Pre-Development Surveying Work Is Lienable: Illinois 2d District (Part I of II)

survey (photo credit: google images; www.state-engineering.com (visited 11.5.14))

In October 2014, the Second District expanded on the Illinois mechanics’ lien act’s (the “Act”) substantive and timing requirements and also examined Illinois agency law and discussed what services are and aren’t lienable in Young v. CES, 2014 IL App (2d) 131090-U. 

Plaintiff owned two parcels of farm land that were going to be developed into residential subdivisions. He hired a real estate developer to develop the property. That developer, in turn, hired the defendant engineering firm to perform preparatory surveying, grading, storm and sewer work along with construction drawings and elevations for both sites.  There was no direct contract between the plaintiff and the engineering firm.

The two developments stalled and the owner plaintiff filed a quiet title suit.

After a bench trial, the court found for the engineering firm in its mechanics lien countersuit against the owner and entered a foreclosure judgment on the firm’s two mechanics’ liens totaling nearly $150,000 on the two parcels.

The owner appealed arguing that the lien was facially invalid, that he didn’t authorize the developer to hire the engineering firm and that the engineering firm sought to recover for nonlienable services.

Held: Foreclosure judgment affirmed

Reasoning:

Upholding the judgment for the engineering firm, the Court stated and applied some recurring mechanics lien and agency law principles:

–  Mechanics liens exist to permit a lien on property where a benefit has been received by a property owner and where value of the property has been augmented due to the furnishing of labor or materials;

– To establish a valid lien claim, the contractor must show (1) a valid contract, (2) with the property owner, (3) to furnish services or materials, and (4) the contractor performed pursuant to the contract or had a valid excuse for nonperformance;

– A contractor must file its lien within four months after completion of the work, verify the lien, include a statement of the contract, set forth the balance due and describe the liened property;

– Section 1 of the Act provides that anyone who authorizes or knowingly permits an agent to contract to improve land may have a lien attach to the land;

– To “knowingly permit” (an agent to contract for an owner) under Section 1 of the Act means to be aware of or to consent to property improvements;

– Illinois agency law has two key elements: (1) the principal has the right to control the manner and method of the agent’s work; and (2) the agent has the power to subject the principal to personal liability;

– The parties don’t have to use the word ‘agency’ nor characterize their relationship as a principal-agent one for a court to find an agency arrangement;

– A principal doesn’t have to actually control the agent for a court to find an agency relationship; all that’s required is the principal has the right to control the agent;

– A course of dealing that is ratified by a principal can lead to an agency relationship finding

(¶¶ 99-115, 122-123)

Finding for the engineering firm, the court first held that the defendant’s description of the contract was sufficient under the Act.  Even though the firm made a technical mistake by saying its contract was with the owner (it was actually with the developer), the court still found the engineering firm’s lien was valid where it correctly identified the property, the property owner and because the owner was the developer’s principal (and the developer was the owner’s agent).

In finding an agency relationship between the owner and the developer, the court pointed to the two contracts between the owner and the developer for work on the two sites as well as the owner’s deposition testimony that he completely relied on the developer to handle all aspects of the properties’ improvements.

The court also credited the developer’s testimony that he believed he had expansive authority to handle all aspects of the properties’ development including hiring and scheduling the engineering, surveying and related activities completed by the plaintiff engineering firm. ¶¶ 115-116.

Key Lessons:

(1) An owner’s right to control is all that is required for an agent to bind the owner to a contract affecting the owner’s real estate; (2) Hyper-precision in a recorded lien’s contract description isn’t required for the claim to be valid.  As long as the Act’s other required information (property description, contract price, completion date, etc.) is accurate, the lien will likely comply with the Act; (3) if there is evidence that a landowner knows a third party has worked on  property coupled with proof of communications between an owner and the third party, a court will likely find for the lien claimant against a lack of privity (“we have no contract”) defense.

Diminution in Value Is Proper Damages Measure in Tree Cutting Case (IL 1st Dist)

tree (photocredit: gettysburgdaily.com (visited 11.2.14)

Geise v. Neal, 2014 IL App (1st) 133914-U, discusses how to measure damage caused by unauthorized tree cutting on private property.

The plaintiff rented out his deceased mother’s home to the defendants under a two-year lease.  After they took possession, the defendants cut down over 50 trees on the lot.  

When plaintiff found out, he terminated the lease, sued for possession of the home and sought damages under the Wrongful Tree Cutting Act, 740 ILCS 185/1 et seq. ( the “Act”), a statute that allows a plaintiff to recover triple the value of trees that are purposefully cut down.

While the lawsuit was pending, plaintiff sold property to a third party for about $65K less than the property purchase option price.

After a bench trial, the trial court entered judgment in plaintiff’s favor for almost $150K – the replacement value of the fifty-plus trees chopped down by the defendants.  The  defendants appealed on the basis that the court applied the wrong damages standard.

Held: Reversed. Trial court should have applied diminution in value standard instead of replacement value.

Q: Why?

