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Board of Managers of 1120 Club Condominium Association v. 1120 Club, LLC

Court of Appeals of Illinois, First District, Third Division

October 26, 2016

BOARD OF MANAGERS OF THE 1120 CLUB CONDOMINIUM ASSOCIATION, Plaintiff-Appellant,
v.
1120 CLUB, LLC, an Illinois Limited Liability Company, and TRAPANI CONSTRUCTION COMPANY, INC., an Illinois Company, Defendants-Appellees, 1120 Club, LLC, Third-Party Plaintiff Appellant,
v.
Trapani Construction Company, Inc., Legat Architects, Inc., and The Rise Group, LLC, Third-Party Defendants-Appellees; Trapani Construction Company, Inc., Fourth-Party Plaintiff-Appellant,
v.
MacDonald Construction Services, Inc., Kole Construction Company, Inc., Boyle Construction Company, Inc., Howard Concrete, Streich Corporation, and Stock Building Supply, Inc., Fourth-Party Defendants-Appellees.

         Appeal from the Circuit Court of Cook County, No. 12 L 7092 The Honorable Margaret Brennan, Judge Presiding.

          JUSTICE PUCINSKI delivered the judgment of the court, with opinion. Justices Lavin and Cobbs concurred in the judgment and opinion.

          OPINION

          PUCINSKI JUSTICE

         ¶ 1 This matter arises from claims by the plaintiff, Board of Managers of the 1120 Club Condominium Association (Board), that a condominium building developed and sold by defendant 1120 Club, LLC (LLC) and built by defendant Trapani Construction Company, Inc. (Trapani) suffered from a number of construction defects. In addition to being a direct defendant on the claims brought by the Board, Trapani was also a third-party defendant to claims brought by the LLC. In turn, in response to the claims brought by both the Board and the LLC, Trapani filed third-party and fourth-party claims against various subcontractors. This single civil case led to three separate appeals, which were consolidated.

         ¶ 2 After a somewhat convoluted procedural history, the trial court granted Trapani's motions to dismiss the claims brought against it by the Board and the LLC on the bases that the Board had elected to pursue recourse from the LLC and thus could not seek recourse from Trapani and that the LLC lacked standing to bring its claims. The grant of these motions resulted in the dismissal of Trapani's claims against the subcontractors. After the trial court entered Illinois Supreme Court Rule 304(a) (eff. Feb. 26, 2010) findings on the respective dismissal orders, the Board, the LLC, and Trapani brought these consolidated appeals. For the reasons that follow, we reverse and remand for further proceedings.

         ¶ 3 BACKGROUND

         ¶ 4 In May 2009, the Board instituted this action by filing suit against the LLC and 1120 Retail, LLC (Retail). The Board then amended its complaint. The Board's amended complaint alleged that the Board is the governing body of the 1120 Club Condominium development located at 1124 Lake Street, Oak Park, Illinois. The Board alleged that residential units and common elements of the building were damaged as a result of construction defects, including the installation of fiber cement siding rather than brick and architectural stone. The Board further alleged that the fiber cement siding was improperly installed and that it warped and/or failed, allowing water to penetrate the building, causing extensive damage to the common elements and residential units of the building. In addition, the Board alleged that the flashings around windows and doors were improperly designed and/or installed, resulting in water penetration into the building; mold and mildew infiltration into the residential units and common elements of the building; water damage to residential units from the water penetration on the fourth and seventh floors; and a lack of proper flashing at certain fourth-floor units and on the west wall of the swimming pool.

         ¶ 5 Against the LLC, the developer and seller of the development, the amended complaint alleged claims of breach of contract, breach of express warranty, consumer fraud, and negligent misrepresentation. Against both the LLC and Retail, the Board alleged breach of contract and sought an injunction related to the reimbursement of expenses the Board claimed it was due from the defendants.

         ¶ 6 On March 29, 2011, the LLC filed its third-party complaint against Trapani, alleging that Trapani and its subcontractors were responsible for the construction defects alleged by the Board. The LLC's third-party complaint sounded in breach of contract, express indemnification, and implied indemnification.

         ¶ 7 On May 11, 2011, the LLC filed a petition for Chapter 7 bankruptcy. Thereafter, the instant matter was placed on the stay calendar due to the bankruptcy.

