Why You Need a Real Estate Attorney When Purchasing a Home

Many states do not require a home buyer to have legal representation during the purchase transaction, but considering the size of the investment and the problems that can often arise, it is very important to have an experienced real estate attorney on your side during this complex process.

Many states do not require a home buyer to have legal representation during the purchase transaction, but considering the size of the investment and the problems that can often arise, it is very important to have an experienced real estate attorney on your side during this complex process.

Documents the Attorney ReviewsReal Estate Attorney

  • Purchase agreement – many sellers use standard forms, but your attorney will read through the agreement and suggest changes to meet your specific needs. These could include the terms of financing, alterations to the property or the conditions of escrow.
  • Mortgage documents – these documents are prepared by the lender and usually cannot be changed, but it is very important that you understand what they mean so you can abide by the terms
  • Title documents – these show any current liens or claims against the property
  • Transfer documents – these transfer ownership from seller to buyer

Problems Can Arise During the Transaction

While some transactions go perfectly smoothly, in many cases there will be problems that need to be resolved.  Your attorney may find errors in the mortgage documents that need to be corrected, the inspection may uncover issues that need to be addressed before finalizing the purchase, the title search may reveal liens or claims against the property, or the seller may try to back out.  It is in these cases where you will be thankful that you have an experienced attorney like those at Churchill, Quinn, Richtman & Hamilton to help sort through and resolve the issues.

Can’t You Just Use Your Real Estate Agent Instead of Hiring an Attorney?

Your real estate agent may be very good at their job, but they are not legally trained and should not give legal advice.  Remember that this is a legal transaction and mistakes cannot be undone once the papers are signed.

The purchase process is very stressful and the closing can be overwhelming.  The attorneys at Churchill, Quinn, Richtman & Hamilton have extensive experience in real estate law and will be there to worry about the details so you do not have to.  Contact us at 847-223-1500 or visit dev-cqrh.pantheonsite.io to see how we can help.

Referenced article found HERE and HERE

Grayslake Color Aloft Balloon Festival

Keep your eyes on the skies as the 6th annual Grayslake Color Aloft Balloon Festival takes flight on August 25th.  This exciting event, sponsored by Churchill, Quinn, Richtman & Hamilton, will feature hot air balloons being inflated and competing to see which one can land closest to the Fox River. 

Balloon FestivalKeep your eyes on the skies as the 6th annual Grayslake Color Aloft Balloon Festival takes flight on August 25th.  This exciting event, sponsored by Churchill, Quinn, Richtman & Hamilton, will feature hot air balloons being inflated and competing to see which one can land closest to the Fox River.  Once retrieved and returned to the park, the balloons will be illuminated by their burners in a captivating glow that you don’t want to miss.

Along with the beautiful balloons, you can enjoy musical entertainment, a Civil War era baseball game, children’s activities, storytelling and business booths.  There will not be any food vendors, so be sure to pack a snack!

This free event runs from 3:00pm until 9:00pm at Central Park in Grayslake, located at 250 Library Lane.

For more information about the balloon festival, click here: http://business.grayslakechamber.com/events/details/6th-annual-color-aloft-balloon-festival-694

Grayslake Summer Days

Celebrate the end of summer at this great family event sponsored by Churchill, Quinn, Richtman & Hamilton. Grayslake Summer Days is happening on August 17th and 18th and will have tons of fun activities to choose from.

Grayslake Summer DaysCelebrate the end of summer at this great family event sponsored by Churchill, Quinn, Richtman & Hamilton.  Grayslake Summer Days is happening on August 17th and 18th and will have tons of fun activities to choose from.

Listen to great music, try your luck at the carnival games, enjoy delicious food or visit the many business booths.  There will be a bike and pet parade on Saturday at noon, bags tournament at 12:30pm and go-kart races at 1:00pm so make a day of it and enjoy everything this fun event has to offer.

The event is FREE and will take place on Friday from 5pm – 12am and Saturday from 11am – 12am and is located at the Whitney Street Festival Site in Downtown Grayslake.

For more event info: http://business.grayslakechamber.com/events/details/summer-days-08-18-2018-693

Understanding Probate

When it comes to settling an estate, most people have heard that it is best to avoid probate whenever possible.  But how many people even know what it is?  It is a lot easier to navigate this issue when you have the necessary information, so here are the basics of probate.

When it comes to settling an estate, most people have heard that it is best to avoid probate whenever possible.  But how many people even know what it is?  It is a lot easier to navigate this issue when you have the necessary information, so here are the basics of probate.

Probate

Probate Defined

Probate is the legal process of a court validating a person’s will and distributing their estate after they pass away.  This can be a complex and lengthy process, especially if a will was never prepared prior to death or if there is a large estate involved.

The Probate Process

The court first names an executor, or administrator, of the estate which may be stated in the will or assigned by the court if there is no will.  It is the executor’s duty to prove validity of the will, as well as provide a list of the deceased’s assets and debts.  Creditors must usually be paid from the assets of the estate before the beneficiaries can receive anything, although there are sometimes exceptions to this rule.

Once all of the debts have been satisfied, necessary tax returns have been filed, disputes settled, beneficiaries paid and the estate closed, the executor’s role is complete.  There are many details involved in this process and help is often needed.  Churchill, Quinn, Richtman & Hamilton has experienced probate and trust administration attorneys who can help you sort through these details in order to avoid further stress during a difficult time of loss.

Probate Causes Problems

The probate process can be very long, sometimes lasting for years.  Heirs can be left waiting for inheritances that they are counting on.  All fees and expenses get paid from the estate and can therefore significantly reduce the value of the estate over time.  And the process can cause stress on a family, sometimes even tearing families apart.

Avoid Probate

The best way to avoid the pitfalls of probate is through appropriate planning ahead of time.  Churchill, Quinn, Richtman & Hamilton can prepare a will, set up a trust, establish joint ownership of assets and address many more estate planning issues in order to aid in the effective administration of an estate, whatever your situation may be.  Call us now at 847-223-1500 or visit dev-cqrh.pantheonsite.io for more information.

