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Chicago Whirly Inc. v. Amp Rite Electric Co.

March 30, 1999

CHICAGO WHIRLY, INC., PLAINTIFF-APPELLEE,
v.
AMP RITE ELECTRIC COMPANY, INC., DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County. Honorable Dorothy Kinnaird, Judge Presiding.

The opinion of the court was delivered by: Justice Mcnulty

JUSTICE McNULTY delivered the opinion of the court:

Plaintiff Chicago Whirly, Inc. (Whirly), filed this declaratory judgment action against defendant Amp Rite Electric Company, Inc. (Amp Rite), the subcontractor hired to do electrical work on Whirly's property, to declare a mechanics lien invalid and for damages for breach of contract. While the action was pending, plaintiff served defendant with a demand that defendant file suit to enforce its lien within 30 days. Defendant did not file suit within 30 days, claiming that a bankruptcy stay prevented it from naming a necessary party, the general contractor Cinaco Builders. Plaintiff filed a motion to remove the mechanics lien. The trial court granted the motion and defendant appeals. We reverse and remand.

Plaintiff is an Illinois corporation that operates a recreational sports facility at 1880 West Fullerton Avenue in Chicago. Defendant is an Illinois corporation engaged in the business of constructing and installing electrical systems.

On or about November 11, 1995, defendant, as a subcontractor, entered into a contract with the general contractor, Cinaco Builders, Inc., an Illinois corporation in the business of managing construction projects. Pursuant to the contract, defendant was to provide electrical labor and materials for the property.

On March 7, 1996, plaintiff filed suit against defendant for damages, claiming defendant failed to install a proper electrical system. Plaintiff also sought a declaration from the court to prevent defendant from filing a mechanics lien on the Fullerton property.

On April 8, 1996, Cinaco Builders filed for bankruptcy. On April 30, 1996, defendant filed a mechanics lien encumbering the property.

On May 15, 1997, plaintiff and the trustee for Cinaco Builders reached a settlement as to the amounts plaintiff owned Cinaco Builders for the construction work done on the Fullerton property and Cinaco Builders issued a release in full of all claims against plaintiff.

On June 19, 1997, plaintiff served defendant with its demand that defendant file suit within 30 days to enforce its mechanics lien pursuant to section 34 of the Illinois Mechanics Lien Act. 770 ILCS 60/34 (West 1996). Defendant notified plaintiff that it could not file suit to enforce its lien because Cinaco Builders was a necessary party to such an action and the automatic stay in bankruptcy prevented the filing of such an action against it.

On July 25, 1997, plaintiff filed a motion to remove the mechanics lien due to defendant's failure to file suit on the mechanics lien within 30 days of plaintiff's demand. On September 30, 1997, the trial court granted plaintiff's motion to dismiss the mechanics lien. The trial court found that defendant could have filed suit against plaintiff by: (1) alleging the bankruptcy; (2) stating the Cinaco was a necessary party but that defendant could not join it; (3) asking the bankruptcy court permission to name Cinaco as a nominal party; or (4) simply suing plaintiff to foreclose the mechanics lien. The trial court, therefore, granted plaintiff's motion and defendant appeals.

The sole issue on appeal is whether the trial court properly found that defendant forfeited its mechanics lien when it failed to file suit against plaintiff within 30 days of its receipt of plaintiff's demand pursuant to section 34 of the Mechanics Lien Act. 770 ILCS 60/34 (West 1996). Section 34 of the Mechanics Lien Act provides:

"Upon written demand of the owner, lienor, or any person interested in the real estate, or their agent or attorney, served on the person claiming the lien, or his agent or attorney, requiring suit to be commenced to enforce the lien or answer to be filed in a pending suit, suit shall be commenced or answer filed within 30 days thereafter, or the lien shall be forfeited. Such service may be by registered or certified mail, return receipt requested, or by personal service." 770 ILCS 60/34 (West 1996).

It is undisputed that defendant here did not file suit to enforce its lien on the property within 30 days of plaintiff's demand for defendant to commence its suit. Defendant, however, claims that it was unable to file suit within the period to enforce the mechanics lien since Cinaco Builders, the general contractor, was a necessary party to the suit but could not be named as a party to the suit due to a bankruptcy stay. Defendant claims that section 108(c) of the Bankruptcy Act extended the time in which it had to bring suit to enforce the mechanics lien. 11 U.S.C. §108(c)(1994).

There is no case law addressing the impact that a bankruptcy stay has on the 30-day time period in which to file suit after a demand is made pursuant to section 34 of the Mechanics Lien Act. However, we agree with defendant that the Illinois Supreme Court case Garbe Iron Works, Inc. v. Priester, 99 Ill. 2d 84, 457 N.E.2d 422 (1983), addressing the effect that a bankruptcy stay has on the two-year ...


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