East Peoria Community High School Dist. No. 309 v. Grand Stage Lighting Co.

• Decision Date: 04 September 1992
• Docket Number: No. 3-91-0869,3-91-0869
• Citation: 601 N.E.2d 972,235 Ill.App.3d 756,176 Ill.Dec. 274
• Court: United States Appellate Court of Illinois
• Parties: , 176 Ill.Dec. 274, 78 Ed. Law Rep. 425 EAST PEORIA COMMUNITY HIGH SCHOOL DISTRICT NO. 309, Appellant, v. GRAND STAGE LIGHTING COMPANY; Shick Supply & Equipment Company; the Pipco Companies, Ltd., and Union Roofing Co., Inc., Appellees.

Page 972

601 N.E.2d 972

235 Ill.App.3d 756, 176 Ill.Dec. 274,

78 Ed. Law Rep. 425

EAST PEORIA COMMUNITY HIGH SCHOOL DISTRICT NO. 309, Appellant, v. GRAND STAGE LIGHTING COMPANY; Shick Supply & Equipment

Company; the Pipco Companies, Ltd., and Union

Roofing Co., Inc., Appellees.

No. 3-91-0869.

Appellate Court of Illinois,

Third District.

Sept. 4, 1992.

Rehearing Denied Nov. 13, 1992.

William R. Kohlhase (argued), Dennis R. Triggs, Thomas R. Davis, Miller, Hall & Triggs, Peoria, for East Peoria High School Dist. No. 309.

Eric S. Rein (argued), Schwartz, Cooper, Kolb & Gaynor, Chicago, William R. Kelly, Peoria, Bret A. Rappaport, Earle S. Rappaport, Schwartz Cooper Kolb Gaynor Chtd., Chicago, for Grand Stage Lighting Co., Union Roofing Co., Inc.

Randall Ray, Sebat, Swanson, Banks, Garman & Townsley, Danville, for Shick Supply & Equipment Co.

Daniel G. O'Day, Cusack & Fleming, P.C., Peoria, for The Pipco Companies, Ltd.

J. Paul Bertsche, Fagel, Haber & Maragos, Chicago, Richard J. Dalton, Gridly, for Union Roofing Co., Inc.

Andrew W. Covey, Baymiller, Christison & Radley, Peoria, for First Nat. Bank of Peoria, Commerce Bank, N.A.

David Daley, Sutkowski & Washkuhn, Peoria, for appellees.

Justice GORMAN delivered the opinion of the court:

Defendants-counterplaintiffs-subcontractors filed actions against plaintiff-counterdefendant East Peoria Community High School District No. 309 to collect on amounts unpaid by the general contractor for certain work performed on the school. The trial court granted summary judgment for defendants. We affirm.

In 1985, plaintiff East Peoria High School District No. 309 contracted with Tousley-Iber to oversee a life safety survey and related improvements of some high school buildings. Tousley-Iber contracted with defendant Union Roofing for the roof work; with defendant PIPCO Companies Ltd. for the plumbing and electrical work; with defendant Grand Stage Lighting for stage renovation work; and with defendant Shick Supply and Equipment Company for the locker replacement. All of the subcontractors performed the work contracted for. The original unpaid amounts were as follows: Union Roofing--$63,042.61; PIPCO--$15,467.07; Grand Stage--$145,949.00; Shick--$22,782.00.

Plaintiff made progress payments to Tousley-Iber. Tousley-Iber did not make any payments to defendant Shick or to defendant Grand Stage Lighting. Tousley-Iber paid defendant Union Roofing and defendant PIPCO for part of the work they performed.

Litigation ensued between the parties. The only claims at issue here are the claims by the subcontractors that they were third party beneficiaries of the agreement between plaintiff and Tousley-Iber and that the Bond Act mandated that plaintiff require Tousley-Iber to obtain a payment bond. Plaintiff raised certain affirmative defenses. The court granted each defendant's motion for summary judgment and held in its February 1990 order that, among other things, the contract was subject to the Bond Act and that the subcontractors were third party beneficiaries of the contract between plaintiff and Tousley-Iber. As a result of the court's October 1991 order entered pursuant to the parties' stipulation, defendants Union Roofing, Grand Stage, and PIPCO received partial payment against their lien claims. The amounts now claimed to be due are as follows: Union Roofing--$53,263.34; PIPCO--$13,067.80; Grand Stage--$123,309.27; and Shick--$22,782.00.