See fully referenced articles HERE and HERE

Tips for Buying Commercial Real Estate

Owning commercial real estate can be a very rewarding experience but purchasing it can be a challenge. Some people may be hesitant to make the investment because they think it will be too complicated. But by doing some preliminary research and having the right experts helping you, anyone can enjoy the benefits that commercial real estate can offer.

Commercial Real EstateOwning commercial real estate can be a very rewarding experience but purchasing it can be a challenge.  Some people may be hesitant to make the investment because they think it will be too complicated.  But by doing some preliminary research and having the right experts helping you, anyone can enjoy the benefits that commercial real estate can offer.

Know What You Are Looking For

You must ask yourself a lot of questions up front in order to determine how to start.  What can you afford in terms of down payment, repairs and financing?  What purpose will the property serve?  How much work do you want to put in to the property?  These and many other questions will help you determine the right property to look for.

Be Sure to Look at Many Different Properties

It is never wise to settle for the first property you visit.  Tour many different places so you can compare the features of each.  Decide what is most important to you and always consider the location of the property as one of the most important factors.  Your final choice should be what fits best with your specific situation and needs.  Churchill, Quinn, Richtman & Hamilton’s attorneys have experience in transactions involving office buildings, retail centers, warehouses, and apartment and condo properties so we can help with whatever you decide on.

Choose Experts to Help

Whatever the property, the process can be quite complex so the right experts can make all the difference for a smooth transaction.  A commercial real estate agent, mortgage broker and accountant will all most likely be needed to provide assistance.

One of the most valuable experts you need to hire is an attorney, and Churchill, Quinn, Richtman & Hamilton has extensive experience to guide you through all steps of the process.  From negotiating and drafting a contract to performing due diligence, all the way through the details of closing the deal and transferring funds, we will ensure you know exactly what your rights and obligations are.

Contact us at 847-223-1500 or visit dev-cqrh.pantheonsite.io for more information about our attorneys and practice areas.

 

Full referenced article HERE

Legal Documents Every College Student Should Have

The end of summer marks an exciting time for recent high school graduates as many of them will be heading off to college and university campuses to start a new chapter of their lives on their own. While they may be prepared with books, supplies and dorm room essentials, there are a few legal documents that you probably did not think of but are essential to their safety.

The end of summer marks an exciting time for recent high school graduates as many of them will be heading off to college and university campuses to start a new chapter of their lives on their own.  While they may be prepared with books, supplies and dorm room essentials, there are a few legal documents that you probably did not think of but are essential to their safety.

College Documents

Power of Attorney

Once your child turns 18, you no longer have any legal authority to make healthcare or financial decisions for them.  If something drastic were to happen, such as being involved in an accident or becoming extremely ill, and your child were to become unable to speak for themselves, a power of attorney would give you court approval to act on their behalf.  Accidents and sickness are very real possibilities so it is essential to have a qualified attorney like Churchill, Quinn, Richtman & Hamilton prepare this important document which would allow you to speak to doctors about care and gain access to medical and financial records and accounts.

Living Will

The living will document specifies which healthcare procedures they do or do not want if they were to become terminally ill or in a vegetative state.  While it is not a pleasant thought, it is important to know your child’s wishes about life-extending medical treatments or organ donation.

When it comes to a child, nobody wants to imagine the possibility that something could go wrong, but the reality is that life is very unpredictable and the best way to prepare is to have your affairs in order ahead of time.  Getting ready to head off to college is the perfect time to discuss these issues with your child, and to let them know that you want to always be there for them if they need you.

The legal team at Churchill, Quinn, Richtman & Hamilton can correctly prepare these important documents in order to ensure that there are no questions if the unexpected happens.  Call us at 847-223-1500 or visit dev-cqrh.pantheonsite.io for more information.

 

Referenced articles can be read HERE and HERE

Grayslake 5K Run & Walk

Churchill, Quinn, Richtman & Hamilton is proudly sponsoring the 27th Annual Grayslake Chamber of Commerce 5K Run & Walk through historic Grayslake. Runners, walkers, strollers and wheelchair athletes of all ages and abilities are encouraged to participate in this fun community event on July 14th.

Grayslake 5K Run & WalkChurchill, Quinn, Richtman & Hamilton is proudly sponsoring the 27th Annual Grayslake Chamber of Commerce 5K Run & Walk through historic Grayslake.  Runners, walkers, strollers and wheelchair athletes of all ages and abilities are encouraged to participate in this fun community event on July 14th.

Awards will be given out based on age groups as well as overall finishers so there are many opportunities to claim a prize.  But this event is not all about winning – it is a great opportunity to share a day and be healthy with friends and family.

A kids fun run for ages 5-8 will begin at 7:30am and the 5K will start at 8:00am.  Race shirts are guaranteed to the first 500 registered participants, so be sure to sign up early.  Proceeds from this event will go to the Grayslake Chamber Scholarship Fund so come out to support a great cause!

For more event info: https://www.signmeup.com/site/reg/register.aspx?fid=BF2V5H7

 

Understanding Mechanic’s Liens

When construction or improvements are done on a property, sometimes things do not go according to plan. When problems arise and contracted payments are not made, the situation can result in a mechanic’s lien being filed.

When construction or improvements are done on a property, sometimes things do not go according to plan.  When problems arise and contracted payments are not made, the situation can result in a mechanic’s lien being filed.

What is a Mechanic’s Lien?Mechanic's liens

A mechanic’s lien is a “claim” against your property, similar to a mortgage, filed by someone who has done construction or home improvement work on your property such as a contractor, subcontractor, laborer or material supplier.  When the contractor or laborer has not been paid, they can record a lien with the county recorder’s office in order to ensure a payment.

How a Homeowner is Affected by a Mechanic’s Lien

The homeowner is the person who is ultimately legally responsible for payment of the lien, even if they have already paid the contractor.  Problems that can arise include:

  • Not paying the lien can result in foreclosure on the property
  • The lien gets recorded on the property’s title, which can affect the ability to borrow against it or sell it
  • The homeowner may end up paying twice for the same work

How Mechanic’s Liens Work for a Contractor or Supplier

A mechanic’s lien is a very powerful tool that allows for the ability to receive payment for the goods or services provided by a contractor, subcontractor or supplier.  If the agreed-upon work has been completed but payment has not been made, a mechanic’s lien can provide a solution.  When Churchill, Quinn, Richtman & Hamilton helps you file the lien, it can benefit you as a contractor/supplier by giving you the ability to legally collect the debt.

