No. 3-07-0402
consolidated with No. 3-07-0462
_________________________________________________________________
Filed June 16, 2008
IN THE
APPELLATE COURT OF ILLINOIS
THIRD DISTRICT
A.D., 2008
WEATHER-TITE, INC., an ) Appeal from the Circuit Court
ILLINOIS CORPORATION, ) of the 12th Judicial Circuit
) Will County, Illinois
Plaintiff, )
)
v. )
)
UNIVERSITY OF ST. FRANCIS, )
STONITSCH CONSTRUCTION, INC., )
QUAKER WINDOW PRODUCTS )
COMPANY, EXCEL ELECTRIC, INC.,)
LAFORCE, INC., SCOTT KARLI )
d/b/a SK SALES, MIDWEST )
ARCHITECTURAL GLASS, INC., )
UNKNOWN OWNERS AND NON-RECORD )
CLAIMANTS, )
)
Defendants. )
______________________________) No. 06-CH-1131
) 06-CH-1135
EXCEL ELECTRIC, INC., an )
ILLINOIS CORPORATION, )
)
Counter-Plaintiff- )
Appellant, )
)
vs. )
)
UNIVERSITY OF ST. FRANCIS, )
STONITSCH CONSTRUCTION, INC., )
WEATHER-TITE, INC., QUAKER )
WINDOW PRODUCTS COMPANY, )
LAFORCE, INC., SCOTT KARLI )
d/b/a SK SALES, MIDWEST )
ARCHITECTURAL GLASS, INC., )
UNKNOWN OWNERS AND NON-RECORD )
CLAIMANTS, )
) Honorable
Counter-Defendants- ) Bobbie Petrungaro
Appellees. ) Judge Presiding.
_________________________________________________________________
JUSTICE LYTTON delivered the Opinion of the court:
_________________________________________________________________
Excel Electric, Inc. filed a complaint to foreclose a
mechanic’s lien against University of St. Francis. St. Francis
filed a motion for summary judgment, and Excel filed a cross-motion
for summary judgment. The trial court granted University’s motion
and denied Excel’s motion. We reverse and remand.
BACKGROUND
In March 2005, St. Francis hired Stonitsch Construction, Inc.
to be its general contractor on a project to renovate a residence
hall. Stonitsch hired many subcontractors to complete the
renovation project, including Excel Electric, Inc.. According to
the contract between Stonitsch and Excel, Excel was to provide
electrical labor, materials and services for the project. From May
2005 to November 2005, Excel provided the necessary labor,
materials and services to Stonitsch.
On four occasions during the course of the renovation project,
Stonitsch submitted documents to St. Francis entitled "Application
and Certificate for Payments." In these documents, Stonitsch
requested payment from St. Francis in the following amounts: (1)
$123,703.20 on May 26, 2005, (2) $532,475.10 on June 16, 2005, (3)
$1,204,333.10 on June 15, 2005, and (4) $1,081,999.69 on August 18,
2005. Each of the payment certificates listed Excel as the
electrical subcontractor and showed the amount that it was due.
St. Francis provided Stonitsch payments in the amounts requested in
each "Application and Certificate for Payments." After St. Francis
paid Stonitsch, Stonitsch paid Excel the amount it was due as set
forth in each payment certificate.
2
Stonitsch completed its renovation work in November 2005. On
December 6, 2005, Stonitsch issued its final "Application and
Certificate for Payments" to University. According to that
document, St. Francis owed Stonitsch $458,237.56, of which
$130,948.48 was due Excel. St. Francis made its final payment of
$458,237.56 on January 20, 2006. That amount was wire transferred
into Stonitsch’s account at Harris Bank. Upon receiving the
payment, Harris Bank exercised its right of set off and applied the
funds received to partially satisfy a debt Stonitsch owed Harris.
Excel received no payment from Stonitsch with respect to the final
payment certificate.
On February 22, 2006, Excel served a Notice and Claim for
Mechanic’s Lien on University, claiming it was owed $140,547.09 for
its work on the renovation project. Other subcontractors, including
Weather Tite, Inc., served St. Francis with notices and claims for
mechanics’ liens.
In May 2006, Weather Tite filed a complaint for foreclosure of
its mechanic’s lien. One month later, Excel filed a counter-
complaint to foreclose its mechanic’s lien. St. Francis filed a
motion for summary judgment, arguing that Excel did not have an
enforceable mechanic’s lien. Excel filed a cross-motion for
summary judgment, arguing that it had a valid and enforceable
mechanic’s lien against St. Francis in the amount of $130,948.48.
