In re G & R Builders, Inc.
| Decision Date | 21 December 1990 |
| Docket Number | Bankruptcy No. 89-0049-8P7,Adv. No. 90-018. |
| Citation | 123 BR 654 |
| Parties | In re G & R BUILDERS, INC., Debtor. Charles L. WEISSING, Trustee Plaintiff, v. Hal GERRING, et al., Defendants. |
| Court | U.S. Bankruptcy Court — Middle District of Florida |
Charles L. Weissing, Tampa, Fla., trustee.
Thomas F. Capshew, Sarasota, Fla., for Hal and Winona Gerring.
Mark J. Wolfson, Tampa, Fla., for Superior Heating-Cooling Corp., Doors of the South, Inc., Hoops Elec. Corp.
Joel Treuhaft, Tampa, Fla., for Florida Mining & Materials Corp., Intra-State Terrazo & Cement Co., Inc., Eugene R. Gilworth, Englewood Fireplace Shoppe, Inc., Blu Aqua Pools, Inc.
Andrew Shaw, Sarasota, Fla., for Stottlemeyer & Shoemaker Lumber Co.
William R. Pomeroy, Fort Lauderdale, Fla., for J.G. Plumbing Service, Inc.
Michael S. Drews, Sarasota, Fla., for American Residential Elevators, Inc.
Allen J. Levin, Port Charlotte, Fla., for Scotty's, Inc.
Randall W. Lord, Tampa, Fla., for Russell and Callie Mitchell.
Robert W. Clark, Tampa, Fla., for First Florida Bank.
Robert E. Messick, Sarasota, Fla., for Charles and Mrs. Charles Winkler.
THIS IS a Chapter 7 liquidation case, and the matters under consideration are two Motions for Summary Judgment. One is filed by Charles L. Weissing, Trustee (Trustee), the Plaintiff, and the other by American Residential Elevators, Inc. (American Residential), one of the named Defendants in the above-captioned adversary proceeding. The Trustee in his Complaint, which consists of eight counts, sets forth following claims.
In Count I, the Trustee seeks a "turnover" sic, i.e., to recover the sum of $31,710.23 from two of the named Defendants, Harold Gerring and Winona Gerring (Gerrings). In Count II, the Trustee seeks a determination of the extent and validity of liens of several of the Defendants named in the adversary proceeding, all of which were subcontractors or suppliers of materials in a certain construction project in which G & R Builders, Inc. (Debtor), was the general contractor and the Gerrings were the owners. In Count III, the Trustee seeks again a turnover of $2,359.78 from Community National Bank (Bank) and from Russell Mitchell and Callie Mitchell (Mitchells), also named as Defendants in the adversary proceeding. In Count IV, the Trustee seeks again a turnover of the sum of $187.52 from First Florida Bank (First Florida) and again, the Mitchells.
In Count V, the Trustee seeks a turnover of the sum of $4,475.48 from the First National Bank of Venice (Bank of Venice) and the Mitchells and from American Lumber & Home Center, Inc. (American Lumber), who is also a named Defendant in the adversary proceeding. In Count VI, the Trustee seeks to recover by way of turnover the sum of $19,525.40 from Mr. and Mrs. Charles Winkler (Winklers), also named as Defendants in this adversary proceeding. The claim in Count VII is based on 11 U.S.C. § 547 of the Bankruptcy Code and seeks to invalidate as preferences certain liens obtained by garnishment by the Defendants, the Mitchells. In Count VIII, the claim is again based on § 547 and seeks to invalidate the garnishment lien obtained by American Lumber. Most of the Defendants filed crossclaims asserting that they have the superior right to the funds the Trustee seeks to recover.
Unfortunately, the Trustee lumped several different claims in one single Complaint and while there may be common questions of fact and law toward the Defendants concerning Count II which seeks a determination of the validity and extent of the liens and claims of the named Defendants, several other actions which deal with preferences are certainly not properly part of this lawsuit. Since no one has filed a Motion To Sever these claims, this Court will consider them together.
The Trustee's Motion seeks a Summary Judgment on his claim set forth in Count II, the Count involving American Residential, and seeks a determination that the funds are presently due and owing to the Debtor and therefore are properties of the estate by virtue of § 541(a)(1) of the Bankruptcy Code and that his right to the funds in question is superior to any claim of American Residential and the other materialmen and subcontractors named as Defendants based on the undisputed facts as appear from this record. In addition, the Trustee contends that neither American nor the other subcontractors filed claims of lien or otherwise perfected their lien rights against the property owned by the Gerrings. Therefore, their claims to the funds are inferior to the rights of the Trustee, and the subcontractors have nothing but an unsecured claim against the Debtor and have no right to the funds in the registry of the Court.
