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Paul H. Schwendener, Inc. v. Larrabee Commons Partners

March 10, 2003

PAUL H. SCHWENDENER, INC., PLAINTIFF AND COUNTERDEFENDANT-APPELLANT,
v.
LARRABEE COMMONS PARTNERS, AN ILLINOIS LIMITED PARTNERSHIP, AS SOLE BENEFICIARY OF LASALLE NATIONAL BANK TRUST NO. 111955, DATED MARCH 16, 1987; HORWITZ MATTHEWS, INC., AN ILLINOIS CORPORATION; TEM HORWITZ, AND LASALLE NATIONAL BANK, AS TRUSTEE UNDER TRUST AGREEMENT NO. 111955, DEFENDANTS AND COUNTER-PLAINTIFFS-APPELLEES.



Appeal from the Circuit Court of Cook County Honorable Loretta Douglas, Judge Presiding

The opinion of the court was delivered by: Justice McNULTY

Unpublished

Paul H. Schwendener, Inc. (PHS), sued Larrabee Commons Partners (LCP) for breach of a construction contract. LCP countersued and demanded a jury trial. Years later, on the eve of trial, LCP withdrew its jury demand. PHS promptly filed its own demand for a jury trial on the counterclaim and on the complaint. The court denied the jury demand. After a bench trial the court entered judgment in favor of LCP. We reverse and remand because section 2-1105 of the Civil Practice Law (735 ILCS 5/2-1105 (West 1998)) protects the counterdefendant's right to demand a jury once the counterplaintiff withdraws its jury demand. We also find, in light of the right to a jury trial on the counterclaim, that the court abused its discretion by denying the late jury demand on the complaint.

BACKGROUND

Resolution of the dispositive issue for this appeal requires no extensive discussion of the evidence in the 160-volume record filed in this court. Nonetheless we will discuss some of the proceedings and the evidence to provide guidance to the trial court for the retrial.

In March 1987, Tem Horwitz, on behalf of LCP, and Michael Schwendener, on behalf of PHS, signed a contract in which LCP agreed to pay PHS $8.8 million for the construction of 49 townhouse units in 10 buildings, to be completed by May 1988. The contract required PHS to document the progress of the work, and LCP agreed to make progress payments based on the work completed. LCP expressly stated in the contract that "the majority of the units *** ha[d] been presold."

Paragraph 21 of the contract provided:

"In the event Contractor [PHS] shall fail to perform any of its obligations hereunder, including without limitation, its refusal or neglect to supply a sufficiency of skilled laborers or materials of the proper quality and quantity [for] its failure to prosecute the Work with promptness and diligence ***, each of which shall constitute a default hereunder, Owner [LCP] shall have the right, after forty-eight (48) hours written notice to Contractor, to (i) remedy *** such default *** and recover from the Contractor the amount of any loss or damage *** suffered or incurred as a result of such default, including, without limitation, attorneys' fees, *** in which event Owner may deduct and withhold from payments otherwise due Contractor any of the foregoing amounts, which deductions shall be deemed credits or back charges against the Price, or (ii) terminate this Contract.

*** In the event of termination of this Contract, Owner may use Contractor's material and equipment to complete the Work, or may complete the Work in any other expedient manner, and the Contractor shall receive no further payments until the Work is complete. Upon completion, if the unpaid balance of the Price exceeds Owner's cost of completion ***, such excess shall be paid to the Contractor, but if such cost of completion exceeds the unpaid balance of the Price, the Contractor shall pay the difference to the Owner ***."

The contract further permitted the parties any other remedies "existing at law or in equity."

Several delays affected the project. Poor work on some buildings by the carpentry subcontractor and the masonry subcontractor impeded progress significantly. Those subcontractors put up some walls out of plumb. PHS fired both subcontractors, tore out some walls and hired new subcontractors to reconstruct the walls.

LCP held the initial open house in January 1988, showing realtors the one model townhouse PHS had completed by that date. Sales remained slow in the months following the open house. In July 1988 LCP hired an outside marketing firm to sell the townhouses. Many units sold for prices considerably lower than the prices LCP had listed.

