Father & Sons Home Improvement II, Inc. v. Stuart

• Decision Date: 31 March 2016
• Docket Number: No. 1–14–3666.,1–14–3666.
• Court: United States Appellate Court of Illinois
• Parties: FATHER & SONS HOME IMPROVEMENT II, INC., Plaintiff–Appellant, v. Tracee M. STUART and Cedric D. Stuart, Husband and Wife; Mortgage Electronic Registration Systems, Inc., a Corporation; Countrywide Home Loans, Inc., a Corporation Duly Licensed as an Illinois Residential Mortgage Licensee; Defendants–Appellees (Trans–Land Financial Services, Inc., a Corporation Duly Licensed as an Illinois Residential Mortgage Licensee; RBS Citizen's NA, a Corporation Duly Licensed as an Illinois Residential Mortgage Licensee; and Nonrecord Claimants, Defendants).

52 N.E.3d 581

402 Ill.Dec. 660

FATHER & SONS HOME IMPROVEMENT II, INC., Plaintiff–Appellant

v.Tracee M. STUART and Cedric D. Stuart, Husband and Wife; Mortgage Electronic Registration Systems, Inc., a Corporation; Countrywide Home Loans, Inc., a Corporation Duly Licensed as an Illinois Residential Mortgage Licensee; Defendants–Appellees (Trans–Land Financial Services, Inc., a Corporation Duly Licensed as an Illinois Residential Mortgage Licensee; RBS Citizen's NA, a Corporation Duly Licensed as an Illinois Residential Mortgage Licensee; and Nonrecord Claimants, Defendants).

No. 1–14–3666.

Appellate Court of Illinois, First District, Fifth Division.

March 31, 2016.

Jonathan P. Novoselsky, of Novoselsky Law Offices, P.C., Waukegan, for appellant.

Michael W. Kelly, Chicago, for appellees Tracee M. Stuart and Cedric D. Stuart.

E. King Poor, Steven V. Hunter, and Christopher J. Zdarsky, all of Quarles & Brady LLP, Chicago, for appellees Mortgage Electronic Registration Systems, Inc., and Countrywide Home Loans, Inc.

OPINION

Justice GORDON

delivered the judgment of the court, with opinion.

¶ 1 This appeal arises from plaintiff Father & Sons Home Improvement II, Inc.'s mechanic's lien action brought against defendants Tracee and Cedric Stuart (the Stuarts); and Bank of America, N.A., and Mortgage Electronic Registration Systems, Inc. (together, Bank of America¹ ). Plaintiff raises three issues on appeal: (1) whether the circuit court erred in finding that plaintiff had committed constructive fraud and granting summary judgment in favor of the Stuarts and Bank of America; (2) whether the circuit court erred in awarding the Stuarts attorney fees pursuant to the Mechanics Lien Act (770 ILCS 60/17(c)

(West 2008)); and (3) whether the circuit court erred in awarding Bank of America attorney fees pursuant to Illinois Supreme Court Rule 137 (eff. July 1, 2013). We affirm all three of the circuit court's orders for the reasons set forth below.

¶ 2 BACKGROUND

¶ 3 Plaintiff's verified complaint alleges the following undisputed facts: defendants Tracee and Cedric Stuart, husband and wife, own a house located on Peoria Avenue in Chicago, Illinois. On March 9, 2005, the Stuarts obtained two mortgages on this house from Bank of America, which timely recorded these mortgages with the Cook County Recorder of Deeds' Office on March 29, 2005.

¶ 4 In April 2009, the Stuarts entered into a written construction agreement with plaintiff. Under this agreement, the Stuarts agreed to pay plaintiff $43,500 for the construction of a deck, garage, and basement in their house. Six months later, on September 10, 2009, plaintiff obtained a building permit from the Department of Buildings and soon after, plaintiff began construction on the Stuarts' house.² On September 12, 2009, the Stuarts and plaintiff agreed to modify this construction agreement to include a retail installment contract, under which plaintiff agreed to provide the Stuarts with financing for the costs of the construction project.³

¶ 5 Over the next five months, as the project progressed, plaintiff had the Stuarts sign “certificates” titled “Final Completion Certificate for Property Improvements.” These certificates purported to report the Stuarts' satisfaction with the construction work on their house at various stages of the project. The Stuarts signed such certificates in November 2009, January 2010, February 2010, March 2010, and May 2010. Construction on the Stuarts' house was ultimately completed sometime in June 2010.

¶ 6 On September 17, 2009, eight months before plaintiff completed construction on the Stuarts' house, plaintiff recorded an “Original Contractor's Claim for a Lien” (the mechanic's lien) with the Cook County Recorder of Deeds. This mechanic's lien included an affidavit, signed by Nancy Martinez, president of plaintiff's company, which stated:

“That on the 18th day of April, 2009 the Claimant, Father and Sons Home Imp. II, Inc., entered into a contract &/or Change Order with (1) said owner Tracee M. Stuart & Cedric D. Stuart (J). (2) to do a Deck, Garage and Basement for the building, (3) erected on said land for the sum of $43,500.00 and on the 12th day of September, 2009, completed there-under (4) All work required by said contract. ” (Emphasis in the original.)

