People ex rel. Peters v. Murphy-Knight

• Decision Date: 04 June 1993
• Docket Number: MURPHY-KNIGHT,No. 1-90-1982,1-90-1982
• Citation: 618 N.E.2d 459,248 Ill.App.3d 382,187 Ill.Dec. 868
• Court: United States Appellate Court of Illinois
• Parties: , 187 Ill.Dec. 868 The PEOPLE of the State of Illinois ex rel., George PETERS, Chairman of the Illinois Capital Development Board, Plaintiff-Appellant, v.; Murphy/Jahn Associates, Inc.; Lester B. Knight & Associates, Inc.; Richard Stamm d/b/a Industrial Refrigeration Inc.; Economy Mechanical Industries of Illinois, Inc.; R & D Development Company; Sullair Corporation; Safeco Insurance Company of America; Morse Diesel, Inc.; Newberg-Paschen; Gust K. Newberg Construction Company; Paschen Contractors, Inc.; the Aetna Casualty and Surety Company; and Hartford Fire Insurance Company, Defendants, (Chester Jensen & Co., Inc., Defendant-Appellee).

Page 459

618 N.E.2d 459

248 Ill.App.3d 382, 187 Ill.Dec. 868

The PEOPLE of the State of Illinois ex rel., George PETERS Chairman of the Illinois Capital Development Board, Plaintiff-Appellant, v. MURPHY-KNIGHT; Murphy/Jahn Associates, Inc.; Lester B Knight & Associates, Inc.; Richard Stamm d/b/a Industrial Refrigeration Inc.; Economy Mechanical Industries of Illinois, Inc.; R & D Development Company; Sullair Corporation; Safeco Insurance Company of America; Morse Diesel, Inc.; Newberg-Paschen; Gust K. Newberg Construction Company; Paschen Contractors, Inc.; the Aetna Casualty and Surety Company; and Hartford Fire Insurance Company, Defendants, (Chester Jensen & Co., Inc., Defendant-Appellee).

No. 1-90-1982.

Appellate Court of Illinois First District, Fifth Division.

June 4, 1993.

Office of the Atty. Gen., State of Ill., Chicago, for appellant (James Carroll, Deborah Gibula and Brian Farley, of counsel).

Jenner & Block, Chicago, for appellees (Keith Bode, Joseph Bisceglia and Gabrielle Sigel, of counsel).

Presiding Justice GORDON delivered the opinion of the court:

This appeal arises from the dismissal pursuant to section 2-615 of the Code of Civil Procedure (Ill.Rev.Stat.1991, ch. 110, par. 2-615) of count X of plaintiff's complaint for damages arising from the design, manufacture and installation of the heating, ventilation and air conditioning (HVAC) system in the State of Illinois Center (SOIC) in Chicago.

The first nine counts of plaintiff's complaint, which are incorporated by reference into count X, seek recovery against the architects, engineers, construction managers, the general contractor and several subcontractors and materialmen, under the theories of professional malpractice, breach of contract, and breach of express and implied warranties. Count X seeks recovery under a theory of fraud from Chester-Jensen which supplied, through a sub-contractor, thermal banks, or ice builders, for the HVAC system.

Among the allegations from counts I through IX incorporated into count X are the following. In March 1981, the Capital Development Board (hereafter CDB) awarded a contract to furnish and install the HVAC system for the SOIC, to Economy Mechanical Industries of Illinois (hereafter EMI), a plumbing, heating and air conditioning contractor. Under the provisions of its contract with CDB, EMI was to furnish eight thermal banks and ancillary equipment meeting the State's criteria.

On March 30, 1981, Chester-Jensen submitted a proposal to EMI for thermal banks and ancillary equipment for the HVAC system. In a submittal letter accompanying the proposal, James Donovan wrote that he was presenting Chester-Jensen's "written proposal covering the eight (8) Ice Builders, as called for in the specifications." The proposal stated:

"We propose to furnish the equipment specified in the following, and further described in the enclosed literature:

Model: XM-14-14-100, eight (8) required.

Capacity: 100,000 pounds of ice at a 2 1/2" ice thickness, (1200 tons latent storage)."

The literature referenced in the proposal was a brochure from Chester-Jensen entitled "Air Agitated Ice Builders" which described the principles underlying the use of ice builders as an economical and efficient method of cooling, and listed various models of ice builders offered by Chester-Jensen. The brochure included a model M-14-14-100, but did not list model XM-14-14-100 as proposed by defendant.

EMI entered into a subcontract agreement with R & D Development Company, Inc., (hereafter R & D), a corporation engaged in the piping, heating, and plumbing business, for the purchase and installation of the thermal banks. EMI issued a purchase order to R & D for the purchase of eight thermal banks and ancillary equipment, and R & D, in turn, purchased the thermal banks from Chester-Jensen. The thermal banks were delivered in the spring of 1982, and installed in the SOIC sometime thereafter.

