author: PRESIDING JUSTICE BARRY

text:
    DAVID P. RANSBURG et al., Plaintiffs-Appellants, v. DAVID HAASE, Defendant-Appellee.
    Third District
    Nos. 3—90—0889, 3—91—0174 cons.
    Opinion filed January 24, 1992.
    Rehearing denied March 10, 1992.

      Linda L. Laugges and John S. Elias, both of Keck, Mahin & Cate, of Peoria (Robert M. Riffle, of counsel), for appellants.
    Mark W. Marlott, of Kavanagh, Scully, Sudow, White & Frederick, P.C., of Peoria (David J. Dubicki, of counsel), for appellee.
   PRESIDING JUSTICE BARRY

delivered the opinion of the court:

Plaintiffs David and Alexandra Ransburg appeal from orders of the circuit court of Peoria County which dismissed counts II, III, and V of their first amended complaint in an action filed against David Haase, defendant. Plaintiffs are seeking to recover $83,876.77 paid to defendant to design, decorate, and manage the construction of a residence in Vail, Colorado.

Both plaintiffs and defendant are residents of Peoria, Illinois. Defendant owns and operates a business in Peoria, David William Haase Associates, which designs and decorates houses. Plaintiffs allege that they entered into an oral agreement with defendant for him to provide professional services as an architect in connection with the design, construction and decoration of a duplex residence in Vail, Colorado. They further allege that the parties discussed the project and the parties’ respective responsibilities several times during 1987, both in Peoria and in Colorado, and finalized the terms of the agreement on June 22,1987.

According to the complaint, defendant promised “to act as the architect, construction manager, designer and decorator of the subject premises, and also to provide budgetary control for the project, and to otherwise monitor every aspect of the design, construction and furnishing of the residence.” The parties allegedly agreed to a construetion budget of $838,000 and a furnishing budget of $107,500, for a total project cost of $945,500. Defendant was to receive $80,000, including travel and other expenses, as compensation for his services. The scheduled completion date was December 15,1988.

Count I of the complaint alleged defendant’s breach of contract by failing to complete the project on time, by failing to provide sufficient drawings and specifications for use by the contractor, by failing to assure compliance with applicable building codes and easements, and by failing to control the budget. It is claimed that certain improvements were constructed over utility and public easements and on adjoining land and that the total cost of the project has exceeded $1,200,000. The breach of contract count is still pending in circuit court and is not involved in this appeal.

In count II plaintiffs reallege all of count I and further allege as an alternative that defendant represented himself to be an architect to plaintiffs and that he undertook to provide architectural services when in fact he is not a registered architect in Illinois or in any other State. Plaintiffs further assert that defendant has practiced architecture without an Illinois certificate of registration as required in section 1 of the Illinois Architecture Act (Ill. Rev. Stat. 1987, ch. 111, par. 1201), and, therefore, that the contract for architectural services was unenforceable and void as against the public policy of the State of Illinois.

The trial court dismissed count II for the stated reason that the Illinois statute requiring a person who practices architecture to be licensed in Illinois applies only to construction within Illinois.

In count III plaintiffs alternatively allege that defendant violated Colorado law by engaging in conduct intended to mislead the public into believing that he is an architect or by engaging in the practice of architecture without a license issued in Colorado, as required under the Architects Licensing Act (Colo. Rev. Stat. §12 — 4—113 (1990)). Plaintiffs further assert that the contract was unenforceable and void as against the public policy of the State of Colorado.

The trial court dismissed count III for reason that defendant did not violate the Colorado statute, which exempted work done for the construction of one-, two-, three- or four-family dwellings.

The trial court also dismissed count V, which purported to plead a cause of action based on an alleged violation of the Illinois Consumer Fraud & Deceptive Business Practices Act (Ill. Rev. Stat. 1987, ch. 121½, par. 262).

The trial court subsequently heard and denied plaintiffs’ motion to reconsider the dismissal of counts II and III and made a finding that there is no just reason for delaying enforcement or appeal. A notice of appeal from the order dismissing counts II and III was timely filed on December 17,1990.

In the briefs and at oral argument before this court, plaintiffs seek a reversal of the court order dismissing count V as well as counts II and III. Our docket indicates that a second notice of appeal was filed by plaintiffs in this cause on March 8, 1991, and that on motion of plaintiffs the subsequent appeal was consolidated with the instant appeal in this court. However, no record was filed in the March 8, 1991, appeal, and the original record was not supplemented. Since the record on appeal does not contain an order indicating a Rule 304(a) finding as to the dismissal of count V, this court has no jurisdiction to review the dismissal of count V. Therefore, we shall limit our consideration here to the issues raised concerning counts II and III.

Assuming, as we must, that the facts well pleaded are true, the initial question is whether defendant acted in violation of the Illinois Architecture Act (Act) when he represented to plaintiffs that he is an architect and undertook to provide architectural services in connection with the construction of a residence in Colorado. Section 1 of the Act (Ill. Rev. Stat. 1987, ch. 111, par. 1201) states that it is “unlawful for any person to practice architecture or advertise or put out any sign *** which might indicate to the public that he or she is entitled to practice as an architect, without a certificate of registration.” Section 2 defines the practice of architecture as follows:

“The practice of architecture within the meaning and intent of this Act includes the offering or furnishing of professional services such as consultation, environmental analysis, feasibility studies, programming, planning, aesthetic and structural design, construction documents consisting of drawings and specifications and other documents required in the construction process, administration of construction contracts, project representation, and construction management, in connection with the construction of any private or public buildings ***.” Ill. Rev. Stat. 1987, ch. 111, par. 1204.

The allegations in the complaint plainly charge defendant with offering professional services as an architect in Peoria, where he operated a design and decorating business. Regardless of where the services were ultimately furnished, holding himself out to plaintiffs as an architect in Illinois was a violation of the Illinois Architecture Act.

As a general rule, courts will not enforce a contract involving a party who does not have a license called for by legislation that expressly prohibits the carrying on of the particular activity without a license where the legislation was enacted for the protection of the public, not as a revenue measure. (51 Am. Jur. 2d Licenses and Permits §66 (1970).) In other words, a person practicing a profession without a license cannot recover fees for services rendered. E.g., Pascal P. Paddock, Inc. v. Glennon (1964), 32 Ill. 2d 51, 203 N.E.2d 421.

The purpose of the Blinois statute prohibiting the practice of architecture without the required registration has long been held to be for the protection of the public. In Hattis Associates, Inc. v. Metro Sports Inc. (1975), 34 Ill. App. 3d 125, 127, 339 N.E.2d 270, 272, the court said:

“The statute was not intended to protect architects by limiting the work to licensed architects. Rather, its real purpose was to protect the public from damage caused by the work of incompetent and unlicensed architects. People ex rel. the State Board of Examiners of Architects v. Rodgers Co. (1917), 277 Ill. 151, 115 N.E. 146.”

Applying the general rule to the case before us, it does not appear that the contract between plaintiffs and defendant would be enforceable.

The trial court ruled that the controlling law was set out in the Florida case of Rolls v. Bliss & Nyitruy, Inc. (Fla. App. 1982), 408 So. 2d 229. In that case, a Florida firm contracted to provide architectural services for the construction of low cost housing in Algeria. One of the architects employed on the project was licensed in the Bahamas and other foreign countries but not in Florida. The Florida court held that the Florida licensing law protected the public from improper design and construction within the State of Florida and that the statute did not prevent a Florida cause of action to recover architect fees for the bargained-for services where those services related to a building constructed outside the borders of the State.

In our opinion Rolls v. Bliss does not control here. In the Florida case, the architect who lacked a Florida license was licensed in several other jurisdictions, while in the instant case, architectural services were offered in Illinois to residents of Illinois by an Illinois businessman who was not licensed to practice architecture anywhere. The Illinois statute was intended to protect Illinois residents in just such a situation as this.

Many of the cases cited to us by both parties, including Rolls v. Bliss, involved an action for fees due under a contract for architectural services performed by the plaintiff where the party who benefit-ted from those services asserted the plaintiff’s lack of license as a defense. As indicated above, Illinois has denied recovery in such cases. In Keenan v. Tuma (1926), 240 Ill. App. 448, 456, the court stated:

“As here, however, the evidence shows that a substantial part of the architectural services contracted for were actually rendered and practiced not by a licensed architect in the employment of the plaintiff, but by the plaintiff himself and so constituted a violation of the statute, it follows that they could not become a valid consideration for the promise of the defendant, and so, in the eyes of the law the alleged contract of employment became a nullity. A promise to do or the doing of illegal things is not a good consideration for a promise to pay. In such a case the law affords no affirmative remedy, but leaves the parties where, by their own acts, they have placed themselves.”

Accord Pascal P. Paddock, Inc. v. Glennon (1964), 32 Ill. 2d 51, 203 N.E.2d 421.

The question in the case before us is a different one: Do Illinois courts recognize a cause of action to recover money previously paid to defendant for architectural services which have been rendered but for which defendant was not licensed? Although it is a general rule that parties to a void contract will be left where they have placed themselves with no recovery of money paid for illegal services, exceptions to that rule have been recognized under two different rationales: (1) that the person who paid for the services is not in pari delicto with the unlicensed person, and (2) that the law in question was passed for the protection of the person who paid and it appears that the purposes of the law would be better effectuated by granting relief than by denying it. Annot., 74 A.L.R.3d 637 (1976).

