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Rite-way Plumbing & Heating v. Wil-freds

OPINION FILED AUGUST 29, 1978.

RITE-WAY PLUMBING & HEATING, INC., PLAINTIFF,

v.

WIL-FREDS, INC., DEFENDANT AND THIRD-PARTY PLAINTIFF-APPELLANT. — (PULLMAN BANK & TRUST CO., TRUSTEE, ET AL., THIRD-PARTY DEFENDANTS-APPELLEES.)



APPEAL from the Circuit Court of Du Page County; the Hon. PHILIP F. LOCKE, Judge, presiding.

MR. JUSTICE GUILD DELIVERED THE OPINION OF THE COURT:

This suit involves the interpretation of two contracts for the construction of the Maple Lakes Apartments project in Woodridge, Illinois. It was originally brought by subcontractors of the general contractor, Wil-Freds, Inc. Wil-Freds, in turn, filed a third-party complaint against the titleholder of record, Pullman Bank & Trust Co., as trustee, and W.G. Barr & Associates, William G. Barr and D.F. Antonelli, Jr., the beneficiaries of the land trust in the Pullman Bank. The original suit was settled and the case proceeded on the third-party complaint of Wil-Freds against the Bank and the other parties (hereinafter sometimes called the owners). The trial court entered judgment on the third-party complaint in favor of the contractor in the sum of $78,216.17, which the owners admitted was due and owing. A counterclaim having been filed by the owners alleging damages in the sum of $119,650, the trial court entered judgment on this claim in favor of the owners in the sum of $2500. The contractor, Wil-Freds, Inc., appeals.

A contract was entered into on September 15, 1970, between Wil-Freds, the contractor, and the defendant, Pullman Bank & Trust Co., entitled "Construction Contract — Cost Plus" (FHA contract). This contract provides that the contractor shall receive only the cost of construction as defined in article 10 of that contract. A second contract was entered into on September 18, 1970, between Wil-Freds, the contractor, and the defendants William G. Barr and D.F. Antonelli, Jr., hereinafter referred to as the supplemental agreement. This agreement provides that Wil-Freds, the contractor, is to receive as a fee for its performance of the FHA contract "a sum equal to 10.24% of the actual cost of construction as defined in Article 10 of the aforesaid `Construction Contract — Cost Plus' [FHA contract] exclusive of any overhead expenses therein contained."

In the course of construction of this project, Wil-Freds subcontracted a part of the work to two subsidiary corporations, Hirsekorn Construction Co., Inc., for the masonry work and Concrete by Noffsinger for the concrete work. At least a controlling interest in both of these subcontractors was owned by the general contractor, Wil-Freds. The fact that the contractor intended to utilize his subsidiaries and to seek overhead and profit for them was made known to the defendants before either contract was entered into and no objection was raised. Examination of the record discloses that the attorneys for the owners advised them

"* * * that Wil-freds, Inc. has a substantial interest in a concrete subcontractor, Concrete by Noffsinger and a masonry subcontractor, Hirsekorn Construction Company, Inc., with both of which firms it intends to contract on a General Contractor-Subcontractor basis for material and services in connection with the referenced project. There can be little question but that an identity of interest between Wil-freds and the named Subcontractors exists. You are advised that identity of interest subcontracts may be approved for inclusion of profit and overhead upon cost certification only in the event that (a) the subcontractor had demonstrated experience and capability in the specific field covered; and (b) the subcontracts are no higher than the best prices which could be obtained from outside sources where outside sources are available * * *."

There has been no question properly raised in this proceeding as to the subcontractors not being experienced and capable or that the prices of the subcontracts were higher than the best price available. This relationship of Wil-Freds to its subsidiary subcontractors was disclosed to the FHA by the owners.

At the outset this rather complicated situation may best be shown by the figures contended for by the owners and accepted by the trial court in awarding a balance due under the supplemental agreement in the sum of $78,216.17.

Amended Cost Certification $4,373,506.11

LESS:

Wil-Fred's overhead $65,100.00 Tap On Fees 95,250.00 Wil-Fred's profit 10,029.74 Concrete by Noffsinger Profit and Overhead 34,492.00 Hirsekorn Construction Co. Profit and Overhead 32,143.96 237,015.70 ____________ ________________

CORRECT COST BASE $4,136,490.41 ================ 10.24% — Agreed percentage $423,576.62 of cost base

LESS:

Wil-Fred's profit $10,029.74 Wil-Fred's Overhead 65,100.00 Concrete by Noffsinger Profit and Overhead 34,492.00 Hirsekorn Construction Co. Profit and Overhead 32,143.96 Funds paid on Account ...


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