Palatine Nat. Bank v. Charles W. Greengard Associates, Inc.

• Decision Date: 03 November 1983
• Docket Number: No. 82-474,W,No. 756,No. 78-179,No. 2059,H,756,2059,78-179,82-474
• Citation: 74 Ill.Dec. 914,456 N.E.2d 635,119 Ill.App.3d 376
• Parties: , 74 Ill.Dec. 914 PALATINE NATIONAL BANK, as Trustee under Trust Agreementome State Bank of Crystal Lake, as Trustee under Trust Agreementauconda National Bank, as Trustee under Trust Agreement, and Investco, an Illinois partnership, Plaintiffs-Appellants, v. CHARLES W. GREENGARD ASSOCIATES, INC., an Illinois professional corporation, Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 635

456 N.E.2d 635

119 Ill.App.3d 376, 74 Ill.Dec. 914

PALATINE NATIONAL BANK, as Trustee under Trust Agreement No 756, Home State Bank of Crystal Lake, as Trustee under Trust Agreement No. 2059, Wauconda National Bank, as Trustee under Trust Agreement No. 78-179, and Investco, an Illinois partnership, Plaintiffs-Appellants, v. CHARLES W. GREENGARD ASSOCIATES, INC., an Illinois professional corporation, Defendants-Appellees.

No. 82-474.

Appellate Court of Illinois Second District.

Nov. 3, 1983.

Harold E. Collins, Bruce L. Goldman, Chicago, for plaintiffs-appellants.

Clausen, Miller, Gorman, Caffrey & Witous, James T. Ferrini, Henry R. Daar, Lisa D. Marco, Stephen D. Marcus, Chicago, for defendants-appellees.

NASH, Justice:

Plaintiffs, George Dunn, Henry Hop, Larry Brelsford, Benjamin Falk and Roger Wahlin, doing business as Investco, an Illinois partnership (Investco), appeal from an order of the circuit court of McHenry County dismissing Counts I through III and striking portions of Count IV of their second amended complaint at law filed against defendant, Charles W. Greengard Associates, Inc. (Greengard).

Investco's second amended complaint against Greengard consisted of four counts, the first three of which sounded in negligence and the fourth count in contract. All of the counts alleged the same factual background of the dispute between the parties. In 1973, Investco was formed for the purpose of purchasing, developing and selling real estate known as Loch Wood Acres. Towards that end, Investco retained Greengard for the preparation of preliminary engineering studies with respect to the property. The complaint alleges that Investco informed Greengard that it intended to annex Loch Wood Acres to the city of Crystal Lake; that the development was to occur in three phases over a seven year period; that the real estate was being purchased pursuant to a land contract which was financed through various banks; and, that Investco intended to develop and sell the improved lots as they were completed. In 1975, Investco entered into a written agreement with Greengard for professional engineering services which included the design of a system to dispose of storm and surface water from the real estate as well as to calculate the grading requirements for the different phases of the project. Investco alleged that it then became the duty of Greengard to use that degree of care and skill usually and customarily followed by other engineers under similar circumstances in the performance of these services. Greengard did design a system as contemplated by the written agreement and in 1976 Loch Wood Acres was annexed to the City of Crystal Lake.

The complaint further alleges that in June 1977, certain of the plaintiffs entered into a written agreement to sell portions of Phase I of Loch Wood Acres; that in February 1978, the storm water drainage system had been constructed, but it was contrary to the specifications and designs submitted by Greengard and water began to accumulate in the retention ponds. During the spring thaw of 1979, the retention ponds filled and overflowed resulting in the inundation of the undeveloped parts of the real estate. Because of the flooding, the City of Crystal Lake refused to permit further development of Loch Wood Acres and Investco was prevented from continuing its development of Phases II and III. In May 1979, Investco discharged Greengard for its failure to design an acceptable storm water drainage system. As a result of the delay caused by the flooding, various banks foreclosed on the real estate forcing Investco to convey all of its rights in the property to the mortgage holders.

Count I of Investco's complaint alleged also that Greengard breached its duty to Investco by designing an inadequate storm and surface water drainage system and sought damages for expenses and lost profits as well as for attorney fees incurred by Investco in actions and negotiations outside of this litigation. Count II of the complaint sought damages for Greengard's failure to adequately plan the landscape grading for the preparation of Phase I of Loch Wood Acres. Count III of the complaint sought punitive damages for Greengard's reckless, wilful and wanton conduct with respect to its negligence as specified in Counts I and II. Count IV was for breach of warranty premised upon the written agreement entered into between the parties.

Upon the motion of Greengard, the circuit court dismissed Counts I through III (sounding in negligence) in their entirety as contrary to the economic loss doctrine established by our supreme court in Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443. Although it did not dismiss Count IV, the trial court struck portions which sought damages for lost profits and attorney fees incurred in actions outside of this litigation. Investco appeals.

