Subcontractors’ Recovery Limited to Their Pro Rata Share of Funds Due on the Date Lien Notices Were Served

In Gerdau Ameristeel US, Inc. v. Broeren Russo Const., Inc.,  2013 IL App (4th) 120547, Campus Investors 309, LLC (“Campus”) entered into a contract with general contractor Broeren Russo (“Russo”) to perform the construction of a high-rise apartment building, known as the Green Street Tower project, in Champaign, Illinois.  Russo entered into a contract with subcontractor Jacobsmeyer-Mauldin Construction Company (“JMC”), who then contracted with second tier subcontractors Ahal Contracting Co. (“Ahal”) and Blager Concrete Company (“Blager”).

In October 2008, JMC submitted its waiver of lien to date/subcontractor’s affidavit to Russo indicating JMC owed more to its subcontractors and suppliers than it had shown on previous requests.  Russo froze all payments pending a resolution.  Ahal and Blager timely filed claims for liens for their outstanding balances.  Campus and Russo settled with JMC and argued that Ahal and Blager were limited to their pro rata share of any settlement by the owner with JMC.  The trial court denied Campus and Owner summary judgment motions and granted the summary judgment motions of Ahal and Blager.  The court entered into judgments for Ahal and Blager to the full amounts owed in their contracts.

On appeal, Campus and Russo argued the trial court erred by not limiting Ahal and Blager’s recovery to only their pro rata shares of the amount of unpaid contract funds remaining at the time they served their notices of lien.  The appellate court agreed with Campus and Russo.  The appellate court analyzed different sections of the Mechanics Lien Act (Act) and relied on caselaw from a First District case,  Bricks, Inc. v. C & F Developers, Inc., 361 Ill. App. 3d 157 (2005) in particular.  The analysis focused on the purpose of the Act and how it seeks to balance the rights and duties of subcontractors, materialmen, and owners alike.  The owner should not be required to pay more than he contracted for, absent notice of subcontractors’ claims.  As in Bricks, since Campus could rely on Russo’s sworn statements, Ahal and Blager’s recovery was limited to the unpaid amount due to their immediate contractor as of the date they served notice of their liens.  As such, Ahal and Blager were entitled to recovery of their pro rata shares of the funds remaining due to JMC on the subcontract between Russo and JMC.

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