In a recent decision, the Indiana Court of Appeals addressed the priority of competing judgments—one arising from a vendor’s lien and the other from a mortgage lien. See Wachovia Financial Services, Inc. v. Dune Harbor, LLC, 948 N.E.2d 339 (Ind. Ct. App. 2011). In a real estate foreclosure action, the trial court entered summary judgment to foreclose and order a Sheriff’s Sale of certain property in favor of Wachovia. The trial court also entered judgment in favor of Lefty’s Co-Ho Landing, Inc. (“Lefty’s”), the original owner of the property, who had entered into a series of option agreements and assignments of those options. Lefty’s ultimately executed a corporate warranty deed evidencing its conveyance of the property to DHI “subject to” a “vendor’s lien”. DHI sold the undeveloped property to Dune Harbor, LLC without Lefty’s consent. Dune Harbor began development of the property, including platting it into lots for development, obtaining approval from the City of Portage Planning Commission, and recording a Planned Unit Development Plat in the City of Portage with the Porter County Recorder.
The trial court ruled that Lefty’s judgment lien, based on its vendor lien, had priority over Wachovia’s judgment lien, based on its mortgage lien. Wachovia appealed. The Court of Appeals first engaged in a review of Indiana law regarding creation and termination of a vendor’s lien:
Ordinarily a vendor of realty has an implied lien for the amount of the unpaid purchase price. A vendor’s implied lien, as distinguished from a lien expressly reserved, or from the security which the vendor has while he holds the legal title under an executed contract to convey, is the equitable right, which by implication is accorded to one who has conveyed title to land without reserving a lien thereon, and has taken no security for the purchase money other than the personal obligation of the purchaser, subject the land in equity to the payment of the purchase price. The lien is not dependent on any agreement between the parties other than the contract to pay the purchase money, and it is presumed to exist in all cases in which such a lien is allowed by law in the absence of a showing of an intent to the contrary.
Id.; See also Prell v. Trustees of Baird and Warner Mortgage and Realty Investors, 386 N.E.2d 1221, 1227 (1979).
The court evaluated the extent to which, if at all, a vendor’s lien was created in the transfer of the property and, if so created, if it was subsequently abandoned or extinguished. In doing so, the court looked at four documents – the Restated Option, the DHI Addendum, the Corporate Warranty Deed, and the Notice of Covenants – for evidence of the creation and the extent, if at all, of a vendor’s lien. Specifically, the court concluded that the dwelling unit sales provision alone did not create a vendor’s lien and, as such, a question of fact existed as to whether a vendor’s lien was created in favor of Lefty’s, and if so, whether it was abandoned or extinguished before Wachovia recorded its mortgages.