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Casenotes

Illinois

Mechanic's Liens

Parkway Bank and Trust Co v Meseljevic, 406 Ill App 3d 435, 940 NE2d 215, 346 Ill Dec 215 (1st D, 2010).

Facts:In 2006, Haso Meseljevic and associates started development of a condominium project and incorporated the project as 1633 Farwell Ave. LLC. On April 11, 2006, Beta entered into a contract with Haso under which Beta would perform electrical work on the project. On May 8, 2006, Parkway entered into a construction mortgage contract with Haso. Parkway recorded the construction mortgage on May 11, 2006. Following modification, 1633 Farwell Ave. LLC. was added as grantor/borrower in October 2007. On August 5, 2008, Beta recorded a mechanic's lien against 16 of the condominium units in the amount of $136,200.

On August 29, 2008, Parkway filed a verified mortgage foreclosure complaint that included Beta as a defendant. On January 26, 2009, the court entered an order of default against all defendants and granted Parkway's motion for a judgment of foreclosure and sale. In March 2009, the court vacated the default judgment to allow Beta to assert the priority of its mechanic's lien over Parkway's mortgage. Following the filing of Beta's answer and counterclaim, Parkway filed a motion for judgment on the counterclaim pleading on May 7, 2009. A scheduling order by the court set June 4, 2009, as the due date for Beta's response to the motion. As a result, the court barred Beta from oral argument. The court heard argument by Parkway and, on June 26, 2009, found that Beta was a subcontractor, Beta failed to perfect its lien because of lack of notice to Parkway, and Parkway's mortgage was therefore superior and prior to Beta's lien. The court reinstated the January 2009 default judgment. The condominiums were sold for less than the judgment and a deficiency judgment was entered against Meseljevics and 1633 Farwell Ave. LLC. On December 7, 2009, Beta filed its notice of appeal.

Holding:Affirmed. On appeal, Beta first argued that it was an abuse of discretion for the trial court to deny their late response and prevent it from participating in oral argument. The court found that its discretion to allow a late response pursuant to a Rule 183 motion does not come into play until the responding party can show good cause for the extension. Here, Beta provided no reason for its late response and the motion to allow the late response was unsupported by affidavit. The right to participate in oral argument is a privilege and it was within the discretion of the trail court to deny oral argument following a late response. Accordingly, the trial court did not err in denying Beta's motion for approval of the late filing.

Before approaching the judgment on the pleadings, the appeals court found as a preliminary matter the following: that (1) Parkway preserved its objection to Parkway's motion for judgment because it did object; its objection was simply stricken as untimely; (2) a response from Beta was not necessary for the court to rule on the motion for judgment; and (3) the court did not enter a default judgment against Beta simply for failing to file a response, rather it ruled on the merits of the motion and reinstated the original default to reflect the dismissal of the counterclaim.

Looking to the judgment on the pleadings, the appellate court found that the district court did not err in finding that Beta did not properly perfect its lien. To perfect a mechanic's lien claim, Section 24(a) of the Mechanics Lien Act requires a subcontractor to send or serve a notice of its lien claim within 90 days after "completion" of its work to any "known" lending agency. A lender discoverable through searching title records is a "known" lender. If a subcontractor does not provide notice to a known lender then its lien is unenforceable against that lender. A contractor is not subject to the 90-day notice requirement. Thus if Beta was a subcontractor, its failure to notify Parkway of the lien would be fatal to its claim against Parkway. Beta's contract with Haso identified him "customer" and not "owner.". The lien identified 1633 Farwell Ave. LLC as "owner" and Haso and Samuel Meseljevic as "contractor." Beta was therefore a subcontractor under the definitions in Sections 1 and 21 of the act because it entered into a contract to do work for Haso, who was the contractor.

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