Venturi, Inc. v. Austin Co.
| Decision Date | 08 March 1988 |
| Docket Number | Civ. No. 87-4373. |
| Citation | 681 F. Supp. 584 |
| Court | U.S. District Court — Southern District of Illinois |
| Parties | VENTURI, INC., a Delaware Corporation, Plaintiff, v. The AUSTIN COMPANY, A Corporation, and General Accident Insurance Company, a Corporation, Defendants. |
COPYRIGHT MATERIAL OMITTED
Morris Lane Harvey, Fairfield, Ill., for plaintiff.
Michael Reda, Robert Wilson, Edwardsville, Ill., Robert B. Wedge, David L. Tank, Atlanta, Ga., for defendants.
This matter is before the Court on plaintiff's Motion to Dismiss (Document No. 13). The Motion urges the Court to dismiss the five counterclaims asserted by the defendants in their Answer on the basis of limitations and failure to state a claim on which relief can be granted.
It appears from the record that on March 25, 1977, defendant, the Austin Company (Austin), contracted with plaintiff, Venture, Inc. (Venturi), to construct certain silos and other facilities for an entity known as Dixie Portland Flour Mills, Inc. (Dixie) at that firm's Milner, Georgia site.1 Under this agreement, Venturi performed their work as a subcontractor of Austin. Venturi's work was apparently substantially completed around December 7, 1978. Almost seven years later, in August of 1985,2 cracks began appearing in the walls of the silos which resulted in Dixie making a demand on Austin to repair them. Austin thereafter made substantial repairs to the silos, incurring expenses allegedly in excess of $574,000.00 for which it made a claim on its insurer for the project, General Accident Insurance Company (General). Apparently, General, pursuant to its policy in favor of Austin, at least partially reimbursed Austin for its expenses in repairing the silos. Thereafter, in August of 1987, General demanded reimbursement from Venturi for the funds it had paid Austin to repair the silos.
On October 9, 1987, Venturi filed a Complaint for Declaratory Judgment pursuant to § 2-701, Ill.Code of Civil Procedure, SHA ch. 110, ¶ 2-701, in the Circuit Court of Wayne County, Illinois, seeking a declaration of its rights and responsibilities to Austin and General under its contract with Austin. On November 30, 1987, Austin and General removed that case to this Court in accordance with 28 U.S.C. § 1446 asserting diversity of citizenship under 28 U.S.C. § 1332 as the basis for this Court's jurisdiction of the matter. Concurrently, Austin and General filed their Answer and asserted five counterclaims: 1) breach of contract, 2) negligence, 3) statutory fraud, 4) express indemnity, and 5) implied indemnity. These counterclaims are the subject of Venturi's Motion to Dismiss.
As a threshold matter, the Court notes that since its jurisdiction is derived from diversity of citizenship, the substantive law of Illinois, as well as its applicable conflicts of laws decisions, are controlling. Hartford Accident and Indemnity Co. v. Crider, 392 F.Supp. 162, 167 (N.D.Ill.1974) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941).) Illinois, in choice of laws questions, follows the "most significant contacts" approach of the Restatement (Second) of Conflict of Laws § 145. Ingersoll v. Klein, 46 Ill.2d 42, 262 N.E.2d 593 (1970); see also, Edwardsville Nat. Bank v. Marion Laboratories, Inc., 808 F.2d 648, 651 (7th Cir.1987).
As the defendants correctly note, the statute is not applicable where one of the parties is a resident of Illinois. Coan v. Cessna Aircraft, 53 Ill.2d 526, 293 N.E.2d 588 (1973); see also Nutty v. Universal Engineering Corp., 564 F.Supp. 1459, 1461-62 (S.D.Ill.1983), Miller v. Lockett, 75 Ill.Dec. 224, 457 N.E.2d 14 (1983). However, defendant incorrectly asserts that a "resident" for the statute's purpose is the same as a "resident" for diversity purposes. Such is not the case.
There appears to be no state court decision defining corporate residency for borrowing act purposes but the Northern District of Illinois courts have held that in the absence of a statutory or court-supplied definition, we, as federal courts, must apply—as would the state courts—the general common law approach to corporate residency. See, Hollins v. Yellow Freight System, Inc., 590 F.Supp. 1023 at 1026 (N.D.Ill.1984). This Court agrees. That being the case, the Court holds that for borrowing act purposes, a corporation is a resident only of the state(s) in which it is incorporated. Id. See also, Edward Hines Lumber Co. v. Vulcan Materials Co., 669 F.Supp. 854, 857 n. 4 (N.D.Ill. 1987). Thus, since it is undisputed that Venturi is a Delaware corporation, it is not an Illinois resident for borrowing act purposes and the statute applies. The impact of the statute on Austin's and General's counterclaims will be discussed infra.
