US Home Corp. v. GEORGE W. KENNEDY CONST.

• Decision Date: 17 September 1985
• Docket Number: No. 82 C 7775.,82 C 7775.
• Citation: 617 F. Supp. 893
• Parties: U.S. HOME CORPORATION, Plaintiff, v. GEORGE W. KENNEDY CONSTRUCTION COMPANY, INC., et al., Defendants. MACKIE CONSULTANTS, INC., et al., Third Party Plaintiffs, v. ARMCO, INC., Third Party Defendant.
• Court: U.S. District Court — Northern District of Illinois

617 F. Supp. 893

U.S. HOME CORPORATION, Plaintiff, v. GEORGE W. KENNEDY CONSTRUCTION COMPANY, INC., et al., Defendants.

MACKIE CONSULTANTS, INC., et al., Third Party Plaintiffs, v. ARMCO, INC., Third Party Defendant.

No. 82 C 7775.

United States District Court, N.D. Illinois.

September 17, 1985.

Edward M. Crane, Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago, Ill., for Mackie and Lorek.

Arthur Debofsky, Debofsky & Debofsky, and Ronald S. Fishman, Fishman & Fishman, Chicago, Ill., for Geo. W. Kennedy Const. Co., Inc.

David J. Gibbons, Edward L. Michael, Chadwell & Kayser, Ltd., Chicago, Ill., for Armco, Inc.

MEMORANDUM OPINION AND ORDER

SHADUR, District Judge.

This multiparty litigation was originally launched by U.S. Home Corporation ("U.S. Home"), whose First Amended Complaint (the "Complaint") runs against George W. Kennedy Construction Company, Inc. ("Kennedy"), Mackie Consultants, Inc. ("Mackie"), William Lorek ("Lorek") and American States Insurance Company ("American"). U.S. Home charges:

1. Kennedy and Mackie with breach of contract,

2. Kennedy with breach of express and implied warranties and

3. Kennedy, Mackie and Lorek with negligence,

all arising out of the construction of sanitary sewers that serve the single-family Waterford Woods residential development in Lindenhurst, Illinois. Kennedy and Mackie and Lorek have in turn filed two-count Third Party Complaints (the "Kennedy Complaint" and the "Mackie-Lorek Complaint") against Armco, Inc. ("Armco"),¹ seeking recovery via contribution and indemnity.

Armco now moves to dismiss each of the Kennedy Complaint and the Mackie-Lorek Complaint under Fed.R.Civ.P. ("Rule") 12(b)(6). For the reasons stated in this memorandum opinion and order, the motion is granted in principal part and denied in part.

Facts²

U.S. Home, a real estate developer, suffered more than $450,000 in damages when the sanitary sewer installation for its major single-family residence development in Lindenhurst proved defective and actually collapsed in part. Mackie had designed the system (its employee Lorek was the responsible professional engineer) and Kennedy had installed it, each under a separate contract with U.S. Home. Armco truss pipe and other Armco-manufactured accessory components were used in construction of the system. No contractual arrangement existed between Armco and either Kennedy or Mackie-Lorek.

Kennedy, Mackie and Lorek contend any liability any of them might have to U.S. Home would be occasioned not by their own delinquency but rather by the defective conditions of the Armco products involved. That, they say, entitles each of them to contribution and indemnity. Armco retorts none of Kennedy, Mackie and Lorek states a cause of action for either such claim.

Contribution

Section 302(a) of the Illinois Contribution Among Joint Tortfeasors Act (part of the "Act," Ill.Rev.Stat. ch. 70, §§ 301-305) provides:

Except as otherwise provided in this Act, where 2 or more persons are subject to liability in tort arising out of the same injury to person or property, or the same wrongful death, there is a right of contribution among them, even though judgment has not been entered against any or all of them.

Thus the Act expressly requires each party to the contribution action to be "subject to liability in tort," and the sensible reading of that phrase connotes liability to the injured party—here U.S. Home. In those terms each of Kennedy, Mackie and Lorek has a viable contribution claim only as to a portion of U.S. Home's potential sources of recovery.

1. Kennedy's and Mackie's Potential Contract Liability to U.S. Home

Armco is quite right in urging no contribution would lie if Kennedy's or Mackie's liability to U.S. Home were established on a breach of contract theory. Even were Armco then determined to be a tortfeasor as to U.S. Home, no contribution would be available to Kennedy or Mackie because the requisite "2 or more persons ... subject to liability in tort" would be lacking. Intamin, Inc. v. Figley-Wright Contractors, Inc., 605 F.Supp. 707, 709-10 (N.D.Ill.1985).

Both Kennedy and Mackie purport to find shelter against that fatal conclusion in Maxfield v. Simmons, 96 Ill.2d 81, 70 Ill. Dec. 236, 449 N.E.2d 110 (1983). But Maxfield distinguished carefully between claims sounding in contract and those sounding in tort, holding that only the latter would trigger rights of contribution or indemnification. Indeed, the very portion of the Maxfield opinion quoted at Kennedy Mem. 3 makes plain the only predicate for contribution there was that (adapting the quotation to this case) "the liability, if any, imposed on Kennedy or Mackie will be the result not of breach of contract, but of tortious conduct" (id. at 87, 70 Ill.Dec. at 238, 449 N.E.2d at 112).

