STATEMENT OF THE CASE
Dеfendants-appellants City of Evansville, Green Construction Corporation of Indiana, Inc., Grex Realty Corporation, Inc., Corley Concrete Corporation, Old National Bank in Evansville, and Robert E. Green, appeal the judgment of the Vanderburgh Superior Court ordering the foreclosure of a mechanic's lien held by plaintiff-appellee Verplank Concrete & Supply, Inc., upon certain property known as the Executive Inn Parking Garage.
FACTS
In August, 1972, Robert E. Green (Green), a director and оfficer of both Green Construction of Indiana, Inc. (Green Construction) and Grex Realty Corporation, Inc. (Grex Realty), purchased certain real estate located within the city limits of Evansville. He conveyed the property to Green Construction on October 27, 1972.
In January, 1978, Green Construction undertook the construction of a parking garage on the property. Green Construction entered into a contract with Corley Concrete Corporation (Corley) providing that Corley would supрly preformed and pre-stressed concrete beams, "T's", and the like, according to the architect's specifications. These component structures were prefabricated at Corley's plant in Lafayette and shipped to Evansville. Green Construction, as owner/contractor, was responsible for the erection of the structure.
From January 31, until October 11, 1978, Verplank Concrete & Supply, Inc. (Ver-plank) supplied Corley with various mixtures or grades of cement for use in pre-casting the segments. At some point in time, Corley ran intо financial difficulty as a result of which Verplank did not receive payment for approximately $49,500 worth of cement delivered to the Lafayette factory.
On July 30, 1978, Green Construction conveyed the aforementioned property along with other adjacent parcels to Grex Realty. Grex Realty then conveyed the property to the City of Evansville (the City) on October 31. 1
On November 6, 19783, Verplank filed notice of intent to hold a mechanic's lien upon the property known as the Executive Inn Parking Garage. Verplank filed suit to foreclose the lien in September, 1974; a judgment in Verplank's favor is the basis of the appeal.
ISSUES
Appellants present two issues for review: 2
1) Whether the trial court erred in allowing the filing of a mechanic's lien upon public property.
2) Whether the trial court erred in allowing the materialman of a materialman a mechanic's lien upon the property.
We reverse.
Issue One
Mechanic's liens are governed by statutory law, Ind.Code 82-8-8-1 et seq. Ind.Code 82-8-3-1 (Supp.1979) provides, in part:
"(That) contractors, subcontractors, mechanies, lessors . _. ., journeymen, laborers and all other persons performing labor or furnishing materials or machinery, for the erection, altering, repairing or removing any . building, may have a lien separately or jointly upon the |. . . building, which they may have erected, altered, repaired, moved or removed or for which they may have furnished materials or machinery of any de-seription, and, on the interest of the owner of the lot or parcel of land on which it stands or with which it is connected to the extent of the value of any labor done, material furnished, or either ."
In Moore-Mansfield Construction Company v. Indianapolis, Newcastle and Toledo Railway Company (1913)
"The mechanics' lien laws of America, in general, reveal the underlying motive of justice and equity in dedicating, primarily, buildings and the land on which they are erected, to the payment of the labor and materials incorporated, and which have given to them an increased value. The purpose is to promote justice and honesty, and to prevent the inequity of an owner enjoying the fruits of the labor and materials furnished by others, without recompense. &"
It has long been the law that mechanic's liens may not be acquired or enforced upon public property. Fatout v. Board of School Commissioners of City of Indianapolis (1885)
Although it is uncontested that the City holds fee simple title to the property as a result of the conveyance from Grex Realty, whether the parking garage is the type of public property or property held for a public use traditionally afforded immunity from mechanic's liens remains a contested issue.
On March 23, 19783, while the real property was owned by Green Construction, Grex Reаlty submitted a report to the Evansville Economic Development Commission (the Commission) on the economic impact of the proposed project. On March 26, the Commission, established under and acting pursuant to authority granted by Ind.Code 18-6-4.5-1 et seq., passed a preliminary resolution concerning the proposed project. On October 1, the Common Council of the City passed an ordinance authorizing the construction, acquisition, and leasing of the garage as an economic dеvelopment facility, the issuance of revenue bonds to finance the construction thereof, and the safeguarding of the interests of holders of said bonds by lease and trust indenture.
