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Components, Inc. v. Walter Kassuba Realty

OPINION FILED SEPTEMBER 19, 1978.

COMPONENTS, INC., PLAINTIFF,

v.

WALTER KASSUBA REALTY CORPORATION ET AL., DEFENDANTS. — (MOHAWK CONSTRUCTION CO., DEFENDANT-APPELLANT,

v.

JACK R. COURSHON, NOMINEE OF THE TRUSTEES OF FIRST MORTGAGE INVESTORS, DEFENDANT-APPELLEE.)



APPEAL from the Circuit Court of Du Page County; the Hon. PHILIP F. LOCKE, Judge, presiding.

MR. JUSTICE NASH DELIVERED THE OPINION OF THE COURT:

Components, Inc., brought the underlying action in this case in February 1975 to foreclose a mechanic's lien against the partially constructed Countryside Trace apartment complex in Woodridge, Illinois, owned by Walter Kassuba Realty Corp. (Kassuba), a named defendant. Among those named as additional defendants by Components were Jack R. Courshon, as nominee of the trustees of First Mortgage Investors, a Massachusetts business trust (FMI), a mortgagee of the subject property; North American Construction Corp. (North American), the general contractor of the development; Mohawk Construction Co. (Mohawk), a subcontractor; and various others possessing possible interests in the subject property. Thereafter, FMI counterclaimed against all these parties, including Mohawk, seeking to foreclose a mortgage lien on the subject property and Mohawk counterclaimed against these same parties and FMI seeking to foreclose a mechanic's lien against the property. A motion by FMI for partial summary judgment in its favor against Mohawk was granted by the trial court which found that Mohawk's mechanic's lien was subordinate to FMI's mortgage lien. Mohawk appeals from that determination of the trial court.

The material facts are not in dispute. Mohawk, a concrete contractor, was engaged by North American to provide concrete work on the Countryside Trace project for a contract price of $265,500. It began work on May 31, 1973, and received its first progress payment of $110,771 on November 8, 1973, based on a total of $123,079 worth of work performed through September 30, 1973. On December 18, 1973, Mohawk ceased work on the property because of North American's failure to make additional progress payments as required by its contract with Mohawk, and at no time thereafter did it perform any further work on the project. From September 30, 1973, the date of the last invoice, through December 18, Mohawk had provided an additional $42,102 worth of work, bringing its total claim to $54,410. On December 21, 1973, Kassuba and various related debtor entities, which included North American, instituted proceedings under chapter 11 of the Bankruptcy Act (11 U.S.C. § 701 et seq.) and, thereafter, until at least mid-May 1974, Mohawk was from time to time assured by North American that the project would be completed. These assurances were based upon a "Master Loan Agreement," entered into between FMI and the Kassuba entities on February 4, 1974, and approved by the bankruptcy court, under which FMI would advance funds for the completion of various real estate developments engaged in by Kassuba, including the subject property. The proposed agreement was not consummated, however, due to various problems and, having received no request to resume work, Mohawk served notice on Kassuba on May 15, 1974, of monies due to it under its contract with North American. On July 11, 1974, Mohawk filed a claim for a mechanic's lien against Kassuba in the office of the recorder of deeds of Du Page County.

The issue presented is whether Mohawk timely filed its claim for lien according to the requirements of the Mechanics' Liens Act (Ill. Rev. Stat. 1973, ch. 82, pars. 1 through 39) such that its mechanic's lien obtained a priority over the mortgage lien of FMI. We find that it did not do so.

Section 21 of the Mechanics' Liens Act pertains to the liens of subcontractors and materialmen and concludes with the following provision:

"Also, in case of default or abandonment by the contractor, the sub-contractor or party furnishing material, shall have and may enforce his lien to the same extent and in the same manner that the contractor may under conditions that arise as provided for in section four (4) of this act, and shall have and may exercise the same rights as are therein provided for the contractor." (Ill. Rev. Stat. 1973, ch. 82, par. 21.)

The pertinent portion of section 4 provides:

"When the owner of the land shall fail to pay the contractor moneys justly due him under the contract at the time when the same should be paid, or fails to perform his part of the contract in any other manner, the contractor may discontinue work, and the contractor shall not be held liable for any delay on his part during the period of, or caused by, such breach of contract on the part of the owner; and if after such breach for the period of ten days the owner shall fail to comply with his contract, the contractor may abandon the work, and in such a case the contractor shall be entitled to enforce his lien for the value of what has been done, and the court shall adjust his claim and allow him a lien accordingly." (Ill. Rev. Stat. 1973, ch. 82, par. 4.)

The above-quoted portions of sections 21 and 4 were intended to apply to the situation before us where a contractor defaulted on its subcontract at a time when there had been only partial performance by the subcontractor (Koester v. Huron Development Co. (1962), 25 Ill.2d 337, 185 N.E.2d 196), and Mohawk correctly relies upon them as entitling it to enforce a lien for partially completed work. The time limitations applicable to the filing of claims for liens or suits to enforce liens of subcontractors under the Act, however, are found in section 28 which provides, in part, that

"If any money due to the laborers, materialmen, or subcontractors be not paid within 10 days after his notice is served as provided in sections 5, 24, 25, and 27, then such person may either file a claim for lien or file his petition and enforce his lien within the same limits as to time and in such other manner as herein before provided for the contractor in section 7 and sections 9 to 20 inclusive, of this Act * * *." (Ill. Rev. Stat. 1973, ch. 82, par. 28.)

Section 7 of the Act then provides, in part, that

"No contractor shall be allowed to enforce such lien against or to the prejudice of any other creditor or incumbrancer or purchaser, unless within four months after completion * * * he shall either bring suit to enforce his lien therefor or shall file in the office of the recorder of deeds of the county in which the building, erection or other improvement to be charged with the lien is situated, a claim for lien * * *. Such claim for lien may be filed at any time after the contract is made, and as to the owner may be filed at any time after the contract is made and within two years after the completion of said contract * * *." Ill. Rev. Stat. 1973, ch. 82, par. 7.

FMI contends Mohawk cannot enforce its lien to the prejudice of FMI, an encumbrancer, because Mohawk failed to file either a claim for lien or suit to enforce its lien within four months after completion of the last work done by it on the project under its contract with North American, December 13, 1973, as was required under section 7.

Mohawk contends the requirement of section 7 that a claim for lien or suit to enforce that lien be filed "within four months after completion" (emphasis added) applies only in cases where a contract has been completed, and not here where it sought to perfect a lien for partially completed work pursuant to the last sentence of section 21. It asserts that in cases of partially completed contracts where that portion of section 21 is relied upon, such as that at bar, the ...


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