Court Opinion

ID: 3146429
Source: CourtListenerOpinion
Date Created: 2015-10-22 18:15:58.93409+00
Date Added: 2024-06-11T12:14:59.135386
License: Public Domain

FIRST DIVISION
                                                          December 31, 2007

No. 1-05-3567

THE PIERRE CONDOMINIUM ASSOCIATION,          )      Appeal from the
an Illinois not-for-profit corporation,)     Circuit Court of
                                       )     Cook County.
             Plaintiff,                      )
                                             )
      v.                                     )
                                             )
LINCOLN PARK WEST ASSOCIATES, LLC., an       )
Illinois Limited Liability Company;          )
BAKER DEVELOPMENT CORPORATION, an Illinois   )
Corporation; McCAULEY CONSTRUCTION           )
CORPORATION, an Illinois Corporation; and    )
CASE FOUNDATION COMPANY, a Maryland          )
Corporation Doing Business in Illinois,)
                                             )
             Defendant                       )     No.   00 L 14319
                                             )           01 M1 015653
                                             )           01 L 01036
                                             )
(Lincoln Park West Associates, LLC., an)
Illinois Limited Liability Company; and)
Baker Development Corporation, an            )
Illinois Corporation,                        )
                                             )
      Counterplaintiffs-Appellants;          )
                                             )
      v.                                     )
                                             )      Honorable
Case Foundation Company, a Maryland,         )      Allen S. Goldberg.
Corporation Doing Business in Illinois,)     Judge Presiding.
                                             )
      Counterdefendant-Appellee).            )
                                             )

           JUSTICE GARCIA delivered the opinion of the court.

      Defendants and counterplaintiffs Baker Development

Corporation and Lincoln Park West Associates, LLC (LPWA), appeal

from an order of the trial court finding the settlement agreement

between plaintiff The Pierre Condominium Association and the

counterdefendant, Case Foundation Company, to be in good faith

and dismissing Baker/LPWA's counterclaim against Case.                   The
No. 1-05-3567

counterclaim and settlement arose out of the plaintiff's suit for

property damage allegedly caused during the construction of a

high-rise condominium building on an adjacent property.      We

affirm.

                              BACKGROUND

     The plaintiff owns a building located at 2100 North Lincoln

Park West in Chicago, Illinois (The Pierre).      Baker owns the real

property located immediately adjacent to the north side of The

Pierre, at 2120 North Lincoln Park West (Adjacent Property).

Baker was also the developer for the construction project on the

Adjacent Property.

     LPWA is an Illinois limited liability company and owner of

the Adjacent Property.    Baker formed LPWA to develop the Adjacent

Property.

     Baker/LPWA retained McCauley Construction Corporation as the

general contractor for the construction of a high-rise

condominium building on the Adjacent Property.

     McCauley subcontracted with Case to perform excavation

services to create an underground foundation for the construction

project on the Adjacent Property.      The subcontract between

McCauley and Case, in part, provides:

                 "4.6.1   To the fullest extent permitted by law,

            the Subcontractor [Case] shall indemnify and hold

            harmless the Owner, Contractor, Architect, Architect's

            consultants, and agents and employees of any of them

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No. 1-05-3567

           from and against claims, damages, losses and expenses,

           including but not limited to attorney's fees, arising

           out of or resulting from performance of the

           Subcontractor's Work under this Subcontract, provided

           that any such claim, damage, loss or expense is

           attributable to bodily injury, sickness, disease or

           death, or to injury to or destruction of tangible

           property (other than the Work itself), but only to the

           extent caused by the negligent acts or omissions of the

           Subcontractor, the Subcontractor's Sub-subcontractors,

           anyone directly or indirectly employed by them or

           anyone for whose acts they may be liable, regardless of

           whether or not such claim, damage, loss or expense is

           caused in part by a party indemnified hereunder.    Such

           obligation shall not be construed to negate, abridge,

           or otherwise reduce other rights or obligations of

           indemnity which would otherwise exist as to a party or

           person described in this Paragraph 4.6."

     On or about November 12, 1998, during the excavation work on

the Adjacent Property, the north end of The Pierre began to

subside.   The subsidence caused cosmetic damage to the building.