Recovery was allowed in a case involving a foreign corporation doing business in Illinois without a certificate of authority from the Secretary of State of Illinois. (The Automotive Material Co. v. The American Standard Metal Products Corp. (1924), 232 Ill. App. 532, rev’d on another ground (1927), 327 Ill. 367, 158 N.E. 698.) After observing that the statute governing foreign corporations was enacted for the benefit of the general public and its purpose cannot be bargained away by individuals, the court decided to allow recovery of money paid pursuant to the void contract, holding:

“The general rule is that where a contract is illegal, ‘a court of equity may, in furtherance of justice and of a sound public policy, aid the one who is comparatively the more innocent, and may grant him full affirmative relief, by canceling the execu-tory contract, by setting aside an executed contract, convey-anee or transfer, by recovering back money paid or property delivered, as the circumstances of the case shall require ***.'” (Emphasis added.) 232 Ill. App. at 551, quoting 2 Pomeroy’s Equity Jurisprudence, §942, at 2000 (4th ed.).

Courts of other jurisdictions also have allowed recovery of money paid for professional services where the person rendering the service was not licensed. In Rubin v. Douglas (D.C. App. 1948), 59 A.2d 690, plaintiff sought to recover money paid to defendant for a treatment for arthritis after discovering that defendant was not licensed to practice “the healing arts” as required by statute. After noting that a court ordinarily will not interfere to give relief to either party to an illegal contract, the court went on to recognize an exception to that rule where the law in question was passed for the protection of the plaintiff and where it appears that the purposes of the law would be better effectuated by granting relief than by denying it. The court stated that the licensing law in that case was passed for the protection of the public, including the plaintiff, and then held:

“[T]he purposes of the Act will not be effectuated by permitting defendant to retain that which he ought not to have received. The public interests, in our opinion, are best served by requiring defendant to pay back the fruits of his illegal agreement.” 59 A.2d at 691.

Accord Bathroom Design Institute v. Parker (D.C. App. 1974), 317 A.2d 526 (unlicensed contractor); Wineman v. Blueprint 100, Inc. (1973), 75 Misc. 2d 665, 348 N.Y.S.2d 721 (unlicensed architect). Cf. In re Winston v. Kaspar American State Bank (1962), 36 Ill. App. 2d 423, 184 N.E.2d 725. See also Annot. §5(b), 74 A.L.R.3d 637, 659 (1976).

Defendant relies upon those decisions in other jurisdictions denying recovery of money paid for service performed by one not licensed. For example, in Design-4 v. Mason Mountainside Inn, Inc. (1977), 148 N.J. Super. 290, 372 A.2d 640, a counterclaim to recover fees paid to a designer for architectural services was denied even though the contract had been held void because the designer was not a licensed architect as required by statute. The court observed that the counter-claimants were aware that the designer was not licensed to practice architecture and that counterclaimants had solicited the designer’s advice and services; therefore, the law would leave the parties to the illegal contract where it found them. The instant case is readily distinguished because here there are no allegations that plaintiffs knew that defendant was not a licensed architect. To the contrary, plaintiffs allege that defendant represented himself to be a licensed architect.

Another case discussed by defendant is Food Management, Inc. v. Blue Ribbon Beef Pack, Inc. (8th Cir. 1969), 413 F.2d 716, where the court denied a counterclaim to recover fees paid to an architect licensed in Ohio but not in Iowa, where some of the services were rendered. The Federal court held: “To allow both retainment of services and recovery back of money paid is not necessary to effectuate the public policy of the licensing statutes *** because, as found by the trial court, [counterclaimant] obtained the service it had bargained for.” 413 F.2d at 727. Accord, Kempf v. Joint School District No. 3 (1959), 6 Wis. 2d 95, 94 N.W.2d 172.

We believe the public policy of Illinois to be better served by recognizing a cause of action here. To allow the unlicensed architect to retain the fees paid is to allow him to practice architecture in the State of Illinois without a license and to reap the rewards thereof. The purpose of the Illinois licensing act can best be effectuated by recognizing plaintiffs’ right to recovery. The order of the trial court dismissing count II must, therefore, be reversed and this cause remanded for further proceedings.

As to count III, alleging a violation of the Colorado statute requiring architects to be licensed, we conclude that defendant comes within the exemption to the licensing requirement as set out in section 12 — 4—112 of the Architects Licensing Act (Colo. Rev. Stat. §12—4—112(1)(a) (1990)), which provides as follows:

“Exemption
(1) Nothing in this article shall prevent any person, firm, corporation, or association from preparing plans and specifications for, designing, planning or [supervising] the construction *** of any of the following:
(a) One, two, three, and four family dwellings, including accessory buildings commonly associated with such dwellings *** 9>

Plaintiffs contend that defendant nonetheless violated a provision of the Colorado Architects Licensing Act which forbids “conduct which is intended or reasonably might be expected to mislead the public into believing that such person is an architect.” (Colo. Rev. Stat. §12—4—113(b) (1990).) However, this provision is contained within the same article of the Colorado statutes as the exemption provision, and thus the exemption applies to it as well. In the absence of any citation of authority to the contrary, we must give the language of the act its plain meaning. We hold that defendant is exempt from any licensing or penalty requirements of the Colorado statute for the services rendered to plaintiffs in connection with the design and construction of a duplex residence in Vail, Colorado. The trial court correctly dismissed count III.

Plaintiffs also claim that the trial court erred in refusing leave to amend count III when plaintiffs sought to do so because of recently discovered facts which support their claim that defendant misled the public. The “facts” consisted of documents signed by defendant as architect of the project which were allegedly intended to mislead bank officials, subcontractors, and the general contractor into believing that he was a licensed architect. As we have stated, defendant was exempt from any violation of the Colorado Architects Licensing Act for this two-family residence project. Hence, the trial court’s refusal to allow plaintiffs to file an amended count III was not an abuse of discretion and will be affirmed.

Defendant argues that the dismissal order of the trial court should be upheld on the ground that plaintiffs have elected to recover for breach of contract in count I and cannot at the same time seek recovery on a theory that the contract was void as alleged in counts II and III. Defendant acknowledges that plaintiffs have pleaded alternative theories of liability and that alternative pleading is authorized under Illinois law. Defendant insists, however, that alternative pleading is limited to those situations where a party is in doubt as to which of two or more statements of fact is true. (Ill. Rev. Stat. 1989, ch. 110, par. 2—613(b).) Defendant reasons that plaintiffs here must know whether defendant represented himself as an architect and whether defendant provided architectural services, and therefore, plaintiffs must choose whether to proceed on a contract theory or on a theory that the contract was void.

We do not agree with defendant that the doctrine of election of remedies should be applied in this case. It is important to note that the instant case is still at the pleading stage. Obviously plaintiffs cannot recover on two inconsistent theories (McCormick v. Kopmann (1959), 23 Ill. App. 2d 189, 161 N.E.2d 720; May v. Watt (9th Cir. 1987), 822 F.2d 896), and acceptance of the benefit of one theory will bar a subsequently filed complaint alleging an inconsistent theory. For example, in Benedetti & Sons, Inc. v. O’Malley (1984), 124 Ill. App. 3d 500, 464 N.E.2d 292, plaintiff was not allowed to allege alternative counts for forfeiture of a real estate installment contract and for damages for breach of contract since plaintiff had already terminated the contract and taken possession of the property. In Benedetti the court noted that under the terms of the contract forfeiture was not an exclusive remedy, but that the provisions for other remedies must be construed to mean only that plaintiff might pursue such remedies (e.g., negligent damage to property) contemporaneously with forfeiture. Plaintiff’s right to a cause of action based on the contract was held to have expired when plaintiff terminated the contract.

Unlike Benedetti, plaintiffs have not accepted benefits under either the theory of breach of contract or void contract. This case more closely resembles Walsh v. Oberlin (1971), 2 Ill. App. 3d 987, 276 N.E.2d 728, where the plaintiffs first filed a cause of action for rescission of the sale of certain stock on the ground that the defendant sellers had failed to register the securities for sale in Illinois as required by statute. After the complaint was dismissed, plaintiffs filed a second amended complaint which included a cause of action for common law fraud and deceit. This court stated:

“The general rule is that the defrauded person may elect to accept the situation created by the fraud and seek to recover his damages, or he may elect to repudiate the transaction and seek to be placed in status quo. [Citation.] The rule is based on the recognition that the remedies are inconsistent and that the plaintiff by his conduct or election makes only one of such remedies appropriate under the circumstances.” (2 Ill. App. 3d at 989, 276 N.E.2d at 730.)

We then held that the joining of inconsistent or alternative remedies did not constitute an election of remedies at the pleading stage. The same is true in the case at bar.

Defendant’s contention that plaintiffs must know whether or not defendant represented himself as an architect is not persuasive. Plaintiffs could well know that defendant made such representations, but at the pleading stage plaintiffs may not know whether they can carry the burden of persuasion on that issue. The same is true for their breach of contract cause of action. Plaintiffs may believe that strategically it is too early to determine which action is the best one to pursue to completion. We hold that the doctrine of election of remedies does not apply to plaintiffs at this time.

