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Judges order trial on couple’s responsibility to unpaid subcontractors

November 7, 2012

The Indiana Court of Appeals reversed a decision by a DeKalb Superior judge that Fred and Mary Anna Feitler were personally liable for unpaid bills to subcontractors on their home, which was being constructed on land owned by a trust to which they were sole beneficiaries.

The Feitlers contracted with Cedar Creek Homes to build a home on real estate in DeKalb County. The couple and the contractor agreed that no mechanic’s lien could attach to the property in the event of nonpayment. A mortgage taken out by the Feitlers paid more than $366,000 of the $478,225 contract price of the home, but Cedar Creek went out of business before finishing the home and did not pay subcontractors J. Laurie Commercial Floors LLC, JM Woodworking Co., and Springfield Enterprises Inc. for work completed on the home.

The subcontractors sued the Feitlers, arguing they should be able secure money judgments against the couple, with J. Laurie and JM also arguing they should be able to hold mechanic’s liens against the real estate. The trial court entered summary judgment in favor of the subcontractors.

The Feitlers and the land trust argued that J. Laurie and J.M. can’t hold a mechanic’s lien against the property and that the trial court erred in granting summary judgment on the question of personal liability. In Fred C. Feitler, Mary Anna Feitler, and the Feitler Family Trust v. Springfield Enterprises, Inc., J. Laurie Commercial Floors, LLC, d/b/a Jack Lauries Floor Designs, JM Woodworking Co., 17A04-1206-PL-297, the appellate court agreed with the Feitlers, reversing and concluding the question of personal liability should go to trial.

The COA found that the Feitlers qualify as owners pursuant to the mechanic’s lien, so the agreement they entered into with Cedar Creek is binding on J. Laurie. The Feitlers entered into an agreement with JM after Cedar Creek went out of business for JM to complete the cabinetry in the home, but did not pay JM. The Feitlers claimed JM’s failure to file a pre-lien notice pursuant to I.C. 32-28-3-1(i) prevents it from holding a mechanic’s lien. The judges agreed, finding the plain language of the statute makes the filing of a pre-lien notice a condition precedent to the right to hold a lien.

The designated evidence creates a question as to whether Cedar Creek was paid off by the Feitlers, which would prevent the subcontractors from having a claim against them under the personal liability notice statute.

The judges ordered summary judgment entered in favor of the Feitlers regarding whether JM and J. Laurie could hold a mechanic’s lien against the property and ordered a trial on the question of personal liability.


 

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