Recently in Statutes Category

Here’s something you’re sure to be interested in.  We had previously discussed an order in Vancil v. Tres Amigos (C.D.IL, Doc. No. 06-71254) regarding Tres Amigos attempt at attaining summary judgment to extinguish two mechanic’s liens filed by former subcontractors of Vancil in a bankruptcy proceeding initiated by Vancil.  That entry is here.


Today, the court denied Tres Amigo’s motion for reconsideration.  Of note to everyone working in the industry and dealing with mechanic’s liens, this order, holds that section §60/9 of the mechanic’s lien act, which allows the parties to an Illinois mechanic’s lien foreclosure to contest each other’s rights without the need for multiple pleadings between all of the parties, is a procedural statute and not a substantive right given to the parties.  Because the federal court is not bound by state procedure, but rather, by state substantive law, in order to maintain an action against the other lien claimants, a party must file pleadings against the other parties in order to contest the issues between them.  Given this assessment of the nature of the rights granted under §60/9 the court denied Tres Amigo’s motion for reconsideration and held, again, that it needed to have pleadings on file against the lien claimants it was contesting, or no remedy was available from the federal court.

The Mechanics Lien is a testament to the fact that the same problems have been occurring in construction projects since construction began.  The concept behind the act is rooted in equity – a person puts time and effort into improving something and has a right to remuneration for those improvements.  Usually, the improvements cannot be removed from the thing, so justice requires some remuneration, either by getting to sell the thing for the money owed on the improvement or by having a right in any eventual sale.  Many state’s have lien laws similar to Illinois’ that can cover a multitude of types of work, from car, boat and horseshoe repair to construction work, mining work, and liens for judgments awarded to parties in litigation.  What those state laws have in common for the most part, is the creation of a system for conducting affairs in that trade or business that, when followed, can grant parties rights they would otherwise not have outside of the statute.

In the case of the Illinois Mechanics Lien Act, compliance with the provisions of the act can protect the owners of property from subcontractors’ liens when the owner complies by requesting statements from the general regarding amounts owed to subs and then withholds the amounts owed the subs from payment to the general for their benefit.  Subs and generals can protect themselves by providing the proper documentation required under the act to the owner and will have a claim for unpaid monies that attaches to the land and allows them to foreclose on the lien and the possibility of selling the property to satisfy that judgment.  The important point is that the parties need to follow the letter of the act or problems (the same old problems that were cause for the creation of the act in the first place) will arise and they will not have the protections that they thought they did.

Depending on your viewpoint, a comedy of errors came together and an owner’s problems were exacerbated for not following the act, forcing the Third District to reverse a Will County trial court decision in favor of an owner (University St. Francis) against an electrical subcontractor (Excel Electric, Inc.) in this case.

St. Francis hired a general contractor to renovate a residence hall at the university.  The GC hired Excel as the sub.  Work was performed and up to the final invoice, the GC submitted invoices showing the subs and the amount due to the subs.  The original invoices were all paid.  The final invoice was sent to St. Francis by the GC showing the amount of the final payment as $458,237.56 and stating the $130,948.48 was due to Excel.  St. Francis transferred the full amount to the GC (which included the 130k for Excel) to the GC’s Harris Bank account, but instead of having access to the money, Harris Bank took the funds pursuant to its right of set off for a debt that the GC owed Harris Bank.  Excel and other subs never got their money.

Excel filed its claim for a lien and noticed St. Francis that it was owed $140,547.09 (likely the amount plus interest, but the opinion is silent regarding the discrepancy).  Another sub that had a lien filed a foreclosure action and pursuant to the statute, Excel joined in that action and filed a counter-complaint to foreclose on its lien.  The university and Excel both filed motions for summary judgment.  Excel argued that it had a valid and enforceable lien in the amount of $130,948.48 and St. Francis argued that the lien was not enforceable.  The trial court agreed with St. Francis and based its opinion on an understanding that because Excel did not file its notice of lien until after St. Francis had made final payment to the GC.

The appellate court reversed.  The opinion is worth reading for anyone in the industry who is interseted in either enforcing liens or trying to get out of them.  The court cited the notice provisions required in §5(a) and §24(a) of the Act and noted that the final invoice from the GC put the university on notice that Excel was owed money.  Under the act, St. Francis should have withheld the funds for the benefit of Excel (possibly paying them directly to Excel, or at least waiting to obtain a final lien waiver from Excel before transferring payment).  It is interesting that if the final statement from the GC had been fraudulent, and listed the amount as $60 or that no money was owed Excel and then St. Francis did, in fact either retain the $60 or make payment, Excel’s claim against the university would not stand.

Owners should note that they need to request that final statement of subcontractors and amounts due and owing to be protected under the Act.  Contractors should note that they need to get their notices and billings to the owner in a timely fashion under the act to preserve their rights.

 

The Illinois EPA asked the State Attorney General’s office to seek an injunction and civil penalties against the defendant for operating a “construction or demolition debris” landfill without a permit.  The defendant, a company operating a landfill in the Village of Ford Heights (a village the court describes as “an economically depressed community south of Chicago”), argued that the debris (a mound 70 feet tall spanning 26 acres) would be “waste” and therefore in violation of the Illinois Environmental Protection Act (415 ILCS 5/21(d)(2)) but for the fact that the landfill was the proposed site of an all-seasons downhill skiing facility which placed it under an exception to the act.


