In Petkovich, the homeowners hired Prime to repair the damages to their home. Prime originally estimated the loss at approximately $84,000 but the estimate increased to almost twice that amount after the home suffered additional rain damage. Prime left the job site prior to completion of the work. Later, and in order to resume work, Prime had the homeowners sign an “extras contract” for additional add-ons that were not covered by the insurance estimate. Thereafter, Prime finished the roof and walked off the job site. Prime recorded a mechanic’s lien against the homeowners’ property for approximately $75,000 –the amount Prime felt it was still owed under the original insurance contract or the “extras contract,” as well as additional items for change order requests, upgraded items, appliances and kitchen cabinets.
Prime timely filed a complaint to foreclose its mechanic’s lien. After conducting a bench trial, the trial court entered judgment in favor of Prime but not for the full amount of Prime’s lien. Instead, judgment was entered in favor of Prime for approximately $31,000 – an amount less than one-half of Prime’s original mechanic’s lien. The trial court ordered the mechanic’s lien foreclosed and a sheriff’s sale of the property. Thereafter, Prime submitted an affidavit seeking approximately $36,000 in attorneys’ fees. The trial court awarded Prime $27,000 in attorneys’ fees – around 75% of the total fees requested. The homeowners appealed.
LESSON LEARNED: This case serves as a reminder that liability for attorneys’ fees can be a significant risk of exposure in mechanic’s lien foreclosure actions. In Prime, it seems as if the homeowners raised a plausible and logical argument because Indiana law only allows the recovery of reasonable attorneys’fees. However, it is important to keep in mind that the mere fact that an attorneys’ fee award exceeds the amount of the lien foreclosure judgment does not render the fee award amount unreasonable. In fact, the Indiana Supreme Court previously held that a trial court did not abuse its discretion in awarding attorneys’ fees three times the judgment amount because the fee award represented the amount the plaintiff reasonably had to expend to foreclose the lien given the complexity of the case. Johnson v. Blankenship, 679 N.E.2d 505, 1997 Ind. App. LEXIS 386 (1997), transfer granted, 690 N.E.2d 1189 (Ind. 1997), aff'd, 688 N.E.2d 1250, 1997 Ind. LEXIS 211 (Ind. 1997).