Pyramid Development, LLC v. Dukane Precast, Inc. (IL)

Summary: Failure of general contractor to provide correct sworn affidavits upon request of the property owner precluded the general contractor's recovery on its mechanics lien claim.

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Pyramid Development, LLC v. Dukane Precast, Inc., 2014 IL App (2d) 131131, rehearing denied March 9, 2015.


Facts: Dr. Husam Aldairi and Pyramid Development, LLC entered into a written contract for Pyramid to construct eight townhome units on land owned by Aldairi. Pyramid was a construction manager and hired subcontractors to do all of the work. Aldairi required Pyramid to submit sworn affidavits when it drew funds from Broadway Bank (Broadway), Aldairi's lender, to work on the project.

Pyramid contracted with Dukane Precast, Inc. (Dukane) to furnish prefabricated concrete slabs. Pyramid noticed problems with the slabs when they were being incorporated into the townhome units, and met with Dukane representatives to resolve the issues. However, Pyramid rejected Dukane’s solutions and hired subcontractors to address the problems.

When the repairs were finished, Pyramid sent Dukane an “itemized invoice” for reimbursement for the cost of the repairs. The “itemized invoice” did not break down the numbers by listing the subcontractors that furnished the labor and materials for individual projects. Dukane rejected the “itemized invoice” and demanded “signed work sheets with labor hours and material invoices” for each item. In response, Pyramid submitted a document entitled “Dukane Repairs.” However, much of the information was inaccurate as Pyramid gathered the figures from cancelled checks and his memory about what those cancelled checks related to.

There were additional problems with the construction which culminated in a retaining wall failing. Aldairi subsequently fired Pyramid. When Pyramid filed suit to collect on its mechanic’s lien, Aldairi filed for bankruptcy protection. Aldairi entered into a consent judgment with Broadway, and Broadway eventually sold the property to a third party. Broadway assumed the duty to pay Pyramid's mechanic's lien claim, and Broadway claimed that it should have the cost to repair the failed retaining wall deducted from the lien.

The trial court heard (1) Pyramid's claim to foreclose its mechanic's lien, (2) Dukane's claim against Pyramid for breach of contract, (3) Pyramid's claim against Dukane for breach of contract, and (4) Broadway's claim for a setoff against Pyramid for the repair of the retaining wall.

The trial court found Pyramid's principal, Ramy Saif, to be not credible. The court noted that he was “evasive and disruptive,” and the court found that he was impeached on material issues. The court also found that Pyramid had no records regarding any work done. The trial court found that Pyramid had admitted owing Dukane a balance under the contract, which the court determined was $50,395. The court denied any recovery on Pyramid's claim against Dukane for the cost of repairs, finding that Pyramid did not sustain its burden of proof as to the cost of materials and labor.

With respect to the issues between Pyramid and Broadway, the court found that Pyramid was entitled to a mechanic's lien because Aldairi and Broadway waived the requirement of section 5 of the Mechanics Lien Act (Act) (770 ILCS 60/5), that the contractor provide sworn affidavits listing the names of all subcontractors and the amounts due or to become due. The court adjudicated Pyramid's mechanic's lien at $35,340.47. The court then found that Broadway was entitled to a setoff of $145,000 for the cost of repairing the retaining wall. The court ruled that, because Broadway's setoff exceeded the amount of Pyramid's lien, the lien was extinguished. Pyramid appealed.

Holding: Affirmed. On appeal Pyramid argued that Broadway was not entitled to a setoff. Pyramid argued that (1) Broadway did not plead a right to a setoff; (2) Broadway had no right to a setoff under the Act; and (3) if Broadway were entitled to a setoff, the trial court incorrectly calculated the amount of Pyramid's lien. The appellate court disagreed. The court found that, contrary to the trial court's ruling, Aldairi and Broadway did not explicitly or implicitly waive Pyramid’s duties under the Act. The plain language of the Act provided that an owner only waived the requirement that a contractor furnish a compliant sworn affidavit when the owner did not request it. Further, case law interpreting the Act held that a contractor furnishing a noncompliant sworn affidavit did not possess a valid lien. Therefore, Pyramid was not entitled to recover on its lien as it had furnished a noncompliant affidavit.

Pyramid also contended that the trial court incorrectly awarded and/or assessed the amount of damages on Dukane's breach-of-contract action against Pyramid. The court again disagreed. First, the sum of $50,395 was calculated by subtracting the disputed extras from the full amount Dukane sought, and maintained only the amount that Pyramid agreed it owed. Consequently, the trial court's finding that Pyramid owed Dukane $50,395 was not against the manifest weight of the evidence.

Second, regarding Pyramid’s claim for a setoff, the court stated that damages didn’t require mathematical certainty, and Pyramid only had to present evidence that allowed the court to compute damages within a fair degree of probability. The trial court found that Pyramid's lack of records undermined its damages claims. Accordingly, the court’s decision was not against the manifest weight of the evidence, and Pyramid was improperly attempting to create a new argument on appeal.

Third, Pyramid contended that the trial court improperly denied its right to present rebuttal testimony to support its setoff claim against Dukane. The court found that Pyramid did not allege prejudice as a result of the trial court's ruling. Therefore, the court was unable to review the issue because Pyramid did not preserve it by making an offer of proof.

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By: ATG Underwriting Department | Posted on: Mon, 02/22/2016 - 4:26pm