As far as lien foreclosure deadlines are concerned, Illinois has a pretty liberal rule. Unlike states like California where lien claims must be foreclosed upon within just 90 days from its filing date, claimants in Illinois need not foreclose on their mechanics lien claims until two years after the completion of their contract.
In a recent case before the Illinois First District Court of Appeals, a contractor asked that it be excused for filing its lien foreclosure action two months late because of some unique circumstances. The court refused.
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Facts: Lien Foreclosure Late Because Of Existing Litigation
The law is unfortunate because it too often creates confusing procedural situations. One party sues another party, who countersues, who ties in another third party, and so on and so forth. Sometimes it can leave lawyers scratching their heads as to how to deal with a particular situation.
Such appears to be the case in Bank of N.Y. v. Jurado, an appeals decision handed down just this past week on September 21, 2012.
Prior to the mechanics lien foreclosure deadline the parties were involved in litigation between one another where the plaintiff (the bank, and not the lien claimant) had filed a lawsuit and gotten a default judgment against the lien claimant. The lien claimant was on their heels and had to file an action to vacate the default judgment (which they won).
Now here was their dilemma: They had a deadline to file their foreclosure action, and that deadline was approaching. The procedural rules required that any actions that relate to the principal action must be filed within that proceeding as a counterclaim. However, since the lawsuit was pending, the claimants were required to get “leave of court” to file the foreclosure action.
So, they sought leave of court. The court – as courts so often do – dragged their feet and didn’t get around to granting the leave. This delayed the claimant’s ability to file the foreclosure action on time. When it was finally filed the plaintiffs argued that it was late and should be struck. The appeals court, as we will examine below, agreed.
Illinois Court Holds That The 2 Year Deadline Is Firm, With No Exceptions
The trial court had ruled in this case as follow:
No rule of law precluded RBM [the defendant, lien claimant] from filing its own complaint at any time within the two year period following completion of its work. Not having done so, and not having filed its counterclaim in the pending mortgage foreclosure lawsuit, RBM has forfeited its right to enforce its mechanics lien.
RBM argued that it had lodged the lien foreclosure action in the Illinois court record before the 2 year deadline as it was attached to its motion to vacate and request for leave. Remember, RBM was procedurally required to get leave of court before the foreclosure action could be formerly filed in the action that was pending.
While that is true, the Illinois appeals court held that the claimant didn’t quite do enough and may have had other options. Here are the suggested options:
Court Says Lien Claimant Should Have Pestered Lower Courts For Expedited Ruling
While the appeals court doesn’t say that RBM was required to ask for an expedited hearing or notify the trial court of the approaching foreclosure deadline, they do imply that RBM could have done these things and that this justifies the trial court and appeals court determination that the foreclosure action was ultimately tardy.
The court states ” [T]here is no indication in the record that after RBM…ever informed the trial court that its two-year deadline was approaching on June 14, 2008 or that an expedited hearing was needed.”
Court Says Lien Claimant Could Have Filed The Foreclosure Action Independent Of The Other Proceeding
The Illinois appeals court goes on to suggest that RBM had other procedural options aside from filing the counter-claim. It could have, for example, filed an independent action for foreclosure and coupled it with an independent lawsuit to have the default judgment overturned. This is supported by digging deep into the procedural rule book, which would have allowed RBM to “file its own case to foreclose the lien before the time elapsed because a void judgment could be attacked directly or collaterally.”
This appears to be very flawed logic to me.
First, RBM couldn’t have predicted that the trial courts docket was so full it would be unable to rule on the motion for leave within a very reasonable time of two months. The appeals court even admits and agrees “that RBM took a proper course of action when it filed the motion to vacate the default judgment to protect its rights.”
According to my understanding of the rules of civil procedure in any state, if a party proceeds in a procedurally “proper course of action” they should be allowed to proceed, and not be required to have predicted that there was a more superior “proper course of action.” Proper is proper.
Second, yes, RBM could have filed a seperate action based on Illinois unique procedural rule allowing for an independent action in this unique situation (a void judgment), but 99 out of 100 attorneys would have filed under the same caption. It just makes sense, and it is in line with the judicial systems overall goal to foster an efficient judicial economy.
Conclusion – This Case Stinks
The court concludes with:
Section 9 of the Act provides that the counterclaim must be filed within two years of the completion of the work, not merely presented as an attachment. The arguments and authority presented by RBM to support its position in the trial court and on appeal are not persuasive. Accordingly, the judgment of the circuit court is affirmed.
This case stinks to me.
Yes, on the one hand, the two year foreclosure action is firm and should be implemented without exception. On the other hand, however, the courts can always use equity considerations to avoid things exactly like this, where the law forced the lien claimant into this procedural riddle to which there was no escape and barely – but only retrospectively – an alternative.
The plaintiffs in this case would not have been prejudiced by allowing the filing as they were served with it through the motion to vacate and for leave. The foreclosure action itself – as an attachment, granted – was even a part of the record.
Nevertheless, lien claimants should take note of this harsh decision. It is representative of the harsh legal reality out there when looking to file and enforce mechanics lien claims. You have strict lien deadlines to follow and you must follow them. No exceptions. Plan ahead, and be prepared to be pushed off course. Don’t wait until the last day, week, month – or in this case – quarter.