Hirsch v. Optima, Inc.

• Decision Date: 09 December 2009
• Docket Number: No. 1-08-1347.,No. 1-08-1378.,1-08-1347.,1-08-1378.
• Citation: 336 Ill. Dec. 338,920 N.E.2d 547
• Parties: Judith HIRSCH, Plaintiff-Appellee and Cross-Appellant, v. OPTIMA, INC., an Illinois Corporation, Defendant-Appellant and Cross-Appellee. (John H. Kelsey and Coromandel Town Home Association, Defendants).
• Court: United States Appellate Court of Illinois

920 N.E.2d 547

336 Ill. Dec. 338

Judith HIRSCH, Plaintiff-Appellee and Cross-Appellant, v. OPTIMA, INC., an Illinois Corporation, Defendant-Appellant and Cross-Appellee (John H. Kelsey and Coromandel Town Home Association, Defendants).

No. 1-08-1347.

No. 1-08-1378.

Appellate Court of Illinois, First District, Third Division.

December 9, 2009.

Clausen Miller P.C. (Edward M. Kay, Richard M. Kaplan, Joseph J. Ferrini of counsel), Chicago, IL, for Defendant-Appellant/Cross-Appellee.

Milton M. Blumenthal & Associates (Michael L. Blumenthal, David J. Piell, Milton M. Blumenthal of counsel), Chicago, IL, for Plaintiff-Appellee/Cross-Appellant.

Presiding Justice MURPHY delivered the opinion of the court:

After plaintiff, Judith Hirsch, purchased a townhouse from defendant John Kelsey in 2002, the basement flooded. On April 18, 2005, plaintiff sued Kelsey, the seller of the townhouse; Coromandel Town Home Association, the homeowner's association; and Optima, Inc., the builder. The trial court dismissed with prejudice plaintiff's case against Optima but later granted in part plaintiff's petition under section 2-1401 of the Code of Civil Procedure (735 ILCS 5/2-1401 (West 2006)) based on newly discovered evidence. On appeal, Optima argues that the trial court erred in granting plaintiff's petition because the evidence was not new. Plaintiff cross-appeals the trial court's partial denial of her petition.

I. BACKGROUND

Plaintiff filed a complaint and two amended complaints alleging that Optima designed and constructed the townhouse at 415 Milford Road in Deerfield, Illinois, in 1994 and 1995. In June or July 2001, when Kelsey owned the property, "there was a leakage of water in the basement through a crack in the foundation." Kelsey notified Optima and Coromandel of the problem, and they concluded that the flooding was due to the improper design and installation of the drain-tile storm-water discharge system around the foundation of the unit. They arranged for Roto-Rooter to fix the problem and to do maintenance work on the drain-tile storm-water discharge system on a biannual basis.

Kelsey sold the property to plaintiff in 2002. None of the defendants informed plaintiff that there was a problem with the drain tiles or that the repairs were not permanent. The real property disclosure report completed by Kelsey indicated that he was not "aware of flooding or recurring leakage problems in the crawlspace or in the basement" or of "material defects in the basement in foundation (including cracks and bulges)." Furthermore, defendants cancelled the biannual servicing by Roto-Rooter on the property. In June 2003 and March 2005, plaintiff's basement flooded. The second amended complaint alleged that Optima breached the implied warranty of habitability and negligently performed a voluntary undertaking. These counts were dismissed with prejudice on December 13, 2006, for failure to state a claim.

On January 10, 2007, plaintiff filed a motion for reconsideration. In March 2007, between filing the motion and the court's decision, plaintiff received answers to interrogatories that she had served on Kelsey. These answers provided that there was "some seepage" in the basement in 1997 and one leak in June or July 2001 and that Optima and Coromandel undertook to repair the problem on both occasions. Plaintiff did not raise Kelsey's responses about the 1997 seepage during the proceedings on her motion for reconsideration. The hearing on plaintiff's motion occurred on May 10, 2007, and the trial court denied the motion on June 6, 2007.

On July 17, 2007, Kelsey filed a motion for leave to file an amended counterclaim against Optima and Coromandel. It alleged that in 1997, Kelsey "observed water accumulation" in the basement of the townhouse and that he contacted Optima and Coromandel, which undertook to remedy the problem. In 2000, water accumulated in another part of the basement, and Optima and Coromandel again took care of it.

Plaintiff filed a motion for leave to file a third amended complaint on August 10, 2007. The motion argued that Kelsey's July 17, 2007, motion for leave to file an amended counterclaim raised new facts regarding the relationship among defendants, that a recently decided case affirmed the correctness of her position, and that "a motion to reconsider would be appropriate, given the discovery of new facts not previously discoverable."