PHS presented applications for progress payments to LCP regularly during the course of construction. Representatives of both parties reviewed the applications to determine the amount due for the work completed. LCP then sent a copy of the application to the architect so that the architect could verify that PHS had performed the work shown on the application. Once the architect approved the application, LCP forwarded it to the bank that loaned LCP funds for the development. The bank employed its own consultants to verify that PHS had completed the work shown on the application. The bank then decided whether to loan LCP the amount requested for payment to PHS.

LCP made the first 19 progress payments promptly. In the revised twentieth pay application, PHS requested a final payment of $520,217.35, claiming that it had completed its part of the construction project. After the usual discussion between LCP and PHS, the architect certified the request for payment on February 19, 1991. Although the bank released most of the funds, LCP decided not to forward the funds to PHS.

In 1992 PHS filed this lawsuit to recover the outstanding balance. LCP countersued for breach of contract, arguing that PHS failed to complete the project within the time designated in the contract and it failed to complete work on some of the units. LCP filed a jury demand with its answer and counterclaim.

The parties engaged in years of highly contentious discovery proceedings. Each party filed multiple motions seeking sanctions for the opposing party's refusal to respond to specified discovery despite court orders. For example, LCP refused for years to specify the alleged defects in the construction.

After six years of such proceedings, LCP sought to amend its counterclaim to add claims for common law fraud and violation of the Consumer Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (Ill. Rev. Stat. 1987, ch. 121½, par. 261 et seq. (Now 815 ILCS 505/1 et seq. (West 2000))). A few months later PHS sought to amend its complaint to add claims for fraud and conversion. The court permitted LCP to amend the counterclaim but did not permit PHS to amend the complaint.

LCP's count based on the Consumer Fraud Act states in its entirety:

"27. Larrabee realleges and incorporates by reference the allegations contained in Paragraph 1 through 6 of the Complaint.

28. By reason of the foregoing, PHS has violated Section 2 of the Illinois [Consumer] Fraud and Deceptive Business Practices Act (815 ILCS 505/2) by, among other things, the following: (a) the use of various deceptions, fraud, misrepresentations and concealment of material facts with the intent that Larrabee rely upon the concealment, suppression or omission of such material facts, and (b) falsely representing that goods and services were of a particular standard, quality or grade when they were of another."

Paragraphs 1 through 6 of the complaint name and provide brief descriptions of the parties. The sole allegation regarding PHS or any of its employees asserts only that PHS has its principal place of business in DuPage County. LCP's counterclaim does not include any paragraphs numbered 1 through 6; LCP began the counterclaim with a paragraph numbered 11. Paragraph 15 of the counterclaim lists several alleged breaches of the contract, including the assertion that PHS failed to manage the job properly and failed to correct defective work. In the final subclause of paragraph 15, LCP alleges that "PHS submitted false Applications and Certificates For Payment." The other subclauses of lengthy paragraph 15 refer neither to falsity nor to any representations PHS made. The counterclaim nowhere specifies any misrepresentations PHS made either in its pay applications or at any other time. The counterclaim nowhere identifies any occasion on which PHS remained deceptively silent when it had a duty to speak to LCP.

PHS moved to strike the counterclaim as deficient pleading. In the alternative PHS sought a bill of particulars to specify the alleged misconduct. The trial court denied the motion in its entirety, requiring no amendment of the counterclaim.

The court also permitted LCP to withdraw its jury demand on the eve of trial. PHS demanded a jury, arguing that section 2-1105 of the Civil Practice Law (735 ILCS 5/2-1105 (West 1998)) preserved its right to demand a jury when LCP, the counterplaintiff, withdrew its jury demand. PHS argued in the alternative that the court should permit it to file a late jury demand on both the complaint and the counterclaim. The court held that PHS did not qualify as a defendant within the meaning of section 2-1105. The court exercised its discretion to deny the late jury demand.

PHS called Horwitz as its first witness, seeking to use his testimony to disprove a number of allegations in LCP's answer and counterclaim. LCP alleged that PHS breached the contract by violating certain provisions the City of Chicago required in the construction contract. LCP paid a deposit to the city to assure compliance with the requirements. PHS asked Horwitz whether the city repaid the deposit. The court disallowed the question.

LCP sought millions of dollars in damages due to construction delays. PHS sought to present evidence that LCP did not rely on the precise date for completion stated in the construction contract. PHS asked Horwitz whether LCP presented to the city a construction schedule providing for completion beyond the date set ...


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