  • It will prevent the property from being sold, refinanced or transferred
  • It can put pressure on lenders and property owners to address the debt
  • It can give the debt first priority over other debt

The attorneys at Churchill, Quinn, Richtman & Hamilton are well-versed in the enforcement of mechanic’s liens.  Contact us at 847-223-1500 or visit dev-cqrh.pantheonsite.io to learn how we can help you navigate the complexities of this law.

Referenced articles can be read HERE and HERE

Appeal Your Property Taxes to Save Money

While it might seem logical to be happy about an increasing home value, when it comes to the tax assessor’s office you want your value to be as low as possible.  Since your real estate taxes are based on your assessed value, convincing the government that your home is worth less than they say it is can save you money.

While it might seem logical to be happy about an increasing home value, when it comes to the tax assessor’s office you want your value to be as low as possible.  Since your real estate taxes are based on your assessed value, convincing the government that your home is worth less than they say it is can save you money.

The county is not always correct in their assessment and there are steps you can take to appeal your taxes and get changes made:

Make Sure You Meet the DeadlineAppealing Property Taxes

Once you receive your assessment, you have only 30 days to file an appeal.  Make sure you are aware of the specific deadline for your property’s location.  Contact our office at 847-223-1500 as soon as you get your blue tax card to assure there will be time to assemble your case.

Understand Assessment Ratios

If your home’s value seems low on your assessment, they may be using an “assessed value”, which is only a percentage of the full market value.  You can confirm this on the assessor’s website before building your case.

Make Sure Your Property Information is Accurate

We can request a copy of the internal notes and data the assessor used when determining the value of your home and verify that they used the correct lot size, house age, room count for bedrooms and bathrooms, or anything else that might affect the value.  We also make sure they compared your house to similar homes based on size, age, etc.

Hire an Attorney to Help in the Process

There are many details to consider during the appeal process and even if you present a good case, the assessor does not have to agree with you.  Often times they will do their best to defend their original estimate.  A qualified attorney can make a significant difference in a successful appeal.

The attorneys at Churchill, Quinn, Richtman & Hamilton in Grayslake are experienced in reducing real estate tax liability.  We will provide a free evaluation to determine if an appeal is warranted and will not charge any fee unless we successfully reduce your taxes.  Contact us at 847-223-1500 or visit dev-cqrh.pantheonsite.io for more information.

Click HERE for a list of 2018 filing deadlines for Lake County

Read the full referenced article here

Grayslake Arts Festival & Wine Tasting Sponsored by CQRH

In what promises to be an enjoyable day, downtown Grayslake is set to host the 23rd annual Arts Festival & Wine Tasting on June 23rd.

This free event will offer the opportunity to view the works of over 60 local artists who will be displaying and selling their work.

Grayslake Arts FestivalIn what promises to be an enjoyable day, downtown Grayslake is set to host the 23rd annual Arts Festival & Wine Tasting on June 23rd.

This free event will offer the opportunity to view the works of over 60 local artists who will be displaying and selling their work.

There will be great entertainment throughout the day, food vendors, children’s activities, a high school art exhibit and a “Wines Around the World” wine tasting event.

Churchill, Quinn, Richtman & Hamilton is a proud sponsor of this great family festival event that you don’t want to miss!

http://business.grayslakechamber.com/events/details/23rd-annual-arts-festival-annual-wine-tasting-688

Estate Planning is Important at Any Age

When you are young and healthy, estate planning does not always seem like an urgent matter.  But that is exactly when you should get started!  It can be an unsettling thought, but life is unpredictable and it is never too early to solidify plans for child custody, money and possessions.

When you are young and healthy, estate planning does not always seem like an urgent matter.  But that is exactly when you should get started!  It can be an unsettling thought, but life is unpredictable and it is never too early to solidify plans for child custody, money and possessions.

What is an Estate Plan?

The word “estate” implies that you have a vast accumulation of property or possessions, but the reality is that if you have any assets whatsoever, you have an estate.  You car, home, business, savings, or retirement accounts (regardless of size) all count as part of your estate.  An estate plan gives explicit instructions as to how those assets should be distributed, eliminating any stress or confusion for your family or friends.

Estate Planning TipsIs an Estate Plan or Will Really Necessary?

Absolutely, yes.  A will helps ensure that your wishes are carried out in respect to property distribution, designating a guardian for your children and naming an executor of your estate.  Without a will or estate plan, you lose all control and a judge will have to make these decisions for you.  The professionals at Churchill, Quinn, Richtman & Hamilton are here to make sure YOU get to make those decisions.

Estate Planning When Children are Involved

If you have children, this should be the most important reason to have a final plan in place now.  Our lawyers cannot stress enough that everyone who has a child should have a current, valid will.  If you were to pass away, you do not want the courts to make the important decision of who will take responsibility for your children.  Guardians should be chosen carefully after a thorough discussion with the would-be caregivers to ensure their willingness and appropriate ability to provide for your kids.

Take the Time to Plan Properly

There are many details involved in properly executing an estate plan and will.  Small errors could result in delays in the court system and open your estate to being contested.  Our qualified attorneys can prepare and file the correct estate documents in order to protect your family, your assets and your wishes for what happens to your property.

Churchill, Quinn, Richtman & Hamilton has operated in Grayslake for over 100 years and our attorneys are experts in the field of estate law.  Contact our legal professionals at 847-223-1500 for guidance through the estate planning process and to develop the best plan for you and your beneficiaries.

 

Read the full referenced article HERE

A Roadmap to Pursuing Fraudulent Transfer Actions: A.G. Cullen v. Burnham Partners, LLC

You’ve gone through all the work of litigating the case through pleadings, motions, discovery and, finally, either a dispositive motion or trial resulting in your client being awarded a long-sought monetary judgment.

