Stanray Corp. v. Horizon Const., Inc., 2--475A96

Citation168 Ind.App. 164,342 N.E.2d 645
Decision Date23 February 1976
Docket NumberNo. 2--475A96,2--475A96
PartiesSTANRAY CORPORATION, Appellant, v. HORIZON CONSTRUCTION, INC., et al., Appellees.
CourtCourt of Appeals of Indiana

James R. McClarnon, Michael B. Cracraft, Smith, Morgan & Ryan, Indianapolis, for appellant.

James E. Dowling, Rocap Rocap Reese & Young, Raymond Good, Good & Bertram, Ben F. Hatfield, Jr., Coates, Hatfield & Calkins, Indianapolis, Stephen W. Cook, Campbell Malan Kyle Proffitt & Cook, Noblesville, for appellees.

SULLIVAN, Judge.

Plaintiff-appellant Stanray Corporation (Stanray) initiated this action on May 31, 1972 when it filed its Complaint to Foreclose Mechanic's Lien against defendant Horizon Construction, Inc. (Horizon). The lien was claimed on improved 'Lot Number Forty-four (44) in Broadmoore Terrace Addition, Revised, an Addition to the City of Indianapolis' (Lot 44), owned by Horizon. Stanray alleged that it had furnished Horizon with certain building materials for the latter's construction of the house of Lot 44 during 1970, and 1971. Various other creditors of Horizon ventually became parties, all claiming interests in the subject realty, some by mortgage and others by mechanics' liens arising from Horizon's building of the house. When the dust settled on November 8, 1974, all the claimed mechanics' liens were declared to be invalid, the subject realty was ordered sold, and the proceeds of the sale ordered to go first to appellee Union Federal Savings and Loan Ass'n. (Union), as the holder of a valid superior mortgage lien on Lot 44, with any remainder to go to Wainwright Bank & Trust Company (Wainwright) as the holder of a valid mortgage lien junior to Union. Of the competing creditors, only Stanray has appealed, alleging that:

1. The trial court erred as a matter of law in finding Stanray's lien to be invalid in that said finding is contrary to the court's own entry of April 25, 1973.

2. The court's finding that Stanray's notice of lien was not timely filed is contrary to law and unsupported by the evidence.

3. The court erred in finding that Stanray's notice of intent to hold lien was not in the form required by law.

4. The order of priorities among the Horizon's competing creditors as found by the trial court is contrary to law.

LIEN INVALIDITY

Resolution of Stanray's first allegation of error requires a brief recitation of the procedural history of this case:

Initially this case was simply an action by a materialman (Stanray) against the owner-builder (Horizon), seeking foreclosure of a mechanic's lien. However, as the action proceeded, the case became increasinbly complex as more and more of Horizon's creditors asserted claims to Lot 44. As of April of 1973, a total of five materialmen were parties, all asserting liens arising from Horizon's construction of the house on Lot 44, with each seeking foreclosure of its lien and alleging that its lien was superior to any other claim to the realty. 1 Competing with the materialmen and each other were the alleged mortgagees, Union and Wainwright, who, like the materialmen, alleged that their respective interests in Lot 44 were superior to all other claims. Union impleaded the four guarantors of the note secured by their mortgage alleging the guarantors' personal indebtedness. Horizon did not respond to any of the claims of its creditors, and the record reveals that Horizon was placed in receivership prior to April of 1973.

By April of 1973, all of Horizon's creditors had filed motions for summary judgment on their respective claims. On April 25, undoubtedly in an attempt to simplify the lawsuit by disposing of certain issues and eliminating from the contest certain parties, the trial court entered a 'Judgment and Decree of Foreclosure.' In this entry, the court made, inter alia, the following findings and issued the following orders:

'And upon hearing for summary judgment, . . . summary judgments for said moving parties are now granted against Horizon Construction, Inc. but as to Union Federal Savings and Loan Association, Summary Judgment is also granted against . . . (the) guarantors of Horizon Construction, Inc.

And the Court further finds that the mortgage of Union Federal as against all of the parties to this action is a valid and subsisting lien (with priority to be determined at a later date) as of its date upon the fee simple title to the real estate therein and herein described; that the lien of said mortgage in the sum of $30,798.26 is superior in equity to the right, title and interest and claims of the Horizon Construction, Inc., and the guarantors and J & J Floor Covering Co., Inc., Broad Ripple Heating & Air Conditioning Co., Inc., and each of them, in and to said real estate; that said mortgage ought to be foreclosed as prayed for in the cross-complaint of Union Federal and said real estate sold by the Sheriff of Marion County. . . ..

