Atlantic Mut. Ins. Co. v. Metron Engineering and Const. Co.
| Decision Date | 13 May 1996 |
| Docket Number | No. 95-2815,95-2815 |
| Parties | ATLANTIC MUTUAL INSURANCE COMPANY, Plaintiff-Appellant, v. METRON ENGINEERING AND CONSTRUCTION COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Daniel A. Celske, Sanchez & Daniels, Chicago, IL, Daniel Q. Harrington (argued), Scott M. Waldman, Philadelphia, PA, for plaintiff-appellant.
Edward M. Kay, James T. Ferrini, Susan Condon, Imelda Terrazino (argued), Clausen, Miller, Gorman, Caffrey & Witous, Chicago, IL, for defendant-appellee.
Before BAUER, ESCHBACH, and FLAUM, Circuit Judges.
On December 4, 1992, general contractor Metron Engineering and Construction Company (hereinafter "Metron") entered into a contract with the Intercommunity Charitable Trust (hereinafter "ICT") to provide "rehabilitation work" at 6259 North Broadway in Chicago, Illinois, a premises owned by ICT. 1 Unfortunately, a fire severely damaged the project on February 17, 1993, while Metron was working at the site. ICT's insurance carrier, Atlantic Mutual Insurance Company (hereinafter "Atlantic"), paid to ICT approximately $620,000 for damage resulting from the fire. Because it compensated ICT for the loss, Atlantic became duly subrogated to ICT's claims against third parties regarding the fire.
Invoking diversity jurisdiction, Atlantic (a New York corporation) filed suit in federal district court in the Northern District of Illinois against Metron (an Illinois corporation) for fire-related damages under theories of negligence, breach of contract, and breach of express and implied warranties. Metron filed a motion for summary judgment arguing that the agreement between Metron and ICT incorporates by reference document A201/CM (1980 edition) from the American Institute of Architects (hereinafter "A201/CM"). A201/CM, entitled "General Conditions of the Contract for Construction" contains a "waiver of subrogation" provision at Article 11.3.6. According to Metron, because A201/CM is incorporated by reference, Atlantic is precluded from bringing its subrogated claim.
Atlantic responded that A201/CM is not, in fact, a part of the agreement between Metron and ICT because A201/ CM was neither attached to the Metron/ICT agreement nor expressly enumerated as a contract document as required under Article 7 of the agreement. Indeed Atlantic contended that Metron never provided to ICT a copy of A201/CM. According to Atlantic, the Metron/ICT agreement is at least ambiguous regarding A201/CM; the meaning of the contract is a factual question.
The district court concluded as a matter of law that A201/CM is incorporated in the Metron/ICT agreement and that Atlantic is precluded from bringing suit as ICT's subrogee. Atlantic brings this timely appeal. We have jurisdiction pursuant to 28 U.S.C. § 1291.
After considering the Metron/ICT agreement as a "whole," the district court held that "it is clear that the parties intended the General Conditions [A201/CM] to be part of the Contract." Reviewing the district court's decision de novo and considering the record in the light most favorable to Atlantic, we respectfully disagree.
Under Illinois law 2 our point of departure is the contract itself. LaSalle Nat'l Bank v. Service Merchandise Co., 827 F.2d 74, 78 (7th Cir.1987). If the plain language of the contract resolves the dispute, our analysis necessarily ends. Id. Therefore, we turn to the plain language contained within the "four corners" of the Metron/ICT contract (hereinafter "the agreement"). Omnitrus Merging Corp. v. Illinois Tool Works, Inc., 256 Ill.App.3d 31, 195 Ill.Dec. 701, 704, 628 N.E.2d 1165, 1168 (Ill.App.Ct. 1993).
Although Metron technically drafted the agreement, we are being charitable in calling Metron the "drafter." Metron actually obtained a copy of document A101/CM (1980 edition) from the American Institute of Architects (hereinafter "A101/CM"), and filled in the blanks. Because the agreement is actually A101/CM as modified or completed by Metron, it contains instructional language and boilerplate provisions that needlessly complicate our analysis.
The agreement features the following heading in large bold print: "Standard Form Agreement Between Owner and Contractor." Below the heading, in much smaller print, are the following instructions to persons using A101/ CM: Following the heading appears "AGREEMENT," suggesting that all language subsequent constitutes the agreement between the parties.
