McArdle Explains Supreme Court Mechanics Lien Proceeds Case

May 3, 2011

David W. McArdle and Gregory J. Barry of Zukowski, Rogers, Flood & McArdle co-authored an April 23 article in the Chicago Daily Law Bulletin on the Illinois Supreme Court’s decision in LaSalle Bank v. Cypress Creek 1, LP.

The court’s Feb. 25, 2011, ruling dealt with allocating sales proceeds under the Illinois Mechanics Lien Act. The article by McArdle and Barry appeared on the cover of a Leading Lawyers Network supplement in the 60-page Law Day issue.

In a 5-2 decision, the Illinois Supreme Court held that “[i]n a proportionality determination under section 16 of the Mechanics Lien Act, the value of the property attributable to improvements paid for with proceeds of a mortgage and construction loan should be attributed toward the satisfaction of the mortgage.”

Among the ruling’s practical implications, according to the authors, are that construction lenders now have more security when lending draws on their loans, especially if they contemplate purchasing the property at a foreclosure sale. Also, contractors should be vigilant in learning which improvements lenders are funding. Contractors may even want to consider seeking funding directly from that lender, the authors say.

McArdle is a named partner in McHenry County’s largest law firm, Zukowski, Rogers, Flood & McArdle. He practices primarily in construction law, commercial litigation, real estate and zoning. In addition to representing a number of local government units, he is an adviser to the Illinois Road and Transportation Builders Association and its members on construction-related matters. Gregory J. Barry graduated magna cum laude from the University of Notre Dame before earning his law degree from the University of Texas.

To read the article’s complete analysis of the Illinois Supreme Court’s clearly defined rules on priority and some remaining unanswered ambiguities, click LaSalle Bank v. Cypress Creek 1, LP.