that the first tower was substantially completed on May 16, 2003 and the second tower
was substantially completed on October 11, 2004. In support of these two dates, DeRouin
attaches a letter that was written to SCDT on May 16, 2003 indicating that substantial
completion had occurred with respect to the first tower, and a certificate of substantial
completion that is signed by him and dated October 11, 2004 with respect to the second tower.
¶ 37 In SCDT's response to the motions to dismiss, it attached a counteraffidavit of Vincent
Forgione. Forgione is an employee of Frontier Management Corporation, which is an affiliate of
SCDT. Forgione states in his affidavit that he "has not been able to locate certificates of
substantial completion for Phase I and Phase II of the Project," but that based on his "experience"
and "SCDT's schedule of contractor draw payments," "[b]ecause substantial completion typically
occurs after the general contractor has completed the majority of the work, based on the
contractor draw schedule, substantial completion most likely occurred in early 2006." Thus,
Forgione uses the date of the final contractor draw payment, December 2006, to predict when
"the majority of the work" was completed to then estimate that substantial completion occurred
in early 2006.
¶ 38 Here, all parties entered into contracts stating that the date of substantial completion
would be determined by the architect (Fitzgerald) and would be reflected in a certificate of
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substantial completion. DeRouin's affidavit states that Fitzgerald determined that the first tower
was substantially completed on May 16, 2003, and the second tower was substantially completed
on October 11, 2004. In support of these two dates, DeRouin also attached a letter that was
written to SCDT on May 16, 2003 indicating that substantial completion had occurred with
respect to the first tower, and a certificate of substantial completion that is signed by him and
dated October 11, 2004 with respect to the second tower. As a result, Forgione's affidavit, which
estimates when substantial completion occurred based upon draw payments and when the final
draw payment was made, does not contradict the testimony of DeRouin who testifies that
substantial completion, pursuant to the contracts signed by the parties, was achieved on May 16,
2003 and October 11, 2004. Safeco Insurance Co. v. Jelen, 381 Ill. App. 3d 576, 583 (2008)
(where facts asserted in an affidavit are not refuted by counteraffidavit, the court will take those
facts as true notwithstanding any contrary unsupported allegations in the plaintiff's pleadings).
Further, any evidence regarding when substantial completion may have occurred that does not
comport with the terms that were contracted to by the parties is not material and cannot create a
material issue of fact. Therefore, because we find that the Forgione affidavit did not contradict
the evidence stated in the DeRouin affidavit and did not raise a genuine issue of material fact, it
follows that there is no genuine issue of material fact and the trial court properly concluded the
dates of substantial completion occurred on May 16, 2003 and October 11, 2004. See
Bloomingdale State Bank v. Woodland Sales Co., 186 Ill. App. 3d 227, 232 (1989) (where there
are no genuine issues of material fact, the court may grant a section 2-619 motion to dismiss).
¶ 39 C. Statute of Limitations on SCDT's Claims
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¶ 40 Since we have concluded that the trial court properly enforced the cause of action
accrual agreement and also properly determined the date of substantial completion of the project
to be May 16, 2003 and October 11, 2004, we can now determine whether the statute of
limitations expired on SCDT's claims against Linn-Mathes and Fitzgerald.
¶ 41 a. Implied Indemnity Claims and Breach of Contract Claims
¶ 42 With respect to the implied indemnity claims, the applicable statute of limitations states
that a party has two years from being served with process in the underlying action or two years
from the date the party knew or reasonably should have known of an act or omission giving rise
to the action for indemnity, whichever period expires later. 735 ILCS 5/13-204(b) (West 2008).
However, in this case, because of the existence of the cause of action accrual agreement, the two-
year period began to run on the date of substantial completion. Because substantial completion
occurred at the latest on October 11, 2004, the limitation period on SCDT's claims for implied
indemnity against the third-party defendants expired on October 11, 2006, well in advance of the
March 9, 2009 tolling agreement, and are therefore time-barred. With respect to the breach of
contract claims, which the parties agreed were governed by the four-year statute of limitations
period applicable to construction-related activity, those claims are also time-barred as the statute
of limitation on those claims expired on October 11, 2008, which again was prior to the March 9,
2009 tolling agreement. Accordingly, we affirm the judgment of the trial court dismissing the
breach of contract and implied indemnity claims against the third-party defendants as being time-
barred.
