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03/22/94 LOHMANN GOLF DESIGNS v. LAVERNE KEISLER

March 22, 1994

LOHMANN GOLF DESIGNS, INC., ET AL., PLAINTIFF,
v.
LAVERNE KEISLER, ET AL., DEFENDANTS. GEWALT HAMILTON ASSOCIATES, INC., COUNTER OR CROSS-PLAINTIFF/APPELLANT, V. LAVERNE KEISLER, ALICE KEISLER, MELVIN J. THOMPSON, FRANCIS D. THOMPSON, AND CHARLES Y. THOMPSON, CROSS-DEFENDANTS/APPELLEES, AND DEAN R. CROUSE & ASSOC., INC., CARROWMORE DEVELOPMENT, INC., MARTIN JARRETT, INC., LOHMANN GOLF DESIGNS, INC., THOMPSON DYKE AND ASSOCIATES, LTD., AND UNKNOWN OTHERS, COUNTER OR CROSS-DEFENDANTS.



Appeal from the Circuit Court of Cook County. Honorable Thomas J. Wynn, Judge Presiding.

Released for Publication May 5, 1994. As Corrected October 19, 1994. Supplemental Opinion of February 7, 1995,

DiVito, Hartman, McCormick

The opinion of the court was delivered by: Divito

Presiding Justice DiVito delivered the opinion of the court:

After providing engineering services for the development of a proposed golf course on three parcels of property in Barrington, Illinois, counter or cross-plaintiff Gewalt Hamilton Associates, Inc. (Gewalt Hamilton), ceased performance due to nonpayment and recorded a mechanics' lien against each property for $145,568, the full amount owing. Thereafter, Lohmann Golf Designs, Inc., filed a Mechanics' Lien Complaint in the circuit court of Cook County, naming as defendants the owners of the three parcels of property and all other lien claimants, including Gewalt Hamilton. Gewalt Hamilton then filed a counter and cross claim to foreclose on its mechanics' liens, naming as defendants Laverne Keisler, Alice Keisler, Melvin Thompson, Frances Thompson, and Charles Thompson (collectively "defendants"), the owners of two of the parcels of property, in addition to several others. Defendants moved to dismiss Gewalt Hamilton's claims against them pursuant to section 2-619 of the Code of Civil Procedure (Ill. Rev. Stat. 1991, ch. 110, par. 2-619, now codified as 735 ILCS 5/2-619 (West 1992)). The circuit court dismissed the claim and awarded defendants attorney fees, finding that by recording three different liens, each for the full amount owing rather than allocating among the three separate parcels of property, Gewalt Hamilton committed constructive fraud.

On appeal, Gewalt Hamilton contends that (1) the circuit court inappropriately considered factual matter not supported by affidavit; (2) the court erred in finding that it committed constructive fraud; and (3) the court improperly assessed costs and attorney fees against it.

In 1988, Martin Jarrett, Inc. (Martin Jarrett), entered into separate contracts for the purchase of several parcels of property in Barrington, including three contiguous farms, two of which belonged to defendants and the third to IMM Acceptance Corporation (IMM). *fn1 Martin Jarrett, intending to develop a golf course on the three farms, hired Carrowmore Development, Inc. (Carrowmore), to serve as the general contractor of the project and various other sub-contractors to provide the necessary services. Lohmann Golf Designs, Inc. (Lohmann), was hired for architectural services and course design; Thompson Dyke and Associates (Thompson Dyke) for land planning; Dean R. Crouse and Associates (Crouse) for surveying services; and Gewalt Hamilton for engineering services.

Gewalt Hamilton rendered professional engineering services from February 1989 through May 1990, when it ceased performance due to nonpayment. At that time, Gewalt Hamilton had provided $189,917 in services, but had received only $44,349 in payments, leaving a balance due of $145,568. Thereafter, between January 3 and 11, 1991, Gewalt Hamilton recorded a mechanics' lien against each of the three properties with the Cook County Recorder of Deeds, each lien alleging that the full sum was owed to Gewalt Hamilton.

