Lake Hinsdale Village Condominium Ass's v. Dept. of Public Aid

No. 3--97--0500
_________________________________________________________________

IN THE

APPELLATE COURT OF ILLINOIS

SECOND DISTRICT
_________________________________________________________________

LAKE HINSDALE VILLAGE ) Appeal from the Circuit Court
CONDOMINIUM ASSOCIATION, ) of Du Page County.
)
Plaintiff-Appellee, )
)
v. ) No. 96--CH--0428
)
THE DEPARTMENT OF )
PUBLIC AID, )
)
Defendant-Appellant )
)
(Heirs of Bernard F. DaSilva, )
Deceased; Heirs of Wilhermina )
DaSilva, Deceased; Bernard C. )
DaSilva; Claudette Rodriguez; )
Unknown Heirs and Devisees of )
Wilhermina DaSilva, Deceased; ) Honorable
and Unknown Owners and Non- ) Bonnie M. Wheaton,
record Claimants, Defendants). ) Judge, Presiding.
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JUSTICE McLAREN delivered the opinion of the court:

Plaintiff, the Lake Hinsdale Village Condominium Association
(the Association), sued under section 9 of the Condominium Property
Act (Act) (765 ILCS 605/9 (West 1996)) to foreclose a lien for
unpaid common expense assessments. Bernard and Wilhermina DaSilva,
both deceased by the time of the suit, originally owned the unit.
Defendant, the Department of Public Aid (Department), also asserted
a lien against the property for medical assistance payments it made
to or on behalf of Wilhermina DaSilva. Relying on section 3--10 of
the Illinois Public Aid Code (Code) (305 ILCS 5/3--10 (West 1996)),
the Department claimed it could satisfy its lien from the
foreclosure proceeds before the Association could do so to recover
any condominium assessments that came due after the Department
recorded its lien. The remaining defendants having defaulted, the
Association moved for summary judgment. The trial court granted
the motion, ruling that the Association's lien was wholly prior to
the Department's because the initial default that triggered section
9 of the Act occurred before the Department recorded its lien.
The Department appeals. It argues that the trial court erred
in (1) giving the Association's lien priority insofar as it is
based on assessments that came due after the Department recorded
its lien; (2) holding that various incidental expenses, beyond the
overdue assessments, were included in the Association's prior lien.
We agree in part with the trial court and in part with the
Department. We hold that (1) the Association's lien for unpaid
assessments has priority over the Department's lien, even as to
assessments for the months after the Department recorded its lien;
(2) the statutory lien does not extend to expenses other than those
specifically listed in subsection 9(g)(1) of the Act (765 ILCS
605/9(g)(1) (West 1996)); and (3) the trial court must determine
the amount of reasonable attorney fees and other incidental
expenses due under the Association's statutory lien. We affirm in
part, reverse in part, and remand for a determination of the
precise value of the Association's lien.
The Association's foreclosure complaint, filed May 10, 1996,
alleged the following facts. On October 25, 1994, the Association
filed a notice of its lien claim with the Du Page County Recorder
of Deeds. The Association asserted that Bernard and Wilhermina
DaSilva owed the Association $2,487.09 and that the Association had
a lien for this amount. On November 21, 1994, the Association took
possession of the unit via a forcible entry and detainer judgment.
The total due from the unit owners through May 6, 1996, was
$14,565.33 plus interest and assessments accrued hereinafter,
advances for real estate taxes, storage fees, cleaning fees,
insurance, court costs, title costs, etc., and [the Association's]
attorneys fees.
The Association added the Department as a defendant; the other
defendants were defaulted. The Department claimed that it had a
lien against the property for $95,616.38 it paid to or on behalf of
Wilhermina DaSilva in medical assistance pursuant to article V of
the Code (305 ILCS 5/5--1 et seq. (West 1994)). The Department
claimed that its lien had priority over the Association's lien
insofar as the latter secured debt created by unpaid assessments
coming due after July 8, 1994, the date that the Department
recorded its lien. Thus, the Department could satisfy its debt
from the proceeds of a foreclosure sale before the Association
could use those proceeds to recover monthly assessments that came
due after July 8, 1994. The Department conceded that the
Association's lien for assessments due before July 8, 1994, had
priority over its lien.
The Department relied on section 3--10.2 of the Code, which
grants the Department a lien with priority over any lien
thereafter recorded or filed (305 ILCS 5/3--10.2 (West 1994)).
Also, the Department invoked the following language in section
9(g)(1) of the Act:
"(1) If any unit owner shall fail or refuse to make
any payment of the common expenses or the amount of any
unpaid fine when due, the amount thereof together with
any interest, late charges, reasonable attorney fees
incurred enforcing the covenants of the condominium
instruments, rules and regulations of the board of
managers, or any applicable statute or ordinance, and
costs of collections shall constitute a lien on the
interest of the unit owner in the property prior to all
other liens and encumbrances, recorded or unrecorded,
except only *** (b) encumbrances on the interest of the
unit owner recorded prior to the date of such failure or
refusal which by law would be a lien thereon prior to
subsequently recorded encumbrances." 765 ILCS
605/9(g)(1) (West 1996).
The Association moved for summary judgment, asserting that, as
a matter of law, the full amount of its lien under section 9 of the
Act had priority over the Department's competing lien. According
to the Association, its lien arose on October 15, 1993, when the
unit owners first became delinquent on their assessments. An
affidavit the Association's president filed February 11, 1997,