Originally published in The Docket, May 2016
By Mark A. Van Donselaar

Stack of  american coins on the dollar banknotesYou’ve gone through all the work of litigating the case through pleadings, motions, discovery and, finally, either a dispositive motion or trial resulting in your client being awarded a long-sought monetary judgement. Feeling good about yourself and proud of your victory, you press onward into post-judgment collection. And then it hits you. It’s not uncommon. In fact, at times it’s almost expected, yet it’s demoralizing, nonetheless. All the time and effort that you’ve put into the case leads up to the situation that nearly every civil litigator has encountered: the dreaded uncollectible judgment debtor.

However, all is not lost when the judgment debtor explains that it does not have any income or assets. The opinion in A.G .Cullen Construction, Inc. v. Burnham Partners, LLC,1 (hereinafter “Cullen”) highlights three possible actions to take after a judgment debtor appears to be uncollectible: an action for violation of the Uniform Fraudulent Transfer Act, an action to pierce the corporate veil, and an action against the corporate officers, directors, members or manager for breach of fiduciary duty. Additionally and importantly, Cullen represents the first reported decision of an Illinois court piercing the corporate veil of a limited liability company, albeit while applying Delaware law.

The dispute in Cullen arose from the construction of a warehouse in Pennsylvania. Defendant, Westgate Ventures, LLC, hired A.G. Cullen Construction as its building contractor for the warehouse. Westgate was primarily owned by Defendant, Burnham Partners, LLC which, in turn, was owned by Defendant, Robert Halpin. Halpin signed the contract with Cullen on behalf of Westgate. Near the completion of construction, a disagreement arose between Cullen and Westgate, and Westgate refused to approve a payment of $360,000 to Cullen. The matter went to arbitration in July 2007, and in September 2007, Cullen obtained an arbitration award of$457,416.37 against Westgate which was then reduced to a judgment in Pennsylvania in November 2007.

In April 2007, prior to the arbitration hearing, Westgate sold the warehouse for $3.2 million. Westgate conducted no further business after the warehouse was sold, and Halpin undertook to liquidate its assets. First, Halpin paid the lender which had a secured interest in the warehouse over $2.5 million. Second, Halpin paid $120,000 to Northern Trust to repay a personal loan that he and his wife had made to Westgate. Third, Halpin paid a development fee of $400,000 to Burnham Partners, LLC, which was later transferred to Halpin, personally. Finally, Halpin gave $70,000 to himself and his wife. Those four transactions left Westgate with the Docket, May 2016 a balance of $27,530.44 which Halpin then transferred to himself in the same month that the arbitration with Cullen occurred.

Cullen then filed an action in the circuit court of Cook County to recover the amount owed on the Pennsylvania judgment. Cullen brought claims for fraudulent conveyance and breach of fiduciary duty, and also sought to pierce Westgate’s corporate veil to hold Burnham and the Halpins liable for the debt of Westgate. While the case was pending, Westgate filed for bankruptcy protection and thus the case only went to trial against Mr. and Mrs. Halpin and Burnham Partners, LLC. At the close of trial, the circuit court ruled against Cullen finding that Burnham and Westgate were separate entities that kept separate books and records. The circuit court also ruled that Burnham earned its $400,000 development fee and that the $175,000 that was repaid by Westgate to the Halpins was also appropriate.

The appellate court began its review by examining the claim alleging a fraudulent conveyance. The court noted that the Uniform Fraudulent Transfer Act2 is intended to allow a creditor to defeat a debtor’s transfer of assets to which the creditor is entitled.3 Claims under the UFTA are divided into two categories – fraud in fact and fraud in law.4 Claims brought under section 5(a)(1) of the UFTA are for actual fraud, referred to as “fraud in fact.”5 Such claims require a showing of an actual intent to hinder, delay or defraud creditors.6 The court noted that: [c]onstructive fraud or “fraud in law” does not require proof of actual intent to defraud. (citations omitted) “Rather, transfers made for less than reasonably equivalent value, leaving a debtor unable to meet its obligations, are deemed or presumed to be fraudulent.” (citation omitted) The test for determining the validity of a transfer under the UFTA is “whether or not it directly tended to or did impair the rights of creditors***. If the transfer hinders, delays, or defrauds his creditors, it may be set aside as fraudulent.” (citations omitted)7

The appellate court then reviewed the 11 factors specifically listed in section 5(b) of the UFTA that are to be considered in making a determination as to actual intent under section 5(a). Those factors are:

  • The transfer or obligation was to an insider;
  • The debtor retained possession or control of the property transferred after the transfer;
  • The transfer or obligation was disclosed or concealed;
  • Before the transfer was made or obligation was incurred, the debtor has been sued or threatened with suit;
  • The transfer was of substantially all the debtor’s assets;
  • The debtor absconded;
  • The debtor removed or concealed assets;
  • The value of the consideration received by the debtor was reasonably equivalent to the value of the asset transferred or the amount of the obligation incurred;
  • The debtor was insolvent or became insolvent shortly after the transfer was made or the obligation was incurred;
  • The transfer occurred shortly before or shortly after a substantial debt was incurred; and
  • The debtor transferred the essential assets of the business to a lienor who transferred the assets to an insider of the debtor.8

The appellate court commented that while proof of some or even all of the factors does not create a presumption that the debtor had the actual intent to defraud, “…the presence of these ‘badges of fraud’ may, in sufficient number, give rise to an inference or presumption of fraud.”9

However, the circuit court had not even considered the factors found in section 5(b) in making its decisions, but had simply ruled that Burnham and Westgate were separate entities.10 On review, the appellate court found that the evidence at trial had established a significant number of “badges” giving rise to the presumption of fraud.11 Specifically, the court found that Burnham and Robert and Lori Halpin were insiders of Westgate. Thus, the $400,000 payment of the development fee to Burnham was to an insider as were the payments to Robert and Lori Halpin.12 It also disagreed with the trial court’s acceptance of Halpin’s testimony that he had no reason to believe that Cullen would obtain the arbitration award that it did and the trial court’s finding that Halpin had acted in good faith. The appellate court found that Halpin knew of the threat of a lawsuit and judgment at the time he was winding up Westgate and that he had an obligation to not dissipate its assets as he did, especially without making any disclosures to Cullen. Furthermore, the appellate court found that Westgate did not receive “reasonably equivalent value” in exchange for the $400,000 development fee paid to Burnham or for the $120,000 transfer to Northern Trust to repay Halpin’s loan. With respect to the development fee, the appellate court found that Burnham and Halpin were already obligated to perform the services for which they were compensated as the majority owner of Westgate. The court also noted that Halpin failed to present any invoice or other evidence showing what services Burnham actually performed that were above and beyond what it was already required to do that warranted the $400,000 fee.