     In 2000, the plaintiff filed suit against Baker, LPWA,

McCauley, and Case, seeking recovery for property damage to The

Pierre allegedly caused by the construction of the high-rise

condominium building on the Adjacent Property.   The plaintiff's

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No. 1-05-3567

complaint alleged theories of strict liability, common law

negligence, and willful and wanton conduct.

     On November 12, 2002, Baker/LPWA filed a counterclaim

against Case seeking recovery under the Joint Tortfeasor

Contribution Act (Contribution Act) (740 ILCS 100/1 et seq. (West

2002)) and pursuant to paragraph 4.6.1 of the subcontract between

McCauley and Case.

     On March 23, 2005, Case filed a motion for partial summary

judgment on the counterclaim filed by Baker/LPWA.   Case argued

that paragraph 4.6.1 of the subcontract required it to indemnify

Baker/LPWA for their own negligence in violation of the

Construction Contract Indemnification for Negligence Act

(Indemnification Act) (740 ILCS 35/1 et seq. (West 2002)) and,

thus, was void against public policy.   In the alternate, Case

argued that if paragraph 4.6.1 of the subcontract required

contribution, rather than indemnification, Baker/LPWA's

contractual contribution claim was duplicative of their statutory

contribution counterclaim and, thus, should be stricken.

     Based on the subsidence of The Pierre, the plaintiff claimed

damages ranging from $5 million to $6 million.   Case estimated

the amount of recoverable damages to be about $3.8 million.      The

plaintiff and Case entered into a settlement agreement with the

following relevant terms:

                "a.   Defendant, Case Foundation Company, will

          cause to be paid a sum in the amount of $4,967,350.00

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No. 1-05-3567

          to the plaintiff;

                b.    Plaintiff will release, acquit and forever

          discharge Case Foundation Company and its agents,

          servants, employees, successors and assigns;

                c.    The plaintiff will covenant not to further

          prosecute or again sue the aforesaid defendant, Case

          Foundation Company, its agents, servants, employees,

          successors and assigns;

                d.    The plaintiff will indemnify, hold harmless

          and satisfy any and all outstanding liens, from any

          source;

                e.    This agreement is a comprise of a disputed

          claim and does not constitute an admission of liability

          on the part of Case Foundation Company which expressly

          denied any and all such liability; and,

                f.    This agreement does not constitute a

          settlement or release of any claims the plaintiff has

          or may assert against any other parties to this

          action."

The settlement agreement was contingent upon entry of a court

order approving the settlement and a finding that it was entered

into in good faith.    The settlement was also contingent upon the

dismissal of all counterclaims against Case.

     On June 7, 2005, Case filed a motion for a good-faith

finding pursuant to the settlement it reached with the plaintiff.

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No. 1-05-3567

On July 22, 2005, after hearing arguments, the trial court

granted Case's motion for partial summary judgment on

Baker/LPWA's counterclaim finding "the relevant case law supports

Case's motion and asserts that contractual contribution is

invalid."   The trial court also granted Case's motion for a good-

faith finding, leading to Case's dismissal from the lawsuit.    The

court found that "Baker and LPWA *** presented no concrete

evidence to challenge the [good] faith of the settlement" and

thus, "they have not satisfied their burden of demonstrating that

the settlement was made in bad faith."   Baker/LPWA filed a timely

notice of appeal.

                             ANALYSIS

                                 I

     At the trial court level, Baker/LPWA and Case disputed the

effect to be given paragraph 4.6.1 in the subcontract.

Baker/LPWA argued the subcontract did not violate the

Indemnification Act because the disputed provision provided Case

would be liable for damages only to the extent of its own

negligence and, thus, the provision must be read as one seeking

contribution, not indemnification.   Case responded that the

provision required it to fully indemnify Baker/LPWA for their

negligence if Case were found jointly negligent to any extent

and, thus, was void against public policy.

     We agree with Baker/LPWA that "[t]he trial court did not

explicitly rule on *** whether the subject provision violates the

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No. 1-05-3567

Construction Indemnification for Negligence Act, but implicitly

determined that it does not by finding the provision is 'actually

a contractual contribution clause.' "    That the provision should

be read as a contribution clause, rather than one requiring

indemnification, is consistent with Illinois case law.

