• Recovery of Attorneys’ Fees under the Indiana Mechanic’s Lien Statute
  • July 15, 2010 | Author: Alice J. Springer
  • Law Firm: Barnes & Thornburg LLP - South Bend Office
  • Attorneys' fees can be icing on the cake when a mechanic's lien holder recovers foreclosure judgments, but the amount and reasonableness of the award is often left to the court to determine.

    Indiana’s mechanic’s lien statute provides for the recovery of attorney’s fees when there is a valid lien. IND. CODE § 32-28-3-14(a) states that “in an action to enforce a lien under this chapter, a plaintiff or lien holder who recovers a judgment in any sum is entitled to recover reasonable attorney’s fees.” The award of attorney’s fees will be a part of the in rem judgment. Clark v. Hunter, 861 N.E.2d 1202, 1210-11 (Ind. Ct. App. 2007). An exception to this general principle applies “in an action in which the contract consideration for the labor, material, or machinery has been paid by the property owner or party for whom the improvement has been constructed.” IND. CODE § 32-28-3-14(b). Accordingly, if an owner has paid the general contractor in full, a subcontractor will not be entitled to recover attorney’s fees.

    If the exclusion does not apply, under subpart (a) if a lien holder recovers a judgment “in any sum” he is entitled to recover his reasonable attorney’s fees. See Clark, 861 N.E.2d at 1210-11. It is within the trial court’s discretion to determine what constitutes a reasonable fee amount. Clark’s Pork Farms v. Sand Livestock Systems, Inc., 563 N.E.2d 1292, 1300 (Ind. Ct. App. 1990). Attorney’s fees are awarded with caution “so that property owners are not discouraged from challenging defective workmanship on the part of lien holders...” Id. The amount a court awards is intended to reflect the amount the lien holder reasonably had to expend to foreclose the lien, and does not necessarily include all fees and costs the lien holder paid to his attorney. Id. Indiana courts have held that the amount awarded for attorney’s fees should be reasonable in relation to the amount of the judgment. Id.

    While the amount of attorney’s fees should be reasonable compared to the judgment awarded, this does not preclude a lien holder from recovering fees that are equal to or greater than the actual value of the lien. For example, in Johnson v. Blankenship, 679 N.E.2d 505, 506 (Ind. Ct. App. 1997), the lien holder foreclosed on a $5,775 mechanic’s lien and the court awarded $20,500 in attorneys’ fees. Id. at 510. In determining the reasonableness of the fee, the court looked at many factors including the time and effort required, the value of the interest involved the experience, reputation, and ability of the attorneys performing the services, and the results secured at trial. Id. at 509. Due to the length of the case, (over six years) and its complexity, the court determined a fee award in an amount three times more than the judgment on the contract was reasonable. Id. at 510. See also Sand Livestock, 563 N.E.2d at 1301 (stating that fees in the amount of $84,204.50 on a lien valued at $80,568.00 were not excessive, but cautioning the trial court on remand that if an attorney fee award was required under the statute to “keep in mind that an award of attorney’s fees should be in reasonable relation to the amount of the judgment secured, and the policy of not discouraging valid claims by property owners”). By contract, in Korellis Roofing, Inc. v. Stolman, 645 N.E.2d 19 (Ind. Ct. App. 1995), the court determined that an award of attorney’s fees in the amount of $500 was reasonable for a $5,000 lien despite the lien holder requesting an award of $6,000.

    If a party who successfully forecloses on a mechanic’s lien is forced to defend its judgment on appeal, in addition to recovering its fees from the trial court proceedings, the party may be entitled to recover its appellate attorney’s fees under I.C. § 32-28-3-14(a). See Hayes v. Lee, 894 N.E.2d 1047 (Ind. Ct. App. 2008).