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Cap. Dev. Ex Rel. Gallas El. v. Rafel & Co.

OPINION FILED APRIL 10, 1986.

THE CAPITAL DEVELOPMENT BOARD EX REL. P.J. GALLAS ELECTRICAL CONTRACTORS, INC., PLAINTIFF-APPELLEE,

v.

G.A. RAFEL & COMPANY, INC., ET AL., DEFENDANTS (FIDELITY DEPOSIT COMPANY OF MARYLAND, DEFENDANT-APPELLANT). — P.J. GALLAS ELECTRICAL CONTRACTORS, INC., PLAINTIFF,

v.

GEORGE A. RAFEL ET AL., DEFENDANTS.



Appeal from the Circuit Court of Du Page County; the Hon. John J. Bowman, Judge, presiding.

JUSTICE SCHNAKE DELIVERED THE OPINION OF THE COURT:

Rehearing denied June 13, 1986.

This is a consolidated action by an electrical contractor, P.J. Gallas Electrical Contractors, Inc. (plaintiff), against a second electrical contractor, George A. Rafel, individually, and G.A. Rafel & Company, Inc. (Rafel), and its surety, Fidelity Deposit Company of Maryland (defendant), for breach of contract. After a jury trial in the circuit court of Du Page County, a judgment in the amount of $46,634.91 was entered against Rafel and defendant. Thereafter, defendant filed this appeal, arguing: (1) that the trial court erred in denying its motion for judgment on the pleadings; (2) that the jury's verdict was against the manifest weight of the evidence; and (3) that the trial court erred in awarding plaintiff attorney fees and prejudgment interest.

On June 8, 1973, Rafel was awarded a contract by the Illinois Capital Development Board (CDB) for the electrical work at a project known as the Davea Center, located in Addison. As per the contract requirements, Rafel obtained a labor and material payment bond from defendant. In late 1973 or early 1974, Rafel experienced financial difficulties and filed a petition for reorganization pursuant to chapter 11 of the Bankruptcy Act. Rafel was unable to complete the Davea Center on its own and turned to plaintiff for assistance. Plaintiff and Rafel entered into an oral agreement whereby plaintiff would complete the physical construction work and Rafel would continue to handle the paper work. Plaintiff and Rafel worked under this arrangement until the Davea Center was finished.

After receiving the necessary documents, including a final lien waiver from plaintiff, the CDB processed the final payment and issued a warrant for $46,634.91 to Rafel. George Rafel then met with Peter Gallas to discuss final payout. Rafel told Gallas that his company was entitled to the retainage it had in the job, which was approximately $22,000, and to a rental fee for his tools and equipment that plaintiff had been using to complete the project. Gallas disagreed that Rafel was entitled to any of the final payment or to any rental fee.

On November 15, 1978, plaintiff filed suit against Rafel and defendant on the labor and material bond. On December 18, 1978, plaintiff filed suit against George Rafel, individually, and against G.A. Rafel & Company, for breach of the oral agreement to complete the Davea Center electrical work. On June 6, 1979, plaintiff filed its amended complaint which consolidated the prior two complaints. In its answer filed on June 15, 1979, defendant alleged that plaintiff was not a proper party to sue on the bond. In its amendment to answer filed August 30, 1979, defendant alleged the additional affirmative defenses of waiver and the statute of limitations. These three defenses were not specifically designated as affirmative defenses, and plaintiff did not file a reply to them.

On July 19, 1979, and July 21, 1980, respectively, plaintiff and defendant moved for summary judgment. The court denied both motions on October 31, 1980, but did not address the issue of whether plaintiff's lien waiver barred it from suing defendant on its labor and material payment bond. Defendant thereafter filed a motion to reconsider as to this issue. Plaintiff responded that summary judgment should be denied because of the existence of an industry custom that final lien waivers were routinely tendered by subcontractors before they received payment. The court denied defendant's motion to reconsider on May 20, 1983, and the case proceeded to trial on January 17, 1984.

