In re L. Bruce Nybo, Inc.
| Decision Date | 04 April 2000 |
| Docket Number | No. CVS990145JBRRJJ. Bankruptcy No. S-972097-LBR. Adversary No. S-972097.,CVS990145JBRRJJ. Bankruptcy No. S-972097-LBR. Adversary No. S-972097. |
| Citation | 247 BR 294 |
| Parties | In re L. BRUCE NYBO, INC., Debtor. Paragon Henderson Associates I, a Nevada Limited Partnership; Kimball Hill Homes Nevada, Inc., a Nevada Corporation; Juliea M. Ness as Trustee of the Juliea M. Ness Family Trust, Appellants, v. L. Bruce Nybo, Inc., Appellee. |
| Court | U.S. District Court — District of Nevada |
John Sacco, Sacco & Dion, Ltd., Las Vegas, NV, for appellant Kimball Hill Homes, Nevada; Juliea M. Ness; and Paragon Henderson Associates.
L. Truman, Tobler & Truman, Las Vegas, NV, for appellee L. Bruce Nybo, Inc. and Nybo Engineering.
This matter comes before the Court on an appeal (# 1) by Appellants Paragon Henderson ("Paragon"), Kimball Hill Homes ("Kimball") and Juliea M. Ness as trustee of the Juliea M. Ness Family Trust ("Ness") (Paragon, Kimball and Ness are sometimes jointly referred to hereinafter as "Appellants" or "Buyers") of the bankruptcy court's Findings of Fact and Conclusions of Law and Judgment in favor of Appellee L. Bruce Nybo, Inc. ("Appellee" or "Nybo") entered on October 21, 1998 upholding Nybo's mechanics' lien against property purchased by Buyers.
L. Bruce Nybo, Inc., is a civil engineering firm which entered into an arrangement with Tri-Star International Development ("Tri-Star") between March 1996 and November 1996 to provide engineering service for a 433-acre parcel known as Black Mountain Vistas ("Black Mountain") owned by Tri-Star. The engineering services included the creation and recording of a parcel map so that the property could be split into parcels and sold to builders or developers. Black Mountain was divided into at least 17 separate parcels (A - 44.85 acres, B1 - 15.62 acres, B2 17.84 acres, C - 30.57 acres, D1 - 2 acres, D2 - 1.9 acres, E1 - 8.5 acres, E2-2.72 acres, E3 - 1.48 acres, E4 - 1.98 acres, E5 - 1.98 acres, F1 - 34.18 acres, F3 - 102.10 acres, G - 72.25 acres, I - 21.44 acres, J - 31.11 acres, and K - 33.59 acres).
Because Tri-Star had not paid the amount Nybo claims was due for the engineering services provided, on January 13, 1997, Nybo recorded its first notice of mechanics' lien. That lien was eventually released but another notice of lien was filed on February 18, 1997. Tri-Star stipulated at trial that the lien release was only intended to release Parcel J and not all the property at Black Mountain. The release of Parcel J was to be in exchange for a deposit of $200,000 to be held in escrow.
Subsequent to the notice of lien filed on February 18, 1997, Paragon purchased Parcels A, B1 and B2; Ness purchased Parcel D2; and Kimball purchased Parcel K. At trial, the only evidence presented of work actually performed at Black Mountain prior to conveying Parcels A, B1, B2, D2 and K to Buyers was the staking of parcel boundaries and potential streets. Paragon and Kimball authorized Nybo to perform certain engineering services on the parcels they purchased but Mr. Nybo, owner of Nybo, testified that Paragon and Kimball paid Nybo in full for the work authorized by Paragon and Kimball.
