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06/09/97 BOARD MANAGERS COURTYARDS AT WOODLANDS

June 9, 1997

BOARD OF MANAGERS OF THE COURTYARDS AT THE WOODLANDS CONDOMINIUM ASSOCIATION, PLAINTIFF,
v.
IKO MANUFACTURING, INC., ZALE GROVES, INC., ZALE GROUP, INC., ZALE CONSTRUCTION CO., INC., ZALE ENTERPRISES, INC., DEFENDANTS. (ZALE GROVES, INC., ZALE GROUP, INC., ZALE ENTERPRISES, INC., ZALE CONSTRUCTION CO., INC., THIRD-PARTY PLAINTIFFS-APPELLEES, V. JOHNSTON ASSOCIATES INC., THIRD-PARTY DEFENDANT-APPELLANT, AND IKO CHICAGO, INC., W.A. ANDERSON CONSTRUCTION CO., LENNY SZAREK, INC., PRATE ROOFING, INC., S.J. NITCH/ROOF BROKERS, INC., AND ALL AMERICAN ROOFING, INC., THIRD-PARTY DEFENDANT.



Appeal from the Circuit Court of Cook County. Honorable LORETTA C. DOUGLAS, Judge Presiding.

Released for Publication July 21, 1997.

The Honorable Justice Buckley delivered the opinion of the court. O'brien and Gallagher, JJ., concur.

The opinion of the court was delivered by: Buckley

The Honorable Justice BUCKLEY delivered the opinion of the court:

This appeal arises from the trial court's denial of third-party defendant Johnston Associates, Inc.'s (Johnston) motion to compel arbitration and stay the third-party claims against it. The motion was based upon the existence of a written agreement to arbitrate. Johnston was brought into the underlying action in March 1996, as a third-party defendant by defendant developer and its affiliated entities for potential liability to plaintiff condominium association for alleged defects in the design and construction of roofs on a condominium development. Johnston raises the following issues: whether the trial court erred in refusing to compel arbitration under section 2(a) of the Illinois Uniform Arbitration Act (710 ILCS 5/1 et seq. (West 1994)) after finding a valid agreement to arbitrate, and instead denying arbitration based on a number of factors set forth in J.F. Inc. v. Vicik, 99 Ill. App. 3d 815, 426 N.E.2d 257, 55 Ill. Dec. 282 (1981), after finding that those factors outweighed Johnston's contractual right to arbitration and the public policy of the State of Illinois in enforcing valid arbitration agreements.

The Board of Managers of the Courtyard at the Woodlands Condominium Association (plaintiff) is the entity charged with the maintenance and upkeep of the common elements of a 128-building condominium development located in Buffalo Grove, Illinois. The roofs of those condominiums are one of the common elements that allegedly fall under the authority of plaintiff. Plaintiff commenced the underlying action in 1994, seeking damages for alleged defects in the design and construction of the condominium development.

In plaintiff's amended complaint, plaintiff named four entities as defendant developers: Zale Groves, Inc., Zale Group, Inc., Zale Enterprises, Inc., and Zale Construction Co., Inc. (the Zale Defendants). Plaintiff advanced theories of liability against the Zale Defendants based on express and implied warranties.

Plaintiff alleged that defects in the roofs on all 128 buildings in the development have resulted in cracking shingles, water leakage causing drywall damage, saturation of attic insulation and other water damage. According to plaintiff, these defects resulted from the Zale Defendants' having provided defective shingles; failure to provide roofs that properly drain; failure to construct the roofs in conformity with steep roofing and flashing standards; failure to properly cut and fit dormer roof and wall sheathing; failure to properly install flashing and wood fascia; failure to provide ice and water shield membrane flashing; and constructing fascia with defective wood.

On March 1, 1996, the Zale Defendants filed their third-amended third-party complaint against Iko Chicago, Inc., W.A. Anderson Construction Co., Lenny Szarek, Inc., Prate Roofing, Inc., S.J. Nitch/Roof Brokers, Inc., All American Roofing, Inc. and Johnston. The Zale Defendants premised their third-party action solely on theories of conditional contribution or indemnification, predicating each third-party defendant's liability on Zale's first being found liable to plaintiff. The Zale Defendants did not allege any independent causes of action against any third-party defendant.

The Zale Defendants allege that they entered into a written contract with Johnston, as with most of the other third-party defendants, for work on the development. The contract between Johnston and Zale Construction Co. is a preprinted form that includes the following provision:

"Either party may demand in writing arbitration of all claims, disputes or questions of this Contract or breach thereof in accordance with the prevailing rules of the American Arbitration Association, within reasonable time before the date legal proceedings would be barred by applicable statute of limitations, and judgment upon the award rendered by the arbitrators shall be final and may be entered in any court having jurisdiction thereof."

In count VII of the third-amended third-party complaint, the Zale Defendants allege that Johnston "entered into written contracts with Zale Groves in which [Johnston] agreed to furnish architectural and design services for the buildings." The Zale Defendants further allege that "the actions of which plaintiff complains in its fifth amended complaint are services furnished in part by third party defendant [Johnston]."

Based upon the arbitration clause contained in its contract with Zale Construction Co., Johnston filed and served a written demand for arbitration with the American Arbitration Association on April 4, 1996. On that same date, Johnston filed a motion to compel arbitration and stay the third-party claims against it pursuant to section 2(a) of the Illinois Uniform Arbitration Act (710 ILCS 5/1 et seq. (West 1994)).

The Zale Defendants, plaintiff and W.A. Anderson Construction Co. opposed Johnston's motion, relying on the decision in J.F. Inc. v. Vicik, 99 Ill. App. 3d 815, 817, 426 N.E.2d 257, 259, 55 Ill. Dec. 282 (1981). The Zale Defendants argued that Johnston's motion should be denied because the "issues in this case are inextricably intertwined, intermingled and dependent upon each other such that the issues raised in count VII cannot be severed." The Zale Defendants also claimed that (1) they had not created the multiplicity of parties in the litigation; (2) their claim against Johnston could not proceed without a prior determination of their liability to plaintiff; and (3) the public policy favoring joinder of claims in a single judicial proceeding outweighs the public policy favoring arbitration since arbitration would be less ...


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