The question was certified:

   "Whether clean construction and demolition debris deposited onto the land for the purpose of providing the infrastructure for a recreational facility to be built at the site and to be used for snow skiing/snow boarding (facts which are undisputed for purposes of the August 4, 2007 partial summary judgment order) constitutes 'waste' under the Illinois Environmental Protection Act and requires a permit in compliance with the Act's waste disposal requirements including but not limited to 415 ILCS 5/3.305, 415 ILCS 5/21 et seq., 415 ILCS 5/21.1 and 35 Ill. Adm. Code 812.101(a)."


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The court put aside the question regarding whether the debris deposited by the defendant was, in fact, “clean construction or demolition debris” reserving the issue for trial.  Assuming that the debris was “clean” the court found that there was nothing in the actions of the defendant by leveling the debris once it reached the site, demonstrating that it “separated or processed” the debris.  The court also found that the planned ski hill did not create an exception amounting to “returning [the debris] to the economic mainstream in the form of raw materials or products.”  (415 ILCS 5/3.160)  The court reasoned that accepting the claim that the future use created an exception would negate landfill regulation by allowing any landfill operator with a future intention to avoid meaningful regulatory oversight.  The court additionally dismissed the defendants argument that an exception for using the debris as fill material was met – stating that the fill material exception was negated when the debris reached a height (70 feet) well above the adjacent land as the exception stated.


Answering the certified question in the negative, the court remanded the case.  The opinion is here.  For more information on what to do with construction debris, the IL EPA maintains this construction debris website.

Given the glut of Bankruptcy cases we have been seeing over the past four months where differing lien matters are being resolved over limited funds in bankruptcy actions, it’s refreshing to see an interpleader action.  (An action filed by a party that has control or possession of property that should go to some other party, but first it needs the court to determine which party is the correct party.  In the context of this action, which involved a developer in control of funds that would have been paid to a general contractor but for the fact that the contractor was no longer in business.)  The reason this is refreshing is that lately we have been seeing cases where the GC gets behind and starts using all kinds of funds from different projects to pay its bills.  Often, the GC does not reveal its financial state to the parties it contracts with know of its financial state until it is too late.  The GC goes bankrupt, which consumes the remaining monen that was to be paid out to its subs and other creditors… resulting in a GC that can’t pay and multiple liens filed against property owners who had no idea that the payments they were certifying weren’t getting to the subcontractors and creditors.

In this action, the company that went under had also failed to make its FICA payments to the IRS.  At the time the interpleader action was filed, the developer was still in possession of some money that it intended to use to pay the GC.  This money was put forth in the interpleader action with a request to adjudicate a settlement of the pending mechanic’s lien claims in state court.  The developer also added the US as a party because of the lien the US had on the missing FICA tax payments.  The US then filed a motion to remove the case to federal court to which the mechanic’s lienors and other creditors objected.  The court denied the motion to remove the case back to state court finding that the interpleader action had properly consolidated all the cases, and that venue was correctly in federal court under the US Code.

The case is also a reminder that one quick way to federal court when you can’t get diversity jurisdiction is to join the U.S. Government as a party.

The case is available here.

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This is a case from the first district about the collapse of a building in Chicago.  The Chicago Province of the Society of Jesus (a Jesuit organization) had a building and demolition work adjacent to the building went awry causing the collapse of the Jesuit’s structure.

The parties (and there are many) sued each other and some of the defendants decided to settle.  In total, the Jesuits sought close to $3 Million in damages from the defendants on theories of negligence, violation of the Adjacent Landowner’s Excavation Protection Act and violation of the Illinois Municipal Code.  Six of the defendants offered a total of $1,185,000 to settle the claims made against them.

In Illinois, parties can seek a “good faith finding of settlement” under the Illinois Joint Tortfeasor Contribution Act allowing a party that settled to be discharged not only in settlement with the plaintiff, but also from all liability to any other party that might be pointing a finger in their direction.

Here, some of the parties that did not settle objected to the attempts by the settling defendants to obtain a good faith finding because that finding would mean that the non-settling defendants could not seek any more contribution from the settling defendants and would be left paying for whatever damages might be assessed down the road.

In addressing the matter, the court provided a decent summary of the relevant case law and standards regarding “good faith” findings of settlement and upheld the trial court’s determination that the settlements were made in good faith.  Effectively allowing the settling defendants to have their liability capped and be removed from the case.

For those who haven’t been following SB 2014, the synopsis of the bill reads:

Amends the Illinois Municipal Code. Provides that any decision by the corporate authorities of any municipality regarding any petition or application for a special use, variance, rezoning, or other amendment to a zoning ordinance (instead of any special use, variance, rezoning, or other amendment to a zoning ordinance adopted by the corporate authorities of the municipality) is subject to de novo judicial review.”

  • We have written about it here and commented on its status here.

The bill has now passed both houses and has yet to be sent to the Governor for signature or veto.

HB 2094 - No Vote

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For those following HB2094.  The saga has ended for this version of the bill.  The legislature did not vote on HB 2094.