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Consolidated Const. Co. v. Malan Const. Corp.

JULY 17, 1963.




Appeal from the Circuit Court of Cook County; the Hon. THOMAS E. KLUCZYNSKI, Judge, presiding. Affirmed in part, reversed in part and cause remanded with directions.


Rehearing denied July 17, 1963.

June 5, 1963. Supplemental Opinion,

Consolidated Construction Co. was a subcontractor engaged by the defendant, Malan Construction Corp. Malan had an $18,366,000 contract with its co-defendant, the City of Chicago, for the erection of terminal buildings at Chicago-O'Hare International Airport. Consolidated claimed it was not fully paid for work done and material furnished and, after serving a lien upon the City for $1,153,330.16, brought this action in the Circuit Court of Cook County against Malan and the City. The defendants Feldman are described in the complaint as the sole stockholders of Malan; no distinction between them and Malan will be made in this opinion.

Consolidated had previously filed a complaint against the same defendants in the United States District Court for the Northern District of Illinois. That complaint was later amended to eliminate the City as a defendant. The eighteen-count complaint in the United States District Court, as amended, and the eighteen-count complaint in the Circuit Court, are identical as to Malan, but three counts of the Circuit Court complaint include the City as well as Malan. These three counts are 1, 10 and 13.

The City moved to dismiss upon the ground that it was neither a necessary nor a proper party. Malan moved to dismiss on the ground that a prior action was pending against it in the Federal Court. The trial court sustained the City's motion and then, with the City out of the suit, sustained the Malan motion because the action in the Federal Court involved the same parties and the same subject matter.

The principal issue presented is the propriety of the order dismissing the City. There are many reported cases in Illinois of suits by subcontractors against prime contractors in which municipal corporations have been joined as defendants but, as far as we know, this is the first case where the right to do so has been challenged.

The controversy centers around section 23 of the Mechanics' Lien Act (Ill Rev Stats, 1961, c 82, § 23) which is the only section of the Act providing for liens against municipalities. The lien is upon the public funds due a contractor and is not upon the improvement for which the work and materials were furnished. This is in contrast to other sections of the Act where the lien is upon the improvement and the real estate, not upon the money due the contractor from the owner of the property improved. Standard Oil Co. of Indiana v. Vanderboom, 326 Ill. 418, 158 N.E. 151; Alexander Lumber Co. v. City of Farmer City, 272 Ill. 264, 111 N.E. 1012. Because section 23 is specifically directed to liens upon public funds, cases holding that liens cannot be enforced against a municipal corporation (e.g. attorney liens) have no application. Cf. Brazil v. City of Chicago, 315 Ill. App. 436, 43 N.E.2d 212; Marks v. Checker Taxi Co., 21 Ill. App.2d 124, 157 N.E.2d 430.

Section 23 provides, in brief, that: anyone who furnishes material or labor to a contractor who has a contract for public improvements, shall have a lien on the money due such contractor, provided, before payment has been made to the contractor, he notifies the municipality of his claim and within sixty days thereafter files a complaint for an accounting making the contractor a party defendant, and serves a copy of the complaint upon the proper public officials. If this procedure is followed, the municipality shall withhold the amount claimed until the final adjudication of the suit, or if it wishes it may turn over the amount of the claim to the clerk of the court in which the suit is pending. There are like provisions for quasi-municipal corporations, and for the State.

