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Board of Education v. Pacific Nat. Fire Ins.

OCTOBER 21, 1958.

BOARD OF EDUCATION, NORTHFIELD TOWNSHIP HIGH SCHOOL, DISTRICT NO. 225, COOK COUNTY, ILLINOIS, FOR USE OF SAMUEL S. PALUMBO, D/B/A PALUMBO EXCAVATING CO., AND SAMUEL S. PALUMBO, D/B/A PALUMBO EXCAVATING CO., APPELLANTS,

v.

PACIFIC NATIONAL FIRE INSURANCE COMPANY, A CALIFORNIA CORPORATION, AND UNITED PACIFIC INSURANCE COMPANY, A WASHINGTON CORPORATION, AND JACOBSON BROS. CO., AN ILLINOIS CORPORATION, APPELLEES.



Appeal from the Circuit Court of Cook county; the Hon. HARRY M. FISHER, Judge, presiding. Reversed and remanded.

JUSTICE MURPHY DELIVERED THE OPINION OF THE COURT. Rehearing denied November 13, 1958.

This is an action at law by a subcontractor seeking payment of a balance due him for excavating services in the construction of a public high school. Plaintiff appealed from an adverse summary judgment direct to the Illinois Supreme Court, contending that the validity of a statute was involved, but the Supreme Court transferred the case to this court on defendants' motion. Therefore, the constitutionality of the statute involved is not before this court and will not be discussed. Kowalczyk v. Swift & Co., 317 Ill. 312 (1925); People v. Stump, 269 Ill. App. 182, 184 (1933).

Defendant Jacobson Bros. Co., a corporation, contracted with the Board of Education, Northfield Township High School District #225, Cook County, Illinois, as general contractors, to build a public high school. They engaged plaintiff, Samuel S. Palumbo, to do the excavating work and, going bankrupt, failed to pay him a balance of $5,332. Pursuant to statute (Ill. Rev. Stat. 1951, ch. 29, pars. 15 and 16) the general contractor delivered to the Board of Education a payment bond, with sureties thereon, dated May 27, 1952, conditioned upon the prompt payment by the general contractor to all persons supplying labor and material for use in the prosecution of the work provided for in its contract with the Board of Education. The sureties are the defendant insurance companies.

Palumbo served a verified notice of his claim upon the Board of Education and contends that the instant action and notice are in compliance with chapter 29, and that in the alternate, the bond is a common law obligation and the statutory requirements do not apply.

Defendant surety companies deny liability and claim that the surety bond, on which suit is brought, is governed by the provisions of paragraphs 15 and 16 of chapter 29, and that the action is barred by the provisions of section 16, because Palumbo failed to serve any verified notice of his claim upon the Board of Education within 180 days after he last furnished labor or materials to the job. Written interrogatories established that Palumbo did not perform any labor or furnish materials to the job after January 15, 1954, and filed a verified notice of claim with the Board of Education more than 180 days thereafter. The trial court entered a summary judgment for the defendant surety companies, after considering the pleadings and the interrogatory answers.

Paragraphs 15 and 16 of chapter 29 were enacted in 1931. Paragraph 15, as originally enacted, set forth the provisions of a bond required by a public body of a general contractor in making contracts for public work of any kind, and said:

The bond "shall be conditioned for the payment of material used in such work and for all labor performed in such work, whether by subcontractor or otherwise."

By amendment in 1941, the following was added to paragraph 15:

"Each such bond shall be deemed to contain the following provisions whether such provisions be inserted in such bond or not:

"`The principal and sureties on this bond agree to pay all persons, firms and corporations having contracts with the principal or with subcontractors, all just claims due them under the provisions of such contracts for labor performed or materials furnished, in the performance of the contract on account of which this bond is given, when such claims are not satisfied out of the contract price of the contract on account of which this bond is given, after final settlement between the officer, board, commission or agent of the State or of any political subdivision thereof and the principal has been made.'"

Paragraph 16 provides that every person furnishing material or performing labor as a subcontractor, with any political subdivision of the State, where a bond has been executed as provided in the Act, shall have a right to sue thereon in the name of the political subdivision entering into the public work contract, for his own use and benefit, "Provided, however, that any person having a claim for labor, and material as aforesaid shall have no such right of action unless he shall have filed a verified notice of said claim with the officer, board, bureau or department awarding the contract, within 180 days after the date of the last item of work or the furnishing of the last item of materials." (Italics ours.)

Paragraph 16 also provides that the claim shall be verified, shall contain the name and address of the claimant, his or its business address, the name of the contractor, the amount of the claim, and a description of the public improvement sufficient for identification. Another procedural requirement is that "no action shall be brought until the expiration of one hundred and twenty (120) days after the date of the last item of work or the furnishing of the last item of materials, except in cases where the final settlement between the officer, board, bureau or department of municipal corporation and the contractor shall have been made prior to the expiration of the one hundred and twenty (120) day period, in which case action may be taken immediately following such final settlement."

The bond on which plaintiff brought his suit is a statutory bond, and his suit is governed by the statute (Board of Education Decatur School Dist. No. 61, Macon County, Ill. v. Swam, 5 Ill. App.2d 124, 128 (1955)), and he has no common law right as a third party beneficiary to recover on the principal contractor's bond executed by the sureties in ...


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