978-1285770178 Case Problem Case CPC-20-06 Part 1

925 N.E.2d 233

Page 1

398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736

(Cite as: 398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736)

Ill.App. 3 Dist.,2010.

LaSalle Bank Nat. Ass‘n v. Cypress Creek 1, LP

398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736

Appellate Court of Illinois,

Third District.

LASALLE BANK NATIONAL ASSOCIATION, Plaintiff-Appellee,

v.

CYPRESS CREEK 1, LP, an Illinois limited partnership; Crystal Lifestyles, Inc., an Illinois corporation; Dennis Egidi; Dre,

Inc. National City Community Development Corporation d/b/a National City Community Development Association-Illinois;

Fifth Third Community Development Corporation; Anthony F. Starcevic; Donna Starcevic; Illinois Housing Development

Authority; CL Management, Inc.; Wegner Sewer And Water, Inc.; Hill Concrete Products; NEE-Corp.; Underground Pipe &

thony F. Starcevic; Donna Starcevic; Illinois Housing Development Authority; CL Management, Inc.; Wegner Sewer and

Water, Inc.; Hill Concrete Products; NEE–Corp.; Underground Pipe & Valve Co.; Basic Development Group; and “Unknown

Owners” and “Non–Record Claimants”, Defendants.

and

LaSalle Bank National Association, a national banking association, Defendant-Appellee Cross-Appellant.

lien claimants, and subrogated bank to the position of mechanic’s lien claimant for various costs it funded during construc-

tion. Lien claimants appealed, and bank cross-appealed.

Holdings: The Appellate Court, O’Brien, J., held that:

(1) trial court properly allocated sheriff sale proceeds;

Justice Schmidt, specially concurred, and filed opinion.

West Headnotes

925 N.E.2d 233

Page 2

398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736

(Cite as: 398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736)

266k151(3) k. Mortgages and mechanics’ or contractors’ liens in general. Most Cited Cases

Mortgages 266 163(3)

266 Mortgages

266III Construction and Operation

266III(D) Lien and Priority

266k162 Priority of Record

266k163 In General

266k163(3) k. Mortgages and mechanics’ liens. Most Cited Cases

Following judicial foreclosure, the priority of claims between a mortgagee and a mechanic’s lien claimant depends on the

30 Appeal and Error

30XVI Review

30XVI(F) Trial De Novo

30k892 Trial De Novo

266X Foreclosure by Action

266X(P) Review

266k578 k. Scope and mode of review. Most Cited Cases

Apportionment of sheriff’s sale proceeds and statutory interpretation are questions of law that the Appellate Court reviews de

novo. S.H.A. 770 ILCS 60/16.

266k563 k. Disposition in general. Most Cited Cases

Mortgages 266 565

266 Mortgages

925 N.E.2d 233

Page 3

398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736

(Cite as: 398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736)

mortgage was recorded, and proceeds were insufficient to satisfy mechanics liens and mortgage in full. S.H.A. 770 ILCS

257k5 k. Construction of lien laws in general. Most Cited Cases

The purpose of the Mechanics’ Lien Act is to protect those who, in good faith, furnish material or labor for construction of

buildings. S.H.A. 770 ILCS 60/0.01 et seq.

[5] Mortgages 266 133

[6] Subrogation 366 17

366 Subrogation

366k17 k. Junior mortgagees or lienors. Most Cited Cases

266 Mortgages

266X Foreclosure by Action

266X(O) Disposition of Proceeds and Surplus

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Mortgagee was not entitled to be subrogated to status of a mechanic’s lien claimant to share proceeds from judicial sale of

102 Costs

102VIII Attorney Fees

102k194.16 k. American rule; necessity of contractual or statutory authorization or grounds in equity. Most Cited

Cases

925 N.E.2d 233

Page 4

398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736

(Cite as: 398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736)

361 Statutes

361VI Construction and Operation

30 Appeal and Error

30XVI Review

30XVI(F) Trial De Novo

30k892 Trial De Novo

266 Mortgages

266III Construction and Operation

266III(D) Lien and Priority

266k151 Priorities of Mortgages in General

266X(Q) Fees and Costs

266k581 Attorney Fees

266k581(2) k. Stipulation for attorney fees in general. Most Cited Cases

Mortgagee was entitled to have attorney fees it incurred in prosecuting judicial foreclosure of mortgaged property included as

additional indebtedness in the decree for judicial sale, and have priority for payment of attorney fees, as provided for in the

go, for LaSalle Bank National Association.

