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Ferentchak v. Village of Frankfort

OPINION FILED JANUARY 26, 1984.

PHILIP J. FERENTCHAK ET AL., PLAINTIFFS-APPELLEES,

v.

THE VILLAGE OF FRANKFORT ET AL., DEFENDANTS-APPELLANTS (ALBERT H. KRUSEMARK, JR., ET AL., DEFENDANTS).



Appeal from the Circuit Court of Will County; the Hon. Charles P. Connor, Judge, presiding.

JUSTICE ALLOY DELIVERED THE OPINION OF THE COURT:

This is a consolidated appeal from judgments entered by the circuit court in favor of plaintiffs Philip and Caroline Ferentchak and against defendant Robert E. Hamilton and defendant village of Frankfort, a municipal corporation. The case is based upon property damage to the plaintiffs' home in the village of Frankfort as a result of alleged negligence by the defendants. The jury found against both defendants. The separate appeals by the defendants have been consolidated for appeal. A threshold issue, raised by both defendants, is whether the plaintiffs' negligence actions seek merely "economic damages," and are, therefore, barred by the decisions of the Illinois Supreme Court in Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443, and Redarowicz v. Ohlendorf (1982), 92 Ill.2d 171, 441 N.E.2d 325. Since we find no bar to the negligence actions under Moorman, we also address the other issues raised by the defense. Defendant Robert Hamilton contends that his liability, as architect and subcontractor, terminated upon completion of his contract with the builder and acceptance of his work. He also contends that the trial court committed prejudicial error in permitting plaintiffs' expert to testify to his opinion as to unethical conduct by Hamilton. The municipal defendant, village of Frankfort (hereinafter Frankfort), argues that the plaintiffs failed to both state and prove any cause of action against it. We turn to the facts as found in the record.

In 1971, Albert Krusemark (hereinafter developer) engaged defendant Robert Hamilton, an Illinois civil engineer and sole proprietor of his own consulting firm, to design and oversee the construction work on a subdivision in Frankfort. The contract called upon Hamilton to design and construct the subdivision so as to meet applicable code requirements of the village. Included in the subdivision design and construction work was a surface water drainage system for the project. Hamilton, pursuant to his contract with developer, did the engineering work on the project.

Hamilton, at the same time, was also the village engineer for Frankfort. In that capacity, he reviewed the subdivision plans submitted by developer to the village planning commission. Such review required him to assess if the proposed plans complied in all respects with the village's building and zoning codes. Hamilton reviewed the plans and passed them, advising the board in writing that they conformed to applicable village standards. The subdivision plat was accepted by the village and the plat was recorded in 1973.

Hamilton's plans concerning the surface water drainage system for the subdivision included a 20-foot wide channel easement for surface water drainage between the northern boundary of Lot 82 and the southern boundary of Lot 81 in the subdivision. The designation "channel easement" was on the plat of the subdivision between those two lots, although there were no specifications on the plans indicating the shape or depth of any channel to be constructed. The village's 1971 ordinances did not require that such specifications be included on subdivision plats. Hamilton would testify later at trial that the omission of specifics was intentional, to permit individual development of the lots, while reserving to the village the right to restore the natural drainage, through use of the channel easement. Hamilton also testified that no specifics were set forth because there was no way of knowing how the adjacent properties would be developed, which development would affect the design of the channel.

Lot 81, the property at issue herein, was sold by developer to Lidio Filippo (hereinafter builder) in 1975. Builder then applied to the village for a building permit for construction of a single-family residence on Lot 81. At the time of his application, he was informed by William Knippel, building and zoning codes administrator for the village (hereinafter Code Administrator), that the foundation grade of the home had to be a certain number of inches about the mid-level of the curb or street. Builder testified at trial that Code Administrator informed him specifically of what foundation grade to build for the house. Code Administrator testified that he informed the builder of the standard minimum foundation level required by the city, thereby leaving a final decision as to foundation grade above that level to the builder. Code Administrator also stated that the plans submitted by builder in his application for building permit did not contain any specification as to foundation grade level. When the builder indicated that he was ready to pour the footings, Code Administrator visited the premises for an on-site inspection prior to commencement of the cement pour. At that time, Code Administrator directed that the foundation be raised as much as possible and still remain on good, bearing soil. The foundation height was raised several inches above the minimum, or approximately 20 inches above middle of the lot. The home was built on Lot 81 with the foundation at the height indicated by the Code Administrator at the time of construction, approval of building having been given.

Subsequent to construction of the home, builder sold the property to plaintiffs Caroline and Philip Ferentchak, in August of 1976. There was some delay in the Ferentchaks' taking possession as a result of problems obtaining the occupancy permit from the village. Code Administrator, prior to approving an occupancy permit for the home, insisted that builder put in a drainage swale, as indicated on the plat of the subdivision. Builder testified at trial that he was unaware that a drainage swale had to be constructed until so informed by the Code Administrator during the attempt to obtain the occupancy permit. The permit was withheld until the drainage matters were addressed. Since the plat contained no specifics as to construction of the swale, builder asked Code Administrator what needed to be done to get the approval on the permit. Code Administrator, after consulting with Bruce Hamilton, an employee of defendant, Robert Hamilton, gave builder specific directions for construction of the drainage swale on Lot 81. In the same period of time, Code Administrator, during a visit to the site, objected to a crown, or gentle slope, that ran across the rear portion of Lot 81. He felt that the crown would impede proper drainage and was, therefore, unacceptable. On his directions, the builder flattened the crown so that water would drain from north to south, from the back of the lot to the front. Builder also dug the drainage swale and sodded it according to directions from the Code Administrator. Code Administrator thereafter visited the site and approved the occupancy permit, the required changes having been made.

