Portage Park Capital, LLC v. A.L.L. Masonry Construction Co. , 2024 IL App (1st) 240344 ( 2024 )

2024 IL App (1st) 240344No. 1-24-0344
Opinion filed June 14, 2024
FIFTH DIVISION
IN THE
APPELLATE COURT OF ILLINOIS
FIRST JUDICIAL DISTRICT
PORTAGE PARK CAPITAL, LLC, ) Appeal from the
an Illinois Limited Liability Company, ) Circuit Court of
) Cook County.
Plaintiff-Appellant, )
) No. 23 CH 008139
v. )
) Honorable
A.L.L. MASONRY CONSTRUCTION ) Anna Loftus,
COMPANY., INC. d/b/a All Construction Group, ) Judge, presiding.
an Illinois Corporation, )
)
Defendant-Appellee. )
PRESIDING JUSTICE MITCHELL delivered the judgment of the court, with opinion.
Justice Lyle and Justice Navarro concurred in the judgment and opinion.
OPINION
¶1 Plaintiff Portage Park Capital appeals the circuit court’s order compelling arbitration for
all of the issues plaintiff raised and dismissing the case. The issue on appeal is whether the circuit
court erred by determining that the validity of a mechanic’s lien is subject to arbitration. For the
reasons stated below, we hold that the circuit court did not err and affirm.
No. 1-24-0344
¶2 I. BACKGROUND
¶3 Plaintiff Portage Park Capital contracted with defendant A.L.L. Masonry Construction
Company to construct a new self-storage building in Chicago, Illinois, for plaintiff. The contract
is a standard form AIA agreement with an arbitration clause that provides as follows:
“If the parties have selected arbitration as the method for binding dispute resolution
in the Agreement, any Claim subject to, but not resolved by, mediation shall be subject to
arbitration which shall be conducted in Chicago, Illinois by a single arbitrator selected by
mutual agreement of the parties.”
A claim subject to arbitration under the contract is defined as
“a demand or assertion by one of the parties seeking, as a matter of right, adjustment
or interpretation of Contract terms, payment of money, extension of time or other relief
with respect to the terms of the Contract. The term ‘Claim’ also includes other disputes and
matters in question between the Owner and Contractor arising out of or relating to the
contract. The responsibility to substantiate Claims shall rest with the party making the
Claim. Claims must be initiated by written notice.”
The parties agreed to submit all claims not resolved by mediation to arbitration.
¶4 Over the course of the parties’ dealings, disputes arose regarding the amount of money that
plaintiff owed defendant. Accordingly, defendant filed a mechanic’s lien for the amount it believed
that it was still owed under the contract. A short time later, plaintiff made a demand for arbitration
regarding the payment of money under the contract and the amount due. This arbitration is
currently duly convened and pending. Plaintiff also filed this action in the circuit court of Cook
County, seeking a declaratory judgment that defendant’s mechanic’s lien “is fraudulent and/or
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false and thus void.” In response, defendant filed a motion to compel arbitration and a section 2-
619 motion to dismiss. The circuit court granted defendant’s motion, dismissing the case and
determining that all claims raised in plaintiff’s complaint were subject to arbitration. This timely
appeal followed. See Ill. S. Ct. R. 303(a) (eff. July 1, 2017).
¶5 II. ANALYSIS
¶6 “A motion to compel arbitration is essentially a section 2-619(a)(9) motion to dismiss or
stay an action in the trial court based on an affirmative matter, the exclusive remedy of arbitration.”
