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Krack Corp. v. Sky Valley Foods

JUNE 4, 1971.




APPEAL from the Circuit Court of Cook County; the Hon. JAMES A. ZAFIRATOS, Judge, presiding.


Rehearing denied July 1, 1971.

Plaintiff, a sub-contractor, filed its complaint to foreclose a mechanics lien. The trial court found that there was due plaintiff the sum of $5188.38, but that the owners, Sky Valley Foods and Skyval Realty Corporation, were entitled to rely upon a "final sworn statement" furnished by the contractor, Midwest Engineering, which purportedly showed that plaintiff was paid in full, and that the owners were to be protected against plaintiff's claim except as to a retained sum of $1000.00. The trial court found a lien in favor of plaintiff in the sum of $1000.00 plus interest. Plaintiff appeals. The owners cross-appeal from the latter award.

The owners contracted with Midwest Engineering for certain improvements and the latter entered into a contract with plaintiff to supply refrigeration units.

On October 13, 1967, plaintiff sent a letter by certified mail to the owners stating that they would be shown as suppliers upon the "Contractor's Affidavit [sic]", and that plaintiff would "* * * supply you with a Waiver of Lien upon receipt of payment * * *." Although the owners had paid Midwest some $1000.00 prior to that date, on October 18th, Midwest first supplied a "sworn statement" together with an invoice for $12,968.00. Such "sworn statement" listed plaintiff as a sub-contractor whose contract was in the amount of $5172.00. That amount was carried in a parallel column designated "Balance to Complete" It seems agreed that such designation means that the entire contract of plaintiff was unpaid. The owners paid this invoice from Midwest on October 30, 1967.

In November, payments approximating $2460.00 were made by the owners and on December 1st, an invoice dated November 28th in the sum of $12,622.00 was paid by the owners to Midwest. The owners did not obtain or receive a "sworn statement" from Midwest prior to these payments. At the time of this last payment, the owners retained less than the amount shown to be due plaintiff in Midwest's "sworn statement" dated October 18th.

On December 8th, Midwest submitted to owners a second "sworn statement" reflecting plaintiff's contract amount of $5172.00, with a like amount in a parallel column designated "Total Previous Request". The remaining parallel columns designated respectively: "Amount this Request" and "Balance to Complete" were left blank.

The owners claim such form of statement means that Midwest had made a sworn statement that plaintiff had been paid. The magistrate adopted such conclusion and found that the owners should be "protected" despite the fact that they had paid some $13,000.00 to Midwest prior to receiving such "sworn statement", and did not then have sufficient retained funds to pay plaintiff.

The owners' argument that plaintiff's notice by mail dated October 13th did not then comply with the statute, Ill. Rev. Stat. (1967), ch. 82, par. 24, need not be discussed. In oral argument plaintiff has conceded that such letter did not serve as statutory notice, but calls attention and believes some effect should be given to the language of the letter as to supplying waiver of lien upon receipt of payment.

We find a consistent statutory pattern for notice which creates and establishes the owners' liability to a sub-contractor or material man. Section 5 creates the duty of the contractor to give and the owner to obtain a verified "statement in writing" of the names of parties furnishing labor or material and the amounts to become due to them. This data was accurately supplied by Midwest in its statement of October 18th.

Section 24 provides the manner whereby a sub-contractor may give notice to the owner. This section contains the further language:

"and, * * * such notice shall not be necessary when the sworn statement of the contractor or sub-contractor provided for herein shall serve to give the owner notice of the amount due and to whom due * * *." (Emphasis supplied)

Section 21 creates the lien of the sub-contractor or material man and includes the following language:

"But where the contractor's statement, made as provided in section five (5), shows the amount to be paid to the sub-contractor, or party furnishing material, or the sub-contractor's statement, made pursuant to section twenty-two (22), shows the amount to become due for material; * * *, and thereafter such sub-contract shall be performed, or material to the value of the amount named in such statements or notice, shall be prepared for use and delivery, * * * then, and in any of such cases, such sub-contractor or party furnishing or preparing material, regardless of the ...

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