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03/31/89 E.R. Stone, D/B/A E.R. v. the City of Arcola

March 31, 1989

E.R. STONE, D/B/A E.R. STONE HEAVY EQUIPMENT COMPANY, PLAINTIFF-APPELLEE

v.

THE CITY OF ARCOLA, DEFENDANT-APPELLANT AND COUNTERPLAINTIFF-APPELLANT (THE FIRST NATIONAL BANK



APPELLATE COURT OF ILLINOIS, FOURTH DISTRICT

of Arcola, Defendant; E.R. Stone, d/b/a E.R.

Stone Heavy Equipment Company, et al.,

Counterdefendants-Appellees)

536 N.E.2d 1329, 181 Ill. App. 3d 513, 130 Ill. Dec. 118 1989.IL.463

Appeal from the Circuit Court of Douglas County; the Hon. Frank W. Lincoln, Judge, presiding.

APPELLATE Judges:

JUSTICE SPITZ delivered the opinion of the court. McCULLOUGH, P.J., and KNECHT, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE SPITZ

This action was brought by plaintiff E.R. Stone, d/b/a Stone Heavy Equipment Company, against defendant City of Arcola (City) to recover monies held by defendant which plaintiff claims to be due to plaintiff under a construction contract. Plaintiff's two-count complaint alleges breach of contract (count I) and equitable restitution based on a theory of unjust enrichment and implied contract (count II).

Defendant counterclaimed to recover damages caused by plaintiff's delay in completing the contract and failure to perform all work required by the contract. Following a bench trial conducted in the circuit court of Douglas County, judgment was entered in favor of plaintiff and against defendant on both the complaint and counterclaim.

Plaintiff is a contractor engaged in the construction of public utilities. Plaintiff submitted a $1,273,000 bid to construct a portion of defendant's new sanitary sewage facility. Plaintiff's bid was accepted on July 6, 1981, and plaintiff signed the acceptance of notice of the award on July 20, 1981.

The agreement provided that plaintiff would commence work within 10 calendar days after the date of the notice to proceed and would complete the same within 365 calendar days unless the period for completion was extended. After Stone submitted a performance bond and a payment bond, defendant issued a notice to proceed which designated the date of completion of all work as July 20, 1982. However, on the copy of the notice to proceed that was received by plaintiff, the date of completion of the work was changed to read July 30, 1982. Stone did not change the completion date on the notice to proceed which was included with the copy of his contract documents, and the trial court specifically found that no evidence was submitted to explain this discrepancy.

At the hearing, Stone testified the work immediately fell behind schedule because of rain that started on August 10. By a letter to defendant's mayor, Jack Chaney, dated September 3, 1981, Stone asked defendant to consider an extension of the construction and completion date because "August has been an abnormally wet month." Stone does not recall ever receiving any response to his letter.

Thereafter, the work continued behind schedule on the project. After a work stoppage for the winter, plaintiff started pumping water from the lagoons into a road ditch. Stone testified that in early April he had a conversation with Chaney in which the mayor told him that complaints were being received from a farmer about drainage from the lagoon site flooding his field. The farmer was concerned about his crop and asked that the pumping cease. After this conversation, plaintiff stopped pumping water from the lagoons and proceeded to lay an outfall sewer from the sewer plant. This sewer was part of the contract, but now had to be completed out of sequence. Plaintiff resumed pumping water from the lagoons into the outfall sewer on April 20, 1982.

Chaney, when called as an adverse witness, initially denied he ever went to the plant site and instructed Stone to cease pumping water. Chaney did recall going to the site and talking with Stone on one occasion and asking his cooperation on some matter but Chaney had no recollection of the exact conversation. Chaney further stated he had no authority to tell Stone to stop doing anything. Under further examination, Chaney did recall asking Stone that he cooperate by not pumping water into the ditch and causing a problem for the City downstream.

Stone also testified there were some difficulties resulting from variations from the plans and the actual way the facility had to be constructed. These conflicts specifically involved elevations for the structures, dimensions on the building, and piping. There were contradictions in the paint and finish specifications for the clarifier, and changes were made with regard to the control building and the chemical feed location. Stone worked out these problems with the engineers in the field. According to his testimony, sometimes small items are just negotiated or trade-offs are made. However, Stone felt that this particular job contained more contradictions than usual and he sustained some delays as a result of resolving contradictions. Plaintiff's expert, Michael Murphy, testified the contradictions in the plans, in his opinion, caused somewhere between 35 to 60 days' delay.

