this case involves a split between first district on the one hand and the second and fourth district on the other over whether the implied warranty of habitability in the construction of a new home should be extended beyond the builder or developer vendor of the new home  impose duties and sub contractor defendants who are not party to the contract of sale in or trusting that portion of the question i'm going to focus on why the duty that arises by virtue of the implied warranty cannot be severed completely from the underlying contract of sale why the economic loss doctrine precludes converting it into a tort like duty for imposing liability the better tatts would be no recourse rather than a lack of solvency test so beginning with the question of duty and why that duty must be rooted in the underlying sales and that takes us all the way back to part of that contract and although it's independent it's not a strict breach of contract type claim it arises out of that contract that's where the duty of arises now the first district and the  a second or subsequent purchaser was permitted to enforce the implied warranty against the builder or developer vendor now the first district and the plaintiff in this case that is essentially eliminating the and or developer assumed under the original sales contract if it held them to nothing more then they were held to by virtue of the original sales contract when we turn to this case everyone agrees that if the builder and the ballpark remain solvent they favorite paint they have assets from which a home buyer can obtain requires that a subcontractor has no like concepts of the relative culpability and it was only responding to an argument before this court that it it really conflicts me why the contract is so important to the implied warranty and that's because this court has long recognized that a distinction between tween twitt claims and contract duties for purposes of the economic loss doctrine under the economic loss doctrine contract relate to the disappointed expectations of a purchaser disappointed expectations with respect to the quality of goods or the quality of service it's a service contract that's the type of plane the the commercial transaction has a expertise or a higher knowledge that the other party to the contract could not have so one of the primary reasons that the economic law section is so important is because it's it's there to protect the freedom of the parties to contract to bargain over the terms of any warranties that they may do or do not exten and in a situation like this where the subcontractors are pretty to the original sales contract they don't have that opportunity to debate they don't have the opportunity  at the end of the day we get down to the underlying policy behind the implied warranty of capital and plaintiff of course focuses on the policy of protecting the innocent purchaser know willy nilly there have to be some sort of connection some sort of basis to justify for acquiring a particular good kind and be responsible for protecting the innocent purchasers expectations and as far back as peterson this court has recognized that the appropriate basis for imposing that obligation and the reason why it's imposed on the builder or developer is because of the unusual dependent nature of the ranks but the work being performed by the contractors tells them what to do and how to do it and at the end of the day supervises and inspects and improves the work done by subcontractors and materials fires and in don't have a relationship that's dependent on those items but pendant on the builder and in fact the subcontractors are similarly dependent on the builder because they're looking to the builder to provide the design and the plants in the specifications that they follow are relying on the builder to be the one that inspects and supervises and approves the work at the end of the day for the structure is complete the first district has said it's because they're involved in the physical work that it's not clear why physical work force is drafting of plans versus providing the physical materials  and paragraph three plaintiffs goes to great lengths to discuss the fact that the developer in this case was a single purpose l l c and they offer that i suppose as context for their pleading but it's very pertinent in this particular case because we get into a public policy argument about the likelihood of these events occurring and leaving homeowners see the sole asset that it had was this project and that's as as the plaintiff concedes in their own pleading that's essentially how all of these projects are structured so what you have here is if the project is successful th the developer and the owners of the developer profit from that project or if in this case there's a problem with the project or market forces this project was done right around the same time as the economic collapse in zero eight some other forces came into play perhaps appears at the conclusion to count one which is the trusts to t r sienna and that's the damages count and paragraph sixty seven of count one says as a result of t o c and has breaches of its contracts in a court has incurred damages in excess of two point five million dollars in costs to repair and remediate the defects in the two buildings the key issue that i'd like to address is that in this case although the plaintiff doesn't make any disclosure in their twenty fourteen pleading of the fact that they have recovered three hundred eight thousand dollars from the warranty fund side aside there's no reference to that in their pleading as a disclosure of we have two point of damages but we already have received three hundred eighty thousand and then we have through the discovery process we learned that there's two insurance policies that are for the developer and the general contractor each with a single single incident coverage of one million aggregate of two million so there's an additional three hundred thousand of the warranty fun plus a potential of another two million dollars in insurance coverage test of insolvency the appellate court elected to go purely on essentially a bankruptcy court analysis of the fact that they had filed for bankruptcy and that they had been discharged and completely ignored the fact that the plaintiff had gone in lifted the state to pursue to the owner insurance code to access the two million dollars in insurance coverage and they had brought in two thousand and ten a motion to lift the state to access the three potential downstream liability to the sub contractors