(Internal quotation marks omitted.) Key v. Accolade Healthcare of the Heartland, LLC, 2024 IL
App (4th) 221030, ¶ 24. Accordingly, this court “must interpret all pleadings and supporting
documents in the light most favorable to the nonmoving party.” Nord v. Residential Alternatives
of Illinois, Inc., 2023 IL App (4th) 220669, ¶ 28. We review the granting of a motion to compel
arbitration without an evidentiary hearing de novo. Sturgill v. Santander Consumer USA, Inc.,
2016 IL App (5th) 140380, ¶ 20.
¶7 A. Arbitrator’s Ability to Consider Lien Validity
¶8 Section 9 of the Mechanics Lien Act provides that “[i]f payment shall not be made to the
contractor having a lien ***, then such contractor may bring suit to enforce his lien in the circuit
court in the county where the improvement is located.” 770 ILCS 60/9 (West 2022). In the early
1900s, the Illinois Supreme Court made clear that this section granted the circuit court exclusive
jurisdiction to enforce a mechanic’s lien. O’Brien v. Gooding, 194 Ill. 466, 473 (1902). Several
years later, the supreme court determined that submitting a contract dispute to arbitration does not
waive a party’s ability to seek a mechanic’s lien and that an arbitrator’s decision on the amount
due under the contract would not affect the lien. Sorg v. Crandall, 233 Ill. 79, 99 (1908)
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(per curiam). From these holdings, plaintiff contends that the circuit court also has exclusive
jurisdiction to determine the validity of that lien. Defendant does not contest that only the circuit
court may enforce a mechanic’s lien; instead, it asserts that lien validity and lien enforcement are
not equivalent.
¶9 In order to enforce a lien, the party seeking enforcement must prove that the lien is valid.
See Tefco Construction Co. v. Continental Community Bank & Trust Co., 357 Ill. App. 3d 714,
718-19 (2005) (“A mechanic’s lien is valid only if each of the statutory requirements is strictly
observed [citation], and the party seeking to enforce the lien bears the burden of proving that each
requisite has been satisfied [citation].”); Watson v. Watson, 218 Ill. App. 3d 397, 399-400 (1991)
(same); Ronning Engineering Co. v. Adams Pride Alfalfa Corp., 181 Ill. App. 3d 753, 758-59
(1989) (same); Edward Electric Co. v. Automation, Inc., 164 Ill. App. 3d 547, 549 (1987) (same);
In re Cook, 384 B.R. 282, 291 (Bankr. N.D. Ala. 2008) (“Before a lien on property can be enforced,
three issues must be addressed: (1) the validity of the lien (because an invalid lien is not
enforceable) ***.”). These cases make clear that lien validity is a prerequisite to lien enforcement.
That is, a court may not enforce a lien unless and until it has been determined that the lien is valid.
Thus, courts have consistently considered lien validity to be an antecedent issue separate from the
enforcement of the lien (rather than a part of enforcement).
¶ 10 Accordingly, the Illinois Supreme Court’s holdings in O’Brien and Sorg do not control
here because the issue of whether an arbitrator could consider the validity of a mechanic’s lien was
never presented to either court. While Sorg involved a contract dispute, an arbitration clause, and
an allegedly fraudulent lien, the parties there never sought to compel arbitration on the question of
the validity of the lien. Similarly, the supreme court’s holding that “had a lien existed it would not
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have been affected by such an award” does not support concluding that the court intended lien
validity to be nonarbitrable. (Emphasis added.) Sorg, 233 Ill. at 99. The court held only that, in the
context of the case before it, where the arbitrator had decided only the amount due to the plaintiff
in the underlying contract dispute but had not addressed any issues related to the mechanic’s lien,
the arbitrator’s award would have no effect on the lien. Accordingly, O’Brien and Sorg have
nothing to say about what issues parties may arbitrate and provide no support for plaintiff here.
