A subcontractor should not file a mechanics lien worth more than the work that the subcontractor actually performed. However, when a subcontractor overstates the amount of money that it can legally collect from a mechanics lien, whether the subcontractor will be prohibited from recovering on the lien depends on whether the subcontractor’s overstatement was intentional or merely accidental.
In a case recently decided by the Illinois Appellate Court, Springfield Heating & Air Condition, Inc. v. King Drive at Oakwood, 901 N.E.2d 978 (1st Dist., 2009), the subcontractor performed work in the amount of $289,302, for which it never received payment. The subcontractor subsequently filed mechanics lien claims on two different properties where it performed work. The filing of the mechanics lien was improper because the subcontractor filed both mechanics liens in the amount of $289,302, totaling $578,604, and thus creating an appearance that the property was encumbered with a lien that was twice the amount of money actually owed. Due to this overstatement, the lower court dismissed the subcontractor’s suit with prejudice.
The subcontractor admitted that it overstated the amount of money in the mechanics liens. The only dispute on appeal concerned whether this overstatement was intentional or simply an inadvertent error. As clarified by the appellate court in Springfield Heating & Air Condition, under Illinois law, if a subcontractor accidentally overstates the proper amount of money ina mechanics lien, the defendant cannot deny payment solely on the grounds that the subcontractor committed an inadvertent mistake. On the other hand, if evidence before the court demonstrates that the subcontractor intentionally overstated the amount of money on the mechanics lien, such actions amount to “constructive fraud,”and therefore, the lien is unenforceable.
The appellate court held that the trial court should not have dismissed the subcontractor’s claim to enforce the lien because there was no proof that the subcontractor’s overstatement was intentional, as required by the Mechanics Lien Act, 770 ILCS 60/7 (West 2006). Moreover, the appellate court noted that even if an overstatement seems too significant to be a mistake, the overstatement alone, absent some other proof of an intent to overstate the lien, cannot support a motion to dismiss. As stated by the court, “An express showing of an intent to defraud must be established by evidence in addition to and apart from an overstatement included in a lien.”
Finally, before remanding this case to the lower court, the appellate court confirmed the generally accepted rule that a subcontractor cannot recover from the owner of the property under a theory of unjust enrichment and quantum meruit when “the subcontractor has no contractual relationship with the owner.” Instead, when no such contractual relationship exists, the only remedy available to the subcontractor is an action pursuant to the Mechanics Lien Act.
