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Stiffle v. Marz

Court of Appeals of Illinois, First District, Fifth Division

December 30, 2016

KIMBERLY STIFFLE and SCOTT STIFFE, Plaintiffs-Appellants,
v.
BAKER EPSTEIN MARZ, Doing Business as Baker Construction Group, Defendants-Appellees.

         Appeal from the Circuit Court of Cook County, No. 12 CH 15769 The Honorable Lynn M. Egan, Judge Presiding.

          JUSTICE HALL delivered the judgment of the court with opinion. Presiding Justice Gordon and Justice Lampkin concurred in the judgment and opinion.

          OPINION

          HALL, JUSTICE

         ¶ 1 The plaintiffs, Kimberly and Scott Stiffle, appeal from an order of the circuit court of Cook County granting the defendant's, Baker Epstein Marz's, motion for sanctions pursuant to Illinois Supreme Court Rule 137 (eff. Feb. 1, 1994) and dismissed the plaintiffs' second amended complaint with prejudice. On appeal, the plaintiffs contend that the circuit court erred when it found they violated Rule 137 and that dismissal of their second amended complaint with prejudice was too severe a sanction. For the reasons set forth below, we affirm in part and vacate in part the order of the circuit court.

         ¶ 2 BACKGROUND

         ¶ 3 I. The Pleadings

         ¶ 4 On June 14, 2013, the plaintiffs filed a single-count complaint against the defendant alleging breach of contract in connection with the defendant's construction of a residence for the plaintiffs. The complaint sought $280, 000 in damages for construction defects the plaintiffs discovered after they moved into the residence. The complaint alleged that the plaintiffs entered into a construction contract with the defendant sometime in or around September 2008, and further alleged as follows:

         "The actual written contract is unavailable as of the date of filing this Complaint, although it is believed to be an AIA form contract between owner and contractor." In compliance with section 2-606 of the Code of Civil Procedure (Code) (735 ILCS 5/2-606 (West 2012)), attached to the complaint was the plaintiffs' affidavit stating in pertinent part that they had "entered into a written contract" with the defendant for the construction of a new single-family residence. The plaintiffs set forth in general terms the duties of the defendant under the contract and the price they agreed to pay the defendant. The affidavit stated further as follows:

"As of the date of filing of this complaint, we are unable to locate the original or a copy of the executed written contract. However, we believe it was an AIA contract and the terms described herein and cited in the complaint are the agreed upon terms of the contract."

         ¶ 5 The defendant filed a motion to dismiss, inter alia, citing the plaintiffs' failure to attach the written contract to the complaint and their failure to state that they had signed a written contract with the defendant. While, in response, the plaintiffs maintained that their affidavit was sufficient, they were granted leave to file an amended complaint.

         ¶ 6 On February 7, 2014, the plaintiffs filed their first amended complaint for breach of contract against the defendant. In the first amended complaint, the plaintiffs alleged that the parties "began negotiating a standard AIA Document-A107 Agreement" for the construction of the plaintiffs' residence. They further alleged that the parties "eventually agreed on a modified version of the AIA form agreement" whereby the defendant agreed to act as general contractor for the construction of the residence, and the plaintiffs agreed to pay a specific sum for the construction. The plaintiffs further alleged that "[t]he parties never executed the [AIA] Agreement but nonetheless [the defendant] started work on the project at the [plaintiffs'] request." Attached to the first amended complaint was a copy of the non-executed AIA standard agreement and the architect's plans and specifications for new residence.

         ¶ 7 After its initial motion to dismiss the first amended complaint was denied as legally insufficient, the defendant move to dismiss the first amended complaint pursuant to section 2-619(a)(9) of the Code (735 ILCS 5/2-619(a)(9) (West 2012)). The defendant pointed out that after alleging the existence of a written contract in the original complaint, the plaintiffs now claimed that despite the lack of signatures, the parties had agreed to modifications of the standard AIA agreement. At the bottom of its pages, the modified standard AIA agreement was referred to as the "Stiffle working draft - 08-01-07.doc[.]" The defendant maintained that the provision dealing with the execution of the contract and the signature lines in the modified standard AIA agreement evidenced that the document would have no effect unless signed by the parties.

