Lake County Grading Co. v. Village of Antioch
Citation2014 IL 115805
Date Filed2014-11-24
Docket115805
Cited46 times
StatusPublished
Full Opinion (html_with_citations)
Illinois Official Reports
Supreme Court
Lake County Grading Co. v. Village of Antioch, 2014 IL 115805
Caption in Supreme LAKE COUNTY GRADING COMPANY, LLC, Appellee, v. THE
Court: VILLAGE OF ANTIOCH, Appellant.
Docket No. 115805
Filed October 17, 2014
Held The Public Construction Bond Act protects subcontractors for whom
(Note: This syllabus no right of mechanicâs lien exists against a public body by
constitutes no part of the guaranteeing that labor and materials furnished to one who contracts
opinion of the court but with a public body are paid for, even if such provisions are not
has been prepared by the specifically included in the bonds provided under the Act.
Reporter of Decisions
for the convenience of
the reader.)
Decision Under Appeal from the Appellate Court for the Second District; heard in that
Review court on appeal from the Circuit Court of Lake County, the Hon.
Margaret M. Mullen, Judge, presiding.
Judgment Appellate court judgment reversed.
Circuit court judgment reversed.
Cause remanded with directions.
Counsel on Robert J. Long, of Daniels, Long & Pinsel, LLC, of Waukegan, and
Appeal Lawrence R. Moelmann and Nancy G. Lischer, of Hinshaw &
Culbertson LLP, of Chicago, for appellant.
Bogdan Martinovich, of Ray & Glick, Ltd., of Libertyville, for
appellee.
Brian Day and Roger Huebner, of Springfield, for amicus curiae The
Illinois Municipal League.
Justices JUSTICE THEIS delivered the judgment of the court, with opinion.
Chief Justice Garman and Justices Thomas, Kilbride, and Karmeier
concurred in the judgment and opinion.
Justice Freeman dissented, with opinion, joined by Justice Burke.
OPINION
¶1 The circuit court of Lake County granted summary judgment to plaintiff, Lake County
Grading Company, LLC, on its third-party beneficiary breach of contract claims against
defendant, Village of Antioch (Village). The appellate court affirmed, holding that the Village
breached the subject contracts by violating section 1 of the Public Construction Bond Act
(Bond Act) (30 ILCS 550/1 (West 2008)). 2013 IL App (2d) 120474, ¶¶ 39-40. For the reasons
that follow, we hold that the Village did not violate section 1 of the Bond Act, and, therefore,
reverse the judgments of the appellate and circuit courts.
¶2 BACKGROUND
¶3 This cause of action arises from construction work performed in two residential
subdivisions located in Antioch, Illinois, known as the NeuHaven subdivision (formerly the
Deercrest subdivision), and the Clublands subdivision. Neumann Homes, Inc. (Neumann), was
the developer of both subdivisions.1
¶4 The Village entered into two infrastructure agreements (the contracts) with Neumann to
make certain public improvements in the subdivisions for the benefit of the Village. Pursuant
to the contracts, and based upon section 1 of the Bond Act, Neumann was required to provide
surety bonds, the amount of which was based on the total cost of the improvements.
¶5 Section 1 of the Bond Act provides, inter alia, that a political subdivision of the State, such
as the Village, contracting for public works above a specific dollar amount shall require the
contractor, as part of the agreement, to supply and deliver a bond. 30 ILCS 550/1 (West 2008).
Each such bond is âdeemedâ to contain certain provisions, even if they are not expressly
1
Neumann is not a party to this appeal.
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included in the bond, and must provide for the completion of the contract, the payment of
materials used in the work, and all labor performed in the work, including work completed by
subcontractors. Id.
¶6 Neumann provided four surety bonds issued by Fidelity and Deposit Company of
Maryland (Fidelity) that were substantively identical. Each bond provided, in pertinent part:
â[The P]rincipal [Neumann] shall perform and complete *** improvement(s) to
*** development in accordance with either the plan(s)/specification(s)/agreement
[prepared by Pearson Brown & Associates, Inc. or Manhard Consulting], then this
obligation shall be void ***. This bond will terminate upon written acceptance of the
improvements by the obligee [Village] to the principal [Neumann] and/or surety
[Fidelity].â
The four surety bonds totalled $18,128,827.
¶7 It is undisputed the bonds provided by Neumann did not contain specific âpayment bondâ
language that expressly guaranteed payment to subcontractors for labor or materials. A
payment bond generally provides that if the contractor does not pay its subcontractors and
material suppliers, the surety will pay them. See Western Waterproofing Co. v. Springfield
Housing Authority, 669 F. Supp. 901, 903 (C.D. Ill. 1987). In contrast, a âcompletion bondâ
(also known as a âperformance bondâ) provides that if the contractor does not complete a
project, the surety will pay for its completion. Id.
