Hillside FXF, LLC, et al. v. Premier Design + Build Group, LLC, et al. (Lawyers Weekly No. 12-158-16)

This case arises out of the construction of a FedEx facility in Northborough, Massachusetts. Plaintiffs Hillside FXF, LLC (Hillside) and Jones Development Company, LLC (Jones) filed this action against defendants G. Lopes Construction, Inc. (Lopes), Premier Design + Build Group, LLC (Premier), and Haley & Aldrich, Inc. (Haley) seeking to recover damages relating to remedial work performed after the construction. This Court has already denied Haley’s summary judgment motion. This memorandum concerns the defendant Premier’s Motion for Summary Judgment as to plaintiffs’ claims against it. 1 Premier argues that release language in a change order bars all of the plaintiffs’ claims against it and that plaintiffs have in any event waived any claim because they failed to follow certain contractual provisions. After careful review of the summary judgment record, this Court concludes that there are questions of fact such that the Motion must be Denied.
1 Plaintiffs also filed a motion to strike three of Premier’s fact statements contained in Premier’s Superior Court Rule 9A (b) (5) statement of material facts. That motion is denied for the reasons stated in Premier’s opposition.
The relevant facts in the summary judgment record, viewed in the light most favorable to the plaintiffs, are as follows. Hillside and Jones engage in commercial development and construction projects. On August 23, 2011, Hillside as the owner/developer and Premier as the general contractor entered into an agreement to construct a FedEx freight facility at 300 Bartlett Street, Northborough, Massachusetts (the “Project”). Because the site was on a relatively steep slope, a significant amount of cut and fill and excavation work was required to prepare it for construction. The earthwork began in September 2011, with foundations and walls of the building installed in early 2012. Shortly thereafter, it was noticed that the walls appeared to have shifted laterally. Ultimately, it was determined that the foundations had settled and that this was caused by improper fill work. By the time the building was stabilized and the site repaired, Hillside had spent more than $ 3 million in remedial work.
Premier’s Motion is based in part on language contained in its construction contract with Hillside (the Agreement). See Exhibit C of Joint Appendix. Article 7 of the Agreement states that “[i]f, during the period of construction, the Work [as defined by the Agreement] is found to be defective or not in accordance with the Agreement Documents, contractor shall correct it with reasonable promptness after receipt of written notice from Owner to do so …. Owner shall give such notice within ten (10) business days after discovery of the condition.” Article 9 ¶ Q states that: “[s]hould either party to this Agreement suffer injury or damage…because of any act or omission of the other party…claim shall be made in writing to such other party within a reasonable time after the first observance of such injury or damage.” On March 26, 2012,
Premier sent the plaintiffs a written notice of soil stability issues. Four days later, on March 30, 2012, plaintiffs sent Premier a notice that these issues arose from Premier’s defective work.
The Motion also relies on a certain change order — Change Order 13 — entered into between the parties following the execution of the Agreement. The Agreement defines a change order to be “a written order to a Contractor signed by Owner issued after execution of the Agreement authorizing a change in the Work or an adjustment in the Agreement Sum or Agreement Time.” Article 6 of Agreement. Change Order 13 was one of fourteen change orders issued. It was executed on June 19, 2013, many months after Hillside had discovered the problems with the foundation. Change Order 13 stated that:
“The following changes shall be added to and become part of Item I of the Standard Contract Agreement dated August 23, 2011:
. . . Credit to contractors [sic] fee. This credit shall serve as final compensation to the Owner [Hillside] and constitutes a complete release from any and all claims against the Contractor [Premier] relating to this project. DEDUCT $ 30,000.”
See Exhibit J. Kevin Jones signed Change Order 13 on behalf of the plaintiffs.
The summary judgment record contains various e-mails and portions of deposition testimony relating to the meaning of this language. As described in one email, its purpose was to give Premier a $ 30,000 credit to help offset the costs “associated with the soils, building and undercut issues.” Alec Zocher, a Premier representative, testified that he had several conversations with Jones about Change Order 13 but couldn’t recall what was said beyond the fact that there was some negotiation as to the amount of the credit. As Jones recalls it, the discussion pertained only to the specific work that was to be performed pursuant to Change Order 13, and that, although he did not notice the release language, he would have assumed that it related only to a minor dispute between the parties regarding Premier’s ten percent fee as general contractor. Jones denies that there was any discussion about resolving the parties’ larger dispute
over the failure of the Project site, nor did he understand the language to constitute a release by plaintiffs of that much larger claim.
