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Controlled Demolition, Inc. v. F.A. Wilhelm Construction Company

May 20, 1996




Appeal from the United States District Court for the Southern District of Indiana, Indianapolis Division. No. 91 C 830 S. Hugh Dillin, Judge.

Before CUMMINGS, CUDAHY, and MANION, Circuit Judges.

CUDAHY, Circuit Judge.


DECIDED MAY 20, 1996

This diversity case involves various claims which resulted from breaches of contract by general contractors and subcontractors involved in a major construction project. All of the basic liability issues have been resolved. The issues raised on appeal are of importance only for their effect on whether Controlled Demolition, Inc. (CDI) can recover attorney's fees pursuant to an Indiana statute governing the enforcement of liens. Ind. Code sec. 32-8-3-14. Specifically, CDI challenges the district court's grant of summary judgment on a statutory "personal liability" claim against the owner of the property for moneys it was owed by the general contractor, Ind. Code sec. 32-8-3-9; the grant of summary judgment as to CDI's attempt to foreclose a mechanic's lien on the property and the district court's finding that CDI owed an implied duty to indemnify the general contractor for funds the latter expended to settle mechanic's liens placed on the property by certain subcontractors. We affirm.

I. Background

F. A. Wilhelm Construction Company was hired by Mansur Development Corporation to develop real estate located in Indianapolis, Indiana and owned by Mansur as a site for the corporate offices of Farm Bureau Insurance Company. In August 1990, in aid of its development efforts, Wilhelm entered into two separate contracts with CDI. The first agreement involved the removal of transformers containing PCBs from the premises of the planned Farm Bureau development. The second was a contract for general demolition work. CDI in turn subcontracted with Donald Lee Twichell, Jr., individually and doing business as DLT, Inc., (collectively, Twichell) to aid in removing the debris caused by the demolition. Twichell rented equipment from K & F Industries, Inc. for use in the project. Some of the rented equipment was owned by Carlisle Equipment Company, Inc. The work was completed in early 1991. However, CDI and Wilhelm became involved in a dispute, details of which are immaterial here, apparently occasioned by Twichell's failure to complete its subcontractual responsibilities in a timely fashion. As a result of the dispute, Wilhelm did not pay CDI the balance due to it under the contract. Various disputes also erupted over the matter between CDI and its subcontractors.

On February 13, 1991, CDI filed two notices with the Marion County Recorder. The first detailed its intent to hold a mechanic's lien on the property, as allowed by Ind. Code sec. 32-8-3-3, in the amount of $344,570.81. The second gave notice of a "personal liability claim" against Mansur, under Ind. Code sec. 32-8-3-9. This statute "provides that upon notice to the owner by a subcontractor . . . of the subcontractor's claim against the contractor, . . . the owner shall be liable to the subcontractor for that claim up to the amount that the owner owes the contractor." Coplay Cement Company, Inc. v. Willis & Paul Group, 983 F.2d 1435, 1436 (7th Cir. 1993). In other words, this statute gives a subcontractor a direct claim against the owner for a general contractor's breach of its duty to pay the subcontractor.

Wilhelm's project manager, Terry Bareither, responded to these filings by mailing to CDI, on February 23, 1991, a certified Notice to Commence Suit, as set out in Ind. Code sec. 32-8-3-10. The letter stated that CDI was thereby "notified to commence suit within thirty (30) days of receipt of this Notice." Rec. Doc. 61, Exh. A. CDI was also informed in the letter that, as the statute provides, "[f]ailure to file suit within thirty (30) days after receipt of this notice shall cause the above identified lien to become null and void." Id. The original letter contained a typographical error in the statutory reference. CDI therefore responded on February 25, 1991, with a letter stating:

Regarding your Notice to Commence Suit, my attorney advises me that I.C. 23-8-3-10 as listed in your certified mail covers hospital associations. If your intent was to file a legal notice, Terry, I think you will have to refile with appropriate Indiana Code notation. Rec. Doc. 61, Exh. C.

Bareither sent a corrected notice on March 3, 1991. CDI did not file suit within thirty days of receiving the corrected notice, nor respond to the notice in any other way. In fact, CDI did not file its suit on the mechanic's lien until July 26, 1991, after it received a Notice to Commence Suit directly from Mansur, the owner of the real estate. Rec. Doc. 11, Exh. E. That letter, mailed on June 25, 1991, was received by CDI on July 1, 1991.

Contending that Twichell had not met his obligations for the equipment used in the project, Carlisle and K & F also filed mechanic's liens against the property. While the district court proceedings attending the current suit were ongoing, Wilhelm, pursuant to an obligation to clear liens imposed by its contract with Mansur, settled the claims of Carlisle and K & F. Wilhelm then sought indemnification from CDI for this payment.

The district court dealt with a number of issues during the course of this lawsuit, only some of which are relevant to this appeal. We summarize the court's relevant actions here. The district court granted summary judgment against CDI on its mechanic's lien claim (Count VII of its Amended Complaint) and on its claim based on the Indiana personal liability statute (Count VI). Summary judgment on these claims was based on CDI's failure to respond in a timely fashion to Wilhelm's Notice to Commence Suit.

At trial, the court rendered judgment on all breach of contract claims related to the agreements between Wilhelm and CDI, granting CDI's claim that Wilhelm had breached the PCB contract (Count I) and finding that both Wilhelm and CDI had breached the demolition contract (Count II and Wilhelm Counterclaim Count I). The result of these findings was that Wilhelm was liable to CDI for $51,325.30 on the PCB contract. Wilhelm and CDI each recovered a judgment resulting from the other's breach of the demolition contract, with Wilhelm liable to CDI for $174,802.00 and CDI liable to Wilhelm for $133,254.30. At trial, the district court also found in favor of Wilhelm on the indemnification claim (which was related to the demolition subcontracts), in the amount of $45,000. Thus Wilhelm received a total judgment against CDI in the amount of $178,254.30. The net result of these decisions was that CDI owed Wilhelm a sum somewhat over $3,000 stemming from the demolition contract. All judgments based on the dispute between CDI and Wilhelm have been satisfied. CDI also was ...

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