Initially, we note that for the purposes of ruling on a motion to dismiss all well pleaded facts contained in a complaint must be taken as true and all inferences therefrom must be drawn in favor of the non-movant. (Burks Drywall, Inc. v. Washington Bank & Trust Co. (1982), 110 Ill.App.3d 569, 572, 66 Ill.Dec. 222, 225, 442 N.E.2d 648, 651; Album Graphics, Inc. v. Beatrice Foods Co. (1980), 87 Ill.App.3d 338, 344, 42 Ill.Dec. 332, 408 N.E.2d 1041, 1046.) A complaint should not be dismissed for failure to state a cause of action unless it clearly appears that no set of facts could be proven under the pleadings which would entitle plaintiff to relief. (Burks Drywall, Inc. v. Washington Bank & Trust Co. (1982), 110 Ill.App.3d 569, 572, 66 Ill.Dec. 222, 225-26, 442 N.E.2d 648, 651-52; Felbinger & Co. v. Traiforos (1979), 76 Ill.App.3d 725, 731, 31 Ill.Dec. 906, 912, 394 N.E.2d 1283, 1289.) Although Illinois requires fact rather than notice pleading (Ill.Rev.Stat.1981, ch. 110, pars. 2-603(b), 2-612(c); Pelham v. Griesheimer (1982), 92 Ill.2d 13, 17, 64 Ill.Dec. 544, 546, 440 N.E.2d 96, 98), a complaint will not be dismissed if facts essential to its claim appear by reasonable implication and it reasonably informs the defendants of a valid claim under a general class of cases. Magana v. Elie (1982), 108 Ill.App.3d 1028, 1031, 64 Ill.Dec. 511, 513, 439 N.E.2d 1319, 1321; Central States, Southeast & Southwest Areas Pension Fund v. Gaylur Products, Inc. (1978), 66 Ill.App.3d 709, 713, 23 Ill.Dec. 487, 490, 384 N.E.2d 123, 126.

Investco initially contends that the dismissal of Counts I, II and III of its second amended complaint was erroneous in that the economic loss doctrine as set forth in Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443, does not apply to the case at bar. We do not agree. It is now settled in Illinois that when a defect of a product is of a qualitative nature and the alleged harm relates to the consumer's expectation that the product is of a particular quality resulting in solely economic injury, without personal injury or other property damage, the appropriate remedy lies in contract, and not in tort. (Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 81-85, 61 Ill.Dec. 746, 751-56, 435 N.E.2d 443, 448-53; Redarowicz v. Ohlendorf (1982), 92 Ill.2d 171, 176-77, 65 Ill.Dec. 411, 413-14, 441 N.E.2d 324, 326-27; Foxcroft Townhome Owners Association v. Hoffman Rosner Corp. (1983), 96 Ill.2d 150, 156, 70 Ill.Dec. 251, 253, 449 N.E.2d 125, 127.) This doctrine applies regardless of whether the tort theory involved is in strict liability or simple negligence. (Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 85, 61 Ill.Dec. 746, 754, 435 N.E.2d 443, 451.) The doctrine has been applied to deny recovery in tort in a variety of factual settings including: sale of a defective grain storage tank (Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443); the sale of a home (Redarowicz v. Ohlendorf (1982), 92 Ill.2d 171, 65 Ill.Dec. 411, 441 N.E.2d 324); latent construction defects (Foxcroft Townhome Owners Association v. Hoffman Rosner Corp. (1983), 96 Ill.2d 150, 70 Ill.Dec. 251, 449 N.E.2d 125); sales of computer software (Black, Jackson & Simmons Insurance Brokerage, Inc. v. International Business Machines Corp. (1982), 109 Ill.App.3d 132, 64 Ill.Dec. 730, 440 N.E.2d 282); and the design and assembly of a traveling ship unloader (Flintkote Co. v. Dravo Corp. (11th Cir.1982), 678 F.2d 942).

Even prior to the definitive Moorman decision in 1982, the Illinois courts have recognized that purely economic loss caused by the failure to perform contractual duties is not recoverable under tort theories when the parties to the litigation are in privity of contract. Heat Exchangers, Inc. v. Aaron Friedman, Inc. (1981), 96 Ill.App.3d 376, 51 Ill.Dec. 828, 421 N.E.2d 336 (sale of heat pumps); Fireman's Fund American Insurance Companies v. Burns Electronic Services, Inc. (1980), 93 Ill.App.3d 298, 48 Ill.Dec. 729, 417 N.E.2d 131 (sale of defective fire alarm); Album Graphics, Inc. v. Beatrice Foods Co. (1980), 87 Ill.App.3d 338, 42 Ill.Dec. 332, 408 N.E.2d 1041 (sale of glue with warranty); Alfred N. Koplin & Co., Inc. v. Chrysler Corp. (1977), 49 Ill.App.3d 194, 7 Ill.Dec. 113, 364 N.E.2d 100, leave to appeal denied ...