¶8 Plaintiff and Neumann also entered into agreements for plaintiff to provide certain labor
and materials for the public improvements required under the contracts. Plaintiff completed the
work, but was not paid in full. Neumann later defaulted on its contract with the Village and
declared bankruptcy on November 1, 2007. Plaintiff last performed work on the Clublands
subdivision on December 23, 2006. Plaintiff last performed work on the NeuHaven
subdivision on April 16, 2007. On February 18, 2008, plaintiff served Neumann and the
Village with notices of a lien claim for the work it had completed on the project.
¶9 Plaintiff ultimately filed a five-count second amended complaint seeking to recover
payment from the Village. In counts II and IV, the only counts at issue here, plaintiff alleged
breach of contract claims related to the work performed by plaintiff in the NeuHaven and
Clublands subdivisions. Specifically, plaintiff alleged the Village breached the contracts
because the surety bonds provided by Neumann did not contain actual language guaranteeing
payment to subcontractors as mandated by the first paragraph of section 1 of the Bond Act.
Plaintiff further alleged that by virtue of this provision in section 1, it became a third-party
beneficiary of the contracts between the Village and Neumann because the requirements
contained therein are read into every public works contract for the benefit of subcontractors
such as itself.
¶ 10 The parties filed cross-motions for summary judgment. The Village in its motion also
relied upon section 1. It asserted that based upon the âdeeming languageâ contained in the
statute, the bonds procured by Neumann were sufficient because they contained both
completion and payment provisions as a matter of law and covered all of the site improvements
which plaintiff constructed. The Village argued that plaintiffâs only cause of action was against
the bonds themselves, but because plaintiff gave notice of its claims more than 180 days after
last working on the project, the claims were barred by the limitations period found in section 2
of the Bond Act (30 ILCS 550/2 (West 2008)).
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¶ 11 In response to the Villageâs motion for summary judgment, plaintiff did not dispute that it
made its notices of claims more than 180 days after last performing work or providing
materials, but argued that the limitations period applied only to a suit on the bond. Plaintiff
claimed that the 180-day limitations period was inapplicable to its breach of contract claims
because in a case such as this where no payment bond was procured, a suit on the bond is
impossible.
¶ 12 The issue before the trial court was therefore whether the surety bonds provided by
Neumann to the Village conformed with the relevant requirements of section 1 of the Bond
Act.
¶ 13 The trial court granted plaintiffâs motion for summary judgment on counts II and IV of the
second amended complaint for the work it performed on the two subdivisions, but granted the
Villageâs cross-motion for summary judgment as to counts I, III, and V, dismissing those
counts with prejudice. As to counts II and IV, the only counts at issue here, the trial court
concluded that the bonds provided by Neumann were completion bonds, not payment bonds,
and that it could not impute the âdeeming languageâ contained in section 1 into a completion
bond that did not specifically contain a payment bond provision. The trial court ultimately
entered judgment in plaintiffâs favor in the amount of $246,054.73.
¶ 14 The appellate court affirmed. 2013 IL App (2d) 120474, ¶ 40. In interpreting section 1 of
the Bond Act, the appellate court held that the Act mandates the public entity require the
general contractor to obtain a bond that contains language that expressly provides payment for
the benefit of subcontractors. Id. ¶ 36. It found the Village breached its contractual obligation
by not requiring Neumann to furnish a bond with an express payment provision for
subcontractors. Id. ¶ 33. The appellate court held that the requirement to obtain such a bond
became a term of the contract between Neumann and the Village and that plaintiff, as a
subcontractor, was a direct third-party beneficiary with the right to sue on the contract. Id.
¶ 15 The appellate court further held that the language found in section 1, which provides that
payment provisions are deemed to be included in the bond, applies only after the public entity
satisfies the predicate condition of requiring the contractor to procure a bond with a payment
guarantee. Id. ¶ 36. The appellate court concluded that the limitations period found in section 2
applied only to a suit on the bond and that where no payment bond is procured, this section is
inapplicable. Id. ¶ 39. Consequently, the appellate court found that plaintiffâs breach of
contract claims were not time barred because the four-year statute of limitations for
construction contracts (see 735 ILCS 5/13-214 (West 2008)) applied rather than the 180-day
limitations period contained in the Bond Act. 2013 IL App (2d) 120474, ¶ 39.
¶ 16 This court granted the Villageâs petition for leave to appeal (Ill. S. Ct. R. 315(a) (eff.
July 1, 2013)) and also allowed the Illinois Municipal League to file an amicus curiae brief in
support of the Village (Ill. S. Ct. R. 345 (eff. Sept. 20, 2010)).
