Gerdau Ameristeel US, Inc. v. Broeren Russo Construction, Inc.
992 N.E.2d 27
Ill. App. Ct.2013Background
- Gerdau Ameristeel filed a verified foreclosure/mechanics lien suit on Green Street Tower project in Champaign involving JMC, Campus, Broeren Russo, and subcontractors Ahal and Blager; Blager and Ahal asserted liens under the Mechanics Lien Act.
- JMC (subcontractor) purportedly owed more to its subcontractors and suppliers than previously shown, leading Broeren Russo to freeze payments.
- Ahal and Blager filed timely notices and recorded liens in December 2008; Gerdau (material supplier) claimed a lien for $658,590.54 not paid.
- Campus (owner) and Broeren Russo (general contractor) paid most funds before Ahal/Blager filed liens; JMC’s last pay request indicated $495,850 remained due to JMC.
- Trial court granted partial summary judgment for Ahal/Blager in December 2011; foreclosure and sale judgment entered in April 2012; petitions for attorney fees and deposition costs denied.
- Court held that secondary subcontractors’ recovery was limited to pro rata shares of funds remaining due to JMC at the time notices were served, and remanded for such calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ahal and Blager may recover more than pro rata shares. | Ahal/Blager argue they are entitled to full recovery beyond pro rata shares. | Campus/Broeren Russo contend recovery limited to pro rata of unpaid funds to JMC. | Yes, limited to pro rata shares of funds remaining due to JMC. |
| Whether Broeren Russo’s section 5 affidavits to Chicago Title satisfied the Act’s notice requirements. | Ahal/Blager claim statements to Chicago Title were not Campus’s notice. | Campus/Broeren Russo relied on contractor affidavits; Chicago Title acted as Campus’s agent. | Sworn statements to Chicago Title satisfied section 5; Campus could rely on them for payments. |
| Effect of Campus/Broeren Russo’s settlement with JMC on Ahal/Blager’s liens. | Settlement with JMC should relieve Campus/Broeren Russo of liability. | Such settlement cannot extinguish Ahal/Blager’s liens without their consent. | Settlement with JMC did not extinguish Ahal/Blager’s claims; not bound by mutual releases. |
| Mootness of Ahal/Blager’s attorney fees and deposition costs on appeal. | If judgment reversed, fees should be recoverable. | Issues moot due to reversal remand. | moot. |
Key Cases Cited
- Bricks, Inc. v. C&F Developers, Inc., 361 Ill. App. 3d 157 (Ill. App. 1st Dist. 2005) (balance Act protects owners from unknown subcontractors; owner may rely on contractor affidavits)
- Weather-Tite, Inc. v. University of St. Francis, 233 Ill. 2d 385 (Ill. 2009) (purpose of the Act to protect subcontractors and owner; funds held in trust; greater protections when appropriate)
- Premier Electrical Construction Co. v. American National Bank of Chicago, 276 Ill. App. 3d 816 (Ill. App. 1st Dist. 1995) (settlement dynamics; owner/contractor defenses; impact on lien rights)
- Sanaghan v. Lawndale National Bank, 90 Ill. App. 2d 254 (Ill. App. 2d Dist. 1967) (owner may rely on contractor statements; notice requirements)
- Lazar Brothers Trucking, Inc. v. A&B Excavating, Inc., 365 Ill. App. 3d 559 (Ill. App. 4th Dist. 2006) (section 5 affidavits and protection of owner from unknown subs)
- Decatur Housing Authority v. Christy-Foltz, Inc., 117 Ill. App. 3d 1077 (Ill. App. 1st Dist. 1983) (subsidiary contractor recovery limited to amounts due to immediate contractor)
- Season Comfort Corp. v. Ben A. Borenstein Co., 281 Ill. App. 3d 648 (Ill. App. 4th Dist. 1995) (owner’s duty to retain funds; risk of false statements by subcontractors)