The trial court entered an order granting University’s motion
for summary judgment and denied Excel’s cross-motion for summary
judgment. In its order, the trial court relied on Luczak Bros.,
Inc. v. Generes, 116 Ill. App. 3d 286, 451 N.E.2d 1267 (1983),
3
which "seemed factually similar to this case." The trial court
summarized that case as follows: "[T]he subcontractor was entitled
to a lien only in the amount show to become due on the last
statement for which payment was made and the subcontractor must
look to the contractor for payment." (Emphasis by trial court),
citing Luczak, 116 Ill. App. 3d at 303, 4512 N.E.2d at 1281. The
trial court concluded that because St. Francis did not receive
Excel’s notice of lien and claim until after it made final payment
to Stonitsch, Excel did not have a valid and enforceable mechanic’s
lien against St. Francis and must look for Stonitsch for payment.
ANALYSIS
Excel argues that it is entitled to a lien of $130,948.48
because that amount was shown to be due Excel in the final payment
certificate Stonitsch provided to St. Francis. St. Francis
responds that Excel is not entitled to a lien because Excel did not
serve its lien notice until after St. Francis made its final
payment to Stonitsch and all work on the project was complete.
The purpose of the Mechanics Lien Act (Act), 770 ILCS 60/1 et
seq. (West 2004), is to protect those who in good faith furnish
material or labor for the construction of a building. State Bank
of Lake Zurich v. Winnetka Bank, 245 Ill. App. 3d 984, 994, 614
N.E.2d 862, 869 (1993). The Act attempts to balance the rights and
duties of owners, contractors and subcontractors. Alliance Steel,
Inc. v. Piercy, 277 Ill. App. 3d 632, 635, 660 N.E.2d 1341, 1343
(1996).
Under section 5 of the Act, it is the owner’s duty, before
making any payments, to require the general contractor to provide
4
a sworn written statement listing the subcontractors and the
amounts due or to become due to each one. 770 ILCS 60/5(a) (West
2004). If a subcontractor’s name is omitted from the contractor’s
statement or the subcontractor is owed an amount different from
what is provided in the statement, the subcontractor must give the
owner written notice of its claim no later than 90 days after its
completion of the contract. 770 ILCS 60/24(a) (West 2004).
When an owner is notified of a subcontractor’s claim, he must
retain from any money due the contractor an amount sufficient to
pay the subcontractor. 770 ILCS 60/27 (West 2004); see
Knickerbocker Ice Co. v. Halsey Bros. Co, 262 Ill. 241, 246, 104
N.E. 665 (1941). If an owner pays a contractor and does not retain
sufficient funds to pay a subcontractor after receiving notice that
a subcontractor is owed, such payment shall be considered illegal
and made in violation of the subcontractor’s rights. 770 ILCS
60/27 (West 2004).
An owner will not be required to pay a greater amount than the
contract price "unless payment be made to the contractor or to his
order, in violation of the rights and interests of the persons
intended to be benefitted by this act." 770 ILCS 60/21(d) (West
2004). An owner who pays a contractor without withholding
sufficient funds for the subcontractor runs the risk of being
obligated to pay the subcontractor even if he already paid the
contractor the full contract price. See Hall v. Harris, 242 Ill.
App. 315, 318 (1926); see also Capital Plumbing & Heating Supply
Co. v. Snyder, 2 Ill. App. 3d 660, 666, 275 N.E.2d 663, 668 (1971)
(once an owner is put on notice that money is due a subcontractor,
5
he acts at his peril unless he retains sufficient funds to pay the
subcontractor).
A payment to a contractor is not wrongful if it is made by an
owner prior to receiving notice of a subcontractor’s claim. See
Contractors’ Ready-Mix, Inc. v. Earl Given Construction Co., Inc.,
242 Ill. App. 3d 448, 458, 611 N.E.2d 529, 535 (1993). However,
when an owner has notice of a subcontractor’s claim, through the
contractor’s statement under section 5 or through the
subcontractor’s 90-day notice under section 24, and nevertheless
makes payment to the contractor without retaining funds for the
subcontractor, such payment is wrongful under the Act. See
Contractors’ Ready-Mix, 242 Ill. App. 3d at 458, 611 N.E.2d at 535;
Snyder, 2 Ill. App. 3d at 667, 275 N.E.2d at 668-69; Gilbert v.