       We consider basic tenets of contract law and the purpose of

the Indemnification Act in determining the character of a

disputed contract provision.    Braye v. Archer-Daniels-Midland

Co., 175 Ill. 2d 201, 215, 676 N.E.2d 1295 (1997).    As general

principles of contract law, we consider that parties are presumed

to contract with the knowledge of existing laws and that

interpretation of a contract that renders the agreement

enforceable is preferable to an interpretation that renders it

void.    Braye, 175 Ill. 2d at 217.

       The Indemnification Act was enacted to thwart the common

construction industry practice of using indemnity agreements to

avoid liability for negligence and to ensure a continuing

incentive for individuals responsible for construction activities

to protect workers and others from injury.    Braye, 175 Ill. 2d at

216.    Thus, the Indemnification Act renders construction

contracts with an indemnification clause as to the contractor's

own negligence void against public policy.    740 ILCS 35/1 (West

2002).

       It is clear that paragraph 4.6.1 provides that Case is

liable to Baker/LPWA for Case's negligence.    However, Case

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No. 1-05-3567

contends that the provision may be read to require it to

indemnify Baker/LPWA for their own negligence, based on the

following language:

          "the Subcontractor [Case] shall indemnify and hold

          harmless the Owner, Contractor, Architect, Architect's

          consultants, and agents and employees of any of them

          from and against claims, damages, losses and expenses,

          *** but only to the extent caused by the negligent acts

          or omissions of the Subcontractor, the Subcontractor's

          Sub-subcontractors, anyone directly or indirectly

          employed by them or anyone for whose acts they may be

          liable, regardless of whether or not such claim,

          damage, loss or expense is caused in part by a party

          indemnified hereunder." (Emphasis added.)

However, according to Illinois case law, at the time the parties

entered into the subcontract, Baker/LPWA were presumed to know

that a pure indemnification clause is void as a violation of

public policy.   See Braye, 175 Ill. 2d at 217.   Moreover, "the

literal terms of a contract are not necessarily dispositive on

the issue of whether it is void under the Construction Contract

Indemnification for Negligence Act."   Liccardi v. Stolt

Terminals, Inc., 178 Ill. 2d 540, 549-50, 687 N.E.2d 968 (1997).

Thus, while the above language may support Case's contention,

consistent with the supreme court's suggestion, we read the

disputed provision as requiring contribution, not

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No. 1-05-3567

indemnification.   See Liccardi, 178 Ill. 2d at 549-50.

Accordingly, the anti-indemnity act is not implicated and the

subject provision is not void as against public policy.

                                II

     Next, Baker/LPWA contend the trial court erred when it

disposed of the contribution issue on summary judgment.       Before

the trial court, Baker/LPWA conceded that a proper good-faith

settlement finding would extinguish their statutory contribution

claim under the Contribution Act.       See 740 ILCS 100/2(d) (West

2002).   On appeal, Baker/LPWA do not refute their earlier

concession; rather, they contend the trial court erred in

granting Case summary judgment because their contribution claim

was not based on a statutory right stemming from the Contribution

Act, but on a contractual right.       Case responds that the good-

faith settlement with the plaintiff extinguished any contribution

claim, whether statutory or contractual, that Baker/LPWA may have

had and, thus, summary judgment was proper.

     In arguing that Baker/LPWA's cause of action for contractual

contribution was extinguished by the settlement, Case relies on

the decision in Herington v. J.S. Alberici Construction Co., 266
Ill. App. 3d 489, 639 N.E.2d 907 (1994).       In Herington, the court

held that construing a contract provision to create a cause of

action for contractual contribution, independent of the

Contribution Act's dismissal provision based on a good-faith

settlement, would contravene the public policy of Illinois

                                   9
No. 1-05-3567

favoring settlements.    Herington, 266 Ill. App. 3d at 494.    As

the Herington court explained, "Such a result would effectively

eliminate settlements by joint tortfeasors under the Contribution

Act."   Herington, 266 Ill. App. 3d at 495.   That is, no

settlement would be possible because under a contractual

contribution claim as asserted by Baker/LPWA, only a finder of

fact could determine a tortfeasor's pro rata share of liability.

