Bailey v. Holliday

806 N.E.2d 6, 2004 Ind. App. LEXIS 588, 2004 WL 737248

• Court: Indiana Court of Appeals
• Decided: April 7, 2004
• Docket: 22A04-0301-CV-33
• Status: Published

Opinions

OPINION

SHARPNACK, Judge.

In this interlocutory appeal, Larry Bailey ("Contractor") appeals the trial court's order releasing the mechanic's lien on real property of Carlus Holliday and Steve Goodman (collectively referred to as "Owners") and the trial court's denial of Contractor's motion to correct error. Contractor raises one issue, which we restate as whether the trial court abused its discretion when it released the mechanic's lien on Owners' property. We reverse.

The relevant facts follow. Owners entered into a written contract with Contractor for the installation of drywall in their residence. After Contractor completed drywall work in the house, he sent an invoice for $5,400 to Owners. Owners disputed the amount and did not pay the invoice.

Contractor filed a notice of intention to hold a mechanic's lien for $5,400 on Owners' real estate with the Floyd County Recorder's Office and later filed a complaint to foreclose the mechanic's lien. Owners filed a written undertaking pursuant to Ind.Code § 32-28-3-11 and paid $5,400 to the trial court clerk. That same day, the trial court ordered that the written undertaking be approved and that the mechanic's lien against Owners' property be released. The trial court's order provided:

COMES NOW the Court, upon [Owners'] Written Undertaking Pursuant to 1.C. 32-28-8-11. ...

And the Court, being duly advised in the premise, grants and approves said written undertaking, acknowledging payment by [Owners] of the amount of FIVE THOUSAND FOUR HUNDRED AND NO/100 ($5,400.00) DOLLARS to be held in the office of the Clerk until further Order of this Court pursuant to I.C. 32-28-8-11; and

IT IS FURTHER ORDERED AND DECREED the lien of [Contractor], as set out in his Complaint, and of record in the office of the Recorder of Floyd County, Indiana at 1200207869, be and is hereby discharged and released of and from the real estate of [Owners] as described in the lien and [Contractor's] Complaint; and

IT IS FURTHER ORDERED [Owners] are personally bound to pay any judgment rendered by this Court in said proceeding.

Appellant's Appendix at 6. Contractor filed a motion to correct error, and the trial court denied that motion.

The sole issue is whether the trial court abused its discretion when it released the mechanic's lien on Owners' property. The trial court abuses its discretion if its decision is clearly against the logic and effect of the facts and cireum-stances before it. McCullough v. Archbold Ladder Co., 605 N.E.2d 175, 180 (Ind.1993).

Contractor argues that the trial court erred by releasing the mechanic's lien from Owners' property because Owners written undertaking did not comply with Ind.Code § 32-28-8-11 (Supp.2008), which provides:

(a) In an action to foreclose a lien:

(1) the defendant or owner of the property subject to the lien; or

(2) any person having an interest in the property subject to the lien, including a mortgagee or other lHienholder;

may file in the action a written undertaking with surety to be approved by the court.

(b) An undertaking filed under this seetion must provide that the person filing it will pay any judgment that may be recovered in the action to foreclose the lien, including costs and attorney's fees allowed by the court, if the claim on which the judgment is founded is found by the court to have been a lien on the property at the time the action was filed.

(c) If an undertaking is filed and approved by the court:

(1) the court shall enter an order releasing the property from the lien; and

(2) the property shall be discharged from the lien.

Specifically, Contractor argues that Owners' undertaking did not comply with the statute because the surety did not include any potential costs and attorney fees that he may recover if the trial court finds that his mechanic's lien was valid. We agree.

Here, Owners filed their written undertaking and paid $5,400 to the trial court clerk. Owners' written undertaking provided:

1. That pursuant to I.C. 32-28-8-11, and while disputing the nature and the amount of the lien filed by [Contractor], and reserving all rights to be asserted in a Counterclaim for Slander of Title, they hereby pay and tender into Court the full amount of the lien to be held by [Contractor].

2. [Owners] pay the amount into Court with a full understanding and ac-knowledgement the same represents their personal surety to pay a judgment, if any, rendered by this Court on the foreclosure filed by [Contractor] herein.

3. [Owners] respectfully request the Court to issue the attached Order releasing [Owners'] real estate from the lien and the property shall be discharged from the lien pursuant to I.C. 32-28-3-11(c)(1) and (2).

4. [Owners] respectfully request the funds paid in be held by the Clerk of this Court pending final resolution and judgment in the above captioned action, or further Order of this Court releasing said funds.

Appellant's Appendix at 28. The trial court approved the undertaking and surety and released the property from the lien. After the trial court had issued its order and during a later hearing, the trial court "acknowledge[d] that [Contractor] could be entitled to recover attorney's fees, interest[,] and costs pursuant to the Mechanic's Lien statutes...." Id. at 28. However, the trial court stated that Owners' surety covering only the amount of the lien combined with the statement that Owners would pay any judgment rendered by the trial court were adequate because the "security as to interest, attorney's fees, and costs, if any, to which [Contractor] might be entitled are adequately covered based on the Court's knowledge of [Owners'] involvement in the community and their interests. ..." Id. at 25.

We cannot say that Owners' surety, which only covered the amount of the lien, and their "personal surety" or mere statement that they would pay any potential judgment that may stem from Contractor's foreclosure action complied with the undertaking statute. In interpreting the undertaking statute, we conclude that the surety needs to cover any judgment, including the amount of the lien, costs, and attorney fees and that that surety needs to be in a form (e.g., a bond, cash, or letter of credit) that will guarantee or secure the undertaking.