For the reasons stated, we reverse the dismissal of count II of the complaint in this cause, affirm the dismissal of count III, and remand for further proceedings.

Affirmed in part; reversed in part and remanded.

STOUDER and HAASE, JJ., concur.


source: Caselaw Access Project

author: JUSTICE HAASE

license: Public Domain

text:
      In re MARRIAGE OF SHERRY A. LEES, Petitioner-Appellee, and BRIAN T. LEES, Respondent-Appellant.
    Third District
    No. 3-91-0492
    Opinion filed January 27, 1992.
    Rehearing denied March 10, 1992.
    Deutsch & Deutsch, of Rock Island (Sidney S. Deutsch, of counsel), for appellant.

      Williams, Buckrop, Malvik & Associates, of Rock Island (John Malvik, of counsel), for appellee.
   JUSTICE HAASE

delivered the opinion of the court:

The trial court dissolved the parties’ marriage and ordered the respondent husband, Brian T. Lees, to pay the petitioner wife, Sherry A. Lees, $330 per month in maintenance. Brian appeals.

The record reveals that the parties were married on October 23, 1981, and the trial court dissolved their marriage on January 11, 1991. At the time of dissolution, Brian was 39 years old and was employed at a data entry job. His monthly earnings were $784. He also received $144 in monthly disability benefits. Thus, his total monthly income was $928, while his monthly expenses were about $875.

Sherry was 48 years old and was employed as a gas station clerk. Her income from her employment was $750 per month. She also received a $466 monthly allowance for caring for two foster children. Additionally, she received $200 a month in rent from a female tenant. Sherry’s total monthly expenses were $1,263.67.

In 1983, the parties began operating a small family business involving beauty aids such as artificial fingernails and tanning booths. During the marriage Sherry inherited $135,000, which she deposited in a personal banking account. In 1984, she used $78,000 of that money to buy a house, where she currently lives. Brian conceded that the house was Sherry’s nonmarital estate.

After paying for the house, the balance remaining in Sherry’s personal account was eventually used for the couple’s living expenses and business. In 1986, the parties decided to borrow an additional $30,000 to finance their business. After repeated assurances from Brian that Sherry would never lose her house, she eventually consented to allowing the home to be mortgaged as security for the loan. Sometime later, the parties borrowed an additional sum of money which was again secured with the house. At that time, Brian again assured Sherry that he would never allow her to lose her home. At the time of the dissolution of the marriage, the balance due on the mortgage was $39,200.

During the marriage, the parties’ business premises were destroyed. Because they had no insurance coverage, the business ended. Thereafter, the parties filed for bankruptcy and their debts were discharged. After the bankruptcy proceedings were concluded, the couple executed a reaffirmation agreement with the mortgagee of Sherry’s real estate. The mortgagee subsequently failed to properly file the reaffirmation agreement.

The real estate taxes on Sherry’s residential property were delinquent to the extent of $4,000 for the years 1987, 1988, and 1989. The fair market value of the property was $65,000.

Based on the foregoing evidence, the trial court found that the $39,200 balance due on the mortgage was a marital debt and apportioned it equally between the parties. In so doing, the court stated the following:

“If husband contributes to payment of the secured debt ***, wife will be able to meet her reasonable living expenses. Hence, one-half the monthly payment on the marital debt, which husband must pay or $320 per month plus an additional $10 *** shall be characterized also as maintenance, and not discharge-able in bankruptcy, but subject to review, modification or termination if wife voluntarily sells said residence, or remarries or lives in said house on a continuing conjugal basis with an unrelated adult male, but only as to such amounts as have accrued. *** Because husband, after his payments on the marital secured debt, will be unable to pay on the marital tax debt at the present time, wife on proof of payment of such taxes in full shall be entitled to a judgment order against husband in the amount of his share.”

On appeal, Brian first argues that the court improperly ordered him to pay part of the $39,200 debt where the parties’ debts had been discharged in bankruptcy.

It is well settled that marital debts as well as marital assets must be distributed equitably. (In re Marriage of Cesaretti (1990), 203 Ill. App. 3d 347, 561 N.E.2d 306.) A discharge in bankruptcy, being personal to the bankrupt, does not act as a release of liens or security interests in the property owned by him. Farmers State Bank v. Hansen (1990), 196 Ill. App. 3d 295, 553 N.E.2d 751; Rochelle State Bank v. Gavic (1979), 70 Ill. App. 3d 42, 388 N.E.2d 436.

Applying the above principles, we find that the trial court could properly order Brian to pay a portion of the debt. It was undisputed that Sherry’s real estate was nonmarital property and that the lien encumbering it was the result of a marital debt incurred during the marriage for the purpose of financing the parties’ business. With regard to that debt, Brian reassured Sherry that he would not allow her to lose her home. Moreover, following the bankruptcy, Brian executed a reaffirmation agreement on the debt secured by Sherry’s property. Although the reaffirmation agreement was not properly filed by the mortgagee, the lien on the property remained after the bankruptcy. Under these circumstances, the trial court could properly require Brian to pay Sherry for a portion of the marital debt he left with her. While Brian’s liability to the creditors was obviously discharged by the bankruptcy proceedings, those proceedings did not discharge his obligations to the marriage resulting from its dissolution. See In re Marriage of Cesaretti (1990), 203 Ill. App. 3d 347, 561 N.E.2d 306.

Next, Brian argues that the trial court erred in fashioning the order to pay the marital debt as a maintenance decree. He also argues that the court abused its discretion in awarding any maintenance to Sherry.

We agree with both of Brian’s contentions. Section 504(a) of the Illinois Marriage and Dissolution of Marriage Act (Act) provides that the court may grant maintenance only if it finds that the spouse seeking maintenance lacks sufficient property to provide for her reasonable needs and she is unable to support herself through appropriate employment or is otherwise without sufficient income. (Ill. Rev. Stat. 1989, ch. 40, par. 504(a).) Section 504(b) of the Act provides that the maintenance order shall be in such amounts and for such period of time as the court deems just, and may be in gross or for a fixed or indefinite period of time. (Ill. Rev. Stat. 1989, ch. 40, par. 504(b).) An award of maintenance is within the sound discretion of the trial court and will not be disturbed on appeal unless it is an abuse of discretion or is against the manifest weight of the evidence. In re Marriage of Kaplan (1986), 149 Ill. App. 3d 23, 500 N.E.2d 612.

Here, we find that while it may have been appropriate for the trial court to order Brian to pay a portion of the marital debt, it was not appropriate to use maintenance as a vehicle to accomplish it. In so finding, we recognize that the issue of maintenance is interrelated with the distribution of the marital property (In re Marriage of Hughes (1987), 160 Ill. App. 3d 680, 513 N.E.2d 1203). While recognizing that maintenance and distribution of property are considered together, they are clearly not the same thing. Maintenance is a sum of money payable to a spouse for his or her support. It is not the same thing as a distribution of property. We have found no case that stands for the proposition that maintenance can be used to pay a portion of the marital debt. In fixing a maintenance award, the court should consider the amount of property that it is distributing to each party. Nonetheless, maintenance and property distribution are two separate concepts which cannot be interchanged as the trial court has done here. (Cf. In re Marriage of Rowden (1987), 163 Ill. App. 3d 869, 516 N.E.2d 1041; Ihle v. Ihle (1981), 92 Ill. App. 3d 893, 416 N.E.2d 366.) While the award may have been proper had it been characterized strictly as a property settlement, we find that it was not proper as maintenance where the record shows that the wife’s financial condition did not warrant any maintenance. Since the court’s order was fashioned in terms of maintenance, we find that it must be reversed. On remand, the court should reconsider whether Brian should nonetheless be responsible for a portion of the marital debt as part of the general property distribution. If so, the court should take into consideration Brian’s financial position before deciding the method of payment.

We further note that the additional $10 award of maintenance was also an abuse of discretion. Sherry’s monthly income exceeded her monthly expenses by at least $150. Moreover, her assets were substantially greater than Brian’s assets. Since Sherry had sufficient income and property to satisfy her reasonable needs, we find that the trial court’s order awarding maintenance was against the manifest weight of the evidence and must be reversed.

Brian next argues that the trial court erred in ordering him to pay Sherry’s nonmarital tax debt.

Section 503(d) of the Act provides that in dissolution proceedings, the court is to assign nonmarital property to the respective spouse who owns it and then divide the marital property in just proportions. (Ill. Rev. Stat. 1989, ch. 40, par. 503(d).) Absent special circumstances, the spouse incurring nonmarital debts should be required to pay them. In re Marriage of Shields (1988), 167 Ill. App. 3d 205, 521 N.E.2d 118.

In the instant case, the house was a nonmarital asset awarded to Sherry. She had possession and was residing there. We find that the tax debt due and owing on the property was a nonmarital debt for which Sherry was solely responsible. Accordingly, we reverse the court’s order directing that Brian pay a portion of the taxes.

For the reasons stated, we reverse the judgment of the circuit court of Rock Island County and remand the cause with directions. On remand, the court should reconsider whether Brian should be responsible for a portion of the marital debt in light of our findings in this opinion.

Reversed and remanded with directions.

