Vernon Hills III Ltd. Partnership v. St. Paul Fire and Marine Ins. Co.

• Decision Date: 03 April 1997
• Docket Number: No. 2-96-0724,2-96-0724
• Citation: Vernon Hills III Ltd. Partnership v. St. Paul Fire and Marine Ins. Co., 678 N.E.2d 374, 287 Ill.App.3d 303, 222 Ill.Dec. 762 (Ill. App. 1997)
• Parties: , 222 Ill.Dec. 762 VERNON HILLS III LIMITED PARTNERSHIP, Plaintiff and Counterdefendant-Appellee, v. ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant (Bucon, Inc., d/b/a Butler Construction Company, Defendant and Counterplaintiff-Appellant).
• Court: Appellate Court of Illinois

Page 374

678 N.E.2d 374

287 Ill.App.3d 303, 222 Ill.Dec. 762

VERNON HILLS III LIMITED PARTNERSHIP, Plaintiff and Counterdefendant-Appellee, v.ST. PAUL FIRE AND MARINE INSURANCE COMPANY, Defendant (Bucon, Inc., d/b/a Butler Construction CompanyDefendant and Counterplaintiff-Appellant).

No. 2-96-0724.

Appellate Court of Illinois Second District.

April 3, 1997.

Peter G. Swan, Emalfarb, Swan & Bain, Highland Park, Matthew R. Hale, Troy H. Ellis, Polsinelli, White, Vardeman & Shalton, Kansas City, MO, for Bucon, Inc., dba Butler Construction Co.

John H. Anderson, Seyfarth, Shaw, Fairweather & Geraldson, Chicago, for Vernon Hills III Ltd. Partnership.

Presiding Justice GEIGERdelivered the opinion of the court:

The defendant and counterplaintiff, Bucon, Inc.(Bucon), appeals from the April 23, 1996, order of the circuit court of Lake County granting summary judgment in favor of the plaintiff and counterdefendant, Vernon Hills III Limited Partnership(VHLP), on its claim for declaratory judgment.The trial court ruled that Bucon forfeited its mechanic's lien by failing to commence an action to foreclose the lien within 30 days after receipt of VHLP's written demand to sue, as required by section 34 of the Mechanics Lien Act (the Act)(770 ILCS 60/34(West 1994)).On appeal, Bucon argues that the trial court erred in finding that VHLP's letter of July 29, 1994, constituted a written demand to sue pursuant to section 34 of the Act.We affirm and remand.

The facts necessary for the disposition of this appeal are as follows.On February 18 1993, VHLP contracted with Bucon to design and build a shopping center in Vernon Hills.Bucon was to design and construct all of the buildings, as well as numerous site improvements, including the parking lot and utility connections.The contract provided that Bucon would be paid approximately $15 million for the project.Bucon commenced construction in the spring of 1993, and a certificate of substantial completion was issued on August 22, 1994.

On July 21, 1994, Bucon filed a mechanic's lien against the shopping center in the Lake County recorder's office.The lien was in the amount of $1,315,249.On August 1, 1994, Bucon received, via certified mail, a letter from VHLP dated July 29, 1994.The letter provides, in pertinent part:

"Pursuant to Article 11.4 of that certain Design Build Contract dated as of February 18, 1993, * * * between [VHLP] and [Bucon] for the design and construction of a retail shopping center * * * located in Vernon Hills, Illinois, this letter shall serve as notice of your breach on the Contract pursuant to Article 11.5.2 of the Contract.

Article 11.5.2 of the Contract provides that '[i]n no event may Design/Builder file, or permit those whom it controls or for whom it has legal responsibility under the Contract to file, a mechanics' * * * lien or claim for lien for work performed under the Contract * * *.'However, on July 21, 1994, a claim for lien in the amount of $1,315,249.00 was filed in the Lake County Recorder's Office * * *.This course of action is clearly in violation of the Contract.

We hereby demand that you either immediately release your lien or bring suit to enforce it so that this matter can be expeditiously resolved.We fully intend to look to your organization in order to recapture any additional costs we may incur in connection with your actions.In addition, in the event this lien is not released of record immediately, we will pursue all other rights and remedies available in the Contract, at law or in equity in response to your breach and your failure to fulfill the requirements of this letter."

On August 3, 1994, Bucon received a follow-up letter from VHLP's attorney dated July 28, 1994.The letter provided as follows:

"You should be receiving, if you have not received already, a copy of ownership's letter in connection with the mechanic's lien you recently filed under Illinois' Mechanic's Lien Statute(770 ILCS 60/1, et seq.).It is not the purpose of this letter to alter the contents of ownership's letter, but I did want to initiate with you a discussion as to why you have filed the lien and what purpose you think it will serve and further to suggest a dialogue to accomplishing the mutual objectives of your company and ownership.If you are so inclined, please give me a call."

