Chapter VII Statutes of Limitation and Related Matters
Library | Turner on Illinois Mechanics Liens (2016 Ed.) |
A. The Two Year Period to File a Mechanics Lien Foreclosure Suit 1. The Two Year Requirement
A suit to foreclose a mechanics lien under Section 9 of the Act must be filed "within two years after the completion of the contract, or completion of the extra or additional work, or furnishing of extra or additional material thereunder."1 This period will be referred to in this Chapter as the "Two Year Period." This requirement is not an ordinary statute of limitations. Filing suit within the Two Year Period is a requirement that goes to the existence of the right of action itself.2 Filing suit within the Two Year Period is an essential part of the cause of action. It does not merely limit the remedy.3 The cause of action ceases to exist if a foreclosure action is not filed within the Two Year Period.4 After the Two Year Period, the mechanics lien claimant cannot add other parties (including lien claimants) to its lawsuit.5 But service on all parties does not have to occur within the Two Year Period.6
Note that the language of Section 9 is somewhat different than the language in Sections 7 and 24. In Section 9, the statute of limitations runs from two years "after the completion of the contract, or completion of the extra or additional work." Courts have held that the time for serving notices or filing claims for lien under Sections 7 and 24 runs from the time the work for which the lien claimant seeks payment is completed.7 This is different than under Section 9 which seems to provides that the time for filing suit begins to run either (a) from the time the contract work is completed or (b) from the time the extra or additional work is completed. The fact that the work last done has been paid for apparently does not prevent the time that work is completed from being the date on which the Two Year Period begins to run.
This can be a significant difference. Due to delays in having change orders approved for extra work already done, it is not uncommon in a construction project for all of the contract work to be completed and paid for before extra work is paid for even though there is unpaid for extra work that was done before the contract work was completed. The time for serving notices and filing liens runs from the time the unpaid for work was completed. The time for filing suit runs from the later of (a) when the work of the lien claimant's contract was completed or (b) when the lien claimant completed all of its extra work.
2. What Work Counts?
Work which is "in the nature of repairs to and maintenance" of work already done will not extend the time for filing suit.8 The test for "completion" is whether the work done thereafter is "trivial and inconsequential" or "essential to the completion of the contract.9
3. Counterclaims
A lien claimant who is named as a defendant in a mechanics lien foreclosure suit must file a counterclaim asserting its lien within two years of its last day of work.10 But if the defendant lien claimant files an answer within the Two Year Period alleging the elements of its mechanics lien claim, the court may allow the lien claimant to amend its pleadings after the Two Year Period by filing a counterclaim. But the counterclaim has to be based upon the same facts as are alleged in the answer.11
4. Motions to Dismiss
In most situations, the statute of limitations is an affirmative defense that must be alleged in an answer or else asserted in a motion raising affirmative matter under 735 ILCS 5/2-619. But in a mechanics lien action, filing suit within the Two Year Period is an essential part of the cause of action. The suit may be dismissed under 735 ILCS 5/2-615 for failure to state a cause of action if suit is not filed within the Two Year Period. Where suit is filed after the Two Year Period, a judgment of foreclosure is void. It is subject to attack at any time.12
5. Reinstatement of Voluntary Dismissals
Formerly, if a plaintiff took a nonsuit in a mechanics lien foreclosure action, it could file a new action within one year after the dismissal or before the statute of limitations had run, whichever time was longer.13 But in 1995, 735 ILC 5/13-317 was amended to provide, "No action which is voluntarily dismissed by the plaintiff or dismissed for want of prosecution by the court may be filed where the time for commencing the action has expired." Therefore, if a foreclosure case is nonsuited by the plaintiff, any new suit must be filed within the Two Year Period.
