Where a plaintiff files suit against a contractor or subcontractor for breach of implied warranty of habitability, the plaintiff must be in privity with the contractor, or recovery is barred by the economic loss rule.
The 1st District Appellate Court affirmed the decision of Cook County Circuit Judge Brigid M. McGrath.
1400 Museum Park LLC (Museum Park) initiated construction of a 260-unit condominium building in 2006, hiring Kenny Construction Company (Kenny) as a general contractor. Franks Mechanical Contractors, Inc. (Franks) was hired as the plumbing subcontractor. The building was completed in 2008, and condominium units were sold up through 2011, when all units were sold. The unit owners later formed the 1400 Museum Park Condominium Association (Association) to manage the property. In June 2013, the Association was alerted to leaks in the hot water supply riser, the investigation of which allegedly revealed latent defects in the design, materials and construction of the plumbing system. The estimated repair costs were in excess of $1 million, and Kenny refused to investigate or remediate.
The Association filed suit against Kenny and Franks for breach of contract and breach of implied warranty of habitability in November 2016. While the case was pending trial, in 2018, the Illinois Supreme Court issued an opinion, Sienna Court Condominium Association v. Champion Aluminum Corporation, where a property owner attempted to sue a subcontractor on that property with whom they held no contractual relationship. The Supreme Court found that privity of contract was required to bring the claim, otherwise, recovery was barred by the economic loss rule. Kenny immediately moved to dismiss based on this ruling. The circuit court granted the motion, and the Association appealed.
On appeal, the Association argued that the circuit court erred in finding that Kenny could not be found to have breached the implied warranty of habitability towards the condominium owners or the Association. Kenny, citing the decision in Sienna, argued that the implied warranty of habitability was a “creature of contract, not tort” and so privity of contract was required, and Kenny’s only contract was with Museum Park, not the Association or the unit owners who Museum Park sold the units to. Without a contract between Kenny and the Association, the economic loss rule bars recovery in tort for solely economic damages if there is no “personal injury, property damage, intentional fraud, or misrepresentation.” None has been alleged by the Association. The appellate court agreed.
The Association noted that the Supreme Court’s decision in Sienna was applied to a subcontractor with whom there was no contractual privity, and that Kenny functioned as a general contractor, but the appellate court found the reasoning in Sienna applied equally well to general contractors, and that Kenny was not party to the contracts between Museum Park and the unit owners. Finally, the Association argued that the Supreme Court’s decision in Sienna should not be applied retroactively and should only be given prospective effect. However, applying the first of the Chevron factors, the appellate court concluded that the decision in Sienna did not establish a new principle of law but instead clarified the limits of a tort for breach of implied warranty of habitability in light of the economic loss rule. As such, it should be applied retroactively.
The appellate court therefore affirmed the decision of the circuit court.
1400 Museum Park Condominium Association v. Kenny Construction Company et al.
2021 IL App (1st) 192167
Writing for the court: Justice LeRoy K. Martin Jr.
Concurring: Justices Robert E. Gordon and Bertina E. Lampkin
Filed: Aug. 5, 2021