In support of the trial court's order, Malan — whose brief the City adopted and to whom the City deferred in oral argument in this court — argues that it is the public policy to prevent municipalities from being involved in private litigation and that section 23 reflects the legislative intention to exclude them from this particular type of litigation. Malan points out that section 23 states that a complaint for an accounting must be filed against the contractor, and says nothing about suing the municipality; that it states that a copy of the complaint shall be given the municipality and that this provision would be superfluous if it were contemplated that the municipality should be a defendant; that the same procedure is provided for municipal corporations as for the State, and since the State cannot be sued, it was intended that the municipality should not be; that if a lien has been served, the municipality becomes a mere stakeholder whose duty, to disburse the funds in question, is contingent upon the result of the subcontractor's suit against the contractor and therefore no suit against the municipality is necessary because it is to be presumed that public officers will do their duty. Argued also as indicative of the legislative intent is a change made in section 23 by an amendment adopted in 1937. Malan seeks to read into the present statute a prohibition against including the City as a party defendant. It does this by contrasting the statute before and after the 1937 amendment. Prior to 1937 the section provided that "any of the parties interested may institute suit"; the elimination of these words is said to show that the legislature intended the municipality should not be a litigant.

[2-4] These arguments are persuasive as to why a municipality is not a necessary party to a suit of this kind, but they are not persuasive as to why a municipality is not a proper party. First of all, there is no prohibition in our law against suing a municipal corporation and section 23 does not prohibit this by implication. Although the policy of the law is not to involve governmental bodies in private litigation, the party directly affected by a suit of this kind is the contractor and not the municipality. A suit of this nature does not infringe upon the rights of a municipality (Gunther v. O'Brien Bros. Const. Co., 369 Ill. 362, 16 N.E.2d 890) and is of little burden to it. Even this slight burden can be avoided by the municipality depositing the liened funds with the clerk of the court. If a municipality could not be made a defendant, there is little reason for the provision that it may turn the liened funds over to the clerk. The only utility of this provision seems to be that it would relieve the municipal-defendant of a further participation in the suit.

A suit in equity against both the contractor and the municipality has been called "the subcontractor's principal and most common remedy" to enforce his lien (Love, Illinois Mechanics' Liens, 2d Ed, 1950, p 438) and the changes made in the Liens Act in 1937 do not indicate a legislative intent to deprive a subcontractor of this traditional remedy. The elimination of the provision that "any of the parties interested may institute suit," and the present requirement that the subcontractor must bring the action, only places the burden of instituting the suit where it rightly belongs: upon the claimant. Another provision was also eliminated in 1937. Prior to 1937 the statute placed an affirmative duty upon the municipal official who was notified of the lien not only to withhold sufficient money to pay the claim but "to pay the amount so determined to be due such claimant." The deletion of this latter provision emphasizes the need to preserve the subcontractor's privilege of including the municipality in his suit.

Both the subcontractor and the municipality profit from this inclusion; the contractor suffers no harm. The subcontractor has no recourse against a municipality except through section 23. Liens cannot be enforced against public buildings, improvements or property, as public policy forbids execution upon such property. The municipality benefits by avoiding a multiplicity of suits and by the right to settle in one suit many difficulties that could arise as a result of a lien, such as: (a) if the contractor has already been paid; (b) if less money remains to be paid him than the subcontractor claims; (c) if there is a dispute over the amount that the municipality owes the contractor because of a default on his part, incompletion of his work, or because of the municipality's right to reserve payment in order to guarantee faithful performance of his work; (d) if the contractor has assigned part or all the money due him and if the rights of assignees are involved; (e) if the lien would compel the city to pay more than the contract price; or (f) if other liens are filed and a pro rata division with court approval is advisable.

Joinder of defendants is controlled by section 24 of the Civil Practice Act. (Ill Rev Stats, 1961, c 110, § 24(1), (2).) Parties may be joined when it is necessary that they be in the case for the complete determination or settlement of any question involved, and parties may be joined who are "alleged to have or claim an interest in the controversy, or in any part thereof" or "against whom a liability is asserted either jointly, severally or in the alternative arising out of the same transaction or series of transactions, regardless of the number of causes of action joined. It is not necessary that each defendant be interested as to all the relief prayed for, or as to every cause of action included in any proceeding against him." As in the joinder of plaintiffs, the objective is economy of actions and trial convenience. City of Nokomis v. Sullivan, 14 Ill.2d 417, 153 N.E.2d 48. Certainly the scope of section 24 is wide enough to include joining the City in the present action. To ...

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