Case Title: Guzman v. C.R. Epperson Construction, Inc.

Citation: 

Docket Number: 89006

State: illinois

Court: Illinois Supreme Court

Date: 2001-06-21T00:00:00Z

Document:
Docket No. 89006-Agenda 25-September 2000.
MILTON GUZMAN et al., Appellees, v. C.R. EPPERSON 
CONSTRUCTION, INC., Appellee (MJE Construction, Inc., et
								 al., Appellants).
Opinion filed June 21, 2001.
	JUSTICE FREEMAN delivered the opinion of the court:
	We granted leave to appeal in this case (177 Ill. 2d R. 315(a))
in order to determine whether the third-party complaint in this
action was filed within the time prescribed by law. The circuit
court concluded that it was not and dismissed the third-party
action. The appellate court reversed. 309 Ill. App. 3d 655. For the
reasons that follow, we vacate the judgment of the appellate court,
reverse the judgment of the circuit court, and remand the matter to
the circuit court.



BACKGROUND
	On September 25, 1992, plaintiffs in the underlying action,
Milton and Donna Guzman (the Guzmans) filed their original
complaint which named C.R. Epperson Construction, Inc.
(Epperson), as the defendant. The Guzmans alleged that, in 1988,
they entered into a contract with Epperson for the construction of
a house in Bloomington, Illinois. They further alleged that
Epperson breached the contract by constructing a home that
contained numerous design and construction defects. The
Guzmans voluntarily dismissed the suit on March 28, 1996, and
refiled a new action on April 12, 1996. In the refiled pleading, the
Guzmans alleged both breach of contract and breach of implied
warranty of habitability stemming from damages caused by, inter
alia, defects in the installation of the house's windows, roof,
plumbing, flooring, and walls.
	On September 4, 1996, Epperson filed its third-party
complaint against MJE Construction, Inc. (MJE), Michael
Hadden, then doing business as Hadden Concrete, Holland
Brothers, Inc., Hardesty Heating and Ventilating, Inc. (Hardesty),
and Robert Georgi, doing business as G&G Roofing (Georgi).(1)
Epperson alleged that it entered into subcontracts with each of the
third-party defendants under which the third-party defendants
agreed to perform various aspects of the construction of the
Guzman home. The third-party complaint sounded in breach of
contract and detailed the construction defects for which each
subcontractor was allegedly responsible, alleging that the
residence had flooded and leaked repeatedly in 1989, 1990, and
subsequent years during periods of heavy rainfall.
	On February 10, 1997, Epperson amended its complaint to
include express and implied indemnity claims against each third-party defendant. Epperson demanded a jury trial on all counts.
Thereafter, third-party defendant Georgi sought dismissal on the
grounds that the third-party action was time-barred under section
13-214 of the Code of the Civil Procedure. In support of the
motion, Georgi attached a letter, dated August 15, 1996, that
Epperson wrote to Georgi. The letter reads, in pertinent part, as
follows:
		"It is with great regret that this letter is written. In 1988,
Epperson Construction built a house for Milton and
Donna Guzman ***. Since that time, the owners have
alleged that some of the work on the house was not
quality work or done in a workman like manner. They
have also alleged that some of the materials used in the
construction were not 'new' materials. Many of the
alleged 'defects' are nothing more than homeowner
maintenance items.
			We have tried to resolve these issues since 1990, but
the owners refuse to cooperate. We have offered to do any
and all work to take care of issues that relate to building
the house (not maintenance) or a monetary settlement.
