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02/02/88 Board of Education, School v. Fred L. Ockerlund

February 2, 1988

BOARD OF EDUCATION, SCHOOL DISTRICT NO. 15, DU PAGE COUNTY, ET AL., PLAINTIFFS-APPELLANTS

v.

FRED L. OCKERLUND, JR. & ASSOCIATES, INC., ET AL., DEFENDANTS (THE AETNA CASUALTY AND SURETY COMPANY, DEFENDANT-APPELLEE)



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

519 N.E.2d 95, 165 Ill. App. 3d 439, 116 Ill. Dec. 505 1988.IL.119

Appeal from the Circuit Court of Du Page County; the Hon. Robert D. McLaren, Judge, presiding.

APPELLATE Judges:

JUSTICE DUNN delivered the opinion of the court. NASH and REINHARD, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE DUNN

Plaintiff, Board of Education, School District No. 15 (Board), filed a four-count complaint against a general contractor, a paving subcontractor, an architect, and the contractor's surety, The Aetna Casualty and Surety Company (Aetna), alleging faulty construction at a new school site. The trial court granted Aetna's motion to dismiss count IV of the complaint, the only count directed against Aetna, on grounds

that the Board lacked standing to enforce the surety bond. The court later denied the Board's motion to amend count IV to include the Illinois Capital Development Board as a party plaintiff. The Board and the CDB appeal both the dismissal of count IV and the denial of leave to amend the complaint. We find that the trial court correctly dismissed the original count IV, but improperly denied leave to amend.

The CDB is authorized by statute to construct educational facilities for school districts, to lease such facilities back to school districts for their use, and to transfer title to such facilities to the school districts after the cost is repaid by annual rentals. (Ill. Rev. Stat. 1973, ch. 127, pars. 774.01, 779.04; ch. 122, pars. 35-1, 35-5(d).) In August 1975, the CDB solicited bids for the regrading and paving of driveways and parking lot areas at the Marquardt Middle School in Glendale Heights. The bid documents included a requirement that the contractor furnish a performance bond and a labor and materials bond to the CDB.

On September 5, 1975, the CDB entered into a written contract with Fred L. Ockerlund, Jr., & Associates (Ockerlund) for the regrading and paving work. The advertisement for bids, which was incorporated into the construction contract, provided that the project was to be constructed for the use of the Board. The contract also incorporated the following provisions from the bid specifications:

"The owner is constructing the project for the use and benefit of the user. It is intended, therefore, that the rights of and benefits to Owner under the Contract Documents, including, but not limited to, the obligations of Contractor to protect Owner's property and to indemnify Owner against certain losses, shall and do extend to User and User's property."

The performance bond is listed as one of the contract documents.

On September 6, 1975, Aetna issued a performance bond, on a form issued by the CDB, binding itself as surety for Ockerlund's performance of the work specified in the construction contract. The surety contract incorporated the construction contract by reference and named only the CDB as obligee on the bond. The surety contract also contained the following provision:

"No right of action shall accrue on this bond to or for the use of any person or corporation other than the Obligee named herein."

Ockerlund completed the regrading and paving work on November 12, 1975, and was paid $79,200 in accordance with the construction contract. On October 15, 1985, the Board commenced this action against Ockerlund, the paving subcontractor, the project architect, and Aetna, alleging that the grading and paving work was defective. On August 22, 1986, the trial court dismissed count IV of the complaint, the only count against Aetna, ruling that the bond could only be enforced by the named obligee, the CDB. Plaintiffs then sought leave to amend count IV to include the CDB as ...


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