Lake County Grading Company, LLC v. Forever Construction, Inc.
2017 IL App (2d) 160359
Ill. App. Ct.2017Background
- Waukegan Savings foreclosed on 133 S. Genesee St.; it recorded lis pendens, obtained a foreclosure judgment, became mortgagee in possession, and was the successful bidder at sheriff’s sale before confirmation.
- After the warehouse on the property burned (May 4, 2011), Waukegan Savings told the City it would pay for demolition and asked the City to hire a contractor; the City engaged Lake County Grading (LCG) to perform demolition on Waukegan Savings’ behalf.
- LCG performed demolition May–June 2011, recorded a mechanic’s lien (Aug. 24, 2011), and was later served with a section 34 demand from Waukegan Savings to foreclose the lien or forfeit it; LCG filed this separate mechanic’s-lien foreclosure suit within 30 days (Feb. 22, 2012).
- While LCG’s separate suit was pending, Waukegan Savings sought and obtained confirmation of its sheriff’s-sale purchase (Mar. 15, 2012) and later, after FDIC takeover, First Midwest acquired Waukegan Savings’ assets and was sued as successor in interest.
- The trial court dismissed LCG’s mechanic’s-lien claim (holding lis pendens extinguished it because LCG should have intervened in the foreclosure action) and denied leave to amend to add an equitable-lien claim; LCG appealed and the appellate court reversed and remanded as to the mechanic’s-lien claim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction / forfeiture of appellate issues | LCG: notice of appeal and briefing fairly present lis pendens and §34/McCluskey arguments; motion to reconsider raised new evidence/change in law | First Midwest: notice of appeal omitted denial of motion to reconsider; arguments raised below are forfeited | Court: jurisdiction exists; arguments not forfeited (motion to reconsider invoked newly discovered evidence and change in law) |
| Does lis pendens bar LCG’s separate mechanic’s-lien suit (i.e., was LCG required to intervene)? | LCG: not required — Waukegan Savings induced LCG to perform work and then demanded separate suit under §34; thus bank waived lis pendens protection | First Midwest: lis pendens gave constructive notice; LCG was bound and should have intervened; claim extinguished by foreclosure confirmation | Court: LCG’s lien not extinguished here — Waukegan Savings is not a bona fide innocent purchaser because it induced performance and compelled separate suit under §34, so lis pendens protection is waived |
| Effect of section 34 demand (owner’s demand to sue within 30 days) | LCG: complied with §34 by filing a separate suit as demanded; that compliance precluded forfeiture and justified not intervening | First Midwest: LCG could have intervened; §34 did not excuse failure to protect itself in foreclosure action | Held: §34 demand justified LCG’s filing of a separate action to preserve the lien; Waukegan Savings’ demand cannot be used to later claim prejudice via lis pendens |
| Equitable lien / leave to amend to add equitable-lien claim | LCG: if statutory mechanic’s lien is unavailable, equity should impose an equitable lien | First Midwest: equitable lien inappropriate because LCG had an available statutory remedy and failed to perfect it | Court: trial court did not abuse discretion denying equitable-lien amendment — legal remedy (mechanic’s-lien foreclosure) is available, so equitable lien is precluded |
Key Cases Cited
- General Motors Corp. v. Pappas, 242 Ill. 2d 163 (discussing notice-of-appeal sufficiency and liberal construction)
- R.W. Boeker Co. v. Eagle Bank of Madison County, 170 Ill. App. 3d 693 (contractor’s lien extinguished by foreclosure where purchaser was innocent third party)
- Patrick Engineering, Inc. v. City of Naperville, 2012 IL 113148 (standard for reviewing section 2-619 motions; accept well-pleaded facts)
- First Bank of Roscoe v. Rinaldi, 262 Ill. App. 3d 179 (equitable lien may be imposed only when legal remedy is insufficient)