Serv. Steel Warehouse Co. v. U.S. Steel Corp.
| Decision Date | 03 May 2021 |
| Docket Number | Court of Appeals Case No. 20A-CC-1643 |
| Citation | 171 N.E.3d 115 |
| Court | Indiana Appellate Court |
| Parties | SERVICE STEEL WAREHOUSE CO., L.P., Appellant-Plaintiff, v. UNITED STATES STEEL CORP., Appellee-Defendant. |
Attorney for Appellant: Joshua W. Casselman, Rubin & Levin, P.C., Indianapolis, Indiana
Attorney for Appellee: Kevin E. Steele, Burke Costanza & Carberry LLP, Valparaiso, Indiana
[1] In this interlocutory appeal, we are asked to determine whether an off-site fabricator on a construction project is a subcontractor or a material supplier under Indiana's mechanic's lien statute. Our decision impacts whether the fabricator's material supplier has a valid mechanic's lien against the project site in light of Indiana case law prohibiting supplier-to-supplier-based liens.
[2] We hold that Indiana's mechanic's lien statute does not require on-site labor for subcontractor status. The essential feature making one a subcontractor, rather than a material supplier, is the performance of a definite and substantial portion of the project's prime contract. We reverse the trial court's entry of partial summary judgment and remand for further proceedings.
[3] In 2008, United States Steel Corp. (U.S. Steel) contracted with Carbonyx, Inc. (Carbonyx) to design and build two carbon alloy synthesis facilities (the Project) in Gary, Indiana. The facilities—known as C Module and D Module—were intended to produce a cheaper alternative to coke, a high-carbon fuel used in the steelmaking process. Carbonyx contracted with Steven Pounds d/b/a Troll Supply (Troll Supply) to fabricate approximately 75% of the steel components needed for the Project. Troll Supply contracted with CPN Ventures LLC d/b/a Texas Steel (Texas Steel) to assist with its fabrication work.
[4] Troll Supply's fabrication work involved altering (e.g. , cutting, bending, welding, riveting) thousands of structural steel pieces (e.g. , columns, beams, plates, pipes) to build infrastructure components needed for the Project (e.g. , trusses, platforms, stairs, ductwork). Each component weighed anywhere from 1,000 to 260,000 pounds, many were very large, and some spanned 130 feet when assembled. The work required thousands of labor hours, and the Project's carbon alloy synthesis process could not have functioned without the components Troll Supply fabricated.
[5] Troll Supply purchased approximately 90% of the structural steel pieces needed for the fabrication work from Service Steel Warehouse Co., L.P. (Service Steel). In nearly all instances, Service Steel shipped the steel pieces directly to Texas Steel's facility in Denton, Texas, where the fabrication work was performed. Once the work was completed, the fabricated components were shipped either to U.S. Steel's Project Site in Gary, Indiana, or to Carbonyx's staging facility in Catoosa, Oklahoma. At the latter, larger structures were assembled before being shipped to the Project site. Ultimately, all of the components and structures fabricated from steel supplied by Service Steel were delivered to the Project site.
[6] C Module was completed and became operational in late 2012. However, U.S. Steel permanently shut down the facility in 2014 for economic reasons. Around the same time, U.S. Steel halted construction of D Module, which was never completed.
[7] At some point, a dispute between U.S. Steel and Carbonyx resulted in U.S. Steel agreeing to pay Troll Supply up to $1,780,249 for its fabrication work. At least 65% of this sum was paid in exchange for Troll Supply's release of any and all claims against U.S. Steel and its real estate. But Troll Supply allegedly did not pay Service Steel for $563,084 of the steel pieces it supplied for fabrication. Therefore, within ninety days of the last date Service Steel supplied Troll Supply with steel, Service Steel recorded a mechanic's lien against U.S. Steel's Project site.
[8] Service Steel later filed suit against U.S. Steel, asserting claims of unjust enrichment, property owner liability, and foreclosure on mechanic's lien.2 U.S. Steel moved for summary judgment on Service Steel's foreclosure claim, challenging the validity of Service Steel's mechanic's lien under Indiana law. Following a hearing on the motion, the trial court entered partial judgment in favor of U.S. Steel.3 Service Steel now appeals.
[9] Although the trial court did not enter findings of fact and conclusions of law, the parties agree that the court found both Service Steel and Troll Supply to be material suppliers under Indiana's mechanic's lien statute. The parties also agree that the statute does not grant lien rights to a remote material supplier, one who merely supplies materials to another material supplier on a project.
[10] Service Steel argues that the supplier-to-supplier prohibition does not apply to its mechanic's lien because Troll Supply was a subcontractor on the Project, not a material supplier. Accordingly, Service Steel contends the trial court erred in entering summary judgment in favor of U.S. Steel on Service Steel's mechanic's lien foreclosure claim.
