Mars, Inc. v. HERITAGE BLDRS. OF EFFINGHAM

• Decision Date: 29 January 2002
• Docket Number: No. 4-01-0352.,4-01-0352.
• Parties: MARS, INCORPORATED, and Kal Kan Foods, Inc., Plaintiffs-Appellants, v. HERITAGE BUILDERS OF EFFINGHAM, INC., Defendant (GF General Contractors, Inc., Defendant-Appellee).
• Court: United States Appellate Court of Illinois

763 N.E.2d 428

327 Ill. App.3d 346

261 Ill.Dec. 458

MARS, INCORPORATED, and Kal Kan Foods, Inc., Plaintiffs-Appellants, v. HERITAGE BUILDERS OF EFFINGHAM, INC., Defendant (GF General Contractors, Inc., Defendant-Appellee).

No. 4-01-0352.

Appellate Court of Illinois, Fourth District.

January 29, 2002.

Marc J. Shrake, Terrance C. Newby (argued), Zelle, Hofmann, Voelbel, Mason & Gette LLP, Minneapolis, MN, William J. Sneckenberg, Steven M. Thompson, Benjamin E. Alba, William J. Sneckenberg & Associates, Ltd., Chicago, for Mars, Incorporated.

Carl J. Tenney (argued), Hughes, Hill & Tenney, L.L.C., Decatur, for GF General Contractors, Inc.

Justice KNECHT delivered the opinion of the court:

In early 1995, plaintiffs, Mars, Inc., and Kal Kan Foods, Inc. (collectively Kal Kan), initiated a warehouse expansion project. Kal Kan's general contractor engaged GF General Contractors, Inc. (GF), to erect a steel-frame system (frame) that would eventually support the building. According to Kal Kan, the frame was the property of Kal Kan when GF undertook to erect it. The frame collapsed in June 1995 in the early stages of construction after a violent thunderstorm, and in February 1998, Kal Kan brought suit against GF for negligence in failing to properly brace the frame. GF sought dismissal on the grounds that the negligence claim was barred by the economic-loss doctrine of Moorman Manufacturing Co. v. National Tank Co., 91 Ill.2d 69, 81, 61 Ill.Dec. 746, 435 N.E.2d 443, 448 (1982). In June 2000, the trial court reconsidered an earlier ruling, agreed, and dismissed the claim. Kal Kan appeals. We affirm.

I. BACKGROUND

Kal Kan operates a dog and cat food manufacturing plant and warehouse in Mattoon. In early 1995, Kal Kan solicited bids for construction of a 60,000-square-foot warehouse expansion. Among the contractors submitting bids was defendant Heritage Builders of Effingham (Heritage), which was awarded the contract on March 15, 1995.

In early April 1995, Heritage began construction and subcontracting portions of the work to various subcontractors. Among these was defendant GF, engaged by Heritage to erect the steel-frame system that would eventually support the warehouse building. Kal Kan was not a party to this subcontract.

According to Kal Kan, the steel-frame system GF was to erect already had been purchased from another entity and was, at the time of erection, Kal Kan's property. Pursuant to its subcontract with Heritage, GF was to "unload and erect" the frame. According to Kal Kan, "GF was hired simply to erect the frame that Kal Kan had independently purchased, and not to supply any of the components."

Nevertheless, Kal Kan's initial purchase order to Heritage stated that Heritage was to "provide materials, labor, equipment, engineering, and supervision to construct a warehouse." Attached to this purchase order was an addendum that provided Heritage must "furnish all of the materials and perform all the labor necessary" to construct the warehouse. Further incorporated into the purchase order was a project manual for the work, which included design and materials specifications for the structural steel.

Regardless of the true owner of the frame, GF began erecting the frame on May 30, 1995. As of June 9, 1995, GF had erected between 70% and 85% of the frame, bracing it with temporary cable bracing. GF did not installed any permanent angle or cross-bracing. According to Kal Kan, the temporary bracing GF installed did not meet the applicable building code wind-load requirements and project specifications.

During the early morning of June 10, 1995, a severe thunderstorm passed through Mattoon, causing the frame to suddenly collapse. As result of this collapse, the frame was irreparably damaged, necessitating the purchase of a new steelframe system. This resulted in an eightweek delay in the completion of the warehouse.

In April and October 1997, Kal Kan filed complaints against Heritage in Coles County circuit court, alleging a single breach of contract count. On February 19, 1998, Kal Kan amended its complaint and added a negligence count against GF, alleging that GF negligently failed to properly erect and brace the frame, thereby causing its collapse during the storm.

In May 1998, GF moved to dismiss this portion of the complaint, arguing such claims were barred by the economic-loss doctrine set forth in Moorman. Holding that the economic-loss doctrine did not bar the negligence claim, Judge Paul C. Komada, the judge then presiding, denied GF's motion. Specifically, Judge Komada held the frame that collapsed was not GF's "product" for purposes of the Moorman doctrine. Rather, GF's "product" was the service of erecting the frame. As such, Judge Komada held, the Moorman doctrine did not bar Kal Kan's complaint. Both parties agreed Judge Komada's ruling from the bench denying GF's motion would stand as a docket entry and no written order would issue.

