MBA ENTERPRISES v. NORTHERN ILLINOIS GAS

• Decision Date: 31 August 1999
• Docket Number: No. 3-98-0305.,3-98-0305.
• Citation: 307 Ill. App.3d 285,717 N.E.2d 849,240 Ill.Dec. 500
• Parties: MBA ENTERPRISES, INC., d/b/a Ramada Inn, and Northern Insurance Company of New York, Plaintiffs-Appellants, v. NORTHERN ILLINOIS GAS COMPANY, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

717 N.E.2d 849

307 Ill. App.3d 285

240 Ill.Dec. 500

MBA ENTERPRISES, INC., d/b/a Ramada Inn, and Northern Insurance Company of New York, Plaintiffs-Appellants, v. NORTHERN ILLINOIS GAS COMPANY, Defendant-Appellee.

No. 3-98-0305.

Appellate Court of Illinois, Third District.

August 31, 1999.

Christopher W. Bohlen, Barmann, Kramer & Bohlen, P.C., Kankakee, John F. Brown, Jr. (argued), Paul R. Bartolacci, Cozen and O'Connor, Philadelphia, PA, for MBA Enterprises, Inc., Northern Insurance Company of New York.

George J. Tzanetopolous (argued), Robert M. Dow, Jr., Mayer, Brown & Platt, Chicago, for Northern Illinois Gas.

Justice BRESLIN delivered the opinion of the court:

Plaintiffs MBA Enterprises (MBA), d/b/a the Ramada Inn, and Northern Insurance Company filed suit against Northern Illinois Gas Company (NI Gas) to recover property damages in excess of $2 million caused by a gas explosion and fire at the Ramada Inn in Bradley, Illinois. The trial court granted NI Gas's motion for summary judgment based on the construction statute of repose of the Code of Civil Procedure (Code) (735 ILCS 5/13-214(b) (West 1996)) because MBA failed to commence the suit within 10 years of construction of the gas piping system. We find that, while the plaintiffs' claims regarding design and installation of the system are time-barred, their remaining allegations concerning the continued use of and sale of gas through the defective system survive. Accordingly, we affirm in part, reverse in part and remand.

BACKGROUND

NI Gas constructed and installed a gas piping system on the premises of the Ramada Inn in 1961. A stopper nipple assembly pipe was installed in the system as a bypass. The pipe served to connect a testing valve to the main supply pipe. The connection enabled NI Gas employees to inspect and service the gas piping system without disabling the system and interrupting business at the hotel. After installing the piping, NI Gas continued to use the stopper nipple and gas piping system to operate, sell and supply gas to Ramada Inn until the explosion in 1994.

MBA Enterprises acquired the Ramada Inn premises in 1992. In July of 1993, a NI Gas service technician performed an annual meter inspection and regulator overhaul on the Ramada Inn system. Approximately six months later, a Ramada Inn employee was changing the position of a louver which controlled entry of air into the boiler room where the gas system was located. When he heard a loud escape of gas from the system he immediately exited the room. The gas leakage caused an explosion and subsequent fire, severely damaging the Ramada Inn. The explosion was attributed to a fracture in the stopper nipple pipe. MBA, along with its insurer, filed suit against NI Gas alleging negligence, strict liability, breach of warranty of merchantability and breach of warranty of fitness. The breach of warranty claims were dismissed at the initial stages of the pleadings.

In preparation for trial, the plaintiffs retained two opinion witnesses. In their depositions, the witnesses stated that the gas leak was due to the failure of the stopper nipple used in the system. Both witnesses opined that during the assembly of the gas piping system, the stopper nipple was welded to the main pipe. A hole was then drilled with a power tool through the nipple and into the wall of the main pipe. Upon examination of the fractured pipe, it appeared that during the drilling procedure some of the wall of the nipple was abraded away by the installer drilling an off-centered hole. In addition, the particular stopper nipple utilized had both internal and external threads without the required plug and cap components. The witnesses deposed that the internal threads were unnecessary and weakened the wall of the stopper nipple.

In their complaint, the plaintiffs alleged that the explosion and resulting damage were due to NI Gas's negligent fabrication, installation, assembly, design, maintenance and supply of gas through a system containing a defective stopper nipple. Paragraph 15 included several allegations of defective design and installation of the system. However, subsection (c) stated that NI Gas was negligent for continuing to operate, sell and supply gas through the defective gas system without proper maintenance, inspection and testing to evaluate the integrity of the system. NI Gas moved for summary judgment on all negligence and strict liability claims, insisting that it was immune from liability under the construction statute of repose. The trial court granted the motion and the plaintiffs appeal.

DISCUSSION

The sole issue on appeal is whether the plaintiffs' entire complaint alleging negligent design and installation of the piping system, as well as negligent maintenance, sale and supply of gas through the defective system, is barred by section 13-214(b) of the Code (construction statute of repose).

