New Rule: Construction Liens Limited to Debts Directly Benefiting the Encumbered Property

Introduction

The Indiana Supreme Court’s decision in EdgeRock Development, LLC, et al. v. C.H. Garmong & Son Inc., et al. (No. 24S-PL-184, decided June 3, 2025) clarifies two seminal questions of first impression in Indiana mechanics’-lien law:

Whether a contractor may file duplicate construction liens on different owners’ lots for the same cumulative debt; and
How statutory lien priority interacts with a lender’s mortgage lien when part of the loan repays an earlier construction lien.

EdgeRock subdivided a 17-acre parcel into five lots (“Trails of Westfield”), contracted with Garmong and Fox to build infrastructure and buildings across all five lots, then sold two of them to ZPS Westfield, LLC. After falling behind on payments, EdgeRock satisfied Garmong’s first lien with a loan from First Bank Richmond (secured by a mortgage on two lots and other collateral). Later defaults prompted Garmong and Fox to record multiple overlapping liens—each one securing the same total debt against each owner's lots. The contractors sued to foreclose those liens, and First Bank claimed its mortgage lien was senior. The Supreme Court granted transfer to resolve (1) lien validity and scope and (2) lien priority between the contractors and the bank.

Summary of the Judgment

The Indiana Supreme Court unanimously held:

A construction lien under Ind. Code § 32-28-3 secures only the debt for labor or materials directly benefiting the specific lot to which the lien attaches. Contractors may not record redundant liens on multiple owners’ properties to secure one cumulative debt.
Duplicate or triplicate liens overstating the amount attributable to each lot do not void the lien in its entirely, but must be reduced to the fair share for each encumbered property.
First Bank’s mortgage lien is senior to the contractors’ liens only to the extent the bank’s loan funds actually paid off Garmong’s prior construction lien; for the remainder of the loan proceeds (including amounts paid to investors and general corporate uses), the contractors’ liens are senior.

The Court remanded with instructions to (a) reduce Garmong’s lien on ZPS’s lots to the $520,509.70 attributable to building work there and eliminate that lien on EdgeRock’s lots; (b) limit Fox’s liens similarly; and (c) apply sale proceeds first to the bank for the $2,140,722.51 it advanced to pay Garmong’s prior lien, then to the contractors for their senior debt.

Analysis

1. Precedents Cited

Shilling v. Templeton (66 Ind. 585 (1879)) – Mechanics’ liens arise by statute, not by contract, and secure only the owner’s interest in the improved property.
Saint Joseph’s College v. Morrison (302 N.E.2d 865 (Ind. Ct. App. 1973)) – A lien may embrace work under multiple contracts so long as it benefits one plot of land under a common plan; critical that a single owner consented to all improvements.
Premier Steel Co. v. McElwaine-Richards Co. (43 N.E. 876 (Ind. 1896)) – Where multiple buildings on one owner’s lot are improved under one contract, one lien suffices; the statute avoids multiplicity of foreclosures when no prejudice to owners results.
West v. Dreher (126 N.E. 688 (Ind. App. 1920)) – A single lien can cover two neighbor houses under one contract if both lots share the same owner and the work was “indiscriminately” spread.
Wells v. Christian (76 N.E. 518 (Ind. 1906)) – Off-site work (steam-distribution mains) “connected” physically to the boiler property creates a lien there when it was necessary for the heating plant’s operation.

2. Legal Reasoning

The Court’s reasoning rests on three pillars:

Statutory Text (I.C. § 32-28-3-1(b)–(2)): Liens attach only to the “interest of the owner” in the lot “for whose immediate use or benefit the labor was done.” “Connected” improvements must bear a physical nexus (e.g., sewer mains, sidewalk).
Consent & Unjust Enrichment: A lien presumes the owner consented to the work. No owner may be made guarantor for another’s improvements it never approved. Each lot bears only its own share.
Remedy for Overstatement: Overstated liens due to legal dispute do not void entirely; instead the lien is reduced to the amount directly attributable to that lot and owner.

On priority, Ind. Code § 32-28-3-5(b) provides that a recorded construction lien relates back to when work began, so it outranks any mortgage recorded after that date. An exception (subsec. (d)) gives a mortgage lien priority “to the extent of the funds actually owed” to the project lender. First Bank’s lien was senior for the $2,140,722.51 it lent to retire Garmong’s prior lien, but junior for the rest, which served unrelated investor pay-outs and general corporate purposes.

3. Impact

This decision reshapes Indiana mechanics’-lien practice:

Contractors must allocate lien amounts by lot and owner when work spans multiple parcels with different owners.
Consumptive refinancing or capital returns unrelated to project improvements do not secure senior priority under the § 32-28-3-5(d) exception.
Lenders who pay existing mechanics’ liens expect seniority only for the advances funding those liens, absent a traditional construction or purchase-money loan structure.

Complex Concepts Simplified

Relation-Back: A construction lien is treated as having begun when the contractor first performed work or furnished materials, not when the lien is recorded.
Duplicate Liens: Contractors cannot use the same job’s total bill to secure payment on different owners’ lots—each lot pays only for the work that improved it.
Equitable Subrogation: Normally lets a new lender “step into the shoes” of a prior mortgagee when it refinances a mortgage; here, the Court declined to extend it to half-loans used for unrelated capital returns.

Conclusion

EdgeRock v. Garmong & Son establishes that Indiana mechanics’-liens must be parcel-specific and owner-specific: each lien secures only the debt for improvements directly benefiting the lot to which it attaches. Overstated liens are not void but must be trimmed to each lot’s fair share. On lien priority, a lender’s mortgage outranks a later construction lien only to the extent its loan funded that lien; non-project uses of loan proceeds remain subordinated. This decision brings precision to lien drafting, evidences the limits of “common plan” arguments, and clarifies lien vs. mortgage financing interplay in Indiana.