MQ CONST. CO., INC. v. Intercargo Ins. Co.

• Decision Date: 29 December 2000
• Docket Number: No. 1-99-3424.,1-99-3424.
• Citation: 742 N.E.2d 820,318 Ill.App.3d 673,252 Ill.Dec. 282
• Parties: MQ CONSTRUCTION CO., INC., Plaintiff-Appellee, v. INTERCARGO INSURANCE COMPANY, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

742 N.E.2d 820

318 Ill.App.3d 673

252 Ill.Dec. 282

MQ CONSTRUCTION CO., INC., Plaintiff-Appellee, v. INTERCARGO INSURANCE COMPANY, Defendant-Appellant.

No. 1-99-3424.

Appellate Court of Illinois, First District, Third Division.

December 29, 2000.

Riordan, Dashiell & Donnelly, Ltd. (Paul A. Brocksmith, of counsel), Chicago, for Appellant.

Bruce B. Jackson & Associates, Ltd., Chicago, for Appellee.

Justice BURKE delivered the opinion of the court:

Defendant Intercargo Insurance Company, a surety on a public construction bond, appeals from an order of the circuit court entering judgment in favor of plaintiff MQ Construction Co., Inc. on plaintiff's claim against defendant's bond for money owed to plaintiff for certain construction work it performed on a public construction project. On appeal, defendant contends that the trial court erred in finding that December 12, 1996, was the "last day of work" of plaintiff on the project for purposes of determining whether plaintiff filed a timely notice of its claim against defendant's bond as required by the Illinois Public Construction Bond Act (Bond Act) (30 ILCS 550/2 (West 1996)). For the reasons set forth below, we reverse.

The city of Chicago (City) hired Roadworks, Inc. (Roadworks) as the general contractor for a public works construction contract known as "project No. S-5-020, 1995 Model Block Group 21-A" (project). Plaintiff entered into an "agreement" with Roadworks for certain work on the project, which included: "Type 4 curb removal; Type 4 curb replacement; 5" PCC mainwalk; 5" PCC for the disabled; 8" PCC driveway; Type 3 curb removal; Type 3 curb replacement." Although a complete contract is not contained in the record, portions of the "General Conditions and Special Conditions" for the City's project contract provided:

"The Contractors shall not be entitled to demand or receive final payment until all the stipulations, provisions and conditions as set forth in the contract have been complied with, and the work has been accepted by the Commissioner, whereupon the City will, at the expiration of 30 calendar days after such completion and acceptance, pay the whole account of money due the contractor under the contract.

The acceptance by the Contractor of the final payment above mentioned shall operate as and shall be a release to the City from all claims or liability under this contract, or for any act or neglect of the city relating to or connected with this contract.

* * *

Contractor's Responsibility for Work

The Work shall be under the charge and care of the Contractor until final acceptance by the Commissioner, including all "Punch List" work, unless otherwise specified in the Contract Documents.

* * *

The Work will not be considered as completed and accepted until a written notice from the Commissioner, confirming the Final Completion and acceptance of all Work, including "Punch List" Work has been received by the Contractor."

On April 3, 1995, Roadworks, with defendant acting as surety, obtained a "Contractor's Performance Bond" in which it agreed to be bound to the City for $783,989.55 for the work, labor, and materials used on the project. Between April 24, 1995, and May 12, 1995, plaintiff performed its work on the project pursuant to its agreement with Roadworks. On June 6, 1995, plaintiff sent an "invoice" to Roadworks for "full and final payment" pursuant to the agreement. The invoice itemized the work performed, listed the "total" for the work as $146,796.20, indicated that a previous payment had been made for $70,000, and demanded payment of $81,796.20.

In December 1996, plaintiff received a copy of a "memorandum" and an accompanying "Preliminary Punch List" sent to Roadworks from the project director for the City. The document stated, in part: "Final payment shall be withheld until both preliminary and final punch list items are completed to the city's satisfaction." Items 1, 3 through 8, and 10 on the punch list required patching or replacing certain sections of sidewalk that plaintiff had originally constructed in April or May 1995, but which had been "marred after pouring and after the wet cement had cured, or which had cracked subsequent to installation." On December 12, plaintiff returned to the project site and performed the punch list items related to its work and did not perform any further work on the project after that date. Plaintiff did not issue an invoice to Roadworks for the work plaintiff performed on December 12.