James B. Upchurch, engineer for defendant on this project, testified there were several field adjustments made during the period of construction. He stated field adjustments are made in every type of construction project. Specifically, Upchurch testified there was a field adjustment made in connection with the floor of the first clarifier which resulted because the concrete used did not pass specifications. Consequently, Upchurch let plaintiff add an extra four inches of concrete to the top of the base so that he did not have to tear out the old base. There were also some bad concrete reports on the floor of the building at the old plant. Since he did not think this was significant, he did not require anything to be done. He determined concrete footings for the sludge drying beds were not necessary and, even though these footings were shown on the original plans and specifications, plaintiff was allowed to dispense with pouring these footings. At least 60 days were saved by not having to replace the bad concrete on the first clarifier, one week by not having to replace any of the bad concrete in the maintenance building at the old treatment plant, and two or three days by not having to put footings in some of the sludge drying beds. Other minor field adjustments were made on the project, but most of the field adjustments were made as a result of requests from plaintiff to facilitate the work.

Stone sent a letter to Chaney dated July 2, 1982, which referred to his letter of September 1981 and stated there had not been a sufficient number of favorable days or conditions to re-establish the original schedule and completion date. Therefore, plaintiff requested the completion date be extended 90 days. Chaney responded with a letter dated August 2, 1982, approving a 60-day extension of time from July 19, 1982, to and including September 17, 1982, for completion of the work. This letter stated defendant would take the necessary steps to enforce the contract, including the provision for liquidated damages in the amount of $200 per day for each day beyond September 17, 1982, the work remained uncompleted. The letter further stated the city council had reviewed plaintiff's request and had determined there had been an abnormally large amount of rainfall during the term of the contract which had been a condition beyond plaintiff's control within the meaning of section 15 of the general conditions of the contract.

On September 18, 1982, Stone mailed a letter to Chaney referring to the previous letters and reviewing the request for a 90-day extension. Stone did not recall receiving any correspondence with regard to that request but testified he knew it was denied. Stone did not make any further written requests for an extension of time. He did appear before the city council at a meeting in early February of 1983, explained to the council the situation and tried to describe the events leading up to the current status of the job. Stone then orally requested a time extension. Stone was not certain as to what action was taken that night by the council, but he did not receive any extension of time. He also had a conversation with one of Upchurch's associates asking to have a time extension. In another conversation, it was indicated to Stone by Upchurch that any Discussion about an extension of time was almost pointless.

Plaintiff's expert witness, Michael Murphy, is a construction management consultant with a degree in civil engineering. Murphy does consulting work for American States Insurance Company, the surety on Stone's performance and payment bonds. In Murphy's opinion, weather was a significant factor in delaying the completion of the project. However, he indicated that under the then existing weather conditions, it would have been possible to complete the project although it would have been "very tight." In response to a subsequent question as to whether the job could be completed within 365 days of August 1, 1981, Murphy responded: "I guess nothing is impossible with enough money. Certainly would have been unreasonable or nearly impossible to have completed it within the 365 days." Even with the 60-day extension, it was not possible, according to Murphy, to complete the project on time. In his opinion, there was a 14- to 16-month delay due to inclement weather.

On cross-examination, Murphy conceded his information as to specific rainfall amounts for the construction site was climatological data put out by the National Oceanic and Atmospheric Administration which included precipitation amounts for the closest reporting station in Tuscola, Illinois. These records showed a departure from normal rainfall for the months of September through December 1981, as follows: .47 inches less than normal for September; 1.01 inches less than normal for October; 1.76 inches less than normal for November; and .59 inches above normal for December. However, Murphy explained the number of days it actually rained and the times of day it rained are more important than total amounts of rainfall. In ascertaining this information he relied on Stone's daily notes even though these notes did not state amounts of rainfall.

Based on Murphy's review of the plans and specifications of the job and based upon his review of the engineering data from the parties, he formed an opinion that the lagoon aeration system was 100% complete on October 10, 1983, and the entire plant was substantially completed in early December 1983. He explained that the entire lagoon aeration system was able to be used for the purpose for which it was intended on October 10, 1983. However, the outfall chlorine system was not totally operational at that point and the chlorine system and alum system were not operational, but became operational in early December. He further explained the diversion of the sewage from the old treatment plant to the lagoon system in October of 1983 benefited both plaintiff, who needed to protect the aeration pipes from freezing with a minimum of two feet of water over them during the winter, and defendant, since defendant obviously needed this plant and it was already much later than defendant expected to have the plant on line.

