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John J. Calnan Co. v. Talsma Builders

OPINION FILED SEPTEMBER 27, 1979.

JOHN J. CALNAN CO., PLAINTIFF AND COUNTERDEFENDANT-APPELLEE AND CROSS-APPELLANT,

v.

TALSMA BUILDERS, INC., DEFENDANT AND COUNTERCLAIMANT-APPELLANT AND CROSS-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. HERBERT R. FRIEDLUND, Judge, presiding. MR. PRESIDING JUSTICE JIGANTI DELIVERED THE OPINION OF THE COURT:

John J. Calnan Company (Calnan), the plaintiff and counter-defendant, and Talsma Builders, Inc. (Talsma), the defendant and counterclaimant, both appeal from a judgment entered in the circuit court of Cook County. The court there found that Calnan, a subcontractor, was in breach of contract by walking off a construction project and that Talsma, the contractor, was not in breach of contract in failing to make periodic payments to Calnan. The court awarded Calnan $50,600 for the work it completed before abandoning the job site. Talsma was awarded the sum of $20,000 for reasonable costs and damages suffered as a result of Calnan's breach. The net judgment in favor of Calnan was $30,600.

Calnan now argues the court was in error in finding it in breach of the contract and Talsma not in breach. Calnan asked that the $50,600 award in its favor stand and that the $20,000 judgment against it be reversed.

Talsma argues the court erred in ordering it to pay $50,600 after finding that it had not committed a breach of contract. Talsma also appeals the court's ruling denying it attorneys' fees, which it claims it is entitled to under the terms of the contract.

This appeal represents the latest stage in a long history of litigation between the parties. That history is set forth in the supreme court's opinion in John J. Calnan Co. v. Talsma Builders, Inc. (1977), 67 Ill.2d 213, 367 N.E.2d 695. We will repeat here only those facts which are relevant to the issues before us.

In May of 1974 the president of Talsma asked Calnan to submit a bid for plumbing work on a nursing home project in Robbins, Illinois. Calnan delivered a bid of $237,000 on May 14. On the following day, Calnan notified Talsma that it had failed to include bathtubs in the bid. An agreement, which included $40,000 for the omission, was delivered to Calnan on June 13. The agreement provided that Talsma would pay Calnan $277,000 for its work.

Calnan returned the signed contract to Talsma around July 10. The subcontract, insofar as relevant to this appeal, provided that Calnan would receive "monthly payments of 90% of the work performed in any preceding month * * *"; that payment requisitions were to be "accompanied by waivers of lien * * *"; that "such payments [were] to be made as payments [were] received by the Contractor from the Owner covering the monthly estimates of the Contractor, including the approved portion of the Subcontractor's monthly estimate"; and that

"In the event the Subcontractor does not submit to the Contractor such monthly estimates prior to the date of submission of the Contractor's monthly estimate, then the Contractor shall include in his monthly estimate to the Owner for work performed during the preceding month such amount as he shall deem proper for the work of the Subcontractor for the preceding month * * *."

The general conditions of the prime contract, expressly adopted by the subcontract, provide in part that "failure to supply waivers of lien * * * will be considered grounds for withholding partial payments * * *." The subcontract also provided that Calnan was to furnish to Talsma a surety bond guaranteeing the faithful performance of the work and the payment of all labor and material bills. Another provision states: "The Subcontractor shall indemnify the Contractor and the Owner against, and save them harmless from, any and all loss, damage, expenses, costs, and attorneys' fees incurred or suffered on account of any breach of the aforesaid obligations and covenants * * *." Finally, the subcontract addresses the possibility of the contractor having to complete the subcontractor's work:

"Any costs incurred by the Contractor in doing any such portion of work covered by this agreement shall be charged against any monies due or to become due under the terms of this agreement, and in the event the total amount due or to become due under the terms of this agreement shall be insufficient to cover the costs accrued by the Contractor in completing the work, then the Subcontractor * * * shall be bound and liable unto the Contractor for the difference."

On August 15 Talsma requested the performance bond from Calnan. The request was not met. Calnan began working on August 18. In mid-September, Calnan discovered it had omitted from its bid the cost of the entire water supply system. Talsma was asked to increase the subcontract amount by $31,000. Talsma relayed the request to the owner who refused to increase the amount. Talsma consequently refused to change the subcontract. Calnan informed Talsma that it would be unable to post a surety bond.

At the end of September, Calnan submitted a requisition seeking a payment of $27,900, or 100% of the payment for the previous month's work, plus $31,000 for the omitted water supply system. Talsma rejected the requisition. On October 9, Calnan informed Talsma in a letter that it could no longer honor the contract because it had received no payment and because the F.H.A. financing, as required by the contract, had not been finalized. On October 23, Calnan's people left the job-site for the last time, after completing the outside plumbing work with the exception of the water supply system. Calnan submitted a second requisition, again seeking 100% payment. Talsma again rejected it.

Calnan initiated this action on November 18, 1974, for a declaratory judgment against Talsma, seeking rescission of the plumbing subcontract. Talsma counterclaimed for a declaration that the contract could not be rescinded and for damages. The circuit court found for Calnan by rescinding the contract, and the appellate court affirmed. 40 Ill. App.3d 62, 351 N.E.2d 334.

The supreme court concluded that rescission by Calnan was not warranted and reversed the lower courts>. The case was remanded to the circuit court with directions to consider two issues: (1) "whether Calnan had breached the contract other than in the context of its decision to rescind"; and (2) whether Talsma "breached for failure to make payments * * *." 67 Ill.2d 213, 220-21, 367 N.E.2d 695, 699.

Testimony relevant to the question of breach will be briefly summarized: Frank Collins, an owner of Calnan, testified that when he submitted his first requisition for payment Richard Reszel, treasurer of Talsma, told him that it was not payable because there was no money available; Reszel also told him that it was not payable because it was incorrectly prepared. On October 18, Arthur Talsma and Reszel told Collins that the bond required by the contract did not make any difference. Collins conceded that Reszel told him, in a letter dated October 23, to revise his payment requisition and to deliver the bonds. Collins said he knew that the payment procedure required that mechanic's lien waivers accompany payment requests. He said his practice was not to submit the waivers with the requisition. Calnan never supplied ...


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