These efforts were to no avail. The Guzman's [sic] have
sued our company.
			Some of the issues in the lawsuit relate to work done by
your company. We have no alternative but to involve your
company in the resolution of this matter. Hopefully, you
understand that this was the last resort. We hope that all
of the parties involved will combine forces to work
together to dispel this frivolous lawsuit."
	According to Georgi, the letter established that Epperson had
known about the various problems at the Guzman home at least by
1990. Georgi contended that section 13-214 provides a four-year
statute of limitations for such actions and that Epperson's claim
had expired in 1994, some two years before Epperson filed suit.
	In response, Epperson argued that it had not suffered an
"injury" until the Guzmans filed suit against it in April 1996 or, at
the earliest, when the Guzmans originally sued Epperson in
September 1992. Epperson also noted that section 13-204 of the
Code applied to its indemnity claims. Section 13-204, which was
amended in 1994 and took effect on January 1, 1995, provides that
no action for contribution or indemnity "may be commenced more
than 2 years after the party seeking contribution or indemnity has
been served with process in the underlying action or more than 2
years from the time the party *** knew or should reasonably have
known of an act or omission giving rise to the action for
contribution or indemnity, whichever period expires later."
(Emphasis added.) 735 ILCS 5/13-204(b) (West 1996).
	The circuit court granted Georgi's motion, finding that the
Epperson letter established that Epperson knew of the Guzmans'
complaints of construction defects by no later than 1990. The court
ruled that the four-year statute of limitations contained in section
13-214, therefore, began to run in 1990 and expired in 1994.
Because Epperson did not file its third-party action until 1996, the
court concluded that the action was time-barred. The circuit court
further found that section 13-204, as amended, did not apply to the
action because section 13-214 had previously applied to the action
and that section 13-214's four-year limitation period for these
claims had expired prior to the effective date of the amendment.
	After Georgi successfully obtained dismissal of Epperson's
claims on the basis of the statute of limitations, both Hardesty and
Hadden moved, pursuant to section 2-619(a)(5), to dismiss
Epperson's claims against them on the same grounds. Each
supported its motion with a letter from Epperson that was
essentially identical to that received by Georgi. MJE, thereafter,
moved for summary judgment (see 735 ILCS 5/2-1005 (West
1996)) for similar reasons and, likewise, supported its motion with
the same letter. Like the Georgi letter, each of these three letters is
dated August 15, 1996. The circuit court dismissed Epperson's
third-party claims against Hadden and Hardesty and granted
summary judgment to MJE. In so ruling, the circuit court found no
just cause for delaying enforcement or appeal of all of the orders
(see 155 Ill. 2d R. 304(a)).
	As noted previously, the appellate court reversed the dismissal
orders of the circuit court. The appellate court held that section
13-214 had no applicability to Epperson's third-party action. The
court, instead, found that "no particular statute of limitations
specifically applied to these claims before section 13-204 was
amended." 309 Ill. App. 3d 655, 660. For that reason, the court
held that section 13-204 was applicable to the claims. 309 Ill.
App. 3d at 660-61. As such, the court concluded that the third-party complaint was timely filed pursuant to section 13-204. 309
Ill. App. 3d at 661.



