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Fred C. Kramer Co. v. La Salle Nat. Bank

JUNE 12, 1962.

FRED C. KRAMER COMPANY, AN ILLINOIS CORPORATION, PLAINTIFF-APPELLEE,

v.

LA SALLE NATIONAL BANK, A NATIONAL BANKING CORPORATION, AS TRUSTEE UNDER TRUST AGREEMENT DATED OCTOBER 31, 1957, KNOWN AS TRUST NO. 20891, ET AL., LA SALLE NATIONAL BANK, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County; the Hon. CORNELIUS J. HARRINGTON, Judge, presiding. Decree affirmed.

MR. PRESIDING JUSTICE FRIEND DELIVERED THE OPINION OF THE COURT:

Rehearing denied September 11, 1962.

Plaintiff filed its complaint to foreclose a mechanic's lien against real estate held by defendant as trustee under a land trust. Pursuant to a stipulation of facts the chancellor found that plaintiff was entitled to a mechanic's lien and entered a decree accordingly, from which defendant appeals.

By way of defense it is urged that the mechanic's lien claim is barred as a matter of law because defendant, as owner of the real estate, complying with all the provisions of the Mechanics' Lien Act (Ill. Rev Stats 1961, c 82, §§ 1-39), as defendant argues, paid to the contractor the full amount of the contract price of the improvements before it had any knowledge of plaintiff's claim; and also that plaintiff, because of its failure to give timely notice of its claim to defendant, had no remedy under the statute.

The essential facts disclose that defendant, LaSalle National Bank, as trustee, holds legal title to real estate at 1610 South Cicero Avenue, Cicero, Illinois. Sam Shiner and Michael Reese were and still are equal owners of all the beneficial interest in this trust. About January 1, 1958 Shiner and Reese orally agreed to erect a motel on this property, and to assign to Reese the responsibility of supervising the construction and awarding the contracts. Accordingly, on February 1, 1958 Reese entered into a contract with Automatic Boiler Company, Inc., by which the latter agreed to install certain plumbing, heating, and air-conditioning equipment at an agreed price of $29,000. On March 17, 1958 Automatic Boiler in turn verbally agreed to buy certain of this equipment from plaintiff, Fred C. Kramer Company, at the prevailing market prices. This equipment was delivered to the motel site, was used in the construction of the motel, and constituted a permanent improvement. The first shipment from plaintiff to Automatic Boiler took place March 20, 1958 and was paid for by Automatic Boiler on April 11, 1958. Further shipments were made by plaintiff to Automatic Boiler in June 1958 and were paid for in full on June 27, 1958. In July 1958 further orders of Automatic Boiler for equipment were filled by plaintiff, totaling $4206.75; Automatic Boiler did not pay for these orders. The sum of $4206.75, which constitutes the amount of plaintiff's claim in this case, did not become due until August 31, 1958. Automatic Boiler subsequently went into bankruptcy.

It further appears that on April 7, and May 5, 1958 Reese on behalf of defendant paid to Automatic Boiler the sums of $7500 and $6972.44 for labor and materials supplied by Automatic Boiler to the motel. Each time Reese received a partial waiver of lien from Automatic Boiler but no sworn contractor's statement. On May 19, 1958 Reese submitted his own sworn contractor's statement to First Federal Savings and Loan Association of Maywood, the lending institution, listing Automatic Boiler as the contractor for heating and air-conditioning work in the amount of $29,000. On that same date Reese on behalf of defendant authorized First Federal to pay Automatic Boiler the sum of $10,000.00. At that time Automatic Boiler submitted its sworn contractor's statement to First Federal and waivers of lien.

On June 30, and July 17, 1958 further payments of $3000 and $1500, respectively, were made by First Federal at Reese's direction to Automatic Boiler. These payments, together with what had previously been paid to Automatic Boiler, left a balance due to it of $27.56 on its $29,000 contract with Reese. On both June 30, and July 17, 1958 Automatic Boiler delivered to First Federal waivers of lien and purported sworn contractor's affidavits which stated "all material taken from stock and paid for." These affidavits were in fact false and fraudulent, for on and prior to June 30, and July 17, 1958 Automatic Boiler had purchased equipment from plaintiff, which orders totaled $4206.75.

On August 26, 1958 plaintiff caused a notice of lien to be served on the trustee, and on the association, individually and as agent for Reese. As of that date all money due from defendant to Automatic Boiler had been paid except $27.56. It was not until then that defendant, or its agent, Reese, or First Federal of Maywood, had any knowledge that the heating and air-conditioning equipment used by Automatic Boiler in its work at the motel was not taken from stock and paid for or that plaintiff had any claim against any of them.

The principal question presented is whether defendant's payments to the contractor were made in violation of the rights of plaintiff, a subcontractor under the act. Defendant relies on the following language of section 21 of the Mechanics' Lien Act:

"In no case, except as hereinafter provided, shall the owner be compelled to pay a greater sum for or on account of the completion of such house, building or other improvement than the price or sum stipulated in said original contract or agreement, unless payment be made to the contractor or to his order, in violation of the rights and interests of the persons intended to be benefited by this act . . . ." (Emphasis added.)

Defendant made its first payment to the contractor, in the amount of $7500, on April 7, 1958. In reciting this payment the agreed statement of facts reads:

". . . The said Michael Reese did not require of Automatic Boiler, nor did Automatic Boiler deliver to Michael Reese, before the making of such payment of $7,500.00 aforesaid, any statement in writing, under oath or verified by affidavit, of the names of all parties furnishing materials and labor to Automatic Boiler, and of the amounts due or to become due each. . . ."

Defendant made its second payment, in the amount of $6972.44, to the contractor on May 5, 1958. In describing this payment the agreed statement of facts uses the identical language, except for the amount and the date of the payment, that it used to describe the $7500 payment on April 7, 1958. These recitals constitute an admission on the part of defendant that it did not comply with section 5, which reads:

". . . It shall be the duty of the contractor to give the owner, and the duty of the owner to require of the contractor, before the owner or his agent, architect or superintendent, shall pay or cause to be paid to said contractor or to his order any moneys or other consideration, due or to become due such contractor, or make or cause to be made to such contractor any advancement of any moneys or any other consideration, a statement in writing, under oath or verified by affidavit, of the names of all parties furnishing materials and labor, and of ...


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