Summary: Counterclaim to enforce a mechanic's lien was time-barred because it was not filed until after the two-year statute of limitations period, pursuant to Section 9 of Mechanic’s Lien Act.

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Bank of New York v. Jurado, 2012 IL App (1st) 112116.

Facts: In February 2007, Plaintiff Bank of New York (BONY) filed a complaint seeking to foreclose on a mortgage for property located on Kenton Avenue in Lincolnwood. Defendant RBM Development Inc. (RBM) had a mechanic’s lien on the property that was recorded on October 12, 2006. On February 21, 2007, BONY served its lawsuit upon RBM’s registered agent, as listed in the records of the Illinois Secretary of State. RBM failed to appear or answer the complaint. The court subsequently granted BONY’s motion for default against RBM and the other defendants and entered an order for judgment of foreclosure and sale.

On April 10, 2008, about nine months later, RBM filed a motion to vacate the default judgment and for leave to intervene and file a counterclaim. RBM attached its proposed counterclaim to foreclose on its mechanics lien to the motion claiming that its lien was prior and superior to the mortgage owed to BONY. In its motion, RBM alleged that its last day of work was June 14, 2006 and that it had provided materials, equipment, services, and labor in the amount of $428,500 to the owners of the Lincolnwood property, and subsequently recorded a mechanic’s lien for unpaid work.

On August 4, 2008, the trial court, after allowing a period of limited discovery, vacated the default judgment of foreclosure as to RBM, finding that RBM's registered agent did not have authority to serve as its agent. The trial court gave RBM leave to file its answer and counterclaim, which RBM timely filed on August 25, 2008. BONY subsequently filed a motion for summary judgment alleging RBM failed to enforce its mechanics lien within two years of completion of the work (which was June 14, 2008), as required by Section 9 of the Act, and was therefore unenforceable.

On August 13, 2010, the trial court granted BONY’s motion for summary judgment. RBM appealed.

Holding: Affirmed.On appeal, RBM argued that the counterclaim attached to its motion to vacate and leave to intervene was filed before the two-year deadline required by section 9 of the Mechanic’s Lien Act. RBM argued that its counterclaim satisfied the two-year filing requirement because RBM could not file its counterclaim without leave of the court. Section 9 of the Act requires that all lien claimants must commence suit or file a petition to intervene “within two years after the completion of the contract.” 770 ILCS 60/9 (West 2008).

RBM relied on Wasilevich Construction Co. v. LaSalle National Bank, 222 Ill. App. 3d 927 (1991) in support of its claim that it complied with section 9 of the Act. In Wasilevich, a subcontractor filed a petition for leave to intervene and a counterclaim to enforce a mechanic’s lien one day prior to the expiration of the two-year limitations period, but leave was not granted until after the two-year period elapsed. The court in Wasilevich found that filing the petition satisfied section 9 of the Act.

The appellate court in the case at hand engaged in statutory construction to ascertain the intent of the legislature and distinguished this decision from Wasilevich. The court determined that the counterclaim in this case was not filed until after the two-year limitations period had expired, which was in contrast to the decision in Wasilevich where the claimant’s petition was filed, but not granted within the two-year statutory period as required by section 9 of the Act. The court determined that “[s]ection 9 of the Act provides that the counterclaim must be filed within two years of the completion of the work, not merely presented as an attachment.”

In addition, the court held that RBM could have filed a separate suit to foreclose the lien before the statutory period had lapsed rather than wait for a decision on the motion to vacate BONY’s foreclosure action.