In sum, contribution on any U.S. Home contract-breach recovery is simply unavailable. This opinion turns then to the same question in the tort arena.

2. Kennedy's, Mackie's and Lorek's Potential Tort Liability to U.S. Home

None of the litigants has dealt properly with the tort-contribution subject. Because the Act treats with the topic so plainly (though that could not be guessed from the parties' memoranda), no extended discussion is required.

Armco really glosses over (or ignores entirely) the negligence theories advanced by U.S. Home against the third-party plaintiffs, as referred to in the two Third Party Complaints. To the extent U.S. Home is successful against any of Kennedy, Mackie and Lorek on such negligence grounds³ and Armco is also found negligent or strictly liable⁴ as to U.S. Home, the "2 or more persons ... subject to liability in tort" would be present. And that of course is all the Act requires for contribution from Armco.

But each of the third-party plaintiffs is equally guilty of glossing over the relevant provision of the Act.⁵ As already indicated, what "subject to liability in tort" means is liability to the original plaintiff (here U.S. Home), not liability of the third-party disputants inter sese. Intamin, 605 F.Supp. at 710.

Yet Kennedy's Complaint sets out a contribution claim full of irrelevant allegations as to Armco's duty to others than U.S. Home (Count I ¶ 5):

That Armco, Inc. had a duty to Kennedy, Mackie Consultants, Inc. and William F. Lorek and U.S. Home to exercise due care in the design, manufacture and marketing of Armco truss pipe.

And Kennedy's Count I ¶ 4 asserts various potential strict liability or negligence breaches by Armco, without identifying how any of those violated a duty owed to U.S. Home. Even worse, the Mackie-Lorek Complaint may be searched in vain for any hint of how Armco's asserted misconduct impinged on a duty running from it to U.S. Home.

Despite those flaws in the third-party complaints, the fact remains Armco may be subject to contribution claims for the reason stated at the outset of this section. Consequently it seems most efficient⁶ to deny Armco's motion to dismiss on condition each of the Third Party Complaints is amended on or before September 30, 1985 to conform to this opinion.

Indemnity

As contrasted with contribution and its risk-sharing approach, indemnity is an all-or-nothing concept. Implied (that is, not expressly contractual) indemnity was originally a product of, and largely a judicial response to, the era when the rule against contribution among joint tortfeasors—coupled with a plaintiff's absolute choice of whom to sue—sometimes left a more culpable party free of liability while a lesser wrongdoer bore the entire cost of plaintiff's injuries. As to Illinois' adoption of the indemnity concept in the area of strict products liability, see Suvada v. White Motor Co., 32 Ill.2d 612, 624, 210 N.E.2d 182, 188-89 (1965). And as to the identical rationale for the judicial creation of the active-passive negligence theory of indemnity, see Skinner v. Reed-Prentice Division Package Machinery Co., 70 Ill.2d 1, 12-13, 15 Ill.Dec. 829, 833, 374 N.E.2d 437, 441 (1970).

In this case U.S. Home had originally joined Armco as a defendant on strict liability grounds. After this Court had upheld that cause of action (solely in pleading terms) against Armco's Rule 12(b)(6) attack, 565 F.Supp. 67 (N.D.Ill.1983), U.S. Home nonetheless dismissed out Armco. Now the third-party plaintiffs, urging Armco was the real culprit because of its defective product, seek to shift all their potential liability to Armco.

But it should be obvious from the very origins of implied indemnity that passage of the Act, which removed a good part of the policy underpinnings from the indemnity doctrine, would work some dramatic changes in indemnity as well as contribution. And that has in fact taken place. Earlier this year this Court rejected the Mackie-Lorek cross-claim for indemnity against Kennedy because post-Act case law (most importantly Morizzo v. Laverdure, 127 Ill.App.3d 767, 83 Ill.Dec. 46, 469 N.E.2d 653 (1st Dist.1984)) "has specifically held Illinois' common-law cause of action for active-passive indemnity has not survived passage of the ... Act." U.S. Home Corp. v. George W. Kennedy Construction Co., 601 F.Supp. 84, 86 (N.D.Ill.1985).

In an important sense the Kennedy and Mackie-Lorek claims against Armco are, on the third-party plaintiffs' own characterizations of those claims, of that same active-passive type. And to that extent the logic of this Court's earlier opinion bars such claims. However, the third-party claimants also urge Armco's vulnerability in strict liability terms renders it liable in indemnity to them for any exposure they may have to both (1) U.S. Home's breach of contract and breach of warranty claims and (2) U.S. Home's negligence claims.

As to contract-type claims (including warranty claims), that is simply wrong. It is based on a flat-out misreading of Maxfield, which—after speaking of indemnification (as well as contribution) as being triggered by tortious conduct on the part of the third-party defendants—said, again...