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Midwest Util. Co. v. Chicago Title & Trust





APPEAL from the Circuit Court of Cook County; the Hon. HAROLD A. SIEGAN, Judge, presiding.


Plaintiff Midwest Utility Company, Inc. (Midwest) sued to foreclose a mechanic's lien to recover the unpaid contract price of a water treatment system it built for defendant Intercontinental Food Industries, Inc. (IFI), and for attorneys' fees under the contract. IFI counterclaimed for the amount paid Midwest, alleging breach of contract by Midwest. *fn1

After a bench trial, the court entered judgment for plaintiff for the unpaid balance, with interest, and for attorneys' fees. Defendant's counterclaim was dismissed.

Defendant appeals, raising four issues: (1) whether plaintiff introduced any evidence that the system performed or could perform as warranted or that defendant caused the failure of the system to perform; (2) whether the trial court properly entered a protective order prohibiting defendant from introducing evidence of water flow through the system; (3) whether there was any evidence that defendant waived complete performance or was estopped from insisting on complete performance of the contract; and (4) whether plaintiff was properly granted attorneys' fees pursuant to the contract.

Mr. Harold Ritke is the president of Midwest Utility Company, Inc. He has a degree in engineering, is a licensed professional engineer in Illinois and also holds an operator's license in water treatment and a license in sewage treatment plant operations. He has worked for Midwest for 14 years, where he has been primarily engaged in water treatment work. Prior to forming Midwest, Ritke worked as an engineer for Water Process Equipment for 10 years.

On February 19, 1972, Mr. Thomas of IFI called Ritke and asked him if he was interested in bidding on the design and construction of waste water treatment equipment for IFI's meat processing plant. On March 1, 1972, Ritke met Thomas at IFI's plant in Franklin Park, Illinois. Thomas told Ritke that the plant was still under construction. The plant would process and package meat and there would be some preparation, cooking and fast freezing. It would be necessary to clean the processing areas. The cleaning would be done in three steps. There would be tallow reclamation, drycleaning and high pressure water spraying. Some fats or hexanes would be in the water from the third phase. The wash water would also contain some solids from the meat. The wash water would run into drains in the floor and then into Metropolitan Sanitary District sewers. The Metropolitan Sanitary District required that discharges into its sewers contain less than 100 parts per million (ppm) of hexane solubles. IFI wanted a system which would reduce the hexane solubles in its wash water to the amount permitted by the District. It also wished to settle out the solids contained in the wash water.

Ritke asked Thomas for some design specifications for the desired equipment. Thomas would say only that the peak flows would be 20,000 gallons per hour, with a daily average of 160,000 gallons. Thomas gave Ritke no information about the nature or temperature of the expected flows.

Ritke testified that several days after his first meeting with Thomas, he met Thomas at the IFI plant to discuss a rough sketch which Ritke had made. Ritke asked Thomas for more details, but Thomas gave him none. Thomas said he wanted the simplest piece of equipment to reduce the hexane solubles. There was going to be an addition to the plant and at that time there would be better information available to design and construct a treatment plant. Thomas told Ritke that if he was interested in doing the job, he should submit a detailed sketch and a bid.

Subsequently Ritke submitted detailed plans and a bid to Thomas. Thomas told Ritke to submit his material to Altback and Brandman, IFI's consulting engineers. After submitting the plans to the consulting engineers, Ritke received terms and specifications from IFI. Ritke called Thomas after reading the proposal and terms and conditions, because certain items were contrary to the discussions which they had. Thomas told Ritke not to worry about the inconsistencies.

On March 30, 1972, Ritke sent a letter to Thomas attached to the terms and conditions form. According to the letter, Midwest could not agree to the completion date set out in the IFI proposal. Midwest also told IFI that the system was designed to reduce hexane solubles to 100 ppm in order to comply with Metropolitan Sanitary District standards. Further, the letter stated: "In as much as there were no absolute sample analysis or quantity measurements we can hardly guarantee performance as absolute as that requested in this paragraph. We are fully confident the operation will be more than satisfactory but cannot accept liability for conditions over and above stated flows and normal wash waters with residual solids and grease."

