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Falcon Associates Inc. v. Cox

August 14, 1998


The opinion of the court was delivered by: Justice Goldenhersh


Appeal from the Circuit Court of St. Clair County.

No. 94-L-740

Honorable James M. Radcliffe, Judge, presiding.

This appeal centers around a new home with a final purchase price of $227,387.54 built by plaintiff-counterdefendant, Falcon Associates, Inc., for defendants-counterplaintiffs, Wendell Cox and Mary Jean Love. Cox and Love (buyers) appeal from the St. Clair County Circuit Court's order rejecting their claim that Falcon Associates, Inc., along with other counterdefendants, Robert G. Wolfe and Falcon Land Company (collectively, sellers), violated the Illinois Consumer Fraud and Deceptive Business Practices Act (the Act) (815 ILCS 501/1 et seq. (West 1994)). Sellers appeal the circuit court's judgment in the amount of $222,896.77, entered after a jury returned a verdict for buyers in that amount. The appeals were consolidated. On appeal, buyers contend that (1) the home builder's promise to provide a house with a certain amount of insulation (R-19) and the subsequent failure to deliver that amount is fraudulent and entitles buyers to remedies under the Act, (2) a home builder's failure to take reasonable steps to ensure compliance with applicable codes is fraudulent and entitles a buyer to the remedies of the Act, and (3) the delivery of a residential building in substantial noncompliance with contractual promises is fraudulent and entitles a buyer to the remedies of the Act. In their appeal, sellers contend that (1) the trial court erred in refusing to dismiss counts IV and V of buyers' counterclaim and in entering judgment against Robert G. Wolfe and Falcon Land Company because piercing the corporate veil of the contracting party, Falcon Associates, Inc., was not justified and (2) the damages awarded buyers on the breach of contract claim were excessive, improper, speculative, and erroneous. We affirm in part as modified, reverse in part, and remand with directions.


On September 12, 1993, buyers signed a contract with Falcon Associates, Inc., for the construction of a residence at 1010 Thornbury in Thornbury Hill subdivision, located in O'Fallon. Robert G. Wolfe was president of Falcon Associates, Inc. Buyers' decision to sign a contract with this home builder was due in large part to the quality of construction shown in the builder's model homes in the subdivision. Mary Jean Love testified that she and her husband toured two model homes built by sellers and were impressed with the quality of those homes. Wolfe admitted that the model homes were intended as a reliable indicator of the general construction quality of homes that would be built by sellers.

The contract called for a two-story, 2,753-square-foot home with a basement, in which "all work [would] be performed in a workmanlike fashion consistent with applicable building codes." The contract called for the home to be completed on January 14, 1994; however, the closing did not occur until March 29, 1994. Even at that late date, the home was not finished, and buyers were given a list of incomplete items, which sellers promised to complete in the near future. Buyers moved in after the closing date and immediately began to experience problems with the house.

One of the first things noticed by buyers was that the wind blew through the home, even with all windows and doors shut. This caused a draft strong enough to blow papers and napkins off tables and onto the floor. Buyers also experienced numerous water problems. For example, windows and doors leaked when it rained; water from an upper floor bathroom pooled in a kitchen light fixture; the upper floor master bedroom ceiling leaked, causing the mattress and furniture in that bedroom to be soaked; and water flowed into the basement from outside during rains. Pictures exhibiting the extent of these problems were introduced by buyers.

The builder was made aware of problems as they arose. Between March 30, 1994, and July 19, 1994, Doren Rakers (sellers' superintendent) and other employees of sellers and subcontractors made at least 31 visits to the home in question, attempting to repair the house. Sellers' own records indicate numerous leaks and other problems found at the house, and the records indicate attempts to correct the situation. For example, sellers' records indicate leaks in the basement, the utility room, the library, the living room, and the garage and at various windows throughout the house, including a front bay window.

Mary Jean Love testified that it was not her or her husband's contention that sellers did not try to fix things, but rather, they were complaining of sellers' lack of accomplishment. As soon as one thing was fixed, it would rain again and the problem would be back or a new problem would be discovered. The litigation began after buyers placed signs in the windows of their home which read, inter alia, "Please fix this home," "Please fix our lawn," and "Water damag[e]." Wolfe testified that he could not understand why these signs had been posted because he was attempting to fix the problems and had directed his employees to get the house fixed so buyers would be happy. Wolfe did not want his reputation damaged.

