First Nat'l Bank v. Crescent Elec. Supply Co. (In re Renaissance Hosp. Grand Prairie Inc.)

• Decision Date: 05 April 2013
• Docket Number: No. 12–10386.,12–10386.
• Citation: 713 F.3d 285
• Court: U.S. Court of Appeals — Fifth Circuit
• Parties: In the Matter of RENAISSANCE HOSPITAL GRAND PRAIRIE INCORPORATED, Debtor. First National Bank; MetroBank N.A., Appellees, v. Crescent Electric Supply Company; Hajoca Corporation, doing business as Easter & Sons Supply; Innovative Plumbing Services, Incorporated; Metropolitan Professional Electrical Services, Incorporated, doing business as Metro Electric, Appellants.

713 F.3d 285

In the Matter of RENAISSANCE HOSPITAL GRAND PRAIRIE INCORPORATED, Debtor.First National Bank; MetroBank N.A., Appellees,

v.Crescent Electric Supply Company; Hajoca Corporation, doing business as Easter & Sons Supply; Innovative Plumbing Services, Incorporated; Metropolitan Professional Electrical Services, Incorporated, doing business as Metro Electric, Appellants.

No. 12–10386.

United States Court of Appeals, Fifth Circuit.

April 5, 2013.

Eric Yollick, Yollick Law Firm, P.C., The Woodlands, TX, Charles L. Perry, Andrews Kurth, L.L.P., Dallas, TX, for Appellees.

Misti L. Beanland, Timothy Allen Dunn, Matthews, Stein, Shiels, Pearce, Knott, Eden & Davis, L.L.P., Gregory Alan Whittmore, Dallas, TX, Randyl S. Meigs, Brittani Wilmore Rollen, McDonald Sanders, P.C., Fort Worth, TX, for Appellants.

Appeals from the United States District Court for the Northern District of Texas.

Before STEWART, Chief Judge, and DAVIS and CLEMENT, Circuit Judges.

CARL E. STEWART, Chief Judge:

Plaintiffs–Appellants, Innovative Plumbing Services, Inc. (“IPS”) and Metropolitan Professional Electrical Services, Inc. (“MPES”) challenge the district court's final judgment, reversing and vacating the bankruptcy court's amended judgment, that their mechanics' liens on the property of Debtor, Renaissance Hospital Grand Prairie Inc. (“RHGP”) ¹ did not pertain to materials or labor supplied before September 1, 2006, the date on which Defendant–Appellee, MetroBank N.A. (“MetroBank”) perfected its deed of trust lien. Additional Plaintiffs–Appellants, Hajoca Corp. (“Hajoca”) and Crescent Electric Supply Co. (“Crescent”) challenge the bankruptcy court's determination that their mechanics' liens also did not pertain to materials or labor supplied before September 1, 2006, which the district court upheld.² Additional Defendant–Appellee, First National Bank (“FNB”) is a party to this litigation as a participant in MetroBank's loan to RHGP.³

For the reasons provided herein, we AFFIRM the final judgment of the district court, which previously had reversed and vacated the amended judgment of the bankruptcy court.

I. BACKGROUND

A. Facts

On August 31, 2006, RHGP purchased an abandoned hospital site (the “Hospital”) with the proceeds of a secured $7,000,000 purchase money note from MetroBank. In order to perfect its deed of trust lien, MetroBank recorded the deed of trust and a security agreement in the Tarrant County, Texas land records on September 1, 2006.⁴

At the time of the purchase, RHGP intended to renovate the Hospital, which was without water supply or electrical power. To this end, RHGP contracted with IPS to provide plumbing services for the renovation project. Similarly, RHGP contracted with MPES to provide electrical services.⁵

To fund the renovation project, RHGP secured $26,000,000 in additional financing from MetroBank on February 6, 2007. The deed of trust secured both loans, which amounted to $34,033,053.37 as of the date of RHGP's bankruptcy petition. On February 14, 2007, MetroBank sold FNB an undivided participation in the loans.

On January 15, 2008, MPES recorded a mechanic's lien on the Hospital site in the Tarrant County land records. MPES did not pay its subcontractor, Crescent, for electrical materials used in the renovation project. Instead, on March 14, 2008, Crescent recorded its own mechanic's lien on the Hospital site.

On February 13, 2008, IPS recorded a mechanic's lien on the Hospital site in the Tarrant County land records. IPS did not pay its subcontractor, Hajoca, for plumbing materials used in the renovation project.Instead, on February 1, 2008, Hajoca recorded its own mechanic's lien on the Hospital site.

B. Proceedings Before the Bankruptcy Court1. RHGP's Filing for Bankruptcy Protection

RHGP filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on August 21, 2008. On September 23, 2009, the bankruptcy court converted RHGP's case into a Chapter 7 liquidation. Thus, the Hospital renovation project never was completed.

