Illinois Housing Development Authority v. Sjostrom & Sons, Inc.

• Decision Date: 30 March 1982
• Docket Number: No. 81-686,81-686
• Citation: 433 N.E.2d 1350,105 Ill.App.3d 247,61 Ill.Dec. 22
• Court: United States Appellate Court of Illinois
• Parties: , 61 Ill.Dec. 22 ILLINOIS HOUSING DEVELOPMENT AUTHORITY, An Illinois body politic and corporate, Plaintiff-Appellant, v. SJOSTROM & SONS, INC., an Illinois Corporation, Orput Associates, Inc., an Illinois Corporation, Valley View Apartments, Ltd., an Illinois Limited Partnership, Knowland, Smith & Tyson, Inc., an Illinois Corporation, Mid-States Construction, Inc., an Illinois Corporation, Finestone Corporation, a Foreign Corporation, and Bert M. Lafferty Company, a Foreign Corporation, Defendants- Appellees.

Page 1350

433 N.E.2d 1350

105 Ill.App.3d 247, 61 Ill.Dec. 22

ILLINOIS HOUSING DEVELOPMENT AUTHORITY, An Illinois body politic and corporate, Plaintiff-Appellant, v. SJOSTROM & SONS, INC., an Illinois Corporation, Orput Associates, Inc., an Illinois Corporation, Valley View Apartments, Ltd., an Illinois Limited Partnership, Knowland Smith & Tyson, Inc., an Illinois Corporation, Mid-States Construction, Inc., an Illinois Corporation, Finestone Corporation, a Foreign Corporation, and Bert M. Lafferty Company, a Foreign Corporation, Defendants- Appellees.

No. 81-686.

Appellate Court of Illinois, Second District.

March 30, 1982.

Rooks, Pitts, Fullagar & Poust, Alan S. Ganz, Margaret S. Garvey and Stephen D. Sharp, Chicago, Berry, Berry & Heckinger, J. F. Heckinger, Rockford, for plaintiff-appellant.

Judge, Drew, Cipolla & Kurnik, Jay S. Judge and Charles C. Hoppe, Jr., Park Ridge, McDermott, Will & Emery, Chicago, Greenwald, Maier & Newton, Reno, Zahm, Folgate, Lindberg & Powell, J. Todd Kennedy, Rockford, for defendants-appellees.

Barrick, Jackson, Switzer, Long & Balsley, Connolly, Oliver, Goddard, Coplan & Close, Rockford, for Finestone Corp.

Pedderson, Menzimer, Conde, Stoner & Killoren, Rockford, for Valley View Apartments.

Robert A. Calgaro, Turner & Shoemaker, Harold L. Turner, O'Brien, Healy, Wade & Gorman, Rockford, for Orput Assoc. VAN DEUSEN, Justice:

The plaintiff appeals from the dismissal of its thirteen count complaint pursuant to section 48(1)(i) of the Civil Practice Act (Ill.Rev.Stat.1979, ch. 110, par. 48(1)(i)).

In 1973, the defendant Valley View Apartments, Ltd. (Valley View), initiated an application for funding of a housing development in Rockford. Valley View sought the funding in order to construct a thirteen-floor residential building which was to contain 179 units of housing for the elderly. Valley View's application sought funding from the plaintiff, the Illinois Housing Development Authority (IHDA). Shortly after funding was received, Valley View, as beneficial owner of the proposed development, entered into contracts with several of the defendants. These contracts were for construction and architectural services for the development.

The development was built and occupied by July of 1975. Shortly after the project was occupied, a water leakage problem developed. Over 85% of the units experienced water leakage. Apparently rain was able to penetrate the exterior stucco panels and seep in the apartments. The seepage problem was causing substantial interior and exterior damage. A final disbursement of funds from the mortgagee, IHDA, was obtained on April 16, 1976.

On March 17, 1980, IHDA filed a twelve count complaint naming as defendants the development's general contractor, Sjostrom & Sons (Sjostrom); the preconstruction architect, Orput Associates, Inc. (Orput); the supervising architects, Knowland, Smith & Tyson, Inc. (Knowland); the beneficial owner, Valley View, the fabricator of the exterior stucco panels, Mid-States Construction, Inc. (Mid-States); and Mid-States' supplier of materials and specifications, Finestone Corporation (Finestone).

In the complaint, IHDA alleges that during the construction of the building, the defendants breached the provisions of the contracts which assured quality workmanship, and/or they negligently designed, installed or constructed the exterior stucco panels. The plaintiff sought monetary damages for the cost of repairing the water leakage problem and for impairment of their security interest.

On July 2, 1980, Valley View filed a counterclaim against four of the named defendants: Finestone, Mid-States, Sjostrom, and Knowland. They did not file a claim against Orput. Various parties then filed cross-claims. For over a year the parties took discovery. Numerous depositions were taken and numerous interrogatories were served.

On February 27, 1981, plaintiff filed a second amended complaint adding an additional negligence count and two defendants: Bert M. Lafferty Co. (Lafferty), the caulking sub-contractor, and Harry Vernetti, the sole proprietor of Mid-States.

