Morrow v. L.A. Goldschmidt Associates, Inc.

• Decision Date: 16 August 1984
• Docket Number: No. 83-2119,83-2119
• Parties: , 82 Ill.Dec. 152 Ronald D. MORROW; Dorothy J. Morrow; Edward M. Strenk; Arlene H. Strenk; Daniel D. Majchrzak, Christine E. Kukulka; Nelson T. Levings, Jr.; and Susan C. Levings, Plaintiffs-Appellants, v. L.A. GOLDSCHMIDT ASSOCIATES, INC.; Leo A. Goldschmidt; First Charter Service Corporation; and American National Bank, T/U/T39672, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 414

468 N.E.2d 414

126 Ill.App.3d 1089, 82 Ill.Dec. 152

Ronald D. MORROW; Dorothy J. Morrow; Edward M. Strenk Arlene H. Strenk; Daniel D. Majchrzak, Christine E. Kukulka; Nelson T. Levings, Jr. and Susan C. Levings Plaintiffs-Appellants, v. L.A. GOLDSCHMIDT ASSOCIATES, INC.; Leo A. Goldschmidt First Charter Service Corporation; and American National Bank, T/U/T39672, Defendants-Appellees.

No. 83-2119.

Appellate Court of Illinois, First District, Fourth Division.

Aug. 16, 1984.

[82 Ill.Dec. 154] Siegan, Barbakoff, Gomberg, Gordon & Elden, Ltd., Chicago, for plaintiffs-appellants; Steven P. Gomberg, James A. Reiman, Chicago, of counsel.

Ash, Anos, Freedman & Logan, Chicago, for defendant-appellee First Charter Service Corp.; Bruce T. Logan, George J. Anos, James L. Glass, Jr., Chicago, of counsel.

Gordon & Glickson, P.C., Chicago, for defendants-appellees L.A. Goldschmidt Associates and American Nat. Bank.

LINN, Presiding Justice:

Plaintiffs, purchasers of townhomes, brought an 11 count complaint against defendants, designer/builder/vendors, alleging breach of express warranty and breach of implied warranty of habitability, and requesting punitive damages. Counts VIII through XI, requesting punitive damages for wilful and wanton misconduct by defendants, were dismissed with prejudice. The remaining counts were sustained.

Plaintiffs now appeal the dismissal of Counts VIII through XI.

We reverse the decision of the trial court and remand with directions to reinstate Counts VIII through XI.

FACTS

Plaintiffs alleged the following facts in their third amended complaint. Defendant, L.A. Goldschmidt Associates, Inc. is an Illinois corporation engaged in the construction business. Defendant Leo A. Goldschmidt is a contractor and developer, and defendant First Charter Service Corporation (First Charter) is a bank service corporation. In 1976, these defendants jointly purchased a parcel of land in Palos Park, Illinois, and placed title to the property in defendant American National Bank, as land trustee.

Defendants Goldschmidt Associates, Leo A. Goldschmidt and First Charter formed a business entity known as The Commons of Palos Park (Commons). The Commons planned, designed and constructed a residential housing project in Palos Park known as "The Commons, Phase I", consisting of single family townhomes and condominiums. The homes ranged in price from over $70,000 to over $90,000.

Plaintiffs contracted with the Commons, agent for the trustee, to purchase four of the townhomes in the development. These purchase contracts were entered into prior to the completion of the construction of the homes. Closings on plaintiffs' transactions At the time of each closing, the Commons executed an express warranty with the purchaser, which provided that for a period of one year from the date of the execution of the warranty, the Commons would, among other things,

[82 Ill.Dec. 155] respectively occurred on December 29, 1978 (Morrow), December 15, 1978 (Strenk), February 27, 1979 (Majchrzak and Kukulka), and July 21, 1978 (Levings).

A. Correct all structural defects due to faulty construction and/or defective materials;

B. Warrant the basement to be waterproof and free from infiltration of water from penetration through the walls or floors;

C. Warrant the roof and roof flashings to be free from leaks; and

D. Warrant all plumbing to be in proper working order and free from all defects of workmanship and/or materials.

Both the sales contracts and the express warranties were made part of the pleadings.

Plaintiffs allege that at the time the townhomes were conveyed to them by defendants, numerous and substantial structural defects and contract variances were present. Several such defects are common to each home purchased. These include floors improperly supported due to lack of or improper installation of the floor support system, non-functioning of the reverse osmosis water system, and defective carpentry. In addition to these common defects, plaintiffs allege other defects particular to each home: these include extraordinary flooding and water leakage in the basement; roofs incapable of supporting design loads; gas and water leaks resulting from improperly fitted fixtures; sump pumps connected in violation of the Palos Park Municipal Sanitary Code; and malfunctioning of the heating/ventilation system.