In January 1977 the Ferentchaks began to experience water problems at their new home. They noticed water in the back portion of the rear yard, as well as the water running in the swale to the street. In February 1977, water was observed in the family room down in the basement. The problems with water oozing into the lower level of the house have continued since that time, without significant abatement, whenever there is a heavy rain in the area. Their attempts to solve the problem, through basement waterproofing, were unsuccessful. In the spring of 1978, Colin Gray, a civil engineer obtained by the Ferentchaks' attorney, examined the property. He later would testify as their chief expert witness at trial.

The Ferentchaks also continued to complain to builder and to the village concerning their problems. In the spring of 1978, after discussions between plaintiffs' counsel and the village board and its engineering department, the Hamilton firm was instructed by the board to visit the Ferentchak property to make observations. Bruce Hamilton did so and noted two problems already referred to, that is, the surface ponding in the southwest corner of the lot and water leaking into the lower level of the home. As a result of his recommendations for modifications, the village regraded the swale in the summer of 1978. This action had no apparent effect on the problem, as plaintiffs' evidence indicated that the flooding continued with the same regularity as prior to the changes in the swale made by the village.

Plaintiffs' expert was Colin Gray. Gray testified that it was his opinion that the basic problem with the home was that the foundation grade had been set too low, and that this fact, coupled with an inadequate and improper drainage system, resulted in the damage to plaintiffs' home. Gray gave his expert opinion that the subdivision plans drawn by Robert Hamilton failed to meet sound engineering standards, in that they (1) lacked specifics as to foundation levels for the homes in the subdivision; (2) lacked specifics as to design criteria for the drainage swale; and (3) contained inadequate specifics for the grading of the subdivision. Gray concluded that the design in the plans was inadequate to properly drain the contributory drainage area in the subdivision and that the house was set too low in relation to nearby houses.

The defense experts varied in their appraisal of the causes and the duties involved herein. One defense expert, Joseph Schudt, agreed that the foundation was too low, given all the other factors involved. Two other experts found no fault with the foundation grade. All of the experts who testified indicated that the lot grade drainage was improper, with Gray concluding that no amount of further lot grading would cure the problem, because of the foundation level and the amount of drainage area to be drained. As to the sufficiency of the surface water drainage system plans, designed by Hamilton, the defense witnesses found that they were adequate to meet standards in existence in 1971 in Will County. Gray, as noted, disagreed, and testified that the plat failed to meet sound engineering standards applicable at the time. Gray also testified, over objection, that it was improper, in his opinion, for an engineer to design a subdivision plat and review his own design as village engineer, absent an express recommendation by him to the village to retain another engineer to review his work. The defense experts found no impropriety in the manner in which the plans were drawn and approved.

The jury returned verdicts in favor of the plaintiffs and against both Hamilton and the village of Frankfort. From judgments on those verdicts, the parties now appeal.

A threshold issue, common to both appeals, is whether the Ferentchaks' causes of action against each defendant, sounding in negligence, are barred by the decisions of the Illinois Supreme Court in Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443, and Redarowicz v. Ohlendorf (1982), 92 Ill.2d 171, 441 N.E.2d 325. In seeking to apply the Moorman decision, the defendants place undue emphasis on the nature of the damages involved, thereby proceeding to an erroneous conclusion as to the "economic loss" doctrine's scope and applicability. The argument is essentially that since the Ferentchaks' claim for damages, as against all three defendants, was for the costs of repair to their home and diminution in value, due to the water damage; therefore, they suffered only economic losses for which no tort recovery is available. Put differently, the village contends that since these economic losses could not be recovered under a tort theory as against the builder, therefore, tort recovery is also barred as to other parties. This approach adopts too simplistic an analysis of Moorman, focusing solely on the nature of damages while ignoring the policy behind and analytical underpinnings of that opinion. As this court noted in Vaughn v. General Motors Corp. (1983), 118 Ill. App.3d 201, 454 N.E.2d 740, the Illinois Supreme Court in Moorman and its progeny did not intend that the nature of damages be the sole factor used in distinguishing a tort claim from a contract claim. As insightful commentary has noted, Moorman's bar to tort recovery for economic losses does not focus on a particular type of damage, so much as it identifies harm originating from a particular context, the commercial context wherein harm is to a consumer's commercial expectations. (See Bertschy, The Economic Loss Doctrine in Illinois after Moorman, 71 Ill. B.J. 346 (1983).) The court in Moorman cited with approval the following passage from Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3d Cir. 1981), 652 F.2d 1165:

"`* * * [T]he items for which damages are sought, such as repair costs, are not determinative. Rather, the line between tort and contract must be drawn by analyzing interrelated factors such as the nature of the defect, the type of risk, and the manner in which the injury arose. These factors bear directly on whether the safety-insurance policy of tort law or the expectation-bargain protection policy of warranty law is most ...


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