6. Filing Suit in the Wrong County
A foreclosure suit must be filed in the county where the real estate is located.14 If a foreclosure suit is filed in the wrong county within the Two Year Period, it can nonetheless be transferred to the proper county even after the Two Year Period has run.15
7. Effect of Stay in Bankruptcy
A bankruptcy of a necessary party that results in an automatic stay of proceedings will toll the Two Year Period until the stay is lifted.16 If the bankrupt is a natural person, the stay is automatically lifted if the bankrupt is discharged from the debt.17 Once the automatic stay is lifted, the Two Year Period will again begin to run so that the time for suit is extended only for the time the automatic stay was in effect.18 But there is nothing in the law that requires a party to petition the bankruptcy court to lift the automatic stay.19
8. A Petition to Intervene, Complaint, or Counterclaim Must Actually be Filed During the Two Year Period
Bank of New York v. Jurado20 is a cautionary tale. In that case, a petition to intervene21 was filed before the Two Year Period had run, but the motion was not heard and granted until after the Two Year Period. The court held that the filing of the petition did not stop the running of the statute because the proposed counterclaim was not filed with the petition to intervene. In Wasilevich Construction Co. v. LaSalle National Bank,22 the filing of the petition did stop the running of the Two Year Period because the counterclaim was actually filed with the Clerk's office with the petition to intervene.
Suppose an order is entered giving a party leave to file its counterclaim to foreclose its lien within thirty days and the Two Year Period expires on the fifteenth day. Is the counterclaim barred if it is filed after the fifteenth day? Since filing within two years of completing the work is not merely a limitation but is a necessary element that the lien claimant must prove, an argument can be made based upon Jurado that such a counterclaim would be barred.
9. A Joint Action May Be Filed Within Five Years After the Last Day of Work
A joint action for a money judgment against the owner and the contractor pursuant to Section 28 is not a suit to foreclose a lien pursuant to Section 9.23 The requirement that suit be filed within the Two Year Period does not apply to suits for a joint judgment against the owner and the contractor under Section 28. Instead, the five year limitation period provided in 735 ILCS 5/13-205 applies.24
B. Section 34: The Demand for Suit
A demand for suit under Section 34 of the Illinois Mechanics Lien Act (770 ILCS 60/34) is a way of shortening the time for filing a suit to foreclose a mechanics lien. It may also have an impact on the lien claimant's right to file a joint action under Section 28. A Section 34 demand for suit can only be served if a claim for lien has been recorded with the Recorder of Deeds.25 Also, a bankruptcy stay will extend the time for filing a complaint in response to a Section 34 demand to file suit of the Act.26
1. What the Demand Must Contain
Section 34 has been part of the mechanics lien statute since at least 1903. It was most recently amended effective February 11, 2013. Until Section 34 was amended in February of 2013, there were no articulated standards for what a Section 34 notice must contain. A letter could serve as a demand.27 The section now reads:
34. Notice to commence suit.
(a) Upon written demand of the owner, lienor, or any person interested in the real estate, or their agent or attorney, served on the person claiming the lien, or his agent or attorney, 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.
(b) A written demand under this Section must contain the following language in at least 10 point bold face type: "Failure to respond to this notice within 30 days after receipt, as required by Section 34 of the Mechanics Lien Act, shall result in the forfeiture of the referenced lien. (Emphasis added)
The italicized portion is what was added by the 2013 amendment.
From the language of Section 34 as amended, it would appear that to have a valid notice, the notice should: (a) be served by the owner, lienor, a person having an interest in the real estate, or their agent or attorney;28 (b) be addressed to the lien claimant, its agent or its attorney; (c) identify the lien claim that has been recorded; (d) demand that suit be brought to enforce the lien; and (e) include the required language added by the 2013 amendment. This language must be in at least 10 point bold face type and read as follows:
Failure to respond to this notice within 30 days after receipt, as required by Section 34 of the Mechanics Lien Act, shall result in the forfeiture of the referenced lien.
This precise language must be used or the notice is ineffective. In addition, the notice is not effective unless a claim for lien is recorded because the purpose of the Section 34 demand is to eliminate clouds on title. If there is no claim for lien recorded, there is no cloud on title.29
Moreover, just because an owner negotiates for settlement of the lien claim during the thirty day period does not mean that the owner is estopped from asserting the Section 34...
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