Croshaw, 178 Ill. App. 10, 12-13 (1913); Butler v. Gain, 128 Ill.
23, 26-27, 21 N.E. 350 (1889). When an owner makes a wrongful
payment, the subcontractor is entitled to a lien in the amount of
the wrongful payment. See Contractors’ Ready Mix, 242 Ill. App.
3d at 458, 611 N.E.2d at 535.
In an attempt to balance the rights and duties of owners,
contractors and subcontractors, the Act draws lines establishing
who is entitled to relief when an owner and subcontractor are both
bona fides. Under the Act, a bona fide owner is protected from
having to pay out twice as long as he follows the terms of the Act.
See 770 ILCS 60/21(d) (West 2004); see also Gilbert, 178 Ill. App.
at 13 (an owner will be required to pay more than the original
contract price only if he has not complied with the provisions of
6
the Act). However, if an owner does not abide by the provisions of
the Act, "he acts at his peril." Capital Plumbing, 2 Ill. App. 3d
at 666, 275 N.E.2d at 668. In other words, an innocent owner
protects itself and a subcontractor by complying with the Act; but
if an otherwise innocent owner does not follow the terms of the
Act, the subcontractor is entitled to relief. See Contractors’
Ready-Mix, 242 Ill. App. 3d at 458, 611 N.E.2d at 535; Snyder, 2
Ill. App. 3d at 667, 275 N.E.2d at 668-69; Gilbert, 178 Ill. App.
at 12-13; Butler, 128 Ill. at 26-27, 21 N.E. 350.
Here, we agree with Excel that St. Francis was required to
retain the amount it was due as set forth in Stonitsch’s last
payment certificate. Our analysis begins with the case of
Contractors’ Ready-Mix, 242 Ill. App.3d 448, 611 N.E.2d 529. In
that case, First Midwest Bank contracted with Earl Given
Construction Co. to erect a Wal-Mart. Given entered into a
subcontract with Ready-Mix. In September and October 1990, Ready-
Mix delivered materials to Given and did not receive payment in the
amount of $77,102.77. After that, Given gave First Midwest a sworn
statement showing that Ready-Mix was due $127.25. Given also
served First Midwest with a document purporting to be a waiver of
Given’s lien for $280,800 worth of work that Given had completed.
In November, First Midwest paid Given $280,800. In January 1991,
Ready-Mix mailed its notice of lien to First Midwest.
The appellate court found that Ready-Mix was entitled to a
lien in the amount of $127.25 because "except for the owner’s
failure to withhold $127.25 from the sum which it paid Given on
November 2, 1990, the owner complied with the requirements of
7
section 5 of the Act when the owner obtained Given’s section 5
affidavit on October 25, 1990, and then paid Given $280,800 on
November 2, 1990." Contractors’ Ready-Mix, 242 Ill. App. 3d at
454, 611 N.E.2d at 533. The court held that "Ready-Mix’s section
24 notice to the owners did not render wrongful payments made by
the owner to Given prior to the owner’s receipt of that notice."
242 Ill. App. 3d at 456, 611 N.E.2d at 534. However, the court
found that "[w]here, as here, the owner has made some wrongful
payments, the subcontractor or supplier is entitled to a mechanic’s
lien to the extent of those payments." 242 Ill. App. 3d at 458,
611 N.E.2d at 535. The court found that "the owner wrongfully paid
out the sum of $127.25 and Ready-Mix is entitled to a mechanic’s
lien but only to that extent." 242 Ill. App. 3d at 458, 611 N.E.2d
at 535.
The facts in Ready-Mix are similar to those in the instant
case. In both, the contractor’s sworn statements showed that one
or more subcontractors were owed money. Nevertheless, the owners
paid the contractors the full amount requested and did not withhold
any money for the subcontractor(s). According to the court in
Ready-Mix, such a payment is wrongful and entitles the
subcontractor to a lien in the amount of the wrongful payment. 242
Ill. App. 3d at 458, 611 N.E.2d at 535.
Stonitsch’s final payment certificate requested payment from
St. Francis in the amount $458,237.56, of which $130,948.48 was due
Excel. St. Francis paid Stonitsch the entire amount it requested
and did not withhold $130,948.48 for Excel’s benefit. After making
its final payment to Stonitsch, University received Excel’s Notice
8
and Claim for Mechanic’s Lien, showing that it was owed
$140,547.09.