Plaintiffs further allege that defendants had actual knowledge of these defects. In factual support of this allegation, plaintiffs refer to letters, made part of the pleadings, informing defendants of various building and code violations. In a letter dated September 11, 1978, authored by the building inspector of the Village of Palos Park and hand delivered by the police to the construction manager of the Commons, defendants were informed that the "workmanship [of the Commons] was extremely bad" and that there were code violations, some of which included:

"1. Floors not level

2. Supports foundation to plate, wedging not acceptable.

3. Lack of support under some floor areas.

4. Part of fire wall missing

5. Steel support beams resting on wooden blocks and wedges or a piece of brick. Should have steel plate and mortar.

and many other items I discussed with you * * * "

In another letter dated June 5, 1978, the chief engineer of the Metropolitan Sanitary District of Greater Chicago informed the mayor of Palos Park, with a copy to defendants, that the sewer system serving one of plaintiffs' homes was improperly installed such as to be substantially below minimum grade. Still another letter dated September 1978, authored by a building inspector for the Village of Palos Park and addressed to Palos Commons with copies to defendants, admonishes the Commons that it has been repeatedly notified to correct certain deficiencies and that occupancy is not to be allowed until permits have been issued subsequent to such correction. The admonition informs defendants that "[f]ailure to comply will result in a complete order to stop all construction and the posting of non occupancy notices on all buildings".

Plaintiffs further allege that they provided oral and/or written notice of the defects to defendants and made demands to repair all defects in accordance with the provisions of the warranties and that defendants, despite repeated demands by plaintiffs In Counts VIII through XI, plaintiffs request punitive damages for "wilful and wanton" misconduct as evidenced by defendants' failure to supervise the construction of the homes and to determine the competency of their agents; defendants' failure to inspect, attempt to detect and correct construction defects, reinspect, and search for similar defects in light of defendants actual knowledge. Within each of these counts, plaintiffs enumerate in substantial detail the specific defects particular to each home.

[82 Ill.Dec. 156] and actual knowledge of the defects, have failed to correct and cure them.

Pursuant to Code of Civil Procedure section 2-619 (Ill.Rev.Stat.1983, ch. 110, par.2-619), defendants moved to strike and dismiss plaintiffs' third amended complaint. In an order dated April 11, 1983, the trial court dismissed with prejudice Counts VIII through XI, those counts seeking punitive damages for wilful and wanton misconduct. The order was certified for appeal.

Plaintiffs now appeal the dismissal of those counts.

OPINION

In determining the propriety of a dismissal based on a motion to dismiss, the appellate court is concerned only with questions of law presented by the pleadings. (Circle Security Agency, Inc. v. Ross (1981), 99 Ill.App.3d 1111, 55 Ill.Dec. 110, 425 N.E.2d 1283.) The question presented by the instant appeal is whether plaintiffs state a claim for an award of punitive damages, generally a form of tort recovery, where the action brought sounds in contract, and the actual damages alleged reflect economic loss.

Defendants point out, and correctly so, that the general rule in Illinois precludes the recovery of punitive damages in an action for breach of contract. (Ash v. Barrett (1971), 1 Ill.App.3d 414, 274 N.E.2d 149) Defendants quote Alsip Homebuilders, Inc. v. Shusta (1972), 6 Ill.App.3d 65, 69, 284 N.E.2d 509, 512) to explain the reasoning behind this rule:

"The theory behind this rule rests upon a distinction drawn between compensation and punishment. If the general purpose underlying the law of damages is to promote security and prevent disorder, as Corbin points out, and breaches of contract do not cause as much resentment or other physical or mental discomfort as do wrongs called torts or crimes, then the remedies needed to prevent breaches of contract and satisfy the injured party are not as severe as those needed to punish the tort feasor or criminal."

Out of this very reasoning emerges the exception to the general rule. The general rule denying punitive damages for breach of contract does not apply in those exceptional cases where the breach amounts to an independent tort, and there are proper allegations of malice, wantonness or oppression. (Wallace v. Prudential Insurance Co. of America (1973), 12 Ill.App.3d 623, 299 N.E.2d 344.) In such cases, the allowance of punitive damages is actually for the tort, or, more precisely, for the defendants' culpable state of mind (Dobbs, Remedies § 3.9 at 207 (1973)) and the motive and conduct with which the tort was committed. (St. Ann's Home for the Aged v. Daniels (1981), 95 Ill.App.3d 576, 51 Ill.Dec. 64, 420 N.E.2d 478.) To support the existence of an independent tort, plaintiffs must allege facts which would bring their claim for punitive damages under any recognized tort theory. Illinois Sterling, Inc. v. KDI Corp. (1975), 33 Ill.App.3d 666, 338 N.E.2d 51.

In the instant case, the tort theory asserted by plaintiffs to justify the award of punitive damages is wilful and wanton misconduct. The trial court found that wilful and wanton misconduct is not an independent tort. Our research...