     In the face of this explicit rejection of the position they

advocate here, Baker/LPWA contend that the court's statements in

Herington about contractual contribution under the Contribution

Act are no longer the law of Illinois and, thus, the trial

court's reliance on Herington to grant Case's motion for summary

judgment was improper.   While recognizing that Herington has not

been overruled, they claim that post-Herington developments make

clear that parties may contract out of the provisions of the

Contribution Act.   Baker/LPWA argue that a subcontractor may

relinquish by contract the good-faith settlement dismissal

provision of the Contribution Act.    According to Baker/LPWA, a

subcontractor may contract for its full liability for all damages

it proximately causes, relying on their reading of the decisions

of Braye, Liccardi and Willis v. Kiferbaum Construction Corp.,

357 Ill. App. 3d 1002, 830 N.E.2d 636 (2005), and their claim

that the decision in Herington was "an aberrational ruling."

     In both Braye and Liccardi, the issue was whether an

employer could enter into a valid and enforceable contractual

                                 10
No. 1-05-3567

agreement to waive the workers' compensation liability cap on its

contribution liability.    Braye, 175 Ill. 2d at 202; Liccardi, 178
Ill. 2d at 542-43.   Preliminarily, this issue hinged on whether

the disputed provision in the construction contract was

interpreted as a promise for indemnity or a promise for

contribution.   Braye, 175 Ill. 2d at 202; Liccardi, 178 Ill. 2d

at 542-43.   In both cases, our supreme court found that the

respective contractual provisions promised contribution, not

indemnity.   The court then considered whether the contract

provisions at issue constituted enforceable provisions for

contribution unrestricted by the workers' compensation liability

cap recognized by Kotecki v. Cyclops Welding Corp., 146 Ill. 2d
155, 585 N.E.2d 1023 (1991).    Braye, 175 Ill. 2d at 210;

Liccardi, 178 Ill. 2d at 546.   The supreme court ultimately

concluded that the provisions at issue were valid as waivers of

the workers' compensation liability cap.    Braye, 175 Ill. 2d at

213-18; Liccardi, 178 Ill. 2d at 546-50.

     Baker/LPWA argue that by failing to invalidate the

contractual provisions in Braye and Liccardi, our supreme court

implicitly recognized the viability of a claim for contractual

contribution as they contend exists here.    They argue "that a

claim under a contract may be for greater relief than one under

the Contribution Act."    This freedom of contract position taken

by Baker/LPWA fails to recognize that the supreme court grounded

its decisions in Braye and Liccardi, regarding "discretionary

                                 11
No. 1-05-3567

business decisions made by an employer" that may result in a

decision to relinquish the protections of the Workers'

Compensation Act, on its determination that such decisions do

"not violate the terms or policy of the Act."      Braye, 175 Ill. 2d

at 212.

     In Braye and Liccardi, our supreme court interpreted the

contractual provisions as evidence of a promise by an employer to

contribute according to "its pro rata share of damages

proximately caused by its negligence, notwithstanding the

employer's ability to avail itself of the Kotecki cap on its

liability."     Braye, 175 Ill. 2d at 210.   "We continue to adhere

to [the] view [that an employer may relinquish by contract the

liability limitation set forth in Kotecki]."      Liccardi, 178 Ill.
2d at 546.    The court expressly held "that neither the language

of the Workers' Compensation Act nor public policy prohibits our

determination that an employer may waive the protection of the

Workers' Compensation Act."     Braye, 175 Ill. 2d at 210; Liccardi,
178 Ill. 2d at 546.    Baker/LPWA, from the recognition that an

employer may waive the damages limitation in Kotecki, leap to the

conclusion that a contracting party may also waive the good-

faith-settlement dismissal provision in the Contribution Act.

Without deciding whether the provision at issue here may be read

as such a waiver, we reject Baker/LPWA's contention that such

relinquishment by contract is not against Illinois public policy

favoring settlements.

