In re JF Naylor and Co., Inc., Bankruptcy No. 85-01231
| Decision Date | 26 August 1986 |
| Docket Number | Bankruptcy No. 85-01231,Adv. No. 85-0194. |
| Parties | In re J.F. NAYLOR AND COMPANY, INC. (EIN XX-XXXXXXX), Debtor. J.F. NAYLOR AND COMPANY, INC., Plaintiff, v. MECHANICAL SHEET METAL, INC., Defendant. |
| Court | United States Bankruptcy Courts. Fifth Circuit. U.S. Bankruptcy Court — Middle District of Louisiana |
Charles S. McCowan, Jr., and Gary A. Bezet, Baton Rouge, for J.F. Naylor and Co., Inc. (debtor-plaintiff-third party defendant).
Michael J. Harig, Baton Rouge, for Mechanical Sheet Metal, Inc. (defendant-third party plaintiff).
Bryan McDaniel, Baton Rouge, and Michael S. Tudor, Alexandria, for Tudor
Const. Co. (third party defendant-third party plaintiff).
Della O. Hayes, Baton Rouge, for debtor-plaintiff.
Richard L. McGimsey, Baton Rouge, pro se, and for Roy Jones as defendants.
DETERMINATION OF ENTITLEMENT TO INTERPLEADER RELIEF
This proceeding is a mass of claims and counterclaims that results from construction contracts. For purposes of determining whether an interpleader proceeding is appropriate, and only for those purposes, the following facts are undisputed, except as may be indicated.
Swaggert (the landowner) employed Tudor as a general contractor on three construction contracts: (i) the Permanent Worship Center job; (ii) the Temporary Worship Center job; and (iii) the Dormitory job. Tudor employed Naylor as a subcontractor to perform parts of all three contracts. Naylor purchased goods from materialmen and engaged subcontractors in connection with the work. The contracts were bonded by insurance companyes: Heritage bonded the Permanent Worship Center job; Credit General bonded the Dormitory job; USF & G bonded the Temporary Worship Center job.
Naylor employed Mechanical Sheet Metal, Inc. as a subcontractor. Mechanical filed liens in the amounts of the $30,313.43; $11,397.23 involves the Dormitory job and $18,916.20 involves the Temporary Worship Center job.
Naylor also employed Acadiana Sheet Metal as a subcontractor. Acadiana sued USF & G for $29,576.01 for sums due it by Naylor.
Naylor also employed Insulation Sales & Service, Louisiana Controls, & Thibodeaux Mechanical as subcontractor; they sued USF & G, Credit General, and Heritage for $83,213.12.
Naylor also employed Carrier New Orleans Co. as a subcontractor; Carrier filed a lien against the Permanent Worship Center job in the amount of $3,641.59. It filed liens in the same amounts against the Temporary Worship Center job and against the Dormitory job.
Naylor also employed Honeywell, Inc. as a subcontractor; Honeywell filed a lien against the Permanent Worship Center job for $22,805.50. It filed an identical lien against the Temporary Worship Center job.
Naylor also employed Kirkwood Company as a subcontractor; Kirkwood filed a lien against the Dormitory job for $10,924.44.
Naylor also employed Coburn as a subcontractor; Coburn filed a lien against the Temporary Worship Center job for $9,435.99.
Both Naylor and Mechanical were Debtors before this Court when this adversary was filed on November 20, 1985.1 Naylor filed this adversary proceeding against Mechanical seeking a judgment determining that Mechanical's liens were not valid and ordering those liens canceled. Mechanical answered denying the jurisdiction of the Bankruptcy Court and alleging that Naylor did not have a claim on which relief could be granted; Mechanical then counterclaimed against Naylor for $30,313.43 due on the job and for $500,000 damages for late payment; in addition to asserting these claims against Naylor, Mechanical asserted the same claims against Tudor and Swaggert in third party claims. Naylor answered by denying that it owed Mechanical any funds and denying that the Bankruptcy Court had jurisdiction over the subject matter of the counterclaim.
