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09/29/87 Northwest Water Commission v. Carlo V. Santucci

September 29, 1987







Company et al., Plaintiffs-Appellees)

516 N.E.2d 287, 162 Ill. App. 3d 877, 114 Ill. Dec. 132 1987.IL.1449

Appeal from the Circuit Court of Cook County; the Hon. James C. Murray, Judge, presiding.


PRESIDING JUSTICE SCARIANO delivered the opinion of the court. STAMOS and HARTMAN, JJ., concur.


The Northwest Water Commission (the Commission), a municipal corporation, was created in 1979 pursuant to the Municipal Code (Ill. Rev. Stat. 1979, ch. 24, par. 11-135-1 et seq.), for the purpose of constructing a water pipeline from Lake Michigan to its member communities of Arlington Heights, Buffalo Grove, Palatine, and Wheeling. On March 17, 1983, the Commission contracted with Carlo V. Santucci, Inc. (Santucci), a party to each of the consolidated actions below but not to this appeal, to provide underground excavation for certain sections of the pipeline. Ben Franklin Insurance Company (Ben Franklin) was Santucci's surety, and posted a "payment bond" and a "performance bond," each in the amount of $3,883,332.05. Santucci subsequently subcontracted separately with Price Brothers Company (Price) and Armco, Inc. (Armco), whereby Price agreed to provide prestressed concrete pipe and other necessary materials, and Armco promised to furnish labor and materials for the installation of tunnels.

This appeal involves section 23 of the Mechanics' Liens Act (Ill. Rev. Stat. 1983, ch. 82, par. 23) (hereinafter referred to as section 23), which allows subcontractors of a general contractor employed by a public body to establish a lien on funds in the possession of the public body. According to such statute:

"Any person who shall furnish material . . . or labor to any contractor having a contract for public improvement for any . . . municipal corporation in this State, shall have a lien for the value thereof on the money . . . due or to become due the contractor . . .," (Ill. Rev. Stat. 1983, ch. 82, par, 23.)

Hence, as subcontractors of a contractor employed by a public body, Price and Armco are permitted a lien on funds "due or to become due" Santucci. In order to perfect such a lien, however, section 23 requires that a subcontractor,

"before payment of delivery thereof is made to such contractor, notify the official or officials of the . . . municipal corporation whose duty it is to pay such contractor of his claim by a written notice and furnish a copy of said notice at once to said contractor." (Ill. Rev. Stat. 1983, ch. 82, par. 23.)

On February 2, 1984, after not being paid by Santucci, Price filed with the Commission by certified mail a notice of lien against funds "due or to become due" Santucci from the Commission, and Armco filed a similar notice on March 12, 1984.

After receiving these initial notices, the Commission began to withhold payment to Santucci as mandated by section 23, which states:

"It shall be the duty of any such official upon the receipt of the first notice herein provided for to withhold a sufficient amount to pay such claim for the period limited for the filing of [such claim]." (Ill. Rev. Stat. 1983, ch. 82, par. 23.)

Between February 8, 1984, and May 2, 1984, pursuant to the statute, the Commission withheld payment on Santucci pay requests number 9 in the amount of $359,812.79, number 10 in the amount of $244,824.53, number 11 in the amount of $63,296.93, and number 12 in the amount of $2,359.40, for a total of $570,293.65. In accordance with its contract with Santucci, the Commission also withheld an additional $194,907.07, which represented "retainage," or money reserved by the Commission at the rate of 10% of each payment to insure completion of the project as per such contract. Thus, Santucci had completed $765,200.72 worth of construction for which it had not been compensated as of the time periods covered by the pay requests noted above.

