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Bates & Rogers Constr. v. N. Shore San.

OPINION FILED NOVEMBER 14, 1984.

BATES & ROGERS CONSTRUCTION CORPORATION ET AL., PLAINTIFFS-APPELLANTS,

v.

NORTH SHORE SANITARY DISTRICT ET AL., DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Lake County; the Hon. William D. Block, Judge, presiding.

JUSTICE UNVERZAGT DELIVERED THE OPINION OF THE COURT:

Rehearing denied December 27, 1984.

The question presented by this appeal is whether the economic loss doctrine of Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, bars the suit of a contractor against an architect/engineer where there is no contract between them, and where the contractor claims the architect/engineer was negligent in the design and administration of a project under construction.

This cause is appealed to this court for the second time. The first appeal was taken from the Lake County circuit court's grant of motions to strike and/or dismiss the complaint; this appeal is taken from the same court's subsequent grant of defendant Greeley & Hansen's motion for summary judgment following this court's partial affirmance and partial reversal, and remand for further proceedings. Bates & Rogers Construction Corp. v. North Shore Sanitary District (1980), 92 Ill. App.3d 90.

The plaintiffs in the first cause were, and are here as well, Bates & Rogers Construction Corporation (the Contractor) and two of its subcontractors, Economy Mechanical Industries, Inc., and Goldberg & O'Brien Electric Company (the Subcontractors). Plaintiffs sued defendants North Shore Sanitary District (NSSD) and its engineers, d/b/a individually and as Greeley & Hansen Engineers, a partnership (referred to collectively as defendants or Engineers), claiming damages arising from the construction of portions of the Gurnee Sewage Treatment Plant. After remand, plaintiffs settled their claim against the NSSD, and it is not involved as a party to this second appeal.

In the first appeal, plaintiffs sought reversal of the trial court's dismissal of its amended five-count complaint on the grounds of multifariousness and failure to state a cause of action. This court affirmed the dismissal of counts I, III and V against NSSD, but reversed the dismissal by the trial court of counts II and IV against the Engineers. The stated ground of the trial court for dismissing the counts was that the Engineers owed no duty to the Contractor as a matter of law. This court disagreed, noting it had recently held that an engineer owes the contractor a duty of care in the design and administration of the project. (Bates & Rogers Construction Corp. v. North Shore Sanitary District (1980), 92 Ill. App.3d 90, 96-98, citing, inter alia, W.H. Lyman Construction Co. v. Village of Gurnee (1980), 84 Ill. App.3d 28, 40.) We also disagreed that Alfred N. Koplin & Co., Inc. v. Chrysler Corp. (1977), 49 Ill. App.3d 194, was persuasive authority for the proposition that the plaintiffs' complaint failed to state a cause of action because it claimed economic damages. We observed that the reasoning of Koplin, which involved products liability, had not been applied in design malpractice cases such as Lyman, noted above, and Rozny v. Marnul (1969), 43 Ill.2d 54. (Bates & Rogers Construction Corp. v. North Shore Sanitary District (1980), 92 Ill. App.3d 90, 98.) Accordingly, we reversed and remanded the cause for further proceedings pursuant to our opinion. We later modified our opinion in order to reverse the portion of the trial court's judgment dismissing count V against NSSD insofar as that count amounted to a claim for the retainage held by NSSD under the contract, and for interest on that amount.

Upon remand, plaintiffs filed a three-count second amended complaint on December 28, 1981. Counts I and II against the Engineers alleged they were negligent in their design and administration of the project. Counts I and II were substantively the same as former counts II and IV, which were involved in the previous appeal. Count III, formerly count V in the previous appeal, was for the retainage and interest thereon held by the NSSD. Plaintiffs and the NSSD later settled, and an agreed judgment order was entered on May 5, 1983, dismissing count III of the second amended complaint with prejudice.

Plaintiffs' complaint against the Engineers essentially alleged that they were negligent in their design of certain equipment and negligent in their supervision of the Gurnee Sewage Treatment Plant project. Defendants had a contract with the NSSD to provide certain engineering and architectural services in connection with the construction of the Gurnee Sewage Treatment Plant. Bates & Rogers had a contract with the NSSD to be the prime contractor for two divisions of the project, specifically known as contract divisions P12A-P12B and P12C-P12D. In connection with both of these divisions, Bates & Rogers subcontracted with plaintiff Economy Mechanical Industries, Inc., for the performance of certain mechanical work, including the piping for the project. In connection with the latter division only, Bates & Rogers subcontracted with the remaining plaintiff, Goldberg & O'Brien Electric Company, for all the electrical work to be performed. There was no contractual privity between Bates & Rogers and Greeley & Hansen. Plaintiffs' complaint specifically alleged the Engineers were negligent because they:

"a) Carelessly and negligently failed to include within the design criteria for the electrical switchgear sufficient and adequate information as to the existing power source facilities when they knew or in the exercise of ordinary care ought to have known that such failure would result in a lack of electrical power to the construction site and would burden, obstruct and interfere with the ordinary prosecution of the work by plaintiffs;

b) Carelessly and negligently failed to cure the design defects described above in timely fashion;

c) Carelessly and negligently caused a re-design of the switchgear after the switchgear had been ordered from the supplier, Westinghouse Electric Co., and substantial work on it had been done, so as to make the same compatible with generators purchased under a separate contract when they knew or in the exercise of ordinary care ought to have known that plaintiffs' work would be forced out of sequence, would proceed inefficiently, and the cost thereof would be burdened;

d) Carelessly and negligently administered and exercised their powers as the Engineer under the Contract documents so as to deny access to the plaintiffs to the work, and to interfere with plaintiffs' performance of the work when they knew or in the exercise of ordinary care ought to have known that plaintiffs' costs and productivity would be severely prejudiced;

e) Carelessly and negligently failed to provide electrical service to plaintiffs' job site in accordance with the specifications when they knew or in the exercise of ordinary care ought to have known that such failure would force plaintiffs' work out of sequence and burden the cost thereof."

As a direct and proximate result:

"15. [N]o electrical service was furnished the work site until more than a year after the same was required, and plaintiffs were denied access to a material portion of the work, the sequence of plaintiffs' work was disrupted and burdened so as to increase the cost thereof and decrease its productivity and to cause the proliferation and duplication of labor and labor operations not otherwise necessary."

As a consequence, plaintiffs sustained:

"16. [E]normous cost overruns in the actual performance and prosecution of their work under the contract, including but not limited to excessive labor costs, labor `add-ons', excessive supervision, winter protection of their work, increased overhead, bond and insurance costs, interest on moneys borrowed and expended and the loss of anticipated profit * * *."

Defendants moved for summary judgment on the ground that the damages claimed, even if proved, were economic damages, recovery of which is barred in negligence as a matter of law. The motion included citation to three Illinois Supreme Court cases decided subsequent to the parties' first appeal of this cause. After briefing and argument by both parties, the court granted summary judgment, including a finding there was no just cause to delay enforcement or appeal.

The parties raise these two issues: (1) whether the trial court erred in finding that plaintiffs could not recover economic loss resulting from the Engineers' professional negligence; and (2) ...


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