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State Toll Highway Comm. v. Boyle & Co.

OCTOBER 24, 1962.

THE ILLINOIS STATE TOLL HIGHWAY COMMISSION, EX REL. PATTEN TRACTOR & EQUIPMENT CO., PLAINTIFF-APPELLANT,

v.

M.J. BOYLE & COMPANY AND RYAN CONSTRUCTION CO., INC., W.M. WYANT CO., INC., THE FIDELITY AND CASUALTY COMPANY OF NEW YORK, AND FIDELITY AND DEPOSIT COMPANY OF MARYLAND, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. THOMAS E. KLUCZYNSKI, Judge, presiding. Reversed and remanded.

MR. JUSTICE MCCORMICK DELIVERED THE OPINION OF THE COURT.

The Circuit Court of Cook County sustained defendants' motions to dismiss the second amended complaint filed by the plaintiff and dismissed the suit. From that order this appeal is taken.

From the record it appears in substance that two corporations, M.J. Boyle & Company and Ryan Construction Co., Inc. (hereinafter referred to as "Boyle" and "Ryan"), entered into a contract with the Illinois State Toll Highway Commission whereby Boyle and Ryan agreed to act as general contractors for the construction of certain public highways. Boyle and Ryan then entered into a contract with another corporation, W.M. Wyant Co., Inc. (hereinafter referred to as "Wyant"), whereby the latter was to act as a subcontractor in this highway construction project. In compliance with paragraph 15, chapter 29, Illinois Revised Statutes, Boyle and Ryan furnished a payment bond to the Illinois State Toll Highway Commission wherein they were named as principals and The Fidelity and Casualty Company of New York and Fidelity and Deposit Company of Maryland were named as sureties. During the fall of 1957 Wyant purchased various items of road construction machinery on conditional sales contract from Patten Tractor & Equipment Co. (hereinafter referred to as plaintiff). Wyant defaulted in its payments on these contracts and the plaintiff repossessed the machinery. Subsequently Wyant was declared bankrupt. The plaintiff instituted this action on the payment bond seeking to recover damages caused by Wyant's breach of contract. The court dismissed the plaintiff's second amended complaint and dismissed the suit, deciding as a matter of law that the plaintiff has failed to state a cause of action.

The defendants' motion alleged as one of the grounds for dismissal that the court did not have jurisdiction because the plaintiff had failed to comply with the time provisions of paragraph 16, chapter 29, Illinois Revised Statutes. This assertion was supported by affidavit. The plaintiff filed a counteraffidavit in which it asserted facts which were sufficient to show that there was compliance with the section. Nowhere in the record does it appear that the court resolved this issue, but the defendants have not presented this question to us for a determination and it will not be considered.

The plaintiff's second amended complaint consisted of three counts. During oral argument counsel for plaintiff suggested that counts two and three are alternative counts for relief which are only to be considered if we determine that count one does not state a cause of action.

Count one, after alleging that Boyle and Ryan had entered into a contract with the Illinois State Toll Highway Commission for the construction of certain roadways and structures, referred to in the pleadings as "Section T-7A Contract," under which they agreed to build and construct certain highways and agreed to furnish a payment bond to secure the payment of "all sums of money due for any labor, materials, apparatus, fixtures or machinery and transportation with respect thereto," further alleged that such a bond was furnished with sureties; that Boyle and Ryan subsequently entered into a subcontractor's contract with Wyant; and that plaintiff, in reliance upon the principal contract, the payment bond, and the subcontractor's contract furnished certain machinery to the defendant Wyant. It is further alleged that the machinery, labor and material furnished were specifically for use in the construction contract and were so used, and that the said machinery was such that its normal life for the use for which it was designed would be practically consumed by its use in and about the performance of the contract. All necessary allegations of demands for payment, Wyant's default and compliance with paragraph 16 of chapter 29 were included in this count.