Midwest's design called for the wash waters to flow from the drains in the floor of the plant to a pipe which ran to tanks in an enclosure outside of IFI's main building. The first tank was an aeration tank, in which nozzles mounted in the tank would force air into the wash water. This tank was intended to balance out the flows, equalize temperatures, keep the greases in suspension and provide a place for the introduction of chemicals, if required. An outlet pipe ran from the aeration tank through the clarifier tank wall into the clarifier tank. The water was to run through the pipe into the clarifier tank into a well in the center of the clarifier tank. The grease in the wash water would escape from holes near the top of the stilling well onto the surface of the water, where it would be moved along by scrapers. A scum box would collect the grease from the surface of the water where it would be pumped into a storage tank. The water with the grease removed was to flow from the clarifier into the sewers with less than 100 ppm of hexane solubles.

Ritke testified that the parties included a payment schedule in their contract. The terms of payment were $5,000 upon approval of final plans, $40,000 upon completion of the concrete tanks, $25,000 when the unit was operable and $6,765 thirty days after the date of completion. On May 1, 1972, Midwest started the project. IFI's first payment of $5,000 was made on May 26, 1972. On June 9, 1972, a contractor's affidavit and mechanic's lien waivers were sent to IFI in support of a $40,000 statement sent to IFI previously. After some negotiating with officials of IFI, Midwest received $20,000. In July 1972, Mr. Ritke finally saw IFI's president, Mr. Chapman, who would not authorize payment at that time. Ritke told Chapman that Midwest might have to leave the job because Midwest needed money to continue the work. Chapman said that contractors want money but never get the work done on time. Ritke told him that the work necessary for Midwest to start the job had not been completed in time for Midwest to start on schedule.

Ritke testified that in late July he spoke to a Mr. Oberman, who said he was a vice-president of IFI. Ritke told Oberman that Midwest could not complete the system until water and power were made available to it. Oberman told Ritke that if Midwest hooked up the power and water and got the system running by the next week, he would see that Midwest was paid. Midwest hooked up power and water to the system although IFI's letter of March 29, 1972, said that this was not part of Midwest's work. The system was operating in late July or early August of 1972. Mr. Marks of IFI told Ritke that he would not be paid until Mr. Grassl approved the system.

In late August 1972, Ritke and Grassl inspected the system. Grassl complained that the effluent from the system was a dark color and smelled. Ritke explained that the system was only intended to settle solids and reduce hexane solubles before the wash water went into the sewers. Ritke observed that large quantities of very rancid grease were entering the system. Grassl explained that the shakedown of the plant was still occurring. The tallow recovery system was not functioning. Large quantities of grease were temporarily stored in barrels and later discharged from the plant. Some grease was accumulating on the aeration tank and was removed manually.

In late September or early October of 1972, Ritke met Mr. Grassl, Mr. Pawluczuk and Mr. Albergo at the IFI plant. They viewed the Midwest treatment system and agreed to make a list of modifications that Midwest would make. Midwest made those changes and did other work on the water treatment system that was not on the list of modifications or a part of the contract.

Mr. Ritke stated that in his opinion the system was in accordance with the specifications submitted as part of the contract. He also testified that in his expert opinion as an engineer the Midwest system would reduce hexane solubles from the wash water to less than 100 ppm if the amount of water did not exceed 20,000 gallons per hour and a daily average of 160,000 gallons, which were the requirements set out by Mr. Thomas in March 1972. Mr. Ritke said that when he had a sample of the effluent from his system tested, it showed that the hexane solubles were being reduced properly.

On cross-examination, Ritke testified that he had never designed a system such as IFI's before. He said that although he had designed or helped design approximately 50 water treatment systems, only three or four of them were industrial systems. However, Ritke said that all water treatment systems share similar characteristics and the components are similar in all systems. He did not tell Thomas that he had not designed such a system before. Thomas did not give Ritke the sources of his specifications for the system. Ritke testified that there was also rotten grease on the aeration tank in July 1973, and that this grease was accumulating because something other than wash water was entering the Midwest system. Ritke said that the only test that showed the system reduced ...

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