And now the Court further finds that Stanray Corporation (D/B/A Burnet-Binford Lumber Company), Linaburry Brick & Block Co., Inc., and Brooks Guttering, Inc. each hold a mechanic's lien upon the hereinabove described real estate by virtue of the mechanic's liens and notices thereof as set forth in their complaint and cross-complaints all of which are valid as against Horizon Construction, Inc. and defendants J & J Floor Covering Co., Inc., Broad Ripple Heating and Air Conditioning Co., Inc., and Milton H. Slossen, Receiver; but among such valid lienholders and Union Federal, the issue of validity and priority shall be determined by this Court at a later date.

And the Court further finds that there is now due and unpaid on said mechanic's lien in favor of Stanray Corporation the sum of $7,461.77 in principal, the sum of $945.19 for interest to March 31, 1973, and the sum of $1,000.00 as fee for plaintiff's attorneys herein, making an aggregate sum due and payable of $9,406.96 which sum plaintiff is entitled to recover herein against the defendant, Horizon Construction, Inc., in rem and said lien should be foreclosed.

'IT IS THEREFORE CONSIDERED, ORDERED ADJUDGED AND DECREED by the Court that the plaintiff have and recover a judgment of the defendant, Horizon Construction, Inc., in rem, in the sum of $9,406.96 all without relief from valuation and appraisement laws, together with all costs of this action.

IT IS FURTHER ORDERED, ADJUDGED AND DECREED by the Court that the mortgage liens and mechanic's liens of all parties on the real estate hereinafter described be and the same are hereby foreclosed and the . . . the said real estate (Lot 44) . . . shall be sold by the Sheriff of Marion County, . . . and the proceeds thereof to be applied as follows:

1. To the payment of the costs of this action and the costs and expenses of said sale;

2. To the payment of the various judgment holders set forth below, but not in the order set forth,

The order of priority being reserved for further order of the Court. The Sheriff is ordered to hold all proceeds from said sale, after payment of costs, be such proceeds money or judgment bid of Union Federal Savings and Loan Association or part money and judgment bid of other judgment holders until this Court further orders the priority of distribution among said judgment holders.

                  a. Union Federal Savings
                     and Loan Association     $30,798.26
                  b. Stanray Corporation        9,406.96
                  c. Wainwright Bank &amp
                     Trust Co.                  9,003.32
                  d. Linaburry Brick & Block
                     Co., Inc.                  2,417.75
                  e. Brooks Guttering, Inc.       506.93"
                (Emphasis supplied)
                

Following the April entry, the trial court conducted a hearing and heard arguments on 'the issue of validity and priority' among 'such valid lienholders (Stanray, Linaburry and Brooks), and Union Federal . . .' This controversy was settled by way of the entry, on November 8, 1974, of a 'Decree for Distribution of Proceeds' in which the court found:

'1. That the Mechanics' liens filed by Charles R. Brooks (Brooks' Guttering), Stanray Corporation, and Linaburry Brick & Block Co., Inc. are not valid liens pursuant to the mechanic's lien law of the State of Indiana.

'a. Charles R. Brooks did not file his lien within sixty (60) days of the last authorized work.

b. Stanray Corporation did not file its lien within sixty (60) days after the last authorized delivery of material actually used in the subject real estate, and the mechanic's lien notice was not in the form as required by law.

c. Linaburry Brick & Block Co., Inc.'s mechanic's lien notice was not filed in the form as required by law.

2. That the Mortgage lien of Union Federal Savings and Loan Association is first and prior to all other claimants, for the amount of its Judgment, $30,798.26, with interest at eight percent (8%) per annum from and after March 31, 1973.' (Emphasis supplied).

The crux of Stanray's first allegation of error levelled at the court's November 8, 1974 'Decree' is stated in its brief as follows:

'The lien of Stanray was earlier (in the 1973 'Judgment and Decree of Foreclosure') decreed to be valid, judgment was awarded, in rem, against defendant Horizon, and Stanray's lien was foreclosed. It was a finding of validity for all purposes. The lien of Stanray could not be said to be valid for one purpose and invalid for another.' (Emphasis supplied).

Stanray's substantive argument is no doubt correct. A purported mechanic's lien is valid only if it meets all statutory requirements necessary to its creation. Gooch v. Hiatt (1975), Ind.App., 337 N.E.2d 585. If the lien meets all the statutory requirements, see Ind.Ann.Stat. 32--8--3--1, 32--8--3--3 (Burns Code Ed. 1973), the lien is necessarily 'valid' as against any party contesting its legal existence, whether property owner or competing creditor.

The question of a purported lien's 'validity' is conceptually distinct from the issue of its 'priority' as against competing creditors. The mechanic who...

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