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09/23/88 Northrop Corporation, v. Crouch-Walker

September 23, 1988

NORTHROP CORPORATION, PLAINTIFF AND THIRD-PARTY, PLAINTIFF-APPELLANT

v.

CROUCH-WALKER, INC., THIRD-PARTY DEFENDANT-APPELLEE (M. W. POWELL COMPANY, THIRD-PARTY DEFENDANT-APPELLEE;



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIFTH DIVISION

Carter-Hawley Hale Stores, Inc., Defendant)

529 N.E.2d 784, 175 Ill. App. 3d 203, 124 Ill. Dec. 803

Appeal from the Circuit Court of Cook County; the Hon. Myron T. Gomberg, Judge, presiding. 1988.IL.1435

APPELLATE Judges:

JUSTICE PINCHAM delivered the opinion of the court. SULLIVAN and McNAMARA, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE PINCHAM

Northrop Corporation (Northrop), a general construction company, filed a complaint against Carter-Hawley Hale Stores, Inc. (Carter Hawley), for monies due Northrop under a construction contract with Northrop. Carter Hawley responded by filing a counterclaim against Northrop which alleged defects in the construction. In response to Carter Hawley's counterclaim, Northrop filed third-party complaints against two subcontractors, Crouch-Walker Corporation (Crouch-Walker) and M. W. Powell Company (Powell). The trial court granted the motions of the third-party defendants, Crouch-Walker and Powell, to strike and dismiss Northrop's third-party complaint and denied Northrop's motion for leave to amend, from which Northrop appeals.

In July 1974, Carter Hawley and Northrop entered into a contract for the construction of a Nieman Marcus retail specialty store. Northrop agreed to design, construct and install the exterior masonry wall panels and travertine work of the store. The contract between Carter Hawley and Northrop also provided that Carter Hawley was to either assign certain subcontracts to the contractor, Northrop, or require Northrop to enter into the subcontracts. Northrop agreed to supervise, administer and coordinate all work under the assigned subcontracts. Northrop entered into a subcontract with Crouch-Walker for the installation of the masonry, wall panel and travertine work of the store. Crouch-Walker guaranteed that it would install the work using the methodology set forth and in accordance with Northrop's general contract plans and specifications. Powell subcontracted with Northrop to provide the roofing, sheet metal and membrane waterproofing for the store.

Northrop's complaint against Carter Hawley sought money due Northrop from Carter Hawley under the contract between them. Carter Hawley's amended counterclaim against Northrop alleged serious leaks in the roof, abnormal settling of the sidewalks and that Northrop failed to properly design, construct and install the wall panels and exterior travertine as Northrop had contracted. Northrop's second amended third-party complaint against Crouch-Walker and Powell alleged that Crouch-Walker and Powell were responsible for the leaks in the roof and the faulty construction of the Nieman Marcus store and that they were therefore liable. Crouch-Walker and Powell moved to dismiss Northrop's initial third-party complaint on the ground that Northrop's claim for recovery was based on article XVII of the subcontract, a provision that Crouch-Walker and Powell would indemnify Northrop for Northrop's negligence, in violation of section 1 of "An Act in relation to indemnity in certain contracts" (Ill. Rev. Stat. 1983, ch. 29, par. 61), which voids agreements for indemnification for one's own negligence as against public policy. In its second amended third-party complaint, Northrop did not cite or rely on article XVII of the subcontract, which provided for Crouch-Walker and Powell's indemnification of Northrop for Northrop's negligence, and during the trial court proceeding to dismiss its second amended third-party complaint, Northrop expressly denied that it relied on article XVII and urged that its claims against Crouch-Walker and Powell were for breach of contract. Moreover, Northrop asserted that it was entitled to recover against Crouch-Walker and Powell, not because of the indemnity provision of article XVII of the subcontract, but rather because of Crouch-Walker and Powell's alleged breaches of the other covenants and warranties in the subcontracts. Notwithstanding Northrop's arguments, the trial court concluded that Northrop was essentially attempting to circumvent the prohibition of section 1 (Ill. Rev. Stat. 1985, ch. 29, par. 61) against the indemnification of a construction contractor from its own negligence and held that Northrop had failed to state a cause of action against Crouch-Walker and Powell and dismissed Northrop's second amended third-party complaint. The trial court denied Northrop's motion for leave to amend. Northrop appeals from the order dismissing its second amended third-party complaint and from the order denying it leave to file an amended third-party complaint.

In order to survive a motion to dismiss, a complaint must state a cause of action that is both legally and factually sufficient. A legally sufficient complaint is one which sets forth a legally recognized claim upon which the plaintiff is entitled to recover damages. A factually sufficient complaint must plead facts which are essential to the plaintiff's alleged cause of action. Failing either factual or legal sufficiency, the complaint must be dismissed. People ex rel. Fahner v. Carriage Way West, Inc. (1981), 88 Ill. 2d 300.

Northrop's second amended third-party complaint against Crouch-Walker and Powell alleged that the subcontractors breached certain express provisions and implied warranties contained in their contracts with Northrop. In so doing, contrary to the Conclusion of the trial court, Northrop did set forth a legally recognized claim, breach of contract, against the subcontractors, upon which relief could be granted. Northrop's complaint was therefore legally sufficient. Because the trial court erroneously concluded that Northrop's second amended third-party complaint sought recovery against Crouch-Walker and Powell as an invalid indemnification claim, the trial court incorrectly dismissed it.

Northrop predicated its breach of express and implied contract claims upon allegations that Crouch-Walker and Powell failed to perform in a workmanlike manner, failed to use proper construction materials and constructed the building with major flaws and defects. In Northrop's pleadings against Crouch-Walker and Powell, Northrop adopted the allegations in Carter Hawley's amended counterclaim against Northrop as Northrop's own allegations and incorporated them in Northrop's second amended complaint as Northrop's allegations against Crouch-Walker and Powell. It is instructive to examine the pertinent provisions of Northrop's adopted and incorporated allegations against Crouch-Walker and Powell of the Carter Hawley amended counterclaim. Count I of Carter Hawley's amended counterclaim against Northrop, which became Northrop's allegations against Crouch-Walker and Powell, specifically alleged (substituting Crouch-Walker and Powell for Northrop):

"(4) Under the terms of the contract, [Northrop] expressly agreed to perform its work in accordance with the Contract, expressly agreed to do its work in a workmanlike manner, 'and expressly warranted that' . . . all work would be of good quality, free from faults and defects and in conformance with the Contract Documents:

(5) [Northrop] failed to perform its Work under the Contract in the following respects:

(a) [Northrop] failed to properly design, construct and install the exterior travertine walls utilizing the 'conventional system,' as proposed by [Northrop], resulting in serious deficiencies . . .;

(b) [Northrop] failed to properly construct the roof of the building, resulting in numerous ...


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