Chapter V Burden of Proof, Proof, Certain Defenses, and Damages

• Library: Turner on Illinois Mechanics Liens (2016 Ed.)

CHAPTER V - BURDEN OF PROOF, PROOF, CERTAIN DEFENSES, AND DAMAGES

A. Introduction

This Chapter discusses what a lien claimant must prove (a) in a foreclosure action under Section 9, and (b) in a joint action under Section 28, and how it must prove it. The Chapter also discusses what needs to be proved to establish certain affirmative defenses, the nature of the proof required, and who has the burden of proof on particular issues.

1. Proving the Lien Claimant's Case

What will be discussed includes proving: (1) that all necessary parties have been joined; (2) the technical requirements for enforcing a lien claim against the owner and what is required to prove a valid lien against third parties; (3) the lien claimant's contract and the chain of contract between the owner and the lien claimant; (4) the owner "knowingly permitted" the work to be done; (5) that contractual requirements have been satisfied; (6) breach of contract and the consequences of breach; (7) that the work, labor, material, or services furnished were lienable; (8) that the lien claimant either completed its work, substantially completed its work, or is justified in not completing its work; (9) the last day on which the lien claimant performed work for which it seeks recovery; (10) the balance due the lien claimant; and (11) priority. The Chapter will also discuss the differences in proof required for a joint action under Section 28 from what is required for a foreclosure suit under Section 9.

2. Proving Defenses

This Chapter will discuss what is necessary to prove defenses against mechanics lien suits. There are many different defenses that are available,¹ but some defenses are peculiar to mechanics lien proceedings and construction cases. These include: (a) the defense of rightful payment; (b) defective work, and damages resulting therefrom; (c) defenses based upon waivers; (d) payments made by mistake; and (e) fraudulent liens.

3. Proving Delay

This Chapter will also discuss proof of delay claims by both a contractor and contractee, and what the owner has to prove to establish damages for breach of contract. The purpose of this Chapter is to provide a guide for proving certain issues. While it is generally preferable to avoid discussing the same issues in different chapters, in order to make this Chapter easier to understand, some of what appears in other chapters is repeated here.

Generally, a party must prove what it has to plead.² In Fieldcrest Builders, Inc. v. Antonucci, 311 Ill. App. 3d 597, 609-610, 724 N.E.2d 49, 59 (1st Dist. 1999) the court said: "The burden is on the lien claimant to prove every element necessary to establish the lien. Delaney Electric, 235 Ill. App. 3d at 265, 176 Ill. Dec. 280, 601 N.E.2d 978 (1st Dist. 1992). To bring a contractor's lien claim, four prerequisites are recognized: (1) a valid contract; (2) with the owner of the property or someone with proper authority for the owner; (3) for the furnishing of services or materials; and (4) performance of the contract or a valid excuse for nonperformance."

Also, a party's proof must be in accordance with its pleading. Leffers v. Hayes³ states:

There is a general rule of law, invoked by appellant, that a party cannot make one case by his pleading, and another and different case by his proofs . . . It is also a familiar rule that before a party is entitled to a decree his allegations and proofs must agree, otherwise his complaint must be dismissed, if no amendment is made, and that a party cannot try a case on one theory in the trial court and on another theory in a court of review. The last mentioned doctrine is applied when no amendment is made in the reviewing court.

A lien claimant must prove slightly different things in a joint action under Section 28 than in a foreclosure suit under Section 9.

B. Proving That All Necessary Parties Have Been Joined

A lien claimant can prove that it has joined all necessary parties to the action by proving (a) that all parties in the chain of contract between the lien claimant and the owner have been made parties and have been served; (b) that all mechanics lien claimants who recorded claims for lien before the suit was filed have been named and sued; (c) that a lis pendens notice was properly recorded; (d) that "unknown necessary parties" have been named in its pleading; and (e) that within six months of filing of the lien claimant's pleading "unknown necessary parties" have been served by publication.⁴ Prima facie proof of title can be made by introducing into evidence certified copies of deeds conveying the property to the owner plus proof that the owner was in possession of all or part of the property.⁵