McCUSKEY and SLATER, JJ., concur.


author: JUSTICE LaPORTA

text:
    COLE TAYLOR BANK, as Successor to Cole Taylor Bank/Main, Plaintiff-Appellee, v. COLE TAYLOR BANK et al., Defendants (Alan Turover et al., Counterplaintiffs-Appellants; Cole Taylor Bank, as Successor to Cole Taylor Bank/Main, et al., Counterdefendants-Appellees).
    First District (6th Division)
    No. 1—90—3450
    Opinion filed January 17, 1992.
    Rehearing denied April 24, 1992.

      Gottlieb & Schwartz, of Chicago (Loren J. Mallon, Stanton Schuman, and Gregory A. McCormick, of counsel), for appellants.
    Neal, Gerber & Eisenberg, of Chicago (Joel M. Hurwitz, David J. Krupp, and Lawrence M. Benjamin, of counsel), for appellees.
   JUSTICE LaPORTA

delivered the opinion of the court:

Alan and Sara Turover paid Jack Lofstrom $130,000 as the down payment on a house he promised to build for them in Glencoe. The house was never built. The Turovers sued Lofstrom and a lis pendens notice was recorded against the property because Lofstrom was the beneficial owner of the land trust that held title to the property. After the construction contract was signed but before the Turovers sued for breach of that contract, Lofstrom obtained a mortgage on the property. The Turovers won their suit against Lofstrom for breach of contract and a $291,010.10 judgment was entered against Lofstrom. When Lofstrom failed to pay on the mortgage, the bank foreclosed and Lofstrom filed for bankruptcy protection. This action deals only with the foreclosure. The Turovers appeal the trial court’s refusal to modify the foreclosure judgment in which the judge placed the Turovers’ lien third in priority behind a demolition lien held by the Village of Glencoe and the mortgage lien held by Cole Taylor Bank. The Turovers contend their lien against the property is superior to the lien held by Cole Taylor because it is an equitable lien that was entered into with the bank’s knowledge prior to the bank’s authorizing a mortgage on the property.

The Turovers raise two issues on appeal: (1) whether they possess an equitable lien on the Glencoe property that is superior to the interests of Cole Taylor Bank; and (2) whether the trial court abused its discretion by refusing to modify the judgment of foreclosure to reflect that the Turovers’ lien was superior to the bank’s lien.

The record establishes that the Turovers entered into a written contract with Jack Lofstrom, then the record owner, on or about October 2, 1987, for the purchase of a parcel of property in Glencoe and the construction of a single-family home there. They paid Lofstrom $130,000 as a down payment to be applied at closing. The home was to be completed by March of 1988.

With the construction still incomplete on April 1, 1988, Lofstrom placed the property into a land trust at Cole Taylor Bank under trust agreement No. 88 — 131. On April 26, 1988, Lofstrom mortgaged the property, executing a $275,000 secured revolving note with Cole Taylor Bank. The note was secured by a trust deed for the property prepared by Cole Taylor, the same bank which held legal title in the land trust in which Lofstrom held the beneficial interest. The trust deed was recorded April 29, 1988. Construction was never completed, the closing did not occur, nor was the property ever conveyed to the Turovers.

Eight months after the Cole Taylor mortgage to Lofstrom, on December 30, 1988, the Turovers filed suit against Lofstrom for breach of contract. A lis pendens notice of the action was recorded against the property on or about the same day. On March 2, 1990, a $291,010.19 judgment was entered against Lofstrom and in favor of the Turovers to compensate them for their $130,000 down payment, costs and attorney fees.

On December 1, 1989, Cole Taylor Bank filed suit to foreclose on the defaulted Lofstrom mortgage. The Turovers were named as defendants in the action. With the exception of the Turovers, Cole Taylor and the Village of Glencoe, all other interested party defendants, including Lofstrom, defaulted on the foreclosure action by their failure to appear in court. The Village sought $14,761.55 as payment for its demolition work on the property and the bank has never disputed that all such municipal liens have first priority by statute. At the hearing on the foreclosure, the trial court was required to consider only the priority between Cole Taylor, as the mortgage holder, and the Turovers, who held a judgment against Lofstrom.

On March 15, 1990, the Turovers filed an answer in the foreclosure action and a counterclaim requesting an adjudication on the priority of their interest in the Glencoe property. The answer and the counterclaim referred to the Turovers’ contract with Lofstrom, his failure to build the house contracted for and the subsequent judgment entered against Lofstrom. The judgment against Lofstrom was referred to in the counterclaim only as a “lien by judgment” on the property, not as an “equitable lien” as alleged on appeal. The prayer of the counterclaim sought: “(1) an adjudication of the priority of their lien by judgment and inclusion of such adjudication in any Judgment Foreclosure and Sale entered in this cause; and (2) such other and further relief as this Court may deem just and equitable.” Neither the answer nor the counterclaim specifically alleged that the Turovers’ lien was superior to the bank’s mortgage lien. The bank did not file an answer to the counterclaim.

Approximately one month later, Lofstrom filed a petition under chapter 11 of the United States Bankruptcy Code and an automatic stay, pursuant to law, was issued against the parties involved in the foreclosure action because the property was an asset of the bankruptcy estate.

On May 9, the bank filed its motion for judgment on the pleadings in the foreclosure action. The motion asked the court to set the priority on the property liens by placing the village’s demolition lien first, the bank’s mortgage second and the Turovers’ judgment third. The motion stated that: “On its face the [Turovers’] counterclaim shows that the lien asserted therein is inferior to plaintiff’s mortgage lien which is the subject of plaintiff’s complaint. Plaintiff has no objection to Turovers’ lien provided that it is subordinate to plaintiff’s interest.” The Turovers were given until June 1 to file a response to the motion, but they did not file a response.

On May 18 the bankruptcy court lifted the automatic stay in an order that stated:

“The automatic stay shall be lifted so as to allow Cole Taylor Bank to proceed on the action entitled Cole Taylor Bank v. Cole Taylor Bank, et al., presently pending in the Circuit Court of Cook County, No. 89 CH 10932 and to foreclose its mortgage interest and sell the property commonly known as 290 Greenwood Avenue, Glencoe, Illinois. The automatic stay is lifted on the condition that the validity and the amount of the lien asserted by Alan and Sara Turover against the property shall not be determined in the foreclosure proceeding, except that the interest of the Turovers, as determined by the Bankruptcy Court or other appropriate tribunal, shall be paid from the remainder of the proceeds from the sale after all other superior liens have been satisfied.
The order lifting the automatic stay shall be entered retroactive to a date prior to the entry of the Default Order entered against Jack A. Lofstrom on April 30, 1990 in the foreclosure proceeding, or in the alternative, it is ordered that the automatic stay shall not have the effect of voiding the Default Order entered against Jack A. Lofstrom on April 30,1990.”

On June 8, 1990, the Turovers’ counsel appeared in court along with counsel for the bank and the Village of Glencoe. The trial judge entered a judgment of foreclosure determining priority of the liens on the property in the order of the village first, the bank second and the Turovers third. The order stated, in pertinent part, “that the material allegations of the Counterclaim of the Turovers are not determined by the present Judgment, except to the extent that if, and when, such material allegations are proven true and correct in Bankruptcy Court or other appropriate proceeding, the interest of the Turovers shall attach and be satisfied from the remainder of the proceeds of sale, after the liens of the Village of Glencoe and the Bank have been paid.”

Turovers’ counsel did not object to the judgment, but the following colloquy occurred before it was entered:

“[Bank counsel]: But there is no dispute to whatever their lien is, they come third in line, and we had the bankruptcy stay lifted, recognizing that they would come third in line, and whatever the excess proceeds were, they would be held in an escrow account.

[Judge]: And you do reflect that in this proposed judgment order?

[Bank counsel]: Yes.

[Judge]: And give them leave to file documentation of the size of their lien, is that what you are saying?

[Bank counsel]: What will happen is they need to get the stay lifted from the Bankruptcy Court, recognizing their lien or authorizing them to draw on their lien, whatever their lien is. All we are saying is that this action does not determine what their lien is. We are not saying it is not determined. They obviously claim it was determined because they got a judgment. We are just saying that this judgment of foreclosure that is attached as Exhibit D, and I have made extra copies, doesn’t determine what the lien is, and it is going to be held in escrow subject to whatever the propert [sic] determination is.

[Judge]: What is going to be held in escrow, the whole thing?

[Bank counsel]: The excess funds after the Village of Glencoe is paid and after the Bank is paid, the excess proceeds will be held for the Turovers’ benefit subject to them getting the stay lifted.

[Judge]: Who is going to make that kind of a bid, though? How much is your lien for?

[Turovers’ counsel]: About twice the value of the property.

[Bank counsel]: We don’t know that there is going to be enough, but every day this waits the Village of Glencoe has more costs to put in this property to secure it, and the longer we wait, the less equity there will be for anyone.

[Judge]: Your lien is already reduced to a judgment?

[Turovers’ counsel]: But I haven’t had the Bankruptcy Court lift the stay on my further action, so that is all I have to do is get the Bankruptcy court to lift my stay and I could proceed to correct it here.

[Judge]: How are you going to collect it, except by bidding it in yourself?

[Turovers’ counsel]: That is what I am going to do, or if there are excess funds and I am the third lien, the court allows me to keep the money.

[Judge]: Realistically, there is [sic] not going to be excess funds. I shouldn’t say that. I don’t have any idea what the place is worth.

