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Judges reverse ruling mechanic's lien has priority over mortgages

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The Indiana Court of Appeals ruled there was no reason for a trial judge to disregard the state’s priority statutes regarding liens and mortgages and find that a construction company’s mechanic’s lien has priority over previously recorded mortgages.

Eby Construction filed suit to try to collect on a debt for work done on real estate owned by a trust. The loans for the construction came from LaPorte Savings Bank, which were secured by mortgages on the real estate prior to Eby beginning work. Eby and two other contractors had asserted mechanic’s liens, which were consolidated into one action. The trust used proceeds from its third loan with the bank to pay its debt to a third contractor.

The trial court originally entered a decree of foreclosure in favor of LaPorte Savings Bank, but after Eby filed an amended complaint, it granted partial summary judgment to Eby. The trial court concluded that although statute and caselaw clearly provides the bank’s mortgage liens should have priority, public policy dictates that Eby’s lien be given priority in this case. The judge also found the bank came to court with “unclean hands” because the trust had used proceeds from a bank loan to pay a third contractor before paying second contractor Eby.

On interlocutory appeal, the COA concluded this was an error by the judge. Citing Harold McComb & Son v. JP Morgan Chase Bank, 892 N.E.2d 1255 (Ind. Ct. App. 2008), and Indiana Code 32-28-3-5(d), the judges held that LaPorte Savings Bank’s mortgages should have priority over Eby’s mechanic’s lien as the mortgage was recorded first.

The judges also disagreed that the bank came to court with unclean hands. While they don’t condone the decision to pay a subsequent contractor when the trust hadn’t yet paid Eby, that decision isn’t an act of unclean hands on the part of the bank, as it did not and was not under any obligation to control the trust’s decision, wrote Judge Terry Crone in City Savings Bank n/k/a LaPorte Savings Bank v. Eby Construction, LLC, No. 64A03-1012-MF-611.

The trial court attempted to use its equitable powers to achieve what it thought was a more fair and balanced result, but it failed to appreciate the importance of the doctrine “equity follows the law”, the judge continued.

“Because there is nothing in the designated evidentiary material to indicate that substantial justice cannot be accomplished by following the law, and the parties’ actions are clearly governed by our priority statutes, equity must follow the law,” he wrote.

The judges remanded the case for further proceedings consistent with the opinion.

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  1. The practitioners and judges who hail E-filing as the Saviour of the West need to contain their respective excitements. E-filing is federal court requires the practitioner to cram his motion practice into pigeonholes created by IT people. Compound motions or those seeking alternative relief are effectively barred, unless the practitioner wants to receive a tart note from some functionary admonishing about the "problem". E-filing is just another method by which courts and judges transfer their burden to practitioners, who are the really the only powerless components of the system. Of COURSE it is easier for the court to require all of its imput to conform to certain formats, but this imposition does NOT improve the quality of the practice of law and does NOT improve the ability of the practitioner to advocate for his client or to fashion pleadings that exactly conform to his client's best interests. And we should be very wary of the disingenuous pablum about the costs. The courts will find a way to stick it to the practitioner. Lake County is a VERY good example of this rapaciousness. Any one who does not believe this is invited to review the various special fees that system imposes upon practitioners- as practitioners- and upon each case ON TOP of the court costs normal in every case manually filed. Jurisprudence according to Aldous Huxley.

  2. Any attorneys who practice in federal court should be able to say the same as I can ... efiling is great. I have been doing it in fed court since it started way back. Pacer has its drawbacks, but the ability to hit an e-docket and pull up anything and everything onscreen is a huge plus for a litigator, eps the sole practitioner, who lacks a filing clerk and the paralegal support of large firms. Were I an Indiana attorney I would welcome this great step forward.

  3. Can we get full disclosure on lobbyist's payments to legislatures such as Mr Buck? AS long as there are idiots that are disrespectful of neighbors and intent on shooting fireworks every night, some kind of regulations are needed.

  4. I am the mother of the child in this case. My silence on the matter was due to the fact that I filed, both in Illinois and Indiana, child support cases. I even filed supporting documentation with the Indiana family law court. Not sure whether this information was provided to the court of appeals or not. Wish the case was done before moving to Indiana, because no matter what, there is NO WAY the state of Illinois would have allowed an appeal on a child support case!

  5. "No one is safe when the Legislature is in session."

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