On August 4, 1994, Falcon Associates, Inc., filed suit against buyers for damage to sellers' business caused by the posting of the signs. Wolfe testified the signs caused a significant decrease in his business in 1994 and 1995. A local real estate agent, Judy Dempcy, also testified that the signs adversely affected sales in the Thornbury Hill subdivision. Buyers denied any liability and filed a counterclaim. Count I was for breach of contract. Count II was a negligence claim. Count III was a claim under the Act. Falcon Associates, Inc.'s original claim was dismissed. Thereafter, an amended complaint was filed.

On February 20, 1996, buyers filed a motion to amend their counterclaim to add counts against the shareholders of Falcon Associates, Inc., and against Falcon Land Company on the ground that Falcon Associates, Inc., was a "sham" corporation and had transferred all its assets to Falcon Land Company. This amendment was allowed, and a first amended counterclaim was filed adding a count against Robert G. Wolfe individually and Falcon Land Company.

At trial, each side called an expert to testify about the problems and defects in the home and how to correct them. Buyers called Leroy Dawson, a licensed architect and experienced general contractor, who first inspected the home after Falcon Associates, Inc., filed the original action. Dawson discovered numerous problems and shoddy workmanship. His preliminary report concluded "that a building with this magnitude of visible defects will have many latent defects." Because of Dawson's preliminary report, buyers proceeded with their own suit against sellers. Ultimately, Dawson discovered, inter alia, incorrectly installed, undersized, and improperly sealed plumbing; the lack of a vapor barrier between the concrete basement floor and the ground, as per the guidelines of the Building Official Code Administration (BOCA) code; no reinforced flooring under the main support wall, as per the BOCA code; an uneven basement floor; inadequately designed floor joists; and an I-beam which measured only four inches rather than 8 to 12 inches, as required by the BOCA code. Dawson also found inadequate flashing of valleys and chimneys, as per the BOCA code; improperly installed roofing shingles, in violation of both the BOCA code and manufacturer's instructions; improper grading, as per the BOCA code, allowing water to seep into the house; improperly supported brick veneer walls; improperly installed air-conditioning units, which were actually leaning at the time of inspection; poor workmanship by brick masons, including not priming and not taking the time to shorten the lentils, resulting in a cracking, uneven foundation; improperly installed siding, which blew off in the wind; improperly installed windows; improperly fabricated and installed chimney caps; incorrectly connected porches; bathroom exhaust vents blocked by insulation; too small a window in an upper floor guest bedroom, which did not permit egress in case of emergency and, therefore, per the BOCA code, could not be considered a bedroom; furnace vents in the attic in direct contact with wood, in violation of both manufacturer's specifications and the BOCA code; improperly ventilated and nonventilated attic areas; no wall ties holding brick veneer to the exterior of the wall, as per the BOCA code; no building felt between exterior sheathing and brick veneer, in violation of the BOCA code; no fire protection between the garage and the living space, in violation of the BOCA code; improperly installed marble flooring in the foyer; and an improperly installed main gas pipe. Additionally, Dawson testified that the specifications for the house called for R-19 wall insulation, but the manner of construction allowed space for only R-13 insulation, which is of lesser quality. Dawson found only R-13 insulation during his inspection. Dawson recommended, inter alia, that the home be reroofed, that the brick veneer be torn off and reinstalled, that the concrete floors be broken up and repoured to create a proper foundation for the support of the wall, and that a steel I-beam be installed to carry the load of the home.

John Page, a structural engineer, testified as an expert for sellers. Page inspected the home after reading Dawson's report and focused on the items in that report. Page disagreed with Dawson as to several items and testified that the repairs necessary to the home would be substantially less than those Dawson believed were necessary. By the time Page inspected the home, the entire roof had already been torn off and replaced as per Dawson's recommendation. Sellers admitted that flashing was questionable at windows and doors and would need to be replaced. They also admitted that there were leaks that would have to be corrected and that the center bearing wall in the basement needed to be replaced. Sellers submitted testimony that repairs estimated to cost $7,720 were necessary. Buyers, on the other hand, presented testimony that the repairs would cost substantially more.

Tony Pacewic of Pacewic Construction was hired by sellers to perform all repairs, except plumbing. Pacewic testified that the repairs would total $88,050. Stephen Jany, a licensed plumber, testified on behalf of buyers about the numerous plumbing problems in the house. According to Jany, there was a multitude of violations of the BOCA code and, in general, overall bad workmanship. For example, the gas piping was inadequately secured, which was a safety hazard; a vent pipe was not hooked up and was not capped off, allowing sewer gas into the house; the rough-in in the basement for an additional bathroom was configured in such a way that he had "no idea how they plan on putting fixtures in there," and none of the vents were capped off in the rough-in area; the water line in the basement ...

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