On August 10, 1998, GF filed its answer to the then-pending third-amended complaint, including an affirmative defense that the negligence claim was barred by Moorman. Fifteen months later, GF filed a third-party complaint against Allen Engineering Corporation (Allen), the manufacturer of the frame, alleging Allen was negligent in its work on the design of the frame, as well as its bracing and anchoring. Allen responded with a motion to dismiss the third-party complaint as being barred by Moorman, making the same substantive argument GF had made in its motion to dismiss Kal Kan's negligence claim against GF.

With the Moorman issue again pending, GF filed a motion for reconsideration of Judge Komada's July 9, 1998, order finding Moorman inapplicable to Kal Kan's negligence claim against GF. According to GF, if the court granted Allen's motion as to Moorman, "it should likewise grant GF's motion for reconsideration of its motion to dismiss [Kal Kan's] complaint."

On June 22, 2000, Judge Gary Jacobs, the new judge presiding, granted GF's motion to reconsider and considered both Allen's motion to dismiss the third-party complaint and GF's motion to dismiss Kal Kan's negligence claim at the same time, since both motions involved a similar application of the Moorman doctrine. In a June 24, 2000, docket entry, Judge Jacobs granted both Allen's and GF's motions, finding Kal Kan's negligence claims and GF's third-party negligence claim improperly sought recovery of economic loss under a tort theory, as stated in Moorman. Further, Judge Jacobs found both causes of action did not fall within the recognized exceptions to the Moorman doctrine.

On February 22, 2001, Kal Kan filed a motion for entry of final judgment against GF pursuant to Supreme Court Rule 304(a). 155 Ill.2d R. 304(a). Judge Jacobs allowed the motion on March 28, 2001, finding no just reason for delaying appeal of the order granting GF's motion to reconsider. This appeal followed. Neither Heritage nor Allen is a party to this appeal.

II. ANALYSIS

The issue before us is a simple one: did the trial court err in holding that the economic-loss doctrine of Moorman applied to the case? However, the facts of the case make the issue one of apparent first impression in Illinois. The issue is better framed in more general terms: does the economic-loss doctrine of Moorman apply to the loss of construction materials where a subcontractor's alleged negligence in construction is alleged to have caused the loss?

As a preliminary matter, we note GF's initial motion to dismiss Kal Kan's complaint was filed pursuant to section 2-615 of the Code of Civil Procedure (735 ILCS 5/2-615 (West 1996)). Thus, our review of the trial court's grant of the motion to dismiss is de novo. Neade v. Portes, 193 Ill.2d 433, 439, 250 Ill.Dec. 733, 739 N.E.2d 496, 500 (2000)

. When considering such an appeal, we interpret all wellpled allegations and supporting documents in the light most favorable to the nonmoving party. In re Chicago Flood Litigation, 176 Ill.2d 179, 189, 223 Ill.Dec. 532, 680 N.E.2d 265, 270 (1997). Only where the plaintiffs fail to allege facts supporting a cause of action should the court grant the motion to dismiss. Chicago Flood Litigation, 176 Ill.2d at 189,

223 Ill.Dec. 532,

680 N.E.2d at 270.

A. The Moorman Doctrine

The crux of the dispute between the parties involves the prospective application of a line of Illinois cases that begin with Moorman, 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443. In Moorman, the plaintiff had purchased from the defendant a bolted-steel grain-storage tank. The tank later developed a crack in one of its steel plates. The plaintiff brought an action alleging, as one count, (1) the tank was not reasonably safe due to defects in its design and manufacturing and, in a separate count, (2) the defendant had negligently designed the tank. The complaint alleged damage only to the tank itself. Moorman, 91 Ill.2d at 73-74, 61 Ill.Dec. 746, 435 N.E.2d at 445.

The supreme court affirmed the trial court's dismissal of both the strict liability and negligence counts, concluding a complaint alleging qualitative defects in a product does not belong in tort. According to the court, a disappointed consumer cannot assert, based on inferior workmanship that led to eventual deterioration, a recovery under a negligence. Moorman, 91 Ill.2d at 86, 61 Ill.Dec. 746, 435 N.E.2d at 450. Thus, Moorman was the first case to stand for the broader proposition that purely economic damages cannot be recovered in tort. According to the court in Moorman, "economic loss" can be defined as "`damages for inadequate value, costs of repair[,] and replacement of the defective product, or consequent loss of profits— without any claim of personal injury or damage to other property.'" Moorman, 91 Ill.2d at 82,61 Ill.Dec. 746,435 N.E.2d at 449, quoting Note, Economic Loss in Products Liability Jurisprudence, 66 Colum. L.Rev. 917, 918 (1966). Further, economic loss can also be expressed as "`the diminution in the value of...