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BROWN & KERR INC. v. ST. PAUL FIRE & MARINE INS. C

September 11, 1996

BROWN & KERR INCORPORATED, a corporation, Plaintiff,
v.
ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a corporation, Defendant. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, a corporation, Third-Party Plaintiff, v. BUCON, INC., d/b/a Butler Construction, Third-Party Defendant.



The opinion of the court was delivered by: ANDERSEN

 Plaintiff Brown & Kerr, Inc. ("BKI") moves for partial summary judgment on Count I of its Amended Complaint against defendant St. Paul Fire and Marine Insurance Company ("St. Paul"). For the following reasons, the motion for partial summary judgment is granted.

 BACKGROUND

 The following facts, taken from plaintiff's Amended Complaint and the parties' Local Rule 12M and 12N statements, are undisputed. On February 18, 1993, Bucon, Inc. ("Bucon") entered into a multi-million dollar design/build contract with Vernon Hills III Limited Partnership ("Vernon Hills") to perform various construction services for a project known as "The Marketplace" in Vernon Hills, Illinois. Pursuant to the terms of the contract with Vernon Hills, Bucon was to act as general contractor for the Marketplace project.

 At the inception of the contract, the sole owner of the premises was Vernon Hills. In 1994, K Mart Corporation ("K Mart") and Northwestern Mutual Life Insurance Company ("Northwestern Mutual") also acquired ownership interests in the premises.

 On April 6, 1993, defendant St. Paul, as surety, issued a "Labor and Material Payment Bond" (the "Bond") for the Marketplace project in the amount of $ 15,735,307 with Bucon as the principal. The owners or obligees on the Bond are Vernon Hills, Northwestern Mutual, and K Mart. The Bond provides in part:

 
The above named Principal and Surety hereby jointly and severally agree with the Owner that every claimant, as herein defined, who has not been paid in full before the expiration of a period of ninety (90) days after the date on which the last of such claimant's work or labor was done or performed, or materials were furnished by such claimant, may sue on this bond for the use of such claimant, prosecute the suit to final judgment for such sum or sums as may be justly due claimant, and have execution thereon. The Owner shall not be liable for the payment of any costs or expenses of any such suit.

 (Pl.'s App. Supp. Summ. J. Ex. A at P 2). Claimants are defined to include subcontractors. (Id. at P 1). The Bond further provides that no claimant may bring suit unless that claimant has "given written notice to any two of the following: the Principal, the Owner, or the Surety above named, within ninety (90) days after such claimant did or performed the last of the work or labor" under the contract. (Id. at P 3(a)).

 On May 17, 1993, Bucon, as general contractor, entered into two subcontracts with plaintiff BKI totalling $ 598,603. Pursuant to the subcontracts, BKI was to supply labor and materials for a complete roofing system of the Marketplace project. One subcontract concerned the Super K Mart portion of the project, and the other subcontract concerned the Builders Square Marketplace portion. Article 9.1 of the subcontracts provides in part:

 
Final Payment constituting the entire unpaid balance of the Subcontract Sum, shall be made by the Contractor to the Subcontractor when the Subcontractor's Work is fully performed in accordance with the requirements of the Subcontract Documents, the Customer or Customer's representative has issued its approval for payment covering the Subcontractor's completed work and the Contractor has received final payment from the Customer under the Prime Contract.

 (Def.'s Mem. Opp'n Summ. J. at 3). The subcontracts further provide that, as a condition to the Contractor's issuance of final payment, the subcontractor shall provide all applicable warranties and guarantees. (Id. at 4).

 On October 25, 1994, BKI completed performance under the subcontracts and even performed extras, at the request of Bucon, in the amount of $ 51,848. BKI subsequently received payments of 544,035.70, and remains owed a total amount of $ 106,415.30. According to Bucon, there is an unpaid balance on the subcontracts in the amount of $ 86,879.30. St. Paul does not dispute this amount. Further, as of the filing of the instant motion, Bucon has not received any payment from the owners for work performed at the Marketplace project.

 On or about December 16, 1994, BKI forwarded to Bucon the manufacturer's warranty for the roofing system issued by Firestone Building Products Company. Paragraph 3 of the warranty provides that Firestone has no obligation under the warranty until both Firestone and BKI have been paid in full. (Pl.'s Reply Br. Supp. Summ. J. Ex. B at P 3). BKI also forwarded to Bucon its own warranty for the roofing system.

 On January 9, 1995, BKI served notice of its demand for payment of the remaining balance on the subcontracts, via certified mail, on the three owners and Bucon as required by the Bond. BKI served an additional notice to St. Paul on January 20, 1995.

 BKI subsequently received no payment after serving its demand notices on the owners, Bucon, and St. Paul. On February 22, 1995, BKI filed a one-count complaint against St. Paul seeking payment of $ 106,415.30 under the Bond for its completed work under the subcontracts and "extras." ...


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