Watson v. Auburn Iron Works, Inc.

• Citation: 23 Ill.App.3d 265,318 N.E.2d 508
• Decision Date: 16 October 1974
• Docket Number: No. 73-110,73-110
• Parties: Hugh WATSON d/b/a Empire Steel and Interstate Erectors, Incorporated, Plaintiffs-Appellees, v. AUBURN IRON WORKS, INCORPORATED, and National Boulevard Bank of Chicago as Trustee under Trust #3399, et al., Defendants-Appellants.
• Court: United States Appellate Court of Illinois

Page 508

318 N.E.2d 508

23 Ill.App.3d 265

Hugh WATSON d/b/a Empire Steel and Interstate Erectors, Incorporated, Plaintiffs-Appellees, v. AUBURN IRON WORKS, INCORPORATED, and National Boulevard Bank

of Chicago as Trustee under Trust #3399, et al.,

Defendants-Appellants.

No. 73-110.

Appellate Court of Illinois, Second District.

Oct. 16, 1974.

Edmund M. Tobin, Rudnick, Wolfe, Snyderman & Foreman, Chicago, for defendants-appellants.

Mirabella, Facktor, Mirabella & Kincaid, Wheaton, for plaintiffs-appellees.

SEIDENFELD, Justice.

The plaintiff, Hugh Watson, d/b/a Empire Steel, sued defendant, Auburn Iron Works (here referred to as Auburn) claiming a mechanic's lien on property known as 'Walnut Creek' in Count I; and seeking a money judgment from numerous other open jobs between the parties in Count II. During the trial, the court allowed the plaintiff to file a third amended complaint adding the general contractor K. M. Knight Construction Co., as a party defendant. Following the trial, the court entered judgment on Count I against Auburn, the general contractor and other parties interested in the property in the amount of $4,027.29 and disallowed a counterclaim which had been filed by Auburn. The court entered judgment on Count II in favor of Watson against Auburn in the amount of $9,187.15. The defendants appeal.

Watson and Auburn had a long standing working relationship prior to this dispute. Auburn would bid the jobs and orally sublet the steel erecting to Watson. In this case, Auburn submitted a bid for nine buildings in the 'Walnut Creek' project. The bid contemplated that Auburn would fabricate the steel and Watson would erect the steel and bar joists. Watson's price quoted to Auburn was on the basis of the original bid for nine buildings.

However, the contract actually entered into by Auburn and K. M. Knight Construction Company, the general contractor, was for steel work for only three buildings at a price of $58,890. Nonetheless Auburn and Watson orally agreed that Watson should do the steel erecting, receiving payment by monthly installments for floors completed. Watson testified that he believed the contract price to be $33,000, plus extras. Anthony Petro, the owner of Auburn, however, set the contract price at approximately $25,000.

Watson began performance on April 7, 1970. He testified to his belief that well after the start of the performance the three buildings were to be only the first phase of the nine building project but that he was thereafter informed that the three buildings were all that were contemplated. Watson continued to do substantial work until June 8, 1971, when further work was suspended pending receipt of payment for work completed. He had received no monthly installments to that date.

Anthony Petro, president of Auburn, testified by contrast that nonpayment was not the main reason why plaintiff walked off the job. He testified that Watson told him that he was tired of the job and wanted out and had complained that the job conditions were not right. Also, that Watson told him that he had been unsuccessful in obtaining the approval of the general contractor and the architect for the performance of extras. At the time of the suspension of work, Watson had completed only 20% of the work with expenditures of $9,898.50.

While Watson was off the job, Auburn hired another erector who worked until plaintiff resumed work on July 22nd, after receiving a partial payment of $2,500. Watson's only other receipts of payment were $1,500 on August 18th and $3,000 on September 2nd.

On September 10th, Auburn was notified by telegram that the erection was not acceptable; and on October 6th, notice was given that the erector's portion of the contract was terminated. Nonetheless, Watson worked until October 7th, when the general contractor dismissed him from work. There was disputed testimony as to the quality of plaintiff's work.

After October 7th, another company was called in to complete the steel erection. The total paid to steel erectors for the job, other than that paid to the plaintiff, amounted to $25,376.

The trial commenced in January of 1972. The general contractor was subpoenaed to testify as a witness and during this portion of the case, defendants moved to dismiss for failure to join the contractor as a party defendant. The motion was denied and at this time plaintiff was allowed to file a third amended complaint and issue summons against the general contractor as a defendant. All defendants were allowed 28 days to plead concerning the amended complaint and the trial was reconvened on April 19, 1972.