ANALYSIS
	The matter comes to this court upon the circuit court's
granting of (i) three motions to dismiss pursuant to section
2-619(a)(5) and (ii) one motion for summary judgment pursuant
to section 2-1005. An appeal from a section 2-619 dismissal is the
same in nature as one following a grant of summary judgment;
both are matters given to de novo review. Kedzie & 103rd
Currency Exchange, Inc. v. Hodge, 156 Ill. 2d 112, 116 (1993). In
such cases, the reviewing court must determine whether the
existence of a genuine issue of material fact should have precluded
the dismissal or, absent such an issue of fact, whether dismissal is
proper as a matter of law. Hodge, 156 Ill. 2d  at 116.(2)
	We begin our analysis by first noting that the appellate court
erred in holding that no particular statute of limitations applied to
Epperson's claims before 1995. At the time the Guzmans filed
their original underlying complaint against Epperson in 1992,
Illinois courts had held that the statute of limitations set out in
section 13-214 applied to third-party actions for indemnification
which are filed in cases covered by that section of the Code of
Civil Procedure. See Hartford Fire Insurance Co. v. Architectural
Management, Inc., 158 Ill. App. 3d 515, (1987); La Salle National
Bank v. Edward M. Cohon & Associates, Ltd., 177 Ill. App. 3d 464
(1988); Board of Library Directors v. Skidmore, Owings &
Merrill, 215 Ill. App. 3d 69 (1991). Section 13-214(a) states in
pertinent part that
			"Actions based upon tort, contract or otherwise against
any person for an act or omission of such person in the
design, planning, supervision, observation or management
of construction, or construction of an improvement to real
property shall be commenced within 4 years from the time
the person bringing an action, or his or her privity, knew
or should reasonably have known of such act or
omission." 735 ILCS 5/13-214(a) (West 1992).
Although there was a consensus of opinion as to which statute of
limitations controlled the third-party construction actions, the
courts were split as to when the four-year limitation period was
triggered. Some courts held the view that, because of the nature of
derivative liability, the trigger date had to be when the third-party
plaintiff became aware of the potentiality for liability in the
underlying action, i.e., the date of the filing of the underlying
complaint (see Hartford, 158 Ill. App. 3d at 520-21) or the date of
service of the underlying complaint (see La Salle, 177 Ill. App. 3d
at 471). Other courts, however, questioned whether the statute of
limitations is triggered automatically by the filing of the
underlying complaint. In Elsa Benson, Inc. v. Kalman Floor Co.,
191 Ill. App. 3d 1016 (1989), the appellate court concluded that
the running of the statute of limitations commences when the
injured person becomes " 'possessed of sufficient information
concerning his injury and its cause to put a reasonable person on
inquiry to determine whether actionable conduct is involved.' "
Benson, 191 Ill. App. 3d at 1022, quoting Knox College v. Celotex
Corp., 88 Ill. 2d 407, 416 (1981). Likewise, the appellate court in
Board of Library Directors v. Skidmore, Owings & Merrill, 215
Ill. App. 3d 69 (1991), held that the third-party plaintiff had four
years from the date of learning of the defects in the construction.
In that case, the underlying complaint had been filed in 1984, and
the third-party complaint was filed in 1988. The appellate court
held, however, that the third-party plaintiff knew or reasonably
should have known as early as 1978 of the construction defects
and, therefore, pursuant to section 13-214, should have filed suit
within four years of the discovery, i.e., 1982.
	MJE, Hardesty, Hadden, and Georgi (collectively, the
subcontractors) rely on cases such as Skidmore for the proposition
that it is the date of the discovery of the wrongful act or omission
which triggers the statute of limitations. They note that Epperson's
letter demonstrates that Epperson knew of the defects in the
construction of the Guzman home as early as 1990 and that
Epperson should have filed suit against them within four years of
that discovery. Epperson counters that the result of such a rule
would be that a third-party claim can expire at or prior to the time
the underlying plaintiff files suit, thus denying a defendant an
opportunity to pursue third-party claims against those who are
responsible for the plaintiff's claimed losses.
	Although the subcontractors' arguments are not without some
appeal, we believe that they must be rejected due to the nature of
third-party actions. A third-party action is a procedural device by
which a defendant may assert a cause of action against a party that
was not joined in the original action. See 3 R. Michael, Illinois
Practice §25.5 (1989). Such actions require that the party seeking
relief assert a claim of derivative liability; therefore, the majority
of third-party complaints are based on claims for indemnification
or contribution. See 3 R Michael, Illinois Practice §25.5 (1989).
As our appellate court has aptly noted in Anixter Brothers, Inc. v.
Central Steel & Wire Co., 123 Ill. App. 3d 947, 953 (1984):
			"Under Illinois law, a defendant entitled to bring an
implied contract of indemnity action has a choice of filing
a third-party complaint against a party who may be liable
to indemnify him as part of the original action (Ill. Rev.
Stat. 1983, ch. 110, par. 2-406(b)), or of waiting until the
original action is over and filing a separate action for
indemnity if he is found liable. In effect, Illinois law
allows the third-party indemnity claim to be filed before
it accrues, in order to promote settlement of all claims in
one action. The third-party claim cannot be determined,
however, before the underlying claim establishing liability
and damages is determined. It follows that the cause of