         ¶ 8 The motion to dismiss was supported by the affidavit of Warren Baker who participated in the preliminary negotiations on behalf of the defendant with the plaintiffs. Mr. Baker averred that a standard AIA agreement or other formal written contract was consummated by the parties; that the parties' negotiations never brought them close to executing such a document; and that the unsigned modified standard AIA agreement relied on by the plaintiffs was merely a series of proposals and counter proposals.

         ¶ 9 The plaintiffs' response to the motion to dismiss was supported by the affidavit of plaintiff Kimberly Stiffle. She averred that the parties agreed on a modified version of the standard AIA agreement and that the defendant proceeded to begin construction of the plaintiffs' residence in accordance with the modified version of the standard AIA agreement.

         ¶ 10 The circuit court granted the defendant's motion to dismiss without prejudice. The court granted the plaintiffs leave to file an amended complaint alleging specific facts to establish the terms of an oral contract between the parties.

         ¶ 11 In their second amended complaint, the plaintiffs alleged that the parties never executed a written contract, but "they reached an oral agreement on or about August 27, 2007, " and alleged the duties of the parties pursuant to the terms of the oral agreement. The second amended complaint added a cause of action alleging that the defendant breached the implied warranty of habitability based on the various defects the plaintiffs discovered after they moved into the residence.

         ¶ 12 II. Rule 137 Sanctions

         ¶ 13 The defendant responded with a motion for sanctions pursuant to Rule 137. The defendant maintained that the first amended complaint violated Rule 137 by: (1) falsely asserting that the parties had agreed to a modified version of the standard AIA agreement; (2) attempting to enforce a unsigned document consisting of proposed and counter proposed terms which neither party agreed to; and (3) submitting Kimberly Stiffle's affidavit which contradicted the plaintiffs' joint affidavit submitted with the original complaint and contradicted their response to the motion to dismiss in which they admitted the terms of the contract they were trying to enforce were uncertain.

         ¶ 14 The defendant further alleged that in their second amended complaint, the plaintiffs and their attorney violated Rule 137 in that (1) the original complaint alleged that the plaintiffs entered into a written contract with the defendant, and they executed an affidavit averring to that fact; (2) in her affidavit attached to the plaintiffs' response to the defendant's section 2-619.1 motion to dismiss, Kimberly Stiffle affirmed under oath that the parties were in negotiations in or around August 2007 and eventually agreed to the modified standard AIA agreement attached to the first amended complaint; (3) in the second amended complaint, the plaintiffs alleged that the parties never executed the written contract but reached an oral agreement on or about August 27, 2007, directly contradicting the plaintiffs' allegation in the original complaint that they entered into a written contract with the defendant in or about September 2008; and (4) the averment that the parties reached an oral agreement on or about August 27, 2007, was directly contradicted by e-mails between the plaintiffs and their attorney and the defendant indicating the parties were still negotiating after that date. As sanctions for the violations, the defendant requested the dismissal of the second amended complaint with prejudice and leave to file a request for attorney fees and costs.

         ¶ 15 In response to the motion for sanctions, the plaintiffs explained that, prior to the filing of the complaint, they attempted unsuccessfully to locate a signed copy of the written contract by searching their records and contacting their architect. Due to the deterioration of their relationship with the defendant, they did not request a copy of the signed copy from it. Nonetheless, because of the size of the project and amount of money involved in the construction, in excess of 1 million dollars, the plaintiffs "reasonably believed they had executed a contract with Defendant."

         ¶ 16 Moreover, after the plaintiffs responded to the defendant's motion to dismiss the first amended complaint, the defendant's attorney contacted the plaintiffs' attorney advising that the defendant's file "did not include a signed initial contract between Plaintiffs and Defendant, " but there were multiple change orders providing in pertinent part as follows:

"This Change Order amends the 'Abbreviated Standard Form of Agreement between Owner and Contractor for Construction Projects of Limited Scope where the basis of Payment is a Stipulated Sum (AIA Document A107-1997)' dated 'PENDING' and/or the Letter of Intent, executed on August 25, 2007, by which the Owner authorized the Contractor to begin work and which separately and together serve as the understanding and agreement between the Owners and the Contactor for the premises known as 4207 N. Greenview, Chicago, Illinois." (Emphasis omitted.) ...

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