Tenants began to move into the SOIC in early 1985. That summer and the next, extremely high temperatures caused by "an inadequately designed and defectively installed and constructed air conditioning system" made the building "virtually uninhabitable." Damages suffered as a result of the high temperatures include the expenditure In count X, plaintiff alleges that defendant represented in its proposal and March 30, 1981, letter to EMI, that defendant's equipment was "capable of building one hundred pounds of ice per thermal bank in a uniform thickness of 2 1/2" along each refrigerant coil, in a period of twelve hours." These parameters constituted "Performance Specifications" developed by the CDB which proposed equipment was required to meet. Those performance specifications included the following concerning the thermal banks:

[187 Ill.Dec. 871] of at least $10,000,000 on modifications and repairs to the system. [248 Ill.App.3d 385] Plaintiff also suffered other damages of at least $5,000,000 as a result of the extreme heat in the building, including lost rent from commercial tenants, lost work days from State employees who became ill as a result of the heat, lost productivity from State employees and excessive electrical consumption caused by the widespread use of portable electrical fans by employees and tenants.

"Performance: Each of the 8 thermal banks shall be capable of making 100,000 pounds of ice in 2 1/2 inch thickness on the coils in 12 hours under the following conditions:

1. Initial water temperature: 42F

2. Refrigerant R-22 with 3:1 overfeed

3. Evaporating temperature: 18F

4. Nominal bank size: 10 feet high, 10 feet wide, 40 feet long."

Plaintiff further alleged that defendant's own literature represented that the thermal banks would perform according to the CBD's performance specifications. The literature included the following:

"STANDARD RATING DATA

1. All ice builders are rated at 1000 pounds of ice per ton of refrigeration with nominal 12 hour building time. This means normal freezing or evaporation rate is 12,000 BTU per hour for 12 hours time to build each 1000 pounds of ice. Evaporation is usually at 20? F (3 psig.) Ice Builder capacity is based on 2 1/2 ice thickness.

2. Maximum evaporation rate with agitation is approximately 200% of nominal rating. At maximum evaporation rate normal Ice Builder capacity could be realized in approximately 6 hours."

Count X further alleged that defendant knew both at the time it made the above representations and when the equipment was delivered that its equipment could not meet the Performance Specifications set forth by the CDB. Plaintiff alleged that this knowledge is shown by a letter sent by defendant in November 1981, to another contractor concerning thermal banks proposed for a different project. In that letter, defendant wrote "In our estimation, it is doubtful that you could recover the full complement of the Ice Builder in 12 hours when that full capacity requires a thickness of 2 1/2"."

The complaint further alleged that plaintiff was a third-party beneficiary of the contract between EMI and defendant, and that these misrepresentations were made for the purpose of inducing EMI to purchase defendant's thermal banks. Plaintiff also alleges that it purchased the thermal banks in reliance on defendant's misrepresentations.

Finally, plaintiff alleged that

"the thermal banks, as installed, did not meet the Performance Specifications * * * in numerous ways, which included, but were not limited to the following:

a. The thermal banks were incapable of building 100,000 pounds of ice in a 12 hour time period; and

b. The thermal banks were incapable of building ice in a uniform 2 1/2" thickness along the refrigerant coils."

In addition to the other damages listed above, the complaint sought punitive damages in excess of $5,000,000 on account of Chester-Jensen's alleged fraud.

The trial court granted Chester-Jensen's section 2-615 motion to dismiss the third amended fraud count and this appeal followed.

OPINION

A motion to dismiss pursuant to section 2-615 of the Code of Civil Procedure (Ill.Rev.Stat.1989, ch. 110, par. 2-615) attacks the sufficiency of a complaint, and is to be decided solely on the allegations set forth in the complaint. (Disc Jockey Referral Network, Ltd. v. Ameritech Publishing of Illinois (1992), 230 Ill.App.3d 908, 172 Ill.Dec. 725, 596 N.E.2d 4.) The motion admits all facts well pleaded, but conclusory allegations of law or fact are not admitted. (Knox College v. Celotex Corp. (1981), 88 Ill.2d 407, 58 Ill.Dec. 725, 430 N.E.2d 976.) Exhibits attached to the complaint are part of the pleading, and the facts stated in such exhibits are considered as if alleged in the complaint. (Outboard Marine v. Chisholm & Sons, Inc. (1985), 133 Ill.App.3d 238, 88 Ill.Dec. 336, 478 N.E.2d 651.) The complaint should be dismissed only if it appears that plaintiff can prove no set of facts under the pleadings which would entitle him to the relief sought. (Disc Jockey Referral Network, 230 Ill.App.3d 908, 172 Ill.Dec. 725, 596 N.E.2d 4.) On review, the question is whether, when viewed in the light most favorable to the plaintiff, the facts alleged in the complaint adequately state a cause of action. (County of Cook v. City of Chicago (1992), 229 Ill.App.3d 173, 171 Ill.Dec. 108, 593 N.E.2d 928.) Although plaintiff argues that his complaint adequately alleges the elements of a cause of action in fraud, we disagree only with respect to the element of reliance.

The elements of a cause of action for fraudulent misrepresentation are: "(1) a false statement of a material fact; (2) known or believed to be false by the party making it; (3) intent to induce the other party to act; (4) action by the other party in reliance on the truth of the statement; and (5) damage to the other party resulting from such reliance." (Soules v. General Motors Corp. (1980), 79 Ill.2d 282, 286, 37 Ill.Dec. 597, 402 N.E.2d 599.) The facts which constitute an alleged fraud must be pleaded with specificity...