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Chicago Housing Authority v. U.s.f. & G. Co.

MAY 25, 1964.

CHICAGO HOUSING AUTHORITY, A MUNICIPAL CORPORATION OF ILLINOIS FOR THE USE OF GENERAL BRONZE CORPORATION, A NEW YORK CORPORATION, PLAINTIFF-APPELLEE,

v.

UNITED STATES FIDELITY AND GUARANTY COMPANY, A MARYLAND CORPORATION, DEFENDANT-APPELLANT. CHICAGO HOUSING AUTHORITY, A MUNICIPAL CORPORATION OF ILLINOIS FOR THE USE OF OTIS ELEVATOR COMPANY, A NEW JERSEY CORPORATION, PLAINTIFF-APPELLEE,

v.

UNITED STATES FIDELITY AND GUARANTY COMPANY, A MARYLAND CORPORATION, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County; the Hon. JOSEPH J. DRUCKER, Judge, presiding. Affirmed.

MR. JUSTICE BURMAN DELIVERED THE OPINION OF THE COURT.

Rehearing denied June 12, 1964.

These two appeals while involving different plaintiffs turn upon the same general issues, were heard together at the trial court level and will be decided by one opinion in this court.

The two plaintiffs involved in this case furnished labor and materials to Sumner Sollitt Company, the prime contractor, under its contract with the Chicago Housing Authority for the construction of a public housing project in the City of Chicago known as Clarence Darrow Homes. Both actions were brought in the name of Chicago Housing Authority against Sumner Sollitt as principal and United States Fidelity and Guaranty Company as surety on the contractor's performance and payment bond executed between the parties. In case number 49201, General Bronze Corporation, plaintiff subcontractor, brought action to recover the sum of $26,076.90 for installing windows and screens. In case number 49202, Otis Elevator made claim for $26,544.45 for the installation of elevators. On January 2, 1963, summary judgments were entered in favor of plaintiffs and against Sumner Sollitt Company for the full amount of the respective claims. No appeal was taken by Sollitt. The defendant, United States Fidelity and Guaranty Company, appeals from an order entered on March 1, 1963, denying its motion for judgment on the pleadings, sustaining summary judgments in favor of both plaintiffs and entering judgments against it for the respective claimed amounts.

The defendant's theory is (a) that the performance and payment bond, which is the subject of these actions, is a statutory bond given pursuant to the requirements of §§ 15 and 16 of chapter 29, Illinois Revised Statutes; that the suits were not commenced within six months after the acceptance of the project or work as required by said statute so that the actions are barred; (b) in the alternative that the question as to whether the project or work was accepted, and if so, then when it was accepted, is a genuine issue of fact raised by the pleadings, so that the court erred in entering summary judgment against the defendant.

Section 15 of ch 29 entitled "bond required" provides that any political subdivision of the State (as in this case the Chicago Housing Authority) in making contracts for public work must require the contractor to supply a bond ". . . and such 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 . . ."

Section 16 entitled "Recovery on bond — Notice of claim — Limitation," gives certain persons (including subcontractors) the right to sue on such a bond in the name of the political subdivision entering into the contract and, in part, recites:

Provided, further, that no actions 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 settlements 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; nor shall any action of any kind be brought later than six (6) months after the acceptance by the State or political subdivision thereof of the building project or work. . . .

The Performance and Payment Bond does not contain any time limitations for bringing suit as required under § 16 and in fact the bond makes no reference to the statute whatsoever. We agree with the defendant that the established law in this state is that the provisions of the applicable statute will be read in a statutory bond. In the case of People v. G.H. Cross Co., 361 Ill. 405, 198 N.E. 356, the Illinois Supreme Court said on p 419: "[a] statute requiring a bond constitutes a part of the bond, and it must be assumed that the bond is executed with reference to the provisions of the statute." Also see Davis v. Moore, 1 Ill. App.2d 519, 130 N.E.2d 117.

It is conceded that due to Sumner Sollitt's failure to make payment, United States Fidelity and Guaranty Company was liable to the plaintiffs for payments under the bond. The principal issue is whether the actions brought by the respective plaintiffs were commenced "later than six months after the acceptance by the state or political subdivison thereof of the building project or work." This question leads us to a careful examination of the purpose and effect of §§ 15 and 16 upon the case at bar.

The purpose of §§ 15 and 16 is remedial and these sections are intended to protect subcontractors and materialmen for whom no right of mechanic's lien exists against a public body. Therefore the sections should be read together in order to get the true intent of the legislature. It has also been held that these sections should be construed liberally in order to effectuate their remedial legislative purpose. Board of Education v. Pacific Nat. Fire Ins. Co., 19 Ill. App.2d 290, 153 N.E.2d 498. The statute specifies a six-month period after acceptance by the public body as the time in which suit must be brought. It does not, however, define the term "acceptance." Parties either intentionally or through inadvertence may leave it to the courts after a lawsuit has developed, to determine from the facts of the case when the project was accepted. A wiser decision motivated by a desire to insure certainty of result would be for the parties to determine by contract the manner in which the state or political subdivision will give its acceptance of the project and thus cause the six-month period to run.

Although the performance and payment bond executed between the defendants does not contain any specifications as to how the project was to be accepted, the contract between Sumner Sollitt Company and the Chicago Housing Authority, which was made a part of the bond, does contain a provision which sets out in detail the machinery for "acceptance." Section 61 of the general conditions of the contract is entitled, "Partial Occupancy and Final Acceptance"; the relevant portion thereof is as follows:

"b. As hereinbefore stated, the `Memorandum of Acceptance for Partial Occupancy' shall constitute the final acceptance of the work enumerated therein and the guarantee period shall begin at the time and date of said Memorandum. Upon subsequent final completion of the work, the entire Project shall be inspected by the Representatives of the Chicago Housing Authority and the Contractor and, if then found acceptable, the Chicago Housing Authority will so inform the Contractor in a Memorandum of Final Acceptance. The general guaranty period called for under this Contract shall begin to run at the date and hour stated ...


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