Am. Family Mut. Ins. Co. v. Plunkett

• Decision Date: 27 June 2014
• Docket Number: No. 1–13–1631.,1–13–1631.
• Parties: AMERICAN FAMILY MUTUAL INSURANCE COMPANY, as Subrogee of Michael P. McGrath, Jr., Plaintiff–Appellee, v. Patrick PLUNKETT, Individually; and Patrick Plunkett Architectural Design, Ltd., Defendants–Appellants (Northern Heritage Builders, L.L.C., Defendant).
• Court: United States Appellate Court of Illinois

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AMERICAN FAMILY MUTUAL INSURANCE COMPANY, as Subrogee of Michael P. McGrath, Jr., Plaintiff–Appellee
v.
Patrick PLUNKETT, Individually; and Patrick Plunkett Architectural Design, Ltd., Defendants–Appellants (Northern Heritage Builders, L.L.C., Defendant).

No. 1–13–1631.

Appellate Court of Illinois, First District, Fifth Division.

June 27, 2014.

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Eugene S. Kraus and Gregory J. Bird, both of Scott & Kraus, LLC, of Chicago, for appellants.

William J. Sneckenberg and Emilie G. Kaplan, both of Sneckenberg, Thompson & Brody, LLP, of Chicago, for appellee.

OPINION

Presiding Justice GORDON delivered the judgment of the court, with opinion.

¶ 1 The instant interlocutory appeal arises from the attempts of plaintiff American Family Mutual Insurance Company (American Family) to file suit against the defendant builders¹ and architects in its capacity as subrogee of Michael P. McGrath, Jr., the owner of a home designed and built by defendants. McGrath filed a claim with American Family, his insurer, after his home sustained water damage, and, after a lawsuit in federal court, American Family settled the claim for approximately $1.1 million; after paying McGrath, American Family asked McGrath to execute a written assignment to the extent of its payment, but McGrath failed to respond.

¶ 2 American Family then filed suit against defendants for their negligence in causing the damage. Since it was not in possession of an executed written assignment, American Family filed suit in its capacity as McGrath's equitable subrogee. While that case was pending, American Family filed suit against McGrath for specific performance in order to obtain his executed written assignment. American Family's suit against defendants was dismissed with prejudice on a combined motion to dismiss under section 2–619.1 of the Code of Civil Procedure (Code) (735 ILCS 5/2–619.1 (West 2008) ), with the trial court finding that American Family was required to have a written assignment in order to pursue a subrogation claim. Shortly thereafter, American Family's suit against McGrath was dismissed on a section 2–619 motion to dismiss (735 ILCS 5/2–619 (West 2008) ), with the trial court finding that American Family had released its claim for an assignment by settling the federal lawsuit; the court also found that the claim was barred by res judicata based on the dismissal of the equitable subrogation suit against defendants.

¶ 3 American Family simultaneously appealed the dismissal of both suits, and the appellate court affirmed the dismissal of the equitable subrogation claim, holding that American Family had failed to perfect

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its rights of subrogation under the terms of the insurance policy. American Family Mutual Insurance Co. v. Northern Heritage Builders, L.L.C., 404 Ill.App.3d 584, 588, 344 Ill.Dec. 617, 937 N.E.2d 323 (2010). However, the appellate court reversed the dismissal of American Family's claim against McGrath and remanded the case. American Family Mutual Insurance Co. v. McGrath, No. 1–10–1619, 406 Ill.App.3d 1202, 376 Ill.Dec. 170, 998 N.E.2d 712 (2011) (unpublished order under Supreme Court Rule 23 ). On remand, McGrath eventually tendered an executed assignment to American Family, and the case was dismissed.

¶ 4 American Family then filed another lawsuit against defendants, this time as McGrath's contractual subrogee. Defendants filed a motion to dismiss, claiming that the suit was barred by the statute of limitations. The trial court denied the motion to dismiss, finding that the statute of limitations had been equitably tolled. Defendants then moved for a permissive interlocutory appeal pursuant to Illinois Supreme Court Rule 308 (eff. Feb. 1, 1994), and the trial court certified one question for review: “Is ‘equitable tolling’ a proper basis to deny Plunkett's and PPAD's motion to dismiss based upon the statute of limitations found in 735 ILCS 5/13–214(b) ?” We granted the petition for leave to appeal, and now answer the trial court's certified question in the negative.