Named parties may also be served by publication if authorized by the Code of Civil Procedure Section 735 ILCS 5/2-1901 or 735 ILCS 5/15-1503. If another lien claimant has filed a complaint or counterclaim in the proceeding and has served a necessary party either by serving summons or by publication, such necessary party does not have to be served by any other lien claimant who has filed a complaint or counterclaim in the proceeding. This is because such necessary party has already been served.⁶ The service can either be personal or by publication, including service by publication of unknown necessary parties. But Subsection 11(e) of the Act requires that all necessary parties be named as parties in the pleading filed by each lien claimant in the proceedings. Thus, even though a lien claimant who filed a complaint or counterclaim does not have to serve a necessary party, the lien claimant must still name the necessary party in its pleading. This requirement can, if appropriate, be satisfied by naming the necessary party under the category of unknown necessary parties.

Care should be taken to name all persons who hold part of the title to the real estate. All such persons are owners and therefore necessary parties.⁷ But failure to name a necessary party may not be fatal. If the statute of limitations has not run, the party may be named even after the opportunity to offer evidence in a trial has been closed.⁸ Also, even if the statute of limitations has run, the owner or other interested person may have a duty to disclose the existence of other necessary parties, move to consolidate pending cases, and file a general settlement action in the proceedings under Section 30 of the Act.⁹ But this liberality may not apply when the omitted parties are in the lien claimant's chain of contract with the owner.¹⁰ There are also several decisions that indicate that a court will not consolidate, dismiss, or remand simply because of a failure to join necessary parties, unless the effect will be to deprive an omitted party of its property rights or unnecessarily burden an owner of property with a multiplicity of mechanics lien suits.¹¹ But these decisions may have been overturned by the 2005 amendments to Subsection 11(e) of the Act which provides that "nothing in this Section 11 shall excuse a claimant from joining all necessary parties to the claimant's pleading, whether as named parties, unknown necessary parties, or unknown owners, within the time permitted by this Act."¹²

C. Contract Related Issues

1. Proving the Contracts and Knowingly Permitted

a. Proving a Contract

Section 11 of the Act requires only that the lien claimant allege its own contract. But the lien claimant must state that its material, equipment, labor, or services were furnished pursuant to a contract with (a) the owner or (b) someone the owner knowingly permitted to improve the real estate. This means that the lien claimant must prove (i) its own contract with its customer, whether it is the contractor or a subcontractor; (ii) the chain of contract between the lien claimant and the owner or person knowingly permitted by the owner to improve the real estate;¹³ and (iii) that the lien claimant's material, equipment, or services were within the scope of the contractor's contract to improve the real estate.¹⁴

The claimant will most likely have information on how its contract was formed. But information on the formation of the other contracts in the chain of contract may have to be obtained through discovery.

If the contract is written and signed or is based on an exchange of documents, proof of execution or transmission and receipt of the exchanged documents will prove the contract. Unless the contract requires a specific way that acceptance has to be manifested, acceptance may be by any reasonable means.¹⁵

In order to prove that a contract exists, it is necessary to produce evidence of an agreement between the parties. This can be done by proving that a written document containing the terms was consented to by the parties or through verbal testimony establishing an offer, acceptance, and consideration or other evidence showing that an agreement exists.¹⁶

As with any action for breach of an oral contract, the plaintiff bears the burden in this case to both plead and prove the essential terms of the agreement sued on; that is, the offer made and its acceptance.¹⁷ Where the contract is formed in one or more conversations or other verbal communications, the verbal communications will have to be proved with proper foundation.

b. Proving "Knowingly Permitted"

In order to prove that an owner "knowingly permitted" the work to be done, it is necessary to prove that the owner knew the work was being done and did not object. This is very much a fact driven issue. The owner is presumed to have "knowingly permitted" where it knew, failed to protest, and accepted the benefits of the improvements.¹⁸ But if the owner did not know of the improvement and, therefore, did not knowingly permit it, his or her interest in the property is not liable for the mechanics lien claim. This means that even if the owner knew of and agreed to a contract for an improvement, he might not have knowingly consented to specific extra work and, therefore, its interest in the property would not be subject to a...