The Trusted Adviser April/May 2011 | Volume 4 • Number 3



Mechanic's Liens

Capital Drywall Supply v Jai Jagdish Inc, 934 NE2d 1193 (Ind Ct App, 2010).

Facts:Ranjan J. Amin (Amin) owned a real estate project (Real Estate) in South Bend, Indiana. On February 28, 2008, he transferred the Real Estate to Jai Jagdish, Inc. (JJI) via warranty deed, which was recorded on March 12, 2008.

Two subcontractors, Old Fort Building Supply Co., Inc. (Old Ford) and Capital Drywall Supply, Inc. (Capital), provided supplies for a project to the general contractor, Complete Construction and Demolition, Inc. Neither subcontractor was paid. On September 9, 2008, an Old Fort employee, Pamela Hartman, requested the name of the project owner from the county auditor's office. According to Hartman's affidavit, she was told the owner was Amin. On April 25, 2008, a Capital employee named Hollie Flint requested the name of the owner from the county assessor's office. According to Flint's affidavit, she was told the owner was "Rahan" Amin.

Old Ford and Capital subsequently filed notices of intent to hold mechanic's liens. On January 3, 2009, D & B Plumbing, Inc. (D & B) filed a complaint to foreclose on a mechanic's lien, naming Amin, JJI, Old Fort and Capital as defendants. The parties filed answers and cross-motions; eventually, Old Fort filed a motion for summary judgment on its foreclosure complaint and JJI and Amin filed motions for summary judgment against both Old Fort and Capital.

On January 5, 2010, JJI and Amin filed a motion to strike portions of the Hartman and Flint affidavits as hearsay. The court granted this motion in part, allowing in some of the disputed testimony only to demonstrate the contacts made by the employee, but not to consider the information allegedly provided to the employee. The court also granted JJI and Amin's motions for summary judgment. Old Fort and Capital appealed.

Holding:Affirmed. First, the court of appeals considered Old Fort's argument that the trial court erred in not considering the affidavits as evidence of what the county offices told the company employees. Testimony is hearsay if it is an out-of-court statement offered to "prove the truth of the matter asserted." Old Fort argued that the county's statement that Amin was the owner of the Real Estate was not offered to prove the truth of that statement, because Amin was not, in fact, the owner at that time. Rather, the statement was offered to show the company's diligence and reasonable reliance. However, the court held that consideration of the testimony for that purpose would not have helped Old Fort's case due to its review of the summary judgment decision, so any error by the trial court was harmless error.

Next, the court of appeals considered and rejected Old Fort and Capital's assertion that they should not have lost on summary judgment because their notices of intent to file a mechanic's lien substantially complied with the statutory requirements and thus were valid. Old Fort and Capital relied on telephone conversations with county record keepers when preparing their notices of intent to hold a mechanic's lien. Such a notice must include the name of the owner, in substantially similar form to the most recent entry in the county auditor's transfer books. As a product of statute and not the common law, the requirements for filing a mechanic's lien are strictly construed. The filer of the notice must have personal knowledge of the matter and cannot rely on a telephone conversation to obtain the owner's identity.

Nevertheless, Old Fort and Capital argued that listing Amin instead of JJI created no prejudice because Amin was the president of JJI and he received actual notice of their mechanic's liens. The court of appeals disagreed, because listing a different name created a great deal of prejudice for third party buyers and money lenders. Therefore, regardless of the information provided by the county offices by telephone, both Old Fort and Capital failed to substantially comply with the strictly construed requirements of the mechanic's lien statute.






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[Last update: 4-22-11]