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Metropolitan San. Dist. v. Pontarelli & Sons

SEPTEMBER 8, 1972.




APPEAL from the Circuit Court of Cook County; the Hon. ALBERT E. HALLETT, Judge, presiding. PER CURIAM:

Plaintiff, in this appeal from an order granting defendants *fn1 summary judgment, contends that the motion was erroneously granted.

All counts of the amended complaint related to a contract between plaintiff and Anthony Pontarelli and Sons, Inc. (hereinafter referred to as Pontarelli) for the construction of a sewer. The substance of those counts is as follows: Count I alleged that Pontarelli and Burton Scheidt, plaintiff's Chief Engineer, through fraud and deceit, induced plaintiff to pay Pontarelli $2,965,042.89 to which Pontarelli was not entitled; Count II alleged that when Pontarelli entered into the contract, it falsely and fraudulently represented that it would do all of the work required by the contract, but Pontarelli never intended to abide by the contract terms; Count III alleged a combination and conspiracy on the part of Pontarelli and Scheidt to defraud plaintiff; Count IV alleged that Pontarelli wrongfully obtained $1,114,125.13 in payment for extra work which was not authorized by the Board of Trustees as required by the contract and that Pontarelli refused to repay that amount as required by the contract; Count V alleged a cause of action for breach of express and implied warranties; Count VI alleged a cause of action for breach of contract; Count VII alleged a cause of action for negligence; Count VIII alleged a cause of action for unjust enrichment; and Count IX, as amended, alleged a cause of action against Fidelity and Deposit Company of Maryland (hereinafter referred to as Fidelity) as surety on Pontarelli's performance bond.

No answers to this complaint were filed, but all defendants filed separate motions for summary judgment which were supported by affidavits and other documents. Plaintiff then filed counter-affidavits and documents.

Generally, Pontarelli contended that the complaint was conclusory. Specifically, as to Count I, Pontarelli alleged that the allegations were insufficient to state a cause of action against it; that because plaintiff had knowledge imputed to it through Scheidt of the actual facts, there could have been no reliance upon the representations of Pontarelli or Scheidt, and that plaintiff was estopped by its inspection of the construction to deny proper performance of the contract. As to Count II Pontarelli contended, inter alia, that because the charges did not relate to existing or past facts, no cause of action was alleged. As to Count III Pontarelli contended that the complaint did not allege an essential element of a cause of action for conspiracy i.e., damages, and again raised the defense of imputed knowledge. With reference to Count IV Pontarelli contended that the authorization of the final payment for extras ratified all extra payments and plaintiff was thereby estopped from denying performance; that Scheidt's approval of the work was a complete defense under the contract, and the requirement of Board approval of extra work was obviated by the contract. With reference to Counts V, VI and VII, Pontarelli again raised the defense of imputed knowledge and estoppel and contended further that Scheidt's approval of the work was binding upon plaintiff. Also, as to Count VIII Pontarelli raised the defense of imputed knowledge. With respect to Count IV Pontarelli contended that because no cause of action was properly pleaded against it, no cause of action was pleaded against Fidelity.

In Scheidt's motion for summary judgment as to Count I he contended in substance that plaintiff had imputed knowledge and therefore could not have relied upon any false representations; that plaintiff was estopped from claiming damages; and that plaintiff did not plead a good cause of action. As to Count III, Scheidt contended that because of the knowledge imputed to it, plaintiff would not have been damaged as a result of Scheidt's representations, that plaintiff was estopped from claiming damages, and plaintiff had not pleaded a good cause of action. Scheidt contended that both counts were conclusory and that no genuine issue of material fact existed. The motion did not expressly treat the remaining counts of the amended complaint as Scheidt merely stated that they did not seek relief against him.

Fidelity, in its motion for summary judgment on Count IV as amended, expressly relied upon Pontarelli's motion. Fidelity went on to contend that plaintiff's approval of the final payment constituted an acceptance of Pontarelli's performance thereby releasing Fidelity of its obligation and liability.

The gist of the affidavits filed by plaintiff is set out below.

