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Overton v. Kingsbrooke Development

April 18, 2003

RONALD OVERTON AND DONNA OVERTON, PLAINTIFFS-APPELLEES AND CROSS-APPELLANTS,
v.
KINGSBROOKE DEVELOPMENT, INC., DEFENDANT-APPELLANT AND CROSS-APPELLEE,
AND LANDMARK REALTY, INC., AND DONALD W. WHITEHEAD, DEFENDANTS.



Appeal from the Circuit Court of Madison County. No. 98-L-51 Honorable Phillip J. Kardis, Judge, presiding.

The opinion of the court was delivered by: Justice Chapman

In March of 1996, Ronald and Donna Overton entered into a contract to purchase a lot from Kingsbrooke Development, Inc. (Kingsbrooke). Unbeknownst to the Overtons, Kingsbrooke had placed a large quantity of fill dirt on the lot prior to the sale. After the sale, the Overtons disputed the suitability of the lot and requested their money back. Kingsbrooke denied the request. The Overtons proceeded to file suit and requested attorney fees. Prior to the trial, the claims against Kingsbrooke were severed from the remaining claims. The court then granted a rescission of the contract based on a breach of an "implied warranty of suitability" and awarded damages to the Overtons, but it denied their request for attorney fees. On appeal, Kingsbrooke argues that (1) the court's reliance on the implied warranty of suitability was both contrary to Illinois law and against the manifest weight of the evidence and (2) granting the rescission was an abuse of discretion because it was not supported by either the facts or the law. The Overtons argue that the court erred in not awarding attorney fees under either the language of the contract or the Consumer Fraud and Deceptive Business Practices Act (815 ILCS 505/1 et seq. (West 1996)). We affirm the decisions of the trial court.

I. BACKGROUND

Kingsbrooke, a corporation in the business of developing residential subdivisions, created Kingsbrooke Subdivision in Glen Carbon, Illinois, and sold lots in that subdivision for residential building. The Overtons purchased Lot 38 after viewing this lot with their builder, Gregory Sheahan. They hired Burns Excavating to stake out and excavate. In its initial staking of the house, Burns Excavating made a mistake that was resolved after Kingsbrooke's engineer inspected the property.

When the Overtons began excavating for the basement, they found a large quantity of fill dirt on the lot. The fill dirt was throughout the lot; it contained brick, wood, and other debris and was more than 12 feet deep in some areas. To determine whether the lot in its existing condition was suitable for building, the Overtons hired SCI Engineering-a firm that practices geotechnical environmental engineering, construction services testing, and soil compaction testing. SCI Engineering had previously done work for Kingsbrooke.

Mark Harmes, an engineer with SCI Engineering, was one of the engineers who evaluated the Overtons' lot and testified at the trial. He stated that most residential structures can tolerate an inch or two of settlement. Settlement beyond this increases the risk of structural damage. The prediction for the settlement of fill dirt, Harmes testified, is based on the density level of the soil. Density testing measures the number of soil particles within an amount of space by determining how many pounds of soil there are within a cubic foot. The field density then is stated as a percentage of the maximum laboratory value. Harmes testified that the acceptable engineering compaction standard was a 95% rate, which ensures a settlement of less than an inch. Kingsbrooke, however, presented evidence that the Village of Glen Carbon had approved its subdivision plans setting forth a 90% compaction density rate. Several of the soil samples from the Overtons' lot showed compaction rates lower than 95%, but all relevant rates were greater than 90%.

Harmes had also issued two reports detailing other observations based on the testing of the Overtons' soil. He noted that there was approximately 6 feet of fill dirt in the front portion of the lot and approximately 20 feet in the rear. He also noted that the fill dirt had been placed without engineering supervision and that no compaction tests had been performed. Based on his observations, Harmes concluded that the fill was not compacted properly for the support of the proposed structure. He informed the Overtons that further steps would be necessary before they could construct a residence on that lot.

Harmes proposed two options to achieve a suitable building site. The first option, called an "engineered fill," required that the existing fill dirt be excavated, that foreign debris be removed, and that the dirt be dried and recompacted to a 95% density rate. The second option would be to extend the building's foundation down to virgin soil with piers.

After consulting with their builder, the Overtons decided to attempt an engineered fill. However, the high moisture content of the soil made this option unworkable. The Overtons abandoned the second alternative, piering, after a piering contractor refused the job. At this point, Sheahan (the builder) withdrew from the project because of concerns about the building site. The Overtons then requested a refund, which Kingsbrooke refused. The Overtons proceeded to sue for a breach of the warranty of habitability, a breach of the implied warranty of fitness for a particular purpose, consumer fraud, and injunctive relief. Additionally, they amended the complaint to include a claim for rescission.

At the trial, David Foreman, who is one of Kingsbrooke's principals and has been in the excavating business for years, stated that he personally did the excavating for the development. He described how he looks at the plans and "cuts and fills" the site according to those plans. The process involves moving dirt from the high places and filling in the low places on the site to get the desired grade. Once the fill dirt is in place, he takes a compactor and runs over it multiple times until he thinks it is sufficiently compacted. Neither Foreman nor anyone else at Kingsbrooke had an engineer do a soil density test to determine whether the fill had been compacted to a density rate that would be suitable for building a residence. Testimony from Kingsbrooke principals indicated that the firm was aware of the potential problems created by the presence of fill dirt on a construction site. When Foreman was asked what he discloses to buyers about the presence of fill dirt on a lot, he stated, "I don't mention nothing unless they ask me, and I tell them, [']yes there is fill on there.['] " He admitted that when a contractor finds out that a lot contains fill dirt, the contractor normally does something extra to prepare the site for construction. Kingsbrooke admitted that several other homes on adjacent lots, built on fill dirt, required additional foundation support. The subdivision plans for Kingsbrooke were prepared by Sherril & Associates. John Dutton, vice president of Sherril & Associates and the project manager for this Kingsbrooke development, stated that he would not build a house on a fill dirt area, even if it were compacted, unless he could first get to virgin soil. Additionally, he stated that before he made a decision whether to build a residence on a lot, he would want to know if 10 to 12 feet of fill dirt were on it.

The Overtons had no experience in constructing homes. They never asked about whether fill dirt was on the lot, nor did anyone at Kingsbrooke inform them of fill dirt on the lot. No mention was made of the need for piering or other foundation support. Donna Overton testified that she would not have entered into the contract if someone had informed her that piering or recompacting the soil would be necessary in order to build a house on the lot.

The Overtons requested attorney fees under the terms of the sales contract, which Kingsbrooke moved to strike. Prior to the trial, the claims against Kingsbrooke were severed from the remaining claims. The court then granted a rescission of the contract based on a breach of an "implied warranty of suitability" and awarded damages to the Overtons. The court denied the Overtons' request for attorney fees. Kingsbrooke appeals the grant of the rescission, and the Overtons cross-appeal the denial of attorney fees.

II. ANALYSIS

A. Implied Warranty

We first note that the parties assume, and we agree, that despite the trial court's usage of the phrase "implied warranty of suitability," its decision was actually based upon the "implied warranty of habitability." Thus, our analysis proceeds based on the ...


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