Construction Systems, Inc. v. FagelHaber, LLC

2019 IL App (1st) 172430
Procedural entryThis page is a short order in Construction Systems, Inc. v. FagelHaber, LLC. Read the opinion of the Court — 429 Ill. Dec. 130
Appellate Court of Illinois·Decided January 15, 2019·No. 1-17-2430·Unpublished

Opinion

2019 IL App (1st) 172430

FIRST DISTRICT

SECOND DIVISION

January 15, 2019

No. 1-17-2430 CONSTRUCTION SYSTEMS, INC, d/b/a ) Appeal from the Construction Systems of ) Circuit Court of Minnesota, ) Cook County, Illinois.

)

Plaintiff-Appellant, )

)

v. ) No. 16 L 3248 )

FAGELHABER, LLC, n/k/a Thompson ) Honorable Coburn LLP, d/b/a Thompson ) John C. Griffin, Coburn FagelHaber, ) Judge Presiding.

)

Defendant-Appellee. )

JUSTICE MASON delivered the judgment of the court, with opinion.

Justices Pucinski and Hyman concurred in the judgment and opinion.

OPINION

¶1 We revisit this legal malpractice action brought by plaintiff Construction Systems, Inc. (d/b/a Construction Systems of Minnesota) (Construction Systems) following the trial court’s grant of summary judgment in favor of defendant FagelHaber, LLC (n/k/a Thompson Coburn LLP, d/b/a Thompson Coburn FagelHaber) (FagelHaber) on the basis that Construction Systems filed its action outside the two-year statute of limitations. On appeal, Construction Systems claims that FagelHaber’s negligence was not plainly obvious but only became known after the underlying case settled, which then commenced the statute of limitations. We find that Construction Systems knew or should have known of FagelHaber’s negligence by early 2005 and that its legal malpractice claim filed more than two years later in January 2009 is time- barred. Accordingly, we affirm.

¶2 I. Background

¶3 The facts of this case were set forth in detail in our earlier opinion Construction Systems, Inc. v. FagelHaber, LLC, 2015 IL App (1st) 141700, and we describe here only the facts and proceedings relevant to this appeal.

¶4 Construction Systems provided steel fabrication materials and labor for a building project located at 6 North Michigan Avenue in Chicago, Illinois. Id. ¶ 3. After Construction Systems failed to receive payments for its work that it furnished at the property, it retained FagelHaber to record a lien against the property under the Mechanics Lien Act (Act) (770 ILCS 60/0.01 et seq. (West 2012)) to protect its interest and collect the outstanding balance that totaled $3,146,200. Construction Systems, Inc., 2015 IL App (1st) 141700, ¶ 6. On April 3, 2003, FagelHaber completed a tract search on the property. Id. ¶ 7. About a month later on May 6, 2003, Cosmopolitan Bank and Trust (Cosmopolitan) recorded a mortgage on the property. Id. On August 6, 2003, without updating the tract search, FagelHaber served notice of Construction Systems’ mechanic’s lien on the project’s owner and construction manager but did not serve notice on Cosmopolitan. Id. On October 6, 2003, FagelHaber recorded a mechanic’s lien against the property in the amount of $3,146,200, but the lien did not list Cosmopolitan as an interested party, and the bank was also not included on the service list. Id. On December 19, 2003, FagelHaber performed a second tract search and discovered Cosmopolitan’s mortgage recorded against the property. Id. ¶ 8.

¶5 Under section 24(a) of the Act (770 ILCS 60/24(a) (West 2012)), a subcontractor “furnishing labor, materials, fixtures, apparatus, machinery, or services *** shall within 90 days after the completion thereof *** cause a written notice of his or her claim and the amount due or to become due thereunder, to be sent by registered or certified mail *** or -2­

personally served on the owner of record *** and to the lending agency, if known.”

(Emphasis added.)

As used in the statute, the phrase “ ‘if known’ ” means “ ‘if discoverable by the subcontractor through searching title recording records.’ ” Petroline Co. v. Advanced Environmental Contractors, Inc., 305 Ill. App. 3d 234, 238 (1999) (quoting Hill Behan Lumber Co. v. Irving Federal Savings & Loan Ass’n, 121 Ill. App. 3d 511, 514 (1984)). A subcontractor is deemed to have constructive knowledge of a lender who properly recorded its mortgage against the property. Parkway Bank & Trust Co. v. Meseljevic, 406 Ill. App. 3d 435, 447 (2010). If a subcontractor fails to provide a known lender with the required 90-day notice under section 24, the subcontractor’s lien is unenforceable against the lender. Id. Unlike a subcontractor, an original contractor is not subject to the 90-day statutory notice requirement. Id.

¶6 Because Construction Systems and various subcontractors had recorded mechanic’s liens on the property, litigation ensued over the recorded liens. Construction Systems, Inc., 2015 IL App (1st) 141700, ¶ 8. Both Construction Systems and First Bank of Oak Park (FBOP), as successor in interest to Cosmopolitan, joined the litigation. Id. Dissatisfied with FagelHaber’s representation in the lien litigation, Construction Systems retained Karen Berres, of Fuller & Berres, as substitute counsel, and FagelHaber was allowed to withdraw. Id. ¶ 9. A dispute arose between Construction Systems and FagelHaber regarding outstanding fees, and on November 10, 2004, the parties executed a general release in settlement of the fee dispute. Id. ¶¶ 9-10, 14.

¶7 Years later, in December 2007, Construction Systems and FBOP agreed to settle the underlying lien claim, and FBOP paid $1,825,000 to Construction Systems in settlement, or $1,321,200 less than its recorded lien. Id. ¶ 12.

¶8 On January 27, 2009, Construction Systems sued FagelHaber for legal malpractice asserting that FagelHaber’s failure to perfect Construction Systems’ mechanic’s lien resulted in -3­ its lien being subordinate to Cosmopolitan’s mortgage lien. Id. ¶ 13. Construction Systems and FagelHaber then litigated the issue of whether the general release executed in connection with the outstanding fee dispute included a release of legal malpractice actions. The trial court granted summary judgment in FagelHaber’s favor finding that the executed release barred known and unknown claims, including legal malpractice actions. Id. ¶ 20. Construction Systems appealed, and we reversed, finding there was a genuine issue of material fact whether legal malpractice claims were contemplated by the parties when they executed the general release relating to the outstanding fee dispute. Id. ¶ 57.

¶9 Following remand, FagelHaber moved for summary judgment asserting that the statute of limitations barred Construction Systems’ legal malpractice action because no genuine issue of material fact existed that Construction Systems knew or should have known between February 2005 and July 2006 about the failure to serve the required statutory notice of its mechanic’s lien on Cosmopolitan. Because Construction Systems did not file its malpractice action until January 27, 2009, FagelHaber claimed that Construction Systems’ action was time-barred. Construction Systems responded that the statute of limitations did not commence until it settled the underlying lien litigation on December 12, 2007, or, at the earliest, on August 20, 2007, when the trial court ruled on the parties’ cross-motions for summary judgment addressing the lien priority issue. Construction Systems contended that its action was timely because it was filed within two years from either December 2007 or August 2007.

¶ 10 On October 12, 2016, the trial court denied FagelHaber’s motion for summary judgment finding that FagelHaber did not make a prima facie showing that there was no genuine issue of material fact as to when Construction Systems suffered an actual injury because it failed to establish that any of the 2005 and 2006 attorney fees paid to Berres, as substitute counsel, were directly attributable to FagelHaber’s negligence.

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