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Docket No. 90439-Agenda 18-September 2001.

THE BOARD OF MANAGERS OF THE VILLAGE CENTRE 
CONDOMINIUM ASSOCIATION, INC., Appellant, v. 
WILMETTE PARTNERS, an Illinois Limited Partnership, et al., Appellees.

Opinion filed November 21, 2001.

JUSTICE THOMAS delivered the opinion of the court:

At issue in this case are the requirements for a valid waiver ofthe implied warranty of habitability. The plaintiff, the Board ofManagers of the Village Centre Condominium Association, Inc.(the Board), as representative of the owners of condominium unitsin relation to matters involving common elements, filed a one-count complaint in the circuit court of Cook County againstdefendants, Wilmette Partners (Wilmette), and Wilmette's generalpartner, Richard A. Keefe (Keefe), for breach of the impliedwarranty of habitability. The breach concerned the garage of theBoard's condominium building.

Defendants moved to dismiss the Board's complaint withprejudice pursuant to section 2-619(a)(9) of the Illinois Code ofCivil Procedure (735 ILCS 5/2-619(a)(9) (West 1996)), on theground that a disclaimer in the purchase contracts entered into bythe unit owners and defendants barred any claims for breach of theimplied warranty of habitability. The circuit court agreed withdefendants and dismissed the Board's complaint with prejudice.The circuit court thereafter denied the Board's motion to vacateand entered a Supreme Court Rule 304(a) finding (155 Ill. 2d R.304(a)). The Board thereafter filed a first amended complaint anda second amended complaint. The Board's second amendedcomplaint remains pending before the circuit court.

The appellate court adopted the circuit court's written orderas its order and affirmed the circuit court. No. 1-99-0571(unpublished order under Supreme Court Rule 23). We allowedthe Board's petition for leave to appeal (177 Ill. 2d R. 315), andnow reverse the circuit and appellate courts.

BACKGROUND

For purposes of reviewing a court's ruling on a defendant'smotion to dismiss, this court accepts as true the well-pleadedallegations of a plaintiff's complaint. River Park, Inc. v. City ofHighland Park, 184 Ill. 2d 290, 293 (1998). The well-pleadedfacts in the Board's complaint show that in 1988 and 1989,defendant Wilmette developed a 36-unit condominium building inWilmette, Illinois. The condominium building is a five-storystructure. The two lowest levels include an indoor parking garage,which contains indoor ramps connecting the levels and leadingfrom the upper level of the garage to the street. The parking garageis a common element of the building.

Wilmette used various real estate contracts to sell thecondominium units. Twenty-nine of those contracts containedpurported waivers of the implied warranty of habitability, whileseven of those contracts did not. Only those contracts containingpurported waivers of the implied warranty of habitability are atissue in this case.

The Board's complaint alleges that the upper level of thegarage had certain specified design and construction defects whichwere not apparent prior to the sale of the condominium units. Asa result of the design and construction defects, the concrete on theupper level of the garage floor developed cracks and separated,and the floor's structural support corroded. The upper level of thegarage thus was incapable of supporting its own weight, wasincapable of safely supporting the weight of normal vehiculartraffic in the garage, and was in danger of collapsing into the lowerlevel of the garage. Consequently, the garage could not be used bythe unit owners for its intended purpose.

As noted, the Board filed suit against defendants for breach ofthe implied warranty of habitability with regard to the parkinggarage. Defendants then moved to dismiss the Board's complaint,arguing that a disclaimer in the purchase agreements was a validdisclaimer of the implied warranty of habitability. Defendantscontended that the disclaimer was so clear and conspicuous that noother conclusion could be reached but that the unit owners readand understood the language in those disclaimers.

The disclaimers were set forth in section 10 of the purchasecontracts and provided:

"EXCEPT AS EXPRESSLY SET FORTH IN THISPARAGRAPH 10, SELLER HEREBY EXCLUDESAND DISCLAIMS ANY AND ALL OTHERWARRANTIES, WHETHER EXPRESS OR IMPLIED,INCLUDING BY WAY OF ILLUSTRATION AND NOTLIMITATION, WARRANTIES OF FITNESS FORPARTICULAR PURPOSE AND MERCHANTABILITY.

THE LIMITED WARRANTIES CONTAINEDHEREIN SHALL BE IN LIEU OF ANY OTHERWARRANTY, WHETHER EXPRESSED OR IMPLIED,PROVIDED THAT IN THE EVENT ANY ITEMWARRANTED HEREIN IS DEEMED TO BE ACONSUMER PRODUCT UNDER THE MAGNUSON-MOSS WARRANTY-FEDERAL TRADECOMMISSION IMPROVEMENT ACT, THEN, ANDONLY IN THAT EVENT, THE DISCLAIMER OFIMPLIED WARRANTY SHALL COMMENCE FROMAND AFTER THE EXPIRATION OF THE EXPRESSWARRANTIES SET FORTH HEREIN."