[Turovers’ counsel]: The rumors around Glencoe, about $350,000. My judgment was 321.

[Bank counsel]: It is anywhere from—

[Judge]: I know what you two want me to do. What are you asking me to do?

[Turovers’ counsel]: Nothing. I am just as anxious for the sale now because the longer we wait—

[Judge]: Then we don’t really have an argument. I will just do it. But you have to get your lien lifted and get your proof up into this by amendment to this foreclosure.

[Turovers’ counsel]: I will be back in this court to ask for an amendment to this order.

[Judge]: Forthwith.

[Turovers’ counsel]: As soon as the bankruptcy judge will let me.

[Judge]: So we don’t have the difference I thought we did.

[Bank counsel]: It would be a supplement as provided for in the order. The order recognized there would be a subsequent order directed to the proceeds. The judgment is attached. I made one amendment.”

After a brief discussion about other matters, the court hearing ended with the Turovers’ counsel stating: “I will be back pretty soon.”

On July 3, 1990, the Turovers filed their motion to modify the order of foreclosure. They contended that their lien was equitable in nature and therefore was superior to the mortgage lien held by the bank. The Turovers contended (1) they were unable to fully participate in the June 8 hearing because their hands were tied by the automatic stay in Lofstrom’s bankruptcy action, and (2) the parties and the court contemplated a modification of the judgment after the automatic stay was lifted.

In response the bank contended that the Turovers (1) agreed to the order of priority at the June 8 hearing, (2) were estopped from denying the superiority of the bank’s mortgage, (3) had waived such a claim, and (4) could not modify the judgment without first amending their answer and counterclaim on the foreclosure action to allege that they held an “equitable” lien and then prove such allegation.

On October 4, the bankruptcy court’s automatic stay with regard to the Turovers’ claim against Lofstrom was lifted and the parties appeared before the State trial judge shortly thereafter on the Turovers’ motion to modify the judgment of foreclosure. When the trial judge denied the Turovers’ motion to modify, the Turovers appealed, contending that the court erred in refusing to modify the judgment of foreclosure to reflect that the Turovers’ prior equitable lien on the Glencoe property was superior to the interests of the bank.

On appeal the bank contends that the Turovers hold no interest in the land because Lofstrom was not the title holder to the property but held only a beneficial interest in the land trust. The bank argues that the Turovers could not have acquired an equitable lien against the property when they do not allege that they contracted with the land trust which was the legal titleholder to the property. The bank contends that the Turovers therefore have failed to state a claim for an equitable lien.

In an Illinois land trust, unlike at common law, the trustee holds both legal and equitable title while the beneficiary retains only a personal property interest. Paine/Wetzel Associates, Inc. v. Gitles (1988), 174 Ill. App. 3d 389, 393, 528 N.E.2d 358.

The bank cites Marshall Savings & Loan Association v. Chicago National Bank (1965), 56 Ill. App. 2d 372, 206 N.E.2d 117, for the proposition that the beneficiary of a land trust has no interest in the realty and any lien created against the land trust beneficiary is not an encumbrance on the realty. (Marshall, 56 Ill. App. 2d at 379.) We note, however, that Marshall was overruled by First National Bank Trust No. 11—1317 v. Oldenburg (1981), 101 Ill. App. 3d 283, 427 N.E.2d 1312, which states that the beneficiary of a conventional land trust may enter into a valid contract to convey title to the trust property, when acting in his capacity as beneficiary, if the trust agreement vests in him the sole right to direct the trust to convey title. First National, 101 Ill. App. 3d at 287.

A beneficiary cannot encumber the property with a lien except where the trust agreement vests in the beneficiary the sole right to direct the trustee to convey title. (Paine/Wetzel, 174 Ill. App. 3d at 393-94.) The bank contends that the Turovers have failed to allege Lofstrom possessed such authority.

The Turovers contend their interest in the property arose prior to the creation of the land trust and the mortgage lien of Cole Taylor, that they held a judgment against Lofstrom and therefore they possessed an equitable lien on the property that should have taken priority over the bank’s mortgage. We agree with the Turovers and find the bank’s argument flawed. Lofstrom contracted with the Turovers in October of 1987, six months before Lofstrom placed his land into a land trust and prior to Lofstrom’s mortgage with the bank.

Having determined that Lofstrom could legally bind his interest in the property, we must determine whether the Turovers secured an equitable lien on the Glencoe property.

The appellate court decision in W.E. Erickson Construction, Inc. v. Congress-Kenilworth Corp. (1985), 132 Ill. App. 3d 260, 477 N.E.2d 513, details what conditions must exist for the court to enforce an equitable lien:

“An equitable lien is the right to have property subjected to the payment of a claim. It is neither a debt nor a right of property, but a remedy for a debt. [Citations.] The imposition of an equitable lien arises in two situations: first, where the parties express in writing their intention to make a particular property, real or personal, or some fund the security for a debt, or where there has been a promise to convey or assign the property as security [citations]; and, second, equity has also recognized similar liens without an express agreement between the parties which arise wholly from general considerations of fairness and justice, such as where a party has made improvements on the property of another. [Citations.] In either case, the essential elements of an equitable lien are (1) a debt, duty or obligation owing by one person to another, and (2) a res to which that obligation fastens.” W.E. Erickson, 132 Ill. App. 3d at 269-70, 477 N.E.2d at 521.

The Turovers contend they obtained an equitable lien on the Glencoe property at the time they signed the contract with Lofstrom. They argue that their lien has priority because it was created before the bank executed its note and trust deed which created the basis of the bank’s foreclosure action. Generally a lien which is first in time has priority and is entitled to prior satisfaction out of the property it binds. First State Bank v. De Kalb Bank (1988), 175 Ill. App. 3d 812, 817, 530 N.E.2d 544.

The Turovers contend that their case is factually identical to the situations articulated in Hinsdale Federal Savings & Loan Association v. Gary-Wheaton Bank (1981), 100 Ill. App. 3d 746, 427 N.E.2d 963, where the court held that the buyers were entitled to an equitable lien on the property they contracted for after a bank foreclosed on the subsequent mortgage.

In Hinsdale, George and Rosemary Myers signed a contract with Wamer-Dutzi, Inc., to buy a lot on which Wamer-Dutzi would build them a home. They paid a deposit and when the home was under roof, Wamer-Dutzi applied for a loan from Hinsdale Federal Savings & Loan Association to complete construction. A copy of the Myers’ contract with Warner-Dutzi was placed in the loan file with Hinsdale.

When construction did not occur as fast as the Myers anticipated, they sued Wamer-Dutzi claiming breach of contract, and the court entered two orders reflecting agreed-upon dates for completion. Warner-Dutzi did not meet those completion dates and the Myers took possession of the premises, spending between $22,000 and $24,000 to complete the home.

Wamer-Dutzi defaulted on the mortgage and Hinsdale sued to foreclose on the loan. A decree of foreclose and sale was entered but the Myers successfully had the order vacated, asserting their interest under the house construction contract. The trial court, however, denied the Myers’ motion to dismiss the foreclosure action and, after a hearing, entered summary judgment for Hinsdale.

The Myers appealed, raising the identical issues presented here, i.e., whether the contract purchaser has an ownership interest in the property under the doctrine of equitable conversion and whether that interest is superior to the subsequent mortgage.

The Hinsdale court held that the Myers were equitable owners of the property because generally a contract buyer becomes the equitable owner of the property upon execution of the installment contract with its owner. (Hinsdale, 100 Ill. App. 3d at 748.) The court further held that the Myers’ equitable interest under their unrecorded contract was superior to the interest of Hinsdale as evidenced by the mortgage subsequently recorded. Hinsdale, 100 Ill. App. 3d at 748.

In this case, the Turovers allege that after the bankruptcy stay was lifted with respect to their counterclaim, the trial judge failed to modify the foreclosure judgment to reflect the true facts alleged in the counterclaim. Among them, that: (1) the Turovers had a judgment against Lofstrom for breach of contract; (2) the lien attached to the property; (3) the Turovers acquired their lien prior to the bank’s lien; and (4) the bank had actual knowledge of the Turovers’ interest. The Turovers argue that had the trial judge recognized these facts, he would have modified the judgment of foreclosure to reflect the priority of their lien over the bank’s lien.

Equitable liens have been imposed where contracts manifested the intent that particular property or funds be security for debts wherever there has been a promise to convey or assign the property as security. Uptown National Bank v. Stramer (1991), 218 Ill. App. 3d 905, 907-08, 578 N.E.2d 1165.

We find the Turovers acquired an equitable interest in the Glencoe property at the time they entered into the contract with Lofstrom, the legal owner, on October 2, 1987. The land trust was created six months later on April 1, 1988. Although the bank alleges that Lofstrom had no authority to enter into the construction and sale agreement with the Turovers, this argument is based on the false premise that the land was held in land trust at the time the contract was executed.

The Turovers filed a lis pendens notice on the property at the time they filed suit against Lofstrom on December 30, 1988, the notice being filed one year before the mortgage foreclosure. The bank was aware of the Turovers’ interest in the property at the time of filing its mortgage foreclosure suit on December 1, 1989, because they named the Turovers as a party in interest.