¶ 17 ANALYSIS
¶ 18 This case comes before us on the trial courtâs grant of summary judgment. Summary
judgment is proper when âthe pleadings, depositions, and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact and that the moving
party is entitled to a judgment as a matter of law.â 735 ILCS 5/2-1005(c) (West 2008). The
interpretation of a statute, such as the Bond Act at issue in this appeal, is a matter of law and
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thus presents a matter that is appropriate for summary judgment. Village of Chatham, Illinois v.
County of Sangamon, Illinois, 216 Ill. 2d 402, 433 (2005). We review summary judgment
rulings and issues of statutory interpretation de novo. Williams v. Manchester, 228 Ill. 2d 404,
417 (2008).
¶ 19 It is well settled that our primary objective in construing a statute is to ascertain and give
effect to the intent of the legislature. MidAmerica Bank, FSB v. Charter One Bank, FSB, 232
Ill. 2d 560, 565 (2009). The plain language of a statute is the most reliable indication of
legislative intent. DeLuna v. Burciaga, 223 Ill. 2d 49, 59 (2006). â[W]hen the language of the
statute is clear, it must be applied as written without resort to aids or tools of interpretation.â Id.
¶ 20 At issue is whether the surety bonds provided by Neumann to the Village conformed with
the relevant requirements of section 1. If the surety bonds were not deficient under this
provision of the Bond Act, the Village is entitled to judgment in its favor as a matter of law on
plaintiffâs breach of contract claims.
¶ 21 The following portion of section 1 is at issue and provides, in pertinent part:
⧠1 Except as otherwise provided by this Act, all officials, boards, commissions,
or agents of this State in making contracts for public work of any kind costing over
$50,000 to be performed for the State, and all officials, boards, commissions, or agents
of any political subdivision of this State in making contracts for public work of any
kind costing over $5,000[2] to be performed for the political subdivision, shall require
every contractor for the work to furnish, supply and deliver a bond to the State, or to the
political subdivision thereof entering into the contract, as the case may be, with good
and sufficient sureties. The amount of the bond shall be fixed by the officials, boards,
commissions, commissioners or agents, and the bond, among other conditions, shall be
conditioned for the completion of the contract, for the payment of material used in the
work and for all labor performed in the work, whether by subcontractor or otherwise.
If the contract is for emergency repairs as provided in the Illinois Procurement
Code, proof of payment for all labor, materials, apparatus, fixtures, and machinery may
be furnished in lieu of the bond required by this Section.
Each such bond is deemed to contain the following provisions whether such
provisions are inserted in such bond or not:
âThe principal and sureties on this bond agree that all the undertakings, covenants,
terms, conditions and agreements of the contract or contracts entered into between the
principal and the State or any political subdivision thereof will be performed and
fulfilled and to pay all persons, firms and corporations having contracts with the
principal or with subcontractors, all just claims due them under the provisions of such
contracts for labor performed or materials furnished in the performance of the contract
on account of which this bond is given, when such claims are not satisfied out of the
contract price of the contract on account of which this bond is given, after final
settlement between the officer, board, commission or agent of the State or of any
2
Public Act 98-216, effective August 9, 2013, increased the threshold amount before a bond would
be required for projects by local governments to those costing over $50,000. Based upon the effective
date, this amendment is not applicable to this case.
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political subdivision thereof and the principal has been made.[â] â (Emphases added.)
30 ILCS 550/1 (West 2008).
¶ 22 Thereafter, section 2 prescribes, in pertinent part, that any party seeking to enforce a claim
for labor or materials has no right of action under the Bond Act unless the party files a verified
notice of the claim with the officer, board, bureau, or department awarding the contract, within
180 days after the date of the last item of work or the furnishing of the last item of materials. 30
ILCS 550/2 (West 2008).
¶ 23 The Village contends, as it did in the appellate court, that section 1 incorporates completion
and payment provisions in all surety bonds for public construction in Illinois, even if the bonds
themselves do not expressly include such provisions, due to the âdeemed to containâ language
found in paragraph three. The Village asserts that the bonds procured by Neumann would have
satisfied all of plaintiffâs claims for payment if plaintiff had made a claim against the bonds
within the 180-day limitations period.
¶ 24 We agree. Based upon its plain language, the first paragraph of section 1 mandates that a
political subdivision of the State, such as the Village, whenever making a contract for public
works in excess of the specified dollar threshold, must have the contractor deliver âa bondâ
with good and sufficient sureties. This paragraph further provides that the amount of âthe
bondâ shall be fixed by the public official and âthe bondâ shall be conditioned, among other
conditions, upon the completion of the contract and for the payment of material and labor.
