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06/30/89 Tde Ltd. Et Al., v. Alan Israel Et Al.

June 30, 1989

TDE LTD. ET AL., PLAINTIFFS-APPELLEES

v.

ALAN ISRAEL ET AL., DEFENDANTS-APPELLANTS (FOCUS REAL ESTATE EQUITIES CORPORATION ET AL., DEFENDANTS)



APPELLATE COURT OF ILLINOIS, FIRST DISTRICT, SECOND DIVISION

541 N.E.2d 1281, 185 Ill. App. 3d 1059, 133 Ill. Dec. 843

Appeal from the Circuit Court of Cook County; the Hon. Franklin I. Kral, Judge, presiding. 1989.IL.1063

APPELLATE Judges:

JUSTICE HARTMAN delivered the opinion of the court. BILANDIC, P.J., and DiVITO, J., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE HARTMAN

This interlocutory appeal (107 Ill. 2d R. 307(a)(1)) arises from a circuit court order denying defendants' motion to dismiss plaintiffs' lawsuit or, alternatively, to stay litigation proceedings, and to compel arbitration. *fn1 We are asked to determine whether the court entered its order in error and whether defendants are entitled to compel arbitration.

After filing their mechanic's lien on September 13, 1988, for labor and materials they claim to have furnished defendants, on September 27, 1988, plaintiffs TDE Ltd. and Arthur Swanson & Associates, Ltd., doing business as CD Group (collectively CD Group), filed a verified complaint to foreclose their mechanic's lien and "for other relief." The complaint alleged in its first count that CD Group acts as a general contractor in the construction of office and other buildings; defendant La Salle National Bank, as trustee for trust number 110740 (Trust), holds legal title to certain real estate and improvements located at 3210 Dundee Road in Northbrook, Illinois (Property); and defendant Dundee-Landwehr Limited Partnership, comprised of defendant Alan Israel and defendants Focus Real Estate Equities Corporation and Pilgrim Investment Group (collectively Owners), owned the beneficial interest in the Property. CD Group additionally asserted that it entered into a written agreement (Agreement) with the Trust on December 17, 1987, whereby CD Group promised to "perform . . . labor and furnish . . . materials at the Property for the construction of a two-story office building with an underground parking garage for the sum of $5,640,000." Subsequent change orders elevated the cost of performance to $5,686,296.

Pursuant to the Agreement, CD Group performed labor and furnished materials required of it. On July 12, 1988, CD Group submitted to the Trust a "fourth draw payment" for $866,298 which the Trust "failed and refused to pay"; the Trust similarly forwarded no payment to CD Group for its "fifth draw payment" of $568,739, tendered August 24, 1988. CD Group also alleged that the Trust holds additional sums of $196,666 as "retainage under the five draw requests" and $461,998 for labor and materials furnished after submission of the fifth draw request. The total outstanding balance owed by the Trust as of September 12, 1988, equaled $2,093,703. Counts II and III of the verified complaint sought damages for breach of contract and quantum meruit.

CD Group moved for appointment of a receiver for the Property on October 11, 1988, declaring that CD Group and subcontractors participating in the project removed their personnel and equipment from the Property after the Owners *fn2 failed to honor CD Group's requests for payment, and alleging that the unfinished structure was exposed to deterioration by the elements or destruction by municipal authorities as an attractive nuisance.

The Owners responded to the motion on October 27, 1988, objecting to CD Group's demand for establishment of an expedited trial schedule and waiver of CD Group's obligation to post a bond. The Owners did not object to appointment of a receiver, provided that corporations furnishing the Owners with a construction loan, defendants Focus Real Estate Finance Company and National Canada Corporation (collectively Lenders), agreed to fund continued construction at the Property. The Owners specifically declared that their consent to appointment of a receiver was not meant to be construed as a waiver of any other rights they may have with respect to the receiver's appointment. The circuit court appointed a receiver on November 4, 1988.

On November 3, 1988, the Owners responded to CD Group's complaint with their motion for dismissal or stay. Citing specific provisions of the Agreement, the Owners asserted that filing the complaint without first submitting the matter to arbitration clearly violated the Agreement and requested that the court compel arbitration. On November 2, 1988, the Trust answered CD Group's complaint.

CD Group filed a response on November 15, 1988, to which the Owners replied on November 28, 1988.

By order entered November 29, 1988, the circuit court denied the Owners' motion.

On December 28, 1988, the Owners filed a notice of interlocutory appeal (107 Ill. 2d R. 307(a)(1)), seeking to compel arbitration and to stay all judicial proceedings ...


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