The Indiana Court of Appeals recently reversed a trial court’s grant of judgment in favor of equipment supplier where a subcontractor filed suit against that supplier to challenge the supplier’s claim under the Personal Liability Notice (PLN) Statute. In R.T. Moore Co., Inc. v. Slant/Fin Corp, 966 N.E.2d 636 (Ind. Ct. App. 2012), the materials supplier (“Slant/Fin”) provided construction materials which were ordered from a second supplier who received the original order from a subcontractor. When the second supplier failed to pay Slant/Fin for the materials, Slant Fin filed a “Notice of Personal Liability” claim pursuant to Ind. Code section 32-28-3-9 (“the PLN Statute”) against the owners of the construction project for monies it believed it was owed. To protect against the possibility of double payment, the owners withheld monies owed to the construction project participants. The subcontractor then filed suit against Slant/Fin.
The PLN Statute imposes personal liability on project owners in favor of subcontractors, along with other parties specifically listed in the statute that have not been paid by their contractors. The statute is an additional or alternative remedy to the subcontractor’s rights under the Mechanics’ Lien Statute (“MLS”). The MLS enables certain persons defined by the statute to establish and enforce a lien on projects which they have performed labor or furnished materials or machinery for the amount owed.
The Court emphasized the difference between the two statutes concerns the limitation on recovery. That recovery under the PLN Statute is limited to the amount that is due or will become due from the owner to the employer, lessee, or subcontractor, whereas the MLS creates a secured interest that gives the subcontractor priority over the owner’s unsecured creditors. This means the amount the subcontractor can recover under the MLS is not limited to the amount the owner owes the contractor.
The Court agreed with the subcontractor that because Slant/Fin was merely a material supplier which supplied materials to another materials supplier, it was unable to invoke the protections of the PLN Statute. It determined that Slant/Fin did not fall with in the class of persons/entities entitled to seek a remedy under the PLN Statute. Utilizing the reasoning from previous case law that established that the protected class under the PLN Statute is the same as under the MLS, the court concluded that Slant/Fin and the second supplier did not perform any labor on the projects and was simply a “materialman to a materialman” who was not permitted to seek the protections of the PLN Statute.
Jeremy Fetty is a partner in the law firm of Parr Richey Obremskey Frandsen & Patterson with offices in Lebanon and Indianapolis. He often advises businesses and utilities (for profit, non-profit and cooperative) on organizational, human resources, and transactional matters and drafts and reviews commercial contracts.
The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.