Consequently, this paragraph does not require, as plaintiff suggests, the furnishing of a
âcompletion bondâ and a âpayment bondâ but, rather, the procurement of âa bondâ for the
public work.
¶ 25 Thereafter, the third paragraph stipulates that â[e]ach such bond is deemed to contain the
following provisions whether such provisions are inserted in such bond or not.â (Emphasis
added.) 30 ILCS 550/1 (West 2008). This paragraph continues by providing language that
ensures payment to all persons who have performed labor or provided materials âin the
performance of the contract on account of which this bond is given.â Therefore, regardless of
the actual language contained in a public construction bond procured in accordance with
section 1, the legislature has unambiguously provided that all such bonds are deemed to
contain both completion and payment provisions as a matter of law. Simply put, we cannot
envision a clearer indication of legislative intent concerning the question before us than the
language contained in paragraph three that â[e]ach such bond is deemed to contain the
following [payment and completion] provisions whether such provisions are inserted in such
bond or not.â
¶ 26 Plaintiffâs suggested interpretation is also inconsistent with the well established two-fold
purpose of section 1 of the Bond Act. First, the language at issue in this appeal protects
subcontractors for whom no right of mechanicâs lien exists against a public body by
guaranteeing payment for their labor and materials furnished to the contractor. See, e.g.,
Carroll Seating Co. v. Verdico, 369 Ill. App. 3d 724, 727 (2006); Aluma Systems, Inc. v.
Frederick Quinn Corp., 206 Ill. App. 3d 828, 853-54 (1990); Housing Authority v. Holtzman,
120 Ill. App. 2d 226, 241 (1970). This provision assures payment to subcontractors who make
a timely demand on the bond, pursuant to section 2, who might otherwise have to depend
solely on the responsibility of the contractor to make payment for the labor and material
provided. Id. Second, this provision of the Bond Act guards the tax money allotted for public
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works by assuring that the terms, conditions and agreements of the contract will be fulfilled
and paid by the surety if the contractor does not complete the project. Id. Consistent with this
dual purpose, and contrary to plaintiffâs suggested construction, the language in paragraph
three of section 1 guarantees completion and payment provisions are deemed in every bond
procured for a public project to assure that sufficient funds are available to pay both
subcontractors and material suppliers and to complete the project if the contractor does not.
¶ 27 Plaintiff attempts to circumvent the plain language of section 1 of our Bond Act by
suggesting the phrase â[e]ach such bondâ in the third paragraph applies only to bonds which
already have payment bond provisions contained therein. Plaintiff asserts that âthe import of
section 1 of the Bond Act is to deem the stated language added only after it has been
established that payment bonds were obtained pursuant to that section.â It is self-evident,
however, that if a bond already has a provision for payment to subcontractors it would be
unnecessary to deem the payment language contained in paragraph three into that bond.
Plaintiffâs suggested interpretation would render the language contained in paragraph three
that â[e]ach such bond is deemed to contain the following provisions whether such [payment
or completion] provisions are inserted in such bond or notâ meaningless or redundant. See
People v. Jones, 223 Ill. 2d 569, 594 (2006) (this court has an obligation to avoid a
construction of a statute which would render a part of it redundant or superfluous and instead
must presume that each part of the statute has meaning).
¶ 28 We note for purposes of comparison that the language found in section 1 of our Bond Act
contrasts significantly with the statutory language found in the comparable federal bond
statute. Under the federal statute, a contractor is required to furnish to the government both a
â[p]erformance bondâ and a â[p]ayment bond.â See 40 U.S.C. § 3131(b)(1), (2) (2012) (âType
of bonds required.âBefore any contract of more than $100,000 is awarded for the
construction, alteration, or repair of any public building or public work of the Federal
Government, a person must furnish to the Government the following bonds, which become
binding when the contract is awarded: (1) Performance bond. *** (2) Payment Bond.â).
¶ 29 Our research further reveals that, unlike our Bond Act, certain other state statutes contain
similar language to the federal bond statute which specifically requires the procurement of a
payment bond and a completion bond for public works. See, e.g., Tex. Govât Code
§ 2253.021(a) (West 2012) (âA government entity that makes a public work contract with a
prime contractor shall require the contractor, before beginning the work, to execute to the
governmental entity: (1) a performance bond if the contract is in excess of $100,000; and (2) a
payment bond if *** the contract is in excess of $50,000, and the governmental entity is a
municipality ***.â); N.Y. State Fin. Law § 137 (West 2012) (âIn addition to other bond or
bonds, if any, required by law for the completion of a work specified in a contract for the
prosecution of a public improvement *** the comptroller *** shall nevertheless require *** a
bond guaranteeing prompt payment of moneys due to all persons furnishing labor or materials
to the contractor ***.â); Minn. Stat. Ann. § 574.26 Subd. 2 (West 2012) (â[a] contract with a
public body for the doing of any public work is not valid unless the contractor gives (1) a
performance bond to the public body *** and (2) a payment bondâ).