We must conclude therefore that the Turovers’ equitable interest in the Glencoe property arose at the time they signed the construction contract on October 2, 1987, prior to any interest acquired by the bank by reason of the mortgage.

Next, we consider whether the trial court erroneously refused to modify the judgment of foreclosure to reflect that the Turovers’ lien was superior to the bank’s lien.

The Turovers contend that they were prevented from pursuing their right to a priority lien over the bank because of the bankruptcy stay. The Turovers cite the United States Bankruptcy Code, which states, in pertinent part: “[A] petition filed under [chapters 11, 13 or 7] of this title, *** operates as a stay, applicable to all entities, of— *** (4) any act to create, perfect, or enforce any lien against property of the estate; (5) any act to create, perfect, or enforce against property of the debtor any lien to the extent that such a lien secures a claim that arose before the commencement of the case under this title; (6) any act to collect, assess, or recover a claim against the debtor that arose before the commencement of the case under this title” (11 U.S.C. §362(a) (1988)).

The Turovers contend that the automatic stay was intended to prevent creditors from obtaining superior interests in property to the detriment of other creditors. (In re C.C.L. Construction, Inc. (N.D. Ill. 1983) 32 Bankr. 693, 697.) They contend they would have risked contempt or sanctions for violating the stay if they had proceeded with their counterclaim while the stay was pending, even if they considered their action of violating the stay to be justified. In re Josephs (N.D. Ill. 1988), 85 Bankr. 500.

The Turovers contend that they were constrained by the language of the bankruptcy court’s order which lifted the stay only with regard to the bank’s foreclosure action. The order provided that the stay was lifted “on the condition that the validity and the amount of the lien asserted by Alan and Sara Turover against the property shall not be determined in the foreclosure proceeding, except that the interest of the Turovers, as determined by the Bankruptcy Court or other appropriate tribunal, shall be paid from the remainder of the proceeds from the sale after all other superior liens have been satisfied.”

The Turovers argue that they were “forced to acquiesce” to entry of the foreclosure judgment because of the language in the stay. They argue that they adequately protected their right to seek the modification by filing their motion to modify within 30 days of the judgment. Because the automatic stay was still in full force, however, they argue that they could not and did not proceed on the motion until after the stay was lifted. The Turovers contend that the trial court had the ability to amend its order (Ill. Rev. Stat. 1989, ch. 110, par. 2—1203) and should have done so after the automatic stay was lifted by the bankruptcy court with regard to the Turovers’ counterclaim. The Turovers contend, therefore, that the trial judge’s refusal later to modify the foreclosure judgment was an abuse of discretion.

The bank argues that no evidence in the record establishes that the Turovers were compelled by the automatic stay to consent to entry of the foreclosure judgment. The bank notes that the automatic stay did not prevent the Turovers from defending their alleged priority interest in the property at the June 8 hearing because the agreed order lifting the stay was entered retroactive to the date prior to the default order against Lofstrom in the mortgage foreclosure. The bank notes that, in addition, the Turovers did not let the stay interfere with their filing the notice of appeal during the time period when they allege they were forced into inactivity because of the stay.

We note that the Turovers’ attorney was present, and indeed participated, at many if not all hearings regarding the foreclosure and apparently did not find this to be a breach of the bankruptcy stay order.

The bankruptcy statute by its plain language affords protection from actions “against the debtor.” The Turovers did not need to litigate their right to a judgment against Lofstrom, the debtor. Their counterclaim stated that they already held a judgment against Lof-strom. Therefore, their only unfinished business was with the bank with regard to the priority of the liens.

The legislative purpose of the automatic stay is “to permit the debtor to organize his or her affairs without creditor harassment and to allow orderly resolution of all claims. *** It gives the debtor a breathing spell from his creditors. It stops all collection efforts, all harassment, and all foreclosure actions.” Fortier v. Dona Anna Plaza Partners (10th Cir. 1984), 747 F.2d 1324, 1330.

We find that the bankruptcy stay provided protection for Lofstrom but did not afford the Turovers the right to sit idle with regard to the priority of their lien. The bankruptcy court lifted the stay with regard to the bank’s foreclosure action. The Turovers’ counterclaim challenged the bank’s interest and not the interest of Lofstrom, the debtor. Accordingly, we find the Turovers were not prevented by the stay order from pursuing their equitable lien claim on the property and alleged right to a priority superior to that of other lien interests on the proceeds of the ultimate land sale.

The bank offers other arguments why the Turovers are not entitled to relief regardless of the bankruptcy stay: (1) the Turovers’ consent to entry of the mortgage judgment was voluntary; (2) the Turovers are estopped from asserting an equitable lien; (3) the Turovers waived their claim of an equitable lien; and (4) any modification of the foreclosure judgment would first require an amendment of the Turovers’ counterclaim and adjudication of its claims.

First, the bank contends that the Turovers agreed to the foreclosure judgment and are therefore bound by the agreement. In support of its argument, the bank points to the transcript of the June 8 hearing where the bank’s attorney stated his understanding of the priority of the liens. The bank argues that all three attorneys present “agreed” on the priority of the liens. The Turovers’ attorney stated that he had no objection to entry of the judgment and was anxious for the sale.

The bank argues that this is evidence of a settlement agreement between the parties and that a settlement should not be set aside absent a showing of fraud or mistake. (Adler Center for Behavior Modification, Inc. v. Chicago Title & Trust Co. (1984), 129 Ill. App. 3d 1024, 1027, 473 N.E.2d 378.) The bank argues that Turovers' discovery of a belated theory that their claim was an “equitable lien” and not merely a lien is not a mistake considered sufficient to set aside a settlement agreement. (Towne v. Town of Libertyville (1989), 190 Ill. App. 3d 563, 570, 546 N.E.2d 810.) A unilateral mistake is insufficient to invalidate an agreement compromising and settling a disputed claim. Turner v. Cosmopolitan National Bank (1989), 180 Ill. App. 3d 1022, 1030, 536 N.E.2d 806.

The bank argues that the Turovers’ explanation is an after-the-fact rationalization for their actions and inconsistent with the fact that the Turovers did not allow the stay to prevent them from filing their motion to modify while the stay was still in effect. The bank notes that the Turovers do not even allege the trial judge erred at the June 8 hearing when the judgment was entered.

The Turovers contend the mortgage foreclosure was not a “compromise” or settlement and therefore the cases cited by the bank in support are distinguishable. The Turovers argue that the record establishes their attorney’s intent to return and seek a modification of the order when the automatic stay was lifted. They argue that this belies the bank’s contention that they agreed to the June 8 order.

Second, the bank argues that even if the Turovers did not agree to the order of priority, they are now estopped from asserting their claim of an equitable lien because the bank relied on the Turovers’ representations to its detriment. The bank argues that it waived its potential deficiency claim against Lofstrom in the bankruptcy proceeding and agreed not to contest the Village of Glencoe’s assertion of a first lien interest in the property. The bank argues that it would not have taken on the burden of selling the property if it was not assured of receiving the second priority interest in the property. We find no support in the record for these contentions as to the bank’s motivations for its actions. The bank argues that at a minimum the Turovers had an obligation to inform the court and the bank that they intended to contest the priorities as set forth in the judgment.

The bank argues that the only modification the Turovers actually intended to seek was an inclusion of their exact interest in the property, once determined. The bank points to the language of the June 8 foreclosure judgment which states “that the material allegations of the Counterclaim of the Turovers are not determined by the present Judgment, except to the extent that if, and when, such material allegations are proven true and correct in Bankruptcy Court or other appropriate proceeding, the interest of the Turovers shall attach and be satisfied from the remainder of the proceeds of sale, after the liens of the Village of Glencoe and the Bank have been paid.” (Emphasis added.)

The Turovers argue that estoppel is an equitable defense that arises only when a party’s statement or conduct misleads another into acting to his detriment in reasonable reliance on that belief. (American States Insurance Co. v. Action Fire Equipment, Inc. (1987), 157 Ill. App. 3d 34, 509 N.E.2d 1097.) The Turovers argue that the bank has offered no evidence of any action by the Turovers that could be construed as misleading the bank. Nor is there evidence the bank reasonably relied on any words or action by the Turovers.

The Turovers argue that no evidence in the record supports the bank’s claim that in reliance on the order the bank waived its deficiency claim against Lofstrom in the bankruptcy action. The bank’s reference to the record pinpoints only the bank’s own response to the Turovers’ motion to modify the foreclosure judgment. They argue that if such reliance existed, it was not a reasonable reliance because the Turovers’ counsel indicated an intention to seek modification of the foreclosure judgment as early as June 8, the day the judgment was entered.

We find the bank’s estoppel argument unpersuasive because the record evidences no reliance on the part of the bank.

Finally, the bank contends the Turovers waived their right to claim a priority over the bank’s lien by failing to claim such superiority in its counterclaim, its answer to the bank’s foreclosure action or at any of the hearings.

The bank argues that no such claim of priority was included in the counterclaim because in fact the counterclaim was based on the judgment entered against Lofstrom, and not on an equitable lien theory. The bank notes that the counterclaim does not mention the word “equitable” in describing the Turovers’ interest in the property.

