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12/30/88 Calumet Construction v. the Metropolitan Sanitary

December 30, 1988

CALUMET CONSTRUCTION CORPORATION, PLAINTIFF-APPELLEE AND CROSS-APPELLANT

v.

THE METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO, DEFENDANT-APPELLANT AND CROSS-APPELLEE



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, FIRST DIVISION

533 N.E.2d 453, 178 Ill. App. 3d 415, 127 Ill. Dec. 581 1988.IL.1935

Appeal from the Circuit Court of Cook County; the Hon. Robert L. Sklodowski, Judge, presiding.

APPELLATE Judges:

JUSTICE QUINLAN delivered the opinion of the court. CAMPBELL, P.J., and MANNING, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE QUINLAN

In November 1986, Calumet Construction Corporation (Calumet) sued the Metropolitan Sanitary District of Greater Chicago in the circuit court of Cook County for breach of a construction contract between the MSD and Calumet. Calumet sought damages for certain alleged breaches of the contract by the MSD, as well as the return of liquidated damages in the amount of $346,000, which the MSD had withheld from the monies it owed Calumet for delays in Calumet's performance under the contract. Calumet filed a motion for partial summary judgment on the liquidated damages issue, and the trial court held an evidentiary hearing pursuant to the motion. After the hearing, the trial court granted Calumet's motion for summary judgment and ordered a return of the liquidated damages withheld by the MSD, but refused to assess prejudgment interest against the MSD. The MSD appeals the grant of partial summary judgment in favor of Calumet, and Calumet cross-appeals the court's refusal to assess prejudgment interest against the MSD.

In 1983, the MSD advertised for bids on a large public construction contract, No. 77 -- 173 -- 2P, for the construction of sludge digestion tanks, floating tank covers, a service terminal, boilers, a central boiler facility, adjoining control chambers, a gas compressor, the rehabilitation of certain existing equipment, and other related work at the West Southwest Sewage Treatment Plant in Stickney, Illinois. In September 1983, the contract was awarded to Calumet, the lowest bidder, for $22,575,000.

The pertinent provisions of the contract between the MSD and Calumet provided generally that the contract was to be completed in 900 days, with different completion dates set for completion of each of the four phases of the project. The contract provided that time was of the essence and it also provided that if there were delays over which Calumet had no control (i.e., delays caused by the MSD, strikes, fire), the engineer, apparently acting in the capacity of an independent third party, would provide matching day-to-day extensions for Calumet's deadlines. The liquidated damages provision of the contract specifically provided for a liquidated amount of damages of $1,000 for each day past the deadline set for Phase 3 (completion of four sludge digestion tanks) and $1,000 for each day past the deadline set for Phase 4 (completion of the entire project). This appeal concerns the assessment of liquidated damages for the late completion for Phases 3 and 4.

Pursuant to the contract terms, the original deadline set for the completion of Phase 3, the completion of four sludge digestion tanks, was September 18, 1985. Due to certain delays by the MSD, Calumet was granted a day-to-day extension to June 5, 1986. The MSD determined that substantial completion of Phase 3 occurred on January 19, 1987. *fn1 Based on this determination, the MSD assessed liquidated damages in the amount of $218,000 for the delay from June 5, 1986, to January 19, 1987, and withheld that amount from monies owing to Calumet under the contract.

The original deadline set for completion of Phase 4, completion of the entire project, was March 17, 1986. Due to certain delays by the MSD, Calumet was granted a day-to-day extension to December 18, 1986. The MSD then determined that substantial completion occurred on April 15, 1987, assessed liquidated damages in the amount of $118,000, for the delay from December 18, 1986, to April 15, 1987, and withheld that amount from the monies owing to Calumet under the contract. Thus, the court ultimately found that the MSD actually withheld a total of $346,000 from Calumet's payment as liquidated damages for the alleged late completion of Phases 3 and 4.

As noted above, Calumet filed its $5,500,000 breach of contract claim in November 1986, a portion of which requested the return of the $346,000 that had been withheld as liquidated damages by the MSD. Calumet also, as noted earlier, filed a motion for partial summary judgment on the liquidated damages issue, and at the evidentiary hearing held by the trial court, Calumet presented evidence to show that the MSD contributed to the delays in the completion of the work. The MSD, on the other hand, presented no evidence to contradict Calumet's presentation. Following the presentation of the evidence at the hearing, counsel for Calumet argued that because the MSD contributed to the delays in the work and because fault could not be apportioned under the liquidated damages clause of the contract, the entire amount of liquidated damages, $346,000, should be returned to Calumet. The MSD argued that, pursuant to the terms of the contract, it had granted day-to-day extensions to Calumet for the delays it, the MSD, had caused, that there was a question of fact concerning who was responsible for the additional alleged delays, and that, contrary to Calumet's contention, the liquidated damages clause could be apportioned on the basis of fault under the terms of the contract and was, thus, enforceable.

The trial court, as stated earlier, granted Calumet's motion for partial summary judgment, finding that Calumet had proven that there was mutual delay, and, consequently, under Illinois law the liquidated damages clause was abrogated. The court then suggested that the parties pursue whatever remedies might be available for actual damages. Calumet had, in its claim for the return of the liquidated damages, additionally requested that the court assess prejudgment interest against the MSD. The court, however, found that although the funds had been illegally withheld, they had not been wrongfully obtained, and since both conditions were required under Illinois law, it denied Calumet's request.

Two issues are presented for our consideration on appeal: (1) whether the trial court properly refused to apportion the fault between Calumet and the MSD for the delays under the liquidated damages provision because there had admittedly been mutual delay; and (2) whether the trial court properly denied Calumet's request to assess prejudgment interest against the MSD.

The MSD first argues that the trial court improperly struck the liquidated damages clause on the basis that Illinois law would not permit apportionment of fault under a liquidated damages clause in the event of mutual delay. The MSD contends that this is not the law in Illinois and that, accordingly, the trial court's grant of summary judgment in favor of Calumet on the liquidated damages issue was erroneous. A trial court's grant of summary judgment is proper only if there is no genuine issue of material fact and the ...


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