Appeal from the Circuit Court of Cook County; the Hon.
Reginald Holzer, Judge, presiding.
PRESIDING JUSTICE JIGANTI DELIVERED THE OPINION OF THE COURT:
Plaintiffs, W.E. Erickson Construction, Inc., and Wilbert E. Erickson (jointly Erickson) brought this action to recover a sum allegedly due under a contract entered into with defendants, Congress-Kenilworth Corporation, James Adams and John Stafford (jointly C-K) for the construction of a concrete water slide, known as "Thunder Mountain Rapids" in Crestwood. C-K filed a counterclaim for damages, among other things, for construction defects. Following a bench trial, judgment was rendered for Erickson on count II of its amended complaint (breach of contract) in the amount of $202,000. The remaining counts I and III (preliminary injunction/appointment of receiver), IV (account stated), V (quantum meruit) and VI (accord and satisfaction) of Erickson's amended complaint and C-K's counterclaim were dismissed for want of equity. The trial court also awarded attorney fees to C-K from a fund held by the receiver, which previously had been appointed. Erickson appeals from the award of damages, the dismissal of counts I, III, IV, V and VI of its amended complaint and the award of attorney fees to C-K. C-K filed a cross-appeal which it has not pursued in this appeal.
The parties here are no strangers to this court. In an earlier appeal, we reversed an order appointing a receiver for C-K. (See W.E. Erickson Construction, Inc. v. Congress-Kenilworth Corp. (1983), 112 Ill. App.3d 847, 445 N.E.2d 1209.) Much of the background surrounding this controversy is contained in that opinion and will not be repeated here. In summary, Erickson, a general contractor, entered into a contract with C-K for the construction of a concrete water slide for a total cost not to exceed $535,000, exclusive of additional costs and interest. The contract provided that Erickson would be paid the cost of the work performed by subcontractors, a contractor's fee of 15% of the project cost, exclusive of concrete, carpentry, architectural and engineering costs, Erickson's labor for concrete and carpentry work, and overhead, as well as additional amounts attributable to the costs of extra or modified work, permits, engineering fees, certain sewer and sanitary work, and interest at the rate of 2% over prime for overdue balances. Work commenced on April 15, 1981, and was completed on July 3, 1981. The project was open to the public the next day on July 4, 1981. To date, Erickson has been paid $150,000 on the contract.
Under its amended count II, Erickson sought damages under the contract in the amount of approximately $550,000, the value of the contract Erickson claimed for its full performance under the contract. The trial court, however, found Erickson was entitled to $352,000 on its contract claim, and, after deducting $150,000 already paid to Erickson, awarded a judgment to Erickson for $202,000.
Erickson argues that the trial court erred in the assessment of damages awarded to it under the contract. Erickson maintains that the trial court, by entering judgment for it under its contract count, had found that Erickson had substantially performed under the contract. However, Erickson contends, the trial court did not award it damages for its substantial performance under the contract. Rather, Erickson asserts, the trial court erroneously entered judgment for it only in the amount of its out-of-pocket expenses for subcontractor labor and materials. C-K argues that the judgment entered was proper. C-K asserts that the trial court had found that Erickson had failed to substantially perform under the contract and, therefore, Erickson was not entitled to damages under the contract. Alternatively, C-K maintains that if the trial court had found that Erickson had rendered substantial performance, the award entered was still proper as it represented the value of the contract fully performed as proved by Erickson. The first issue to be resolved is whether Erickson substantially performed under the contract.
• 1-3 Under the doctrine of substantial performance, the general rule regarding building contracts is that a builder is not required to perform perfectly, but rather is only held to a duty of substantial performance in a workmanlike manner. (Brewer v. Custom Builders Corp. (1976), 42 Ill. App.3d 668, 673, 356 N.E.2d 565.) A purchaser who receives substantial performance of the building contract must pay the price bargained for, less an offset for defects in what he received as compared to what strict performance would have given him. (Park v. Sohn (1982), 89 Ill.2d 453, 464-65, 433 N.E.2d 651; Mayfield v. Swafford (1982), 106 Ill. App.3d 610, 612, 435 N.E.2d 953; Brewer v. Custom Builders Corp. (1976), 42 Ill. App.3d 668, 673-74, 356 N.E.2d 565; Restatement (Second) of Contracts sec. 347 (1979).) A contractor whose work amounts to less than substantial performance may not recover on the contract. Under such circumstances, a contractor may recover under a quasi-contractual theory for the reasonable value of its services rendered less any damages suffered by the purchaser. (Brewer v. Custom Builders Corp. (1976), 42 Ill. App.3d 668, 673, 356 N.E.2d 565; J. Calamari & J. Perillo, Contracts sec. 11-26, at 426-28 (2d ed. 1979).) The question of whether substantial performance has been given varies on the facts presented in each case. (Brewer v. Custom Builders Corp. (1976), 42 Ill. App.3d 668, 673, 356 N.E.2d 565.) The trial court's finding will not be disturbed on appeal unless the holding of the trial court is against the manifest weight of the evidence. V & V Cement Contractors, Inc. v. La Salle National Bank (1983), 119 Ill. App.3d 154, 157, 456 N.E.2d 655.
