Watson v. Auburn Iron Works, Inc.

Citations: 318 N.E.2d 508; 23 Ill. App. 3d 265; 1974 Ill. App. LEXIS 1825Docket: 73-110

Court: Appellate Court of Illinois; October 16, 1974; Illinois; State Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

Hugh Watson, operating as Empire Steel, filed a lawsuit against Auburn Iron Works, claiming a mechanic's lien on the "Walnut Creek" property and seeking a monetary judgment for additional open jobs. The Illinois Appellate Court upheld the trial court's judgment, awarding Watson $4,027.29 for the mechanic's lien and $9,187.15 for the additional jobs, while disallowing Auburn's counterclaim. 

Watson and Auburn had a history of collaboration, with Auburn bidding on projects and orally subletting steel erection to Watson. For the Walnut Creek project, Auburn's bid included steel fabrication, with Watson expected to erect the steel, receiving payments monthly based on completed floors. Despite Watson believing the contract price was $33,000, Auburn's owner, Anthony Petro, claimed it was closer to $25,000. 

Watson began work on April 7, 1970, but after performing only 20% of the job by June 8, 1971, he suspended work due to non-payment, having received no installments as initially agreed. Petro contended that Watson left due to dissatisfaction with the job conditions and not primarily due to non-payment. Watson eventually resumed work after receiving a partial payment but was dismissed by the general contractor on October 7. Disputed testimony regarding the quality of Watson's work arose, and another erector was hired to complete the job, with total payments to other erectors reaching $25,376.

The trial began in January 1972, with the general contractor subpoenaed as a witness. Defendants filed a motion to dismiss the case for failure to join the contractor as a party defendant, which was denied. The plaintiff was permitted to file a third amended complaint and issue summons against the contractor, with all defendants granted 28 days to respond. The trial resumed on April 19, 1972. 

In Count I, defendants argued that the plaintiffs had no damages, contending that the court erred by not dismissing the complaint due to the contractor not being joined before significant trial progress, and by allowing a mechanic's lien. They also claimed Auburn's counterclaim regarding Watson's alleged wrongful job abandonment was improperly denied. In Count II, the defendants questioned the court's refusal to detail its verdict, asserting it lacked evidentiary support.

Defendants maintained that the appropriate measure of damages for breach of contract is the difference between construction costs and fair market value, citing multiple cases where a contractor breached the contract. However, here, the breach was by Auburn for nonpayment, rendering the defendants’ cited measure inapplicable. 

Defendants argued the court incorrectly found that the plaintiff had justification to leave the job and that the plaintiff's resumption of work constituted a waiver of nonpayment issues. The court correctly viewed Auburn's nonpayment as a material breach, allowing the plaintiff to suspend work until payment was made. The plaintiff had received $2,500 before resuming work on July 22, with subsequent late payments. Disputes regarding the quality of the plaintiff's work were present, and fault determination was a matter for the trier of fact. 

Defendants also stated that the measure of damages, if the plaintiff was wrongfully prevented from completing the contract, should restore the plaintiff to the position as if the contract had been fully performed.

Defendants' cited sections of the Restatement of Contracts do not adequately support their position in this case. Section 333 outlines that damages for partial performance are limited to the contract price minus partial payments, and the defendant must prove that the contract is a losing one. However, this section must be interpreted with section 346, which specifically addresses damages for breaches of construction contracts. Section 346 allows a builder to recover the installment due for a partial breach, and for a total breach, the builder can recover either the entire contract price minus payments made and costs saved by not completing the work or the amount spent on part performance subject to section 333's limitations.

In this case, Auburn's failure to make monthly payments was treated by the plaintiff as a total breach, justifying the suspension of work. The legal precedent supports that non-payment of progress payments constitutes a material breach. Comments g and h of section 346 provide guidance on calculating damages, emphasizing that the builder's recovery should reflect the full contract price less costs saved due to the breach, based on a reasonably prudent builder's perspective. The builder is entitled to both expenditures and expected profits, as the full contract price would cover both. If the builder fails to prove costs or profits, they can still recover their expenditures in part performance, subject to the limitations in section 333.

The trial court determined that the defendant did not prove the plaintiff had a losing contract, despite the plaintiff's underbid. Evidence indicated that the plaintiff initially bid to erect steel for nine buildings, but was later informed the contract was only for three. There was no testimony regarding the plaintiff's potential profit had the project proceeded without breaches, with only projected expenses based on initial performance, which faced delays. The review concluded that the damages awarded were supported by evidence.

Defendants argued it was erroneous to allow joinder of the general contractor after significant proceedings had occurred, claiming it caused prejudice by denying the contractor the ability to hear testimony and cross-examine witnesses. However, the court found the general contractor to be a necessary party and that the joinder was within the court's discretion. The final order for a lien of $4,027.29 against all defendants, held by the Chicago Title Trust Company, did not prejudice the general contractor, who had the opportunity to examine witnesses. The court’s measures ensured a fair defense for the contractor, and therefore, the amendment and joinder were upheld.

Defendants also contended that the court erred by not dismissing the plaintiff's mechanic's lien claim due to improper service of the subcontractor's 90-day notice. Testimony indicated that notices were sent via certified mail to two trusts, with one confirmed received. However, the notice did not comply with the requirement of being addressed as "delivery limited to addressee only," leading defendants to argue this non-compliance invalidated the mechanic's lien. Relevant case law was cited to support their position.

The cases cited by the defendants are deemed distinguishable due to differing facts. In Shaffer v. Cullerton, no contract existed, while in Hill Behan Lumber v. Marchese, there was a total failure to provide notice. The court finds that the absence of specific delivery language does not equate to a lack of notification, thus not warranting the invalidation of the plaintiff's claim. Strict construction applies only to requirements essential for lien rights. Although notice is necessary for a mechanic's lien, the omission of limiting delivery to the addressee does not compromise notice or invalidate the lien claim. 

The defendants' assertion that the lien was wrongly filed against a non-party bank, acting as escrowee, is rejected. The plaintiff correctly argues that the lien pertained solely to funds due to Auburn and held by Chicago Title Trust Company at the action's commencement. The necessary parties with rights to the funds were involved, making the escrowee's participation unnecessary for the decree’s validity regarding the frozen funds. Even if the judgment against Chicago Title Trust were invalid, it would not nullify the entire decree. 

Lastly, the defendants claim the trial court should have provided detailed findings on their motion to evaluate the reasonableness of lump sum judgments against evidence. However, detailed findings are not required in a bench trial. The defendants bore the burden to demonstrate legal errors or that verdicts contradicted the evidence's manifest weight, which they failed to do. Consequently, the trial court's judgment is affirmed.