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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. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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