¶ 30 In contrast to the language contained in the federal and state statutes above, our Bond Act
only requires the procurement of âa bondâ in connection with a public work and once the bond
is obtained, it is deemed to include both a payment and performance provision. This language
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is markedly different from that contained in the federal and state statutes quoted above that
plainly require the procurement of a performance and a payment bond.
¶ 31 Plaintiff has not cited, and our research has not revealed, any case where a contractor
furnished a bond as required under section 1 and the court found that the payment provisions
contained therein were not deemed part of the bond. The cases relied upon by plaintiff do not
inform our decision because, in contrast to the instant case, they either involved circumstances
where the contractor failed to procure a bond of any kind (see, e.g., A.E.I. Music Network, Inc.
v. Business Computers, Inc., 290 F.3d 952, 954 (7th Cir. 2002)), or where the case was based
on the absence of a payment bond and there was no discussion of whether the public entities
had procured a completion bond into which the payment provisions of section 1 could be read
(see, e.g., Ardon Electric Co. v. Winterset Construction, Inc., 354 Ill. App. 3d 28, 32 (2004)).
¶ 32 For these reasons, we conclude that based upon the deeming language contained in
paragraph three of section 1, the four surety bonds furnished by Neumann contained both
completion and payment provisions as a matter of law. In light of our determination, we need
not consider, and we make no comment today, on the Villageâs additional claim that plaintiff
did not qualify as a third-party beneficiary under the contracts the Village entered into with
Neumann.
¶ 33 Finally, plaintiff raises two alternative underdeveloped arguments that the lower courts did
not reach for affirming the award of summary judgment. As far as we can discern, plaintiff
initially claims the Village also violated section 1 of the Bond Act because the four surety
bonds issued by Fidelity did not cover all of the unpaid work it performed. Plaintiffâs argument
appears to be based on a claim that the Village did not obtain any bond related to the work
performed during âphase twoâ and âphase fourâ in the Clublands subdivision. The record
establishes that the four surety bonds covered different phases of the project in the two
subdivisions. One of the four surety bonds specifically covered âphase oneâ at Clublands while
a second surety bond covered âphase threeâ there.
¶ 34 Count IV of the second amended complaint contained plaintiffâs breach of contract claim
concerning the work it performed at Clublands. This count included an attached exhibit with a
description and specific cost of all the work and materials provided by plaintiff. Our review of
this exhibit, however, indicates that it only concerns improvements provided by plaintiff
during phase one and phase three at Clublands. Therefore, any claim by plaintiff regarding lack
of a surety bond for work performed during phases two and four at Clublands was not properly
pled by plaintiff and is irrelevant to our determination here.
¶ 35 Plaintiffâs second alternative argument is even more underdeveloped and occupies less
than one page of its brief. Plaintiff simply claims that the Village also violated section 1 of the
Bond Act because a clause in the contracts âshow[s] that [the Village] never intended to have
any Payment Bonds for the protection of the subcontractors, but that the subcontractors were to
be paid solely from SSA bond proceeds.â This argument is apparently related to the fact that
the Village paid for a portion of the site improvement costs by issuing two âSpecial Service
Areaâ bonds for each of the subdivisions. Plaintiff, however, does not provide any elaboration
or real argument of how this payment scheme involving the SSA bonds impacted it or could
constitute a repudiation of the requirements of section 1. Furthermore, plaintiff does not cite to
any authority.
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¶ 36 As we have previously instructed, âa reviewing court is not simply a depository into which
a party may dump the burden of argument and research.â People ex rel. Illinois Department of
Labor v. E.R.H. Enterprises, Inc., 2013 IL 115106, ¶ 56. âA court of review is entitled to have
the issues clearly defined and to be cited pertinent authority.â (Emphasis omitted.) Id. âA point
not argued or supported by citation to relevant authority fails to satisfy the requirements of
Supreme Court Rule 341(h)(7), (i) (see Ill. S. Ct. R. 341(h)(7), (i) (eff. Feb. 6, 2013)
[citation]).â Id.Both argument and citation to relevant authority are required.Id.
Where, as
here, the issue â âis merely listed or included in a vague allegation of error [it] is not âarguedâ
and will not satisfy the requirements of the rule.â â Id.(quoting Vancura v. Katris,238 Ill. 2d 352, 370
(2010)). Accordingly, plaintiff has forfeited review of this issue.Id.