The proposed third amended complaint alleged that Kelsey informed Optima and Coromandel in 1997 that there was "a leakage of water into the basement" of the townhouse and that when Kelsey decided to sell the townhouse, Optima advised him that he did not have to disclose the history of flooding or water seepage. Thus, the proposed complaint alleged, Kelsey's misrepresentations were made "with the knowledge and blessing" of Optima. After the flooding in 2003, Optima continued to misrepresent its prior knowledge of the defective drain-tile storm-water discharge system. In addition to breach of the warranty of habitability and negligent performance of a voluntary undertaking, which were alleged in earlier complaints, the proposed third amended complaint alleged that Optima engaged in fraudulent misrepresentation and violated the Illinois Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq. (West 2006)).

On September 5, 2007, the trial court denied plaintiff's motion for leave to file the third amended complaint as to Optima. It noted that the proposed third amended complaint "does not state a new cause of action or a sufficient cause of action against Optima." Accordingly, the court found that the order dismissing Optima with prejudice would stand. It entered a Supreme Court Rule 304(a) (210 Ill.2d R. 304(a)) finding as to the dismissal with prejudice of plaintiff's claims against Optima and the denial of plaintiff's motion for leave to file a third amended complaint against Optima.

On October 2, 2007, plaintiff filed a notice of appeal as to the court's September 5, 2007, order. On January 22, 2008, while her appeal was pending, plaintiff was granted leave to file a section 2-1401 petition for relief from judgment based on the discovery of new facts.

The petition cited the following: (1) Kelsey's July 17, 2007, motion for leave to file an amended counterclaim, from which plaintiff "learned for the first time that the property had flooded as early as 1997"; (2) Kelsey's December 21, 2007, affidavit, wherein Kelsey "for the first time admitted in a document submitted to this Court" that he called Optima and Coromandel before completing the disclosure report; and (3) records from Roto-Rooter that Kelsey filed in his December 21, 2007, response to Optima's motion to dismiss his second amended counterclaim, showing that the company was at the townhouse at least six times between 1997 and 2002 for rodding and jetting out the drain tiles. According to the petition, the Roto-Rooter records demonstrated that Optima repeatedly misrepresented to the court its level of involvement in the maintenance of the drain-tile storm-water discharge system. In addition, plaintiff asserted that Optima's representations in earlier pleadings that it did not enter into a maintenance agreement with Roto-Rooter until 2003 was refuted by the cited new facts. Plaintiff sought an order vacating the dismissal with prejudice of her two claims against Optima and permitting her to file the third amended complaint that the court previously would not permit her to file.

On April 30, 2008, the trial court granted the petition in part and denied it in part. The trial court found that plaintiff alleged a meritorious claim or defense as to her claim for breach of warranty. Relying on Kelsey's amended counterclaim, the court found that the allegation that the basement first flooded in 1997 was "relevant because in dismissing the breach of warranty count, the Court relied on the amount of time that had elapsed between the construction of the Townhome and the first occurrence of flooding." It continued:

"In dismissing the Second Amended Complaint the Court found that the basement defect did not arise until six years after construction of the Townhome. The Court found that six years did not satisfy the `reasonable time' standard for determining whether subsequent purchasers are entitled to protection of the warranty of habitability. However, it now appears that the basement did experience flooding in 1997. Thus, in fact, the basement's defect manifested itself approximately two years after the completion of the Townhome. Although guideposts for decision making with respect to the `reasonable time' standard of Redarowicz are sparse, this lapse of time is much more reasonable than six years. As such, had the Court been presented the additional facts in connection with the motion to dismiss the Second Amended Complaint, the Court would have likely denied the motion to dismiss."

The court further concluded that "it is not likely" that plaintiff's failure to present the new facts was caused by her own negligence, as she first learned of them when they were presented in Kelsey's motion for leave to file an amended counterclaim, which was filed in July 2007, the month after the court dismissed the second amended complaint with prejudice. It also noted that while "six months is a significant amount of time, it is not such a significant amount of time so as to find Hirsch dilatory in filing the petition." Therefore, the court granted plaintiff's petition with respect to the breach of warranty count.

The court concluded that its decision to dismiss the negligent performance of a voluntary undertaking count was not dependent on the amount of time that elapsed before the basement defect was discovered; rather, the court "dismissed this count because Hirsch could not plead reliance on Optima's agreement to have Roto-Rooter service the drains." The court further found that the...