On January 17, 1997, plaintiff filed an "Original Contractor's Mechanic's Claim for Lien" against the City and Roadworks to recover the balance of $81,796.20 for the work plaintiff performed in "April, May, and June" 1995. On January 28, defendant received a copy of plaintiff's claim on defendant's bond for the project and requested that plaintiff complete a "Proof of Claim" form and supply other documentation supporting plaintiff's claim. Plaintiff completed the "Proof of Claim," indicating on the form that it last furnished labor, materials, supplies, and services in connection with the claim on December 12, 1996.

On April 8,1997, defendant denied liability for plaintiff's claim, stating that its investigation revealed that plaintiff "completed its original contract work" in June 1995 and that plaintiff's work in December 1996 was "corrective and cosmetic" and did not extend the time that plaintiff was required to make a claim against the "contractor's bond." Because plaintiff had not filed a claim against the bond within 180 days of the completion of its work in June 1995, as required by section 2 of the Bond Act, defendant denied the claim.

On June 12, 1997, plaintiff filed a verified complaint for declaratory judgment, alleging that it provided labor and materials on December 12, 1996, to cure punch list deficiencies "pursuant to its obligations to Roadworks," and that it properly filed a lien 36 days after the "last item of work" pursuant to the Bond Act. The complaint requested that the trial court declare that plaintiff was entitled to coverage under the "Contractor's Performance Bond" and that defendant was obligated to provide coverage for plaintiff's loss pursuant to the terms of the bond.

Defendant filed a section 2-615 motion to dismiss the complaint (735 ILCS 5/2-615 (West 1996)), arguing that plaintiff's case was inappropriate for declaratory relief because (1) plaintiff did not seek a determination of the construction of an ambiguous statute or contract provision, (2) plaintiff only sought the enforcement of a right "after the fact" and not a declaration of present rights, and (3) section 2 of the Bond Act (30 ILCS 550/2 (West 1996)) "provided a specifically enacted and far more appropriate remedy than a declaratory judgment action." The parties entered an agreed order which, among other things, struck the prayer for relief of plaintiff's verified complaint for declaratory judgment, and granted plaintiff leave to file an amended complaint.

Plaintiff filed an amended complaint which contained allegations similar to those in the original complaint but requested judgment in plaintiff's favor in the amount of $81,796.20, plus interest. Defendant filed its answer to the amended complaint, denying all material allegations against it, and, as an affirmative defense, stated that the "corrective" work performed by plaintiff on December 12, 1996, did not extend the time in which plaintiff was required to notify defendant of its claim and that plaintiff's claim was not filed within 180 days.

Thereafter, defendant filed a motion for summary judgment. Although defendant stated that there were no Illinois decisions interpreting the term "last work" in reference to the 180-day "claim notice" requirement in the Bond Act, defendant argued that "last work" should be interpreted in a fashion similar to interpretations of similar terms in the federal Miller Act and the Illinois Mechanics Lien Act. Defendant argued that under those Acts the applicable limitations period to demand payment under the Acts begins on the day that the original work is completed on the project and subsequent "corrective" work is not considered with respect to the limitations period. Defendant contended that the trial court, therefore, should adopt a similar interpretation for the Bond Act by finding that plaintiff's "last work" on the project occurred in June 1995, starting the 180-day limitations period under the Act, and that the "corrective" work performed by plaintiff in December 1996 had no effect on this period.

In response to defendant's summary judgment motion, plaintiff argued that because it had received correspondence from the City indicating that final payment would not be made until all punch list items were completed, the City did not consider "the contract substantially performed." Plaintiff maintained that this created a genuine issue of material fact as to whether it had substantially performed its contract in a workmanlike manner in May 1995, entitling plaintiff to demand payment at that time, or in December 1996, after it had completed the punch list items. Plaintiff also argued that defendant's position was not supported by Illinois law.

The trial court denied defendant's motion for summary judgment. On March 25,1999, Michael Quaranta, plaintiff's owner, gave his deposition. He testified that he entered into a verbal agreement with the owner of Roadworks for the work on the project. Roadworks had agreed to pay plaintiff for the work plaintiff performed at the same rate that Roadworks was to be paid by the City for the same work. Plaintiff was not paid directly by the City, and Roadworks did make an informal partial payment of $70,000 to plaintiff. Quaranta was aware that Roadworks was no longer in business, and Quaranta did not send an invoice to Roadworks for the work performed on December 12, 1996, because contractors are typically not paid for punch list work. Quaranta admitted that the punch list work...