As to the alleged loan repayments, the court quoted Northwestern Memorial Hospital v. Sharif13 stating that, just as in Sharif, Halpin “failed to present objective, unbiased testimony or documentary evidence, e.g. cancelled checks, bank transfers, loan agreements, to support his contention that these transfers to himself were credible loan repayments to a bona fide creditor.” It also noted that in transferring money to the Northern Trust to repay the Halpins loans, Westgate did not receive reasonably equivalent value for the payment; in reality, Westgate was actually repaying a capital contribution that Burnham had been required under the LLC agreement to make, but which the Halpins had instead loaned to Westgate. It also held that Westgate’s transfers of all of its assets to Burnham and then to the Halpins just before Cullen obtained a judgment against Westgate impaired Cullen’s rights and were in violation of the UFTA.

Turning to the issue of whether Westgate’s corporate veil should be pierced, the court noted that under Illinois law, the law of the state of incorporation governs that issue.14 Westgate was a Delaware corporation. The court noted that Delaware courts do not lightly disregard the corporate form, but that the veil may be pierced when there is fraud or when a subsidiary is an alter ego of a parent.15 The court went on to find that the fraud on the part of Westgate as to the transfers made to Burnham and Halpin raised a “strong presumption for piercing the corporate veil.”16 Therefore, the appellate court reversed the trial court’s decision denying the plaintiff’s request to pierce Westgate’s corporate veil.

Finally, the court addressed the claim for breach of fiduciary duty against Halpin. The trial court had found no breach. The appellate court held that once Westgate became insolvent, Halpin “owed a fiduciary duty to Cullen, as a creditor of Westgate, to manage its assets properly and in the best interest of creditors.”17 The court further held that when a corporation becomes insolvent, as Westgate had, its assets are deemed to be held in trust for the benefit of its creditors.18 Halpin breached that duty by making transfers to himself, his wife and Burnham that left Westgate without assets to pay the amount owed to Cullen.19

The takeaway from Cullen is, on one hand, very simple and on the other, not simple at all. The simple point is that all is not necessarily lost when your client is faced with a debtor who appears to have no assets and is therefore judgment-proof. The more difficult part is that it takes a lot of work to learn and obtain the facts and information necessary to put together a claim such as the ones brought in the Cullen case. Obviously, cases brought for breach of fiduciary duty, to pierce a corporate veil or for violation of the UFTA will vary greatly based on the facts of the situation. The good news is that such actions are viable in the right circumstances for attorneys and clients who have the tenacity and ability to uncover the relevant facts and are able to allege valid theories of recovery based upon them.

 

Podcast: Home Repairs Gone Awry

How can homeowners protect themselves from unscrupulous home repair/remodeling contractors? Expert litigator Mark Van Donselaar outlines what homeowners can do before, during and after a home repair or remodeling to ensure that they are protected against home repairs gone awry.

How can homeowners protect themselves from unscrupulous home repair/remodeling contractors? Expert litigator Mark Van Donselaar outlines what homeowners can do before, during and after a home repair or remodeling to ensure that they are protected against home repairs gone awry. Van Donselaar has handled many home repair cases as an attorney with the Grayslake firm of Churchill, Quinn, Richtman & Hamilton.

Listen now!

 

Recent Case Demonstrates Potential Perils for Subcontractors Under the Mechanics Lien Act

Imagine the frustration of having a set of strict statutory requirements for a cause of action, meeting those strict requirements, but still failing in the underlying cause of action. Such a frustrating result is entirely possible under the provisions of the Mechanics Lien Act1 (the Act) and the case law interpreting the Act.

Originally published in The Docket, July 2013
By Mark A. Van Donselaar

Depth of field. Great processing photos.Used professional equipment.

Imagine the frustration of having a set of strict statutory requirements for a cause of action, meeting those strict requirements, but still failing in the underlying cause of action. Such a frustrating result is entirely possible under the provisions of the Mechanics Lien Act1 (the Act) and the case law interpreting the Act. The recent Second District Appellate Court opinion in Doors Acquisition, LLC v. Rockford Structures Construction Company2 provides a classic example of how a mechanics lien claimant can fully comply with the provisions of the Act but still have its mechanics lien foreclosure action fall short. This article will examine the holding in Doors Acquisition and provide advice for practitioners and mechanics lien claimants seeking to avoid the unfortunate result of Doors Acquisition.

Before examining the holding in Doors Acquisition, it is worthwhile to briefly examine what the Act requires for a subcontractor to perfect its mechanics lien rights. To be entitled to a mechanics lien, a subcontractor (1) must have a valid contract; (2) the contract must be with a party considered to be an original contractor under the Act; (3) the contract must be for the purpose of furnishing lienable materials or services: and (4) the subcontractor must substantially perform the contract or have a valid excuse for non-performance.3

Meeting the first four prerequisites simply entitles a subcontractor to mechanics lien rights. To perfect those rights a subcontractor must send notice of its lien in accordance with section 24 of the Act.4 Notice may be sent any time after the parties enter into a contract to perform work and must be sent within 90 days of the last day that work is performed.5 Perfection of the lien also requires that the actual lien claim be recorded within four months of last performing work. The recorded lien claim must be verified by affidavit of the claimant, contain a brief statement of the claimant’s contract, set forth the balance due, and provide a sufficiently correct description of the real estate involved.6 As an alternative to recording the claim for lien, a lien claimant may also bring an action to enforce its lien within four months of last performing work.7

With an understanding of what a subcontractor must do to perfect its mechanics lienrights, we can venture into the facts of Doors Acquisition. The facts are not complicated. Norman J. Weitzel and Rockford Structures Construction Company entered into a contract for the construction of a hotel. Rockford Structures was the general contractor for the project. Rockford Structures contracted with D&P Chicago, Inc. to supply, install, and finish the drywall for the project. D&P employed 30 members of District Counsel No. 30 of the International Union of Painters and Allied Trades, AFL-CIO (the Union) to perform work under D&P’s contract with

In November of 2007, Rockford Structures terminated D&P. At the time D&P was terminated, D&P owed the Union $6,591.30 for wages and $17,003.98 for benefits. The unpaid wages and benefits were for work performed from August 2007 through November 9, 2007. On January 10, 2008, Rockford Structures provided a sworn statement to Weitzel stating that D&P had been paid in full for the work that it performed and that D&P’s work on the project was complete. On March 6, 2008, the Union filed its mechanics lien in the amount of $23,595.28.

