2314 Lincoln Park West Condominium Ass'n v. Mann, Gin, Ebel & Frazier, Ltd.

• Decision Date: 23 May 1990
• Docket Number: No. 68146,68146
• Citation: 144 Ill.Dec. 227,555 N.E.2d 346,136 Ill.2d 302
• Parties: , 144 Ill.Dec. 227, 58 USLW 2716 2314 LINCOLN PARK WEST CONDOMINIUM ASSOCIATION, Appellee, v. MANN, GIN, EBEL & FRAZIER, LTD., et al. (Mann, Gin, Ebel & Frazier, Ltd., Appellant).
• Court: Illinois Supreme Court

Page 346

555 N.E.2d 346

136 Ill.2d 302, 144 Ill.Dec. 227, 58

USLW 2716

2314 LINCOLN PARK WEST CONDOMINIUM ASSOCIATION, Appellee, v. MANN, GIN, EBEL & FRAZIER, LTD., et al. (Mann, Gin, Ebel &

Frazier, Ltd., Appellant).

No. 68146.

Supreme Court of Illinois.

May 23, 1990.

Lord, Bissell, & Brook, Chicago (Maynerd I. Steinberg, Hugh C. Griffin and Nancy Shaw, of counsel), for appellant.

Herbert Beigel, Lewis S. Sandler and Stephen D. Sharp, Beigel & Sandler, Ltd., Chicago, for appellee.

Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago (D. Kendall Griffith, Kevin R. Sido and Stephen D. Hurst, of counsel), for amici curiae Consulting Engineers Council of Illinois et al.

Justice MILLER delivered the opinion of the court:

The plaintiff, Conservatory Condominium Association, brought the present action in the circuit court of Cook County seeking an award of damages for the cost of making certain repairs to the building in which the association members' condominium units are located. The circuit judge dismissed without prejudice all but one count of the plaintiff's second amended complaint. The remaining count sought recovery on a negligence theory from the architectural firm responsible for the building's design, and the judge certified, for purposes of a permissive interlocutory appeal pursuant to Supreme Court Rule 308 (107 Ill.2d R. 308), a question concerning the availability of such a cause of action. The appellate court denied the defendant's application for review of the certified question. We subsequently allowed the defendant's petition for leave to appeal (107 Ill.2d R. 315(a)).

The plaintiff, Conservatory Condominium Association, is an association of the owners of the 39 condominium units located at 2314 Lincoln Park West in Chicago. (The plaintiff advises us that it was erroneously identified in the initial complaint as 2314 Lincoln Park West Condominium Association.) The plaintiff brought the present action against the following parties: Conservatory Associates, a limited partnership, which had responsibility for the development, design, construction, and sale of the condominium project; Conservatory, Inc., the general partner of Conservatory Associates; First Property Management Corporation, which acted as the manager of the property after its construction; Equity Realty, Inc., which acted as the sales agent for the property, and which allegedly controlled both Conservatory, Inc., and First Property; Mayfair Construction Company, the general contractor on the project and a limited partner of Conservatory Associates; Esko & Young, Inc., the roofing contractor for the project; and Mann, Gin, Ebel & Frazier, Ltd. (Mann), the architectural firm that designed the project and certified its completion.

On a motion to dismiss, all well-pleaded facts and inferences are accepted as true. (Szajna v. General Motors Corp. (1986), 115 Ill.2d 294, 298-99, 104 Ill.Dec. 898, 503 N.E.2d 760; Acorn Auto Driving School, Inc. v. Board of Education of Leyden High School District No. 212 (1963), 27 Ill.2d 93, 96, 187 N.E.2d 722.) According to the plaintiff's second amended complaint, filed February 16, 1988, construction of the property at issue was originally begun in 1973 by a developer unrelated to any of the present parties. The initial developer encountered financial problems, and construction was halted in 1975, when the project was about 65% complete. In 1979, Equity Realty, Inc., decided to acquire the property, finish the project, and sell residential units in the building as condominiums. Equity Realty then caused the formation of Conservatory Associates, Conservatory, Inc., and First Property Management Corporation to develop and manage the property. The developers subsequently entered into contracts with defendants Mayfair Construction, Mann, and Esko. Mayfair agreed to act as general contractor for the project and also became a limited partner in Conservatory Associates. Mann entered into an agreement with Conservatory Associates to serve as architect for the project, and Mann developed plans and design specifications for the work and certified the final completion of the project. Esko served as the roofing contractor on the project. Construction and development continued from 1980 to 1986, with sales of the units beginning in 1981. It appears that First Property managed the building until October 1984, when the unit owners' association assumed control pursuant to the Condominium Property Act (see Ill.Rev.Stat.1987, ch. 30, pars. 301 through 331).