The lease was signed by Grex Realty and the City on October 1; the trust indenture, entered into by the City, Grex Realty, and the Old National Bank of Evansville (the Bank), was executed and dated the same day. The trust indenture was signed on October 81; the property was conveyed to the City by warranty deed the same day "for the sum of one dollar and other good and valuable consideration." The City issued tax-exempt Economic Development First Mortgage Revenue Bonds, Grex Realty Corporation, Inc. 3 in the aggregate amount of $1,500,000. To secure the bonds, the City "borrowed" that sum from the Bank and executed a trust indenture which was, according to its terms, a mortgage, a deed of trust, and a security interest. The City transferred all rights and interests in the real estate, buildings and improvements, lease, etc., to the trustee, the Bank.
The lease, effective October 1, 1978, through October 1, 1989, or until all bonds are redeemed, provides that the lessor will
The appellants correctly note that in Ind.Code 18-6-4.5-1 (Supp.1979), the legislature expressly declares that the financing of economic development facilities and pollution control facilities for use by others is a public purpose. They contend that, the instant facility having been financed in accordance with the statutory provisions set forth in Ind.Code 18-6-4.5-1 et seq., it unquestionably attains the status of public property used for a public purpose. While we agree with the assertion that the garage has been deemed an economic development facility, the financing of which is a public purpose, we are not convinced that the facility is the type of property which should be afforded protection from the attachment of mechanic's liens.
As mentioned above, mechanic's liens have not been permitted to attach to public property held for public use. Such property has traditionally included the following: schools, Fatout, supra; United States Fidelity & Guaranty Company v. American Radiator Company (1908)
The legislature has, however, provided for the protection of such interests in Ind. Code 5-16-5-1 et seq. Ind.Code 5-16-5-1 states, in part:
"when any public building or other public work or public improvement of any character whatsoever is being constructed, erected, altered or repaired under contract at the expense of the state or at the expense of any county, city, town, township, school corporation, assessment district, or any other political subdivision or commission created by law, it shall be the duty of any such board, commission, trustee, officer or agent acting on behalf of the state, county, city, town, township, school corporation, assessment district, or other political subdivision or commission created by lаw, to withhold final payment to the contractor until such contractor has paid to the subcontractor or subcontractors, materialmen for material furnished, labor employed in such construction or those furnishing any service in relation to or in connection with such construction, erection, alteration or repair, all hills due and owing the same .." (Emphasis added.)
Ind.Code 5-16-5-2 states, in part:
"a good and sufficient bond shall be executed by the contractor to the state of Indiana, and approved by and for thе benefit of any such board, commission, trustee, officer or agent acting on behalf of the state, county, city, town, township, school corporation, assessment district, or other political subdivision or commission created by law in an amount equal to the total contract price, such bond by its terms also shall be conditioned as to directly inure to the benefit of subcontractors, laborers, materialmen, and those performing service as herein provided .." (Emphasis added.)
ImiCode 5-16-5.5-1 et seq. provides additional, related protection.
refutes the claim that the contract between the Board and the prime contractor intended to make suppliers or subcontractors beneficiaries 'in fact though not in form," entitled to demand payment direct from the Board. From the requirement of a payment bond there may soundly be inferred a legislative intent, written into each public construction contract, that the State or other public body is not to have a duty to pay or to see tо the payment of materialmen or subcontractors beyond the furnishing of the payment bond." (Emphasis added.)
However, Grinnell asserted that the construction of an addition to the plant of a private, profit-making company did not constitute a public construction contract. The Maryland Court of Appeals held, at 489 of 287 A.2d:
"In short, we think that the action of the City of COrisfield in financing the acquisition of land and the construction of a plant addition for the Rubberset Company under the authority of Article 41, § 266B servеd a valid purpose, and consequently is a 'public work or improvement," as those words are intended in Article 90, § 11. Having determined that the plant addition falls within the ambit of Article 90, § 11, it follows from Hamilton, supra, and the other, cases we have cited that a mechanies' lien was an unavailable remedy for the appellant to pursue against the City of Crisfield."