The primary goal in statutory construction is to determine, give effect to, and implement the intent of the legislature. State v. Dugan, 798 N.E.2d 1034, 1036 (Ind.2003). The best evidence of legislative intent is the language of the statute itself, and all words must be given their plain and ordinary meaning unless otherwise indicated by statute. Hendrix v. State, 759 N.E.2d 1045, 1047 (Ind.2001). It is just as important to recognize what the statute does not say as it is to recognize what it does say. Dugan, 793 N.E.2d 1034, 1086. We are required to determine and apply the legislative intent underlying the statute and to construe the statute in such a way as to prevent absurdity and hardship and to favor public convenience. Livingston v. Fast Cash USA, Inc., 753 N.E.2d 572, 575 (Ind.2001). In so doing, we consider the objects and purposes of the statute, as well as the effects and consequences of such interpretation. Id.

"The historical origin and purpose of mechanic's lien statutes was to make a property owner an involuntary guarantor of payments for the reasonable value of improvements made to real estate by the physical labor or materials furnished by laborers or materialmen." Premier Investments v. Swites of America, Inc., 644 N.E.2d 124, 130 (Ind.1994). The purpose of mechanic's lien laws is to "prevent the inequity of a property owner enjoying the benefits of the labor and materials furnished by others without recompense." Id. The language of the undertaking statute provides that to release a lien, a property owner must file "a written undertaking with surety" and that such an undertaking must cover any judgment, including costs and attorney fees. IC. § 32-28-8-11. Thus, "[tlhe [undertaking] statute specifically allows substitution of a surety in place of mechanic's liens." John Wendt & Sons v. Edward C. Levy Co., 685 N.E.2d 1838, 188 (Ind.Ct. App.1997), reh'g denied, trams. denied. A surety involves the pledging of property as security or collateral for the performance of some act.¹ Buack's Law Dictto-NArRY 742, 1441 (6th ed.1990). A surety is "a formal engagement entered into, a pledge, bond, guarantee, or security given for the fulfillment of an undertaking." Tsr Oxrorp Enauis: Dictionary (nd ed.1989), available at http://www.oed.com (last visited March 24, 2004). A surety is "something that makes sure or gives assurance, as against loss, damage, or default; security; guarantee." WaBsrer's NEw Worn Dictionary 1346 (@@Brd ed.1988). Consequently, if a property owner wants to release a lien filed on the property, the "property owner may choose to post a bond [or other form of surety] from which to pay any judgment later entered against him as a result of the foreclosure suit." Haimbaugh Land-seaping, Inc. v. Jegen, 653 N.E.2d 95, 103 (Ind.Ct.App.1995), reh'g denied, trans. denied.

The undertaking with surety is a substitution for the protection of the lien and a means of providing a guarantee that the property owner will pay any potential judgment should a contractor succeed in his foreclosure claim. The undertaking statute provides that the undertaking with surety must provide for payment of any Judgment to include costs and attorney fees. LC. § 832-28-3-11. Furthermore, the statute does not provide that an undertaking alone can be used to secure a property owner's payment of any judgment. Id. After reviewing the language of the undertaking statute, considering the legislative intent and policies behind its enactment, and balancing the consequences of our interpretation of the statute, we conclude that the statutory language that permits a property owner to file a "written undertaking with surety" means that the surety must cover any judgment, including the amount of the lien, costs, and attorney fees² and that such a surety must be in a form that will guarantee or secure the undertaking. Any other interpretation would result in the mechanic's lien holder receiving less protection if the owner elects to provide an undertaking with surety than if the mechanic's lien holder forecloses on the lien.

Here, Owners filed a written undertaking with surety that covered only the amount of the lien and stated that they would pay for any potential judgment. While depositing cash with the trial court's clerk is an adequate form of surety,³ it was not adequate here because it covered only part of the judgment that could potentially be recovered. Furthermore, Owners' mere statement that they would pay any judgment entered by the trial court was not adequate surety for the payment of the remainder of a potential judgment, including costs and attorney fees. Owners' words did not provide any kind of guarantee beyond their already existing legal obligation to pay a potential judgment entered in this case. Accordingly, we cannot say that Owners' undertaking complied with the statute. Thus, we conclude that the trial court abused its discretion by releasing the mechanic's lien from Owners' property and by denying Contractor's motion to correct error.

For the foregoing reasons, we reverse the trial court's order releasing the mechanic's lien on Owners' property and the trial court's denial of Contractor's motion to correct error.

Reversed.

VAIDIK, J. concurs. MATHIAS, J. concurs in part and dissents in part with separate opinion.

1 . A surety can also be a person who is liable for the payment of a debt or performance of a duty of another person. Brack's Law Dictio. Nary 1441 (6th ed.1990).

2 . We recognize that costs and attorney fees are going to vary on a case-by-case basis; nevertheless, an estimate of these fees would need to be determined and covered by the surety.

3 . The concurring/dissenting opinion disagrees that the act of depositing cash with the trial court clerk is an adequate form of surety. However, our reading of the statute and the definition of surety as a guarantee or assurance of the undertaking leads us to conclude that, if approved by the trial court, cash deposited with the trial court clerk would comply with the undertaking statute as long as it is in an amount that covers the entire judgment, including the amount of the lien, costs, and attorney fees.