Plaintiff now appeals.

The first issue for review is whether the Bond Act mandated that plaintiff require Tousley-Iber to obtain a payment bond.

The Construction Bond Act provides, in pertinent part, as follows:

All officials, boards, commissions or agents of this State, or any political subdivision thereof in making contracts for public work of any kind to be performed for the state, or any political subdivision thereof shall require every contractor for such work to furnish, supply and deliver a bond to the State, or to the political subdivision thereof entering into such contract, as the case may be, with good and sufficient sureties ... Ill.Rev.Stat.1987, ch. 29, par. 15.

Every person furnishing material or performing labor, either individually or as a subcontractor for any contractor, with the state, or a political subdivision thereof where a bond or letter of credit shall be executed as provided in this Act, shall have the right to sue on such bond or letter of credit.... provided, however, that this Act shall not be taken to in any way make the state, or the political subdivisions thereof entering into such contract, as the case may be, liable to any greater extent than it was liable under the law as it stood prior to the adoption of this Act. Ill.Rev.Stat.1987, ch. 29, par. 16.

As a preliminary matter, Tousley-Iber was a general contractor even though it styled itself a "construction manager". It hired subcontractors and provided no unique services.

Plaintiff argues that the liability of a public body to a subcontractor is controlled by the Mechanics' Lien Act and the Bond Act, with the latter containing a critical proviso. The proviso states that the Bond Act "shall not be taken to in any way make the State or the political subdivision entering into such contract ... liable to any greater extent than it was liable under the law as it stood prior to the adoption of this Act". Pointing especially to the inclusion of the words "in any way", plaintiff asserts that the proviso defeats the subcontractors' contract claims here. Plaintiff argues that Emulsicoat, Inc. v. City of Hoopeston (1981), 99 Ill.App.3d 835, 55 Ill.Dec. 176, 425 N.E.2d 1349 supports its position that the language is to be read broadly.

We are not persuaded by plaintiff's argument. First, we note that "as a remedial statute, the Bond Act is liberally construed to effectuate the General Assembly's intent to encourage and protect artisans, materialmen, and tradesmen. (Chicago Housing Authority v. U.S.F. & G. (1964), 49 Ill.App.2d 407, 199 N.E.2d 217.) Furthermore, Western Waterproofing Company Inc. v. Springfield Housing Authority (C.D.Ill.1987), 669 F.Supp. 901, squarely addressed the issue presented in the instant case. There, the court had to determine whether a third party beneficiary contract action could be asserted against a public entity where the entity had failed to procure a payment bond from a general contractor. The court held that the Bond Act should be read into the contract between the Housing Authority and the general contractor. The court there noted that "[u]nder Illinois law 'statutory provisions applicable to a contract ... are deemed to form a part of that contract and must be construed in connection therewith' ". (Western Waterproofing, 669 F.Supp. 901, 903.) "Because the Bond Act was established to achieve the same remedial goal as the mechanics' lien in a public works situation, it follows that the Bond Act should be read into the public works contract between [the Housing Authority] and [the general contractor], requiring the procurement of a payment bond as required by the Bond Act." Id. at 904.

In contrast, the Emulsicoat case dealt only with a negligence claim against two municipalities. The court there specifically examined the Bond Act's proviso and held that it "represent[ed] a very cautious approach by the legislature to the question of tort immunity of municipalities". (Emulsicoat 99 Ill.App.3d 835, 838, 55 Ill.Dec. at 179, 425 N.E.2d at 1352.) Thus we reject plaintiff's argument and hold that the Bond Act mandated that plaintiff require Tousley-Iber to obtain a payment bond.

The second issue for review is whether the subcontractors were third party beneficiaries of the contract between plaintiff and Tousley-Iber.

The general rule is that if a contract is entered into for a direct benefit of a third person not a party thereto, such third person may sue for breach thereof. (Metro East Sanitary District v. Village of Sauget (1985), 131 Ill.App.3d 653, 86 Ill.Dec. 760, 475 N.E.2d 1327.) Moreover, "one is a third party beneficiary of a contractual provision if the parties to a contract, or at least the promisee intended that the agreement confer a benefit on him [citation omitted]. That intent is 'to be gleaned from a consideration of all of the contract and the circumstances surrounding the parties at the time of its execution.' " Bates and Rogers Construction Corporation v. Greeley and Hansen (1985), 109 Ill.2d 225, 93 Ill.Dec. 369, 486 N.E.2d 902.

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