September 2011 Vol. 4, No. 8



Mechanic's Liens; Slander of Title

Walsh & Kelly, Inc v International Contractors, Inc, 943 NE2d 394 (Ind Ct App, 2011).

Facts: Signature, a real estate developer, contracted with International Contractors, Inc. (International) to complete excavation work and install roads and curbs in a subdivision. International subcontracted Walsh & Kelly, Inc. (Walsh) to install the roads and curbs. All bills from International to Signature were paid in full by Signature. However, International only paid a portion of the bills from Walsh, with a balance of $60,109.50 remaining.

Subsequently, Walsh filed a mechanic's lien on Signature's real estate. In response, Signature requested Walsh to release the lien because Walsh had not done any work on the real estate and because Signature paid all sums due to International, it could not legally be subject to a lien arising out of a debt between International and Walsh. On February 20, 2006, Signature entered into a collateral assignment with International to secure payment to Signature for any indebtedness owed by International to Signature for International's failure to pay Walsh.

On March 30, 2006, Walsh filed a breach of contract against International and a complaint to foreclose mechanic's lien against Signature. Signature counterclaimed for slander of title and conversion against Walsh and a cross-claim for indemnity and damages against International. On January 24, 2007, Signature filed a motion for partial summary judgment because the mechanic's lien was neither valid nor enforceable. Walsh then filed a cross-motion for partial summary judgment. On July 2, 2007, the trial count granted Signature's partial summary judgment but denied Walsh's motion. At trial on May 3, 2010, the court found for Signature's slander of title and damages claims against Walsh and refused to consider the collateral agreement between International and Signature as fully indemnifying Signature. Walsh appealed.

Holding:Affirmed. First, the collateral agreement did not fully indemnify Signature for its loss because Signature had not chosen to recover from International under the collateral agreement. Instead, Signature chose to recover its loss from Walsh and nothing in the collateral agreement prevented this. Had Signature chosen to collect damages under the collateral agreement, then it would be barred from collecting damages from Walsh because that would constitute double recovery. Second, Walsh was liable to Signature for slander of title because Walsh acted with reckless disregard for the truth when it filed an action to foreclose the mechanic's lien after receiving notice that it was not legally entitled to do so. Because Walsh &€œknew of should have known&€ its actions were not permitted by the mechanic's lien statute, Walsh acted with malice sufficient to support a claim for slander of title.

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[Last update: 9-21-11]