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10/27/89 United States Fidelity and v. Klein Corporation Et Al.

October 27, 1989

UNITED STATES FIDELITY AND GUARANTY COMPANY, PLAINTIFF-APPELLEE

v.

KLEIN CORPORATION ET AL., DEFENDANTS (DONNA G. KLEIN, DEFENDANT-APPELLANT)



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SIXTH DIVISION

558 N.E.2d 1047, 190 Ill. App. 3d 250, 137 Ill. Dec. 736 1989.IL.1695

Appeal from the Circuit Court of Cook County; the Hon. Arthur L. Dunne, Judge, presiding.

APPELLATE Judges:

JUSTICE McNAMARA delivered the opinion of the court. QUINLAN and La PORTA, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE MCNAMARA

Defendants, Donna G. Klein and Klein Corporation, each appeal from separate orders granting summary judgment in favor of plaintiff, United States Fidelity and Guaranty Company . The cases were consolidated on appeal. Defendants contend that the order granting USF&G's motion for summary judgment was improperly entered where the evidence presented was incomplete and subject to multiple interpretations, that USF&G is not entitled to indemnity, and that the trial court erroneously found that there was no just reason to delay enforcement or appeal of its order.

The relevant facts are as follows. On April 1, 1982, USF&G entered into a master surety agreement with Klein Construction Company and various corporations controlled by Wayne Klein, Donna Klein's husband. The agreement was executed by Donna Klein.

On or about July 19, 1984, Klein Construction entered into a construction contract with the Chicago Transit Authority (the CTA). Klein Construction agreed to act as general contractor for the construction of a bus facility. The contract price was $25,686,000. USF&G issued performance and payment bonds in that sum, with Klein Construction as principal and the CTA as obligee.

On August 20, 1986, Klein Construction filed a petition for reorganization under chapter 11 of the Bankruptcy Code. On October 15, 1986, the CTA informed USF&G that Klein Construction had defaulted under the construction contract. The CTA demanded that USF&G fulfill its obligations as surety under the performance bond. The master surety agreement provides:

"In the event of . . . (2) any . . . default in any contract secured by BOND(s) . . . SURETY shall have the right, in its discretion, to take possession of any part or all of the work under contract(s) secured by BOND(s) . . . and, at the expense of UNDERSIGNED [defendant], to complete or cause completion of any such work, or relet or consent to the reletting or completion of such contract . . .."

Prior to the date of default, the CTA had paid Klein Construction and its subcontractors $15,653,143.61 under the construction contract. After adjustments due to change orders, there remained a balance of $10,808,567.79 to be paid pursuant to the contract.

On October 23, 1986, USF&G filed suit against Klein Corporation, Wayne J. Klein and Donna Klein. USF&G alleged, among other things, that it was entitled to be reimbursed for various amounts it paid pursuant to the bonds.

On February 20, 1987, USF&G, the CTA and Paschen Contractors, Inc., entered into a tri-party contract assumption agreement for the completion of the CTA project. The parties executed a supplemental and an auxiliary agreement on March 5, 1987. The CTA accepted USF&G's offer of Paschen as completing contractor, and agreed to pay Paschen $10,808,000 less amounts paid by the CTA under a previous estimate. Paschen was required to deliver to the CTA performance and payment bonds in the sum of $10,808,567.79. The CTA agreed to pay Paschen that amount and to look to Paschen and its surety as primary obligors in the event of a default by Paschen.

The CTA also agreed to reduce the penal limits of USF&G's performance bond by the following sums: the amounts paid for enclosure of the building and for all other work done subsequent to the CTA's demand of October 15, 1986; the amounts paid by USF&G to Paschen as completing or interim contractor; and the amounts paid by USF&G to satisfy claims for labor or ...


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