action for an implied contract of indemnity does not
accrue until the defendant has a judgment entered against
him or until he settles the claim made against him. Only
at that point does the cause of action for indemnity accrue
and the statute of limitations begin to run."
If we were to adopt the rationale of Skidmore, we would
potentially be requiring that third-party actions be filed before the
underlying complaint was even filed. Indeed, that is precisely what
the court in Skidmore held-that the third party complaint should
have been filed before the underlying action was even brought.
This approach has been criticized. As the appellate court noted in
the present case, the rationale would compel parties who might
need third-party relief to file "numerous anticipatory claims well
before they are sued, even if such litigation might later be
unnecessary because the original plaintiff does not sue." 309 Ill.
App. 3d at 660. See also Washington Courte Condominium Ass'n-Four v. Washington-Golf Corp., 267 Ill. App. 3d 790, 848 (1994)
(Buckley, J., concurring in part & dissenting in part). We agree
with these observations. The purpose behind a statute of
limitations is to prevent stale claims, not to preclude claims before
they are ripe for adjudication. Because the analysis utilized in
cases such as Skidmore has the potential to require third-party
actions to be filed before the underlying complaint was even filed,
we do not find it persuasive. Instead, we believe that the better
reasoning was that espoused by the court in La Salle, which held
that the statute of limitations in such cases begins to run on the
date the third-party plaintiff is served with the underlying action.
	Our determination in this matter is further strengthened by the
General Assembly's amendment to section 13-204. Prior to
January 1, 1995, section 13-204 applied only to claims for
contribution, not claims for indemnity. The legislature amended
the statute (Pub. Act 88-538, eff. January 1, 1995) to include
indemnity claims within its purview. The section provides that
			"(b) In instances where an underlying action has been
filed by a claimant, no action for contribution or
indemnity may be commenced more than 2 years after the
party seeking contribution or indemnity has been served
with process in the underlying action or more than 2 years
from the time the party, or his or her privy, knew or
should reasonably have known of an act or omission
giving rise to the action for contribution or indemnity,
whichever period expires later.
			(c) The applicable limitations period contained in
subsection *** (b) shall apply to all actions for
contribution or indemnity and shall preempt, as to
contribution and indemnity actions only, all other statutes
of limitation or repose, [including those applicable to the
underlying action.]
			(d) The provisions of this Section, as amended by
Public Act 88-538, shall be applied retroactively when
substantively applicable, including all pending actions
without regard to when the cause of action accrued;
provided, however, that this amendatory Act of 1994 shall
not operate to affect statutory limitations or repose rights
of any party which have fully vested prior to its effective
date." (Emphasis added.) See 735 ILCS 5/13-204 (West
1996).
The amendment provisions indicate that the trigger date for filing
a third party action is the date of service or of knowledge of the
wrongful action or omission, whichever is later. The amendment
therefore prevents a third-party action from being time-barred
before the underlying action has been filed.
	In this case, Epperson was served with the underlying action
on October 9, 1992. Under section 13-214, Epperson had until
October 9, 1996, to file its third-party action. Before that could
occur, however, the General Assembly amended section 13-204
to include indemnity actions such as that involved here. As noted
above, section 13-204 is to be applied retroactively, regardless of
whether the action accrued before or after the effective date of the
amendment and regardless of whether suit had been instituted or
not. "Where a limitation period has not expired prior to
amendment, the amendatory act controls all actions and remedies
not previously barred." Arnold Engineering, Inc. v. Industrial
Comm'n, 72 Ill. 2d 161, 165 (1978). Thus, under the amendment,
Epperson should have filed suit two years after being served with
the Guzmans' original complaint, i.e., October 8, 1994. This court
has held, however, that an amendment shortening a statute of
limitations will not be applied retroactively so as to terminate a
cause of action unless the party has had a reasonable period of
time after the amendment's effective date in which to file an
action. Phillips Products Co. v. Industrial Comm'n, 94 Ill. 2d 200,
203-04 (1983). This judicial rule of construction applies even in
those instances in which the legislature has expressed an intent
that the limitations period be applied retroactively. Phillips, 94 Ill. 2d  at 204.
	In light of the above, it must be determined whether Epperson
had a reasonable period of time, after the amendment of section
13-204, in which to file its action against the subcontractors. In
this case, Epperson had no time to file the claim after the
amendment went into effect because the amendment served to
instantaneously bar Epperson's action. Thus, the reasonableness
inquiry turns upon Epperson's conduct after the effective date of
the amendment. The record reveals that Epperson filed its third-party action within 19 months of the effective date of the
amendment. In our estimation, Epperson's conduct was reasonable
in light of all of the facts evinced in the record. For that reason, the
circuit court improperly granted the motions to dismiss and the
motion for summary judgment based on the statute of limitations.