According to the express terms of and case law interpreting our statutes, economic development facilities which are construсted, acquired, or repaired under Ind. Code 18-6-4.5-1 et seq. are not public buildings, works, or improvements subject to the mandatory withholding and bonding requirements set forth in Ind.Code 5-16-5-1 et seq. It is certainly a good business practice to require such bonds by the terms of the contract, but they are not required.
In the instant case, Green Construction did not execute, and was not called upon by the City to execute, performance or payment bonds. This was largely due to the fact that the transaction was concerned more with the acquisition than with the construction of the garage. Nonetheless, since the subcontractors, materialmen, et al. were not, and are not, afforded the statutory protection of mandatory withholding and bonding, they must be allowed to pursue their remedy under the provisions of the mechanic's lien statutes.
It is important to note that the economic bonds are secured by a first mortgage, see footnote 3, further weakening the City's contention that this is the type of property to which liens cannot attach.
Issue Two
According to the express terms of Ind.Code 32-8-8-1 (Supp.1979), contractors, subcontractors, mechanics, lessors of equipment or tools, journeymen, laborers, and all other persons performing labor or furnishing materials or machinery may assert a lien upon the property subject to improvement. While materialmen are within the protected class, the phrase "all other persons" has not been construed to permit a lien by those parties whose contribution to the effort is remote. Being in derogation of the common law, the mechanic's lien statutes must be strictly construed when determining those persons entitled to acquire and enforce such liens; being remedial in nature, they must be liberally construed when determining the remedies available to persons who have satisfied the strict provisions of the law. Toner v. Whybrew (1912)
As mentioned above, the purpose of the mechanic's lien laws is to promote honesty and fair dealing among the parties to a сonstruction contract and to prevent unjust enrichment of the owner who enjoys the material improvement of his property. 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. Johnson v. Spencer (1912)
Verplank concedes that he is a mate-rialman. However, the trial court specially found that Corley is a contractor within the meaning of the mechanic's lien laws, and therefore Verplank comes within the terms of the statute. In reviewing a trial court's finding that a materialmen is entitled to a mechanic's lien, we view the evidеnce in the light most favorable to the trial court's finding, and reverse only upon determining that the finding is clearly erroneous. Van Wells, supra.
It is clear from the evidence presented that, at the time Corley and Verplank began to perform, the property was owned by Green Construction. Further, Verplank admits that Green Construction hired an architect, a structural engineer, and a project supervisor, poured the foundation and ramps, erected the building, and added extra bracing and an eighth floor sports facility. These facts lead to but one conclusion: Green Construction served as its own general contractor. However, the judgment may also stand if Corley was a sub contractor, and we are obliged to consider that possibility.
In Foster Lumber Company v. Sigma Chi Chapter House of DePauw University (1912)
"We do not see any reason why he ceased to be a materialman because he furnished all the stone, instead of a part; nor -do we think material ceases to be material when it is finished and ready for use. Judge Elliott, in Farmers' Loan & Trust Co. v. Canada & St. L. R. Co.,127 Ind. 250 , 257,26 N.E. 784 ,11 L.R.A. 740 , defines a subcontractor as one who takes from the principal contractor a specific part of the work. We understand this to mean a specific part of the work in the actual construction of the building, and may include furnishing the materials therefor." (Emphasis added.)
In Rudolf Hegener Company, supra, George Clinton entered into a contract with Frost to furnish two flights of stairs, completed and manufactured after a special design expressly for a house which the owner, Frost, was building. Clinton was nоt obligated to install the stairs, but was responsible only for delivering them to the premises. Clinton subsequently contracted Hegener, a custom manufacturer, to construct the stairs at its Chicago factory. The
Notes
. The agreement between Grеx Realty and the City will be explained in detail later in the opinion.
. Appellants have raised other issues in their brief which we do not reach due to our determination on the issues listed.
. The heading on the bonds reads as follows:
"CITY OF EVANSVILLE ECONOMIC DEVE%OPMENT FIRST MORTGAGE REVENUE BOND GREX REALTY CORPORATION, INC."
. Although in some cases materialimen have been denominated subcontractors for the purpose of bringing them within or without the terms of certain public or private payment bonds, Nash Engineering Company v. Marcy Realty Corporation, Inc. (1944)