having in this case the appellate court already allowed the design professionals who made the selections of you know most of the items that were  installed at the building they're out and the material suppliers are out and we're just left with as mischance and spoke to that sort of hands on construction professionals really focused its analysis on the ease of applying the task of insolvency and essentially saying if you file a federal bankruptcy court you must be insolvent and ignoring the fact that in this case and in potentially many more cases  the plaintiffs have recourse to a substantial portion according to my math that's about ninety two percent of their potential damages they could recover against these three sources the three hundred thousand they already have that was undisclosed in the complaint as well as the two insurance policies so you know we have other scenarios where you would have an entity that isn't technically bankrupt but only has you know a very limited amount of money and it's bank account that wouldn't give the plaintiff homeowners the ability to go after the subs but they could get a small tiny fraction of their recovery you know cents on the dollar because the general contractor the developer have limited assets no where near what it would take to satisfy potential judgment but technically they're not insolvent so it's true because under your time as i figured you would have yes in essence the final the final point would be that if the court is inclined to to move forward and allow men to stand i would just ask that the assets the the once the fund and the and the availability of insurance proceeds be considered of the new home purchasers in the state if this court were to rule as suggested by the subcontractor defendants the very strong public policy to protect what is quite candidly though it sounds somewhat odd in a court of law of the american dream of  homeownership would be substantially and seriously subverted the goal of protecting homeowners has been a goal that both has been articulated by this court and the appellate courts for a number of years indeed as noted a few moments ago the minton decision would do an injustice to that public policy the suggestion that minton should be overruled certainly exceeds the rule three zero eight questions moreover the suggestion that the trial court and the appellate court in this case did not consider the questions of possible but not necessarily recoverable insurance or the warrant you find is belied by the certified questions themselves third if i question to insert if i question number three both specifically reference those two if you will entities for those two types of possible but not necessarily probable recovery finally if we look at mr moore's did the second were to reject the analysis and i don't think the second the fourth district really addressed the analysis of minton as it's addressed both before this court now and in the appellate court what they did is they looked at it i would say in different contexts and didn't necessarily reject it but simply said that they're not applying it among other things the cases cited by the appellants here the sub contractors are raw land sales which is substantially different than protecting someone's actual home or home ownership here if we actually the route that the sub contractors are suggesting what we would do is return the concept of cow the i am tour to the purchase of a home in illinois and i would suggest to the court that that is nothing that illinois policy or decisions  matter moreover privity of contract which was talked about is a construct that should have and does have no bearing in this case pretty has been eroded by a partner recovery through both court decisions as well as legislation in illinois but moreover it's practically irrelevant in this situation and the question is why why because as we noted just a few moments ago the contractors do not have simply no relationship they certainly should not be and are not surprised by the fact that they're building a home they aren't doing it just for practice they're building it for a homeowner that will move into that home there's no supporters doesn't the economic loss clue characteriz action that arises a knish way out of contract so it is based essential on the underlying contract so even this court has found that because the warranty is contract like mormon should not and does not apply here when we go we have to go back first if we go back to the original cases ruled on by this board are with peterson etc we look to looking at what gave rise to the warranty of habitability weren't you by its very nature is a contract like claim so i would submit to the court that when looking at its prior decisions in such cases is that it's game or it's came from the genesis of a contract like claim is there direct priv the answer is of course writing between the homeowner and the subcontractor but because it arises in the context of the purchase and sale agreement it is from a contract when we cited the tort law or the tort cases that was really for the proposition that in all my policy even in tort law looks to relative pop ability and the reason we say that is in this case with contracts there is no attempt i would submit bystander or condominium or quite candidly other pla situation to say a sub contractor should be responsible for defects beyond those that they created which is kind of a tort concept that you're responsible for yourself that's also the injured sooty karnik is there a tort duty there's really not necessarily damages from your breach here that breach would be a defective type of construction and we're only looking to have a subcontractor be responsible for that which the subcontractor is defective and that's an important point because we have heard the sub contractors say well we have no way of limiting or somehow putting a cap on our liability and the answer is yes of course you do do not perform defective work it should be the sub contractor who can perform the work in a way share that with not only themselves because they have to perform proper work there were other stuff contractor so someone else did something else wrong that person is responsible and that's an important point here that even if you have a fully solvent fully available as a defendant general contractor if the homeowner sues the general contractor the general contractor under our civil procedure has the ability of the third party that sub contractor in on their defective work here if you have an insult in general that