CONCLUSION
	In light of the foregoing, the judgment of the appellate court
is vacated, the judgment of the circuit court is reversed, and the
matter is remanded to the circuit court for proceedings consistent
with this opinion.
Appellate court judgment vacated;
circuit court judgment reversed;
cause remanded.
	CHIEF JUSTICE HARRISON, specially concurring:
	I agree that Epperson's third-party claims are not untimely
under section 13-204 of the Code of Civil Procedure, as amended
in 1995, and that the judgment of the circuit court dismissing those
claims based on the statute of limitations should therefore be
reversed. I write separately because I do not believe that this
conclusion is dependent upon on whether Epperson acted
seasonably in asserting its claims following the statute's
amendment.
	Section 13-204 of the Code of Civil Procedure, as amended
in 1995, required Epperson to assert its indemnity claims within
two years of when it was served with process in the underlying
action. In applying this requirement, the majority takes as the
service date the date on which Epperson was served in the original
proceeding. The problem with my colleagues' approach is that it
fails to give effect to the Guzmans' decision to dismiss the original
proceeding and to refile later.
	Had Epperson advanced its indemnity claims in the original
action prior to its dismissal, the third-party defendants could have
challenged the timeliness of those claims, and the reasonableness
inquiry called for by my colleagues would have been appropriate.
If the court determined that Epperson had not acted reasonably in
filing its third-party claims following the amendment of section
13-204, it could then have dismissed those claims as time-barred.
The entry of such an order prior to the Guzmans' voluntarily
dismissal of the underlying action on March 28, 1996, would have
precluded Epperson from asserting indemnity claims in the
Guzmans' subsequently refiled action. The indemnity claims
would be barred under principles of res judicata. See Rein v.
David A. Noyes & Co., 172 Ill. 2d 325, 336 (1996); Avery v. Auto-Pro, Inc., 313 Ill. App. 3d 747, 750-51 (2000).
	As my colleagues' recitation of the facts indicates, that did not
happen. When the Guzmans voluntarily dismissed their original
complaint in March of 1996, Epperson had not yet asserted its
indemnity claims. The circuit court therefore had no occasion to
rule on the timeliness of those claims before allowing the
Guzmans to take their voluntary dismissal without prejudice.
Because the court made no such ruling, there was nothing to bar
Epperson from asserting its indemnity claims when the Guzmans
refiled their action.
	Whether or not Epperson delayed too long in asserting its
indemnity claims in the original proceeding, that delay cannot be
transferred to the second action. The refiled complaint was not a
continuation or reinstatement of the prior action. It commenced an
entirely new and separate proceeding. Dubina v. Mesirow Realty
Development, Inc., 178 Ill. 2d 496, 504 (1997). Whatever
obligation Epperson had to assert its indemnity claims in the first
proceeding ended when that proceeding ended. Dismissal of the
underlying complaint eliminated Epperson's potential liability, and
without the prospect of liability, it had no grounds for seeking
indemnification. Any claim it might have asserted for
indemnification up to that point became moot.
	Epperson had no need to seek indemnity again until the
Guzmans refiled their cause of action on April 12, 1996. It was
that refiled action, not the preceding one, against which the
timeliness of Epperson's indemnity claims must be measured.
Under a straightforward reading of section 13-204, Epperson had
two years from the date on which it was served with process in the
new underlying action to assert those indemnity claims. The
company waited less than six months. Its indemnity claims were
therefore timely. Based on these considerations, rather than for the
reasons set forth by the majority, I agree that we should reverse the
judgment of the circuit court and remand the cause for further
proceedings.
 



 



1.      1Holland Brothers, Inc., was later voluntarily dismissed from the suit
by Epperson. 

2.    2We are aware that there exist certain, subtle differences between
motions for summary judgment and motions for dismissal predicated
upon section 2-619. See 4 R. Michael, Illinois Practice §§38.3, 41.2
(1989). These differences play no role in the case at bar.