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06/07/96 FIREMAN'S FUND INSURANCE COMPANY v. SEC

June 7, 1996

FIREMAN'S FUND INSURANCE COMPANY, AS SUBROGEE OF NEPTUNE CONSTRUCTION COMPANY, INC., PLAINTIFF-APPELLEE,
v.
SEC DONOHUE, INC., F/K/A DONOHUE & ASSOCIATES, INC., DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County. The Honorable Patrick E. McGann, Judge Presiding.

The Honorable Justice Egan delivered the opinion of the court: Zwick, P.j., and Rakowski, J., concur.

The opinion of the court was delivered by: Egan

The Honorable Justice EGAN delivered the opinion of the court:

The issue in this appeal is whether the holding in Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 61 Ill. Dec. 746 (1982), bars a subcontractor's tort action against an engineer for purely economic damages. The plaintiff, Fireman's Fund Insurance Company (Fireman's), as subrogee of Neptune Construction Company, Inc. (Neptune), filed a complaint against the defendant, SEC Donohue, Inc. (Donohue), in which it alleged that Neptune had suffered damages in the amount of $57,754.03 for repair work caused by its reliance on engineering plans Donohue had negligently prepared. The judge denied the defendant's motion to dismiss under section 2-619(a)(9) of the Illinois Code of Civil Procedure (735 ILCS 5/2-619(a)(9)(West 1992)). At the defendant's request, the judge entered an Illinois Supreme Court Rule 308(a) finding (134 Ill. 2d R. 308(a)), but this court denied leave to appeal. After the defendant petitioned for leave to appeal in the supreme court, the supreme court ordered us to hear this case on its merits.

In its complaint, the plaintiff alleged the following. In April 1989, Neptune entered into an agreement with Artfield Builders to install underground water service for a project called "The Apartments of Oak Trails." As a subcontractor, Neptune was to dig a horizontal tunnel under property owned by the Illinois State Toll Highway Authority (Toll Authority) in order to make a connection with water supply lines across the tollway from the project.

In anticipation of this work, Donohue, an engineering firm, had supplied drawings and plans, which indicated where Neptune should dig the tunnel and use an auger to bore into the water supply lines. In breach of its duty to provide accurate information to those who would rely on this information, Donohue "carelessly and mistakenly" drafted plans and drawings that located the sites for digging and boring at a spot 73 yards south of the correct location.

In reliance on these plans, Neptune performed its work at the incorrect location, thereby damaging the shoulder of the Toll Authority property. The Toll Authority required Neptune to repair the shoulder at a cost of $57,754.02. Neptune made a claim for this amount to its insurer, Fireman's. Fireman's paid the claim and, therefore, became subrogated to Neptune's claim against Donohue.

The contract between Neptune and Artfield, which was attached to the complaint, stated that Neptune was to perform its work "in accordance with the engineering plans, specifications and general conditions prepared by: DONOHUE & ASSOCIATES, INC., and on file at the office of [Artfield]."

The defendant filed a motion to dismiss this complaint pursuant to section 2-619 of the Code of Civil Procedure. The motion referred to an affidavit the defendant filed. In this affidavit, the defendant's vice president, Fred Borich, asserted that, on October 28, 1988, Donohue had entered into a contract with Artfield Builders to perform engineering services for the Oak Trails project. He also asserted that Donohue had no contract with Neptune.

Attached to the Borich affidavit was the contract between Artfield and Donohue. The contract provided that Donohue was to provide engineering plans for

"onsite and offsite improvements including: *** water mains ***. Offsite improvements are limited to *** water main from the parcel north to Central Road along the east side of East River Road and a single water main crossing the tollway and tying into the existing water main at the Shorewood Village Apartment complex."

In addition, Donohue was to prepare a project manual to describe the scope and nature of the construction proposed in its plans. The contract further provided that it was not to be construed to give Donohue the responsibility to "direct or supervise construction means, methods, techniques, sequence, or procedures of construction selected by contractors or subcontractors."

The defendants asserted in their motion to dismiss that the plaintiff's claim was barred by the supreme court's decision in 2314 Lincoln Park West Condominium Association v. Mann, Gin, Ebel & Frazier, Ltd., 136 Ill. 2d 302, 555 N.E.2d 346, 144 Ill. Dec. 227 (1990), in which the court held that, under Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 61 Ill. Dec. 746 (1982), there could be no tort claim against an architect for purely economic losses. The defendant further asserted that the plaintiff's claim did not come within the negligent misrepresentation exception to the Moorman doctrine. In its response to this motion, the plaintiff argued that its claim fell within this exception.

On August 30, 1993, the judge denied the defendant's motion to dismiss without prejudice. On November 9, 1993, he granted the defendant's motion for a Rule 308 finding on the following question:

"Is a professional engineer who prepares plans and specifications for a construction project in the business of supplying information to others for the guidance of the recipient in its business dealings with third parties and liable in tort for negligent misrepresentations under Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 61 Ill. Dec. 746 (1982)."

We begin our analysis with a discussion of the development of the Moorman doctrine. In Moorman Manufacturing Co. v. National Tank Co., 91 Ill. 2d 69, 435 N.E.2d 443, 61 Ill. Dec. 746 (1982), the court held that purely economic losses may not be recovered in an action for strict liability in tort or for negligence. In Moorman, the plaintiff purchased a grain-storage tank from the defendant. Several years later, a crack developed in the tank. The plaintiff sued the defendant for its loss of use of the tank and for the cost of repairs. Moorman, 91 Ill. 2d ...


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