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A Richmond bank’s mortgage interest, in its entirety, takes priority in a complex land project case involving multiple developers, contractors and the city of Westfield, the Court of Appeals of Indiana ruled Friday.
According to court records, EdgeRock Development LLC contracted with C.H. Garmong & Son Inc., Fox Contractors Corp. and Signworks to complete the “Trails of Westfield,” a commercial building project along State Road 32. The project included work that was to be completed on five different parcels of land, which were owned by three different entities.
As part of the project, the city contracted with EdgeRock to build 175th Street and install related infrastructure, with the project funded, at least in part, by road impact funds issued by the city.
EdgeRock owned two of the parcels, which were secured by a mortgage that had been executed in favor of First Bank Richmond.
ZPS Westfield LLC owned two of the parcels and contracted directly with EdgeRock for the work that was to be completed on its land in connection with the project. ZPS paid its financial obligations outlined in its contract with EdgeRock in full.
EdgeRock, however, failed to satisfy its financial obligations under its contracts with Garmong, Fox and Signworks, all three of which sought to encumber certain parcels connected with the project with mechanic’s liens and breach-of-contract actions.
Signworks, Fox and Garmong moved for partial summary judgment on Feb. 12, 2021. Also, ZPS and EdgeRock filed amended motions for partial summary judgment.
The Hamilton Superior Court issued an order granting Garmong’s motion for partial summary judgment and denying EdgeRock’s motion for partial summary judgment. It also issued an order granting in part and denying in part ZPS’s motion for partial summary judgment.
After finding that the mechanic’s liens filed in connection with the project were valid and had priority over a portion of First Bank’s mortgage interest in EdgeRock’s property, the trial court entered judgment against EdgeRock and in rem judgments against EdgeRock and ZPS’s property.
The trial court also determined that EdgeRock was entitled to recover certain RIF fees that had been paid in connection to the project by the city.
Additionally, the court found that ZPS was entitled to summary judgment on the unjust enrichment claims brought by Garmong and Signworks. It found that summary judgment relating to the validity of Garmong and Fox’s mechanic’s liens filed against ZPS’s property was improper because issues of material fact remained as to whether the liens were valid, specifically whether the liens were overstated.
The trial court further found that ZPS was entitled to summary judgment on Garmong, Signworks and Fox’s requests for attorney fees, ruling it was undisputed that ZPS had paid EdgeRock “all that it was obligated to pay under the terms of the Development Agreement,” and, as a result, “Garmong, Signworks, and Fox may not recover attorney’s fees” from ZPS.
Finally, the trial court issued orders granting in part and denying in part Fox’s motion for partial summary judgment and granting Signworks’ motion for partial summary judgment.
ZPS and EdgeRock challenged the trial court’s determinations regarding the validity of Garmong’s and Fox’s mechanic’s liens.
ZPS also challenged the inclusion of uninstalled material in Signworks’ mechanic’s lien against its property, as well as the propriety of the prejudgment interest awarded to Signworks.
For its part, First Bank challenged the trial court’s determination that the mechanic’s liens had priority over part of its recorded mortgage interest.
Finally, EdgeRock challenged various summary judgment rulings made by the trial court, and multiple parties challenged the trial court’s determination that EdgeRock is entitled to receive the RIF funds.
In a lengthy opinion, the Court of Appeals partially affirmed and reversed, remanding the case with several instructions.
The appellate court ruled that both Garmong’s and Fox’s mechanic’s liens against ZPS’s and EdgeRock’s property are invalid and that the cost of uninstalled material should not have been included in Signworks’ mechanic’s lien on ZPS’s property. Also, ZPS should not have been ordered to pay prejudgment interest to Signworks.
According to the appellate court, to the extent that priority questions remain, First Bank’s mortgage interest, in its entirety, has priority, and the trial court did not err in making the challenged summary judgment rulings.
Further, distribution of the RIF funds is stayed pending a ruling by the Hamilton Commercial Court in a related matter regarding the priority of the secured interests in the funds, and any future ruling from the appellate court regarding the RIF funds should be consistent with that of the Hamilton Commercial Court, the opinion stated.
