Kenny Const. Co. v. Metropolitan Sanitary Dist. of Greater Chicago

• Decision Date: 17 December 1971
• Docket Number: No. 43684,43684
• Citation: 52 Ill.2d 187,288 N.E.2d 1
• Parties: KENNEY CONSTRUCTION COMPANY of Illinois, Appellant, v. The METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO, Appellee.
• Court: Illinois Supreme Court

Page 1

288 N.E.2d 1

52 Ill.2d 187

KENNEY CONSTRUCTION COMPANY of Illinois, Appellant, v. The METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO, Appellee.

No. 43684.

Supreme Court of Illinois.

Dec. 17, 1971.

As Modified on Denial of Rehearing Oct. 2, 1972.

O'Brien, Boyle, Haugh & Trittipo, and O'Keefe, O'Brien, Hanson, Ashenden & Lyons, Chicago (Donald v. O'Brien and James H. O'Brrien, Chicago, of counsel), for appellant.

Allen S. Lavin, Sidney B. Baker, and James W. Kennedy, Chicago (Ralph L. Brill and Fred F. Herzog, Chicago, of counsel), for appellee.

WARD, Justice.

The plaintiff, Kenny Construction Company, brought an action against the defendant, the Metropolitan Sanitary District of Greater Chicago, in a dispute arising under a construction contract. A jury was waived and the circuit court of Cook County found in favor of Kenny and entered judgment for $131,237.71. The District appealed to the Appellate Court, First District, on the issue of liability and Kenny cross-appealed, complaining that the damages awarded were inadequate. The appellate court reversed the judgment of the circuit court, holding that the District was not liable. (128 Ill.App.2d 104, 262 N.E.2d 842.) We granted Kenny's leave to appeal under our Rule 315, Ill.Rev.Stat.1969, c. 110A, § 315, 52 Ill.2d R315.

On December 23, 1958, the District and Kenny, which had submitted the low bid, entered into a contract for the construction of a sewer tunnel in Wheeling Township in Cook County. The tunnel was to be constructed from an existing intercepting sewer at Isabella Street northwesterly to Euclid Road for 8,100 linear feet.

This language appeared in the contract:

'Insert these paragraphs at the end of Article 8, 'Estimating Extra Work', of the General Conditions--

'Changed Conditions: Should the contractor encounter during the progress of the work sub-surface conditions at the site materially differing from any shown on the contract drawings or indicated in the specifications or such conditions as could not reasonably have been anticipated by either the Metropolitan Sanitary District of Greater Chicago or the contractor, which conditions will materially affect the cost of the work to be done under the contract, the attention of the Chief Engineer must be immediately called to such conditions before they are disturbed. The Chief Engineer shall thereupon promptly investigate the conditions and if he finds that they do so materially differ, the contract may with his written approval be modified to provide for increase or decrease of cost and/or differences in time resulting from such conditions. Any increase in costs resulting therefrom should be subject to approval by the Board of Trustees.'

The work by Kenny, as ultimately performed, can be divided into three areas of construction. In the middle section Kenny sank vertical shafts to the required depth and mined tunnels in opposite directions. In this manner, 3,093 linear feet of tunnel were constructed and accepted by the District and for this work Kenny was paid in full under the terms of the contract.

At the north end of the proposed tunnel, unfavorable soil conditions were encountered. After an unsuccessful attempt to continue tunneling by means of a cofferdam, which was constructed by Kenny, the contract was modified. By the modification Kenny, as an alternative to the tunnel construction originally called for installed sewer pipe with an underground pumping station. When Kenny brought suit in the circuit court it advanced a claim for the extraordinary expense of the cofferdam's construction. This claim was not allowed in the circuit court and Kenny has not appealed the nonallowance. The circuit court's action was proper, for the modification prescribed that Kenny was to do the alternate work 'for a total lump sum price of $112,400 with no payment for any other work north of station 30 90.' Kenny accepted payment of the $112,400.

The controversy here arose from the construction performed on the south 1,600 linear feet. In that section, as in the north section, Kenny encountered water, running sand, silt, and other unfavorable subsoil conditions. Kenny, unsuccessfully attempted to tunnel in free air and then compressed air, and finally attempted an open cut, using steel sheeting and air locks, This, too, failed, and Kenny abandoned work on this section, which was, of course, essential to the proposed sewer addition.