Article 1 of the agreement, entitled "The Contract Documents," appears to be an incorporation clause describing those documents that can constitute part of the contract. Article 1 provides in relevant part:
The Contract Documents consist of this Agreement, the Conditions of the Contract (General, Supplementary and other Conditions), the Drawings, the Specifications, all Addenda issued prior to and all Modifications issued after execution of this Agreement. These form the Contract, and all are as fully a part of the Contract as if attached to this Agreement or repeated herein. An enumeration of the Contract Documents appears in Article 7.
Article 7 of the agreement, entitled "Miscellaneous Provisions," appears to be an enumeration clause, giving the parties an opportunity to list those documents that constitute the contract. Article 7 provides in relevant part as follows:
7.1 Terms used in the Agreement which are defined in the Conditions of the Contract shall have the meanings designated in those Conditions.
7.2 The Contract Documents, which constitute the entire agreement between the Owner and the Contractor, are listed in Article 1 and, except for Modifications issued after execution of this Agreement, are enumerated as follows:
(List below the Agreement, the Conditions of the Contract [General, Supplementary and Other Conditions], the Drawings, the Specifications, and any Addenda and accepted alternates, showing page or sheet numbers in all cases and dates where applicable.)
Twenty-three documents, drawings, and modifications are listed under Article 7.2. Noticeably absent from the list is any mention of A201/CM or "General Conditions of the Contract for Construction."
Ruling in favor of Metron, the district court concluded that the agreement incorporated A201/CM by reference. First, the district court reasoned that the instructional language "This document is intended to be used ... with ... A201/CM ..." following the heading "plainly indicates" that the agreement is to be read with A201/CM. We disagree. If anything, the language relied upon by the district court is an instruction to those persons using A101/CM. The language informs the user that the American Institute of Architects has created a document that can be used in conjunction with A101/CM to provide general conditions. Under Illinois law introductory language or recitals are not binding obligations "unless so referred to in the operative portion of the instrument as to show a design that they should form a part of it." Illinois Housing Dev. Auth. v. M-Z Const. Corp., 110 Ill.App.3d 129, 65 Ill.Dec. 665, 675, 441 N.E.2d 1179, 1189 (Ill.App.Ct. 1982). Nothing in the body of the agreement requires that the parties incorporate A201/CM, or indicates that the parties themselves have chosen to do so.
Further, to treat the introductory language as incorporating A201/CM would produce a bizarre result. The introductory language similarly refers to documents B141/ CM and B801 from the American Institute of Architects. B141/CM is entitled "Standard Form of Agreement Between Owner and Architect." B801 is entitled "Standard Form Agreement Between Owner and Construction Manager." We find absolutely no evidence to suggest that either Metron or ICT meant to incorporate an architect and a management agreement into the agreement they signed on December 4, 1992. Yet were we to adopt the district court's interpretation of the introductory language, B141/CM and B801 would be incorporated by reference. The law of Illinois prevents such illogical interpretations. 3 See Omnitrus Merging Corp., 195 Ill.Dec. at 706, 628 N.E.2d at 1170.
The district court also relied on the incorporation language in Article 1 of the agreement to conclude that "Article 1 definitely states that the General Conditions are a part of the contract as if attached." The district court clearly based it determination on the following portion of Article 1: "The Contract Documents consist of this Agreement, the Conditions of the Contract (General, Supplementary and other conditions)...." We disagree with the district court's interpretation.
The very language upon which the district court relied demonstrates the first basis for our disagreement. Article 1 specifically refers to "Conditions of the Contract (General, Supplementary and other conditions)." Assuming arguendo that this language incorporates A201/CM, the plain language of A201/CM demonstrates that A201/CM provides only "General Conditions of the Contract for Construction." The puzzle presented by the district court's interpretation is obvious. If A201/CM provides the "General" conditions of the contract, where are the "Supplementary" and "other" conditions also expressly mentioned in Article 1? We cannot find them anywhere. Were we to adopt the district court's interpretation of Article 1, we would necessarily be incorporating additional documents that apparently do not exist.
What is more, nothing in Article 1 refers to A201/CM. Article 1 only refers to "Conditions of the Contract." As we noted above, there is no requirement that contracting parties using A101/CM incorporate A201/CM as the parties' general conditions. The...
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