¶ 5 BACKGROUND²

¶ 6 I. Federal Court Case

¶ 7 McGrath was the owner of a single-family home in Chicago that was designed and built by defendants. The home was covered by an insurance policy issued by American Family. On August 23, 2006, while the policy was in force, McGrath made an insurance claim for water damage caused by alleged faulty design and construction of the home. American Family denied the claim, and McGrath filed suit against American Family in the United States District Court for the Northern District of Illinois (the federal court case). Summary judgment was granted in McGrath's favor on the issue of coverage, and the case proceeded to a jury trial on the issue of damages. A jury returned a verdict in favor of McGrath, in the amount of $1,130,680.16.

¶ 8 Subsequent to the verdict, on May 16, 2008, McGrath and American Family settled the federal court case and executed a settlement agreement; the terms of the settlement agreement did not contain an assignment to American Family of McGrath's rights of recovery against any negligent party by reason of the damage to his residence. American Family paid McGrath $1,130,680.16.

¶ 9 On June 18, 2008, American Family requested an assignment of their rights of recovery (subrogation) from McGrath to the extent of the $1,130,680.16 payment made by American Family. McGrath did not respond to the request.

¶ 10 II. Equitable Subrogation Case

¶ 11 On May 20, 2008, American Family filed a complaint against defendants in the law division of the circuit court of Cook

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County in its capacity as a subrogee of McGrath (the equitable subrogation case). American Family alleged breach of contract in the defective design of McGrath's home and negligence in the construction of the home. On March 13, 2009, American Family filed its third amended complaint, claiming that it was an equitable subrogee due to the payment it had made to McGrath.

¶ 12 On April 21, 2009, American Family sent another request for an assignment from McGrath.

¶ 13 On May 13, 2009, defendants filed a combined motion to dismiss the complaint under section 2–619.1 of the Code (735 ILCS 5/2–619.1 (West 2008) ). On August 3, 2009, the trial court granted defendants' combined motion to dismiss the complaint with prejudice.

¶ 14 On December 22, 2009, the trial court denied American Family's motion to reconsider, finding that American Family's right to subrogation was limited to contractual subrogation, not equitable or common-law subrogation, due to the existence of a subrogation clause in the insurance policy between American Family and McGrath. On January 14, 2010, American Family filed a notice of appeal.

¶ 15 III. Specific Performance Case

¶ 16 While the equitable subrogation case was pending, American Family filed suit against McGrath in the chancery division of the circuit court of Cook County (the specific performance case). American Family's one-count complaint alleged that McGrath was contractually obligated to assign his subrogation rights to American Family, and sought specific performance of the contract.

¶ 17 After the trial court dismissed the equitable subrogation case under section 2–619.1 of the Code due to its finding that contractual subrogation was the only available basis for subrogation, McGrath filed a motion to dismiss American Family's complaint under section 2–619 of the Code (735 ILCS 5/2–619 (West 2008) ), arguing that the complaint was barred under res judicata and by the parties' settlement agreement.

¶ 18 On May 11, 2010, the trial court granted McGrath's section 2–619 motion to dismiss American Family's complaint for specific performance. The court found that the complaint was barred by res judicata in light of the dismissal with prejudice of the equitable subrogation complaint. Furthermore, the court held that American Family released any rights to an assignment of subrogation rights when it entered into a release and settlement agreement with McGrath concerning payment under the insurance policy. On June 2, 2010, American Family filed a notice of appeal.

¶ 19 IV. Appeals of Equitable Subrogation and Specific Performance Cases

¶ 20 On October 12, 2010, the appellate court issued an opinion affirming the dismissal of the equitable subrogation case, holding that any subrogation right American Family had was a contractual one, arising from the insurance policy between American Family and McGrath, and equitable subrogation was not available in light of the express contractual provision. American Family Mutual Insurance Co. v. Northern Heritage Builders, L.L.C., 404 Ill.App.3d 584, 588, 344 Ill.Dec. 617, 937 N.E.2d 323 (2010). Since there was no written assignment of McGrath's rights, the appellate court found that American Family failed to perfect its rights of subrogation under the terms of the policy, and affirmed the dismissal of the complaint...