An article published in Barnes & Thornburg’s December 2014 Construction Law Update discussed the facts of a case which arose from the construction of an IMAX movie theater, in which an hourglass symbol used on construction drawings caused confusion resulting in project delays. This article addresses the treatment of the case by the Supreme Court of Indiana in an Opinion published on August 26, 2015. Goodrich Quality Theaters, Inc. v. Fostcorp Heating and Cooling, Inc., 39 N.E.3d 660 (Ind. 2015).
The general contractor hired Wilson Iron Works, Inc. to be responsible for structural steel and roof decking for the theater, including joists and joist girders. The installation of the HVAC system by Fostcorp was delayed by an issue involving interpretation of the joist girder drawings. Payment disputes followed, and both Wilson Iron and Fostcorp recorded mechanic’s liens against the project. In May 2007, Fostcorp sued to foreclose its lien. Numerous parties filed cross-claims and counterclaims. The general contractor, Roncelli, Inc., posted a surety bond under the provisions of Indiana Code Section 32-28-3-11. Upon approval of the bond, the mechanic’s liens were released because the bond served as security for the lien claimants instead of the real estate. The terms of the bond obligated Roncelli or the surety to pay any judgment recovered in an action to enforce the mechanic’s liens, “including costs and attorneys’ fees allowed by the court.”
A bench trial was conducted over 14 days from August 2009 to July 2010. In May 2012, the trial court issued a partial ruling to address the claims of Fostcorp and Wilson Iron. In July 2013, the trial court issued a ruling on claims asserted by a carpet installation subcontractor and entered a final judgment addressing all issues in August 2013. Fostcorp and Wilson were both awarded attorneys’ fees against Roncelli. The court of appeals affirmed the trial court on the merits of virtually all claims but reversed the award of attorneys’ fees against Roncelli because it was not the property owner to which the Indiana mechanic’s lien statute applies. Goodrich Quality Theaters, Inc. v. Fostcorp Heating and Cooling, Inc., 16 N.E.3d 426, 441 (Ind. Ct. App. 2015). This holding was reaffirmed by the court of appeals upon rehearing. 23 N.E.3d 28, 29 (Ind. Ct. App. 2014).
The supreme court accepted transfer of the case to determine if the statute allows for recovery from Roncelli under the circumstances. Reversing the court of appeals and affirming the trial court as to fees, the supreme court concluded that since fees are recoverable as part of a lien claim under I.C. Section 32-28-3-14(a), the successful subcontractors were entitled to fees as part of their lien claim. Although under subpart (b) a property owner who has paid the full contract price is not liable for fees, Roncelli was not the property owner. Roncelli secured a bond, which included attorneys’ fees within its scope.
Accordingly, based on the interplay between the two statutes and the terms of the bond, the subcontractors could recover attorneys’ fees from Roncelli. (As to all other issues, the supreme court summarily affirmed the court of appeals.)