The sewer was not constructed in accordance with the terms of the contract. The sewer was improper, faulty and unworkmanlike in the following respects: it is out of alignment; it has a rough grade (in some places the grade varied 20 to 30 inches within a very short distance) and sharp breaks, its concrete bed is unstable, and, in part, the sewer settled more than eight feet. One affidavit stated that, instead of concrete as called for in the contract, a twelve inch stone bed was laid under the sewer. The contract required 330,000 pounds of reinforcement steel; only 113,097 pounds were delivered to the jobsite, but plaintiff was billed for 412,758 pounds, the difference in value amounting to $33,000. Plaintiff was also billed for 8146 cubic yards of encasement concrete but only 7465 cubic yards were installed, a difference in value of $10,400. The location and distribution of reinforcement steel and concrete covering for the sewer pipe was not as required by the contract. An insufficient quality of material was used in the sewer's construction, the concrete top to the sewer was improperly placed. Extremely poor construction procedures resulted in a deficiency of the encasement concrete in the invert and the arch. The joints in the sewer opened causing it to leak, allowing foreign matter to infiltrate the sewer and be carried to a treatment plant. The leaks also caused stalactites to form on the inside top of the pipes. The flowage capacity of the sewer was reduced below contract requirements. This was partially caused by the use of steel bands on the joints. The "sandbox" procedure used in the construction proved to be unsatisfactory. Better "dewatering" of the site was possible at the time of repairs and possibly during the construction itself. Approximately ten percent of the sewer line needed replacement or repair. Where repairs have been made, a good grade has been maintained and there are no apparent leaks. A portion of the sewer will be abandoned. In both May and June of 1966 the sewer collapsed. The Pittsburgh Testing Laboratory was retained to review the work on the sewer and reported that there was a shortage of concrete around the pipe and the amount of reinforcement steel "probably" was less than that called for in the design drawings. It was through the report of the Pittsburgh Testing Laboratory, filed on September 30, 1966, that plaintiff first learned of the deficiency in the materials. It was Scheidt's duty to inspect the work and the materials used. Scheidt appointed Edward Lopatowski as resident engineer and he was to report all matters to Scheidt. Although there were gross irregularities in the work, Lopatowski and Scheidt certified that the work was properly performed in compliance with the plans and specifications. Lopatowski knew that the sewer alignment was poor, the grade was not being maintained and the joints were open. When he objected to the construction methods employed and attempted to control Pontarelli, his efforts met with no success. In fact, on one occasion, after Lopatowski repeatedly attempted to have Pontarelli stop the work, one of the Pontarellis said, "If he does not shape up, we will have him shipped to Alaska." Later a Pontarelli said, "We will have him sent so far from here, it will take him four hours to get to and from work." Lopatowski and other employees of plaintiff had frequent lunches with the Pontarellis. Lopatowski would select those of plaintiff's employees who were to go to lunch with Pontarelli on a given day. After lunch, which Pontarelli paid for, the subordinate employees would leave but Lopatowski would remain with Pontarelli.

Various changes, not included in the original contract, were put into effect and there is nothing in the record to show that any official correspondence authorized those changes. The changes included variations in the elevation, the type of encasement concrete and the number of reinforcement bars.