At the conclusion of the trial, the jury returned a verdict in favor of plaintiff for $46,634.91. Judgment was entered for said amount on January 23, 1984. On February 2, 1984, plaintiff filed a petition for interest, costs and attorney fees. On July 20, 1984, the court granted plaintiff's motion and awarded $13,018.77 in prejudgment interest and $30,547.50 in attorney fees. After several extensions the court set November 21, 1985, as the last date for filing of post-trial motions. Defendant filed its post-trial motion on that date. Defendant's motion was denied on December 20, 1984. On December 28, 1984, the court granted plaintiff additional attorney fees in the amount of $3,469.25 for responding to defendant's post-trial motion. Defendant filed its notice of appeal on January 18, 1985. Rafel has not appealed.

I

The first issue raised is whether the trial court erred in denying defendant's motion for judgment on the pleadings and in allowing plaintiff to file its reply at the conclusion of the trial. Defendant contends that its affirmative defense of waiver contained in its amendment to answer stood admitted because plaintiff had failed to file a reply prior to trial.

• 1 Under Chicago Bridge & Iron Co. v. Reliance Insurance Co. (1970) 46 Ill.2d 522, a subcontractor who delivers its final mechanic's lien waiver prior to payment also waives its rights against the surety under its payment bond unless the subcontractor proves there was a custom in the industry for subcontractors to tender waivers prior to payment. Therefore, where the surety properly raises the subcontractor's lien waiver as an affirmative defense, the subcontractor must raise the issue of industry custom in a reply to rebut the defendant's waiver defense. In the present case, plaintiff did not file a reply before trial an argues that it was not required to because defendant failed to designate its waiver defense as an affirmative defense.

• 2 Plaintiff is correct that defendant's amendment to answer was not technically correct. Under sections 2-603(b) and 2-613(a) of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, pars. 2-603(b), 2-613(a), formerly Ill. Rev. Stat. 1979, ch. 110, pars. 33(2), 43(1)), defendant's affirmative defenses should have been designated as such. Despite this technical defect, however, defendant's amendment to answer was sufficient to raise the affirmative defense of waiver. (Cf. American National Bank & Trust Co. v. Mar-K-Z Motors & Leasing Co. (1973), 11 Ill. App.3d 1046, aff'd (1974), 57 Ill.2d 29 (count II of answer containing the necessary elements of a counterclaim except a designation as such, properly considered as a counterclaim).) Plaintiff, therefore, should have filed a reply to defendant's answer to raise his rebuttal issue of industry custom. Ill. Rev. Stat. 1983, ch. 110, pars. 2-602, 2-613(d), formerly Ill. Rev. Stat. 1979, ch. 110, pars. 32, 43(4).

• 3 While plaintiff should have filed a reply prior to trial, we cannot say that the trial court erred in denying defendant's motion for judgment on the pleadings and allowing plaintiff to file its reply at the conclusion of the trial. Section 2-1007 of the Code of Civil Procedure (Ill. Rev. Stat. 1983, ch. 110, par. 2-1007) provides that "[o]n good cause shown, in the discretion of the court and on just terms, additional time may be granted for the doing of any act or the taking of any step or proceeding prior to judgment." The Code of Civil Procedure itself is to be "liberally construed, to the end that controversies may be speedily and finally determined according to the substantive rights of the parties." (Ill. Rev. Stat. 1983, ch. 110, par. 1-106.) We find that the circumstances of this case satisfy the "good cause" requirement of section 2-1007.

A motion for judgment on the pleadings tests the sufficiency of the pleadings themselves and, therefore, is normally presented prior to discovery. Here, it was not until the parties were at trial that defendant, without notice, moved for judgment on the pleadings. Plaintiff apparently believed that it did not have to file a reply because defendant had not properly pleaded his affirmative defense of waiver. Defendant's failure to move promptly for judgment on the pleadings, following the lapse of time allowed for filing of a reply, did nothing to dispel this misconception. Defendant was well aware that industry custom would be a critical issue at trial because plaintiff had raised the issue to defeat defendant's motion for summary judgment. Under these circumstances, it was not an abuse ...


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