Having reached the point where the Court begins its analysis of plaintiff's Motion, it deems it useful to summarily outline the sequence of events leading to this lawsuit, especially in light of the fact that numerous limitations questions exist.
March 25, 1977.. Date of Contract between
Venturi and Austin
December 7, 1978 Work "substantially" completed
by Venturi
August 16, 1985 Cracks discovered by Dixie
October 1, 19853 Demand made by Dixie on
Austin
September 4, 1987 Demand made by Austin on
General
September 16, Demand made by General
1987......... on Venturi.
Austin and General claim that Venturi breached its contract with Austin by virtue of its failure to follow the plans and specifications made a part of that contract in constructing the silos. Venturi claims that defendants' claims are barred in Illinois by virtue of the borrowing act because they would be barred in Georgia. In Illinois, the statute of limitations on written contracts is ten years. S.H.A. ch. 110, ¶ 13-206. The general rule is that the statute begins to run as soon as the cause of action accrues. U.S. Fidelity Co. v. Dickason, 277 Ill. 77, 115 N.E. 173 (1917). In Georgia, the statute of limitations on written construction contracts is six years. Ga. Code Ann. § 3-705. Benning Construction Company, et al. v. Lakeshore Plaza Enterprises, Inc., 240 Ga. 426, 241 S.E.2d 184 (1977). Under Georgia law, the statute of limitations runs from the time the contract is broken and not at the time the actual damages result or are ascertained. Space Leasing Associates, et al. v. Atlantic Building Systems, Inc., 144 Ga.App. 320, 241 S.E.2d 438 (1977). Thus, in both Illinois and Georgia, limitations for breach of contract run from the time of the breach.
For the purposes of this counterclaim, it is clear that Austin and General's claim arose in Georgia, for that is where the breach occurred when Venturi allegedly failed to perform their work in accordance with Austin's plans and specifications. The next step then is to determine if the claim would be barred in Georgia.
Venturi apparently did the allegedly defective work prior to its substantial completion of the job, however, because the Court has no exact time to work from, it will assume that the breach occurred at the time the work was substantially completed, December 7, 1978. Therefore, limitations began to run on that date. Applying Illinois law, limitations run on December 6, 1988. Applying Georgia law, limitations ran on December 6, 1984. Hence, under Georgia law, defendants' counterclaim for breach of contract would be barred and therefore could not be brought in Illinois because of the borrowing act.
Presupposing this conclusion, defendants additionally assert that S.H.A. ch. 110, ¶ 13-207 precludes plaintiff's assertion of limitations. That statute reads in relevant part:
A defendant may plead a set-off or counterclaim barred by the statute of limitation, while held and owned by him or her, to any action, the cause of which was owned by the plaintiff or person under whom he or she claims, before such set-off or counterclaim was so barred, and not otherwise. Emphasis added.
Giving the wording of the statute its literal meaning, a party may not assert a limitations defense to a counterclaim if that party's claim arose before the counterclaim was barred by limitations. As will be shown, Venturi's declaratory claim did not arise until after limitations had run on defendants' counterclaim for breach of contract.
Venturi filed its Complaint in state court pursuant to Illinois' declaratory judgment statute, S.H.A. ch. 110, ¶ 2-701. In order for a plaintiff to have standing under the statute, there must be an actual controversy, (i.e., the facts and issues are not premature or moot) and the party seeking declaratory relief must possess a personal claim, status or right which is capable of being affected. Underground Contract Ass'n v. City of Chicago, 66 Ill.2d 371, 5 Ill.Dec. 827, 362 N.E.2d 298 (1977). Put in a more comprehensible form, the test is whether, considering all the circumstances, there is substantial controversy between the parties having adverse legal interests of sufficient immediacy and reality to warrant issuance of a declaratory judgment. Clyde Sav. & Loan Ass'n v. May Dept. Stores, 100 Ill.App.3d 189, 55 Ill.Dec. 630, 426 N.E. 2d 955 (1981).
In the case at bar, Venturi first received notification of General and Austin's claim against it on September 16, 1987. The Court, in light of the authority cited above, holds that Venturi had no standing to bring (and thus did not "own") a...
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