As to Count I, defendants contend that plaintiffs had no damages; that the court erred in failing to dismiss the complaint upon defendants' motion for failure to join the general contractor as a party defendant before substantial progress in the trial, and in then proceeding with the trial; that the court erred in denying Auburn's counterclaim based upon its charge that Watson had wrongfully walked off the job; and in allowing the mechanic's lien. The sole issue raised as to Count II is the refusal of the court to detail its verdict which defendants claim cannot be explained on the evidence, and this issue is also raised as to Count I.

Defendants argue that under any legal theory used to measure damages plaintiff may not recover under Count I.

Defendants argue that the proper measure of damages for breach of a construction contract is the difference between the cost of construction and the fair market cost of the agreed construction. (Citing Ross v. Danter Associates, Inc. (1968), 102 Ill.App.2d 354, 370, 242 N.E.2d 330; Bertram v. Bergquist (1910), 153 Ill.App. 43, 45; Schuyler County v. Mo. Bridge Co. (1912), 256 Ill. 348, 352-353, 100 N.E. 239.) However, in each of the cited cases the contractor breached his contract by refusing to perform and the owner was suing. Here, the roles are reversed. The contract was breached by Auburn's nonpayment of monthly installments for work performed as per the contract. Consequently this particular measure of damages relied upon by the defendant is inapplicable.

Defendants claim that the court erred in finding that plaintiff had an excuse to walk off the job and in finding that plaintiff's rights were established as of June 8th rather than at the time of the termination on October 7th when the general contractor forced plaintiff off the job. Additionally, defendants argue that even if plaintiff had an excuse by virtue of Auburn's nonpayment of monthly installments, his resumption of work on July 22nd either operated as a waiver or established the nonpayment as nothing more than an excuse to get out of a bad business deal.

Defendants' contentions are without merit. Auburn's failure to make monthly installments was properly viewed as a material breach establishing plaintiff's rights and entitling him to suspend work until payment was received. (J. J. Brown Co., Inc. v. J. L. Simmons Co., Inc. (1954), 2 Ill.App.2d 132, 143, 118 N.E.2d 781.) The facts reveal that plaintiff received $2,500 prior to resuming work on July 22nd. Subsequent payments were late, with $1,500 being received on August 18th and $3,000 received on September 2nd. Further there was conflicting evidence regarding the character of plaintiff's performance notwithstanding the general contractor's termination of the erection contract on October 6th. Under such circumstances, the resolution of the question of fault, which also disposed of defendant's counterclaim, was a matter properly made by the trier of fact. (Edward Electric Co. v. Metropolitan San. Dist. (1973), 16 Ill.App.3d 521, 526, 306 N.E.2d 733.) The court's finding on this issue is affirmed on the record before us.

Defendants next argue that the measure of damages, even assuming plaintiff was wrongfully prevented from completing the contract, is one which puts the injured party in as good a position as he would have been put by full performance of the contract. (Citing Ryan v. Miller (1893), 52 Ill.App. 191, 194; Restatement of Contracts, section 329, comment (a).) We find neither citation helpful to defendants under the particular circumstances of this case. Similarly, section 333 of the Restatement of Contracts, also cited by defendants, cannot provide the answer standing alone. Section 333 provides in substance that damages for part performance be limited to the contract price less partial payments received; but that the loss to plaintiff must be deducted where performance would have resulted in a loss, with the burden of proof being on defendant to prove that the contract is a losing one. This section must be read in conjunction with section 346 of the Restatement of Contracts which appears specifically designed to govern damages for breach of a construction contract.

Section 346 of the Restatement of Contracts provides in pertinent part:

'(2) For a breach by one who has promised to pay for construction, if it is a partial breach the builder can get judgment for the instalment due, * * *; and if it is a total breach he can get judgment, * * *, for either

(a) the entire contract price and compensation for unavoidable special harm that the defendant had reason to foresee when the contract was made, less instalments already paid and the cost of completion that the builder can reasonably save by not completing the work; or

(b) the amount of his expenditure in part performance of the contract, subject to the limitations stated in sec. 333.'

Here Auburn's failure to make the monthly installments was, in fact, treated by plaintiff as a total breach when plaintiff's men walked off the job on June 8th. Plaintiff's action was proper since it has been held that the failure to make monthly progress payments when due is a material breach of a contract entitling plaintiff to suspend work until the overdue payments were made. J. J. Brown Co., Inc. v. J. L. Simmons Co., Inc., 2 Ill.App.2d 132, 143, 118 N.E.2d 781....