¶ 37 CONCLUSION
¶ 38 We hold that under the plain language of the statute, the bonds furnished by Neumann to
the Village were sufficient and did not violate the pertinent provisions of section 1 of the Bond
Act. Therefore, the Village did not breach any contractual obligation owed to plaintiff in
obtaining the bonds for the public work performed by Neumann.
¶ 39 For the foregoing reasons, the judgments of the appellate and circuit courts are reversed,
and the cause remanded to the trial court with directions to enter an order granting summary
judgment in the Villageâs favor on counts II and IV of the second amended complaint.
¶ 40 Appellate court judgment reversed.
¶ 41 Circuit court judgment reversed.
¶ 42 Cause remanded with directions.
¶ 43 JUSTICE FREEMAN, dissenting:
¶ 44 In todayâs decision, the majority takes the extraordinary step of declaring that a surety bond
that explicitly guarantees a single obligation must, by operation of law, be interpreted as
guaranteeing a second obligation that is not referenced in the bond at all. As a result, the
majority holds that the Village of Antioch (the Village) cannot be held liable for its failure to
require a public construction bond that is expressly conditioned for completion of the contract
and payment for labor and materials furnished by subcontractors, even though section 1 of the
Public Construction Bond Act (Bond Act) (30 ILCS 550/1 (West 2008)) obligates the Village
to do exactly that. For the following reasons, I disagree and respectfully dissent.
¶ 45 The Village entered into two contracts with a general contractor, Neumann Homes, Inc.
(Neumann), to make certain public improvements. Neumann, in turn, entered into subcontracts
with Lake County Grading Company, LLC (Lake County Grading), to provide labor and
materials for certain portions of the public improvements benefitting the Village.
¶ 46 Section 1 of the Bond Act provides that where the State or a political subdivision thereof
enters into a public construction contract that exceeds the statutory threshold amount, the
public body must require the contractor to provide a bond that âshall be conditioned for the
completion of the contract, for the payment of material used in the work and for all labor
performed in the work, whether by subcontractor or otherwise.â 30 ILCS 550/1 (West 2008).
As the majority explains, a payment bond secures the obligation of the general contractor to
pay its subcontractors for labor and materials, while a completion bond (sometimes referred to
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as a performance bond) guarantees the general contractorâs obligation to complete the
construction project. See supra ¶ 7 (citing Western Waterproofing Co. v. Springfield Housing
Authority, 669 F. Supp. 901, 903 (C.D. Ill. 1987)).
¶ 47 In this case, Neumann provided four surety bonds that, on their faces, secured its
obligations to âperform and completeâ various aspects of the public improvements for the
Village. As the majority acknowledges, it is undisputed that the bonds provided by Neumann
did not contain any language that guaranteed payment to subcontractors for labor or materials.
¶ 48 Although Lake County Grading completed the work specified in the subcontracts, it was
not paid in full. Neumann subsequently defaulted on its contract with the Village and declared
bankruptcy. Lake County Grading subsequently brought suit, as a third-party beneficiary,
seeking recovery against the Village for breach of its contract with Neumann. Those claims
were premised on the Villageâs violation of its statutory duty to require that Neumann procure
an appropriate construction bond that secured payment to subcontractors for labor and
materials.
¶ 49 At the time the contracts were entered into, section 1 of the Bond Act provided, in relevant
part, as follows:
⧠1. Except as otherwise provided by this Act, all officials, boards, commissions
or agents of this State, or of any political subdivision thereof in making contracts for
public work of any kind costing over $5,000 to be performed for the State, or a political
subdivision thereof shall require every contractor for the work to furnish, supply and
deliver a bond to the State, or to the political subdivision thereof entering into the
contract, as the case may be, with good and sufficient sureties. The amount of the bond
shall be fixed by the officials, boards, commissions, commissioners or agents, and the
bond, among other conditions, shall be conditioned for the completion of the contract,
for the payment of material used in the work and for all labor performed in the work,
whether by subcontractor or otherwise.
If the contract is for emergency repairs as provided in the Illinois Procurement
Code, proof of payment for all labor, materials, apparatus, fixtures, and machinery may
be furnished in lieu of the bond required by this Section.
Each such bond is deemed to contain the following provisions whether such
provisions are inserted in such bond or not:
âThe principal and sureties on this bond agree that all the undertakings, covenants,
terms, conditions and agreements of the contract or contracts entered into between the
principal and the State or any political subdivision thereof will be performed and
fulfilled and to pay all persons, firms and corporations having contracts with the
principal or with subcontractors, all just claims due them under the provisions of such
contracts for labor performed or materials furnished in the performance of the contract
on account of which this bond is given, when such claims are not satisfied out of the
contract price of the contract on account of which this bond is given, after final
settlement between the officer, board, commission or agent of the State or of any
political subdivision thereof and the principal has been made.â â 30 ILCS 550/1 (West
2002).
