Mechanics' Lien Claim Valid Despite Incorrect Completion Date (North Shore Community Bank v. Sheffield Wellington, 2014 IL App (1st) 123784)

Effective Date: 
Monday, December 15, 2014 - 5:00pm

This recent mortgage foreclosure case involving the validity of two mechanics’ liens has caused some concern among the title companies due to the uncertainty it created regarding the calculation of the expiration of a mechanics lien. This memo will review the court’s holding and set forth ATG’s underwriting requirements in light of this decision.

The Facts

In May 2008, the owner of a commercial property on Sheffield Avenue in Chicago obtained a construction loan from North Shore Community Bank ("North Shore") in the amount of $2.65 million. The owner entered into a contract in December, 2008, with Bluewater Capital Development ("Bluewater") to construct an office on the property. Construction commenced in December 2008, but was not completed due to lack of payment by the owner.

Bluewater filed its mechanics' subcontractor's lien claim on April 3, 2009. In its lien claim, Bluewater stated that it substantially completed the work on Sunday, January 4, 2009.

On May 15, 2009, North Shore filed its complaint to foreclose the construction mortgage due to a default by the owner, naming Bluewater as a defendant. In August, 2009, Bluewater filed its counterclaim for foreclosure of its mechanics' lien claim. In its counterclaim, Bluewater again stated that the completion date was January 4, 2009. Bluewater obtained a default judgment against the owner, and filed its motion for summary judgment against the remaining defendants.

In the discovery deposition of Roi Kiferbaum, president of Bluewater, Kiferbaum stated that the last date that work was supplied to the project was December 27, 2008, although he later stated that his father may have performed some additional concrete work on behalf of Bluewater in January, 2009. North Shore filed a motion for summary judgment, arguing that Bluewater's lien notice failed to be served within 90 days of the completion of the work on December 27, 2008. In its response to North Shore's motion for summary judgment, Bluewater attached the affidavit of the project manager of the general contractor, stating that the general contractor had accepted a change order from Bluewater to pour additional concrete on January 5, 2009, and that the work was completed on that date. The trial court denied Bluewater's motion for summary judgment but granted North Shore's motion for summary judgment, ruling that Bluewater's lien was unenforceable because it was not timely filed.

The second mechanics' lien claim that was adjudicated in the case was that of the roofing contractor, Premier Roofing, Inc. ("Premier"). Premier's general contractor's lien claim stated that Premier completed its contractual work on February 27, 2009, and the lien claim was recorded on June 26, 2009. In response to interrogatories, Premier stated that the last day that work was performed was December 29, 2008. Premier later amended its answer, based upon two later-discovered timesheets for work that had been postponed due to weather delays and unfinished work by other subcontractors, to state that the last day of work was March 4, 2009.

North Shore filed a motion for summary judgment, arguing that Premier was bound by its sworn statement in the lien claim that the last day of work was February 27, 2009, and that the lien claim was unperfected and unenforceable due to the fact that Premier could not produce any evidence that work was actually performed on that date. The trial court agreed, ruling that the lien claim statement constituted a judicial admission by Premier and could not then be contradicted by Premier with evidence of later work.

Bluewater and Premier then filed an appeal.


The appellate court began its discussion of the validity of the two mechanics' lien claims by noting that although the mechanics' lien statute does not explicitly require that the lien claim notice contain the date of completion of the work, the case law did interpret the statute to so require it. The court also noted that "completion date" did not refer to the completion of the contract, but only the completion of the work for which a lien is sought.

Relying on the case of United Cork Cos. v. Volland, 365 Ill.564 (1937), the court held that if the errors made by the contractors in their lien notices did not materially affect the defendants' rights, then the mechanics' lien statute should be liberally construed to comport with the act's remedial purpose. Since one of the purposes of the statute is to give notice to third parties, the court reasoned that the defendants could determine from the lien notices themselves that the liens were facially enforceable, even with the incorrect dates. Thus, whether Bluewater's completion date was January 4 or January 5, 2009, both dates were within 90 days of when notice was served upon North Shore and the other counter-defendants. Likewise, whether Premier's completion date was February 27 or March 4, 2009, both dates were within four months of the filing of the lien notice. The court held that the incorrect completion dates in the claims notices did not materially affect the counter-defendants right of notice under the statute.

The court distinguished the present lien claims from those involved in the cases of Braun-Skiba, Ltd. v. La Salle National Bank, 279 Ill.App.3d 912 (1996) and Mutual Services, Inc. v. Ballantrae Development Co., 159 Ill.App.3d 549 (1987). In those cases, the appellate court held that the lien claimants were bound by the dates stated in their lien claim notices and could not contradict those dates with later evidence due to the fact that the dates stated in the lien claimants' notices were well beyond the statutory period for filing the notices as to third parties, and thus were invalid on their face. As noted, the North Shore court held that both the original dates stated in the lien notices and the proposed amended dates were within the statutory periods for serving and filing the lien notices, and thus were valid on their face and would result in no prejudice to the counter-defendants.

Regarding the trial court's ruling that the dates stated in the lien notices constituted judicial admissions, and, thus, were binding on the lien claimants, the North Shore court reviewed the differences between the de novo (the reviewing court performs the same analysis as the trial court would perform) and the abuse of discretion (the reviewing court determines whether no reasonable person would take the view adopted by the trial court) standards of review regarding judicial admissions. The North Shore court determined that both standards require that before a statement is deemed a judicial admission, the statement must be a "clear, unequivocal statement of a party about a concrete fact within that party's particular knowledge."

The court held that to rule that the completion dates stated in the lien notices constituted judicial admissions would require perfection on the part of the lien claimants, and would thus defeat the statute's remedial purpose when both the original date and the amended date were within the statutory period for serving and filing the lien notices. Additionally, regarding the counter-defendants' argument that the purpose of judicial admissions is to prevent perjury, the court held that allowing the lien claimants to present evidence of a different, valid completion date would allow the lien claimants to avoid summary judgment, but would still jeopardize their credibility, and thus, provides sufficient incentive for the lien claimants to accurately state the completion date.

The court also noted that in order to constitute a judicial admission, the party making the statement must appear to have had no reasonable possibility of being mistaken. Both Bluewater and Premier had to rely on documents and on affidavits from other individuals involved with the property to establish the dates work was scheduled and performed. Thus, the completion dates were not within the either claimant's particular knowledge and could therefore not constitute judicial admissions.

The appellate court held that since there were genuine issues of material fact concerning whether the lien claimants complied with the Mechanics' Lien Act, both North Shore's and the lien claimants motions for summary judgment should have been denied, and the appellate court remanded the case to the trial court for further proceedings.

Underwriting Requirements

ATG's underwriting requirements regarding mechanics' liens require, at a minimum, that the completion date stated on the recorded lien notice, absent any tolling periods, must be at least two years and six months old before the exception for the mechanics' lien claim may be waived. Based upon the holding in the North Shore case, if the completion date on the lien claim notice is within the statutory periods for serving and filing the lien notice, then the lien claim must be considered as valid and a Schedule B exception must be raised for the lien claim. If the lien notice is invalid on its face, then contact the Underwriting Department to obtain authority waive the exception for the lien claim. As always, if there are any questions regarding the validity of a mechanics' lien notice, discuss the matter with the Underwriting Department. Contact an Underwriter.

Posted on: Mon, 12/15/2014 - 4:25pm