Under the mechanics lien act, it is the property owner's duty, before making any payments, to require the general contractor to provide a sworn written statement listing all subcontractors and amounts due or to become due to each of them. 770 ILCS 60/5(a). If a subcontractor's name is omitted from the sworn statement, or if the subcontractor claims he is owed a different amount than is listed in the statement, the subcontractor must give the owner written notice of its claim no later than 90 days after its completion of the contract. 770 ILCS 60/24(a).
When an owner is notified of a subcontractor's claim, either by way of the sworn statement or through the subcontractor's claim for lien, the owner must retain from any money due to the contractor an amount sufficient to pay the subcontractor. 770 ILCS 60/27. If, after receiving notice that a subcontractor is owed, an owner pays a contractor and does not retain sufficient funds to pay a subcontractor, such payment shall be considered illegal and made in violation of the subcontractor's rights, and the owner will have to pay twice.
That is what happened to the University of St. Francis in Joliet in the case Weather-Tite, Inc. v. University of St. Francis, et al. In that case, the general contractor on a residence hall remodeling project submitted its final bill showing it was owed approximately $450,000, $130,000 of which was owed to a subcontractor. St. Francis paid the general contractor the whole $450,000. The general contractor's bank seized the funds to partially satisfy a debt the contractor owed to the bank. The subcontractor never got paid.
Because St. Francis had notice of the subcontractor's claim by way of the general contractor's sworn statement, and because St. Francis did not set aside the subcontractor's payment, the court found that St. Francis' payment of the subcontractor's $130,000 to the general contractor violated the mechanic lien act. The court also found that the subcontractor still had a valid and enforceable mechanics lien. The subcontractor was then granted summary judgment in its attempt to foreclose upon that lien. So, St. Francis will end up paying the $130,000 subcontractor bill twice.
The case does not address the proper remedy, if any, that St. Francis has against the general contractor. Any ideas?