[11] When reviewing the grant of a summary judgment motion, we apply the same standard applicable to the trial court. Wagner v. Yates , 912 N.E.2d 805, 808 (Ind. 2009). Summary judgment is proper only when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). We do not weigh the evidence but will consider the facts in the light most favorable to the non-moving party. Wagner , 912 N.E.2d at 808. We must reverse the grant of a summary judgment motion if the record discloses an incorrect application of the law to those facts. Id.
[1] Mechanic's liens are pure creatures of statute. Premier Investments v. Suites of Am., Inc. , 644 N.E.2d 124, 127 (Ind. 1994). They strive to prevent the inequity of a property owner enjoying the benefits of labor or materials provided by others without compensation. Id. at 130. When manual laborers and material suppliers are not paid, their recourse as unsecured creditors is minimal. Id. But mechanic's lien laws generally make the owner of improved property an involuntary guarantor of payments for the reasonable value of improvements made. Id.
[2] Indiana's mechanic's lien statute is codified as Indiana Code § 32-28-3-1. In pertinent part, this statute entitles the following class of individuals to a mechanic's lien:
A contractor, a subcontractor, a mechanic, a lessor leasing construction and other equipment and tools, whether or not an operator is also provided by the lessor, a journeyman, a laborer, or any other person performing labor or furnishing materials[4 ] or machinery, including the leasing of equipment or tools, for ... the erection, alteration, repair, or removal of ... a house, mill, manufactory, or other building[.]
Ind. Code § 32-28-3-1(a)(1)(A).
[3] Because lien rights are in derogation of common law, statutory provisions relating to the persons entitled to claim a mechanic's lien are to be narrowly construed. Premier , 644 N.E.2d at 127. Indiana Code § 32-28-3-1(a) "expressly sets forth those persons entitled to mechanic's liens," and the list is "exclusive." Id. at 127-28. A person who does not fall within one or more of the listed categories is not entitled to a lien. Id. The inquiry, however, focuses upon the nature of the services and materials provided rather than the identity of the provider. Haimbaugh Landscaping, Inc. v. Jegen , 653 N.E.2d 95, 101 (Ind. Ct. App. 1995).
[4] Here, there is no dispute that Service Steel is a material supplier under Indiana's mechanic's lien statute. The parties’ dispute concerns the status of Troll Supply, to whom Service Steel supplied materials. While material suppliers are generally within the class protected by Indiana Code § 32-8-3-1, the statute has not been construed "to permit a lien by those parties whose contribution to the effort is remote." City of Evansville v. Verplank Concrete & Supply, Inc. , 400 N.E.2d 812, 818 (Ind. Ct. App. 1980).
As a general rule, a mechanic's lien must arise out of the express or implied consent of the owner or person whose interest in the realty is proposed to be bound by the lien. Thus, materialmen who directly supply the owner are permitted a lien upon the property. The law considers the immediate, or general, contractor to be the agent of the owner insofar as it is reasonably necessary to carry out the contract. Thus, materialmen who supply a contractor are permitted to file a lien. A subcontractor is within this chain of authority and may contract with materialmen for supplies necessary to the performance of his portion of the general contract. However, materialmen supplying others who must themselves be considered materialmen have traditionally been considered outside the ambit of the statute.
Id. at 818-19 (internal citations omitted).
[5] This Court has noted that the prohibition of supplier-to-supplier-based liens "promote[s] honesty and fair dealing among the parties to a construction contract." R.T. Moore Co. v. Slant/Fin Corp. , 966 N.E.2d 636, 642 (Ind. Ct. App. 2012). If the supplier of another supplier has a right to a lien, any supplier—no matter how far removed from a project's owner—has the same right. Caulfield v. Polk , 17 Ind. App. 429, 46 N.E. 932, 934 (Ind. Ct App. 1897). Thus, without the supplier-to-supplier prohibition, a distant supplier could assert a lien against an owner with whom it has had no contact by showing only that it furnished material for a project and that the material was used therein. Id.
[6] Service Steel contends its mechanic's lien is not barred by the supplier-to-supplier prohibition because Troll Supply was a subcontractor, not a materialman, under Indiana's mechanic's lien statute. U.S. Steel takes the opposite position.
[7] In defining who...
To continue reading
Request your trial
-
Serv. Steel Warehouse Co. v. U.S. Steel Corp.
...It found the mechanic's lien statute does not require subcontractors to perform on-site work. Serv. Steel Warehouse Co., L.P. v. U.S. Steel Corp. , 171 N.E.3d 115, 122 (Ind. Ct. App. 2021), vacated. It then defined a "subcontractor" under the statute "as one who performs a definite, substan......