¶ 50 The majority concludes that this section must be interpreted to provide that every bond for
a public construction project necessarily guarantees both performance and payment for labor
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and materials, regardless of the nature of the bond that has been actually obtained. See supra
¶ 26. I cannot agree because the majorityâs interpretation is contradicted by the plain language
of section 1, as well as its purpose and history. In addition, the result reached by the majority is
contrary to the common sense application of the statute and creates the potential for confusion
with regard to public construction bonds in the future.
¶ 51 The primary objective in construing a statute is to ascertain and give effect to the intent of
the legislature. Nelson v. Kendall County, 2014 IL 116303, ¶ 23. The best evidence of that
intent is the language of the statute, which must be given its plain, ordinary and popularly
understood meaning. Id. Each word, clause and sentence of a statute must be given a
reasonable construction, if possible, and should not be rendered superfluous. Chicago
Teachers Union, Local No. 1 v. Board of Education of the City of Chicago, 2012 IL 112566,
¶ 15. Also, a court may consider the reason for the law, the problems sought to be remedied,
the purposes to be achieved, and the consequences of construing the statute one way or
another. Id.
¶ 52 The first paragraph of section 1 governs the relationship between the State or political
subdivision and the contractor. That paragraph imposes a mandatory obligation on the public
body to require that the contractor obtain a bond that guarantees both completion of the project
and payment for labor and materials furnished by subcontractors. 30 ILCS 550/1 (West 2002).
¶ 53 The third paragraph begins with the clause âEach such bond is deemed to contain the
following provisions whether such provisions are inserted in such bond or not.â Id. The phrase
â[e]ach such bondâ refers back to the type of bond that is described in the first paragraphâi.e.,
bonds that are conditioned for completion of the contract and payment for labor and materials.
See generally Hooker v. Retirement Board of the Firemenâs Annuity & Benefit Fund, 2013 IL
114811, ¶ 19 (employing similar reasoning to determine the meaning of a clause in the Illinois
Pension Code). What follows the initial clause in the third paragraph is specific language,
included within quotation marks, indicating that the surety is obligated to guarantee
completion of the project and payment to subcontractors. 30 ILCS 550/1 (West 2002). Thus,
the third paragraph, which addresses the relationship between the surety and the contractor,
clarifies the obligations of the surety where the wording of the bond may be viewed as
ambiguous.
¶ 54 The majority acknowledges that statutory provisions are not to be construed in a manner
that renders language meaningless or redundant. Supra ¶ 27 (citing People v. Jones, 223 Ill. 2d
569, 594 (2006)). Yet, the majorityâs interpretation does just that by rendering the
âconditioned forâ portion of the first paragraph superfluous. If the provisions in the third
paragraph, which serve to clarify a suretyâs duty, are construed to define the nature of every
bond issued for a public construction project, there is no need for the legislature to include the
âconditioned forâ clause in the first paragraph to specify the contractual obligations that must
be guaranteed. Also, the majorityâs analysis nullifies the effect of the word âsuchâ in the third
paragraph. The deliberate use of the phrase â[e]ach such bondâ demonstrates that the
legislature intended that clause to refer back to the specific type of bond that was described in
the first paragraph of the section.
¶ 55 In my view, the only way in which the terms of section 1 can be construed without
rendering portions of its language meaningless is to interpret the âdeemed to containâ
provision as clarifying potentially ambiguous language in the construction bond itselfânot as
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altering the statutory duty to require a bond that guarantees both completion and payment to
subcontractors, as imposed in the first paragraph.
¶ 56 I agree with the majorityâs determination that the language in section 1 is clear and
unambiguous. I also agree that two, separate bonds are not required. However, where a single
bond is obtained, that bond must reflect that it secures two distinct obligations: completion
(protecting the public body) and payment for labor and materials (protecting subcontractors).
¶ 57 Moreover, the history and purpose of the statute demonstrate that the third paragraph is
intended only to clarify potentially ambiguous language in the construction bond. When the
Bond Act was originally enacted in 1931, section 1 required only a payment bond to guarantee
that subcontractors would be paid for labor and materials furnished in the construction of
public works. Ill. Rev. Stat. 1933, ch. 29, ¶ 15. The statute did not require a bond to secure the
completion of public improvement projects, and the recognized purpose of section 1 was to
protect subcontractors who did not have a mechanicâs lien right against a public work. See
Fodge v. Board of Education of the Village of Oak Park, District 97, 309 Ill. App. 109, 122-23
(1941); see also Chicago Housing Authority v. United States Fidelity & Guaranty Co., 49 Ill.