                                  12
No. 1-05-3567

       While in Braye the issue concerned the right of the parties

to contract away any limitation on the damages a negligent party

may owe to another for common liability, the supreme court made

clear in answering the certified questions that the position of

the third party seeking contribution from the employer was

"consistent with the Contribution Act."     Braye, 175 Ill. 2d at

214.     The court also made clear that "the policies of the

Contribution Act are not offended by [the third party's] prayer

for relief because the goals of achieving comparative fault and

encouraging good-faith settlements remain intact."     Braye, 175
Ill. 2d at 217.

       Here, however, Baker/LPWA seek relief that is at odds with

the Contribution Act.     The supreme court made clear in Braye and

Liccardi that the decision to relinquish the protections of the

Workers' Compensation Act did not violate the terms or policy of

the Act.     Baker/LPWA's contention that parties may contract out

of the good-faith-settlement provision tears at the very fabric

of the Contribution Act.     The position taken by Baker/LPWA would

in effect preclude a good-faith settlement based on their

contention that the contractual contribution claim trumps the

express policy of the Contribution Act encouraging good-faith

settlements.     See 740 ILCS 100/2(d), (e) (West 2002).   We cannot

agree.    As the court in Herington recognized, to uphold the

validity of such a contract provision would "effectively

eliminate settlements by joint tortfeasors under the Contribution

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No. 1-05-3567

Act."   Herington, 266 Ill. App. 3d at 494.   We find no support in

the supreme court's decisions of Braye and Liccardi to warrant

such an expansion of a contractual claim.

     As further support for their position, Baker/LPWA rely on

our decision in Willis.     We, likewise, find no support for

Baker/LPWA's position in Willis, where we cited with approval the

decision in Herington.     See Willis, 357 Ill. App. 3d at 1006,

citing Herington, 266 Ill. App. 3d at 494.    We read nothing in

Willis to suggest that a construction contract may have a valid

provision waiving the good-faith-settlement dismissal provision

of the Contribution Act.

     Our supreme court's decision in BHI Corp. v. Litgen Concrete

Cutting & Coring Corp., 214 Ill. 2d 356, 827 N.E.2d 435 (2005),

provides further reason to adhere to our decision to follow

Herington that certain provisions in a contract, providing for

contribtuion, may violate state policy.    In Litgen, our supreme

court rejected an attempt by settling defendants, found not to

have done so in good faith, to proceed against the nonsettling

defendants by way of an assignment from the original plaintiffs.

"An arrangement by which a settling defendant attempts to obtain

indirect contribution from a nonsettling defendant by an

assignment of claims violates the Contribution Act.    We cannot

allow the settling defendants to contract an end run around

section 2(e).   Accordingly, we hold that the setting defendants

may not pursue the assigned claims."    (Emphasis Added.)   Litgen,

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No. 1-05-3567
214 Ill. 2d at 366, 365.   The freedom to contract did not prevail

over the policy considerations embodied in the Contribution Act

in Litgen, nor can it here.

     Accordingly, Baker/LPWA's contractual contribution claim is

rejected as such a claim would contravene Illinois public policy

encouraging settlements.   While "an employer may enter into a

valid and enforceable contractual agreement to waive the Kotecki

limitation on the employer's contribution liability" (Braye, 175
Ill. 2d at 218), a contractual agreement that is at odds with the

express policy of the Contribution Act encouraging good-faith

settlements is not valid or enforceable.   The trial court

properly granted partial summary judgment on the contribution

issue.

     Because we find any claim for contractual contribution

without an accompanying dismissal provision based on a good-faith

settlement to be invalid as against public policy, we see no need

to address whether such a claim is duplicative of a claim under

the Contribution Act.

                                III

     It is the good-faith nature of a settlement that triggers

the discharge of the settling tortfeasor's statutory liability

for contribution to other tortfeasors.   740 ILCS 100/2(d) (West

2002).   Thus, in order to determine whether the dismissal of Case

from the lawsuit was proper, we must first determine whether the

trial court properly concluded that the settlement between the

                                15
No. 1-05-3567

plaintiff and Case was made in good faith.