In order to perfect their lien claims, section 23 required Price and Armco to

"within 90 days after giving such notice, commence proceedings by complaint for an accounting, making the contractor having a contract with the . . . [municipal corporation] and the contractor to whom such material, apparatus, fixtures, machinery or labor was furnished, parties defendant, and shall within the same period notify the official or officials of the . . . municipal corporation of the commencement of such suit by delivering to him or them a copy of the complaint filed. Failure to commence proceedings within 90 days . . . shall terminate the lien . . .." (Ill. Rev. Stat. 1983, ch. 82, par. 23.)

On April 27, 1984, within the 90-day period, Price filed a five-count "Complaint For Accounting And Other Relief," entitling its complaint "PRICE BROTHERS COMPANY, a Foreign Corporation, and NORTHWEST WATER COMMISSION, ex rel. PRICE BROTHERS COMPANY, Plaintiffs, v. CARLO V. SANTUCCI, INC., An Illinois Corporation, and NATIONAL BEN-FRANKLIN INSURANCE COMPANY OF ILLINOIS, an Illinois Corporation, Defendants." As

illustrated, Price's designation of the parties did not specify that the Commission was a party defendant, although Price did name the Commission as an " ex rel." plaintiff and did pray "that PRICE be declared to have a lien on the public funds due or to become due to SANTUCCI in connection with the [pipeline project] in the total amount of $520,555.40." On June 5, 1984, Armco also filed suit within the 90-day period to perfect its lien, but, in contrast to Price, Armco specifically designated the Commission as an adverse party in the caption of its complaint. Armco prayed that it too "be decreed to have a lien [on public funds due or to become due Santucci] in the amount so found to be due Armco." In both instances, copies of the complaints were properly delivered to the Commission.

As noted earlier, upon receipt of the statutory first notice from the subcontractors the Commission was obliged to "withhold a sufficient amount to pay such claim for the

"Upon the expiration of this

There is no dispute that Price and Armco timely instituted proceedings (the above-mentioned complaints for accounting), that the Commission was properly notified of the complaints within the 90-day period, and that the Commission did not release the withheld funds to Santucci as payment. Thus, under the terms of section 23, the Commission was obligated to retain the $570,293.53 until the "final adjudication" of Price's and Armco's suits.

On June 18, 1984, the Commission terminated Santucci as the general contractor charging breach of contract, and thereafter undertook to complete the project itself without affording Ben Franklin, Santucci's surety, the opportunity to finish the job. The Commission paid $270,050 to the J. R. Myers Company and $64,696 to the City of Evanston, and apparently also used some of the funds withheld under the statute, to complete construction of the project.

The Commission subsequently brought suit against Santucci, seeking a declaration that its termination of Santucci was proper and praying that judgment be entered against Santucci in the amount of the Commission's damages, plus interest, costs, and attorney fees. Though the complaint did not request a specific dollar figure as damages, in its briefs to this court the Commission asserts it has incurred damages totalling $414,897 as a result of Santucci's defective work and the excess engineering needed to correct such defective work, as well as due to the cost of completing the project.

On September 11, 1984, the Commission filed what it styled an "Emergency Motion . . . To Consolidate Cases," seeking to combine its action against Santucci with Price's suit for an accounting "for purposes of discovery and trial." According to the Commission's motion, "[the] consolidation of these actions would eliminate a multiplicity of suits, prevent unnecessary litigation, and avoid duplication of efforts and expense, thereby conserving the court's time and expediting the Disposition of the actions." The trial court granted the motion for consolidation, explicitly ordering that the cases were "consolidated for the purposes of discovery and trial."

After the consolidation of the Price suit with the Commission's action, but prior to the time that the Armco suit was consolidated therewith, Price brought a motion on February 13, 1985, to compel the Commission to "immediately release to Price $406,000 plus interest which [the Commission] has held for the benefit of Price pursuant to notices of lien filed by Price on public funds held by the Commission which were otherwise due and owing . . . Santucci." In its motion to compel, Price alleged that it had negotiated a settlement agreement with Santucci whereby the latter stipulated that it was indebted to Price in the amount of $406,000 for pipeline materials furnished under ...

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