you can echo across the against if the homeowner goes directly against the sub contractor they're defending exactly the same defect suit as you have it in either case but when the contractor contracts with the subs they have the ability to limit their liability in that and that traction ration relationship there is no privity of contract with the home so how that's what i mean about who are they how can they how could they in any way limit their liability it would be contractual notational be the limitation by doing appropriate work if they felt they then had a cause of action against this general they could sue the general if they if that would be a possibility and that's really the problem here is it's not a possibility what has happened i believe through the suggestion of the sub contractors is to conflate the case take it the pleading stage not pleadings but let's go to am personally aware and not aware that anyone else knows of another illinois cause of action where you look up front can you recover your judgment that is always at the end of the sub contractors by urging recourse or saying let's look at the beginning of the failed them to provide a remedy so a bankrupt defendant is always something that every civil litigants might face so this you're trying to go around and hear that something that happens in every situation the difference is in other situations is that we're not dealing with homeownership and we're not dealing with the strong public policy we have in illinois to protect illinois homeowners and what we're really looking at is an innocent homeowner if there's no five through the from the minton decision that ability to go there has not been challenged by their legislation or by this court and i would submit that that's the appropriate if you will conclusion that should be here to have that protective they'll over the home ownership of illinois homeowners because to otherwise say you can't do that which you do if you leave the homeowner without any without any really affect your recovery and that's really what's inappropriate in this case if they you know and manufacturer the retailer you can go against the retail if the manufacturer ultimately cannot pay so there are other examples where we have adopted this and in this very important example i would submit that it should also be confirmed by th a test that we can actually apply in the first district actually concluded that it is the test that is simpler to apply recourse as i indicated would be taking the end of the case and putting it at the pleading stage which would not be appropriate  morris this was interesting interesting to me in the briefs it seems like it's two sides of the same coin you mentioned public policy the subcontractors sub contractors contractors as a practical matter expanding liability under the employee warranty of have the habitability to sub contractors whenever a purchase is without recourse to the developer or whenever the developer is insolvent allows developers to escape liability structure in a single purpose entity designed to remain solvent only until the project is complete and then you say without the narrow extension of liability under minton the builder general contractors would be encouraged to set up their businesses as single purpose entities that they vote themselves of assets at the conclusion of construction projects the builder general contractor would be encouraged to cut cost and be careless in the construction because no matter what the outcome the builder general contractor in some countries for some contractors would walk away with huge profits not that is that two sides of the same corner and if so why is your position correct for the public policy because it is most likely to size of the same coin but it's a very big and very expensive coin to illinois homeowners obviously and why is what i said that mike is the proper one i guess the first thing is i said it but that's probably not enough but the reason it's there is if we look back to the public policy if we do not do as we suggest the affirm the ability to go against the subcontractor we do if we leave the innocent home purchaser we have left aside in this argument they didn't do anything wrong without any kind of recoverability for their homes defects the burden should not be on that individual the burden should be on the person who performed effective work again if the sub contractor did not perform effective work even if the general contractor is insolvent and someone else performed effective work they're not liable they're only liable for their defective work so as a consequence what we would do under this public policy support is we would support the notion that the sub contractor who does defective work extinguish all liability and therefore the innocent home buyer receives nothing this is a time of public policy certainly the position you take would the fact the home construction industry where some contractors who agree to work a project that is clearly a single based project in terms of it like this one said i only do this project if it works great if it doesn't work insolvent then under your theory sub contractors would have to be very cautious and turn into those kind of contracts with the general that kind of general contractor right there would be correct that would actually be a good thing and  should cost in some way would there this is change the relationship between the sub contractor and the developer would it shift costs it might and if it does shift costs that's an interesting economic question should there be a shifting of costs to say i can do with less and give you defective work but now since i know i can i make it suit i should pay more because he paid mercs i'm not going to defect to work the powers he should be not to encourage and i think your specific justice suggestion is that they've put their prices in such a way that well we'll do more defective work here because we're going to be insulated but if we're not all we better do it right here i think the public policy will and i should be it should be done right for that home buyer there should not be a question of you know can i can't be sued and if i can be sued oh i better do something different so as a consequence of that i submit to the court that yes there could be a fact and that would be a positive effect for  hold water when there should they still have to do it you would presumably should do it do good work and avoid the general community only if it right would only arise the situation where the general specifically was going