Following briefing and argument, the circuit court entered awritten order dismissing the Board's complaint with prejudicepursuant to section 2-619. The circuit court rejected the Board'sargument that the disclaimer at issue was defective because it didnot use the phrase "implied warranty of habitability." The circuitcourt also rejected the Board's argument that the disclaimer failedto put unit owners on notice of its implications. The circuit courtconcluded that given the conspicuous location of the disclaimernear the signature page, the large size print of the disclaimer, andthe plain language of the disclaimer, the disclaimer was, as amatter of law, part of the agreement between the parties. Thecircuit court therefore held that the unit owners had waived and/ordisclaimed their warranties of habitability when they signed thepurchase contracts.

The appellate court adopted the ruling of the circuit court inits entirety. As noted, the Board then filed a petition for leave toappeal to this court (177 Ill. 2d R. 315), which was granted.

ANALYSIS

At the outset, we note that because this appeal arises from thedismissal of the Board's complaint based upon section 2-619, ourreview is de novo. Kedzie & 103rd Currency Exchange, Inc. v.Hodge, 156 Ill. 2d 112, 116 (1993). In this appeal, the Board againchallenges the circuit court's finding that the disclaimer at issuewas sufficient to defeat its claim. The Board argues that the circuitand appellate courts erred in finding that the disclaimer: (1) didnot have to reference the implied warranty of habitability; (2) wasconspicuous; (3) made a full disclosure of the consequences ofdisclaimer; and (4) was proven to be the "in-fact" agreement of theparties.

The dispute in this case essentially turns on language in thiscourt's decision in Petersen v. Hubschman Construction Co., 76Ill. 2d 31 (1979). In Petersen, this court for the first time held thatthe implied warranty of habitability applies to contracts for the saleof new homes by builder-vendors. Petersen, 76 Ill. 2d at 39-40.We noted that the implied warranty of habitability in casesconcerning the sale of new homes by builder-vendors was ajudicial innovation of recent origin. Petersen, 76 Ill. 2d at 38. Theimplied warranty of habitability was created to avoid the harshnessof caveat emptor and the doctrine of merger where the purchasersof new homes discover latent defects in their home. Petersen, 76Ill. 2d at 38. We concluded that "implied in the contract for salefrom the builder-vendor to the vendees is a warranty that thehouse, when completed and conveyed to the vendees, would bereasonably suited for its intended use." Petersen, 76 Ill. 2d at 42.

In defining the implied warranty of habitability in the contextof a new home purchase, we noted that the use of the term"habitability" was unfortunate because that term implied that thewarranty was satisfied where a house merely was capable of beinginhabited. Petersen, 76 Ill. 2d at 41. In fact, prior to Petersen, thewarranty of habitability was found to be violated only where ahome did not keep out the elements, did not provide a reasonablysafe place to live, or was not structurally sound. See Park v. Sohn,90 Ill. App. 3d 794, 797-98 (1980), aff'd in part & rev'd in part onother grounds, 89 Ill. 2d 453 (1982). Consequently, in order toclarify the implied warranty of habitability, we stated that themeaning of habitability in the context of a new home purchasemight more accurately be conveyed through language similar tothat used in the Uniform Commercial Code (UCC) warranties ofmerchantability or of fitness for a particular purpose. Petersen, 76Ill. 2d at 41-42. Drawing an analogy to the provisions of the UCC,we held that implied in a contract for sale from a builder-vendoris a warranty that the home, when completed and sold, would bereasonably suited for its intended use. Petersen, 76 Ill. 2d at 42.

This court further held that a knowing disclaimer of theimplied warranty of habitability would not be against publicpolicy, although such a disclaimer must be strictly construedagainst the builder-vendor. Petersen, 76 Ill. 2d at 43. Quoting adecision from the Supreme Court of Missouri, we held that a partyraising disclaimer as a defense must show that the disclaimer wasa conspicuous provision that fully disclosed its consequences, andthat the disclaimer in fact was the agreement reached by theparties. Petersen, 76 Ill. 2d at 43, quoting Crowder v.Vandendeale, 564 S.W.2d 879, 881 n.4 (Mo. 1978).

In their motion to dismiss, and again before this court,defendants argue that based upon this court's language inPetersen, a party need not use the phrase "implied warranty ofhabitability" in order to effectively disclaim that warranty, butinstead may use the "more meaningful" terminology "impliedwarranties of merchantability and fitness." Defendants thencontend that their disclaimer, using the terminology "impliedwarranties of merchantability and fitness," effectively barred theBoard's cause of action because it was conspicuous, it fullydisclosed its consequences, and it was the agreement reached bythe parties.