The lien was served on Weitzel, Rockford Structures, and D&P. When notice of the lien was received by Weitzel, he was unaware that D&P had failed to pay the Union for its wages and benefits. The opinion does not say when Weitzel received notice of the lien. We are left to assume that the notice was sent within 90 days of November 9, 2007, because if it was sent any later than that, the lien would have been defective for failing to comply with section 24 of the Act.

The circuit court ruled that the Union had a valid lien and ordered Weitzel to pay the Union or the sheriff would execute a judgment of foreclosure. The order included final and appealable language, and Weitzel appealed.

The only issue on appeal was whether the lien was valid. Weitzel argued that the lien was invalid because the Union could only recover the amount owed to its immediate contractor,D&P, and that D&P had been paid in full when he received notice of the Union’s lien. The Union argued that its lien was valid because, when Weitzel received notice of the Union’s lien, Weitzel owed Rockford Structures money for work performed.

The appellate court began its analysis by examining sections 5, 21, 24, and 27 of the Act. Section 5 of the Act8 provides that prior to any funds being paid to a general contractor, the general contractor shall provide the owner with a sworn statement of the names and addresses of all subcontractors involved in the project and the amount due or to become due each. Section 219 provides that subcontractors shall have a lien for the value of the services that they provide to the project and on the funds due or to become due from the owner under the original contract. Section 2410 provides that at any time after starting work on the project and within 90 days of completing its work, subcontractors must send notice of their claim for lien. Such notice must be sent to the owner and any lender with an interest in the property being improved.11 Finally, section 2712 provides that when an owner has notice of a subcontractor’s lien claim, he shall retain sufficient funds due or to become due to the contractor to pay the demands of the subcontractor.

The appellate court then looked to Weather-Tite, Inc. v. University of St. Francis, 223 Ill. 2d 385 (2009) for an example of how the foregoing provisions of the Act work in every day practice. In Weather-Tite the defendant, a university, hired a general contractor to renovate a residence hall. The general contractor hired a subcontractor, Excel, to perform electrical work. On five occasions the general contractor requested a payment from the owner and submitted a sworn statement pursuant to section 5 of the Act with each request. Each sworn statement to the owner listed Excel and the amount due to Excel. After receiving the first four requests, the university paid the general contractor the full amount owed it, including the amount owed to Excel. The general contractor paid Excel. However, the fifth pay request didn’t go as smoothly as the first four requests. The university paid the general contractor, but the general contractor’s bank applied part of the payment received to a debt that it was owed. As a result, Excel was not paid out of the fifth payment that the general contractor received.

Excel filed its mechanics lien, and the supreme court concluded that it was entitled to its lien. The supreme court found that the purpose of the sworn statement required by section 5 of the Act was to put an owner on notice of a subcontractor’s claim, and section 27 created a duty upon the owner to pay the claim of subcontractors named in the sworn statement. Thus, the university could not pay the general contractor and rely upon the general contractor to properly disburse the funds to its subcontractors without running the risk of being subject to a lien of a subcontractor who was not paid. Excel’s lien was found validly perfected.

The appellate court also examined the holding in Bricks, Inc. v. C&F Developers, Inc., 361 Ill. App. 3d 157 (1 st Dist. 2005). In Bricks a material supplier for a subcontractor was not paid by the subcontractor and asserted a lien for the balance owed. The sworn statement that the general contractor provided to the owner did not list the material supplier and listed the subcontractor as being owed an amount much less than was owed to the material supplier. The material supplier did all that was required of it to perfect its mechanics lien rights. The court in Bricks found that the purpose of the Act is not only to protect the rights of those furnishing materials and labor to a project but also to protect owners from potential claims. The court was forced to rule between a lien claimant who had done all that was required to perfect its lien claim and an owner who had unknowingly been provided with incomplete sworn statements and had relied upon them. The court ruled in favor of the owner and limited the material supplier’s lien to the extent owed the subcontractor – an amount less than was actually due the material supplier.

The union relied upon A.Y. McDonald Manufacturing Co. v. State Farm Mutual Automobile Insurance Co.13 and Struebing Construction Co. v. Golub-Lake Shore Place Corp.14 in support of the validity of its lien. However, the court found the facts of both cases to be distinguishable. In A.Y. McDonald, the owner admitted that it had not obtained a sworn statement pursuant to section 5 of the Act. That fact was an important distinction from the facts in Doors Acquisition where the owner had obtained a sworn statement and it showed the lien claimant’s immediate contractors to have been paid in full. In Struebing the lien claimant was not listed on the sworn statement provided to the owner. However, the owner still had notice of the lien claimant’s involvement in the project. Again, this was a distinguishing fact from Doors Acquisition where the owner was not aware of the Union’s role in the project until receiving notice of its lien.

Ultimately, the appellate court in Doors Acquisition found the reasoning in Bricks to be persuasive. The court found that the Act seeks to strike a balance between the rights of owners, contractors and subcontractors. The court found that one way an owner’s rights are protected is by allowing owners to rely upon sworn statements provided to them pursuant to section 5 of the Act. Thus, the balance will be struck in favor of an owner who has properly received a sworn statement over an equally deserving subcontractor who has not been paid in full.