The bank argues that the Turovers’ failure to deny the bank’s superior lien in their answer to the foreclosure complaint can be construed as an admission pursuant to section 2 — 610(d) of the Illinois Code of Civil Procedure; that section states: “Every allegation, except allegations of damages, not explicitly denied is admitted, unless the party states in his or her pleading that he or she has no knowledge thereof sufficient to form a belief, and attaches an affidavit of the truth of the statement of want of knowledge, or unless the party has had no opportunity to deny.” (Ill. Rev. Stat. 1989, ch. 110, par. 2—610(b).) We note, however, that the failure to specifically deny a conclusion alleged in a complaint does not operate as an admission of its truth. Florsheim v. Travelers Indemnity Co. (1979), 75 Ill. App. 3d 298, 393 N.E.2d 1223.

In addition, the bank argues that the Turovers had opportunities to assert their claim before entry of the judgment June 8 but failed to do so. When the bank moved for a judgment on the pleadings in its foreclosure action, the trial court granted the Turovers three weeks to file a response, but the Turovers filed no response. The bank’s motion stated that the order of priority for the liens was the Village of Glencoe first, the bank second and the Turovers third.

The Turovers argue that their counterclaim specifically reserved for them their right to adjudicate the priority of their lien and that therefore the bank’s argument is inappropriate. A waiver requires a clear, distinct intent to relinquish a known right. Village of Orland Park v. First Federal Savings & Loan Association (1985), 135 Ill. App. 3d 520, 481 N.E.2d 946.

We agree with the bank. The Turovers were given an opportunity to respond to the bank’s motion for a judgment on the pleadings but failed to do so despite the trial judge’s order specifically granting the Turovers three weeks to respond.

In summary, we conclude that the Turovers obtained an equitable lien on the Glencoe property at the time they contracted with Lof-strom which was prior in time to the bank’s involvement with the property. We find that Lofstrom’s bankruptcy proceeding did not prevent the Turovers from litigating the priority of their lien over the bank’s lien. Finally, we hold that the Turovers waived their right to challenge the order of the lien priorities on the Glencoe property when they failed to claim such priority before the entry of the judgment of foreclosure.

For the foregoing reasons, the judgment of the trial court is affirmed.

Affirmed.

EGAN, P.J., and McNAMARA, J., concur.


author: JUSTICE WOODWARD

text:
    OTTO PEESEL, Appellant, v. THE INDUSTRIAL COMMISSION et al. (H & H Sand and Gravel, Appellee).
    First District (Industrial Commission Division)
    No. 1—91—0047WC
    Opinion filed January 10, 1992.

      Mark E. Wohlberg, of Chicago, for appellant.
    August M. Mangoni, Ltd., of Chicago (August M. Mangoni and Louis G. Atsaves, of counsel), for appellee.
   JUSTICE WOODWARD

delivered the opinion of the court:

Claimant, Otto Peesel, filed an application for adjustment of claim pursuant to the Workers’ Compensation Act (Ill. Rev. Stat. 1987, ch. 48, par. 138.1 et seq.) for an injury which allegedly arose out of and in the course of his employment with respondent H & H Sand and Gravel on January 22, 1988. Following a hearing held on December 13, 1988, the arbitrator found that no employer-employee relationship existed between respondent and claimant on January 22, 1988. As a result of the finding, all remaining issues were decided against claimant. Without hearing further evidence, the Industrial Commission (Commission) adopted the arbitrator’s decision in its entirety. The circuit court confirmed the Commission’s decision. This appeal followed.

For purposes of this appeal, the sole issue raised by claimant is whether the Commission’s determination that no employer-employee relationship existed was against the manifest weight of the evidence.

At the arbitration hearing, claimant testified that he was 57 years old and had been driving trucks for 43 years. Using his own dump truck, he had hauled dirt, sand, crushed rock and gravel for respondent for about 10 years prior to the subject injury. On September 30, 1986, the parties signed a three-year equipment lease. The lease named as lessor “Peesel Motor Service” of Clarendon Hills, Illinois, and as lessee “H & H Sand and Gravel Haulers Company, Inc.” The lease was signed by claimant on behalf of lessee as “owner/operator,” and John Pasquesi, respondent’s vice-president, signed on behalf of lessor. Under the lease’s terms, claimant provided the tractor and trailer. The agreement also provided that respondent was to secure all insurance required by the Illinois Commerce Commission (ICC) in its name. In fact, claimant paid the truck’s insurance premiums. Further, the lease stated that “LESSEE [respondent] shall be responsible for supervision and control of all operations under this lease.” Claimant’s compensation was to be 86% of the gross revenue, with respondent getting the remaining 14%.

Respondent billed the customers based on the loads that claimant hauled. The percentage paid to claimant was based upon the gross amount of the billings. The billings were based upon the weight of the load hauled by claimant, and claimant was paid his percentage of the gross billings based upon the weights that he hauled. Payments would be made weekly from respondent to claimant and not after every load hauled.

Claimant paid for fuel and maintenance of the truck, as well as for the necessary fees and licenses. He filed the required annual reports with the ICC in 1986 and 1987 under the name of Peesel Motor Service. These filings indicate that claimant was the sole owner and operator of the dump truck. While driving under the subject lease, claimant displayed ICC permit numbers issued to him as owner-operator and to respondent. Claimant testified that when he drove for respondent he applied a magnetic H & H sign to the truck’s door. Respondent entered into evidence an undated picture in which the subject dump truck displayed a door sign reading “Peesel Motor Service.”

Claimant was paid by respondent on a weekly basis. Entered into evidence was a document entitled “Report of Employee’s Wages for period of_weeks_days.” The document lists the weekly payments made to claimant by respondent for all of 1987 and the first three weeks of 1988. It refers to the former as “employee” and the latter as “employer” and is signed thusly:

“Marion P. Remark Employer

By H & H Sand and Gravel Hauling”

Claimant earned $49,717.17 in 1987 and hauled for no other company during that portion of the leasing period. Claimant’s 1987 expenses related to the operation of his truck amounted to $38,826. Respondent deducted 2% of claimant’s gross revenue to pay for workers’ compensation insurance, even though said deduction was not described in the lease.

Claimant received the “1099” tax form for the 1987 tax year from respondent. The payer on the form was listed as “H & H Sand and Gravel,” and the payee was listed as “Peesel Motor Service.” No withholding of taxes appears on the 1099 form. Claimant did not receive a W-2 form from respondent. Claimant used the 1099 form in filing his income tax returns; he paid his personal income taxes and paid his own social security taxes.

Claimant called respondent’s dispatcher in the evening before each work day and received his assignments for the following day. Claimant’s work day often began at 5 a.m. and ended about 3 or 4 p.m. Respondent required that he report for work no later than 7 a.m. Claimant usually hauled five or six loads a day and on occasion as many as 8 to 10 loads.

At the time of the subject incident, claimant lived in Lemont, Illinois, on land owned by the Metropolitan Sanitary District and leased to respondent. He lived rent free on the premises in exchange for keeping “an eye on the place” at night and over weekends. A scale house was situated on the property. Before delivering any load of material, claimant’s dump truck was weighed on this scale.

On Friday, January 22, 1988, claimant began hauling materials at 6 a.m. By 2 p.m., he had delivered three loads of crushed stone to a site in Evergreen Park, returning each time with a load of dirt to dump at a landfill near Lemont. Claimant testified that at 2:15 p.m. the outside temperature was between 20 and 25 degrees Fahrenheit. At that time claimant had returned to the yard and determined that he needed to clean out the frozen dirt, which had adhered to the bottom of the dump truck. Both the ICC and respondent required that the dump truck body be cleaned out of materials remaining in the truck after a completed delivery. Using a spade designed for such a task, claimant dislodged and cleared out approximately four cubic yards of frozen dirt.

After approximately 30 minutes of this activity, claimant felt a “terrific pain” across his arms and in his chest. With difficulty he climbed out of the dumper and went to his home which, as noted above, was located on the premises. He did not make any further runs that day. Over the weekend he rested; the chest pain diminished somewhat. The following Monday morning he contacted respondent’s office to request permission to take the truck in for repairs at a garage. Respondent’s dispatcher gave him permission to do so. Claimant lay down in the garage’s-waiting room throughout the repair, which lasted three hours. The tightness in his chest continued. After returning home, he talked to vice-president John Pasquesi and asked for some time off to which Mr. Pasquesi agreed. As of the arbitration hearing, claimant had not returned to work.

Claimant then saw his physician, Dr. Butcher, who performed a cardiogram on him. This test indicated substantial heart malfunction. Dr. Butcher thereafter admitted claimant to Hinsdale Hospital. Several days later, claimant was transferred to University of Chicago Hospital, where he was hospitalized for approximately eight days. Heart medications alleviated some of claimant’s chest pain.

While hospitalized, claimant informed Mr. Pasquesi by telephone of his heart problems. He related to Mr. Pasquesi that the various tests performed on him showed a “heart attack.” After he was discharged from the hospital, claimant again talked with Mr. Pasquesi by telephone. At arbitration, claimant described the crux of the phone call.

“A. I told him I wouldn’t be back and I asked him how Workmen’s Comp was going to cover me and he said I was covered and I shouldn’t worry about anything and I left it at that. I just kept sending the bills — I asked him if I could send the bills into [sic] him and he told me yes, go ahead and send them into [sic] him and I sent them into [sic] him as I received them.”