¶ 43 b. Express Indemnity Claim
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¶ 44 SCDT argues that its express indemnity claim against Linn-Mathes was improperly
dismissed by the trial court because it was governed by the 10-year statute limitations applicable
to written contracts rather than the 4-year statute limitations applicable to construction matters.
Section 13-206 of the Code states:
"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***." 735 ILCS 5/13-206 (West 2008).
¶ 45 Linn-Mathes argues that the trial court properly determined that its express promise to
indemnify SCDT for breaches related to the construction work is governed by the four-year
statute of limitations applicable to construction-related activity, and that the trial court properly
dismissed SCDT's claim as time-barred under that statute. 735 ILCS 5/13-214(a) (West 2008).
Section 13-214(a) of the Code states:
"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
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known of such act or omission. Notwithstanding any other
provision of law, contract actions against a surety on a payment or
performance bond shall be commenced, if at all, within the same
time limitation applicable to the bond principal." 735 ILCS 5/13-
214(a) (West 2008).
¶ 46 We agree with SCDT that the 10-year statute of limitations applies to its express
indemnity claim. Our decision is based upon our supreme court's ruling in Travelers Casualty &
Surety Co. v. Bowman, 229 Ill. 2d 461 (2008), which found that a written agreement to
indemnify was not one of the activities protected under the 4-year statute of limitations
applicable to construction matters and was instead subject to the 10-year statute of limitations
applicable to written contracts. See 735 ILCS 5/13-206 (West 2008).
¶ 47 In Travelers, Travelers Casualty & Surety Company (Travelers) filed suit against James
A. Bowman and Barbara B. Bowman, the president and sole shareholder, respectively, of a metal
working firm, Carlson, for breach of a written indemnity agreement relating to performance
bonds. Travelers, 229 Ill. 2d at 464. The Bowmans became liable to Travelers under the
indemnity agreement when Carlson failed to perform certain construction work. Id. Our
supreme court found that the 4-year statute of limitations did not apply to Travelers' claim and
that the 10-year statute of limitations applied instead. Id. at 465. In coming to this conclusion,
the Court stated that "'[t]he determination of the applicable statute of limitations is governed by
the type of injury at issue, irrespective of the pleader's designation of the nature of the action.'"
Travelers, 229 Ill. 2d at 466 (quoting Armstrong v. Guigler, 174 Ill. 2d 281, 286 (1996)). The
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court further stated that the "essence of any contractual action is found in the agreement's
promissory language" and "[a]s long as the gravamen of the complaint rests on the
nonperformance of a contractual obligation, section 13-206 applies." (Internal quotation marks
omitted.) Id. at 467 (quoting Armstrong, 174 Ill. 2d at 291). In finding that the type of injury at
issue in Travelers was contract related rather than construction related, the court stated:
"Here, the liability at issue emanates not from construction-
related activity but, rather, from the breach of a contractual
obligation to indemnify. ***
*** The Bowmans' liability to Travelers does not, however,
emanate from Carlson's breach of the construction contracts.
Rather, the Bowmans' liability emanates from the refusal to
perform their obligation of indemnification under the written
indemnification agreement after claims were made against the
underlying performance bonds." Travelers, 229 Ill. 2d at 469.
Further, in Armstrong, which was relied upon in Travelers, the court stated:
"The essence of any contractual action is found in the agreement's
promissory language. Thus, it is only where liability emanates
from a breach of a contractual obligation that the action may be
fairly characterized as 'an action on a written contract.' The focus
of the inquiry is on the nature of the liability and not on the nature
of the relief sought." Armstrong, 174 Ill. 2d at 291.
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In sum, the Travelers court concluded that "[b]ecause the claim at issue is based on a breach of
express indemnification provisions in a written agreement, it is subject to the 10-year limitations
period in section 13-206." Travelers, 229 Ill. 2d at 476.