detailed the assessments and other expenses the Association
claimed. These included the cost of packing and storing the
owners' personal property and repairing the unit, all of which the
Association did pursuant to the forcible entry and detainer
judgment; legal fees from July 1993 through the present; and past
due maintenance fees for October 1993 through February 15, 1997.
In response, the Department argued first that, under St. Paul
Federal Bank for Savings v. Wesby, 149 Ill. App. 3d 1059 (1987), a
condominium association's lien does not arise before assessment
payments are in default. Therefore, according to the Department,
the Association's lien could not have priority over the
Department's lien insofar as the former lien was based on
assessments not payable until after July 8, 1994. The Department
argued secondly that the Association's lien did not cover some of
the Association's claimed expenses, such as repairing the unit,
because these costs were not common expenses, an unpaid fine,
or interest, late charges, reasonable attorney fees *** [or] costs
of collections (765 ILCS 605/9(g)(1) (West 1996)). Furthermore,
there was no evidence of how much of these charges came due before
the Department recorded its lien.
After argument, the court granted the Association's summary
judgment motion and entered a judgment of foreclosure and sale (see
735 ILCS 5/15--1506 (West 1996)). In concluding that all of the
Association's lien had priority over the Department's lien, the
court analogized foreclosing the lien to foreclosing a mortgage.
In each situation, the monthly increase in the amount of money in
default eats into the money available to satisfy a lien that arose
after the initial default. The court also ruled that the Act, at
least in spirit, allowed the Association to collect what it spent
to maintain the unit after it took possession.
The court added that, as a matter of public policy, denying
full priority to a condominium association's lien would work a
severe hardship on the member unit owners. By law, a condominium
association must maintain common areas while relying wholly on the
condominium units as security for the substantial expenses it
thereby incurs. The trial court reasoned that, as a condominium
association is a far smaller group than the taxpaying public, the
latter is in a better position to absorb the hardship from
unsatisfied judgments, and spreading such costs among the whole
public is fairer than endangering the association's ability to meet
its obligations. After the trial court denied its motion to
reconsider, the Department appealed.
The parties recognize, as did the trial court, that whether
and to what extent a condominium association's common expense lien
has priority over the Department's public aid lien is an issue of
first impression. The Department argues first that the
association's lien trumps the Department's lien only insofar as it
relates to assessments that came due before the Department recorded
its lien. The Department observes that section 9(g)(1) refers
specifically to a unit owner's failure to make any payment of the
common expenses *** when due and makes the amount thereof a lien
on the property (emphasis added)(765 ILCS 605/9(g)(1) (West 1996)).
Furthermore, the Department notes, this lien is inferior to
encumbrances recorded prior to the date of such failure or
refusal (emphasis added) (765 ILCS 605/9(g)(1) (West 1996)). From
this phraseology, the Department concludes that each default, which
occurs only after a payment is due, creates a lien that may or may
not be prior to the Department's, depending on when the Department
recorded its lien.
Following the trial court's reasoning, the Association
analogizes the obligation to pay assessments per the condominium
declaration to the obligation to make monthly payments under a
mortgage instrument. Thus, the Association analogizes its security
interest to that created by a mortgage and its right to foreclose
and collect upon default to a mortgagee's right to collect and
foreclose upon the mortgagor's default on a payment. According to
the Association, only one default is necessary to create a lien on
any undue assessments; insofar as priority is concerned, all
defaults relate back to the initial one that triggered the Act's
protections. For the reasons that follow, we agree with the
Association.
We believe that each party sets forth a plausible reading of
section 9(g)(1). The language could be read to create an
individualized lien for each defaulted payment as it comes due.
However, we could also read section 9(g)(1) to discuss a single
continuing obligation, created upon the first default but
expandable depending on later defaults, that the association may
enforce by its lien.
Because the language is susceptible to more than one meaning,
we must engage in statutory construction. Our ultimate goal of
course is to ascertain and effectuate the intent of the
legislature. In re Marriage of Mitchell, 181 Ill. 2d 169, 173
(1998). We may consider that the legislature did not intend
inconvenient or unjust results. McNamee v. Federated Equipment &
Supply Co., 181 Ill. 2d 415, 423-24 (1998).
We believe that the legislature meant the statute to function
as the Association urges. We agree with the trial court that there
is a reasonably serviceable analogy between the foreclosure of a
mortgage (involving the security for a debt created by the mortgage
loan) and the foreclosure of a condominium association's lien for
common expenses (involving the security for a debt created by a
default on the obligation under the condominium declaration). More
crucially, we agree with the trial court that to give section
9(g)(1) the meaning the Department urges would work a needlessly
harsh result. The condominium association relies exclusively on
members' payments to fulfill obligations that are set by law (and
practical necessity). To allow other parties' potentially
unlimited claims to take priority over the association's might well