On December 17, 1959, Kenny wrote to the District, stating its belief that unforseeable and 'changed' conditions had been encountered and suggesting an attempt be made to construct the south end by use of steel liner plates. The letter contained a suggested price for the plates and further stated that 'because of the changed conditions and methods it would be necessary to modify our contract price for Bid Item 1.' Bid Item 1 was the provision authorizing a payment of $109.50 per lineal foot for excavation. Subsequent letters by Kenny on January 5th and 7th restated and further explained its proposal.

There was further correspondence and on February 5 Scheidt, the chief engineer of the District, wrote that the contract's performance was in a 'no-work' status and that unless the work was resumed, a default would be declared on Kenny's performance bond.

John B. Kenny, the president of Kenny, testified that in March he received an invitation from the president of the board of trustees of the Sanitary District to discuss the matter. They met and discussed getting the work underway again, and Kenny said, he testified, that he 'would consider going back to work only if I would be told that I would be paid.' The president of the board, Kenny said, replied that he would talk to the engineering department, and, if it was agreeable to that department, Kenny would be compensated for its extra work. A few days later there was a conference between Kenny, Scheidt and R. H. Kelly, the assistant chief engineer of the District. At it, Kenny testified, Scheidt said he was willing to try the liner-plate method, and he and Kenny agreed on a price for the plates. Kenny testified that he said at that time that the agreement on the price was not the total solution and that it was necessary to review the matter to date, including the cost of the tunnel in the south section in light of the fact that the liner-plate method was a slower method than was originally planned under the contract. Scheidt's reply, according to Kenny, was that the method that he would like to employ was to let Kenny proceed with the work and be paid at a later date. It would be much easier and more realistic for the District's engineering department to evaluate the work after it had been completed, and check as to how much more the contractor had expended, than it would be to accept from the contractor before the work began an added cost which might be exorbitant. Kenny further testified that he accepted these representations and relied on them in undertaking the liner-plate work at the south end of the sewer.

Even though the contract appeared to call for a different approval, this was not the first time the chief engineer had employed this procedure. In regard to claims by Kenny for additional compensation for cofferdam, open cut and compressed air work the contractor had performed at both ends of the tunnel caused by what Kenny claimed were unanticipated subsoil conditions, on January 28, 1960, Burton Scheidt, the chief engineer of the District wrote to Kenny as follows: 'Our engineers have been examining your claims and it is impossible at this time to determine whether those claims are covered by the renegotiation clause in your contract. If existing conditions are such that they could have been anticipated prior to the commencement of the work, the renegotiation clause would not cover any change in conditions and you would be obliged to perform in accordance with the other provisions of the contract. We do not wish to preclude a claim for extras at present, but we feel as though the work under the contract should be completed in accordance with the terms thereof, and upon completion, full consideration will be given to all of your claims.'

On March 29, Kenny sent the District a letter agreeing to resume work and use liner plates and steel ribs at a price of $0.23 a pound for the plates. The letter also stated that any order from the District to resume work should provide for the extra work required for the 40 linear foot steel sheet trench which would be necessary to permit the use of compressed air.

On March 31, the committee on engineering of the District reported to the board of trustees that Kenny had advised them of these claims of unanticipated soil conditions, and the committee recommended the use of steel liner plates and steel ribs. The board approved this recommendation and the price of 23 cents a pound for the plates. On April 11, Kenny was informed of this decision by Scheidt and the engineering department and was authorized to construct 400 feet by this method. Kenny was advised that if it proved satisfactory Kenny would be authorized to continue to use it for the remainder of the south end of the tunnel. (After completing the 400 feet of linerplate construction Kenny apparently was authorized to continue using this technique in completing the remaining 1200 feet of the south section. In any event the District does not contend that Kenny did not have authority.) No mention was made of Kenny's claim for additional compensation for the extra labor required for liner-plate construction.

When Kenney's claim for additional compensation for extra labor was submitted to the District upon completion of the entire tunnel and denied, Kenny filed suit against the District.

The circuit court held that changed conditions had been encountered within the meaning of the contractual provisions; that the District had waived and was estopped from requiring compliance with the contract provisions...