The Indiana Court of Appeals recently rendered a decision that should give all Indiana contractors pause before recording a mechanic’s lien. In Capital Drywall Supply, Inc. et al. v. Jai Jagdish, Inc. and Ranjan Amin, 934 N.E.2d 1193 (Ind. Ct. App. 2010), the court affirmed summary judgment in the owner’s favor where the mechanic’s lien claimants identified the improper owner on their Mechanic’s Liens even though the improper identification was based upon erroneous information received from the County Auditor.

Capital Drywall and Old Fort Building Supply supplied materials for the construction of a hotel in South Bend. After not receiving payment, both contacted the County Auditor’s Office to obtain the name of the owner of record of the real estate. The Auditor advised that Ranjan Amin was the owner. Old Fort and Capital Drywall filed mechanic’s liens naming only Mr. Amin as the owner. In reality, the real estate was owned by Jai Jagdish, Inc. (“JJI”), which had received the property from Mr. Amin by warranty deed in March of 2008. The trial court granted the owner’s motions for summary judgment on the validity of the mechanic’s liens and the Court of Appeals affirmed.

The lien claimants argued that the liens substantially complied with Ind. Code §32-28-3-3, which requires that the lien specifically set forth the name of the owner which, “will be sufficient if [it is] substantially as set forth in the latest entry in the transfer books ... of the county auditor.” Old Fort and Capital Drywall argued that they substantially complied with the statute because the erroneous identification of the owner was based upon information provided by the County Auditor. The claimants also argued that there was no prejudice because JJI’s owner admitted receiving notice of the lien in any event. The court was not persuaded however. The contractors erred in relying upon hearsay from the Auditor. Presumably, the contractors should have had their own title search performed to confirm ownership. Additionally, the Court noted that the stringent recordation requirements are intended to protect third parties who might do business with the owner (e.g. a financial institution or mortgagee bank). It is critical that lien claimants properly identify the owner so these third parties are aware of the existence of liens against the owners.

This result serves as a warning to all contractors in Indiana. Be sure to identify the proper name of the property owner; otherwise your lien is likely to be held invalid, regardless of where the erroneous information comes from.