     Under the Contribution Act, whether a settlement has been

made in good faith is a matter within the sound discretion of the

trial court and one that must be based upon consideration of the

totality of the circumstances.     Johnson v. United Airlines, 203
Ill. 2d 121, 135, 784 N.E.2d 812 (2003).      "The amount of a

settlement must be viewed in relation to the probability of

recovery, the defenses raised, and the settling party's potential

legal liability."     Johnson, 203 Ill. 2d at 137.    In determining

whether the settlement was made in good faith, the trial court

may also consider whether the settlement was supported by

consideration.     Wreglesworth v. Arctco, Inc., 317 Ill. App. 3d
628, 633, 740 N.E.2d 444 (2000).       Additionally, the trial court

may consider: (1) whether the amount paid by the settling

tortfeasor was reasonable; (2) whether there was a personal

relationship between the settling parties; and (3) whether the

settling parties attempted to conceal the terms of the

settlement.     Wreglesworth, 317 Ill. App. 3d at 634.

     The settling party initially bears the burden of proof of

showing that the settlement was made in good faith.       Johnson, 203
Ill. 2d at 132.    The settling party's initial showing of good

faith can be satisfied by showing that the settlement is

reasonable and fair in light of the two policies underlying the

Contribution Act of promoting settlements with a fair

apportionment of damages among tortfeasors.       Johnson, 203 Ill. 2d
16
No. 1-05-3567

at 133.

     After the settling party has met its burden to show good

faith, the burden shifts to the party challenging the settlement

to show by a preponderance of the evidence that the settlement

was not made in good faith.    Johnson, 203 Ill. 2d at 132.     A

settlement is not made in good faith if there is evidence that

the settling parties engaged in "wrongful conduct, collusion, or

fraud" or if the settlement "conflicts with the terms of the Act

or is inconsistent with the policies underlying the Act."

Johnson, 203 Ill. 2d at 134.   Upon review, we will overturn the

trial court's determination of good faith only where there has

been an abuse of discretion.   Johnson, 203 Ill. 2d at 135.

     A review of the circumstances surrounding the settlement

between Case and the plaintiff supports the trial court's finding

that their settlement was entered in good faith.   Case's motion

for a good-faith finding set forth the terms of the settlement,

including the valid consideration.    The value of the settlement

exceeded Case's estimation of the plaintiff's total recoverable

damages and represented over 80% of the plaintiff's total demand

and therefore, was consistent with the objective of the

Contribution Act of fair apportionment of the damages.    See

Johnson, 203 Ill. 2d at 132.   The burden then shifted to

Baker/LPWA to show that the settlement was not made in good

faith.

     However, as the trial court noted, Baker/LPWA failed to

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No. 1-05-3567

offer any evidence to show that Case and the plaintiff engaged in

"wrongful conduct, collusion, or fraud" nor was the settlement

shown to conflict with the terms of the Act or the Act's

underlying objectives.    The trial court properly concluded that

Baker/LPWA failed to satisfy their burden of proof: "Baker and

LPWA fail to show how the settlement was made through wrongful

conduct. *** Since Baker and LPWA have presented no concrete

evidence to challenge the [good] faith of the settlement, they

have not satisfied their burden of demonstrating that the

settlement was made in bad faith."    Accordingly, the trial court

properly granted Case's motion for a good-faith finding.

                                 IV

       Because we have determined the trial court properly found

the settlement between the plaintiff and Case to be in good

faith, we address the trial court's grant of Case's motion for

dismissal from the lawsuit in short order.

       That the settlement between the plaintiff and Case was made

in good faith requires that Baker/LPWA's statutory counterclaim

for contribution against Case be dismissed under the Contribution

Act.    740 ILCS 100/2(d) (West 2002).

                                 V

       Lastly, Baker/LPWA contend that the trial court's finding

that the settlement was entered in good faith, premised on the

dismissal of all counterclaims against Case, must be reversed if

the contractual contribution against Case survives.    As we affirm

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No. 1-05-3567

the trial court's order granting partial summary judgment to Case

on the contribution claim, we need not address this issue

further.

                           CONCLUSION

     For the foregoing reasons, we affirm the judgment of the

circuit court of Cook County.

     Affirmed.

     CAHILL, P.J., and WOLFSON, J., concur.

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