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Anderson Electric v. Ledbetter Erec. Corp.





Appeal from the Circuit Court of Sangamon County; the Hon. Simon L. Friedman, Judge, presiding.


Rehearing denied July 11, 1985.

Plaintiff appeals from an order of the circuit court of Sangamon County which dismissed count II of its fourth amended complaint against defendant C-E Walther, Inc. Count I against Ledbetter Erection Corporation still pends below. The trial court made the appropriate findings under Supreme Court Rule 304(a) (87 Ill.2d R. 304(a)).

The facts drawn from the allegations of the fourth amended complaint indicate that plaintiff Anderson Electric, Inc. (Anderson), was a subcontractor of Ledbetter Erection Corporation (Ledbetter). Anderson was hired by Ledbetter to perform electric work on two precipitator units being constructed at the Kincaid Commonwealth Edison station. Defendant C-E Walther, Inc. (Walther), was the manufacturer of the units, the author of the construction manual, and the construction supervisor on the project. There was no direct contractual relationship between Anderson and Walther. It was alleged that such existed between Ledbetter and Walther, but its nature was not detailed.

Anderson's contract with Ledbetter provided that Anderson was to perform all electrical work according to the specifications in the Ledbetter-Walther contract. Anderson alleged that it so performed and that its work was initially accepted; but subsequently the same work was rejected and Anderson was required to redo portions at an increased cost of $288,802.48.

A provision incorporated in the Anderson-Ledbetter contract stated that Walther's field supervisor would hold regular jobsite meetings to insure orderly and expeditious completion of the work. The precipitator construction manual, which was authored by Walther and was incorporated by reference in the Anderson-Ledbetter contract, set forth Walther's functions and responsibilities as construction superintendent in detail. Walther's functions included regular inspections of the jobsite to insure the quality and workmanship of the work done, and to approve portions of the project as they were installed. If portions of the work were found to be unacceptable, Walther was to promptly inform the contractor of the defect in order to permit prompt correction. Walther's responsibilities included the inspection of materials and work done for compliance with the specifications. Specific inspection procedures and check lists were also set forth in the construction manual. Anderson alleged that Walther breached its duty to Anderson by failing to hold regular jobsite meetings, by supplying faulty materials, by giving improper directions regarding the performance of Anderson's work, by failing to properly inspect the work done on an ongoing basis, and by failing to stop the work when it knew or should have known that the work was not acceptable.

The trial court's decision was based expressly on its interpretation of Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443. In its memorandum opinion the court analyzed the defect, risk, and manner in which the injury arose, and concluded that the claim was more appropriate to a contract action than to tort.

The arguments of the parties center about their respective interpretations of Moorman and two appellate decisions which have offered their own expositions on the same subject: Ferentchak v. Village of Frankfort (1984), 121 Ill. App.3d 599, 459 N.E.2d 1085, and Bates & Rogers Construction Corp. v. North Shore Sanitary District (1984), 128 Ill. App.3d 962, 471 N.E.2d 915.

Plaintiff argues: (1) it does not seek recovery for purely economic loss; (2) the exception to Moorman set forth in Ferentchak should apply in this case; and (3) its claim is for negligent professional services and hence an exception to Moorman exists under the authority of Rozny v. Marnul (1969), 43 Ill.2d 54, 250 N.E.2d 656.

Walther responds: (1) the loss here is purely economic; (2) this court should follow Bates & Rogers as a better-reasoned opinion; and (3) Rozny has no application to the facts here.

The Moorman decision is of sufficient notoriety as to need no extensive repetition here. It established the "economic loss doctrine" which holds that, in general, tort actions should be confined to situations involving physical harm or property damage, as distinguished from purely economic loss for which redress should be sought in a contract action. Tort law requires a manufacturer to produce a safe product, but it is not well suited in regulating other quality requirements. The court commented that a purchaser's disappointed expectations are better redressed in contract, saying:

"`[T]he 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 applicable to a particular claim.'" Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 85, 435 N.E.2d 443, 450 (quoting Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co. (3d Cir. 1981), 652 F.2d 1165, 1172-73).

"Tort theory is appropriately suited for personal injury or property damage resulting from a sudden or dangerous occurrence. * * * The remedy for economic loss, loss relating to a purchaser's disappointed expectations due to deterioration, internal breakdown or nonaccidental cause, on the other hand, lies in contract." 91 Ill.2d 69, 86, 435 N.E.2d 443, 450.

After Moorman, the supreme court extended the economic loss doctrine to bar recovery in tort for economic losses occasioned by latent building construction defects. In Redarowicz v. Ohlendorf (1982), 92 Ill.2d 171, 441 N.E.2d 324, and Foxcroft Townhome Owners Association v. Hoffman Rosner Corp. (1983), 96 Ill.2d 150, 449 N.E.2d 125, plaintiffs who were subsequent purchasers of residential units brought tort actions against the builders of the units for construction defects. The only injuries alleged in either case were damages to ...

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