to disappear so to speak at the end of the project but otherwise you're right the sub contractor would certainly be amenable to a third party action by the general if the general was sued by the homeowner which is the exact action other than the plaintiff name that the homeowner would do against the other state that is extended to statutorily i'm not aware of any other state that's done it illinois of course as we know at least through from the minton case and through certain cases of this court since one thousand and five has had an extension such as this other states have other types of if you will liabilities like for instance in new jersey though it's not in the briefing in a home case if within a year you have any kind of defect you can immediately have an arbitration actually at the home where the defect is so there's other if you will variations on a theme but specifically as relates to this no the answer is really just that one case or that one statute what we suggest is that if there is this  seeing that the practice has been decided and they didn't come in and say let's change it let's make something done so it's either a legislative question or it's a question that we can say the legislature has already by not passing something new said we're happy with the situation there's no reason to change the situation what we would submit to the court is that both the trial court as well as the first district one quote got it right the suggestion that there's a difference with material suppliers and with design professionals quite candidly we would agree that there should not be that distinction but that's not before this court what is before this court really comes up on the four certified questions and under those four certified questions we submit that a subcontractor should not enjoy especially at the expense of illinois homeowners complete immunity from the consequences of its own defective work just because there's a lack of privity with the home buyer moreover even if there is recourse the question of recourse should not be if the pleading stage of the case and the suggestion that if you have minimal assets there's there could still be solved and c does not look at what the test of solve and see is it's not do you have a dollar it's do your assets are they exceeded by your liabilities here if we start looking at recourse we have to ask the question what about that competent has one dollar amenable to collection is that enough is that enough to protect our home buyers i submit the answer should be no to that question and those are more difficult questions that having the court at a trial level at a pleading stage determine is there solvent sing does the decades long since one thousand nine hundred five menton decision as well as the subsequent decisions primarily in the first district should be upheld that except contractor is liable if the general contractor is insolvent and the sub contractor perform defective work and we do that to protect illinois home buyers in my home buyers expectations in the american dream thank you thank you mars reply extending it to subcontractors so raised the point that that in an ordinary action what were the general contractor the builder is still solvent claim against some contractor is based on a separate contract between the general contractor and sub it's not based on the the contract the contract for sale between the builder and the to point out that in this record they in fact this point has in fact run claims against the general contractor and developer in this very case they're on the one hand arguing that they should be allowed to go against some contractors because the general contractor and it developer are insolvent or cannot provide recourse while at the same time that in fact pursuing recourse from the general contractor and the builder either yeah they want to have a big part of the problem that the plaintiff is facing here arises from this developing trend of developers and builders to fund these limited purpose all season they form a limited purpose all see finished the project dissolved leaving the new home buyer without tension without recourse or with an insolvent general contractor or developer  comes in part from the language of the cases and partly from it makes a sympathetic argument but we have to look in particular these this particular case we have this these purchases started in the mid two thousand and we have purchasers and transactions in these two buildings that go on through today this case was filed in two thousand and thirteen so we have some purchasers that purchase it during the pendency of the litigation and additionally exhibit one to the to the third amended complaint is a  of the purchase contract between the homeowners and the developer and exhibit c to that is a disclaimer of an implied warranty so all of these homeowners who bought in this building signed off on an implied express warranty  their implied warranty and i understand the case law says that essentially the sub contractors don't get the benefit of this this language and i understand that that's not properly before us but if we're going to argue about categorizing people as innocent homeowners a sensually the these homeowners would stand to be in a better position having the potential implied warranty limitless exposure of the subcontractors having the benefit of having a developer and a general contractor structured in such a way that they go out of business and by doing so they eliminate their limitation on this written express warranty that they were kept at in the agreement that they signed  of all worlds where the subcontractors on this project were left not paid and fall and then as the court as a member of the court understood that they had x they had the limitations of the face value of the contract they were never going to matter how successful the project was the market went through the roof they were never getting a penny more than the face on their contract in this case many of them were left short on their contract and named as defendants in this case and just highlight  against the sub contractors was dismissed in a typical case if they had properly scheduled their claims they would have contract claims to the extent of their warranties as the court indicated that they had negotiated test and consider the assets available to the plaintiff in this case as available and that being the test of whether or not they can proceed against a subcontractor thank you so much for time he thank you  your arguments this morning years used but ther