In a discovery deposition, Vinton Bacon, plaintiff's General Superintendent since 1962, testified, inter alia, that the design for the sewer in question was excellent and the soil borings accurately showed the water and sand conditions. There were no changed conditions. The sewer leaked not because of poor soil conditions, but because of faulty construction techniques such as Pontarelli's failure to dewater and failure to build a proper foundation. If the sewer had been built in accordance with the original plan, it would have functioned properly. Except for specific contract provisions, the method of construction is generally determined by the contractor. Once a contract is signed the Chief Engineer is plaintiff's sole agent. *fn2 Various engineers at the jobsite would report shortages of materials to the Resident Engineer who in turn would report to his immediate superior, a subordinate of the Chief Engineer. The sewer is still functioning, but it carries infiltration to a treatment plant, thus causing damage to that plant. Some amount of infiltration is always found in sewers and no infiltration tests were taken on the sewers that drain into the sewer which is the subject of controversy. There were no working plans for a new sewer. Reports of the faulty performance were made by various engineers and inspectors. It was common knowledge that the job was not being done correctly. Engineers would continuously inspect the jobsite; they would certify performance before payment was made. Scheidt knew that improper amounts of steel and concrete were being placed in the sewer. The estimate vouchers did not correspond with the materials that actually went into construction. The estimate vouchers for steel were prepared at the jobsite in the presence of the Resident Engineer, the Engineer of Estimates and Inspection and Pontarelli's representative. No documents could be found which indicated that Pontarelli invoiced or demanded payment for the concrete and steel. Requests for payment for "extras" go through various internal procedures, and, if the request is for more than $2,500 it must be submitted to the Board of Trustees. The contractor has no power to submit the request to the Board.

In an evidence deposition, Burton Scheidt testified, inter alia, that the test soil borings taken at the construction site prior to the commencement of the construction revealed no objectionable soil conditions, but it is impossible to anticipate quicksand conditions. Shortly after construction began, he was informed that very unstable ground conditions were encountered. Scheidt and other engineers determined that Pontarelli was having greater difficulty than anticipated. Substantial changes were necessary and the cost would be increased. Scheidt was anxious to have the work completed because certain communities were in need of the facilities. The Sewer Division recommended that a higher grade of structural concrete be used and that proposed change with other proposals was submitted to the Board of Trustees. Because it was practically impossible to place the steel into the sewer, the amount of steel used was decreased on Scheidt's orders. He felt the better grade of concrete was important and the presence of reinforcement steel was not critical. He felt the reduction in cost as a result of the partial elimination of reinforcement steel would be offset by increases in other costs and consulted the Engineer of Investments in this regard. Scheidt believed that if costs could not be equalized, corrective figures would have to be drawn up. On re-direct examination he indicated that the records do not reflect this equalization of costs. He knew that all of the steel paid for was not installed in the sewer and found nothing wrong with the payment for the steel in spite of the fact that some steel was not installed. Pontarelli was doing a good job and Scheidt did not object. The job was finished in 1960, but depressions occurred along the sewer line. The sewer failed; its joints opened. These faults, however, were the result of subsoil conditions and not because the contractor improperly performed the work. A firm determination of why the sewer failed was never made, but subsoil conditions were at the heart of the problem. Scheidt ordered Pontarelli to make immediate repairs to the faults and to voucher the Board of Trustees. On cross-examination Scheidt testified that the order to delete the reinforcement steel was oral and was made after consultation with other engineers. Although Scheidt did not know that one supplier provided less than all of the concrete vouchered for, he said it was usual that other suppliers would be contacted if necessary to keep the job in progress. Any questionable items billed by Pontarelli were discussed by various people within plaintiff's organization. Although $1,113,813.35 in extras may have been paid without the approval of the Board of Trustees, the vouchers for that amount were processed and approved by: Cost and Estimate Department, Sewer Division, Assistant Chief Engineer in Charge of Construction, Law Department and Scheidt himself. He believed everything was "in conformity." On re-direct examination Scheidt testified that plaintiff changed soil testing companies after this job.

Letters were included with various documents filed in this cause. These letters, from the Chairman of the Committee on Engineering to the Board of Trustees, recommended passage of the following orders: that changed conditions materially differing from those contemplated were encountered and that the contract provide for payment for the additional costs resulting from those changed conditions; that Pontarelli be authorized to install steel bands with gaskets at a total approximate cost of $240,000; that the elevation of the sewer be raised and a credit of $25,000 inure to plaintiff; that the actions of the Chief Engineer in authorizing rehabilitative work be ratified and Extra Voucher No. 1 in the amount of $30,000 as partial payment be authorized; that Voucher No. 18 — Extra in the amount of $113,675.84 be authorized as final payment for extra work; that Voucher No. 16 — Final in the amount of $44,408.70 be authorized. All of the recommended orders were passed by the Board. The letters also had the effect of informing the Board that "extra" work was being performed by Pontarelli.

