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Du Page Bank v. Du Page Bank

OPINION FILED MARCH 29, 1984.

DU PAGE BANK & TRUST COMPANY, PLAINTIFF,

v.

DU PAGE BANK & TRUST COMPANY, TRUSTEE, ET AL., DEFENDANTS (E.P. DOYLE AND SON, INC., COUNTERPLAINTIFF-APPELLANT,

v.

DU PAGE BANK & TRUST COMPANY ET AL., COUNTERDEFENDANT-APPELLEE).



Appeal from the Circuit Court of Du Page County; the Hon. John Teschner, Judge, presiding.

PRESIDING JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT:

E.P. Doyle and Son (contractor), counterplaintiff in an action filed by the Du Page Bank & Trust Company (lender) to foreclose a trust deed against property held by the Du Page Bank & Trust Company as trustee under trust No. 2195 with John F. Daniels as sole beneficiary (owner), appeals from a judgment finding that the lender held a lien prior to that of the contractor.

On May 19, 1979, the owner entered into a contract with the contractor to build a restaurant in Glen Ellyn to be called "Track 29," for a construction cost of $474,580. The contract described the work to be done by referring to the architects' plans, by listing the inclusions, exclusions, and changes from those plans, and by providing for possible future change orders at additional cost to the owner.

On August 18, 1979, the owner executed a trust deed, secured by the restaurant to be built. That day, the bank issued a note for $500,000 to the owner personally guaranteed by the beneficiary of the trust. The mortgage was recorded on August 21, 1979.

After the contractor began work, he and the owner executed two change orders, one on January 15, 1980, and one on April 28, 1980, and agreed to additional expenses incurred, bringing the total contract changes to $47,896.48 and bringing the total construction price to exceed the loan amount by $22,476.48.

On June 25, 1980, the owner and the contractor executed an agreement affirming the original contract, agreeing by implication that the contractor had received $500,000, agreeing that $22,476.48 was still owed, and providing that interest would accrue on the unpaid balance at 15% per year beginning June 25. The lender disputes whether these orders form part of the original contract.

On October 30, 1980, the contractor arranged for a plumber to move some vent pipes at the restaurant. The lender disputes whether this work constituted completion of the contract or minor repair and maintenance for the purpose of determining when the contractor's time to file his lien began to run.

On January 7, 1981, the contractor filed his mechanics' lien claim in Du Page County on the Track 29 property, reciting that the last day of work pursuant to contract was October 30, 1980, and claiming $22,476.48 plus interest computed from June 25, 1980.

The lender filed a complaint to foreclose its mortgage February 25, 1981. The contractor filed a petition to intervene, an answer, and a counterclaim, claiming that the owner owed money on the contract and that the contractor's mechanics' lien had priority over the lender's mortgage to the extent of the amount due.

The trial court entered an order January 27, 1983, holding that the contractor possessed a "valid mechanics' lien" and that the lien was "subordinate, inferior, and subject to the first mortgage" of the lender.

On March 16, 1983, the court denied the contractor's motion to reconsider, entered the decree of foreclosure, found a valid mechanics' lien for the contractor, subject to the trust deed lien, and ordered the property sold. The lender purchased at the sale bidding the approximate balance on its mortgage.

I

The lender claimed priority on the theory that the change orders were supplemental contracts and not entitled to the priority of the contractor's lien based on the original contract. The court concluded that the mortgage lien had priority over the amounts due the contractor under the change orders which were executed after the mortgage was recorded. The contractor argues, however, that the change orders were executed pursuant to the provisions of the general contract which was recorded prior to the mortgage and therefore the amounts claimed form part of the prior lien based on that contract.

Change order No. 2, dated April 25, 1980, included changes in paneling, bar fixtures, additional booths, the kind of tile, additional plumbing and heating work, and attendant labor amounting to $30,896.38. A further change order dated June 25, 1980, included additional electrical work, shelving, glass, decorating, Formica table tops, overage on hardware, and exterior stone and asphalt amounting to $7,476.48. The total lien claims, with the balance of $15,000 unpaid on change order No. 2, came to $22,476.48. There is no dispute as to the priority of the mortgage ...


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