Member of Owner’s LLC

Can Lien Job

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Fifth District Reverses;

Acknowledges Dilemma with

Result

          In Peabody-Waterside Development, LLC v. Islands of Waterside, LLC et al, 2013 IL App (5th) 120490, Peabody was a member of a limited liability company, Islands of Waterside LLC. Islands owned 900 acres in Marissa, Illinois. The other member of Islands was Praxis Waterside LLC. 

          When bids for site preparation and grading of this property came in too high, Islands hired Peabody to do the work. When it racked up over $4,500,000 in invoices after performing and not getting paid, it recorded a claim for a mechanics lien.

           Islands won a summary judgment, on the theory that Peabody, as a member, shared in half the profits and losses, and had a joint interest in the property.  

          The appeals court reversed, finding that Peabody was not a co-owner. Islands is a legal entity distinct from its members. This was no joint-venture situation, where the j.v. is not a legal entity. Here, Peabody as its own LLC signed a cost-plus contract with Islands.

           The court hypothesized that were the bank to foreclose, Peabody’s lien might be subordinated and worth nothing. And the bank would own a significantly improved asset. But Peabody as 50% member would gain from its contractually rendered role of performing site improvement. Despite this dilemma the court ruled that the lien was good.

 

9/26/13