The construction statute of repose provides:

"No action based upon tort, contract or otherwise may be brought against any person for an act or omission of such person in the design, planning, supervision, observation or management of construction, or construction of an improvement to real property after 10 years have elapsed from the time of such act or omission." 735 ILCS 5/13-214(b) (West 1996).

Section 13-214(b) applies when: (1) the item at issue is an improvement to real property; and (2) the defendant's actions fall within the scope of the activities enumerated in the statute. Adcock v. Montgomery Elevator Co., 274 Ill.App.3d 519, 211 Ill.Dec. 169, 654 N.E.2d 631 (1995). The statute protects anyone, regardless of status, if that party's engagement in an enumerated construction-related activity is the sole basis of a particular claim. People ex rel. Skinner v. Hellmuth, Obata & Kassabaum, Inc., 114 Ill.2d 252, 102 Ill.Dec. 412, 500 N.E.2d 34 (1986). However, acts unrelated to the initial construction of the improvement, such as the sale and distribution of improvements to real property, are not protected by the statute. Krueger v. A.P. Green Refractories Co., 283 Ill.App.3d 300, 218 Ill.Dec. 626, 669 N.E.2d 947 (1996). We review an order granting summary judgment de novo. Armstrong v. Washington, 289 Ill. App.3d 306, 225 Ill.Dec. 17, 682 N.E.2d 761 (1997).

The plaintiffs maintain that their theory that NI Gas was negligent for continuing to use, maintain and sell gas through the defective piping system does not fall within the scope of the statute. In response, NI Gas claims that the defect in the construction of the gas piping system is at the core of all claims advanced by the plaintiffs; thus, section 13-214(b) bars their suit.

The construction statute of repose was enacted for the express purpose of insulating all participants in the construction process from the onerous task of defending against stale claims. See generally W. Martorelli, State Statutes of Repose and Government Claims for Latent Defects in Design and Construction, 25 Pub. Cont. L.J. 199 (1996). The plain language of section 13-214(b) reflects that purpose but bars only those claims regarding the construction of an improvement to real property. 735 ILCS 5/13-214(b) (West 1996); Krueger, 283 Ill.App.3d at 304, 218 Ill.Dec. 626, 669 N.E.2d at 950.

The plaintiffs' complaint alleges a number of negligent acts by NI Gas that clearly fall within the purview of installation and construction of the piping system. However, while not artfully drafted, the complaint also alleges that NI Gas negligently continued to operate and maintain the system and continued to use the defective system to sell and supply gas to the Ramada Inn. Such claims of negligence are based on the theory that the gas company owed MBA an ongoing duty of care to operate and maintain the gas system in a safe manner. Metz v. Central Illinois Electric & Gas Co., 32 Ill.2d 446, 207 N.E.2d 305 (1965)(those who furnish gas must exercise a degree of care commensurate to the danger of supplying gas and use precaution to prevent injury). Consequently, these claims survive apart from the plaintiffs' claims related to the initial construction of the system. See Krueger, 283 Ill.App.3d at 304, 218 Ill.Dec. 626, 669 N.E.2d at 950(section 13-214(b) applies to activity of installing asbestos but not to related sales and distribution of asbestos claims); see also State Farm Mutual Automobile Insurance Co. v. W.R. Grace & Co., 834 F.Supp. 1052 (C.D.Ill.1993)(protection afforded from section 13-214(b) for construction-related activities but not for manufacturing-related acts). We therefore reverse the trial court's dismissal of this portion of the plaintiffs' complaint.

In rebuttal, NI Gas principally relies on O'Brien v. City of Chicago, 285 Ill.App.3d 864, 221 Ill.Dec.134, 674 N.E.2d 927 (1996), to support its argument that the crux of plaintiffs' claims is a defect in the design or construction of the improvement; therefore, the statute of repose bars all theories of the case. To the extent that O'Brien holds that the statute of repose bars any cause of action for negligence that may arise after the construction or installation of an improvement when the underlying claim is a defective design or construction claim, we decline to follow that case.

Instead, we reiterate our position in Krueger v. A.P. Green Refractories Co., 283 Ill.App.3d 300, 218 Ill.Dec. 626, 669 N.E.2d 947 (1996). The plaintiff in Krueger alleged that the defendant negligently engaged in the business of installing, selling and distributing asbestos. In holding that section 13-214(b) only applies to claims arising out of construction-related activities undertaken by the defendant, we found that the plaintiff's claims regarding the sale of a defective product were not time-barred. Krueger, 283 Ill.App.3d at 304, 218 Ill.Dec. 626, 669 N.E.2d at 950.

NI Gas insists that the great weight of Illinois authority compels us to hold that if the crux of the claim is a defect in the design or construction of the...