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Bethlehem Steel Corp. v. Tishman-adams





APPEAL from the Circuit Court of Cook County; the Hon. HAROLD A. SIEGAN, Judge, presiding.


These appeals arise from a multiparty mechanics' lien proceeding initially commenced by Bethlehem Steel Corporation (Bethlehem) against Tishman-Adams, Inc. (Tishman), La Salle National Bank (La Salle), as trustee, Chicago Union Station Company, Penn Central Company, and Pittsburgh, Fort Wayne & Chicago Railway Company (Railroads). After the filing of the original complaint, counterclaims for mechanics' liens were also asserted by Vulcan Materials Company (Vulcan), Material Service Corporation (Material Service), and a number of other claimants. All claims except those of Vulcan and Material Service were subsequently resolved.

The defendants, Tishman and La Salle, appeal from judgments of the circuit court of Cook County, finding that the plaintiffs, Vulcan and Material Service, have valid mechanics' liens on moneys payable by Tishman to a bankrupt general contractor, Morris-Handler Company, Inc. (Handler). Vulcan and Material Service each cross-appealed from the judgments which found there were no valid mechanics' liens against the property on which work and materials were provided.

The issues on review are whether a written lien waiver between Tishman, as owner, and Handler, as a general contractor, was sufficient under section 21 of the Mechanics' Lien Act (Ill. Rev. Stat. 1971, ch. 82, par. 21) to waive liens on both moneys due and on the property, whether Vulcan had actual notice that no lien on property or moneys would be available before supplying labor or material, whether Vulcan is estopped to claim a mechanic's lien on moneys due or to become due when no explicit claim for such liens was asserted until after trial, and whether Vulcan and Material Service each have liens on improvements in the "space excepted" part of the construction project.

In January of 1969, Tishman and La Salle leased the air rights upon the premises of 222 South Riverside Plaza, Chicago, Illinois, from the Railroads, for the purpose of constructing a building. The lease expressly provided that every contract for labor or services in excess of $10,000 must contain a lien waiver stipulation which contained specified language.

Tishman entered into an oral agreement with Handler on September 23, 1969, to perform certain excavation, filling, grading and concrete work in connection with the construction of the building, and they also orally agreed Handler would waive all of its mechanics' lien rights on the construction project. J. Kenneth Schwartz, president of Handler, testified he understood there was to be a complete waiver of liens for all the work to be done on the project.

Handler began work on October 6, 1969, and in November of 1969, Tishman, as "Builder", and Handler, as "Contractor", executed a written contract back-dated to September 23, 1969, which contained an integration clause. That clause stated the written document was the entire contract, and it prohibited any oral modification or amendment. Simultaneously with the execution of the construction contract, in November of 1969, Tishman, as "Owner", and Handler, as "Contractor", executed a document also back-dated to September 23, 1969, entitled "Stipulation, Waiver of Rights to File Mechanics' Liens" (Waiver) which is Rider A, Appendix A to the construction contract. The Waiver, which contained language conforming to that specified in the leasehold agreement between the Railroads and Tishman, was not filed in the office of the recorder of deeds, Cook County, Illinois, until July 2, 1970.

While Tishman and Handler were discussing the details of their contract, Handler undertook to obtain Vulcan as a subcontractor. J. Kenneth Schwartz of Handler informed Carl Freeberg, general manager of Vulcan's midwest sales division, it was to be a "no-lien" job. Schwartz testified Freeberg stated he would have to check with his office before he could agree to it. Freeberg talked to Jerry Nagel, Vulcan's midwestern division vice-president of sales, and they agreed to take the job because there had been no problem dealing with Schwartz or Handler in the past. Nagel limited his discussion to the sales office and did not discuss the job with anyone from Vulcan headquarters in Birmingham. Cyrus C. Adams, president of the midwest division of Vulcan, testified he had no knowledge it was to be a "no-lien" job. On July 15, 1970, Nagel became vice-president of Material Service, and at no time prior to or during delivery by Material Service did he see the construction contract or the Waiver.

Vulcan started to deliver materials to the project on October 27, 1969, and Material Service began delivering on January 11, 1971. Tishman terminated the contract with Handler on August 4, 1971, on account of Handler's default and inability to perform. Subsequently, Handler went into bankruptcy proceedings and is now a defunct and nonoperating company.

Both Vulcan and Material Service perfected their liens under the statute, and at an evidentiary hearing without a jury the trial court held the Waiver was sufficient to waive lien rights with respect to the premises but not with respect to moneys due. The trial court granted a lien to Vulcan in the amount of $338,859.57 and based on a subsequent motion for summary judgment, granted to Material Service a lien in the amount of $127,516.78.

The defendants first contend the Waiver agreed to by Handler was not confined to a mechanic's lien on the premises, but also extended to moneys due or to become due to Handler. The Waiver provided in relevant part:

"Contractor does now hereby fully and completely waive and release, for himself, his heirs, successors and assignees, and for all his subcontractors and their respective subcontractors, any and all claims of, or right to, mechanic's lien, under the statutes of the State of Illinois, against, or with respect to, the above-described premises, or any portion thereof, or any improvement thereon, or with respect to the estate or interest of any person whatsoever in the said premises or improvements, or any portion thereof, or with respect to any material, fixtures, apparatus or machinery to be furnished to the said premises which claim of lien might be asserted by reason of the doing, making, or furnishing, at any time hereafter by the contractor, his successors, assignees, materialmen, subcontractors, or sub-subcontractors, of any labor, services, material, fixtures, apparatus, machinery, improvements, repairs or alterations in connection with the above-described premises or the improvements thereon.

The contractor further agrees that upon the completion of the performance of this contract, the premises shall be delivered to Owner free and clear of any mechanics' liens, not only of the contractor but also of any and all of the subcontractors, materialmen, laborers, or sub-subcontractors who may furnish any labor, material, services, fixtures, apparatus or machinery in connection with the improvements described in this contract whether such liens relate to the above-described premises or to any moneys or other considerations which may be due at any time hereafter from Owner to the contractor, to any of the subcontractors, or to any of the sub-subcontractors."

The defendants concede there is no specific reference to mechanics' liens on moneys due in the first paragraph which sets forth the waiver, but they argue the words "any and all claims of, or right to, mechanic's lien * * * with respect to any material, fixtures, apparatus or machinery to be furnished," include all liens relating to the job. They also contend that in the next paragraph Handler's covenant to make delivery "free and clear of liens whether on the premises or on moneys or other considerations which may be due at any time hereafter," constituted a waiver of lien rights with respect to moneys due under the Act, citing W.W. ...

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