¶ 11 Courts in other jurisdictions have concluded similarly. In Colorado, an appellate court
concluded that “the district court is the proper forum for contesting any disputes as to the
procedural validity of [a] mechanic’s lien” where the validity of the lien was not “put at issue and
decided in arbitration.” Sure-Shock Electric, Inc. v. Diamond Lofts Venture, LLC, 259 P.3d 546,
550 (Colo. App. 2011). The Utah Supreme Court analyzed the validity of a mechanic’s lien without
considering whether the arbitrator could have ruled on the issue. See Worthington & Kimball
Construction Co. v. C&A Development Co., 777 P.2d 475, 477-78 (Utah 1989). In Connecticut
and Arizona, courts have ruled that a provision in a contract that explicitly reserves the rights of
contractors with respect to statutory remedies under mechanic’s lien laws prevents courts from
compelling arbitration regarding such liens. See Madaio Glass, Inc. v. Stonestreet Hospitality Co.,
No. CV106004094, 2010 WL 4074483, at *3 (Conn. Super. Ct. Sept. 13, 2010); B&M
Construction, Inc. v. Mueller, 790 P.2d 750, 751-52 (Ariz. Ct. App. 1989). And in Florida, a court
determined that it was error to deny a lien foreclosure when the “arbitrator’s award was silent on
the matter.” Royal Palm Collection, Inc. v. Lewis, 36 So. 3d 168, 169 (Fla. Dist. Ct. App. 2010).1
1
In contrast, a federal bankruptcy court in Florida concluded that a lien foreclosure fell within an
arbitration clause under Florida law because “there is more than ‘some nexus’ between the dispute and
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However, these cases stand only for the proposition that a trial court may determine the validity of
a mechanic’s lien in certain circumstances, not that it must or that parties to a contract may not
agree to submit the issue to an arbitrator.
¶ 12 Courts in Minnesota, Ohio, and Texas have held specifically that an arbitrator may
determine the validity of a lien. See McMahon v. Schepers, No. C2-02-266, 2002 WL 31013031,
at *2 (Minn. Ct. App. Sept. 10, 2002); Sebold v. Latina Design Build Group, L.L.C., 2021-Ohio-
124, 166 N.E.3d 688, ¶¶ 13-15; CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 242-43 (Tex. 2002).
Indiana, Michigan, and South Carolina courts have held that mechanic’s lien foreclosures are
broadly subject to arbitration. See Koors v. Steffen, 916 N.E.2d 212, 216-17 (Ind. Ct. App. 2009);
Legacy Custom Builders, Inc. v. Rogers, No. 359213, 2023 WL 1870446, at *3 (Mich. Ct. App.
Feb. 9, 2023); Cape Romain Contractors, Inc. v. Wando E., LLC, 747 S.E.2d 461, 466-67 (S.C.
2013). Of the states to have considered the issue, only New York has held that assessing the
validity of a mechanic’s lien is “beyond the power of the arbitrators to determine.” May v. New
Amsterdam Casualty Co., 60 N.Y.S.2d 613, 615 (App. Div. 1946).
¶ 13 This conclusion does not result in tension by providing courts exclusive jurisdiction to
enforce liens but denying courts exclusive jurisdiction to determine whether liens are valid. Courts
have exclusive jurisdiction to enforce any arbitration award—arbitration awards are not self-
executing. See 710 ILCS 5/16 (West 2022) (“The making of an agreement described in Section 1
providing for arbitration in this State confers jurisdiction on the court to enforce the agreement
under this Act and to enter judgment on an award thereunder.”); see also Adam Martin
contract containing the agreement. Indeed, resolution of the issues requires reference to or construction of
the site development contract.” In re J.E.L. Site Development, Inc., 646 B.R. 338, 344 n.40 (Bankr. M.D.
Fla. 2022).
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Construction Co. v. Brandon Partnership, 135 Ill. App. 3d 324, 326 (1985) (recognizing that an
arbitrator “has no power to implement his decisions”); Tamari v. Conrad, 552 F.2d 778, 781 (7th
Cir. 1977) (explaining that an arbitration award “must be enforced by a court”). Nevertheless,
courts are frequently prevented from considering the validity of the underlying legal interest at
issue. See, e.g., Buckeye Check Cashing, Inc. v. Cardegna, 546 U.S. 440, 449 (2006) (“regardless
of whether the challenge is brought in federal or state court, a challenge to the validity of the
contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator”).
