Hensley Constr. LLC v. Pulte Home Corp.

• Decision Date: 26 March 2010
• Docket Number: 2-09-1141.,No. 2-09-1140,2-09-1140
• Citation: 339 Ill.Dec. 490,926 N.E.2d 965,399 Ill.App.3d 184
• Parties: HENSLEY CONSTRUCTION, LLC, Plaintiff-Appellee,v.PULTE HOME CORPORATION, Defendant-Appellant.Hensley Construction, LLC, Plaintiff-Appellee,v.Del Webb Communities of Illinois, Inc., Defendant-Appellant.
• Court: United States Appellate Court of Illinois

399 Ill.App.3d 184

926 N.E.2d 965

339 Ill.Dec. 490

HENSLEY CONSTRUCTION, LLC, Plaintiff-Appellee,

v.PULTE HOME CORPORATION, Defendant-Appellant.

Hensley Construction, LLC, Plaintiff-Appellee,

v.Del Webb Communities of Illinois, Inc., Defendant-Appellant.

Nos. 2-09-1140, 2-09-1141.

Appellate Court of Illinois Second District.

March 26, 2010.

COPYRIGHT MATERIAL OMITTED

John A. O'Donnell, Richard P. Girzadas, Chenin L. Kilduff, Belgrade & O'Donnell, Chicago, IL, for Pulte Home Corp.

Paul T. Falk, Carl E. Metz II, Bradley M. Arnold, Falk Metz LLC, Chicago, IL, for Hensley Construction LLC.

Justice McLAREN delivered the opinion of the court:

In appeal number 2-09-1140, defendant, Pulte Home Corporation (Pulte), appeals an order of the trial court, Judge Stephen Sullivan presiding, denying Pulte's motion to reconsider and vacate an interlocutory order requiring Pulte to place $229,781.62 into an escrow account pending final resolution of the underlying case, a contract dispute between plaintiff, Hensley Construction, LLC (Hensley), and Pulte. On appeal, Pulte argues: (1) “The trial court's order of October 7, 2009[,] was reversible error, as it was a refusal to vacate a prohibited equitable attachment in a case in which the ‘specific funds exception’ does not apply”; (2) “The additional arguments raised by Hensley in its Response to the Motion to Reconsider and/or Vacate were also unavailing”; and (3) “Hensley also failed to carry its burden of proof before the trial court.”

In appeal number 2-09-1141, defendant, Del Webb Communities of Illinois, Inc., (Del Webb), appeals an interlocutory order of the trial court, Judge Robert B. Spence presiding, requiring Del Webb to place $97,759.10 into an escrow account pending final resolution of the underlying case, a contract dispute between Del Webb and plaintiff. On appeal, Del Webb argues: (1) “The trial court's order was a prohibited equitable attachment and the ‘specific funds exception’ does not apply”; (2) “The new arguments raised for the first time in Hensley's Reply to the trial court are also unavailing”; and (3) “Hensley also failed to carry its burden of proof before the trial court.”

We consolidated these appeals. We reverse and remand both cases for further proceedings.

I. FACTS

A. Overview

Plaintiff is an underground utility business specializing in the installation of water and sewer lines. Pulte and Del Webb are residential construction businesses.¹ In each case, plaintiff entered into a contract with each defendant to provide and install underground utilities in residential home communities. In each case, plaintiff filed a complaint (later amended) against each defendant alleging that plaintiff had performed its obligations under the respective contract and that under the terms of the contract each defendant owed plaintiff money. In each case, plaintiff filed a “Motion[ ] to Compel Deposit of Retention Funds in Escrow Account.” The trial court granted plaintiff's motions and ordered each defendant to deposit funds into an escrow account. The trial court denied Pulte's motion to reconsider and/or vacate. Both defendants filed timely appeals.

B. Plaintiff v. Pulte

Plaintiff's complaint against Pulte alleged that, although plaintiff had performed all of its obligations under the contract, Pulte “failed to pay for all costs associated with the underground construction services” and that “the remaining amount due and owing to [plaintiff] from Pulte under the agreement is * * * ($229,781.62).” Pulte filed an answer denying all material allegations. In its interrogatory answers, Pulte explained, “[p]ursuant to the written contract entered into between Pulte and [plaintiff], the money claimed of is not yet due to be paid to [plaintiff]. This amount will be withheld until Pulte has completed dedication of the improvement with the municipality.” The contract between the parties contained an “Underground Utilities Specifications” provision (section 17.2) that provided in relevant part:

“Ten percent (10%) retention will be held until initial Pulte approval. * * * After initial approval is granted, retention will be reduced by three percent (3%). Upon final acceptance (dedication) to the respective municipality, the remaining retention will be released.”