¶ 48 Here, like in Travelers, the express indemnity claim against Linn-Mathes arose from
Linn-Mathes' refusal to perform its obligation to indemnify SCDT pursuant to an express
promise to indemnify SCDT contained in the contract between the parties. Because the nature of
the claim was Linn-Mathes' refusal to indemnify, any potential liability arises out of Linn-
Mathes' failure to indemnify SCDT rather than any acts or omissions relating to construction-
related activity.
¶ 49 Further, our supreme court has held that the four-year statute of limitations relating to
construction matters protects only certain enumerated activities, specifically, "the design,
planning, supervision, observation or management of construction." (Internal quotation marks
omitted.) People ex rel. Skinner v. Hellmuth, Obata & Kassabaum, Inc., 114 Ill. 2d 252, 261
(1986); see 735 ILCS 5/13-214(a) (West 2008); see also Konstant Architecture Planning, Inc.,
388 Ill. App. 3d at 125-26 (the four-year statute of limitations applicable in construction-related
activities, "applies only if the defendant is being sued for its act or omission of one of the
enumerated construction-related activities"). Indemnification is not one of those enumerated
activities protected under the four-year statute of limitations. As such, section 13-214(a) does
not protect Linn-Mathes' actions or inactions as an indemnitor. Therefore, the 10-year statute of
limitations applicable to written contracts applies to SCDT's express indemnity claim against
Linn-Mathes.
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¶ 50 Linn-Mathes argues that the four-year statute of limitations governing construction
activity should apply here because the express indemnity clause at issue is contained within the
construction contract and is not its own separate contract. However, we see no requirement that
express indemnity clauses must be contained in a separate written document in order to apply the
10-year statute of limitations for written contracts. To the contrary, as made clear in Travelers,
"it is the nature of the plaintiff's injury rather than the nature of the facts from which the claim
arises which should determine which limitations period should apply." (Internal quotation marks
omitted.) Travelers, 229 Ill. 2d at 466 (quoting Armstrong, 174 Ill. 2d at 286-87). The nature of
SCDT's claim against Linn-Mathes is indemnification, regardless of the fact that the
indemnification clause is contained within the overall construction contract.
¶ 51 Further, while Linn-Mathes also argues that the holding in Guzman requires the four-year
construction statute of limitations to be applied to the express indemnity claim at issue here, we
cannot see how the holding in Guzman is applicable. Guzman only dealt with implied indemnity
claims and not an express indemnity claim like the one at issue in this case. See Guzman, 196
Ill. 2d 391. As pointed out in Travelers, the Guzman court "was not presented with the issue of
whether section 13-204 applied to an express indemnity agreement and it did not, therefore,
examine that issue." Travelers, 229 Ill. 2d at 476. Further, the Guzman court ultimately found
that section 13-204 applied to the implied indemnity claims in that case, and our courts have held
that "[s]ections 13-204(a) and 13-204(b) are not applicable when the basis for indemnity rests on
a written indemnity agreement." Travelers, 229 Ill. 2d at 473. Thus, because this appeal deals
with an express indemnity claim, which was not addressed in Guzman and which is an entirely
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different animal than the implied indemnity claims that were addressed in Guzman, Guzman is
inapplicable here.
¶ 52 Accordingly, we find that SCDT's express indemnity claim against Linn-Mathes must be
governed by the 10-year statute of limitations applicable to written contracts because the nature
of that claim is for the failure to indemnify rather than any act or omission relating to
construction activity. We therefore reverse the trial court's finding that the four-year statute of
limitations applies to SCDT's express indemnity claim against Linn-Mathes and the dismissal of
that claim. Since less than 10 years elapsed between the dates of substantial completion (May
2003 and October 2004) and the time the statute of limitations tolling agreement was signed in
2009 and the third-party complaint was filed in 2011, we reverse the dismissal of the express
indemnity claim as time-barred and remand this case to the trial court for further proceedings on
SCDT's express indemnity claim against Linn-Mathes.
¶ 53 III. CONCLUSION
¶ 54 For the above reasons, we affirm the trial court's enforcement of the contractual accrual
agreement and the dismissal of the implied indemnity and breach of contract claims against the
third-party defendants because they are time-barred; we reverse trial court's dismissal of the
express indemnity claim against Linn-Mathes and this case is remanded for further proceedings
on that claim only.
¶ 55 Affirmed in part and reversed in part; cause remanded.
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