¶ 14 This result is consistent with bedrock principles of contract law. The goal in contract law
is to “ascertain and give effect to the intent of the parties.” W.W. Vincent & Co. v. First Colony
Life Insurance Co., 351 Ill. App. 3d 752, 757 (2004). And “an agreement to arbitrate is a matter
of contract.” Salsitz v. Kreiss, 198 Ill. 2d 1, 13 (2001). Further, Illinois public policy favors
arbitration. Illinois permits litigants to settle disputes through arbitration because “[a]rbitration is
regarded as an effective, expeditious, and cost-efficient method of dispute resolution.” Royal
Indemnity Co. v. Chicago Hospital Risk Pooling Program, 372 Ill. App. 3d 104, 110 (2007) (citing
United Cable Television Corp. v. Northwest Illinois Cable Corp., 128 Ill. 2d 301, 306 (1989)).
Because the law recognizes arbitrators as sufficiently capable of deciding disputes, if an issue falls
within the scope of an otherwise valid arbitration clause, “judicial review of an arbitral award is
extremely limited.” American Federation of State, County & Municipal Employees, AFL-CIO v.
Department of Central Management Services, 173 Ill. 2d 299, 304 (1996).
¶ 15 These tenets demonstrate that courts view the act of contracting as volitional and the terms
within a contract as the thoughtful result of a bargained-for exchange. Put more plainly, the terms
of a contract are what the parties voluntarily agreed to. Accordingly, courts should not read limiting
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principles into statutes regarding the issues parties may or may not arbitrate when the legislature
did not expressly provide such a limitation. If it is the intent of the parties to arbitrate a claim,
courts should generally defer to that intent. See Smola v. Greenleaf Orthopedic Associates, S.C.,
2012 IL App (2d) 111277, ¶ 16 (“whether an issue is subject to arbitration is governed by the
agreement between the parties”). Doing otherwise would trench upon the right of the parties to
contract with one another. See Ritchie v. People, 155 Ill. 98, 104 (1895) (recognizing a
constitutional right to make and enforce contracts). While the right is subject to limitations, here,
the legislature did not provide a clear, express limitation to that right regarding the validity of a
lien. Accordingly, there is no such limitation.
¶ 16 However, the opposite is also true: parties are not required to submit claims to arbitrators
just because arbitrators are empowered to hear those claims. Instead, agreements to arbitrate are
“matter[s] of contract” and “[t]he parties to an agreement are bound to arbitrate only those issues
which by clear language and their intentions expressed in the language show they have agreed to
arbitrate.” (Internal quotation marks omitted.) Clanton v. Oakbrook Healthcare Centre, Ltd., 2023
IL 129067, ¶ 29. Accordingly, courts determine the scope of an agreement to arbitrate “using
ordinary contract principles.” Id. ¶ 30. These principles require that “[i]n the absence of an
ambiguity, the intention of the parties at the time the contract was entered into must be ascertained
by the language utilized in the contract itself.” (Internal quotation marks omitted.) Id. Further,
provisions of the contract should not be read in isolation but should be considered in the broader
context of the contract as a whole. Id.
¶ 17 The arbitration agreement at issue covers two types of claims: (1) “a demand or assertion
by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms,
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payment of money, extension of time or other relief with respect to the terms of the Contract” or
(2) “other disputes and matters in question between the Owner and the Contractor arising out of
or relating to the contract.” The language of this agreement closely tracks with what courts have
characterized as a “generic” arbitration clause. See Bass v. SMG, Inc., 328 Ill. App. 3d 492, 498
(2002). In Illinois, “courts have generally construed ‘generic’ arbitration clauses broadly,
concluding that the parties are obligated to arbitrate any dispute that arguably arises under an
agreement containing a ‘generic’ provision.” (Emphasis in original.) Fahlstrom v. Jones, 2011 IL
App (1st) 103318, ¶ 17.