Judgment was rendered for Erickson on its contract count, count II of its amended complaint, in the amount of $202,000, plus statutory interest and costs. That count alleged C-K's breach of contract for nonpayment and sought approximately $550,000 in damages, the value of the contract for Erickson's full performance. The trial court found that while there existed defects in construction of the water slide they were insufficient in themselves to sustain a finding that the water slide was constructed in a "wholly unworkmanlike manner." However, the court found that with respect to the selection of architects and in the subcontractor-bidding process, Erickson "wholly failed to perform." Notwithstanding this conclusion, the court then went on to enter judgment on amended count II (the breach of contract).
• 4 C-K asserts that the finding of these deficiencies in Erickson's performance by the trial court indicates that the trial court had concluded that Erickson had not substantially performed under the contract. Contrary to C-K's contention, we believe that as the trial court had entered judgment on its contract count, the trial court necessarily found that Erickson had substantially performed under the contract. This conclusion is supported by the trial court's dismissal of Erickson's amended count V, which sought recovery on a non-contractual theory of recovery, quantum meruit.
Moreover, the evidence presented at trial established that Erickson had substantially performed under the contract. There was no substantial difference between what C-K contracted for and what it received. There was considerable testimony adduced with regard to the extensive cracking of the concrete flumes within the water slide. Witnesses for both parties presented conflicting testimony as to whether such damage was beyond acceptable limits. But all agreed that the cracks did not affect the operation of the structure as a water slide. Further, an important factor in determining whether a contractor or builder has rendered substantial performance is the actual receipt and enjoyment of benefits by the purchaser. (Brewer v. Custom Builders Corp. (1976), 42 Ill. App.3d 668, 673, 356 N.E.2d 565.) We conclude that there was sufficient evidence to support the trial court's finding that Erickson sustained its burden in proving that its performance was substantial. Damages, therefore, should have been measured on this basis.
• 5 The trial court did not, however, apply the standard of substantial performance in assessing Erickson's damages under the contract. While the trial court entered judgment on the contract, it is evident from the amount awarded that damages were not calculated upon Erickson's substantial performance under the contract. Erickson sought recovery for its damages under the contract. It appears from the amount Erickson was awarded that Erickson only recovered its out-of-pocket expenses for subcontractor labor and materials. Based on this award, it would seem that the trial court may have unintentionally used the non-contractual theory of quantum meruit to measure Erickson's damages under the contract. We note, as we stated earlier, that the trial court dismissed Erickson's claim for quantum meruit under its amended count V. Nevertheless, under the circumstances, the trial court's award was not a proper method of computation of damages under the doctrine of substantial performance. The judgment as to damages therefore must be vacated and the cause remanded for a recalculation of the amount of damages Erickson is entitled to receive for its substantial performance under the contract.
Erickson next raises a number of arguments relating to the pleadings and to the particular calculations of damages. The matters concerning the pleadings, we believe, will not arise again, and we will not address them here. As to the particular findings of damages, the propriety of these findings is not clear at this point, and consequently we will not consider those issues. In light of our remandment for a reassessment of damages, the trial court is directed to recalculate damages and to take whatever evidence is necessary, if any, in order to calculate damages on the basis of substantial performance.
• 6 Erickson also contends that it is entitled to a rate of 2% interest over the prime rate for balances due but unpaid as provided under the contract. The contract provided that Erickson was to make written application for monthly progress payments and that C-K was required to pay within 30 days of application. On June 16, 1981, when the project was 60% completed, Erickson submitted to C-K an application for payment in the amount of $246,958 for the period April 1 to May 31, 1981. The trial court found that as Erickson never tendered a 30-day itemized statement to C-K as required by the contract, Erickson forfeited any claim to interest due since June 1981. The testimony of Erickson and Adams established that the only written application for payment to C-K was prepared in order for C-K to obtain a loan to enable C-K to pay Erickson. Despite Erickson's argument to the contrary, there was no testimony that the application was ever intended to be an application for payment due. Furthermore, C-K did not waive this contract provision by making payments on July 14 and August 20, 1981. The contract specifically provided that a precondition to a payment is a submission of an application. Interest is predicated on such an application. Thus, no waiver occurred. Accordingly, the trial court's findings were not against the manifest weight of the evidence.
• 7 As an alternative ground for recovery, Erickson contends that the trial court erred in not entering judgment for it on the basis of an account stated for which Erickson would then be entitled to the full contract price. In support of this contention, Erickson points out that on June 20, 1981, C-K issued a corporate resolution authorizing the transfer by deed to Erickson of the land upon which the water slide was being built as security for payment. Also, on July 14, 1981, 10 days after the project was opened, C-K's attorney sent Erickson a letter which stated:
"Please be advised that my office is representing Congress-Kenilworth Corp. in the pursuit of financing re: Thundermountain Rapids, Crestwood, Illinois. We totally acknowledge our indebtedness to W.E. Erickson ...