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Schick-johnson Co. v. Malan Const. Co.

MAY 11, 1964.

SCHICK-JOHNSON COMPANY, A CORPORATION, PLAINTIFF-APPELLANT,

v.

MALAN CONSTRUCTION CORP., A CORPORATION, AND CITY OF CHICAGO, A MUNICIPAL CORPORATION, DEFENDANTS-APPELLEES.



Appeal from an Interlocutory Order from the Circuit Court of Cook County; the Hon. CORNELIUS J. HARRINGTON, Judge, presiding. Affirmed.

MR. JUSTICE KLUCZYNSKI DELIVERED THE OPINION OF THE COURT.

This is an appeal from an interlocutory order entered on January 24, 1964 denying plaintiff's petition for an order declaring that plaintiff has prior right to represent a class composed of all other litigants having suits on file against Malan Construction Corporation, and to enjoin the prosecution of such other suits.

Plaintiff also appeals from an order entered February 13, 1964 denying it leave to file a supplement to Count II of plaintiff's amendment to complaint and denying the motion to vacate the previous order.

The original cause was designated a Bill for an Accounting to recover a balance of $7,232.44 allegedly due plaintiff, a subcontractor of defendant Malan, the prime contractor, for work done on the American Airlines hangar and the Terminal Buildings at O'Hare International Airport. It was a suit to enforce a lien under the statute providing for liens on public funds (c 82, § 23, Ill Rev Stats 1961). Plaintiff filed an amendment to the complaint seeking to have itself denominated the representative of all claimants with subcontracts from Malan and having controversies arising from the construction program at O'Hare Airport.

After the issues were drawn, plaintiff petitioned the court for a finding that it had prior right to represent the class and to the institution of proceedings for the benefit of all those whose interests in the subject matter were similar in nature and character to plaintiff's claim. It also prayed for a restraining order against any and all persons, etc., from filing or proceeding with any pending actions or claims or seeking any relief in the subject matter, except through the instant cause. This the court denied. Plaintiff, on February 13, 1964 moved for an order granting it leave to file a supplement to Count II of its amendment to complaint and to vacate the previous order. This the court also denied and the appeal followed.

It is plaintiff's contention that the amendment is a bill in equity to enforce a trust fund for the benefit of the plaintiff and all other beneficiaries of the trust and was in addition, in the nature of a representative action brought in behalf of the plaintiff and all other subcontractors, materialmen and claimants whose interests are substantially similar to those of the plaintiff in and to the trust fund created by the sale or issuance of Chicago-O'Hare International Airport Revenue Bonds, Series 1959, adopted on December 29, 1958 and regulated by the last sentence of sec 23 of the Act regarding liens on public funds.

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 that 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. Any payment so made to the claimant or to the clerk of the court shall be a credit on the contract price to be paid to the contractor. The last sentence thereof provides that: "There shall be no preference between the persons serving such notice, but all shall be paid pro rata in proportion to the amount due under their respective contracts."

The amendment charges wrongful and illegal payments in violation of the terms of the trust from the fund by the city and that the fund is inadequate to satisfy all of the existing and possible claims against it, and prays for a marshalling of the fund by the court for an accounting in a single proceeding in behalf of all claimants, and for an equal distribution under the direction of a court of equity.

Malan's answer asserts that it is not possible to generalize and classify all of its subcontracts and agreements as "substantially the same." That, on the contrary, the numerous subcontracts contain special and individual provisions concerning payment, time of payment, and other pertinent conditions; and each "obviously" relates to the furnishing of different labor and material. Not all agreements were executed on the same general form. Many were on forms or confirmations of purchase orders supplied by the subcontractors themselves. Each contract is an instrument separate unto itself and not capable of identical interpretation or treatment with the others.

The record discloses that when plaintiff made its motion on January 24, 1964 it served notice on the defendants Malan and the city only. When making its motion of February 13, 1964 it had served notice thereof on counsel for "sundry other litigants against the defendant" and on counsel for Malan and the city.

Article Ill, sec 3.01 of the City's Ordinance authorizing the issuance of the Bonds reads as follows:

"Disposition of Proceeds of Bonds. All proceeds received by the city upon the sale of Bonds issued pursuant to the provisions of Sec 2.02 shall be deposited with the depository in trust and credited to a separate fund to be known as `Chicago-O'Hare International Airport Construction Fund.' The moneys in the Construction Fund pending their application as provided in this Ordinance shall be subject to a lien and charge in favor of the holders of the Bonds issued and outstanding under this Ordinance and for the further security of such holders until paid out or transferred as herein provided. . . ." (Italics ours.)

We agree with defendant's contention that the Fund from the Revenue Bonds is not a separate, distinct trust account for the benefit of those performing services in the construction of the public project. Section 3.03 of Article III of the Ordinance specifically states that "The moneys in the Construction Fund pending their application . . . shall be subject to a lien and charge in favor of the holders of the Bonds . . . and for further security of such holders until paid out or transferred. . . ."

To the extent that a trust is created in the funds, it is created by specific Ordinance provision for the bondholders. The rights of subcontractor are otherwise protected by appropriate statutes. The court could not marshall or supervise the disbursement of the funds in the hands ...


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