With the harsh result of Doors Acquisition in mind, we turn to what subcontractors can do to avoid such perils. The solution can be summarized in two words – provide notice. After an owner has received notice of a subcontractor’s involvement in the project, the owner must retain sufficient funds to pay what is due the subcontractor. As stated above, section 24 of the Act allows a subcontractor to provide notice to the owner of their claim any time after making the contract with the general contractor. While section 24 allows notice to be sent up to 90 days after the completion of the work, it can also be sent much sooner. In practice, most subcontractors don’t even think about providing notice of their lien until the project is complete. By waiting until the limits of time allowed by section 24 nears, intervening factors such as those present in Doors Acquisition can be fatal to a subcontractor’s claim. The far safer practice is for subcontractors to provide owners with notice of their involvement and role in the project early on in the construction project.

 

How a Guarantor Became a Surety

A long-time business client calls you with a question about a contract that he is about to enter into on behalf of his business. The party with whom he is contracting is demanding that the contract include either your client’s personal guaranty, or that your client act as a surety for any debt owed under the contract.

Originally published in The Docket, March 2009
By Mark A. Van Donselaar

123737188A long-time business client calls you with a question about a contract that he is about to enter into on behalf of his business. The party with whom he is contracting is demanding that the contract include either your client’s personal guaranty, or that your client act as a surety for any debt owed under the contract. Being a layman, your client does not know the difference between a personal guaranty and a surety, so he wants you to explain the difference. This article will do just that, while focusing on the recent Second District Appellate Court case, JP Morgan Chase Bank, N.A. v. Earth Foods, Inc.,1 which blurs the line between the two. (The Illinois Supreme Court granted leave to appeal on January 28, 2009.)

“There is substantial distinction between the liability of a surety and that of a guarantor. A surety’s undertaking is an original one, by which he becomes primarily liable with the principle debtor, while a guarantor is not a party to the principal obligation and bears only a secondary liability.”2 Stated somewhat differently, the distinction between a suretyship and guaranty is that “a surety is in the first instance answerable for the debt for which he makes himself responsible, while a guarantor is only liable where default is made by the party whose undertaking is guaranteed.”3 A contract is “one of suretyship when one obligates himself to pay the obligee, absolutely and wholly, without the necessity that the obligee exhaust his remedies against the principal before proceeding against the surety.”4 A guaranty is “an undertaking to be responsible for the performance of an obligation of a third person upon his failure to perform it.” 5

Whether the obligation assumed by a party is that of a guarantor or a surety “is to be determined by the intent of the parties as collected from the language of the instrument and the circumstances attending its execution.”6 Where the express terms of the instrument are ambiguous, “the parties’ intentions can be determined from their declarations and conduct andfrom the surrounding circumstances.”7 Where the terms of the instrument are unclear and there are questions of the parties’ intent, parole evidence may be used to determine whether the contract at issue is a surety or a guaranty.8

The word “guarantee” is frequently used interchangeably with the word “surety.”9 “The  terms ‘suretyship’ and ‘guaranty’ are often confounded from the fact that the guarantor is in common acceptation a surety for another.”10 Thus, the determination of whether a contract is a surety or a guaranty does not depend upon technical language, such as security, surety, guaranty, or guarantee, which may be used in the contract.11 To ignore the circumstances in which such terms are used attaches too much importance to them.12 It is the nature of the obligation, whether primary, which would indicate a surety, or secondary, which would indicate a guaranty that is the determinative factor for distinguishing between a surety and a guaranty.13

Perhaps the most significant distinction between a guaranty and a surety is that a surety may avail himself of the protections afforded by the Sureties Act.14 The Sureties Act was first passed in 1874.15 Section 1 of the Act provides:

When any person is bound, in writing, as surety for another for the payment of money, or the performance of any other contract, apprehends that his principal is likely to become insolvent or to remove himself from the state, without discharging the contract, if a right of action has accrued on the contract, he may, in writing, require the creditor to sue forthwith upon the same; and unless such creditor, within a reasonable time and with due diligence, commences an action thereon, and prosecutes the same to final judgment and proceeds with the enforcement thereof, the surety shall be discharged; but such discharge shall not in any case affect the rights of the creditor against the principal debtor.16

In Wurster et.al. v. Albrecht17 the Appellate Court for the Second District examined the section of the Sureties Act quoted above and found that if not for the statutory provision, the holder of the note would not be required to comply with the surety’s demand to sue. However, the “statute was undoubtedly enacted for the purpose of compelling diligence by a creditor to the end that a surety may be protected against loss.”18 Thus, if demand is made by the surety under the provisions of the Section 1 of the Sureties Act and a lawsuit is not diligently brought by the creditor, then the surety may be protected from liability to the creditor.

It was not until the Second District Appellate Court’s decision in JP Morgan Chase Bank, N.A. that the protections of the Sureties Act have been extended to apply to a guarantor. The facts of JP Morgan Chase Bank, N.A. are stated fairly simply: the plaintiff in the case extended a line of credit to the primary defendant, Earth Foods, Inc. (Earth Foods), which was “personally guaranteed” by three co-owners of Earth Foods.19 The defendants sent the plaintiff a  letter in which they warned that Earth Foods was depleting its inventory and demanded that the plaintiff take action. When the plaintiff filed suit against Earth Foods and the co-guarantors, the co-guarantors responded by asserting an affirmative defense based on the protections found in Section 1 of the Sureties Act.

The circuit court granted the plaintiff’s motion for summary judgment on the ground that defendants were guarantors, not sureties, and, therefore, the Sureties Act did not apply. On appeal, the defendants argued, in part, that the circuit court erred when it found that the provisions of the Sureties Act did not apply. The Plaintiff countered with its successful argument in the circuit court that the Sureties Act did not apply because the defendants were guarantors, not sureties.

For its analysis, the appellate court turned to Black’s Law Dictionary for the definition of “surety,” which it found to be “[a] person who is primarily liable for the payment of another’s debt or the performance of another’s obligation.”20 The court quoted further from Black’s, noting that “[a] surety differs from a guarantor, who is liable to the creditor only if the debtor does not meet the duties owed to the creditor; the surety is directly liable.”21 The appellate court reasoned that the definitions found in Black’s Law Dictionary supported the plaintiff’s argument that sureties are distinct from guarantors.22

However, that did not end the court’s examination of the relationship between sureties and guarantors, though it did seemingly end any chance the plaintiff had of prevailing. The court went on to state that “the dictionary definition [of the term surety] does not in this case provide the ‘popularly understood’ meaning of the term.”23 After alluding to the fact that it did not agree with the definition of the word “surety” found in Black’s Law Dictionary, the court set out on an extended analysis of the use of the words surety and guaranty.