A: The court pronounced the operative damages rules:

–  compensatory damages are designed to compensate the injured party for damage to his property and to restore the injured party to his pre-injury position;

– tort damages to real property are typically measured by the difference between the market value of the property before the injury and its value after the injury;

– diminution in value may be inadequate where the property is held for personal use – such as a family residence – and the damage can be repaired with a reasonable expenditure;

– the proper damages measure for injuries to land depends on (1) whether its residential or commercial, (2) the severity of the claimed injury, (3) whether the damaged item has value apart from the realty, and (4) whether the repair or replacement exceed the property value;

– the ‘cost of repair’ damages standard is typically applied to residential property damage and where the repairs are economically feasible;

– where damage to the property is permanent, and repairing the damage is cost-prohibitive, the damage measure is market value of property before injury minus market value after injury;

– where the property damage is temporary or partial, the proper damage measure is the cost of restoration

¶¶ 21-23.

 The court found that the diminution in value was the proper damages standard.  The court noted that the property was held purely for investment purposes: plaintiff didn’t live on the property and he rented it to defendants for $2,300 per month.

In addition, there was no evidence that the chopped-down trees had any sentimental value to the plaintiff or that plaintiff was forced to sell the property due to the destruction of the trees.  The plaintiff admitted that his intention was to sell the property all along regardless of whether the trees were cut down or intact.  

The Court also found that replacement of the trees was no longer possible since plaintiff had already sold the property to a third party.  As a result, awarding the plaintiff the repair costs of the trees would have given plaintiff a windfall.  ¶¶ 31-32.

Afterwords: 

– A damage award to a real estate owner should make him whole; it shouldn’t give him a windfall or double-recovery;

– If property is destroyed or damaged beyond repair, the proper damage measure is diminution in value;

– If property is only partially damaged, and repair is economically practical, cost of repair is the proper damage amount.

Chicago News Reporter’s Defamation and Intrusion on Seclusion Suit Against Rival Networked Tossed (IL First District)

image

(Photo credit: Google images (visited 10.29.14); Associated Press)

The First District recently weighed in on the nature and scope of defamation law and the false light and intrusion on seclusion civil claims in a case involving a well-known Chicago newscaster.

In Jacobson v. CBS Broadcasting, Inc., 2014 IL App (1st) 132480, the plaintiff – a former NBC television reporter – sued rival network CBS when it aired a video of her at the backyard swimming pool of a person of interest in a high-profile missing persons’ case the plaintiff was covering.

CBS showed a video it secretly took of the plaintiff while she was visiting the house of Craig Stebic – whose wife Lisa went missing in 2007 and who hasn’t resurfaced to this day.  The case garnered daily local and national news coverage for several weeks and was a staple of Nancy Grace’s nightly CNN show.

At the height of the case’s notoriety, plaintiff went to the Stebic house to discuss the case. While there, she was videotaped by a neighbor and CBS reporter. Sensing some salacious television fare (my conjecture), CBS aired the tape and plaintiff was shortly fired by NBC for violating journalistic ethics rules (a lapse in judgment, according to network honchos).

The plaintiff sued Chicago’s CBS station, claiming that the tape and broadcast violated her right to privacy, was defamatory, and led to her firing by NBC. The plaintiff specifically alleged that the videotape placed her in a false light and tried to portray her as “an adulteress and an unethical reporter.”

The trial court granted summary judgment for CBS and plaintiff appealed.

Held: Affirmed.

Reasons:

Plaintiff’s claims failed because she was a public figure, failed to prove actual malice by CBS and lacked a reasonable expectation of privacy at a backyard swimming pool.

Defamation Count: Plaintiff is a ‘Limited Public Figure’

The Court found that plaintiff was a public figure under defamation law who must show “actual malice” to win a defamation suit.  Two types of public figures include (1) a general purpose public figure, and (2) a limited purpose public figure.  When someone “thrust [herself] to the forefront of a particular public controversy, she becomes a limited public figure for matters associated with the given controversy. ¶¶ 29-31.

The Court agreed with the trial judge that plaintiff was a limited purpose public figure since she was enmeshed with a controversial news story that attracted national attention.  Plaintiff clearly injected herself into the teeth of the drama by frequenting the Stebic residence, participating in public vigils and urging the public to come forward with any information about Lisa Stebic’s whereabouts.

The Court also found that plaintiff failed to show “actual malice” by CBS. To defeat summary judgment in a defamation count, the public figure plaintiff must show actual malice: that defendant (1) published (i.e. wrote or said) the defamatory falsehood either with knowledge that it was false, or (2) with a reckless disregard to its truth.  Reckless disregard means that the defendant had a “high degree of awareness” that the statement was probably false or “entertain[ed] serious doubts as to its truth.”  Where the defamatory content is implied (rather than overt), the plaintiff has to show the defendant was subjectively aware of the implied meaning, or at least recklessly disregarded the implied meaning.

The crux of plaintiff’s defamation suit was the video’s juxtaposed images: plaintiff in her swimsuit cross-cut against a shirtless Craig Stebic.  Plaintiff claimed the video implied a sexual relationship between the two.

The court held this wasn’t enough to establish express or implied malice.  There were too many non-defamatory alternatives to plaintiff’s interpretation of the video – especially since plaintiff’s children and other people were in the backyard at the same time.  The Court also declined to imply actual malice by CBS just because it was locked in a fierce ratings battle with NBC at the time of taping. ¶¶ 37, 41-42.

Take-aways: (1) A limited purpose public figure must meet heightened actual malice standard to state a defamation case; (2) intrusion on seclusion tort is difficult to win where the location of an alleged private or secluded site is easily viewed or accessed by third parties.