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Lake County Grading Company, LLC v. the Village of Antioch

February 20, 2013

LAKE COUNTY GRADING COMPANY, LLC,
PLAINTIFF-APPELLEE,
v.
THE VILLAGE OF ANTIOCH, DEFENDANT-APPELLANT
(NEUMANN HOMES, INC., DEFENDANT).



Appeal from the Circuit Court of Lake County. No. 08-L-329 Honorable Margaret J. Mullen, Judge, Presiding.

The opinion of the court was delivered by: Presiding Justice Burke

PRESIDING JUSTICE BURKE delivered the judgment of the court, with opinion. Justices McLaren and Hudson concurred in the judgment and opinion.

OPINION

¶ 1 Defendant Neumann Homes, Inc., entered into two infrastructure agreements (the contract) with defendant the Village of Antioch (Village), to make certain public improvements in two residential subdivisions. Pursuant to the contract, Neumann provided four surety bonds that guaranteed performance for the benefit of the Village. The bonds did not also guarantee payment to subcontractors, which was required by section 1 of the Public Construction Bond Act (Bond Act). 30 ILCS 550/1 (West 2010). Neumann defaulted on its contract with the Village and also failed to pay plaintiff, Lake County Grading Co., LLC., a subcontractor that worked on the project.

¶ 2 Plaintiff filed a five-count second amended complaint to recover payment from the Village. The trial court granted plaintiff summary judgment on counts II and IV, in which plaintiff alleged breach of contract under a third-party-beneficiary theory. Plaintiff's theory was that (1) section 1 of the Bond Act (see 30 ILCS 550/1 (West 2010)) required the Village to obtain from Neumann a payment bond for the benefit of subcontractors, (2) Neumann's bonds were only performance bonds and not payment bonds, and (3) the Village's noncompliance with section 1 of the Bond Act rendered it liable for third-party-beneficiary breach of contract. On appeal, the Village argues that under section 1 a payment bond provision was read into Neumann's performance bonds, and therefore plaintiff's recourse was to file an action on the bonds under section 2 of the Bond Act, which was barred by the 180-day limitations period set out therein (30 ILCS 550/2 (West 2010)). We affirm.

¶ 3 I. FACTS

¶ 4 This action arises from construction work performed in two residential subdivisions in Antioch, commonly known as the NeuHaven Subdivision and the Clublands Subdivision. Pursuant to the contract, Neumann agreed to construct certain public improvements for the Village's benefit. Thereafter, Neumann and plaintiff entered into agreements for plaintiff to perform certain grading work required under the contract. The pleadings present no dispute that plaintiff completed the work in compliance with the contract but was not paid in full for its services. Neumann is not a party to this appeal. The Village issued two special service area (SSA) bonds to cover some of the costs.

¶ 5 The contract required Neumann to provide surety bonds, the amounts of which were based on the total cost of the improvements. Neumann provided four surety bonds, issued by Fidelity and Deposit Company of Maryland (Fidelity), to cover the work. The four bonds were substantively similar, each providing in part that "NOW THEREFORE, THE CONDITION OF THIS OBLIGATION IS SUCH, that, if said principal [Neumann] shall perform and complete said improvement(s) to said development in accordance with either the plan(s)/specification(s)/agreement, then this obligation shall be void, otherwise to be and remain in full force and effect. THIS BOND WILL TERMINATE upon written acceptance of the improvements by the Obligee [Village] to the Principal [Neumann] and/or Surety [Fidelity]." While the bonds guaranteed performance by Neumann, they were silent regarding payments to subcontractors, like plaintiff.

¶ 6 Neumann was unable to complete the improvements or to pay plaintiff in full. On November 1, 2007, Neumann declared bankruptcy. On February 18, 2008, plaintiff served Neumann and the Village with notices of a lien claim on a public improvement (see 770 ILCS 60/23 (West 2010)) and notices of a bond claim (see 30 ILCS 550/1, 2 (West 2010)). Plaintiff last performed work on the NeuHaven Subdivision on April 16, 2007, which made the 180th day October 13, 2007. Plaintiff last performed work on the Clublands Subdivision on December 23, 2006, which made the 180th day June 4, 2007. The parties do not dispute that plaintiff made its notices of claims more than 180 days after last performing work or providing materials. Mark Reich, a managing member of plaintiff, testified that he handles lien and bond claims for plaintiff. Reich stated that plaintiff had delayed sending notices of its claims because plaintiff did not want to risk its good business relationship with Neumann and feared losing future work.

¶ 7 Plaintiff filed a five-count second amended complaint, seeking to recover payment from the Village. Counts I and III were lien claims for public funds (see 770 ILCS 60/23 (West 2010)) and count V was a claim for unjust enrichment, but these claims ultimately were dismissed and are not part of this appeal.

¶ 8 Counts II and IV alleged third-party-beneficiary breach of contract. Specifically, plaintiff alleged that section 1 of the Bond Act and section 3.2(a) of the contract conferred third-party-beneficiary status upon plaintiff. Plaintiff alleged that the Village has breached its duty to require from Neumann a sufficient payment bond for the benefit of plaintiff.

¶ 9 Following cross-motions for summary judgment, the trial court granted plaintiff summary judgment on counts II and IV. The Village timely appeals.

¶ 10 II. ANALYSIS

ΒΆ 11 A. Standard ...


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