“We further conclude that the trial court erred in denying First Bank’s request for attorney’s fees but that no party is entitled to an award of appellate attorney’s fees. In addition, we note that EdgeRock has not challenged the judgments against it relating to the breach-of-contract claims brought by Garmong, Fox, and Signworks, and our conclusions relating to the validity of the mechanic’s liens do not alter those judgments against EdgeRock in any way,” the opinion continued.
Judge Cale Bradford wrote the opinion for the appellate court.
According to Bradford, one question before the appellate court is, when work is completed on multiple parcels of land, whether a mechanic’s lien can encompass all costs associated with the project as a whole or must be restricted in some fashion as it relates to the encumbered parcel.
“The parties dispute the meaning of the term ‘connected’ with Garmong and Fox requesting that we define the term ‘connected’ broadly and ZPS and EdgeRock requesting that we apply a narrower definition of the term, i.e., a definition that would require common ownership of the land in question,” he wrote.
The COA rejected Garmong’s reliance on West v. Dreher, 73 Ind. App. 133, 136, 126 N.E. 688, 689 (1920), and Fox’s reliance on Inter-City Contractors Services, Inc. v. Consumer Building Industries, Inc., 175 Ind. App. 665, 373 N.E.2d 903 (1978).
Instead, the court agreed with with ZPS and EdgeRock’s assertions that the cases cited by Garmong and Fox actually supported the position that applicable Indiana authority applies a narrower interpretation of the term “connected” as it requires common ownership.
The appellate court then turned to the question of whether the trial court erred in determining that Garmong’s and Fox’s mechanic’s liens against ZPS and EdgeRock’s property were valid.
ZPS pointed out that despite having been given the opportunity to do so, neither Fox nor Garmong was able to prove the value of the work actually performed on ZPS’s property.
The appellate court agreed.
“Based on the evidence presented to the trial court, we conclude that Garmong’s mechanic’s lien was overstated such that it included costs associated with work that had not been completed on ZPS’s property,” Bradford wrote.
The appellate court also agreed with ZPS that given the evidence demonstrating that Fox had known when it had asserted the lien that the lien had included costs associated with work that was not done on ZPS’s property, its overstatement was intentional.
“Similar to our conclusion relating to Garmong, we conclude that the evidence demonstrates that Fox’s mechanic’s lien included work on property that ZPS did not own, and that Fox had known as much when it had filed the lien. As such, we conclude that Fox’s knowing overstatement rendered its mechanic’s lien against ZPS’s property void,” Bradford wrote.
As for EdgeRock, “We conclude that the rationale for our conclusions relating to Garmong’s and Fox’s mechanic’s liens on ZPS’s property apply equally to the liens on EdgeRock’s property,” the appellate judge wrote. “We further conclude, therefore, that the liens were overstated.”
With the appellate court’s conclusion that Garmong’s and Fox’s mechanic’s liens against EdgeRock’s property are invalid, Bradford noted there was no longer any question as to whether the liens have priority over any portion of the First Bank Mortgage.
“Moreover, it is clear under Indiana law that the First Bank Mortgage has priority over the subsequently-entered judgments entered against EdgeRock in connection with Garmong’s, Fox’s, and Signworks’s breach-of-contract claims,” Bradford wrote, citing Huntingburg Prod. Credit Ass’n v. Griese, 456 N.E.2d 448 (Ind. Ct. App. 1983).
On remand, the appellate court instructed the trial court reduce Signworks’ mechanic’s lien to eliminate the cost of the uninstalled materials; remove the award of prejudgment interest from Signworks’ mechanic’s lien; grant First Bank mortgage priority over all remaining encumbrances on EdgeRock’s property that are at issue in the case; and enter an amended judgment.
Bradford reiterated that the appellate court’s conclusions do not affect the monetary judgments entered against EdgeRock on Garmong, Fox and Signworks’ breach-of-contract claims, and those judgments remain in effect.
Judges Patricia Riley and Leanna Weissmann concurred.
The case is EdgeRock Development, LLC; ZPS Westfield, LLC; First Bank Richmond v. C.H. Garmong & Son, Inc. and Signworks, Inc.; and Fox Contractors Corp., and Fox Contractors Corp., 22A-PL-1968.
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