put the association in an impossible position.
The creation of such perils is not necessary to allow
claimants such as the Department here to protect their interests.
Under section 9(j) of the Act, an encumbrancer of a condominium
unit may request the condominium association to set forth the
unpaid common expenses for the unit. If the association does not
comply within 20 days, its lien on the unpaid common expenses that
come due prior to the request become subordinated to the
encumbrancer's lien. 765 ILCS 605/9(j) (West 1996). Otherwise, as
is true in the mortgage setting, the encumbrancer may pay the
overdue common expenses and thereby give its lien priority. 765
ILCS 605/9(j) (West 1996).
This section allows lienholders such as the Department here to
minimize their risk by acting promptly before the unpaid
assessments become excessively onerous. Also, we read this section
to imply that, absent such action by the lienholder, overdue
association payments can have priority over non-association liens
even if these liens were recorded before the due date of the
payments. This reinforces our conclusion that the overdue payments
relate back to the original date that the association's lien was
perfected--i.e., the date of the first default.
We do not believe Wesby compels a different result. Wesby
does stand for the proposition that there is no lien until there is
a debt or some other obligation; therefore, merely filing the
condominium declaration does not create a lien. Wesby, 149 Ill.
App. 3d at 1067. However, the character of the association's lien
was not further in issue in Wesby, and we believe that opinion
leaves the question here unresolved.
We hold that the Association's lien has priority over the
Department's lien and that this priority extends to all overdue
common expense payments that the Association's foreclosure suit
seeks to recover. The trial court properly included all these
payments in the association's lien. However, the trial court also
found that the Association's lien under section 9(g) of the Act
also included a variety of other expenses, including attorney fees,
the costs of repairing the DaSilvas' unit, and the cost of storing
items. This brings us to the second issue on appeal: whether the
trial court improperly applied section 9 to expenses to which the
Association's lien does not extend. We hold that the court did err
in including certain expenses in calculating the Association's
statutory lien and that a remand is necessary so the court may
determine the exact amount of the Association's lien.
This issue is also one of statutory construction, particularly
of section 9's treatment of assessments of common expenses. We
keep in mind that a court should read all portions of an act in
relation to each other and as part of a coherent whole. McNamee,
181 Ill. 2d at 428; In re A.P., 179 Ill. 2d 184, 197 (1997).
Section 9(g)(1), as pertinent here, restricts the
Association's lien to the amount of unpaid common expenses or the
amount of any unpaid fine when due, *** together with any interest,
late charges, reasonable attorney fees *** and costs of
collections. 765 ILCS 605/9(g)(1) (West 1996). This language
restricts a condominium association's lien to common expenses and
fines and the costs the condominium association incurs in
collecting overdue common expenses and fines. Section 9(a), which
requires each unit owner to pay his proportionate share of the
common expenses, defines this proportionate share as a ratio of the
unit owner's percentage of ownership in the common elements set
forth in the declaration. (Emphasis added.) 765 ILCS 605/9(a)
(West 1996). (Section 9(e) also allows the assessment of
individual units for the costs involved with limited common
elements. 765 ILCS 605/9(e) (West 1996). These limited common
elements are actually a portion of the common elements, not parts
of the units. See 765 ILCS 605/2(s) (West 1996).) Section 9, read
as a whole, plainly has as its focus the assessment and collection
of the expenses for maintaining the common elements, including the
limited common elements that serve a particular unit, not expenses
uniquely associated with a particular unit itself.
We think it plain that neither the overdue common expenses and
fines nor the cost associated with recovering these obligations
encompass the expenses an association incurs in repairing a
particular unit of which it has taken possession or in storing
goods from that unit. These costs are not common expenses and have
nothing to do with the maintenance of the common elements. They do
not benefit the general class of unit owners either directly or in
proportion to the unit owners' respective interests in the
property. Although the Association's spending for repair and
storage ultimately resulted from the DaSilvas' failure to pay
their assessments, this extra cost cannot reasonably be called
common expenses or the costs of collection of the common
expenses (see 765 ILCS 605/9(g)(1) (West 1996)). Whatever measures
the Association has to collect them, they do not factor into the
lien created by section 9(g)(1). Thus, the Association may not
claim that any security interest it has for these costs has
priority over the Department's lien.
We also hold that the trial court could not properly award the
Association all its attorney fees, some of which must have resulted
from collecting sums the trial court erroneously included under the
Association's lien. Also, it is not clear whether the trial court
adequately determined to what extent the Association's attorney
fees and other costs were otherwise reasonable. Therefore, on
remand, the trial court should decide the Association's reasonable
attorney fees for work done in recovering the defaulted
assessments.
The judgment of the circuit court of Du Page County is
affirmed in part and reversed in part, and the cause is remanded.
Affirmed in part and reversed in part; cause remanded.
GEIGER, P.J., and DOYLE, J., concur.