Illinois Court Reverses Trial Court’s Refusal to Award Attorneys’ Fees to Successful Lien Claimant

By John S. Mrowiec

Whether a successful lien claimant is entitled to recover attorneys’ fees for prosecuting a suit to enforce the lien claim absent an attorneys’ fees provision in the underlying contract depends on the relevant statute. Should fees be awarded where a portion of the lien claim is undisputed but unpaid and the balance disputed? An Illinois decision addresses the question.

Contractors, subcontractors, suppliers, architects and engineers secure their payment on private construction projects by mechanics’ or construction lien claims. Mechanics’ or construction lien claims are created by statute. Thus, rights vary from state to state.

Whether a successful lien claimant is entitled to recover attorneys’ fees for prosecuting a suit to enforce the lien claim absent an attorneys’ fees provision in the underlying contract depends on the relevant statute. In our readership area, since March 30, 1997, the Indiana statute provides that, unless the property owner has paid the contract price in full, a lienholder “who recovers a judgment in any sum is entitled to recover reasonable attorney’s fees.” Ind. Code. Ann. § 32-28-3-14 (a) (2009). Missouri’s mechanics’ and materialmen’s lien statute does not mention attorneys’ fees. Nevertheless, for contracts involving private design or construction where the contract provides for scheduled payments, Missouri’s Private Prompt Payment Act, § 431.180 Mo. Rev. Stat., says “[t]he court may . . . award . . . reasonable attorney fees, to the prevailing party.” The award of fees under that Missouri statute is discretionary. Vance Brothers, Inc. v. Obermiller Construction Services, Inc., 181 S.W. 2d 562, 564 (Mo. S. Ct. 2006).

John S. Mrowiec is a partner with Chicago-based Conway & Mrowiec, a construction and public contracts law and litigation practice. He may be reached at (312) 658-1100. For information, go to the firm’s Web site at www.cmcontractors.com

Wisconsin’s Construction Lien Act does not provide for an award of attorneys’ fees. Of course, the above limitations do not prevent an award of fees if the contract requires that result or under the rules of procedure for asserting bad faith defenses.

In Illinois, absent an attorneys’ fees provision in the contract, whether a claimant will be entitled to recover attorneys’ fees is addressed by the Mechanics Lien Act:

“(b) If the court specifically finds that the owner who contracted to have the improvements made failed to pay any lien claimant the full contract price, including extras, without just cause or right, the court may tax that owner, but not any other party, reasonable attorneys’ fees of the lien claimant who had perfected and proven his or her claim.

770 ILCS 60/17 (b). In Illinois, must a trial court award attorneys’ fees to a successful lien claimant? Should fees be awarded where a portion of the lien claim is undisputed but unpaid and the balance disputed? Those issues were confronted in the recent Illinois Appellate Court decision of O’Connor Construction Co. v. Belmont Harbor Home Development, LLC, 2009 Ill. App. LEXIS 285 (1st Dist. May 19, 2009), reh’g denied, 2009 Ill. App. LEXIS June 16, 2009.

O’Connor Construction Co. was the rough and finish carpentry subcontractor for construction of a seven-story residential condominium building with twenty-four units in Chicago. Belmont Harbor Home Development, LLC was the developer. The prime contractor was B2BilT, Inc.

During construction, the original prime contractor went out of business. A new entity was formed, Park Plaza Construction, LLC, who took an assignment of the prime contract and all subcontracts.

One of the conditions of the finish carpentry subcontract was that the prime contractor had to supply the materials. By the subcontract, the carpentry work was to proceed floor-by-floor.

There were delays on the project. Eventually, after Subcontractor had performed the rough carpentry, Subcontractor was directed to perform finish work by individual units instead of by the floor by floor sequence planned. The prime contractor did not supply sufficient materials to perform on a floor-by-floor basis.

Although owner and prime contractor had paid Subcontractor’s first eight payment applications, they balked at Payment Applications 9 and 10. Owner and prime contractor contended Subcontractor’s payment applications were “frontloaded” by including overhead and profit to which Subcontractor allegedly was not yet entitled.

Thereafter, Subcontractor completed one more unit. Subcontractor requested delivery of more materials to complete the remainder of the work but prime contractor did not deliver. Subcontractor recorded a mechanics lien claim. Prime contractor demanded the lien be removed. Subcontractor refused. Prime contractor terminated subcontractor. Subcontractor filed suit.

At trial, owner and prime contractor admitted that Subcontractor was owed at least $47,562 at the time owner and prime contractor refused to pay subcontractor’s payment applications. Owner and prime contractor disputed the remainder.

The trial court ruled in favor of Subcontractor but not for as much as Subcontractor requested. The trial court awarded interest and costs to Subcontractor but refused to award any attorneys’ fees.

Subcontractor appealed two points: the amount of damages and the failure to award attorneys’ fees. The appellate court agreed that Subcontractor was entitled to payment in full of the subcontract price less credits for payments received and work not performed. That amount was $139,599, substantially greater than the $50,876 principal amount awarded by the trial court.

Regarding attorneys’ fees, the trial court had found that developer and prime contractor “had a good faith basis for refusing to pay [subcontractor] the money that [subcontractor] demanded.” The O’Connor Construction Co. appellate court concluded “The Act specifically allows a court to award attorneys’ fees to a party to a contract when the other party has failed to pay the full amount due under the contract without just cause.” O’Connor Construction Co., 2009 Ill. App. LEXIS 285, * 15.

Without discussing whether the trial court had discretion to deny an award of fees to a successful claimant under the Act, the court reversed the trial court’s refusal to award fees. The O’Connor Construction Co. decision held and reasoned:

“We hold that the trial court erred in refusing to consider an award of attorney fees to [Subcontractor]. It is important to note that the defendants acknowledged in the trial court and during oral argument before this court that they knew that [Subcontractor] was owed an undisputed amount of $47,562.19 pursuant to the contract. Yet, the defendants paid [Subcontractor] nothing on that amount and have offered no reasonable explanation for withholding payment on an amount which was not in dispute. Therefore, it is clear that [Subcontractor] was entitled to attorney fees.”

O’Connor Construction Co., 2009 Ill. App. LEXIS 285, * 15.

The court remanded the case to the trial court for hearing on the reasonableness of the fees requested by subcontractor.

The O’Connor Construction Co. court read the Illinois statute as requiring an award of attorneys’ fees when there is an undisputed unpaid amount owing. Perhaps the appellate court thought the withholding was an attempt by owner or prime contractor to gain leverage on settlement of the disputed portion of the claim.

We do not know what the result might have been if the undisputed amount was the only amount to which lien claimant ultimately was entitled. Certainly, the decision cautions that owners risk an award of attorneys’ fees if undisputed amounts are withheld.