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Wash. Courte Condo. v. Wash.-golf Corp.

OPINION FILED DECEMBER 1, 1986.

WASHINGTON COURTE CONDOMINIUM ASSOCIATION-FOUR ET AL., PLAINTIFFS-APPELLEES,

v.

WASHINGTON-GOLF CORPORATION ET AL., DEFENDANTS (CORRA PLUMBING AND WEATHER SHIELD MANUFACTURING, INC., DEFENDANTS-APPELLANTS).



Appeal from the Circuit Court of Cook County; the Hon. Myron T. Gomberg, Judge, presiding.

JUSTICE CAMPBELL DELIVERED THE OPINION OF THE COURT:

This is a consolidated interlocutory appeal arising out of a 34-count amended complaint filed by plaintiffs, Washington Courte Condominium Association-Four and certain owners of condominium units in Washington Courte Condominium-Four, one of five buildings in the Washington Courte condominium complex located in Niles (Washington Courte), against defendants, Washington-Golf Corporation, general contractor/developer vendor of Washington Courte, and numerous subcontractors, including Corra Plumbing Company (Corra) and Weather Shield Manufacturing, Inc. (Weather Shield). The first interlocutory appeal (No. 85-830), brought by Corra and Weather Shield, results from the trial court's denial of their motions to dismiss those counts which alleged negligence (counts XIV and XXII), and those which alleged breach of the implied warranty of habitability (counts XXV and XXXIII). Pursuant to Supreme Court Rule 308 (87 Ill.2d R. 308), the trial court granted Corra's and Weather Shield's motions to certify the issues raised by their motions to dismiss. The second interlocutory appeal (No. 85-1084) is brought by plaintiffs and results from the trial court's dismissal of count XXXIV, predicated on the Racketeer Influenced and Corrupt Organizations Act (RICO Act) (18 U.S.C. § 1961 et seq.).

On appeal, Corra and Weather Shield contend that: (1) the trial court erred in denying their motions to dismiss the negligence counts on the ground that the alleged damages arise in a commercial context and, thus, are recoverable under contract theories only, and (2) the trial court erred in denying their motions to dismiss the warranty-of-habitability counts on the ground that a cause of action for breach of an implied warranty of habitability may not be asserted by a plaintiff/purchaser against a subcontractor where, as here, the general contractor is a viable concern. With respect to the RICO Act appeal, plaintiffs contend that the trial court erred in dismissing the count for lack of subject matter jurisdiction. For the reasons stated below, we reverse that portion of the trial court's order which denied Corra's and Weather Shield's motions to dismiss (No. 85-830) and affirm the dismissal of the RICO Act count (No. 85-1084).

The records below present the following facts pertinent to this consolidated appeal. On January 10, 1984, plaintiffs filed a 33-count amended complaint *fn1 which sought recovery of damages from Washington-Golf corporation, general contractor/developer/vendor, under theories of implied warranty of habitability, express warranty, breach of contract, negligence, wilful and wanton misconduct, and fraud; and from the subcontractors under theories of negligence and breach of the implied warranty of habitability. With respect to Corra, count XIV alleged that as a result of Corra's negligent installation of plumbing and plumbing fixtures, the sinks and shower units emitted strong, unpleasant odors and the toilets leaked at the base and did not flush properly. As a result, plaintiff unit owners alleged that they have paid or will have to pay to repair or replace sink and shower drains, garbage disposals, and toilets. Relying on the same alleged defects, discrepancies and damages, count XXV alleged that Corra had breached the implied warranty of habitability.

With respect to Weather Shield, count XXII of the amended complaint alleged that Weather Shield had negligently supplied the windows and exterior sliding glass doors for the units and is responsible for resulting water damage to insulation, walls, ceilings, and electrical outlets. In addition, plaintiff Therese M. Plummer alleged that she had incurred medical costs for her minor son's allergic reaction to mold which began growing on the walls of her unit as the result of water intrusion from the windows and exterior sliding door. Plaintiffs further alleged that the insulation, window units, sliding doors and cracked and stained wallboard in both the individual units and in the common areas must be repaired or replaced. Relying on the identical defects, discrepancies, and damages alleged in count XXII, count XXXIII alleged that Weather Shield had breached the implied warranty of habitability.

On March 1, 1984, Corra and Weather Shield filed individual motions to strike and dismiss the respective negligence and breach-of-warranty counts. Regarding the negligence counts, both Corra and Weather Shield argued in their motions that pursuant to Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443, plaintiffs cannot seek recovery in tort for damages that are solely in the nature of economic loss. Regarding the breach-of-implied-warranty counts, both movants argued that the cause of action cannot be asserted against a subcontractor when the contractor is a viable concern from whom plaintiffs can recover. In an order entered June 28, 1984, the court denied the motions to dismiss. Thereafter, on July 13, 1984, Corra and Weather Shield moved for certification of the issues presented in their motions to dismiss.

