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South Beloit Elec. Co. v. Lar Gar Enterprises

MARCH 8, 1967.

SOUTH BELOIT ELECTRIC COMPANY, INC., AN ILLINOIS CORPORATION, PLAINTIFF-APPELLEE,

v.

LAR GAR ENTERPRISES, INC., LA SALLE NATIONAL BANK, A NATIONAL BANKING ASSOCIATION, OF CHICAGO, ILLINOIS, ITS SUCCESSOR OR SUCCESSORS, AS TRUSTEE, UNDER THE PROVISIONS OF A TRUST AGREEMENT DATED AUGUST 28, 1962, KNOWN AS TRUST NO. 29937, JOEL ROBERT HILLMAN, SALK, WARD & SALK, A CORPORATION, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of the Seventeenth Judicial Circuit of Winnebago County; the Hon. FRED J. KULLBERG, Judge, presiding. Reversed and remanded.

MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT.

This is an appeal from a Mechanic's Lien decree for $19,596 plus interest and costs. The decree further entered a money judgment in the same amount.

The plaintiff, South Beloit Electrical Co., Inc., as subcontractor, entered into a preliminary subcontract with defendant, Lar Gar Enterprises, Inc., as general contractor, under a letter agreement dated August 30, 1962, for electrical work on an apartment building being erected in Rockford, Illinois. The original contract price was $89,085, but this was shortly thereafter increased by $4,700 to cover the contemplated services of Malko Electric Co. in supervising the work to be done under the subcontract. The formal subcontract agreement was then executed, showing the price to be $93,785, and the plaintiff commenced work thereunder.

In October of 1962, plaintiff made its first request for payment, submitting a lien waiver and contractor's affidavit. This request was for $4,230, being precisely the amount contemplated for the services of Malko Electric Co., after deducting the ten percent which was to be retained on all partial disbursements. These documents were submitted to Lar Gar who in turn submitted them to the defendant, Salk, Ward & Salk, Inc., the construction lender. Payment of the $4,230 was never received by the plaintiff. It is apparent from the testimony of all parties that Malko Electric Co. did no work whatsoever on the job. However, at monthly intervals thereafter, the plaintiff submitted five additional sworn statements, each clearly showing that the initial request of $4,230 had been received by it.

On March 6, 1963, the plaintiff submitted its final sworn statement, requesting payment of $17,419, and filed its waiver of lien therefor. As with its previous sworn statements, this one, too, showed the initial request of $4,230 as having been received by the plaintiff. The entire amount of $17,419 was paid to plaintiff on March 19, 1963, and on the same date, without notice to anyone, the plaintiff abandoned the job. The plaintiff's president testified that the sole reason for leaving the job was the failure to receive the $4,230.

The amended complaint alleged that plaintiff was entitled to $19,596, consisting of the initially requested amount of $4,230, labor and materials supplied from February 28th through March 19, 1963, in the amount of $11,223, and the ten percent retainages of $4,130. The plaintiff prayed for an accounting, and sought to enforce a mechanic's lien for any amounts which the court might find due it from any of the defendants. The answer and amended answer of the defendants pleaded as affirmative defenses that the plaintiff breached its subcontract by abandoning performance thereunder without just cause on March 19, 1963, and that the plaintiff waived and released any lien it might otherwise have had by the execution of its full waiver of lien submitted on March 6, 1963. The amended answer also denied that notice of subcontractor's lien was properly served.

The court entered judgment against all of the defendants for $19,596, decreed the mechanic's lien, as prayed for in the amended complaint, and ordered a sale of the real estate involved if the judgment were not satisfied within thirty days.

The essential grounds urged for reversal are that no monies are due the plaintiff, that plaintiff itself materially breached the subcontract by wrongfully abandoning the job, that any lien rights which the plaintiff might otherwise have had were waived and released, and that the plaintiff did not serve its notice of subcontractor's lien in accordance with the law.

We first consider the items constituting the $19,596 for which the plaintiff brought suit and for which the court below entered judgment.

1. The $4,230 initially requested but never received by the plaintiff. Without question, this amount ($4,700 less ten percent retainage) requested by the plaintiff was that which the parties agreed would cover the expense of the contemplated supervisory services to be furnished by Malko Electric Co. This was precisely the amount of Malko's proposal for these services and it was precisely the amount by which the subcontract was increased for the purpose of providing the plaintiff with the extra funds with which to pay Malko. The testimony of the plaintiff's president himself established these facts. It was obviously never intended by any of the parties that this amount was for the ultimate benefit of the plaintiff.

Parenthetically, plaintiff's affidavit accompanying this request originally included certain services in addition to those of Malko. However, there were several penciled deletions and additions on the face of this statement, and while all of the labor and material listed added up to only $4,200, the figures of $4,230 and $4,700 were also written thereon. Moreover, all subsequent sworn statements of the plaintiff reflect the initial request as being for $4,230 (or $4,700 less ten percent) — and not for $4,200. In addition, a letter written by the plaintiff to the general contractor, as well as plaintiff's amended complaint, alleges that the initial payment due it was $4,230. This figure, penciled in plaintiff's original affidavit and appearing in all subsequent documents, could not possibly apply to the services of anyone other than Malko.

We come, then, to the question of whether the plaintiff was actually entitled to this payment which was to provide the funds for the contemplated supervisory services of Malko. It was agreed by all witnesses who testified on the subject, including the plaintiff's president, that Malko never had a representative on the job and rendered no services at all. It is therefore clear, from all the evidence before us, that Malko was entitled to no money whatsoever, and that receipt of this payment by the plaintiff would have constituted a windfall, for which the plaintiff had not bargained. The testimony of the plaintiff's president on the subject is inconsistent with its present demand for this payment:

"Q. And included in that price you were to get for doing the work was ...


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