The thirteen count, second amended complaint can be summarized as follows:

                            Defendant(s)    Theory of Recovery
                            ------------    ------------------
                Count I     Sjostrom        breach of contract
                                            brought as third-party
                                            beneficiary of contract
                                            with owner
                Count II    Sjostrom        breach of contract
                                            brought as subrogee of
                                            contract with owner
                Count III   Sjostrom        negligent construction.
                Count IV    Valley View &   breach of surety
                            Orput           provision of Building
                                            Loan Agreement.
                Count V     Orput           breach of contract,
                                            brought as third-party
                                            beneficiary of contract
                                            with owner.
                Count VI    Orput           breach of contract,
                                            brought as subrogee to
                                            contract with owner.
                Count VII   Orput           negligent design.
                Count VIII  Knowland        breach of contract,
                                            brought as third-party
                                            beneficiary of contract
                                            with owner.
                Count IX    Knowland        breach of contract,
                                            brought as subrogee
                                            to contract with owner.
                Count X     Knowland        negligent supervision
                                            of construction.
                Count XI    Vernetti d/b/a  negligent manufacturing
                            Mid-States      and design of stucco
                                            panels.
                Count XII   Finestone       negligent manufacturing
                                            of materials used to
                                            make the stucco panels.
                Count XIII  Lafferty        negligent caulking of
                                            the structure.
                

On June 25, 1981, the case was transferred from Judge Layng to Judge Smith. On July 16, 1981, all of the defendants, except Valley View, filed a joint motion to dismiss all counts, except count IV, on the ground that the plaintiff lacked standing. On August 14, 1981, after a hearing, the trial court granted the joint motion to dismiss. All counts, except count IV, were dismissed. In granting the joint motion, the trial court stated that because the owner was not in default in its mortgage payments and because the owner had counterclaimed requesting the same relief as plaintiff requested, the plaintiff, IHDA, as a mortgagee, had no standing to bring the suit against any of the defendants other than the mortgagor.

On July 16, 1981, Valley View and Orput filed a motion to dismiss count IV, which alleged that Orput and Valley View breached the building loan agreement with the IHDA. On September 4, 1981, the court granted Orput's and Valley View's separate motions to dismiss. Count IV was dismissed on the ground that the building loan agreement between the mortgagor, Orput and the mortgagee was fully performed.

From these dismissals, the plaintiff appeals. On appeal, the plaintiff asserts that the trial court made several procedural errors in considering the two motions, and that the trial court erred in that each of the thirteen counts of the complaint does state a cause of action.

We first consider the alleged procedural errors. The IHDA contends that the motion to dismiss should have been denied because they were not brought pursuant to the proper section of the Civil Practice Act.

Both motions to dismiss stated that they were brought pursuant to section 48(1)(i) of the Civil Practice Act (Ill.Rev.Stat.1979, ch. 110, par. 48(1)(i).) Section 48(1)(i) states that a defendant may, within the time for pleadings, file a motion for dismissal of the action on the ground that "the claim or demand asserted against defendant is barred by other affirmative matters avoiding the legal effect of or defeating the claim or demand." Ill.Rev.Stat.1979, ch. 110, par. 48(1)(i).

An "affirmative matter" under this section is "something in the nature of a defense that negates an alleged cause of action completely or refutes crucial conclusions of law or conclusions of material fact unsupported by allegations of specific fact contained in or inferred from the complaint." Austin View Civic Association v. City of Palos Heights (1980), 85 Ill.App.3d 89, 96, 40 Ill.Dec. 164, 405 N.E.2d 1256; see In re Marriage of Musa (1982), 103 Ill.App.3d 189, 191-92, 58 Ill.Dec. 695, 430 N.E.2d 727.

In Hermes v. Wm. F. Meyer Co. (1978), 65 Ill.App.3d 745, 747, 22 Ill.Dec. 451, 382 N.E.2d 841, the court stated that a lack of standing may be a basis for dismissing a suit pursuant to section 48(1)(i). In so holding, this court stated that section 48(1)(i) is to be "broadly construed to encompass basic defenses to a claim." (65 Ill.App.3d 745, 747, 22 Ill.Dec. 451, 382 N.E.2d 841.) In Hermes, the plaintiff, as an owner of 20% of the shares in a corporation, brought a suit against the corporation and other shareholders. The defendants filed a section 48 motion to dismiss, contending that plaintiff had divested himself of the shares and, therefore, lacked "legal capacity to sue." In Hermes, the alleged transfer of ownership of the shares of stock, was an "affirmative matter" which could be raised pursuant to section 48.

It can be argued that here there is no alleged "affirmative matter" which avoids the effect of the claim, rather the defendants' motions and the briefs in support of the motions contend only that plaintiff has failed to plead sufficient facts to establish that the IHDA has a sufficient interest in the development or the contracts to bring the suit. The defendants' motions further assert that the facts as pleaded fail to establish either a right to subrogation, or a breach of a duty owed by the defendants to the IHDA upon which a...