In support of their position, defendants cite the decision of theThird District of the appellate court, in Country SquireHomeowners Ass'n v. Crest Hill Development Corp., 150 Ill. App.3d 30 (1986). The court in that case rejected the plaintiff'sargument that a disclaimer was defective because it failed to usethe phrase "warranty of habitability." Country Squire, 150 Ill. App.3d at 32. The court held that the plaintiff's argument failed"because the contract did use the more meaningful terminologysuggested by the supreme court-'the implied warranties ofmerchantability and fitness.' " Country Squire, 150 Ill. App. 3d at32. The circuit court in this case, although it did not cite CountrySquire, likewise held that the absence of the phrase "impliedwarranty of habitability" was not fatal, "because the purchasecontracts used the more meaningful terminology suggested by thesupreme court in Petersen-'the implied warranties ofmerchantability and fitness.' "

In this court, the Board again argues that the disclaimer wasdefective because it did not refer to the implied warranty ofhabitability by name. The Board observes that aside from the courtin Country Squire, appellate court panels have focused on whethera disclaimer mentioned the word "habitability" as a factor indeciding whether a disclaimer was valid. See Briarcliffe WestTownhouse Owners Ass'n v. Wiseman Construction Co., 134 Ill.App. 3d 402, 410 (1985); Herlihy v. Dunbar Builders Corp., 92Ill. App. 3d 310, 316 (1980); Tassan v. United Development Co.,88 Ill. App. 3d 581, 589 (1980). The Board argues that the courtin Country Squire erred in finding that the terms "merchantability"and "fitness for a particular purpose" are effective substitutes for"implied warranty of habitability," as this court in Petersen wasreferencing the UCC for purposes of analogy only.

We agree. In Petersen, this court stated that it was drawing ananalogy to the UCC in order to more accurately convey themeaning of the implied warranty of habitability. Petersen, 76 Ill.2d at 41-42. More recently, in Board of Directors of BloomfieldClub Recreation Ass'n v. Hoffman Group, Inc., 186 Ill. 2d 419(1999), we again noted that reference to the UCC in Petersen wasfor purposes of analogy. Specifically, we noted that:

"[T]he Association mischaracterizes the purpose behindour comparison of the implied warranty of habitabilitywith the commercial warranties of merchantability andfitness for a particular purpose. *** In departing from thatinequitable approach [of requiring a dwelling to be whollyunsafe and unliveable in order to support a claim], thecourt found favor in viewing the implied warranty ofhabitability as somewhat like the warranties ofmerchantability and fitness for a particular purpose. ***Therefore, even in drawing a comparison with theUniform Commercial Code, the court kept intact bothmain elements of the implied warranty of habitability-alack of defects affecting the residential unit and the fitnessof that unit for use as a residence." (Emphasis added.)Board of Directors of Bloomfield Club, 186 Ill. 2d at 427-28.

It is clear, then, that in analogizing the implied warranty ofhabitability to the UCC warranties, this court never intended thatthose warranties would be interchangeable. Given that the impliedwarranty of habitability is distinct from other warranties by its verynature, we find any disclaimer that does not reference the impliedwarranty of habitability by name is not a valid disclaimer of thatwarranty. Consequently, because the disclaimer in this case did notrefer to the implied warranty of habitability by name, thatdisclaimer was not effective to waive the warranty. The circuitcourt, therefore, erred in dismissing the Board's complaint withprejudice pursuant to section 2-619(a)(9) of the Code on theground that the disclaimer barred the Board's cause of action.

Because we find that the disclaimer in this case was not validbecause it did not refer to the implied warranty of habitability byname, we need not address the Board's additional claims that thedisclaimer at issue was invalid because it did not appear on thesignature page, it was not conspicuous, it did not make a fulldisclosure of its consequences, and it was not proven to be the infact agreement of the parties. We do note that in most cases,however, those issues will present questions of fact unique to eachcase.

The Board also asks this court to adopt or recommend themodel disclaimer of the implied warranty of habitability publishedby the Chicago Bar Association. See T. Homburger, The Waiverand Disclaimer of the Implied Warranty of Habitability, Chi. B.Rec. 364, Appendix I (May-June 1984). Although we decline toadopt that disclaimer as the law of this court, we do observe thatdisclaimers such as that published by the Chicago Bar Associationor similar to the disclaimer at issue in Breckenridge v. CambridgeHomes, Inc., 246 Ill. App. 3d 810, 813-14 (1993), clearly identifythe implied warranty of habitability, set forth the consequences ofwaiving the warranty, and establish that the disclaimer was theagreement of the parties. As the court noted in Breckenridge,where disclaimer language is brought to a purchasers' attention,the consequences of the waiver are made known to the purchasers,and the purchasers knowingly waive their rights to pursue anaction for any alleged breach of the implied warranty ofhabitability, there is an effective disclaimer of the impliedwarranty of habitability under Petersen. See Breckenridge, 246 Ill.App. 3d at 818-19.

CONCLUSION

For all the foregoing reasons, the judgments of the appellateand circuit courts are reversed, and the cause is remanded to thecircuit court of Cook County for further proceedings consistentwith this opinion.

Reversed and remanded.