The Indiana Court of Appeals found a Lake Superior judge erred in denying a construction company’s request to foreclose on a mechanic’s lien after the client withheld a final payment, claiming faulty work.

Quadri Enterprises LLC, owned by Dr. Kamartaj Quadri, hired Ponziano Construction Services to build a medical office on the site of a pre-existing structure in Crown Point. The contract called for Quadri to pay Ponziano $144,900. After executing the contract, the two agreed to an addendum to make changes to the original plan that added $500 to the contract.

Quadri agreed to pay Ponziano through a construction loan from Wells Fargo. It made the first two payments, but withheld the last payment because of concerns over quality of workmanship, including poor painting and countertop installation. Ponziano then filed a mechanic’s lien for $45,549.43 and filed a complaint alleging breach of contract and unjust enrichment and sought to foreclose on the lien and attorney fees. Quadri filed a counterclaim for breach of contract, slander of title, and breach of implied warranty of good workmanship.

The trial court awarded Ponziano $16,000 and attorney fees of $8,000. Ponziano appealed, arguing it is still owed $53,783 absent reduction. Quadri sought to reduce the amount owed by claiming damages due to delays in construction and defective work. But Dr. Kamartaj Quadri caused many of the delays by moving into the office before construction was complete and through her failure to file plans and designs with the state and city, Judge L. Mark Bailey wrote in Ponziano Construction Services, Inc. v. Quadri Enterprises, LLC, 45A05-1112-CC-661.

Quadri presented evidence that the cost of fixing the defective work was $4,800, so that’s the only amount the company is entitled to as a set-off. The appellate court found $48,983.43 to be the appropriate amount owed to Ponziano: the $145,400 contract price, less the $91,616.57 already paid, minus the set-off.

Because Quadri owes the builder $48,983.43, an amount in excess of the mechanic’s lien, Ponziano may foreclose on the entire amount of the lien, the judges held. They remanded with instructions to the trial court to enter judgment in favor of Ponziano for $48,483.43, order sale of the property subject to the $45,549.43 lien, and determine the existence, extent and outcome of a potential priority dispute between Ponziano and Wells Fargo.

The appellate court upheld the $8,000 in attorney fees, finding that Ponziano is only entitled to recover the fees relating to its action to foreclose on the mechanic’s lien.