397980559_f3c0b2c537_zAn engineering firm surveys a tract of land, prepares and records a plat, conducts a wetlands survey, and provides various services for planning roads, utilities and sewers for a proposed subdivision. But ultimately, the developer declares bankruptcy and the project is cancelled. Can the engineering firm record a valid mechanics lien? In Christopher B. Burke Engineering, Ltd. v. Heritage Bank of Central Illinois, a unanimous Illinois Supreme Court answered that question “yes” in an opinion by Chief Justice Garman. Our detailed summary of the facts and underlying court opinions in Burke Engineering is here.

Burke Engineering began in 2008 when the plaintiff entered into a contract with a developer to survey a tract of land and prepare and record a subdivision plat. At the time, the tract was still owned by someone else, but a sale transaction closed several months after the engineers began work. According to her later testimony, the original owner was at least generally aware of the engineers’ work prior to the sale, but had no specific knowledge of what they were doing.

The plaintiffs continued performing various services in the months after the sale. In early 2009, after only one house had been built on the property, the new owners stopped all work on the project. The plaintiffs recorded a mechanics lien and filed suit to foreclose on the lien against the new owners of the tract, the defendant (which held a mortgage interest in the tract) and the owners of the house. The homeowners settled, and the new owners declared bankruptcy, leaving only the defendant bank active in the case. The circuit court granted the defendant summary judgment on the grounds that the plaintiffs’ work did not constitute an improvement to the property within the meaning of the Mechanics Lien Act, and that the original owner had neither induced nor encouraged the work. The Appellate Court affirmed.

The Supreme Court unanimously reversed. According to Section 1 of the Act, “Any person who shall by contract or contracts . . . with the owner of a lot or tract of land, or with one whom the owner has authorized or knowingly permitted to contract, to improve the lot or tract of land or for the purpose of improving the tract of land, or to manage a structure under construction thereon . . .” is entitled to a mechanics lien. (770 ILCS 60/1.) The Court explained that the fate of the plaintiff’s claim depended on two things: whether their services were an “improvement” or “for the purpose of improving” the tract, and whether the original owner knowingly permitted the contract.

The Court found the first issue simple. The Appellate Court had held that the engineers had not improved the land, but that conclusion ignored the second half of the crucial clause, the Court found – since the work was necessary for developing the subdivision, it certainly was “for the purpose of improving” the tract. If a physical improvement on the land was necessary for professionals like engineers to be entitled to a mechanics lien, then the engineers were at the mercy of the developers’ decision as to whether or not to complete a project.

Whether or not the original owner had known of the plaintiffs’ work – a prerequisite for the plaintiffs to recover the full amount of their bill – was another matter. The Appellate Court had interpreted the statutory phrase whether the owner “knowingly permitted” a contract to mean that the property owner knew of the contract and failed to object to it or accepted the benefits of the improvements. The Supreme Court agreed that that was a reasonable interpretation of the statute. The Court concluded that there was a question of fact in the record as to whether the plaintiff could satisfy this standard with respect to the original owner, and accordingly reversed the summary judgment and remanded to the trial court.

Image courtesy of Flickr by Tim (no changes).