In opposition, American Residential asserts in its Motion for Summary Judgment first that the funds withheld are not property of the estate; second, American Residential claims that even if the funds are property of the estate, they are only property of the estate to the extent of the Debtor's bare legal title to the funds as they constitute an express trust. In the alternative, American Residential claims that even if the funds involved are properties of the estate, they are impressed with an equitable lien which is a valid encumbrance of the Trustee's right to the funds.
It is the contention of both parties that the facts are indeed without dispute, but, of course, the parties disagree as to who is entitled to a favorable judgment as a matter of law. Thus, in spite of the confused procedural state of this adversary proceeding, it is clear that the ultimate question is whether or not certain funds withheld by the owners of the property which was involved in the construction project with the Gerrings in which the Debtor was a general contractor, are properties of the estate. There is no question that if the funds involved in this controversy are not property of the estate at all, the Defendants are entitled to proceed in an appropriate nonbankruptcy forum to assert whatever rights they have against the funds in question, assuming this Court lifts the automatic stay to permit them to do so. The next question is whether or not those funds are impressed with a valid, enforceable interest claimed by American Residential based on the theory of an express or resulting trust. If that is the case, the Trustee has only a bare legal title to the funds, and pursuant to 11 U.S.C. § 541(d), the funds will be property of the estate only to the extent of the Trustee's bare legal title. In the alternative, if the funds are property of the estate, the question remains whether the funds are impressed with an equitable lien, and if so, whether the equitable lien would survive the Trustee's avoidance powers pursuant to 11 U.S.C. § 544.
The facts which are relevant and are indeed without dispute are as follows:
On June 16, 1987, G & R Builders, Inc., the Debtor (Debtor), and the Gerrings entered into a construction contract wherein the Debtor agreed to be a general contractor for the improvement of a certain parcel of real property owned by the Gerrings, which is located in Nokomis, Florida. On February 14, 1988, a Notice of Commencement regarding the construction contract was recorded in the Public Records of Sarasota County, Florida. Thereafter, the Debtor commenced construction.
On November 2, 1988, Garry Battaglia, president of the Debtor, executed a Final Contractor's Affidavit pursuant to Fla. Stat. § 713.06(3)(d), stating that the Affidavit was executed "for the purpose of obtaining a final payment from Mr. and Mrs. Harold Gerring in the amount of $20,000.00, plus change orders, as of November 2, 1988, in the amount of $11,710.23." Paragraph 4 of the Affidavit stated that all work to be performed under the contract had been fully completed and that all lienors under the direct contract had been paid in full, except for twelve subcontractors and materialmen, eleven of which are named Defendants in this adversary proceeding. The Affidavit itemized the amounts remaining unpaid, which totalled $33,523.39. Upon receipt of the Affidavit, Hal Gerring kept the sum of $31,710.23 in his checking account at First Florida Bank, Venice, Florida, for the benefit of unpaid subcontractors and suppliers, and withheld this amount from the Debtor.
On January 5, 1989, the Debtor filed its voluntary Petition initiating this case. Subsequent to the commencement of this adversary proceeding, the Gerrings deposited the sum of $31,710.23 into the Registry of this Court and were subsequently dismissed as Defendants in this adversary proceeding.
Based on the foregoing, the threshold question is whether the funds originally deposited in Hal Gerring's checking account are property of the estate. 11 U.S.C. § 541(a)(1) defines property of the estate broadly to include all legal or equitable interests of the debtor in property as of the commencement of the case. Thus, if the Debtor had a legal or equitable interest in the holdback as of the commencement of the case, the holdback is property of the estate.
American Residential argues first that the Debtor has no interest in the funds and, thus, the funds are not property of the estate, based on Fla.Stat. § 713.06(3)(d)(2), which provides that an owner may pay subcontractors directly under certain circumstances and thereby deduct those payments from the total amount owing to the general contractor. This Statute provides in pertinent part as follows:
2. If the contractor\'s affidavit required in this subsection recites any outstanding bills for labor, services, or materials, the owner may, after giving the contractor at least 10 days\' written notice, pay such bills in full direct to the person or firm to which they are due, if the balance due on a direct contract at the time the affidavit is given is sufficient to pay them and lienors giving notice, and shall deduct the amounts so paid from the balance due...
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