This affidavit further stated that the Stuarts owed plaintiff an additional sum of $2,700 for “extra and additional work” completed “at the special instance and request” of the Stuarts. In total, the balance of plaintiff's mechanic's lien was $46,200, not including interest.

¶ 7 On August 17, 2011, plaintiff filed a four-count verified complaint with the Cook County circuit court. Count I of this complaint sought foreclosure on the mechanic's lien; the other three counts, not at issue on appeal, raised claims for breach of contract, unjust enrichment, and quantum meruit. Bank of America responded by filing a motion to dismiss count I of plaintiff's verified complaint under section 2–619 of the Code of Civil Procedure

(735 ILCS 5/2–619 (West 2010) ). In this motion, Bank of America argued that plaintiff's mechanic's lien claim was not recorded within four months of completing the construction project and was therefore not enforceable against third-party creditors under the Mechanic's Lien Act (770 ILCS 60/7(a) (West 2008)). On October 13, 2011, the Stuarts filed a pro se⁴ motion to dismiss arguing that plaintiff's mechanic's lien was invalid because it misrepresented the amount due and the work completed as of the time of its recording.

¶ 8 On December 2, 2011, the circuit court denied both motions to dismiss and the parties went on to engage in extensive written and oral discovery. A key part of this discovery involved plaintiff's responses to Bank of America's requests for admissions, in which plaintiff admits that “it completed work at the subject property in or about June, 2010” and not on September 12, 2009, as the sworn and signed affidavit attached to the mechanic's lien attests.

¶ 9 On June 5, 2014, the Stuarts and Bank of America each moved for summary judgment on count I of plaintiff's verified complaint. In these motions, both Bank of America and the Stuarts argued that plaintiff committed constructive fraud by misrepresenting in its mechanic's lien and in the affidavit attached to the lien the work performed and the amount owed at the time the lien was recorded. In addition, Bank of America's motion argued that plaintiff's lien was not enforceable against third-party creditors because plaintiff had not recorded its mechanic's lien within four months of completing the construction project, as required under the Mechanic's Lien Act (770 ILCS 60/7(a)

(West 2008)).

¶ 10 On June 12, 2014, plaintiff filed a response to defendants' motions for summary judgment arguing that the lien was timely filed as plaintiff had already performed architectural, permitting, and survey work before recording the lien and that the “erroneous overcharges and overstatements” in the lien did not rise to the level of constructive fraud as the Stuarts and Bank of America alleged.

¶ 11 On July 8, 2014, the circuit court granted the Stuarts' and Bank of America's motions for summary judgment, finding that plaintiff had committed constructive fraud in its mechanic's lien claim. The circuit court explained that “overstatement in and of itself is not sufficient with regard to constructive fraud. There has to be something more. In this particular situation there is something more. There is the affiant on behalf of Fathers and Sons stating that the work was completed some months after, after the claim for the lien was actually filed.”

¶ 12 The circuit court also granted both defendants leave to file petitions for attorney fees, explaining that plaintiff's mechanic's lien action was nothing less than “an egregious case of constructive fraud” and that in previous cases the court had already warned plaintiff to stop overstating its lien claims.⁵

¶ 13 The Stuarts filed their petition for attorney fees in the amount of $13,675 pursuant to section 17 of the Mechanics Lien Act (770 ILCS 60/17(c)

(West 2008)). Bank of America filed its amended petition for attorney fees in the amount of $26,291.02 pursuant to Illinois Supreme Court Rule 137. The circuit court granted both petitions, finding that:

“the plaintiff knew or should have known that its September 19, 2009 mechanics lien on which it based this litigation falsely stated that all work due under the contract was complete on September 12, 2009, when in fact the work was not complete until June 2010. Plaintiff verified that false fact or denied its corollary in various documents filed with the court. This false fact was the cornerstone of the litigation.”

¶ 14 The circuit court's order granting Bank of America's attorney fees also listed the following five instances in which plaintiff filed pleadings in violation of Illinois Supreme Court Rule 137

: (1) in paragraph 23 of the verified complaint where plaintiff incorporated its mechanic's lien, which falsely stated that “[a]ll work required by said contract” was completed by September 12, 2009; (2) in paragraph 23 of the verified complaint where plaintiff incorporated its mechanic's lien, which falsely stated that plaintiff “delivered extra labor and materials” and completed “extra and additional work” by September 12, 2009; (3) on page 2 of plaintiff's response to Bank of America's motion to dismiss, where it falsely stated that “[p]laintiff's lien notice was filed at a proper time”; (4) in plaintiff's answer to paragraph 5 of Bank of America's affirmative defenses, where plaintiff denied not having completed the work until after September 17, 2009; and (5) in plaintiff's answer to paragraph 6 of Bank of America's affirmative defenses, where plaintiff denied not having filed its claim for the lien within four months after completion of the work.

¶ 15 Plaintiff's remaining claims for breach of contract, unjust enrichment, and quantum meruit remain...