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March 8, 1988


The opinion of the court was delivered by: Foreman, Chief Judge:


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.*fn1 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,*fn2 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).

Another preliminary consideration is the plaintiff's invocation of the Illinois Borrowing Statute, S.H.A. ch. 110, ¶ 13-210. That statute states

  When a cause of action has arisen in a state or
  territory out of this State, or in a foreign
  country, and, by the laws thereof, an action
  thereon cannot be maintained by reason of the
  lapse of time, an action thereon shall not be
  maintained in this State.
  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, 1985*fn3   Demand made by Dixie on Austin.
  September 4, 1987      Demand made by Austin on ...

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