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Board of Managers of Chestnut Hills Condominium Association v. Pasquinelli

December 23, 2004

BOARD OF MANAGERS OF CHESTNUT HILLS CONDOMINIUM ASSOCIATION, AN ILLINOIS NOT-FOR-PROFIT CORPORATION, PLAINTIFF-APPELLANT,
v.
PASQUINELLI, INC., DEFENDANT-APPELLEE.



Appeal from the Circuit Court of Cook County. Honorable Lee Preston, Judge Presiding.

The opinion of the court was delivered by: Presiding Justice Campbell

Plaintiff, the board of managers of Chestnut Hills Condominium Association, appeals from entry of an order of the circuit court of Cook County staying the proceeding of its claims in counts I, II, and IV of its complaint against defendant, Pasquinelli, Inc., pending submission of all matters to arbitration. On appeal, plaintiff contends that the trial court erred in staying all matters subject to arbitration where the allegations of counts I, II and IV of plaintiff's complaint are not subject to mandatory arbitration. For the following reasons, we reverse the judgment of the trial court and remand this matter for reconsideration consistent with this opinion.

[9]     The following facts are relevant to this appeal. Plaintiff, Chestnut Hills Condominium Association (the Association), is the managing board of a 19-building, 70-unit residential condominium development located in Burr Ridge, Illinois. Pasquinelli, Inc. (Pasquinelli), developed and sold the condominium units of Chestnut Hills to individual owners pursuant to a document entitled "Standard Land and Building Contract" (Purchase Contract). The Purchase Contract contained the following language:

"PURCHASER HAS READ AND UNDERSTOOD THE TERMS OF THE SAMPLE COPY OF THE LIMITED WARRANTY, INCLUDING ANY PROVISION THAT MAY REQUIRE ALL DISPUTES THAT ARISE UNDER THE RWC LIMITED WARRANTY TO BE SUBMITTED TO BINDING ARBITRATION."

The "Limited Warranty" referred to in the Purchase Agreement sets forth its coverage for the common elements of a condominium as follows:

"CONDOMINIUM COVERAGE: This Limited Warranty shall only apply to warranted common elements. Warranted common elements are those portions of the defined electrical, heating, ventilation, cooling, plumbing and structural systems which serve two (2) or more residential units, and are contained wholly within a residential structure. *** Examples of common elements which are covered by this Limited Warranty are hallways, meeting rooms and other spaces wholly within the residential structure designated for the use of two (2) or more units. Examples of common elements which are not covered under this Limited Warranty are club houses, recreational buildings and facilities, exterior structures, exterior walkways, decks, balconies, arches or any other non-residential structure which is part of the condominium." (Emphasis in original.)

The Limited Warranty further provides in pertinent part as follows: "This Limited Warranty is separate and apart from your contract and/or sales agreements with your Builder." A claim under the warranty begins with a "request for warranty performance." The Limited Warranty sets forth the following procedure for dealing with requests for warranty performance:

"Within thirty (30) days following the Administrator's receipt of proper notice of request for warranty performance, the Administrator may review and mediate your request by communicating with you, your Builder and any other individuals or entities who the Administrator believes possess relevant information. If, after thirty (30) days, the Administrator has not been able to successfully mediate your request, or at any earlier time when the Administrator believes that your Builder and you are at an impasse, then the Administrator will notify you that your request has become an Unresolved Warranty Issue."

An "Unresolved Warranty Issue" is defined as follows: "All requests for warranty performance, demands, disputes, controversies and differences that may arise between the parties to this Limited Warranty that cannot be resolved among the parties. An Unresolved Warranty Issue may be a disagreement regarding:

a. the coverages in this Limited Warranty

b. an action performed or to be performed by any party pursuant to this Limited Warranty

c. the cost to repair or replace any item covered by this Limited Warranty."

The Limited Warranty requires binding arbitration of disputes of any unresolved warranty issues. An owner begins the arbitration process "by giving the Administrator written notice of your [sic] request for arbitration of an Unresolved Warranty Issue."

On February 18, 2003, the Association filed a four-count complaint against Pasquinelli alleging that on or after February 18, 1999, the Association learned of the existence of certain defects in design, material or workmanship or both, relating to siding, roofing grading-exterior drainage, balconies, masonry, exterior wood rot, peeling paint, concrete sidewalks, stoops and driveways, and a built-in TV antenna system.

In count I, the Association alleged breach of the implied warranty of habitability arising out of the Purchase Contract. In count II, the Association alleged breach of the implied warranty of good workmanship. Count III contained allegations of breach of the express warranty for constructing the common elements and buildings with one or more of the defects delineated above, and count IV alleged breach of contract for failure to construct the buildings in substantial compliance with the feature sheet and specifications and for failure to install built-in TV antenna systems, among other things.

On May 30, 2003, Pasquinelli filed a motion to dismiss counts I through IV of the Association's complaint pursuant to section 2-615 of the Illinois Code of Civil Procedure (735 ILCS 5/2-615 (West 2002)) or, in the alternative, to stay proceedings as to counts III and IV pending submission to arbitration. The Association filed a motion opposing Pasquinelli's motion to dismiss, therein conceding that the terms of the Limited Warranty require binding arbitration for claims made under the Limited Warranty and withdrawing count III. The Association maintained that counts I, II and IV were not subject to the arbitration provision of the Limited Warranty because the Association sought relief under distinct legal theories.

On October 31, 2003, the trial court issued an order dismissing count III and staying the proceedings related to counts I, II, and IV pending submission of the claims ...


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