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Vulcan Materials Co. v. Bee Construction Co.

OPINION FILED OCTOBER 1, 1981.

VULCAN MATERIALS COMPANY, PLAINTIFF,

v.

BEE CONSTRUCTION CO., INC., ET AL., DEFENDANTS. — CENTRAL STATES CONSTRUCTION CO., INC., PLAINTIFF,

v.

BEE CONSTRUCTION CO., INC., DEFENDANT. — (WANER HEATING AND AIR CONDITIONING CORP., DEFENDANT AND COUNTERPLAINTIFF-APPELLANT,

v.

CHICAGO TITLE INSURANCE COMPANY, DEFENDANT AND COUNTERDEFENDANT-APPELLEE.)



APPEAL from the Circuit Court of Cook County; the Hon. FRANKLIN I. KRAL, Judge, presiding.

MR. JUSTICE LINN DELIVERED THE OPINION OF THE COURT:

Rehearing denied November 12, 1981.

Two cases brought from the circuit court of Cook County are consolidated here. Though both cases involve multiple parties, only Waner Heating and Air Conditioning Corp. has brought this appeal. In both cases, Waner sought to foreclose two mechanics' liens on property located in the Village of Niles and commonly known as the Green Lakes Shopping Center. The liens were allegedly valued at approximately $22,000 and were created as a result of materials supplied to and services performed on the property by Waner between 1974 and 1976.

In both cases, Waner's claims were dismissed pursuant to a motion filed by appellee, Chicago Title Insurance Company. Chicago Title is the holder of tax deeds issued on the property by the County Clerk pursuant to an order of court entered in November 1979 under section 266 of the Revenue Act (Ill. Rev. Stat. 1979, ch. 120, par. 747). Essentially, Waner's claims were dismissed because the trial court found that the tax deeds represented superior and merchantable title in Chicago Title and that the tax deeds, when issued, extinguished Waner's mechanics' liens. From the orders of dismissal, Waner appeals.

We reverse and remand.

Background

All of the significant facts in this case are undisputed for the purpose of this appeal. In 1972, the legal title holder of the property involved in this dispute was American National Bank and Trust Company. American National was simply a land trustee whose beneficiary was Morris Suson. Apparently in 1972, the construction of the shopping center began with a company allegedly owned by Suson acting as the developer and general contractor. Though it appears the shopping center was substantially completed, the center never went into successful operation. As a result, Suson failed to pay many of the subcontractors, including Waner, for their materials and services. One of the cases below was originally brought in 1973 by another subcontractor, Vulcan Materials Company, to foreclose on its mechanics' lien. Waner intervened in this action in 1976 and filed its mechanics' lien claims.

Suson also defaulted on a $7,000,000 construction loan made by Dovenmuehle, Inc. This loan was made in late 1974, and the default occurred in 1975. As security for the loan, Dovenmuehle had been granted a mortgage on the property from American National at Suson's direction. The other case below was originally brought by Dovenmuehle in 1977 to foreclose its mortgage. Waner was a named defendant in this action and filed a counterclaim seeking to foreclose its mechanics' liens.

Besides failing to pay Dovenmuehle and the subcontractors, Suson also failed to pay the 1975 real estate taxes on the property. As a result, in November 1976, the property was sold at a tax sale pursuant to a court order. The purchasers at this sale were Interstate Bond Company and Thornton, Ltd. The tax sale price was apparently between $100,000 and $150,000. There is no dispute in this case as to the validity of this sale.

While the above events were taking place, Chicago Title and Dovenmuehle were involved in a dispute between themselves. Chicago Title was the insurer of Dovenmuehle's mortgage interest and had insured the interest against any losses from mechanics' liens. The dispute involved the extent of Chicago Title's liability. The relationship between Chicago Title and Dovenmuehle is important to this case, as is the action Chicago Title took to protect Dovenmuehle's interest in the property. We will set out here in chronological order the events leading up to Chicago Title's acquisition of the tax deeds on the property and point out Chicago Title's and Dovenmuehle's participation in these events.

August 1978

Interstate Bond Company and Thornton, Ltd., assign their certificates of tax purchase acquired from the tax sale to George Mergili and Janice Wajda. (The consideration for this assignment appears to have been approximately $150,000.) Mergili and Wajda ostensibly act as individuals when purchasing the certificates but in fact are employees of Chicago Title acting for Chicago Title.

November 1978

Mergili and Wajda, acting ostensibly as individuals, file petitions in the tax court seeking an order for the issuance of tax deeds on the property under section 266 of the Revenue Act (Ill. Rev. Stat. 1979, ch. 120, par. 747). Under this section, a purchaser at a tax sale or his assignee may file a petition for tax deeds any time within five months prior to the expiration of the period of redemption. Any party having an interest in property sold at a tax sale has two years after the sale to redeem the property. (See Ill. Rev. Stat. 1979, ch. 120, par. 734.) The initial two-year period is supposed to expire in November 1978, when Mergili and Wajda file their petitions for tax deeds. However, Mergili and Wajda eventually agree to extend the initial two-year period to three years (see Ill. Rev. Stat. 1979, ch. 120, par. 744), and thus the period of redemption will not expire until November 1979.

Many of the mechanics' lien claimants receive notice of the petitions for tax deeds and some file appearances. Waner receives notice but fails to appear.

February 28, 1979

Chicago Title and Dovenmuehle complete their negotiations and enter into a written agreement. Under the agreement, Chicago Title admits its liability to Dovenmuehle for all potential losses to Dovenmuehle's interest in the property from mechanics' liens. Chicago Title promises to defend Dovenmuehle's interest against mechanics' lien claims and pay for any losses from successful claims. In return, Dovenmuehle promises to absorb one-half of any losses from such claims. However, Dovenmuehle's loss is limited to $150,000.

Also on February 28, one of the mechanics' lien claimants who has appeared in the tax deed proceedings files an answer to the petitions for tax deeds. Various reasons for denying the petitions are alleged. One of those reasons is that the mechanics' lienholder, upon information and belief, asserts that Mergili and Wajda are employees of Chicago Title and Chicago Title is Dovenmuehle's insurer against mechanics' lien claims. The lienholder asserts that he believes Dovenmuehle and Chicago Title are involved in a possible scheme that will allow Dovenmuehle to acquire tax deeds to the property, and thus merchantable title to the property free and clear of all liens (see Ill. Rev. Stat. 1979, ch. 120, par. 747), for the minimal cost of outstanding taxes on the property. The lienholder asserts that Mergili and Wajda are acting secretly for Chicago Title and Dovenmuehle in an effort to destroy all outstanding mechanics' lien claims to the property and thus they are not entitled to tax deeds. Other lienholders who have appeared in the tax deed proceedings file similar answers.

March to July 1979

In discovery, Chicago Title admits that Mergili and Wajda are its employees and that it is the insurer of Dovenmuehle's mortgage interest. The February 28 agreement entered into between Chicago Title and Dovenmuehle is discovered; nevertheless, Chicago Title does not admit to a "possible scheme" between Dovenmuehle and it, and Mergili and Wajda file motions to strike the answers. Among the reasons asserted for striking the answers is that insufficient facts have been alleged to show that Dovenmuehle and Chicago Title are involved in a possible scheme. The answers are stricken, but the lienholders are given leave to amend their answers to more ...


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