A pretrial conference was held. At this point in the progress of the adversary proceedings, e.g. after complaint, answer, counterclaim, and third party claim, but before answer by third party defendants, counsel for Naylor and for Mechanical appeared at a pretrial conference and explained to the Court that Tudor owed Naylor substantial sums of retainage but would not pay until Mechanical's liens were canceled. The Court understood counsel to represent that the total retainage on the jobs exceeded all claims against Tudor/Swaggert and that the objective of the adversary proceeding was to remove the Mechanical liens because they effected a logjam that prevented payment of retainage and effective satisfaction of all claims. Had this assertion been correct, the balance due Naylor would certainly have constituted property of the estate and the Court suggested interpleader as a means of dividing the funds owed by Tudor/Swaggert to Naylor from those due the lien claimants. Unfortunately, answers, third party claims, and counterclaims show that the claims of materialmen/subcontractors likely exceed the amount Naylor admits as due, and in addition, there is an additional claim that Naylor has assigned to Capital Bank any receivable that might eventually be due from Tudor.
Swaggert answered by stating that it had paid Tudor all sums due, denying Bankruptcy Court jurisdiction over the subject matter, and denying that Mechanical had stated a claim on which relief could be granted.
Tudor then answered Mechanical's third party claim by admitting jurisdiction and admitting holding retainage due Naylor in the amount of $182,233.37, but claiming that such retainage was subject to offsets of about $27,000. The Tudor answer confirms that Swaggert has paid Tudor in full. Tudor admits that it owes Naylor and claims setoff as follows:
Amount Due
Under Contract Alleged Setoff
Worship Center $111,515.79 $ (6,000)
Dormitory 61,871.98 (20,000)
Temp. Worship
Center 8,845.60 (1,000)
___________ _________
$182,233.37 $(27,000)2
___________ _________
Tudor then asserts that the liens and claims by subcontractors and materialmen generally as set forth above.3 Tudor also asserts that Naylor has assigned its retainage to Capital Bank and joined Capital Bank as an interpleader defendant and claimant to any funds that might remain due to Naylor.
Credit General Insurance answered, admitting the jurisdiction of the Bankruptcy Court and claiming a prior right to the retainage.
Heritage Insurance Company of America answered, asserting a Cook County, Illinois, court injunction staying any proceedings against Heritage because Heritage is under receivership under Illinois law.
Naylor answered, admitting the jurisdiction of the Court over the interpleader but denying any right in Tudor to offset retainage on one job against claims on another.
Thibodeaux Mechanical, Louisiana Controls, Insulation Sales & Service, and Acadiana Sheet Metal answered, alleging that the Court lacks authority to stay any proceeding against the bonding companies, asserting that these defendants have an independent cause of action against the bonding company.
Capital Bank first on April 8 filed a memorandum asserting the impropriety of interpleader. Capital Bank asserts that interpleader is improper: (i) because the claims against Tudor/Swaggert are not limited to the amount to be deposited; and (ii) because Tudor seeks to avoid deposit of the retainage it admits that it holds. Then on May 5 Capital Bank filed an answer to the interpleader reasserting its objection to interpleader and asserting a lien on any funds due Naylor by Tudor. Capital states further that it does not object to the exercise of jurisdiction over the interpleader if the Court exercises such jurisdiction.
On May 7, 1986, Mechanical moved to abstain from hearing the interpleader action on the grounds that the interpleader defendants are not debtors. (Presumably Mechanical was referring to the interpleader defendants other than itself.)
LeDoux Electric, Inc. is a Naylor subcontractor; on May 7, 1986, it answered the interpleader, claiming $2,300.00 for materials and services used in the Dormitory job. It asks for an order directing payment of its claim.
LCR Corporation is a Naylor subcontractor; on May 8 it answered the interpleader, claiming $1,791.20 for materials used in the Dormitory job.
Lawrence Trahan d/b/a Trahan Sheet Metal filed an answer on May 7. The answer is a general denial. It is not possible to determine whether Trahan has any unsatisfied claim from these contracts.
Johnson Controls, Inc. is a Naylor subcontractor; on May 29, 1986, it filed its answer; the answer does not state the amount of its claim for materials and services used in the Temporary Worship Center job, but contends that it has such a claim, admits jurisdiction of the Court, and seeks payment of its claim.
McQuay, Inc. is a Naylor subcontractor; on May 19 it answered the interpleader, claiming $8,751.46 for materials used in the Dormitory job and seeks a judgment in its favor in that amount.
The claims asserted against the fund, therefore, are as follows:
Mechanical $ 30,313.43
Acadiana 29,576.01
Insul. Sales, La. Control, &
Thibodeaux Mech. 83,213.12
Carrier 3,641.59
Honeywell 22,805.50
Kirkwood 10,924.44
Coburn 9,435.99
Ledoux 2,300.00
LCR 1,791.20
McQuay 8,751.46
__________
$202,752.74
___________
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