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Bates & Rogers Constr. v. North Shore San. Dist.





APPEAL from the Circuit Court of Lake County; the Hon. LLOYD A. VAN DEUSEN, Judge, presiding.


Mr. JUSTICE SEIDENFELD delivered the opinion of the court:

Bates & Rogers Construction Corporation (the Contractor) and two of its subcontractors, Economy Mechanical Industries, Inc., and Goldberg & O'Brien Electric Company (the Subcontractors), filed suit against the North Shore Sanitary District (NSSD) and its engineers, doing business individually and as Greeley & Hansen, a partnership (the Engineers) claiming damages arising from the construction of portions of the Gurnee Sewage Treatment Plant.

The complaint as amended was dismissed on the motion of the defendants on the grounds of multifarious pleading and for failure to state a cause of action. The plaintiffs appeal.



In substance the plaintiffs allege in count I as amended that NSSD had the duty to provide electrical power to the work site within 450 days of the construction starting date which was June 8, 1973; that under the contract terms NSSD impliedly covenanted and warranted that they would not obstruct, interfere with or burden the cost of performance of the work and would provide access to the job "in orderly fashion and sequence"; that NSSD individually and through its Engineers breached the express and implied convenience and implied warranties in the contract by inaccurately designing the electrical switchgear and system and failing to furnish electrical power within 300 days; that NSSD preempted the contractual relationship between the Contractor and Westinghouse Electric Co., which was to manufacture the switchgear for the Contractor; that as a proximate result of the breach plaintiffs were denied access to the work and the sequence of the work was disrupted, burdening the performance of plaintiffs requiring them to sustain cost overruns in the form of excessive labor costs, supervision, winter protection of the work and other increased costs, all of which were "exclusive of delay damages none of which are sought hereunder," praying judgment for $672,550 for the Contractor and $487,000 for one of the Subcontractors.

In count III, essentially the same allegations against NSSD are included with the additional allegations that the Contractor entered into an agreement with Westinghouse Electric Corporation to manufacture the electrical equipment designated by defendant; that NSSD and its engineers inadequately designed the switchgear equipment involved which the Contractor had a contractual duty to supply; that the equipment could not be manufactured and installed without extensive redesign; and that as a proximate result the Contractors were unable to energize the plant until late January 1976, "and in the process were denied access prior thereto to a material portion of the work, the sequence of the work was disrupted and burdened so as to increase the cost thereof, and to cause the proliferation and duplication of labor and labor operations not otherwise required"; that damages were thereby incurred of the same nature as provided in count I in the amount of $472,000 for the Contractor and in the amount of $366,000 and $352,000 respectively for the two Subcontractors. In addition, the plaintiffs charge the defendant in both counts with wrongfully withholding monies due for work done on the project, alleging that it had been satisfactorily completed and was operational.

In count V the plaintiffs alleged that the NSSD had retained 10% as additional security for the complete performance of the contract; that the District had no property interest in the "retainage"; that it had nevertheless commingled these funds with construction funds owned by the District which were invested and produced substantial earnings. In the count it was further alleged that the NSSD is the trustee of the funds and prays that the court declare a constructive trust in favor of the plaintiffs on all earnings on the retainage.

NSSD filed a motion to dismiss counts I, III and V on the grounds that plaintiffs had failed to exhaust administrative remedies provided for in the contract; that with respect to the theory of tortious interference with contract the notice required by sections 8-101 and 8-103 of the Local Governmental and Governmental Employees Tort Immunity Act (Ill. Rev. Stat. 1979, ch. 85, pars. 8-101, 8-103) had not been served; and that counts I and III allege more than one cause of action in each count in violation of section 33(2) of the Civil Practice Act (Ill. Rev. Stat. 1979, ch. 110, par. 33(2)). The District also maintained that no action for a breach of contract could be asserted because plaintiffs had not alleged that the work was completed in accordance with the contract and because plaintiffs by contract had agreed not to make any claim for damages for delay. NSSD also asserted that it had no contract with the Subcontractors and thus could not be held to breach of contract as to them. As to count V, NSSD alleged that plaintiffs sought to establish a lien on public funds without statutory notice and that there was no statutory authority for the District to pay interest of that kind. The trial court entered an order dismissing all three counts with prejudice, from which the plaintiffs have appealed.

• 1 Preliminarily, we conclude that several of the grounds for dismissal of counts I and III urged by the NSSD are not meritorious. The fact that the Contractor did not allege that NSSD accepted or certified the work pursuant to the contract is not a necessary allegation to support a claim of breach of contract; it is sufficient that plaintiffs allege, as they have, that they have fully performed their obligations under the contract. Any other interpretation would have the untenable result that the owner could prevent any contractor from ever seeking relief, no matter how meritorious, if the owner failed to provide the formal acceptance.

• 2 The NSSD's claim that the plaintiffs are precluded because of their failure to exhaust administrative remedies is without merit. The contractual provision that the board of NSSD shall determine all questions relating to the contract is obviously not an administrative remedy in the ordinary sense in which a party claims to have been aggrieved by an administrative action. Even if it were so considered, the exhaustion doctrine presupposes that there is an effective administrative remedy which will resolve plaintiff's problem. Strom International, Ltd., v. Spar Warehouse & Distributors, Inc. (1979), 69 Ill. App.3d 696, 700.

• 3 We do find merit in the claim of NSSD that it is improper to plead the claims of the Subcontractor in counts I and III since they stand in a different relation to the District than the Contractor. As a general rule subcontractors cannot recover against the owner in the absence of a contractual arrangement and in the absence of any allegation that they are third-party beneficiaries under the principal contract; their sole remedy is under the Mechanics Lien Act. (Hill Behan Lumber Co. v. Marchese (1971), 1 Ill. App.3d 789, 792.) These conditions have not been satisfied in the pleadings before us.

• 4, 5 We also conclude that the allegations in count III that defendant "preempted the contractual relationship between the Contractor and Westinghouse" introduce an action based on tort rather than on contract and thus were improperly included in the same count as the contract action. (Ill. Rev. Stat. 1979, ch. 110, par. 33(2).) However, the allegations do not in fact state a claim for tortious or negligent interference with contract in the absence of the allegation of sufficient facts to show that defendant intentionally and maliciously induced the breach of ...

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