         ¶ 8 In June 2012, the Board filed a motion seeking to have the case removed from the stay calendar on the grounds that the bankruptcy court had modified the stay to allow the Board to pursue its claims against the LLC to the extent of the LLC's available insurance. The trial court granted the Board's motion and removed the matter from the bankruptcy calendar.

         ¶ 9 On August 24, 2012, the Board filed its second amended complaint. In the second amended complaint, the Board dropped its claims against Retail, thereby removing Retail from this action, and instead chose to bring claims against only the LLC and Trapani. More specifically, it sounded in claims of breach of contract, breach of express warranty, consumer fraud, and negligent misrepresentation against the LLC. Counts VI and VII of the second amended complaint alleged claims of breach of implied warranty of habitability and breach of implied warranty of good workmanship against Trapani.

         ¶ 10 Trapani moved to dismiss counts VI and VII of the Board's second amended complaint on the grounds that, under the holding of Minton v. Richards Group of Chicago, 116 Ill.App.3d 852 (1983), the Board could not directly sue Trapani without first establishing that the LLC was insolvent and the Board had no recourse against the LLC. According to Trapani, the Board could not clear this procedural hurdle because it was pursuing the LLC's insurance, indicating that the LLC was not insolvent and that the Board had recourse against the LLC. The Board refuted these contentions by arguing that the LLC was, in fact, insolvent because the insurance proceeds were not property of the bankruptcy estate and because the holding of 1324 W. Pratt Condominium Ass'n. v. Platt Construction Group, Inc., 404 Ill.App.3d 611 (2010) (Pratt I), permitted a direct action against builders. On April 9, 2013, the trial court denied Trapani's motion to dismiss.

         ¶ 11 In the meantime, Trapani filed its third-party complaint against subcontractors MacDonald Construction Services, Inc., Kole Construction Company, Inc., Boyle Construction Company, Inc., Howard Concrete, Streich Corporation, and Stock Building Supply, Inc. (hereafter collectively referred to as the subcontractors), which it later amended. Trapani's first amended third-party complaint sought contribution from each of the subcontractors for their portion of liability for the damages alleged by the Board. Trapani also brought counts for breach of contract, breach of express warranty, breach of implied warranty of workmanship, and breach of contract to procure insurance against each of the subcontractors.

         ¶ 12 Certain subcontractors brought motions to dismiss Trapani's first amended third-party complaint. Some of them argued that it should be dismissed because the Board did not have a cause of action against Trapani under Minton. On December 4, 2013, the trial court agreed and granted the subcontractors' motions to dismiss with prejudice based on the Minton arguments. The trial court also sua sponte reversed its previous denial of Trapani's motion to dismiss counts VI and VII of the Board's second amended complaint and entered an order dismissing the Board's claims against Trapani with prejudice. The trial court then dismissed all of the other subcontractors with prejudice.

         ¶ 13 On January 3, 2014, the Board filed a motion to reconsider the trial court's dismissal of counts VI and VII against Trapani. In that motion, the Board argued that it had a claim against Trapani independent of Minton and that, even if it did not, the LLC was insolvent, such that the Board could pursue Trapani under Minton. Trapani and subcontractor Stock responded to the Board's motion to reconsider, arguing that the trial court's dismissal was proper because Minton did, in fact, govern the Board's claims against Trapani, and the LLC was solvent.

         ¶ 14 While the parties were briefing the Board's motion to reconsider, the LLC filed a motion requesting that its third-party complaint against Trapani be removed from the bankruptcy calendar and reinstated. The trial court granted the LLC's motion. The LLC then requested leave to file an amended third-party complaint. The trial court granted the LLC's motion and also reinstated Trapani's third-party complaint and converted it to a fourth-party complaint. The amended third-party complaint filed by the LLC contained three counts against Trapani (breach of contract, express indemnification, and implied indemnification) and a count of breach of contract against The Rise Group, LLC (Rise Group), and Legat Architects, Inc. (Legat).

         ¶ 15 Legat filed a motion to dismiss the breach of contract claim against it in the LLC's amended third-party complaint arguing that the LLC failed to comply with all of the conditions of their contract by failing to attend mediation. Legat also argued that pursuant to the contract between Legat and the LLC, the LLC's exclusive remedy was arbitration. It does not appear ...


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