Premier makes two arguments in support of its motion for summary judgment. First, it contends that Change Order 13 is an enforceable release that bars all of the plaintiffs’ claims against Premier in this action. Second, it argues in the alternative that the plaintiffs’ contract claims against Premier are waived because plaintiffs failed to provide timely written notice of the damage to the property and of their claim that Premier’s work was defective. The Court will discuss each of these arguments in turn.
A. Change Order 13
As an initial matter, this Court concludes that Illinois law applies. See Article 12 of the Agreement (providing that Agreement to be construed in accordance with Illinois law). Under Illinois law, a release, like any contract, must be enforced as written if its terms are clear and explicit. However, in determining the meaning of those terms, Illinois courts strictly construe them against the benefitting party; to be enforceable so as to bar a claim, the release must spell out the intention of the parties with great particularity. Construction Systems, Inc. v. FagelHaber, LLC, 35 N.E.3d 1244, 1251 (Ill. App. Ct. 2015). Indeed, Illinois cases seem to suggest that the court must always take into account the circumstances surrounding the execution of a release, regardless of what the release says. Ainsworth Corp. v. Cenco, Inc., 437 N.E.2d 817, 821 (Ill. App. Ct. 1982) (“[N]o form of words, no matter how all encompassing, will foreclose scrutiny of a release . . . or prevent a reviewing court from inquiring into surrounding circumstances to ascertain whether it was fairly made and accurately reflected the intention of the parties’). Moreover, the court should avoid interpretations that lead to absurd results where a
contract is susceptible to more than one construction. Where one construction is “fair, customary and such as prudent men would naturally execute,” and the other is “inequitable, unusual or such as reasonable men would not be likely to enter into,” the court must prefer the former. Chicago Title & Trust Co., v. Telco Capital Corp., 685 N.E.2d 952, 955-956 (Ill.App.1997), quoted in Bank of Commerce v. Fyre Lake Ventures, LLC., 84 F.Supp. 3d 807, 823 (C.D. Ill.2015) (denying summary judgment because of factual disputes as to meaning of release).
In opposing the motion, plaintiffs contend that reading Change Order 13 to release Premier from a $ 3 million damages claim in exchange for a $ 30,000 credit would be an absurd interpretation. This Court finds this argument to be persuasive. At the very least, this Court concludes that there is are genuine disputes of fact regarding the intent of the parties such that summary judgment on this basis would be improper. As noted by the plaintiffs, there is evidence in the summary judgment record suggesting that the only dispute that was intended to be resolved by the release language in Change Order 13 concerned the dispute between the parties regarding the general contractor’s fee on certain of the remedial work. This is a plausible interpretation of the release language, since it is immediately preceded by the words “credit to contractors [sic] fee.” That the language was not intended to foreclose the much larger claims asserted in this action is further supported by the fact that it was placed in a change order. As defined by the Agreement, a change order is an order authorizing a change in the work or an adjustment to the time in which the work is to be completed or the price to be paid. Thus, plaintiffs have some justification for their position that Jones, signing on behalf of plaintiffs, could not be reasonably expected to find a release of the magnitude argued by Premier in a change order that covered a relatively insignificant amount of additional work.
B. Timely Notice
Premier’s second argument merits less discussion. Premier notes that the undisputed facts show that the problems in the building foundation were first observed on or around February 23, 2012, but that the plaintiffs did not issue any written notice of this defect until March 30, 2012. Premier contends that Article 9 of the Agreement required that this notice had to be given within ten days of discovery of the defect and that this delay amounted to a waiver of plaintiffs’ contractual claims. Article 9, however, says only that a claim against the liable party for injury to property must be made “within a reasonable time after the first observance of such injury or damage.” Clearly, a month is not an unreasonable time. Premier asserts that the notice had to be given within ten days, but this ten day requirement is contained in Article 7, not Article 9. Moreover, a reasonable interpretation of Article 7 is that it was to give a contractor a chance to correct its defective work before the owner corrects it and sends the contractor the bill. In any event, neither Article 7 nor Article 9 contains any waiver language.
For all of the foregoing reasons, Defendant Premier Design + Build Group, LLC’s Motion for Summary Judgment is DENIED.
Janet L. Sanders
Justice of the Superior Court
Dated: November 3, 2016

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