Because St. Francis did not receive Excel’s section 24 notice
until after it made payment to Stonitsch, that notice would have
been ineffective; however, St. Francis did receive notice of
Excel’s claim in Stonitsch’s final payment certificate, which
showed that Excel was owed $130,948.48. Pursuant to that notice,
St. Francis was obligated to withhold $130,948.48 from its final
payment to Stonitsch. See 770 ILCS 60/27 (West 2004);
Knickerbocker, 262 Ill. at 246, 104 N.E. 665; Contractors’ Ready
Mix, 242 Ill. App. 3d at 458, 611 N.E.2d at 535. Because St.
Francis paid Stonitsch the full amount requested and did not retain
any funds to pay Excel, St. Francis’s payment was wrongful. See
770 ILCS 60/27 (West 2004); Contractors’ Ready Mix, 242 Ill. App.
3d at 458, 611 N.E.2d at 535; Snyder, 2 Ill. App. 3d at 667, 275
N.E.2d at 668-69; Gilbert, 178 Ill. App. at12-13; Butler, 128 Ill.
at 26-27, 21 N.E. 350.
Nevertheless, St. Francis argues that the cases of Luczak, 116
Ill. App. 3d 286, 451 N.E.2d 1267, and Knickerbocker Ice Co. v.
Halsey Bros., Co., 262 Ill. 241, 104 N.E. 655 (1914), support the
trial court’s conclusion that Excel did not have a valid and
enforceable mechanic’s lien against St. Francis. We disagree.
The trial court relied on the court in Luczak, finding that
"the subcontractor was entitled to a lien only in the amount shown
to become due on the last statement for which payment was made * *
*." (Emphasis added by trial court). However, the court in
Luczak actually held that the subcontractors in that case were
9
"entitled to a lien only in the amount shown to be due on the last
statement for which payment was made." Luczak, 116 Ill. App. 3d at
304, 451 N.E.2d at 1281. (Emphasis added). Thus, applying Luczak
to this case, Excel is entitled to a lien in the amount of
$130,948.48, the amount shown to be due Excel on the final payment
certificate.
Nor does Knickerbocker support St. Francis’ argument. In
Knickerbocker, the contractor issued false sworn statements to the
owner. According to the contractor’s last statement, the
subcontractor was owed $900. The subcontractor was actually owed
$1,426.33 and filed a petition against the owner, claiming a lien
in that amount. The trial court held that the subcontractor had a
lien in the amount of $911, the remaining unpaid balance on the
contract between the owner and the contractor. The appellate court
and supreme court affirmed. The supreme court explained: "Having
no knowledge of the falsity of the statements, the owner had the
right to act upon them, and the subcontractor must look to the
contractor for any balance due on its claim over and above the
amount withheld by the owner pursuant to the sworn statements
made." Knickerbocker, 262 Ill. At 245.
Like the courts in Ready-Mix and Luczak, the Knickerbocker
court found that the subcontractor had a valid and enforceable lien
against the owner pursuant to the contractor’s sworn statement.
However, Knickerbocker is distinguishable from this case in a
significant way. In Knickerbocker, the owner properly withheld
from the contractor the amount that the final sworn statement
reflected was still due to the subcontractor. Thus, the owner in
10
Knickerbocker fulfilled all of his duties under the Act and,
therefore, could not be required to pay more than the contract
price. See 770 ILCS 60/21(d). Here, St. Francis had not properly
withheld from Stonitsch the amount Excel was owed pursuant to the
final payment certificate. Thus, St. Francis’ payment to Stonitsch
was wrongful, and St. Francis could be required to pay more than
the contract price. See Hall, 242 Ill. App. at 318; Snyder, 2 Ill.
App. 3d at 666, 275 N.E.2d at 668.
Excel is entitled to a mechanic’s lien of $130,948.48, the
amount shown to be due Excel in the final payment certificate that
St. Francis wrongfully paid Stonitsch. See Contractors’ Ready Mix,
242 Ill. App. 3d at 458, 611 N.E.2d at 535; see also Luczak, 116
Ill. App. 3d at 304, 451 N.E.2d at 1281 (a subcontractor is
entitled to a lien in the amount shown to be due on the last
statement for which payment is made). The trial court erred in
granting St. Francis’s motion for summary judgment and denying
Excel’s motion for summary judgment.
The judgment of the circuit court of Will County granting
summary judgment to St. Francis and denying summary judgment to
Excel is reversed. We remand to the trial court to enter an order
granting Excel’s motion for summary judgment.
Reversed and remanded.
HOLDRIDGE and O'BRIEN, JJ., concurring.
11