According to Upchurch, the project was 95% complete in October of 1983 at the time the waste water was diverted from the old plant to the new sewage treatment plant. The major things left to be completed when Upchurch viewed the plant in October of 1983 were the chlorine facility, the flow meters, and a whole group of miscellaneous items which were reflected on subsequent lists. The chlorine system and the flow meters were completed around April 2, 1984.

Stone testified the existing sewer line at the old plant was tapped on October 10, 1983, and the sewage was pumped to the lagoons of the new plant. He made a written request to defendant to take over the operation of the plant, but he does not recall receiving a response to that letter, dated February 3, 1984. The letter advised that all systems were operational with the exception of the metering equipment which would be covered under a separate letter.

Plaintiff operated the plant for 210 days from October 10, 1983, to the date that the City took over the operation of the plant. During this period, there would have been about 200 days that equipment would have been serviced at the site. One of plaintiff's employees spent an average of one hour per day performing his duties in the operation of the sewage treatment plant. Plaintiff's employees were paid $20 per hour. In addition, during the time plaintiff operated the plant, plaintiff paid to Central Illinois Public Service Company $5,739.02 for electric bills. Stone did not ask defendant to reimburse him for the electrical expenses, but did request defendant to take over operation of the plant after he had put it in operation. While operating the plant, 48 man-hours were expended in cleaning the sand filters at the rate of $20 per hour.

Five written change orders were made in connection with this project. The first change order was dated August 2, 1982, and granted plaintiff the 60-calendar-day extension to complete the work. The other four change orders were dated August 1, 1983, October 3, 1983, May 7, 1984, and January 24, 1985. These change orders did not extend the contract time, but did increase the contract price by a total of $34,185. Three of these change orders occurred during the time defendant was retaining liquidated damages for plaintiff's delay in completing the contract. One of the change orders resulted from a request by plaintiff. The two change orders dated prior to May of 1984 were requested by defendant and one of these was for the construction of a metal storage building, a project actually performed by a subcontractor selected by defendant and which was merely tied to plaintiff's contract. Plaintiff was to receive a percentage for including this building in his contract.

A certificate of substantial completion dated April 2, 1984, was delivered to plaintiff with an April 3, 1984, letter from Upchurch's associate, Tony Harrell. Also attached to this letter was a clarification agreement as to assessment of liquidated damages and a list of items to be completed, dated March 25, 1984. The substantial completion certificate specified that it applied to all the work except for the storage building in the change order dated October 3, 1983, and lift station No. 1 magnetic flow meter. Stone consulted with an attorney concerning the substantial completion certificate. He then received a letter from defendant dated April 16, 1984, which indicated that upon signing the certificate of substantial completion evidencing an acceptance thereof, defendant would assume the responsibilities of operation, maintenance, heat and utilities for the facility, security and safety, and insurance associated with the operation of the facility. Plaintiff's acceptance of the certificate was dated April 17, 1984, but it was not delivered to defendant's engineers until May 21, 1984.

After the issuance of the substantial completion certificate, defendant made five written requests to plaintiff with regard to work defendant insisted still needed to be completed under plaintiff's contract or under the one-year contract guarantee period. These letters were dated July 10, 1984, August 7, 1984, November 15, 1984, January 4, 1985, and January 4, 1985. Although Stone disputed whether he was required to complete some of these items, he conceded that there were some he did not complete. There was one last list dated February 26, 1985, delivered to plaintiff. Defendant thereafter wrote a letter to plaintiff dated March 4, 1985, sending a copy to American States, which advised plaintiff and American States that, pursuant to paragraph 18 of the general conditions of the contract, his services under the contract would be terminated within 10 days from the receipt of the letter and stated the reasons therefor. Upchurch then prepared three separate sets of bid specifications to complete this work the City claimed was left unfinished under plaintiff's contract. C & R Construction Company submitted a bid on each one of these proposals, performed the work and was paid $5,715 by defendant. In addition, there were repairs done on two flow meters which were a part of plaintiff's original contract. Upchurch explained there were no bids taken on the repairs of the flow meters, since Sparling Instrument Company, the manufacturer of the flow meters, did the repairs at a cost to defendant of $3,557.78. In ...


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