Andrew R. Schwartz, Andrew R. Schwartz, LLC, chicago, for Wegner, Sewer and Water, Inc.

Elizabeth M. Bradshaw, LeBouf, Lamb, Greene & MacRae, LLP, chicago, IL, for Cypress Creek I, L.P.

925 N.E.2d 233

Page 5

398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736

(Cite as: 398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736)

Paula K. McGuire, Friedman & Holtz, P.C., Chicago, IL; Edward Richard, Chuhak & Tecson, P.C., Chicago, IL, for Crystal

Lifestyle, Inc.

Plaintiff-appellee-cross-appellant LaSalle Bank National Association filed this action to foreclose a mortgage it held on a

parcel of real estate that was being developed for senior apartments. Defendants-appellants–cross-appellees Edon Construc-

tion Co. and Eagle Concrete filed mechanic’s liens for work they had done on the apartment buildings. The property was sold

pursuant to a sheriff’s sale, and in allocating the sale proceeds, the trial court apportioned the funds between LaSalle as mort-

gagee and Edon and Eagle as mechanic’s lien claimants, and subrogated LaSalle to the position of mechanic’s lien claimant

ments. The loan, in the amount of $8,018,151, was secured by a mortgage and security agreement. Section 4.3 of the mort-

gage provided, in pertinent part:

“In any suit to foreclose the lien hereof * * *, there shall be allowed and included as additional indebtedness in the de-

cree for sale or other judgment or decree, all expenditures and expenses which may be paid or incurred by or on behalf of

Creek defaulted on the mortgage in June 2005. In July 2005, LaSalle filed the instant complaint to foreclose the mortgage.

Eagle recorded a $63,478 mechanic’s lien on November 4, 2005. Edon recorded a mechanic’s lien in the amount of

$285,826.80, on November 21, 2005. Eagle filed its complaint for foreclosure of its mechanic’s lien on March 30, 2006. A

judgment of foreclosure and sale was entered against Cypress Creek in April 2006, finding that the balance due on the mort-

gage was $8,621,110, and reserving a determination as to priorities between LaSalle as the mortgagee and the various

confirmation of the sale and argued for priority of their liens over the mortgage. Various experts testified as to the value of

the real estate and the improvements. Other testimony included that of John Marynell, a senior vice president at LaSalle, who

testified that LaSalle had funded the construction draws while the work was progressing, including $1,446,266 in construc-

tion costs, $99,917 in engineering costs, $2,842 for environmental reports, and $8,538 for utilities. Marynell also testified that

LaSalle paid the perfected mechanic’s lien for $30,202 of Basic Development, a defendant not involved in this appeal. In to-

925 N.E.2d 233

Page 6

398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736

(Cite as: 398 Ill.App.3d 592, 925 N.E.2d 233, 338 Ill.Dec. 736)

Expense of sale

$ 1,542.00

Receiver’s fees and expenses

746,243.94

Remaining proceeds:

LaSalle Bank

$ 471,614.06

Edon Construction

50,000.00

Eagle Concrete

10,000.00

Gallagher Construction

7,300.00

All American Roofing

7,300.00

Another Plumbing

6,000.00

$1,300,000.00

The court’s apportionment was based on the following:

Value of land before improvements:

$1,360,000.00

Value of enhancements:

Lien claimants

$ 480,934

+

bank subrogation

1,587,765

$2,068,699

+

land value

1,360,000

=

total value

$3,428,699

LaSalle was subrogated as to the following amounts for a total of $1,587,765:

construction costs

$1,446,266

engineering costs

99,917

environmental reports

2,842

utilities

8,538

Basic Development’s lien

30,202

$2,068,699/$3,428,699 = 60% to enhancers of property (lien claimants)

$1,300,000/$3,428,699 = 40% to mortgagee

Value of improvements: $522,214 * x 60% = $331,328.40

Eagle: $63,478 **/$2,068,699 = 3% = approximately $10,000