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H.b. Lumber Co. v. Irv. Fed. S & L Ass'n

OPINION FILED JANUARY 23, 1984.

HILL BEHAN LUMBER COMPANY, COUNTERPLAINTIFF-APPELLANT,

v.

IRVING FEDERAL SAVINGS & LOAN ASSOCIATION ET AL., COUNTERDEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County; the Hon. Rosemary Duschene LaPorta, Judge, presiding.

PRESIDING JUSTICE BUCKLEY DELIVERED THE OPINION OF THE COURT:

Counterplaintiff-appellant, Hill Behan Lumber Company (Hill Behan), appeals from the judgment of the circuit court of Cook County in favor of the counterdefendants-appellees, Irving Federal Savings & Loan Association (Irving) and Chicago Title Insurance Company (CTIC) in an action to foreclose a mechanic's lien. We affirm in part and reverse in part.

The relevant facts are as follows. In March 1981, Irving filed a complaint to foreclose a mortgage on certain property in a subdivision known as Roundtree Commons in Elk Grove Village, Illinois. In its foreclosure action, Irving named as defendants Louis S. Kulma, Inc. (Kulma), a junior lienholder under a recorded trust deed (Kulma trust deed) covering the subject premises, and Hill Behan, a sub-subcontractor who provided lumber and other building materials used for construction of improvements on said premises. Hill Behan sub-subcontractor counterclaimed to foreclose a mechanic's lien against each of the three townhouse units constructed on the aforementioned property in the total amount of $38,567.59. Hill Behan named Irving and Kulma as defendants. CTIC, as assignee of a note from Kulma secured by the Kulma trust deed, filed a petition for and was granted leave to intervene.

Irving and CTIC subsequently filed motions to strike and dismiss Hill Behan's counterclaim. They alleged that Hill Behan failed to notify them of its claim within 90 days after completion of its work as required under section 24 of the Mechanics' Liens Act (Ill. Rev. Stat. 1981, ch. 82, par. 24). In September 1981, Hill Behan filed an amended answer and counterclaim against Irving and CTIC. Irving and CTIC subsequently moved to apply their motions to strike and dismiss to Hill Behan's amended counterclaim.

On July 15, 1982, the trial court entered an order dismissing Hill Behan's amended counterclaim as to Irving and CTIC. The dismissal was predicated on the court's determination that Hill Behan failed to comply with the section 24 90-day notice requirement. On August 6, 1982, Hill Behan filed a motion seeking to vacate the trial court's order of July 15, to add additional party defendants, and to file a second amended counterclaim. On August 9, 1982, the trial court entered an order denying the motion. Hill Behan appeals from the orders entered July 15 and August 9.

The question before us is whether the trial court correctly determined that Hill Behan had no right to a mechanic's lien as against Irving and CTIC. In resolving this issue, we must look to the language of section 24 of the Mechanics' Liens Act, which provides in pertinent part:

"Subcontractors, or party furnishing labor or materials, may at any time after making his contract with the contractor, and shall within 90 days after the completion thereof * * * cause a written notice of his claim and the amount due or to become due thereunder, to be sent by * * * mail * * * to or personally served on the owner of record or his agent * * * and to the lending agency, if known; * * *." (Emphasis added.) (Ill. Rev. Stat. 1981, ch. 82, par. 24.)

Service of the section 24 notice has been described as a precedent to the creation of a lien under the Act. (Suddarth v. Rosen (1967), 81 Ill. App.2d 136, 140, 224 N.E.2d 602.) We note that in 1969 section 24 was amended to include the words "lending agency, if known." Prior to 1969, a subcontractor was only required to serve the section 24 90-day notice on the owner; it was not necessary to serve such notice on the lender. Hill Behan failed to allege that it served the section 24 notice on Irving or CTIC, the lending agencies in this case.

I

• 1 On appeal, Hill Behan first challenges the constitutionality of section 24 of the Mechanics' Liens Act, alleging that the words "lending agency, if known" are unconstitutionally vague and ambiguous. Hill Behan, however, concedes that it failed to raise this issue during the proceedings below. Consequently, this issue is waived for purposes of appeal. Department of Transportation v. Collins (1979), 69 Ill. App.3d 269, 387 N.E.2d 6; Hah v. Stackler (1978), 66 Ill. App.3d 947, 383 N.E.2d 1264.

II

• 2 We next turn to Hill Behan's contention that it was not required to serve the 90-day notice under section 24 on Irving and CTIC because it had no actual knowledge of Irving's or CTIC's interest in the subject property. With regard to this argument, the trial court found that the Act's requirement of service on the "lending agency, if known" is the equivalent of service on the lending agency if discoverable by the subcontractor through searching title recording records. Accordingly, the trial court ruled that Hill Behan was bound to search the public records for the recording of any interest by any person in the subject property and that it had constructive notice of any such recordings. We concur with this ruling, since a contrary interpretation would defeat the purpose of the recording act (Ill. Rev. Stat. 1981, ch. 30, par. 29). The recording act provides that "[a]ll deeds, mortgages and other instruments of writing which are authorized to be recorded, shall take effect and be in force from and after the time of filing the same for record * * * as to all creditors and subsequent purchasers without notice; * * *." Ill. Rev. Stat. 1981, ch. 30, par. 29.

We note that in the amended counterclaim to foreclose its mechanic's lien, Hill Behan recites a completion date of February 29, 1980. Pursuant to section 24 of the Mechanics' Liens Act, Hill Behan was therefore required to give notice of its claim within 90 days subsequent to this specified completion date not only to those actually known to have an interest in the subject property but also to those constructively known. By virtue of Irving's recordation of its mortgage on August 23, 1977, Hill Behan had constructive notice of Irving's interest in the subject property nearly three years prior to the expiration of the period for serving notice. The record also reveals that the Kulma trust deed was recorded on April 28, 1978. Thus, CTIC's interest, as the holder of a note secured by the Kulma trust deed, was represented of record and, therefore, known ...


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