2. The Bankruptcy Court's Compromise Order

a. MetroBank's Trustee's Sale

On January 2, 2009, RHGP and the Lenders jointly moved, pursuant to Federal Rule of Bankruptcy Procedure 9019, for the bankruptcy court's approval for the Lenders to foreclose on the Hospital. The bankruptcy court granted the joint motion and, on January 30, 2009, entered a compromise order that (i) lifted the automatic stay with respect to the Hospital; and (ii) allowed the Lenders to foreclose; but (iii) required the Lenders to credit bid the Hospital for at least $27,000,000. MetroBank conducted a trustee's sale in March 2009, in which it credit bid the Hospital for $27,000,000.

b. The Lenders' Objections to Liens Claimed by MPES, Crescent, and Hajoca

The bankruptcy court's compromise order additionally provided for the Lenders to file notice of their objections to any party claiming a superior interest in the proceeds of the trustee's sale. MPES, Hajoca, and Crescent, inter alios, claimed liens with priority over the deed of trust. Accordingly, on February 18, 2009, the Lenders filed notice of their objections.

Of note, IPS did not directly claim a lien. In 2008, IPS had assigned its lien to Hajoca in consideration for Hajoca forbearing its right to immediate suit for payment from IPS. While Hajoca did directly claim its own recorded lien, Hajoca did not assert its rights as IPS's assignee until later at trial. ⁶

3. The Parties' Scheduling Agreement Concerning Priority–of–Liens Issues

In order to narrow the outstanding priority-of-liens issues for trial, the various parties reached a scheduling agreement. Pursuant to that agreement, the Lenders moved for partial summary judgment as to the date the deed of trust related back, and the Lien Claimants entered into stipulations regarding the dates that they first supplied visible materials or labor to the renovation project. The parties reached this agreement at a stage prior to the close of discovery. Counsel for MetroBank drafted the stipulations.

a. The Lien Claimants' Stipulations

i. IPS and Hajoca

IPS stipulated: “The date that [IPS] performed its first visible work or delivered its first visible materials (as defined by section 53.124 of the Texas Property Code and Texas case law) was on or after October 9, 2006 but before February 22, 2009.”

Hajoca similarly stipulated: “The date that [Hajoca] performed its first visible work or delivered its first visible materials (as defined by section 53.124 of the Texas Property Code and Texas case law) was on or after October 9, 2006 but before February 22, 2009.”

Misti Beanland, counsel for Crescent and Hajoca—but not IPS, executed both stipulations. In executing the stipulations, Beanland specifically referred to herself as “Counsel for Crescent Electric Supply Company, Hajoca Corporation d/b/a Easter & Sons Supply and Innovative Plumbing Services” in her signature block.⁷

ii. MPES and Crescent

MPES stipulated: “The date that [MPES] performed its first visible work or delivered its first visible materials (as defined by section 53.124 of the Texas Property Code and Texas case law) was before September 1, 2006.”

Crescent stipulated: “The date that [Crescent] performed its first visible work or delivered its first visible materials (as defined by section 53.124 of the Texas Property Code and Texas case law) was on or after September 2, 2006 but before October 9, 2006.”

Thus, all Lien Claimants other than MPES stipulated that they performed their first visible work or delivered their first visible materials after September 1, 2006.

b. MPES's Representations to Counsel for the Lenders and Response to MetroBank's Interrogatories

On February 5, 2009, counsel for MPES submitted a letter to counsel for the Lenders, in which MPES represented that it had “commenced work on the [hospital] project on or about September 18, 2006.” MPES added that “materials were first delivered to the project ... on or about September 4, 2006.” In the letter, Counsel for MPES specifically linked MPES's above representations to the date that MPES's lien incepted: “[T]he inception of [MPES's] mechanic's and materialman's lien relates back to the date labor was first performed or materials were first delivered to the project.”

More than six months later, on September 11, 2009, MPES responded to interrogatories from MetroBank with a sworn statement from its President that MPES had “commenced construction on or about September 13, 2006.” Thus, MPES confirmed that it had not delivered materials or commenced labor before September 1, 2006.

MPES presently submits that it “timely supplemented” its interrogatory response, on November 20, 2009, to state instead that it had “[begun] work on the project” in June 2006.

4. The Bankruptcy Court's Disposition of the Lenders' Pre–Trial Motion for Partial Summary Judgment

On January 26, 2010, the bankruptcy court granted the Lenders' motion for partial summary judgment. The following issues remained for trial: (i) whether IPS or MPES had supplied visible materials or labor to the renovation project before September1, 2006; ⁸ and (ii) whether there had been a “general contractor arrangement” within the meaning of McConnell v. Mortgage Investment Co. and its progeny, 157 Tex. 572, 305 S.W.2d 280, 283–86 (1957), which would have allowed the various claimants' liens to relate back regardless.⁹

5. The Bankruptcy Court's August 2010 Trial Decision

After a five-day trial, conducted in April and May 2010, the bankruptcy court issued its decision on August 25, 2010.

The bankruptcy court determined, inter alia: (i) that IPS and MPES had supplied materials and labor before September 1, 2006 but, in light of their stipulations, Hajoca and Crescent had not; (ii) that there had been no general contractor arrangement; (iii) that Beanland's stipulation could not be imputed to IPS because IPS was not her client; and (iv) that Beanland had referred to herself as “Counsel for ... [IPS]” in her signature block only...