The bond sued on was given in compliance with paragraph 15 of chapter 29, Illinois Revised Statutes. That section provides that any person making a contract for a public work to be performed for the State or a political subdivision thereof, shall be required to give bond with sureties, which bond, "among other conditions, 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." The principals in the bond given in this case were Boyle and Ryan, and the sureties were The Fidelity and Casualty Company of New York and Fidelity and Deposit Company of Maryland. After stating the substance of the contract between the principals and the Illinois Toll Highway Commission the bond provided that the principals pay not less than the prevailing wages for the work to be performed in accordance with such contract and also pay "all sums of money due for any labor, materials, apparatus, fixtures or machinery, and transportation with respect thereto, furnished to such Principals for the purpose of performing such work in accordance with the provisions of the contract and any and all duly authorized additions, alterations, cancellations and deductions which may be hereafter made pursuant to said contract. . . ." There is a further provision in the bond that the sureties have "agreed that this bond shall inure to the benefit of any person, firm, company or corporation to whom any money may be due from the Principals, any subcontractor, or other person for any such labor, materials, apparatus, fixtures or machinery, and transportation with respect thereto, so furnished and that suit may be maintained on such bond by any such person, firm, company or corporation for the recovery of any such money." The defeasance clause provided that if the principals should pay the prevailing wages and all moneys due or to become due in accordance with the contract as previously recited in the bond, then the obligation would be void.

Paragraph 15 of chapter 29 further provides that every bond given under such paragraph shall be deemed to contain the following provision whether it was inserted in the 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. . . ."

In Board of Education v. Pacific Nat. Fire Ins. Co., 19 Ill. App.2d 290, 153 N.E.2d 498, the court held that paragraphs 15 and 16 of the statute are remedial and were intended to protect subcontractors and materialmen for whom no right of mechanic's lien exists against a public work.

The bond in the case before us goes much further than the statute requires, and it provides that prevailing wages for the work to be performed in accordance with the contract must be paid, together with money due not only for labor and material as required in the statute but also for apparatus, fixtures or machinery, and transportation with respect thereto, which are furnished for the purpose of performing such work. The question is whether, when a performance bond such as the one in this case is given, which goes far beyond the statutory provisions, recovery can be had against the principals and sureties in a suit on such bond. We have been unable to find any cases in Illinois which specifically pass upon this question.

In Board of Education v. Aetna Indemnity Co., 159 Ill. App. 319, the board of education engaged a contractor to work on a school building and took a bond from him, with the defendant as surety, which bond was conditioned to secure payment for labor or material furnished to such contractor. On default suit was brought on the bond. There was no statutory requirement for such a bond. The court held that the action was clearly within the condition of the bond and that to hold the bond in question valid would only be to compel the obligors to do the thing which they bound themselves to do. The court distinguishes its case from the cases of Spalding Lumber Co. v. Brown, 171 Ill. 487, 49 N.E. 725, and Searles v. City of Flora, 225 Ill. 167, 80 N.E. 98, since in those cases the bonds contained no conditions that the obligors should pay for the labor or material furnished the contractors. In Chaffin v. Nichols, 211 Ill. App. 109, Nichols & Brown, defendants, agreed with the City of Flora to construct and build sewers. They were required under the statute to give a bond for the protection of the city and for those furnishing labor and material in such construction. They gave such a bond with defendant Globe Surety Company as surety. The bond provided that the obligors are held and bound to the City of Flora and "to all persons who may become entitled to liens under the contract hereinafter mentioned." The bond also provided that Nichols & Brown should pay and discharge all indebtedness that may be incurred by them in carrying out the sewer contract and complete the same free from all liens. The bond further provided that it was made for the use and benefit of "all persons who may become entitled to liens under the said contract, under the provisions of the laws of the State of Illinois, and that this bond may be sued upon the same as if to them in proper person." After the execution of the contract and bond Nichols & Brown completed the contract and the sewer was accepted by the City of Flora. During the construction of the sewer Nichols & Brown were unable to meet payments for labor and material and instead issued due bills which were purchased by the plaintiff from those who had furnished the labor and material. The suit was brought by the plaintiff upon the bond to recover the balance due him upon the said liens. The defendants urged that the action should have been brought in the name of the City of Flora and that the plaintiff had no right of action in his own name. The court said that the bond provided that it should extend to all persons who may become entitled to liens under the contract, and held that suit may be brought by them. The court says:

"Here is an express provision giving to each and every person entitled to a lien the right to bring an action upon this bond. This was sufficient to establish a contractual relation between persons entitled to liens and the obligors in the bond and there was by reason thereof a privity of parties. This provision is not contrary to any law and is not void on account of public policy, and we can see no reason why it should not be enforced. . . .

"Upon principle we can see no reason why a right of action should not accrue by contract, not contrary to law or public ...


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