In the interim, on June 20, 1984, plaintiffs were granted leave to add count XXXIV, the RICO Act count, to their amended complaint. In response, Corra, Weather Shield, and numerous other subcontractors moved to dismiss the RICO Act count on the grounds that the RICO Act created exclusive Federal jurisdiction. On March 11, 1985, the court entered an order which restated its denial of Corra's and Weather Shield's motions to dismiss the negligence and warranty-of-habitability counts; granted all motions to dismiss the RICO Act count on jurisdictional grounds; and granted Corra's and Weather Shield's motions for certification of the negligence and warranty-of-habitability issues. Plaintiffs' timely appeal from dismissal of the RICO Act count followed.

• 1 We first address the issue of whether the damages alleged by plaintiffs constitute "solely economic losses" which, pursuant to Moorman Manufacturing Co. v. National Tank Co. (1982), 91 Ill.2d 69, 435 N.E.2d 443, and its progeny, are barred from recovery in tort. In Moorman, plaintiff sought recovery in strict liability and negligence for cost of repairs and loss of use when the grain storage tank he had purchased from defendant developed a crack in one of its steel plates. The supreme court held that the "remedy for economic loss, loss relating to a purchaser's disappointed expectations due to deterioration, internal breakdown or nonaccidental cause, * * * lies in contract." (91 Ill.2d 69, 86.) The Moorman court adopted the recognized definition of economic loss as "`damages for inadequate value, costs of repair and replacement of the defective product, or consequent loss of profits — without any claim of personal injury or damage to other property * * *.'" 91 Ill.2d 69, 82, quoting Note, Economic Loss in Products Liability Jurisprudence, 66 Colum. L. Rev. 917, 918 (1966).

In the present case, plaintiffs concur that, pursuant to Moorman, damages for solely economic losses are precluded in an action for tort. However, they argue that the losses alleged in their complaint were not solely economic, but included claims of personal injury as well as damage to property other than that claimed to be defective. Alternatively, plaintiffs argue that pursuant to Ferentchak v. Village of Frankfort (1985), 105 Ill.2d 474, 475 N.E.2d 822, even if plaintiffs' losses were solely economic, the absence of a cause of action in contract against Corra and Weather Shield permits them to recover in tort.

With respect to Corra, plaintiffs allege improper sink, shower, and toilet installation and improper design and construction of the sink and shower, resulting in the repair or replacement of the sink and shower drains, garbage disposal, and toilets. Plaintiffs did not allege damage to property other than to the plumbing fixtures, nor did they allege personal injury resulting from the allegedly defective plumbing fixtures. Thus, we find that the alleged damages resulting from Corra's installation of the plumbing fixtures constitute solely economic losses not recoverable in tort. Accordingly, we conclude that the trial court erred in denying Corra's motion to dismiss count XIV.

• 2 A different situation arises with respect to the allegations of negligence against Weather Shield. Plaintiffs alleged that as a result of Weather Shield's negligence in supplying windows and exterior sliding glass doors, water and air intruded into the units, causing damage to insulation, walls, ceilings, floors and electrical outlets. In addition, plaintiffs alleged potential personal injury from sparking outlets, and one plaintiff, Therese M. Plummer, alleged that she incurred medical expenses for the treatment of an allergic reaction suffered by her minor son from exposure to mold growing on her carpeting as the result of water intrusion from the windows and sliding doors.

At the outset, we must determine whether the alleged property damage to insulation, walls, ceiling, floors, and electrical outlets constitutes consequential economic loss which would be barred from tort recovery under Moorman and its progeny, or whether the damage constitutes a valid exception to the economic-loss doctrine. In Redarowicz v. Ohlendorf (1982), 92 Ill.2d 171, 441 N.E.2d 324, plaintiff, a subsequent purchaser, sought relief under theories of contract, tort, fraud and implied warranty of habitability against the builder of his house when the chimney and adjoining brick wall began to pull away from the house, causing a crack in the basement wall which resulted in water leakage in the basement and on the roof. The court held that recovery for deterioration alone, caused by latent structural defects, was not actionable in tort. In reaching its decision, the Redarowicz court stated:

"A disappointed consumer of a storage tank [Moorman] or a disgruntled purchaser of a certain house cannot assert that, due to inferior workmanship that led to eventual deterioration, he can recover under a negligence theory in tort." (92 Ill.2d 171, 177.)

In addition, the court distinguished the situation before it from one where defective construction caused a brick to fall on someone's head or a wall to collapse and destroy living room furniture. The latter illustrates a sudden, calamitous occurrence, more appropriately remedied by tort law (see Vaughn v. General Motors Corp. (1984), 102 Ill.2d 431, 466 N.E.2d 195), while damage ...


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