Also included in the record on appeal are 16 estimate vouchers approved by the Chief Engineer and various other members of plaintiff's staff.

• 1-4 The basic principle to be applied in actions wherein a motion for summary judgment has been made was restated in Fooden v. Board of Governors of State Colleges and Universities (1971), 48 Ill.2d 580, 586, 272 N.E.2d 497, 500. There the court stated:

"[U]pon motion for summary judgment the judgment shall be rendered forthwith if the pleadings, depositions and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law."

As recently stated in Doherty v. National Casting Division, Midland-Ross Corp. (1972), 6 Ill. App.3d 329, "The right of a jury trial shall not be denied if fair-minded persons can draw different conclusions from the facts set forth in these documents." The Civil Practice Act expressly provides *fn3 that defendant may move for summary judgment at any time. Thus, the act implies that the motion may be made, as in this case, prior to the filing of an answer. The effect of such procedure upon the general rule to be applied to summary judgment cases was discussed in Moore v. Pinkert (1960), 28 Ill. App.2d 320, 324-325, 171 N.E.2d 73, 74-75, where the court reasoned:

"The summary judgments were entered on defendants' motion before the defendants had filed any pleadings. The 1955 amendment to the Civil Practice Act (Ill. Rev. Stat. 1955, chap. 110, par. 57) provided that a defendant might make a motion for summary judgment `at any time.' That amendment was modeled on Federal Rule 56. Federal cases interpreting that rule hold that a defendant may file a motion for summary judgment before he files any pleadings. Gifford v. Travelers Protective Ass'n of America, 153 F.2d 209; Lindsey v. Leavy, 149 F.2d 899. The case before us illustrates the danger of the indiscriminate application of such rule. The purpose of summary judgment procedure is to determine whether there is a genuine issue of fact involved in the case. Allen v. Meyer, 14 Ill.2d 284, 152 N.E.2d 576; Diversey Liquidating Corp. v. Neunkirchen, 370 Ill. 523, 19 N.E.2d 363. Ordinarily the issues are made up by the pleadings. From an inspection of the pleadings the court can determine whether or not a factual issue is raised. On summary judgment proceedings the court considers the pleadings, the affidavits and the entire record to determine whether or not it can be said that a material dispute exists as to the facts. People ex rel. Sharp v. City of Chicago, 13 Ill.2d 157, 148 N.E.2d 481. When there is no answer filed and the defendant petitions for a summary judgment, the court must apply the same rule, and among other things which the court can and should consider is whether or not the complaint, standing alone, states a cause of action. It would seem better to first test the validity of the complaint by a motion to strike. No such motion was made in this case and in the Dvorak judgment order the court holds that the complaint failed to state a cause of action. There was no answer filed to the complaint, inartfully drawn as it was. In this proceeding all uncontradicted allegations made by the plaintiff must be taken as true (Roberts v. Sauerman Bros., Inc., 300 Ill. App. 213, 20 N.E.2d 849), unless there is a showing made in the affidavits and other documents in the record that the allegation cannot be proved. Loving v. Allstate Ins. Co., 17 Ill. App.2d 230, 149 N.E.2d 641."

In deciding the motion for summary judgment the court considers the pleadings to determine what the issues are and in so doing it presupposes that the pleadings join the issue. (Mastercraft Lamp Co. v. Mortek (1960), 28 Ill. App.2d 273, 275, 171 N.E.2d 427, 428.) The court is not however prohibited from considering affirmative defenses raised in the motion for summary judgment in spite of the fact that those matters were not raised in an answer or by a motion under Ill. Rev. Stat. 1967, ch. 110, par. 43(4) or 48. Slone v. Morton (1963), 39 Ill. App.2d 495, 497, 188 N.E.2d 493, 494.

• 5 The essential elements of a cause of action for fraud were stated in Roda v. Berko (1948), 401 Ill. 335, 339-340, 81 ...

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