Thereafter, VHLP's attorney and Bucon's attorney had several conversations in which they discussed the lien.During these conversations, Bucon's attorney explained that, although Bucon intended to preserve its rights under the Act, it would nonetheless assist VHLP in closing out the project.VHLP's attorney reiterated VHLP's position that Bucon had breached the contract by filing the lien.

On August 4 and 17, 1994, VHLP's attorneys wrote Bucon regarding certain paperwork that had to be completed in order to close out the project and to get the property ready for sale.After August 1994, Bucon and VHLP continued to correspond through their attorneys with respect to completing the steps necessary to close out the project.Bucon fully cooperated with these efforts to complete the project.

On October 27, 1994, VHLP made a claim to Bucon seeking liquidated damages arising from construction delays on the project.Between November 1994 and August 1995, Bucon and VHLP engaged in negotiations in an attempt to settle Bucon's lien and VHLP's delay claim.The parties arrived at a tentative settlement agreement whereby Bucon would discount its lien from $1,315,249 to $922,901.50 and the parties would mutually release their claims.However, this settlement agreement broke down when the parties were unable to reach an agreement with respect to alleged defects in the building's roof.

On January 13, 1995, VHLP filed suit against Bucon claiming damages in excess of the amount of Bucon's lien.On February 27, 1995, VHLP filed an amended five-count complaint.Count IV, which is the only count relevant on appeal, sought a declaration that Bucon had forfeited its mechanic's lien by failing to commence an action to foreclose its lien within 30 days after receipt of VHLP's written demand to sue as required by section 34 of the Act(770 ILCS 60/34(West 1994)).In June 1995, Bucon filed a counterclaim against VHLP seeking a judgment in the amount of its contract balance.On August 30, 1995, Bucon filed a separate action seeking enforcement of its lien.

On January 19, 1996, VHLP filed a motion for summary judgment on count IV of the amended complaint.VHLP argued that its letter of July 29, 1994, was a written demand, made pursuant to section 34 of the Act, that Bucon commence suit to enforce its mechanic's lien.Although Bucon received VHLP's letter on August 3, 1994, it did not file suit to enforce its lien within the next 30 days.VHLP therefore concluded that Bucon had forfeited its lien under section 34 of the Act.

In response to the motion, Bucon argued that VHLP's July 29, 1994, letter was not a written demand to sue under section 34 of the Act.Bucon argued that the letter did not contain any reference to section 34 and did not indicate that Bucon's failure to commence suit within 30 days would render its lien void.In support of its position, Bucon submitted the affidavit of its attorney stating that he did not understand the July 29, 1994, letter to be a demand pursuant to section 34 of the Act.Bucon's attorney also stated that he was unaware of section 34 at the time he received the letter and that at no time did VHLP's attorney mention the statute or its contents.Alternatively, Bucon argued that, even if the July 29, 1994, letter was a written demand to sue under section 34 of the Act, VHLP was estopped from asserting the defense due to its subsequent conduct and attempts to settle the lien.

On April 23, 1996, the trial court granted VHLP's motion for summary judgment and declared Bucon's mechanic's lien forfeited and null and void.On May 23, 1996, the trial court made this order final and appealable pursuant to Supreme Court Rule 304(a)(155 Ill.2d %. 304(a)).Bucon filed a timely notice of appeal.

Bucon first argues that the trial court erred in determining that, as a matter of law, VHLP's July 29, 1994, letter satisfied the statutory demand requirements of section 34 of the Act.Bucon argues that this question is a disputed material fact which precludes the entry of summary judgment.

The purpose of a motion for summary judgment is to determine whether a genuine issue of triable fact exists (Purtill v. Hess, 111 Ill.2d 229, 240, 95 Ill.Dec. 305, 489 N.E.2d 867(1986)), and a motion for summary judgment should be granted only when "the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law"(735 ILCS 5/2-1005(c)(West 1994)).In determining the existence of a genuine issue of material fact, the court must construe the evidence strictly against the moving party and liberally in favor of the nonmoving party.Gatlin v. Ruder, 137 Ill.2d 284, 293, 148 Ill.Dec. 188, 560 N.E.2d 586(1990).The disposition of a summary judgment motion is not discretionary and the standard of review is de novo.Quinton v. Kuffer, 221 Ill.App.3d 466, 471, 164 Ill.Dec. 88, 582 N.E.2d 296(1991).

Section 34 of the Act provides, in pertinent part:

"Upon written demand of the owner * * * served on the person claiming the lien * * *, requiring suit to be commenced to enforce the lien or answer to be filed in a pending suit, suit shall be commenced or answer filed within 30 days thereafter, or the lien shall be forfeited.Such service may be by registered or certified mail, return receipt requested, or by personal service."770 ILCS 60/34(West 1994).

The failure of the lienholder to commence suit within 30 days of receipt of a written notice made pursuant to section 34 of the Act operates to...