¶ 18 Below, the circuit court determined that the mechanic’s lien arose out of or related to the
contract because, “the questions raised in the complaint *** involve the pay apps, whether they
were overinflated, and the values listed in the subcontractors’ agreements versus what’s on the
mechanic’s lien.” The circuit court explained that, in order to answer these questions, it “would
have to look at requirements under the contract.” To determine the validity of the mechanic’s lien,
the circuit court reasoned that it would need to refer to the parties’ contractual requirements.
¶ 19 The contours of when a dispute “arises out of or relates to” a contract are murky. On one
end of the spectrum, a broad reading of this language could reasonably include anything that would
not have occurred “but for” the existence of the contract. On the other end, a narrow reading could
be limited only to those disputes that involve some “interpretation or construction of the contract.”
While this court has never provided a black-letter rule, courts in other jurisdictions have settled
somewhere in between these options, determining that, for a dispute to arise out of or relate to a
contract, it must “ ‘raise some issue the resolution of which requires a reference to or construction
of some portion of the contract itself.’ ” Terminix International Co. v. Michaels, 668 So. 2d 1013,
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1014 (Fla. Dist. Ct. App. 1996) (quoting Dusold v. Porta-John Corp., 807 P.2d 526, 530 (Ariz. Ct.
App. 1990).
¶ 20 The narrowest reading of “arises out of or relates to” is plainly wrong when considered in
light of Illinois case law. See Bass, 328 Ill. App. 3d at 500 (agreeing with federal courts that “broad
arbitration clauses do not limit arbitration to the literal interpretation or performance of the
contract”). Illinois’s public policy favoring arbitration militates toward reading “generic”
arbitration clauses broadly. Fahlstrom, 2011 IL App (1st) 103318, ¶ 17. However, if “generic”
arbitration clauses only reached disputes that involved “interpretation or construction” of a
contract, such clauses would fail to reach disputes that indisputably fall within an arbitrator’s
purview. See, e.g., Buckeye, 546 U.S. at 449 (holding that “a challenge to the validity of the
contract as a whole, and not specifically to the arbitration clause, must go to the arbitrator”); Bass,
328 Ill. App. 3d at 502 (concluding that tort claims of breach of fiduciary duty, misappropriation
of business opportunity, and tortious interference with contract, among others, “ ‘[arose] from the
very heart’ of the relationship between [the companies] and are significantly related to the
agreement defining that relationship,” and were thus subject to arbitration); Fahlstrom, 2011 IL
App (1st) 103318, ¶ 18 (recognizing the principle that “[w]here an agreement contains a generic
arbitration clause, that clause covers a dispute arising under a subsequent agreement between the
same parties if the original agreement and the subsequent agreement concern the same subject
matter” (citing A.E. Staley Manufacturing Co. v. Robertson, 200 Ill. App. 3d 725, 730-31 (1990))).
¶ 21 Moreover, if the generic section of the arbitration clause in this case were limited only to
claims that involve interpretation or construction of the contract, the section would be superfluous.
The first section of the clause already extends the arbitration agreement to “a demand or assertion
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by one of the parties seeking, as a matter of right, adjustment or interpretation of Contract terms,
payment of money, extension of time or other relief with respect to the terms of the Contract”—in
other words, claims involving the interpretation or construction of the contract. If the second
section of the clause is limited to the same claims as the first section, there would have been no
need to include it. Given that, “[g]enerally, when interpreting a contract, we must give effect to all
of the contract’s provisions if it is possible to do so,” reading such a redundancy into the agreement
here would be improper. Wood v. Evergreen Condominium Ass’n, 2021 IL App (1st) 200687, ¶ 51;
see Evans v. Lima Lima Flight Team, Inc., 373 Ill. App. 3d 407, 413 (2007) (“Contractual terms
should be construed so as to avoid the conclusion that other terms are redundant.”).
