Otto Baum Co. v. Sud Family Ltd.
| Decision Date | 25 February 2016 |
| Docket Number | Appeal No. 3-14-0821 |
| Citation | 2016 IL App (3d) 140821 -U |
| Parties | OTTO BAUM COMPANY, INC., an Illinois Corporation, Plaintiff-Appellee, v. SUD FAMILY LIMITED PARTNERSHIP, a Wisconsin Limited Partnership, GIAN C. SUD, individually, doing business as SUD Family Limited Partnership, and NANCY A. SUD, individually, doing business as SUD Family Limited Partnership, Defendants-Appellants, and METHODIST SERVICES, INC., an Illinois not for profit corporation, UNKNOWN OWNERS and UNKNOWN NECESSARY PARTIES, Defendants. OTTO BAUM COMPANY, INC., an Illinois Corporation, Plaintiff-Appellee, v. SUD FAMILY LIMITED PARTNERSHIP, a Wisconsin Limited Partnership, SUD'S OF PEORIA, INC., an Illinois corporation, Defendants-Appellants, and COMMERCE BANK NATIONAL ASSOCIATION, a national banking association, Defendant-Appellee, and METHODIST SERVICES, INC., an Illinois not for profit corporation, REGIONS BANK, an Alabama banking corporation, BUSEY BANK, an Illinois banking corporation, PEORIA MOB OWNERS, LLC, a Delaware limited liability company, THE DASCO COMPANIES, LLC, a Florida corporation, THE METHODIST MEDICAL CENTER OF ILLINOIS, an Illinois not for profit corporation, METHODIST HEALTH SERVICES CORPORATION, an Illinois not for profit corporation, FARNSWORTH GROUP, INC., an Illinois corporation, P.J. HOERR, INC, an Illinois corporation, CITY OF PEORIA, UNKNOWN OWNERS and UNKNOWN NECESSARY PARTIES, Defendants. |
| Court | United States Appellate Court of Illinois |
NOTICE: This order was filed under Supreme Court Rule 23 and may not be cited as precedent by any party except in the limited circumstances allowed under Rule 23(e)(1).
Appeal from the Circuit Court of the 10th Judicial Circuit, Peoria County, Illinois,
Circuit Nos. 09-CH-310 & 09-CH-311
Honorable Michael P. McCuskey, Judge, Presiding.
¶ 1 Held: A judgment in favor of a contractor in a breach of contract action, and foreclosing on mechanics liens, was upheld on appeal because the facts supported the trial court's conclusion that the contractor acted pursuant to oral contracts that were authorized by the owner through its agent. The facts alleged in the pleadings sufficiently stated the agency relationship and the oral contracts, the terms of which were reflected in unsigned written contracts. A bank that purchased one of the owner's lots was entitled to damages in the amount necessary to defend against the contractor's claims and to satisfy the lien, but was not entitled to keep the property and be reimbursed for the purchase price.
¶ 2 The defendants, the Sud Family Limited Partnership (SFLP), Sud's of Peoria, Inc., Gian Sud, and Nancy Sud (collectively, the Sud defendants), appealed from judgments entered in favor of the plaintiff, Otto Baum Company, Inc. (Otto), foreclosing two mechanics liens and finding breaches of oral contracts, denying SFLP's counterclaims, and entering judgment in favor of the defendant, Commerce Bank.
¶ 4 SFLP was a limited partnership that owned and leased commercial real estate. In 2004, SFLP purchased 40 acres of land in Peoria to build an automobile dealership, which was to be built primarily on one (Lot 3) of the five lots, on approximately eight acres. A general contractor, Core Construction of Illinois (Core), was to construct the automobile dealership. The written contract between Core and SFLP was a $7,833,900 design-build contract, which was fully paid by SFLP. However, after Core was fully paid, SFLP continued to receive invoices forwork done by Otto, who had done the excavating work on the property. SFLP contends that this work was paid for under the Core contract.
¶ 5 Otto filed two lawsuits against SFLP, and other defendants, which were consolidated for trial. The first lawsuit (09-CH-310) involves construction work performed by Otto on Lot 5 of the property, which the parties refer to as the Sud Plaza subdivision. The First Amended Complaint alleged claims to foreclose the mechanics lien, breach of contract, unjust enrichment, and quantum meruit (Lot 5 complaint). Otto sought $254,589.00, plus interest and attorney's fees, for the preparation of Lot 5. The second lawsuit (09-CH-311) involved the construction of the roadway and contained the same claims (roadway complaint). Otto alleged that it had constructed 1,000 feet of roadway, and sought $225,896.78, plus interest and attorney's fees. Commerce Bank was also named as a defendant. SFLP filed counterclaims against Otto for slander of title and to quiet title.
