In this Opinion the Illinois Supreme Court comes down on the side of common sense when it comes to lienable improvements under §1 of the Illinois Mechanics Lien Act 770 ILCS 60/1. After reversing the lower Courts however, the case was sent back down to the Circuit Court to determine whether the owner of the property “knowingly permitted” improvements to be made.
In 2006 Carol and Glen Harkins (collectively, the “Harkins”) offered to buy property from Carol Shenck (“Shenck”) for the purpose of subdividing it and developing a subdivision. Burke Engineering (“Burke”) was hired by the Harkins to perform necessary prep work related to the development of the property. So while the work performed by Burke was integral to, and resulted in, improvements to the property (plat of subdivision, etc.), at the time that the work was done under a contract with Harkins, the property was still owned by Shenck. Eventually, the Harkins closed and development began according to the work done by Burke.
Heritage Bank of Central Illinois (“Heritage”) financed the purchase of the property in 2007 and held a Mortgage Lien. But thanks to the Great Recession, work stopped in 2008 and the Harkins failed to pay Burke (or anyone else). As 2008 dragged on however, Burke had still not been paid and eventually the company filed a Mechanics Lien against property – which by this time was owned by the Harkins (the “Lien”). In response, the Harkins filed Bankruptcy. This left Burke to foreclose its lien or not get paid at all.
In response to the Complaint to Foreclose Burke’s Mechanics Lien, Heritage, the Mortgagee, brought a Motion for Summary Judgment. The Circuit Court of Peoria County granted the MSJ and invalidated the Lien on grounds that:
- The requirements of §1 of the Mechanics Lien Act had not been met and that, in any event,
- The owner of the property had not contracted for, “induced, or encouraged” Burke’s work.
In particular, the Trial Court found that
- The services provided by Burke did not constitute an “improvement” to the property;
- Burke had not contracted with the contemporary owner of the property – Shenck; and
- Burke’s engineering services had not been “induced or encouraged” by Shenck either.
The Appellate Court affirmed the Trial Court’s decision.
Illinois Supreme Court
In its appeal to the Illinois Supreme Court, Burke argued that the Circuit Court erred in granting the MSJ. In other words, Burke took the position that its services were an “improvement” as defined in the Act and that Shenck had ratified Burke’s contract with the Harkins – her would-be purchasers. [Ed. Note: Indeed, it’s hard to imagine how the work did not lead to improvement of the property or that Shenck did not know it was being done – after all, Burke’s engineering work mapped out the subdivided property, which was the whole reason Harkins bought in the first place.]
The Supreme Court reversed the grant of the MSJ and concluded that
- Burke’s services did constitute a lienable “improvement” to the property under the Act; but that
- It was unclear whether Shenck knowingly permitted Harkins to enter into its contract with Burke.
In the end, the Illinois Supreme Court concluded that the work at issue was lienable, but that the question of Shenck’s knowledge concerning the Harkins’ contract with Burke constituted an unanswered question of material fact that precluded summary judgment.