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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. I grew up on a farm and live in the county and it's interesting that the big industrial farmers like Jeff Shoaf don't live next to their industrial operations...

  2. So that none are misinformed by my posting wihtout a non de plume here, please allow me to state that I am NOT an Indiana licensed attorney, although I am an Indiana resident approved to practice law and represent clients in Indiana's fed court of Nth Dist and before the 7th circuit. I remain licensed in KS, since 1996, no discipline. This must be clarified since the IN court records will reveal that I did sit for and pass the Indiana bar last February. Yet be not confused by the fact that I was so allowed to be tested .... I am not, to be clear in the service of my duty to be absolutely candid about this, I AM NOT a member of the Indiana bar, and might never be so licensed given my unrepented from errors of thought documented in this opinion, at fn2, which likely supports Mr Smith's initial post in this thread: http://caselaw.findlaw.com/us-7th-circuit/1592921.html

  3. When I served the State of Kansas as Deputy AG over Consumer Protection & Antitrust for four years, supervising 20 special agents and assistant attorneys general (back before the IBLE denied me the right to practice law in Indiana for not having the right stuff and pretty much crushed my legal career) we had a saying around the office: Resist the lure of the ring!!! It was a take off on Tolkiem, the idea that absolute power (I signed investigative subpoenas as a judge would in many other contexts, no need to show probable cause)could corrupt absolutely. We feared that we would overreach constitutional limits if not reminded, over and over, to be mindful to not do so. Our approach in so challenging one another was Madisonian, as the following quotes from the Father of our Constitution reveal: The essence of Government is power; and power, lodged as it must be in human hands, will ever be liable to abuse. We are right to take alarm at the first experiment upon our liberties. I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations. Liberty may be endangered by the abuse of liberty, but also by the abuse of power. All men having power ought to be mistrusted. -- James Madison, Federalist Papers and other sources: http://www.constitution.org/jm/jm_quotes.htm RESIST THE LURE OF THE RING ALL YE WITH POLITICAL OR JUDICIAL POWER!

  4. My dear Mr Smith, I respect your opinions and much enjoy your posts here. We do differ on our view of the benefits and viability of the American Experiment in Ordered Liberty. While I do agree that it could be better, and that your points in criticism are well taken, Utopia does indeed mean nowhere. I think Madison, Jefferson, Adams and company got it about as good as it gets in a fallen post-Enlightenment social order. That said, a constitution only protects the citizens if it is followed. We currently have a bevy of public officials and judicial agents who believe that their subjectivism, their personal ideology, their elitist fears and concerns and cause celebs trump the constitutions of our forefathers. This is most troubling. More to follow in the next post on that subject.

  5. Yep I am not Bryan Brown. Bryan you appear to be a bigger believer in the Constitution than I am. Were I still a big believer then I might be using my real name like you. Personally, I am no longer a fan of secularism. I favor the confessional state. In religious mattes, it seems to me that social diversity is chaos and conflict, while uniformity is order and peace.... secularism has been imposed by America on other nations now by force and that has not exactly worked out very well.... I think the American historical experiment with disestablishmentarianism is withering on the vine before our eyes..... Since I do not know if that is OK for an officially licensed lawyer to say, I keep the nom de plume.

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