¶ 6 The evidence at trial established that SFLP purchased 40 acres of property at the intersection of Illinois Route 6 and Allen Road in Peoria pursuant to a warranty deed dated June 25, 2004. Gian Sud testified that he had a doctorate in biomedical sciences and was a professor before he purchased his first car dealership. Dr. Sud and his wife, Nancy Sud, were the general partners of SFLP, which was a limited partnership. Dr. Sud was also the president of Sud's of Peoria, Inc., which was an Illinois corporation. Dr. Sud testified that he began working with Clark Engineering, which later became STS, in late 2004 to work on ingress and egress to the property. Dr. Sud testified that he wanted to build his car dealership on the 40 acres and sell the rest of the property. Dr. Sud could not recall when he was introduced to Core, but he testified that he met with Core in April or May of 2006, and Core made a verbal presentation regarding the dealership project. Dr. Sud testified that he told Core that he needed a turnkey operation,which Dr. Sud testified that he believed would include the dealership and the road. Dr. Sud testified that he hired Lee Austin of STS through Core, and Otto was hired through Core.
¶ 7 In an agreement dated April 25, 2006, the owner of the property, which was listed as Suds of Peoria Inc., and the contractor, Otto, agreed to what the parties refer to as the rough grading contract for a total of $366, 230.00. This contract covered the dirt work that was necessary to prepare lots 1, 2, and 3 for the car dealership. The agreement was signed by Dr. Sud and Tom Reuter, a project manager at Otto, although Austin testified that Dr. Sud did not actually sign the contract until November 2006, when the work was mostly complete. STS was identified as the architect and owner's representative. According to Reuter, STS directed Otto to have all communications addressed to STS as the owner's representative. Reuter testified that the architect engineer was the owner's representative on most of his jobs. There was one change order associated with the rough grading project, for $4,264, which was signed by Reuter for Otto, Don Hemphill for STS, and Gian Sud for SFLP. Hemphill was an engineer for STS, and he testified that he was the project manager for the Sud development while Austin, also an engineer at STS, was the project director. By email dated August 30, 2006, Hemphill directed Otto to submit pay requests to STS rather than directly to the owner. Otto fully performed this contract and was fully paid as of February 6, 2007. According to Reuter, he told STS that Otto needed to be fully paid on the rough grading contract before it would start on the roadway.
¶ 8 In June 2006, Austin wrote a letter to Dr. Sud detailing the costs of construction to develop the property. The attached document detailed a summary of costs, totaling $2,226,000.00, but did not reference the construction of the dealership. Austin testified that he discussed it with Dr. Sud.
¶ 9 On September 19, 2006, SFLP entered into a contract with Core to build the car dealership for the total contract price of $7,833,900. The owner was typewritten on the agreement as Sud's of Peoria, Inc., but a correction initialed by Dr. Sud listed SFLP as the owner. The agreement referenced documents that were used to prepare the proposal, including civil engineering drawings prepared by STS dated April 17, 2006. The agreement specified all the things that it included, but specifically did not include subdivision work and site access. Also, the agreement provided that the site preparation was to be completed under a separate contract.
¶ 10 Around the same time that SFLP entered into contract with Core, STS prepared roadway project plans for SFLP that were sent out to solicit bids from contractors. There were a number of emails dated between the dates of October 5-18, 2006, among STS and the various contractors regarding the bidding process. Three contractors, including Otto, submitted bids. Austin testified that the bids were submitted to Dr. Sud, Austin recommended the lowest bid, and Dr. Sud agreed to the recommendation. On November 3, 2006, Reuter was informed by Hemphill at STS that Otto was awarded the roadway contract and Reuter was directed to prepare the contract. Reuter testified that he prepared the contract as directed, copying and pasting from the prior rough grading contract, dated November 9, 2006, for the amount of $374,619.37, and signed it and sent it to STS. Austin, by transmittal letter dated November 28, 2006, sent two copies of the contract to Gian Sud. Dr. Sud testified that he never received the proposed contract, and there is no copy of the contract signed by anyone at SFLP. Austin testified that he could not specifically remember a follow-up conversation with Dr. Sud regarding the November 9, 2006, contract, but stated that he likely did. However, Austin testified that although he did not have the authority to order work, he had verbal authority from Dr. Sud or someone at SFLP to authorize or approvethe work by Otto under this contract. Dr. Sud testified that he was aware that Otto was going to construct the road, but testified that he believed that it was being done under the Core contract.
¶ 11 Austin testified that, after the roadway contract was signed by Reuter and sent to SFLP, Austin conducted a preconstruction meeting. Austin testified that...
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