As part of its analysis, the court found that “[t]he terms suretyship and guaranty are often confounded from the fact that the guarantor is in common acceptation a surety for another, and thus the word guarantee is frequently used interchangeably with the word surety.”24 The court continued its analysis and found Illinois cases that have used the term surety in a general sense and those that have used the term in a specific sense.25 Used in its general sense, the term surety has been used to describe “a relationship in which a person undertakes an obligation of another who is also under an obligation or duty to the creditor/obligee.”26 Used more specifically, surety has been used to describe a contract in which the surety is in the first instance answerable for the debt for which he makes himself responsible, as opposed to a guarantor, who is only liable where default is made by the party whose undertaking is guaranteed.27 Accordingly, the court concluded that the term surety “has more than one popularly understood meaning.”28 The term surety could refer to any situation in which a person agreed to be held liable for the debt of another, whether the liability was primary or secondary.29 It could also be used to refer strictly to a surety, who is primarily liable.30

The court continued its examination to focus on when liability attaches to either a surety or a guaranty. A surety is primarily liable as though there is joint and several liabilities with the principal.31 The exact moment that a guarantor becomes liable for the debt of the principal is less certain.32 Some cases stand for the proposition that a guarantor’s liability is only triggered after the creditor has proceeded against the principal and failed to receive full satisfaction.33 Other authority holds that a guarantor’s liability is triggered by the principal’s default, regardless of attempts by the creditor to recover from the principal.34 The court found the position that imposes liability regardless of the creditor’s collection efforts to be the more persuasive position.35 In light of its determination that liability is imposed against a guarantor upon the principal’s default, regardless of attempts against the guarantor’s principal, the Court reasoned that any differences between primary liability of a surety and secondary liability of a guarantor appear to be only academic.36

After the analysis described above, the Court circled back to the issue of whether the legislature intended to distinguish between a surety and a guaranty or whether the legislature meant to use the term surety in its general sense to describe both surety and guaranty scenarios. The court concluded that based upon the intertwined use of the terms guaranty and surety and the confusion surrounding the use of the term surety, the “legislature did not mean to draw the type of precise distinctions we discussed above, but instead used the word in its general sense.”37 That court offered no authority for its determination of what the legislature intended.

It would seem that the very essence of the legislature is to make precise distinctions between divergent positions in the statutes that it enacts. Certainly, some statutes allow for more than one reasonable interpretation. However, where the legislature has specifically used a single, precisely defined term and left out another related, yet distinctly different, term, it would seem  that the statute should be read to include only the term that has been used to the exclusion of the unused term.

An example of the fine distinctions made by the legislature and enforced by the appellate court is demonstrated in Micro Switch Employees’ Credit Union v. Collier.38 In that case, the plaintiff loaned $7,300 to the defendant for him to purchase a car from a car dealer. The defendant fell into arrears, so the plaintiff repossessed the car and filed suit for certification of title and judgment in the amount owed on the loan. The circuit court granted judgment in the plaintiff’s favor, and the defendant appealed arguing that the Motor Vehicle Retail Installment Sales Act (“MVRISA”) applied to the transaction and that the plaintiff violated the provisions of the MVRISA with respect to the notice required to be provided to the defendant.

On review, the appellate court found that the MVRISA did not apply to the transaction because it only applied to purchasers of automobiles who buy from a dealer under a retail installment transaction.39 The court ruled that the plaintiff was not a retail seller under the definitions of the MVRISA because it was not engaged in the business of selling motor vehicles.40 Additionally, the defendant paid the automobile dealer the total amount of the purchase in a single payment, so the transaction at issue did not fit the definition of a retail installment transaction.41

Despite the fact that the definitions found in MVRISA clearly did not support its applicability to the scenario at hand, the defendant in Micro Switch Employees’ Credit Union continued to argue that the statute should apply to his situation because the purpose of the MVRISA was “to protect the buyer from the myriad of oppressive practices which, under the best of circumstances, seems to characterize installment selling.”42 But the court remained firm in its holding that the statute did not apply. “While the purpose of [MVRISA] may seem to warrant including agencies like Micro Switch which make installment loans for car purchases, it is clear that the legislature has chosen to include only retail sellers and sales finance agencies. The language of the statute is clear and precise. Had the legislature intended to include lenders such as the plaintiff, it would have done so. Where the language of the Act is certain and unambiguous, the only legitimate function of the courts is to enforce the law as enacted by the legislature.”43

Though the language of the statute at issue in Micro Switch Employees’ Credit Union may not have the history of double use that the term surety has, it is difficult to determine how the language of the Sureties Act is any less certain than that of the MVRISA that would prompt the court to step outside of the clear language of the statute and apply it to guarantors as well as sureties.

As support for its decision, the court notes that the Sureties Act was created “to compel diligence by a creditor to make certain a surety is protected against loss” and that such purposes would be better served by extending such protections to guarantors and sureties.44 The court continued, “Given the [Sureties] Act’s purpose, which applies to sureties and guarantors alike, and given the exceptionally close relationship between those two terms, we agree with defendant’s position that the legislature must have intended the word ‘surety’ in the [Sureties] Act to encompass a guarantor.”45 The court did not make reference to any Illinois authority for its determination that the Sureties Act should apply to guarantors as well as sureties. However, it did refer to a decision from the First Circuit of the United States Court of Appeals that interpreted the Sureties Act and found that is applied to guarantors and sureties alike.

When asked by a client for advice regarding surety and guaranty agreements, the Illinois practitioner would be wise to advise his clients as to the differences between sureties and guarantees as they relate to the applicability of the Sureties Act. Additionally, as long as JP Morgan Chase Bank, N.A. remains authority, clients should also be counseled that a court may determine that the Sureties Act applies to both surety and guaranty agreements.

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