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Dean Management, Inc. v. Construction

June 2, 2003


Appeal from the Circuit Court of Du Page County. No. 01-AR-58 Honorable Kenneth Moy, Judge, Presiding.

The opinion of the court was delivered by: Justice Byrne


This breach of contract case arises out of a construction agreement between the general contractor, plaintiff, Dean Management, Inc., and a subcontractor, defendant, TBS Construction, Inc. Plaintiff terminated the contract and filed a verified complaint seeking damages, interest, and attorney fees and costs. Defendant filed a counterclaim for past-due payments under the contract. The trial court denied each party relief, finding that (1) plaintiff had not properly served defendant with notice of its intent to terminate the contract and (2) defendant failed to prove that it was entitled to additional payment. On appeal, plaintiff contends that the trial court erroneously (1) concluded that the contract prohibited plaintiff from serving defendant with notice by facsimile transmission and (2) found that the defendant never actually received notice. Rather than challenging the portion of the judgment denying its claim for past-due payments, defendant merely asserts that we should affirm the judgment. We agree with both of plaintiff's arguments, and we reverse the judgment and remand the cause with directions.


The following facts are undisputed. Plaintiff is a Wisconsin corporation engaged in the business of general contracting and construction. Defendant is an Illinois corporation engaged in the business of excavation and concrete installation. On December 22, 1999, the parties entered into a written subcontract agreement (the contract) pursuant to which plaintiff agreed to pay $158,293 for defendant to excavate and install concrete and site utilities at a construction project commonly known as the Lion's Choice Restaurant in Warrenville. Article 5 of the contract permitted plaintiff to terminate the contract and provides in relevant part:

"Should [defendant] fail to perform his obligation hereunder, including but not limited to, failure to pursue completion of said work with due diligence, [plaintiff] may terminate this Subcontract by written notice to [defendant] from [plaintiff]. The determination as to whether [defendant] is pursuing completion of the work with due diligence shall be made solely by [plaintiff] or it's [sic] representative.

In the event of termination, as herein provided, [defendant] will be paid for all work satisfactorily completed to the date of termination; provided, however, that [plaintiff] may withhold sufficient amounts from any such payment to cover any loss which [plaintiff] any [sic] suffer as a result of the failure of [defendant] to satisfactorily fulfill his obligations hereunder. Acceptance of payment upon termination by [defendant] shall waive and [sic] further rights of defendant against [plaintiff] or Owner. Nothing herein shall limit [plaintiff's] rights to damages as a result of [defendant's] failure to fulfill his obligation hereunder. The parties agree that, in the event [defendant] fails to complete the Subcontracted work according to the schedule herein provided, the damages suffered by [plaintiff], as a result of such delay, would be difficult to ascertain, and the parties thereby agree that, in the event of failure of [defendant] to complete said work within the time period herein provided, [defendant] shall pay [plaintiff] liquidated damages in the amount of One Hundred and No/100 ($100.00) dollars for each day beyond the scheduled completion date. In the event [plaintiff] has to take over [defendant's] job and terminate the Contract, said [plaintiff] shall give a twenty-four (24) hours written notice prior to it's taking over the job. [Defendant] is responsible for differences between Subcontract Agreement price and completed price." (Emphasis added.)

During January 2000, defendant completed certain work under the contract. On March 2, 2000, representatives of an electrical workers union began picketing the site because plaintiff had employed a nonunion electrical subcontractor. Plaintiff instituted a gating system whereby it designated both a reserve gate where picketing was allowed and a neutral gate where picketing was not allowed. On March 3, 2000, plaintiff sent defendant a facsimile transmission (fax) notifying it about the establishment of the gating system at the site. Citing the presence of the picketers, defendant removed its equipment and employees from the site and refused to perform additional work pursuant to the contract.

At 5:27 p.m. on March 9, 2000, Timothy Nolan, plaintiff's attorney, sent a fax on his law firm's letterhead to "Russ" at defendant's place of business. The fax stated that plaintiff would take over the project if defendant did not resume performance under the contract within 24 hours of receiving the notice. Nolan included a "Fax Transmittal Sheet," identifying the date, the intended recipient, the fax numbers of the source and destination machines, and the number of pages in the transmission. Nolan's fax machine generated a "transmission report," which indicated the date and time of the transmission, the duration of the call, and verification that the fax was received. The following morning, defendant resumed working at the site. Later that afternoon, Nolan arranged for personal delivery of a copy of the notice via messenger. The messenger signed and dated a statement of delivery, and his signature was notarized. Defendant concedes that "[t]here can be no doubt that [defendant] received the document."

In late March or early April 2000, the presence of picketers again caused defendant to remove its equipment and employees from the site. The appellate record contains a copy of a letter on plaintiff's letterhead that was prepared by Dustin Dostal, plaintiff's project manager. Like Nolan's fax, Dostal's letter was addressed to Russ at defendant's place of business and stated that plaintiff would assume control of defendant's project and terminate the contract if defendant did not return to the site within 24 hours. Dostal's letter contained the following notation: "VIA FACSIMILE TRANSMISSION DATED MARCH 30, 2000 AND VIA MESSENGER DELIVERY ON MARCH 31, 2000." The exhibit in the record does not include a fax transmittal sheet like the one attached to Nolan's fax. However, Dostal dated the letter April 7, 2000, and the top margin contains a fax transmittal code indicating that the letter was sent from plaintiff's fax machine at 8:35 a.m. on April 7, 2000, and that the letter was the second page of the transmission.

James Kehm, plaintiff's site supervisor, testified that, on the morning of April 7, 2000, Steven Snow, one of defendant's employees, arrived at the site and began loading dirt into waiting trucks. Union picketers were on site and had set up informational picketing directed to plaintiff's use of nonunion electrical, heating, and air subcontractors. Plaintiff's two-gate system was operating that morning.

Kehm stated that, at approximately 8 a.m., the business agent from Snow's union arrived and instructed Snow to leave the site. Snow and the agent left, and Kehm telephoned Dostal and told him that defendant's operator had abandoned the project. Snow returned 5 or 10 minutes later. At approximately 8:30 a.m., Kehm spoke with Snow's supervisor, Don Brummerstedt, who stated that the union had demanded that defendant "pull off [the project] and not come back." Snow again left with the agent, and Kehm did not authorize him to do so. Kehm reported Snow's absence to Dostal, who instructed Kehm to locate replacement subcontractors who could complete defendant's project.

Dostal corroborated Kehm's testimony at trial. Immediately after learning that Snow had left the site, Dostal directed his secretary to send the "24-hour demand letter" by fax, but he never sent a copy of the notice via messenger. Dostal did not authorize defendant to leave the site on April 7, 2000, or on any other day. No employee of defendant ever responded to the April 7 fax.

Snow testified that he was ready, willing, and able to work on April 7, 2000, and that he started loading dirt onto trucks that morning. Snow confirmed that his union business agent arrived and inquired why Snow was working while picketers were present. Snow left the site temporarily with the agent, and when they returned, Snow telephoned Don Brummerstedt, who told him to cease working. Snow's time records indicate that he left the site at 8:15 a.m. ...

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