Plaintiff filed a “Motion to Compel Deposit of Retention Funds in Escrow Account” (motion to compel). In its motion, plaintiff cited the “Underground Utilities Specifications” provision, arguing that “[a]s part of this system, Pulte would retain 10% of the contract price in a retention account segregated for this project and relating to [plaintiff's] work until Pulte accepted [plaintiff's] work on the project.” Plaintiff further argued that “[u]pon such acceptance, Pulte would be required to disburse 7% of the retention amount and hold back 3% until the respective municipality accepted the work.”

The trial court granted plaintiff's motion, stating in part that: (1) plaintiff “has established sufficient indicia of a likelihood of success on the merits of its claim to warrant the Court's exercise of its equitable powers so as to preserve the status quo until the matter can be resolved on the merits”; (2) “[I]f the retention funds addressed in the Motion are not safeguarded in an independent escrow account, then substantial and irreparable harm may be caused to Plaintiff due to such funds being dissipated or otherwise compromised”; (3) “This Court finds that the $229,781.62 held by Pulte Homes Corporation in its retention account relating to the Winchester Glen project and which is the remainder alleged to be due and owing to [plaintiff] is and/or would be properly the subject of this Court's final order on the merits of this claim”; and (4) “Pulte Homes Corporation is hereby ordered to deposit into an interest bearing escrow account the $229,781.62 held in its retention account relating to the Winchester Glen project.”

Pulte filed a motion to reconsider and/or vacate and attached to its memorandum in support of its motion the affidavit of Bernard Pallardy. Pallardy stated that he was the vice president of land development for Pulte, that Pulte “did not and does not maintain a segregated bank account solely containing retention funds,” and that “Pulte similarly did not and does not maintain separate bank accounts holding retention funds for specific projects and/or subcontractors.” Pallardy also stated the following in his affidavit. The municipality, the Village of Carpentersville, had retained Smith Engineering Consultants to serve as its consulting engineer on the Winchester Glen project. Smith Engineering had produced a punch list of underground items to be completed before the Village of Carpentersville would give its final acceptance of phase one of the Winchester Glen subdivision, which consisted of more than half of the entire project. The punch list included broken, cracked, and leaking storm sewer lines. The certificates of insurance that plaintiff had originally provided to Pulte in regard to the Winchester Glen project had expired and plaintiff had failed to provide Pulte with current certificates of insurance for any successor corporation or any subcontractors. In addition, during the first quarter of 2009, plaintiff informed Pulte that plaintiff was no longer an operational business and that there was no progress being made on the Winchester Glen punch list.

The trial court denied Pulte's motion to reconsider and/or vacate. Pulte filed a timely interlocutory appeal of the trial court's denial of its motion to reconsider and/or vacate pursuant to Supreme Court Rule 307(a)(1). 188 Ill. 2d 307(a)(1); see Doe v. Department of Professional Regulation, 341 Ill.App.3d 1053, 1057-58, 275 Ill.Dec. 639, 793 N.E.2d 119 (2003).

C. Plaintiff v. Del Webb

Plaintiff's complaint against Del Webb alleged that, although plaintiff performed all of its obligations under the contract, Del Webb “failed to pay for all costs associated with the underground construction services provided by [plaintiff]” and that “the remaining amount due and owing to [plaintiff] from Defendant Del Webb under the agreement is [$93,759.10].” Del Webb filed an answer denying all material allegations.

Plaintiff filed a “Motion to Compel Deposit of Retention Funds in Escrow Account” (motion to compel). In its motion, plaintiff stated that it was bringing the motion to “preserve the status quo” pending the resolution of the case. Citing the “Underground Utilities Specifications” provision of the contract between the parties (the identical provision it cited in its complaint against Pulte), plaintiff alleged that such provision stated that “Del Webb would retain 10% of the contract price in a retention account segregated for this project and relating to [plaintiff's] work until Del Webb accepted [plaintiff's] work on the project.” Plaintiff further alleged that the provision provided that, “upon such acceptance, Del Webb would be required to disburse 7% of the retention amount and hold back 3% until the respective municipality accepted the work.” Plaintiff also alleged that because of the collapsing residential real estate market in the country, including Kane County, “[plaintiff] has substantial concerns regarding the economic viability of Pulte and Del Webb in light of these circumstances and has reasonable concerns that Del Webb may attempt to utilize the [plaintiff's] retention funds to satisfy other debts and that such funds may then not be collectible without substantial additional expense, if at all.”

Del Webb's response to plaintiff's motion to compel asserted, in part, that it did not have any “specifically designated retention funds.” Del Webb also asserted that plaintiff was no longer operational. It supported this assertion by attaching Pallardy's affidavit,² in which Pallardy stated that during the first quarter of 2009 plaintiff informed Pulte that plaintiff was no longer an operational business. Del Webb further asserted that, before the...