The plaintiff alleges that numerous defects in the design and construction of the project had become known to the unit owners by late 1986. According to the second amended complaint, windows and glass doors were loose, the roof leaked, the heating and cooling systems and other utilities were inadequate and did not function property, and the garage was settling. Basing its action on both contract and tort theories, the plaintiff requested compensatory damages for the cost of repairing those problems. The plaintiff brought claims for breach of express and implied warranties against Equity Realty, Mayfair, Conservatory Associates, and Conservatory, Inc.; for breach of express warranty against Esko; and for breach of contract against Mayfair and Mann. (The plaintiff did not assert a contract claim against First Property Management.) The plaintiff brought claims for negligence against all the defendants.

The defendants moved to dismiss the second amended complaint pursuant to section 2-615 of the Code of Civil Procedure (Ill.Rev.Stat.1987, ch. 110, par. 2-615). The circuit judge granted the defendants' motions with respect to the contract counts and dismissed those claims for various reasons. The judge also dismissed all but one of the plaintiff's tort counts, relying on this court's holding in Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443, that damages for economic loss may not be recovered in negligence. The plaintiff was granted leave to file a third amended complaint. The circuit judge refused to strike the plaintiff's negligence claim against Mann, the architectural firm, and the court issued an order on August 16, 1988, certifying the following question for purposes of a permissive interlocutory appeal under Supreme Court Rule 308:

"Should there be an exception to the rule set forth in Moorman which would permit Plaintiffs seeking to recover purely economic losses due to defeated expectations of a commercial bargain to recover from an architect or engineer in tort?"

The appellate court denied Mann's application requesting leave to appeal the question certified by the circuit judge. We later allowed Mann's petition for leave to appeal to this court pursuant to Supreme Court Rule 315(a) (107 Ill.2d R. 315(a)). Amici curiae, the Illinois Council of the American Institute of Architects, the Consulting Engineers Council of Illinois, the Illinois Society of Professional Engineers, and the Illinois Architect-Engineer Council, have submitted briefs in Mann's behalf. See 107 Ill.2d R. 345.

In Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443, this court held that recovery generally cannot be had in tort for what is termed purely economic loss. The plaintiff in that case had purchased a grain storage tank from the defendant manufacturer. A crack developed in the tank some years later, and the plaintiff then sued the manufacturer, seeking damages for the cost of repairing the tank and for the loss of its use. The plaintiff based its action on the tort theories of strict liability, negligence, and misrepresentation and on the contract theory of breach of express warranty.

Central to the court's discussion in Moorman are the appropriate characterization of economic loss and the recognition of the distinct functions served by the regimes of tort and contract. Regarding the term "economic loss," the court stated:

" 'Economic loss' has been defined as 'damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits--without any claim of personal injury or damage to other property * * * ' [citation] as well as 'the diminution in the value of the product because it is inferior in quality and does not work for the general purposes for which it was manufactured and sold.' [Citation.] These definitions are consistent with the policy of warranty law to protect expectations of suitability and quality." (Moorman, 91 Ill.2d at 82, 61 Ill.Dec. 746, 435 N.E.2d 443.)

In Moorman, the court concluded that the plaintiff in that case was seeking compensation for economic loss. The court held that such damages are not recoverable under the tort theories of strict liability, negligence, or innocent misrepresentation.

The court cited several considerations as militating against allowing recovery of damages for economic loss in strict liability. The court believed that the relationships between suppliers and consumers of goods are more appropriately governed by contract law than by tort law, and referred to the large statutory apparatus, such as the Uniform Commercial Code, applicable to the field of sales. The court also observed that the rules of warranty serve to limit the potentially far-reaching consequences that might otherwise result from imposing tort liability for disappointed commercial or consumer expectations; the court noted, moreover, that contracting parties are free to bargain over the terms of their warranties. Moorman, 91 Ill.2d at 78-80, 61 Ill.Dec. 746, 435 N.E.2d 443.

In addition, the court rejected the notion that there is something arbitrary in allowing recovery in strict liability only when physical harm or personal injury results. Quoting Justice Traynor's opinion for the court in Seely v. White Motor Co. (1965), 63 Cal.2d 9, 18, 45 Cal.Rptr. 17, 23, 403 P.2d 145, 151, the court in Moorm...