¶ 22 Instead, at the very least, if resolution of the claims raised in a complaint require the court
to reference the contract, those claims “arise out of or relate to” that contract. Significantly, every
dispute regarding a mechanic’s lien involves some reference to or construction of the contract
because “the liens act becomes a term of every construction contract between the owner and the
contractor for construction of a building.” J&K Cement Construction, Inc. v. Montalbano Builders,
Inc., 119 Ill. App. 3d 663, 673 (1983). Therefore, any reference to the Act is also a reference to
the contract, and without reference to the Act, courts would be unable to resolve disputes related
to mechanic’s liens. But even if this were not the case, the complaint here repeatedly references
the underlying contract and each party’s obligations under the contract. The complaint draws upon
provisions from the contract for support for its claims. Thus, the circuit court could not resolve the
dispute here without reference to the contract. For example, at paragraph 43 of the complaint,
plaintiff claims that defendant falsely and fraudulently swore that “$758,140.00 in Storage
Partitions and Doors was for work to still be performed ***.” In support of this, plaintiff
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specifically directs the court to refer to the contractual provision regarding the purchase and
installation of storage partitions and doors.
¶ 23 Additionally, Illinois courts have recognized that “the adjudication of an action to foreclose
a mechanic’s lien involves essentially the same cause of action as that upon which the lien claim
is based.” Thorleif Larsen & Son, Inc. v. PPG Industries, Inc., 177 Ill. App. 3d 656, 660 (1988).
Here, the lien claim is based upon a contract dispute between plaintiff and defendant. Thus, the
lien claim is essentially the same cause of action as the contract dispute. Any argument that the
two are unrelated lacks any support in fact or law. Accordingly, the trial court did not err in
concluding that the dispute here arose from or related to the contract.
¶ 24 B. Section 2-619 Motion to Dismiss
¶ 25 Plaintiff next contends that the circuit court procedurally erred when it determined that
resolving plaintiff’s claims would require it to refer to the contract. Plaintiff argues that, because
a section 2-619 motion “admits the legal sufficiency of the complaint” (Kean v. Wal-Mart Stores,
Inc., 235 Ill. 2d 351, 361 (2009)) and because “[n]o contract interpretation was needed based on
the face of the Complaint,” the circuit court was bound by the complaint. This argument appears
to rely on plaintiff’s mistaken standard for when a claim arises out of or relates to a contract.
However, the circuit court did not need to find, nor did it find, that contract interpretation was
necessary; instead, it found only that it “would have to look at requirements under the contract.”
The complaint on its face directs the court to look at requirements under the contract; therefore,
plaintiff’s argument completely misses the mark.
¶ 26 However, even if the complaint did assert that any reference to the contract in this case
would be unnecessary, the circuit court would not have been obligated to accept the truth of that
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assertion. “The defendant does not admit the truth of any allegations in plaintiff’s complaint that
may touch on the affirmative matters raised in the 2-619 motion.” Barber-Colman Co. v. A&K
Midwest Insulation Co., 236 Ill. App. 3d 1065, 1073 (1992). Accordingly, the party opposing a
motion to compel arbitration “cannot rely on bare allegations alone to raise issues of material fact.”
Eco Brite Linens LLC v. City of Chicago, 2023 IL App (1st) 210665, ¶ 9. Therefore, the circuit
court’s comments, suggesting that it would need to refer to the contract to resolve the claims before
it, were not improper.
¶ 27 III. CONCLUSION
¶ 28 The judgment of the circuit court of Cook County is affirmed.
¶ 29 Affirmed.
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Portage Park Capital, LLC v. A.L.L. Masonry Construction Co., 2024 IL App (1st) 240344Decision Under Review: Appeal from the Circuit Court of Cook County, No. 23-CH-
008139; the Hon. Anna Loftus, Judge, presiding.
Attorneys Craig Penrose, of Laurie & Brennan LLP, of Chicago, for
for appellant.
Appellant:
Attorneys Frederick J. Sudekum and Jacob R. Coz, of Sudekum, Cassidy &
for Shulruff, Chtrd., and Howard Teplinsky and Mark L. Evans, of
Appellee: Levin Ginsburg, both of Chicago, for appellee.
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