On February 9, 1991, Lohmann and Thompson Dyke, who had also filed liens against the three properties, filed a complaint to foreclose their claims for lien. The complaint named as party defendants all the record property owners as well as all the contractors, including Gewalt Hamilton. After defendants filed a counterclaim, however, Lohmann's and Thompson Dyke's claims against the three property owners were dismissed by stipulation.

On September 26, 1991, Gewalt Hamilton filed its counter and cross claim to foreclose on its mechanics' liens, stating that the total amount owed was $145,568. It also stated the relative acreage of each parcel: the Keislers' property, at 175.79 acres, constituted 61.56%; the Thompson's property, at 50.74 acres, constituted 17.77%; and the IMM property, at 59.04 acres, constituted 20.67%. Gewalt Hamilton also recorded a lis pendens notice with the recorder of deeds on that date.

On November 15, 1991, the Thompsons filed a 2-619 motion to dismiss Gewalt Hamilton's claims against them. On December 9, 1991, the Keislers filed a similar motion. Both motions alleged that Gewalt Hamilton's failure to allocate the lien amount between the three parcels of land constituted constructive fraud and that Gewalt Hamilton failed to satisfy the requirements of the Mechanics' Lien Act by failing to provide a sworn contractor's statement. The Keisler motion also alleged that Gewalt Hamilton failed to allege any enhancement to the property as a result of its services, a necessary prerequisite to a mechanics' lien. On June 24, 1992, Gewalt Hamilton filed its response, asserting that the failure to allocate among the three parcels was not fatal to its claim. Instead, it argued that under section 7 of the Mechanics's Lien Act (Ill. Rev. Stat. 1991, ch. 82, par. 7, now codified as 770 ILCS 60/7 (West 1992)), an error resulting in an overcharge will not serve to defeat the lien unless it was made with an "intent to defraud." Gewalt Hamilton also argued that a sworn contractor's statement was not a condition precedent to maintaining a mechanics' lien cause of action.

On September 21, 1992, the circuit court issued an opinion and judgment order. It first found that the failure to provide a sworn contractor's statement was not fatal to the cause of action, but that the failure to allocate was. It stated that based on Gewalt Hamilton's own figures regarding the relative acreage of the properties, the Keislers were overcharged by approximately 38.44%; the Thompson's by 82.23%; and IMM by 79.33%. It concluded that such excessive overcharges constituted constructive fraud as a matter of law, stating that a third party examining the records in the recorder's office would see "a claim far in excess of what should rightfully be claimed," something that would certainly prejudice an owner. The court also noted that despite the lengthy time period since the liens were recorded, Gewalt Hamilton had taken no remedial action to clarify the records. The court then ordered that Gewalt Hamilton's claims against defendants be dismissed with prejudice, with costs and attorney fees to be awarded to defendants. By stipulation, IMM andGewalt Hamilton agreed that they would be bound by the judgment as if IMM had filed an identical 2-619 motion to dismiss.

On October 9, 1992, Gewalt Hamilton filed a motion to reconsider, in which it asserted that the court's order was contrary to established law and that the court was mistaken when it found that no remedial action had been taken. Instead, it asserted that by recording the lis pendens notice on the same date that it filed its counterclaim, a third party could learn of the appropriate amounts by reviewing the case file in the circuit court. The court rejected Gewalt Hamilton's arguments, stating that rather than serving a remedial purpose, the lis pendens notice actually exacerbated the impact of the excessive liens because it merely stated that a lawsuit had been filed and could lead to the reasonable Conclusion that the full $145,568 per parcel, or $436,704, was the subject of that lawsuit. Accordingly, the court denied the motion and awarded the Keislers $6,310 and the Thompsons $1,830 in attorney fees in sanctions pursuant to Supreme Court Rule 137 (134 Ill. 2d R. 137). This appeal followed.

Gewalt Hamilton first contends that the circuit court erred when it considered factual matter not supported by affidavit. It asserts that the court considered unsupported statements relating to the differing engineering needs among the three ...


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