Claimant talked once more with Mr. Pasquesi, who again assured him that he was covered under respondent’s workers’ compensation insurance policy. Claimant later talked with an employee of Casualty Insurance, who indicated that he was not covered by respondent’s workers’ compensation policy.

Respondent presented no testimony as to claimant’s employment status. In reaching the conclusion that claimant was not respondent’s employee, the arbitrator made the following findings:

“Evidence presented shows that Petitioner was an independent contractor doing business as ‘Peesel Motor Service’ for the years of 1986,1987 and 1988.
Petitioner was the owner of a tractor and trailer which was leased to Respondent, and which bore the name of ‘Peesel Motor Service’, that the lease agreement provided that Petitioner would receive 86% of the gross revenues for the service, with Respondent to receive 14%, that Petitioner was responsible solely for his own insurance, maintenance of his own tractor and trailer, that Petitioner was given a 1099 tax form at the end of the year by Respondent for his services, that Respondent did not withhold any Social Security taxes, Federal, State or local taxes from Petitioner, that Petitioner filed his own tax returns as an independent contractor.
Petitioner filed with the Illinois Commerce Commission (Rxl & Rx2) annual reports which set forth the facts that Petitioner was the sole owner and operator of his tractor and trailer, what his gross revenue was in the operation of his own trucking business, and from that amount he deducted his own business operational expenses, fuel costs and maintenance costs and repairs, leaving him with a net income from the operation of his business of $7,428.00; that Petitioner testified that he reported said amount on his Federal Income Tax returns as owner of his own independent business, known as Otto Peesel d/b/a Peesel Motor Service. * * *
Based upon the above, this Arbitrator finds that Petitioner was an independent contractor and that Petitioner failed to prove that an employee and employer relationship existed between the parties on January 22,1988.”

As stated above, the Commission adopted the arbitrator’s decision.

Various courts have noted that the determination of whether a claimant is an independent contractor or an employee is often a difficult task. The Commission’s decision as to claimant’s employment status will not be reversed unless it is against the manifest weight of the evidence. (Kirkwood v. Industrial Comm’n (1981), 84 Ill. 2d 14.) No one factor determines this issue, but several are considered prominent. Among them are the right to control the manner in which the work is done, the right to discharge, the nature of claimant’s work as it relates to the employer’s business, and who provides the tools, material or equipment. (Wenholdt v. Industrial Comm’n (1983), 95 Ill. 2d 76.) Of these factors, the right to control the work is the single most important factor in determining the parties’ relationship. (Wenholdt, 95 Ill. 2d at 81.) Of growing importance is the nature of claimant’s work in relationship to the employer’s business. Ragler Motor Sales v. Industrial Comm’n (1982), 93 Ill. 2d 66.

We initially note that the arbitrator’s decision did not address the majority of these factors. Rather it focused on claimant’s ownership of the tractor and trailer, his filings with the ICC and statements made on his income tax returns.

A review of the evidence as related to the determinative factors indicates the following. There is no dispute that claimant owned and operated the subject dump truck, and he paid the fuel and maintenance charges, as well as all fees. As to which party controlled the manner in which the work is performed, claimant testified that respondent instructed him where he picked and delivered loads of material. Respondent required him to start work no later than 7 a.m. If respondent made a specific request in regard to a particular hauling assignment, claimant would follow it. Respondent offered no evidence to rebut this testimony. Moreover, claimant did not provide customers for respondent nor did he drive for any other company during the pendency of the subject lease.

The equipment lease signed by the parties supports claimant’s testimony. (See Wenholdt v. Industrial Comm’n (1983), 95 Ill. 2d 76, 80 (a contractor’s agreement is a factor to consider in determining a party’s status).) The lease specifically states that the respondent was responsible for supervision and control of all operations under this lease. The lease defines “LESSEE” (respondent) as “the carrier under whose authority the equipment will be operated.” The lease also contains the following paragraph: “REPRESENTATIONS OF PARTIES. Lessor represents that it is the owner of the equipment and has authority to enter into this lease; that it gives the equipment over to the exclusive use, direction and control of LESSEE during periods when the equipment is operated by or for Lessee.”

As to the right to discharge, claimant’s unrebutted testimony demonstrated that respondent could discharge him for any reason at any time. The lease agreement, unlike that found in the similar case of Earley v. Industrial Comm’n (1990), 197 Ill. App. 3d 309, discussed infra, contains no clauses describing by what mechanisms the leasing agreement could be terminated by one or both parties.

The evidence shows the relationship of claimant’s work to respondent’s business; the work claimant performed was an essential element of respondent’s business. Respondent supplied materials such as sand, dirt and gravel to customers. Claimant’s transportation of same provided a necessary link in respondent’s business operations and, therefore, cannot be viewed in any way as separate and apart from them. From this evidence it is apparent that claimant’s work for respondent falls within the presumption described by our supreme court in Ragler Motor Sales v. Industrial Comm’n (1982), 93 Ill. 2d 66.

“Moreover, because the theory of workmen’s compensation legislation is that the cost of industrial accidents should be borne by the consumer as a part of the cost of the product, this court has held that a worker whose services form a regular part of the cost of the product, and whose work does not constitute a separate business which allows a distinct channel through which the cost of an accident may flow, is presumptively within the area of intended protection of the compensation act. Thus, this court has recently attributed increased significance to the nature of the work performed in relation to the general business of the employer.” 93 Ill. 2d at 71.

Also of importance is claimant's testimony that, on three occasions following his hospitalization, John Pasquesi assured him that he was covered under respondent’s workers’ compensation insurance policy. Mr. Pasquesi also told claimant to send him all medical bills arising from the subject occurrence. Such testimony indicates that respondent viewed the relationship as one of employer-employee. Significantly, respondent made no effort to rebut this portion of claimant’s testimony. Additionally, the weekly payment schedule completed by respondent referred to claimant as “employee” and respondent as “employer.” Said document was signed by an official of respondent as “employer.”

In contrast, the factors cited by the arbitrator as to whether an employer-employee relationship existed with the exception of claimant’s providing the equipment are not those given substantial weight in the determination of this issue. There is no dispute that respondent did not withhold any taxes from claimant’s weekly paychecks, but this factor is not controlling. (See Ragler Motor Sales v. Industrial Comm’n (1982), 93 Ill. 2d 66.) Further, we are not aware of any authority that makes a claimant’s annual filing with the ICC a critical factor in determining claimant’s employment status.

Also, the fact that respondent deducted 2% of claimant’s gross revenues to pay for the latter’s workers’ compensation insurance has been found to be no more than a weak indication that claimant was an independent contractor. Earley v. Industrial Comm’n (1990), 197 Ill. App. 3d 309, 318.

Respondent relies heavily on Earley v. Industrial Comm’n (1990), 197 Ill. App. 3d 309, which we find is distinguishable in several important aspects from the appeal at bar. In Earley, the claimant, Larry Earley, was an interstate trucker who signed a one-year equipment lease with respondent, Crown Transport, Inc. (Crown). Earley did not haul exclusively for Crown. He was permitted to do “trip leases” (hauling shipments for other carriers) on his own. Earley could, with Crown’s permission, hire other drivers to make deliveries. If he needed help unloading a shipment upon delivery, Earley had to hire and pay someone to do so. The Earley court found it significant that Earley chose his own routes to and from interstate destinations.

In contrast, the instant claimant had a long-term relationship with respondent, culminating in a three-year lease signed in 1986. Claimant drove exclusively for respondent and hired no one to help him. Claimant drove only in the Chicago metropolitan area, which dilutes the fact that he chose his own routes to make deliveries.

Further, the lease agreement signed by Earley and Crown distinguishes Earley from the instant appeal. First, the Earley equipment lease included a clause which provided that said agreement could be terminated by either party for any reason upon the giving of 30 days’ notice. Other clauses in the lease stated that the lease could be terminated immediately by either party if there was a substantial breach of the lease agreement and that respondent could immediately terminate the lease agreement for substantial or repeated violations of governmental regulations. The Earley court found that this evidence gave a weak indication of claimant’s status as an employee. Here, the lease is silent as to the agreement’s termination. Claimant’s unrebutted testimony was that respondent could fire him at any time for any reason. Thus, the appeal at bar diverges substantially from Earley regarding the right to discharge.

Further, the Earley agreement specifically refers to Earley as an independent contractor in several instances. This factor was significant in this court’s determination that Earley was an independent contractor and not an employee. Contrarily, there is nothing in the subject lease agreement describing claimant as an independent contractor. Also, claimant testified that respondent’s vice-president assured him that he was covered by its workers’ compensation insurance, and he stated that all claimant’s medical bills were sent to respondent. Further, the weekly pay schedule completed by respondent refers to the parties as employer and employee.

Thus, in critical considerations, namely, the right to control the work performed, the right to discharge, and the parties’ express description of the relationship, Earley is distinguishable from the appeal at bar. Consequently, we find that it is not controlling in the appeal before us.

For reasons stated above, we reverse the circuit court’s confirmation of the Commission’s decision, which we find to be against the manifest weight of the evidence. We remand this cause to the Commission for determination of all remaining issues.

Reversed and remanded.

McCULLOUGH, P.J., and LEWIS, STOUDER and RAKOWSKI, JJ., concur.