App. 2d 407, 410 (1964); Board of Education, Northfield Township High School, District
No. 225 v. Pacific National Fire Insurance Co., 19 Ill. App. 2d 290, 299 (1958).
¶ 58 In 1941, the legislature amended section 1 by adding a new paragraph, which provided as
follows:
âEach such bond shall be deemed to contain the following provisions whether such
provisions be inserted in such bond or not:
âThe principal and sureties on this bond agree to pay all persons, firms and
corporations having contracts with the principal or with sub-contractors, all just claims
due them under the provisions of such contracts for labor performed or materials
furnished, in the performance of the contract on account of which this bond is given,
when such claims are not satisfied out of the contract price of the contract on account of
which this bond is given, after final settlement between the officer, board, commission
or agent of the State or of any political subdivision thereof and the principal has been
made.â â Ill. Rev. Stat. 1941, ch. 29, ¶ 15.
¶ 59 Since only a payment guarantee was statutorily mandated at that time, the additional
provisions that were included by operation of law could only have been intended as clarifying
language to remedy otherwise ambiguous terms in public construction bonds. The âdeemed to
containâ language clearly did not alter or expand the essential nature of the payment bonds that
were required for public construction projects in 1941.
¶ 60 The requirement of a completion bond was not added until 26 years later. In 1967, section
1 was amended to provide, in pertinent part, âand such bond, among other conditions, shall be
conditioned for the completion of the contract, for the payment of material used in such work
and for all labor performed in such work, whether by subcontractor or otherwise.â (Emphasis
added.) Ill. Rev. Stat. 1967, ch. 29, ¶ 15. The inclusion of this second type of guarantee was
intended to protect public bodies by safeguarding âtax money allotted for public works.â
Housing Authority v. Holtzman, 120 Ill. App. 2d 226, 241 (1970). At that time, the legislature
also inserted new language in the âdeemed to containâ provision to coincide with the
imposition of the duty to require a completion bond:
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âThe principal and sureties on this bond agree that all the undertakings, covenants,
terms, conditions and agreements of the contract or contracts entered into between the
principal and the State or any political subdivision thereof will be performed and
fulfilled ***.â (Emphasis added.) (Internal quotation marks omitted.) Id. at 235.
¶ 61 This revision, which was made in tandem with the imposition of the new requirement that
performance be guaranteed, demonstrates that the âdeemed to containâ provision, like its
predecessor, was intended to clarify ambiguous bond terms. Nothing in the language of the
statute indicates a different intent.
¶ 62 As with the 1941 amendment, the âdeemed to containâ language serves as clarifying
language where the actual language in the bond may be viewed as ambiguous. However, that
clarifying language cannot be interpreted as altering the nature of the bond that has been
procured. The clarifying language does not change the essential nature of the bond obtained by
the general contractor, nor does it alter the fundamental way in which section 1 operates. The
âdeemed to containâ provision did not expand the nature of public construction bonds when it
was adopted in 1941, and it should not be construed as working such a transformation now.
¶ 63 The purpose of the Bond Act is to protect subcontractors, as well as public bodies. See
Carroll Seating Co. v. Verdico, 369 Ill. App. 3d 724, 727 (2006); Aluma Systems, Inc. v.
Frederick Quinn Corp., 206 Ill. App. 3d 828, 853-54(1990); Housing Authority,120 Ill. App. 2d at 241
. Unfortunately, the majorityâs analysis does not advance that goal. Rather, todayâs
decision dramatically alters the contractual burdens undertaken by a surety and a general
contractor where a construction bond explicitly guarantees only one of the two obligations
required by section 1. This decision also relieves a public body of the statutory duty expressly
imposed by section 1, which requires it to ensure that both completion and payment are
secured. Before taking this action, it would be prudent to ascertain whether section 1 can be
construed in a manner that avoids such an absurd and unjust result. See Township of Jubilee v.
State, 2011 IL 111447, ¶ 36 (recognizing that courts are obliged to construe statutes to avoid
absurd, unreasonable, or unjust results). A logical and just result can be accomplished by
reading the terms of the third paragraph as providing clarification of ambiguous bond
language. To further the purpose of the Bond Act, a subcontractor should be permitted to bring
suit against a public body for the failure to ensure an appropriate type of bond, as well as the
failure to require any bond at all.
¶ 64 In sum, I would hold that the âdeemed to containâ provision in the third paragraph of
section 1 of the Bond Act is intended only to clarify potentially ambiguous language in a public
construction bond. The majorityâs interpretation of that provision is contrary to the plain
language of section 1, as well as the purpose and history of the Bond Act. The appellate court
correctly resolved this issue, and its judgment should be affirmed.
¶ 65 JUSTICE BURKE joins in this dissent.
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