After filing for protection under Chapter 11 of the Bankruptcy Act, Nybo filed Adversary Case No. 97-2097 LBR on April 8, 1997 against Tri Star and Michael Shipsey, owner of Tri-Star. The Complaint alleged three claims for relief: (1) lien foreclosure on Black Mountain, (2) breach of contract and (3) unjust enrichment. On September 3, 1997, Nybo filed an Amended Complaint adding additional causes of action and additional defendants including Paragon. Nybo filed a Second Amended Complaint on November 14, 1997, naming additional defendants including Kimball and Ness. The Second Amended Complaint alleges that Paragon, Kimball and Ness are owners of property at Black Mountain subject to Nybo's mechanics' lien and seeks foreclosure of the mechanics' lien.
Starting on January 6, 1998, the bankruptcy court held a bench trial on the lien foreclosure and breach of contract causes of action. Following the trial and oral arguments, on October 20, 1998, the bankruptcy court entered its Findings of Fact and Conclusions of Law. The bankruptcy court found Nybo's mechanics' lien to be valid and that the entire property at Black Mountain, including the parcels owned by Buyers, was subject to Nybo's mechanics' lien in the amount of $466,121.00. On that same day, the bankruptcy court entered judgment in favor of Nybo. Thereafter, the bankruptcy court entered orders and judgment against Buyers awarding attorneys' fees and costs to Nybo as a prevailing party in a mechanics' lien action.
On December 23, 1998, Buyers filed a motion to alter or amend judgment. In response to Buyer's motion and after the motion had been fully briefed and argued, the bankruptcy court, on February 2, 1999, directed the entry of judgment in accordance with Bankruptcy Rule 7054.
On February 5, 1999, Buyers filed a notice of appeal under 28 U.S.C. § 158(a) to this Court from the Findings of Fact and Conclusions of Law, the Orders and Judgments awarding attorney fees and costs, and the Order directing the entry of judgment pursuant to Bankruptcy Rule 7054. Subsequently, the bankruptcy court entered an Order staying enforcement of the judgment sale of Buyers' property pending appeal.
In their opening brief (# 327), filed on April 2, 1999, Buyers contend that the bankruptcy court committed the following reversible errors: (1) failing to enter findings with respect to the terms and conditions of the contract between Tri-Star and Nybo for engineering services at Black Mountain; (2) finding that the notice of mechanics' lien recorded by Nybo on January 13, 1997, could be relied upon after it had been released; (3) concluding that Nybo's mechanics' lien was valid; (4) concluding that the Nybo's mechanics' lien was valid and enforceable against Buyers when no visible work of improvement had commenced at Black Mountain before or at the time Buyers closed on the purchase of their parcels; (5) concluding that Nybo did not waive its right to proceed against Buyers on its mechanics' lien action; (6) failing to find that Nybo did not mitigate its damages; (7) concluding that Buyers acquired title to their parcels with actual or constructive notice of Nybo's mechanics' lien and that Buyers therefore have no better rights in the subject property than those possessed by Tri-Star; (8) failing to conclude that Nybo's mechanics' lien should be apportioned among the parcels at Black Mountain; and (9) concluding that Nybo's mechanics' lien was valid upon all real property at Black Mountain even though Nybo failed to name all property owners in its foreclosure action. Nybo filed an Answering Brief (# 335) on April 30, 1999, opposing Buyers' claims of error, to which Buyers replied (# 337).
The bankruptcy court's findings are reviewed under the clearly erroneous standard. Ragsdale v. Haller, 780 F.2d 794, 795 (9th Cir.1986); Bankr.R. 8013. Questions of law are reviewed de novo. Id. Interpretations of state law are reviewed under the same de novo standard as are questions of federal law. Brooks v. Hilton Casinos, 959 F.2d 757, 759 (9th Cir.1992). "A finding of fact is clearly erroneous, although there is evidence to support it, when the reviewing court, after carefully examining all the evidence, is left with the definite and firm conviction that a mistake has been committed." Household Credit Serv. v. Ettell (In re Ettell), 188 F.3d 1141, 1145 (9th Cir.1999) (citation and quotation omitted).
Buyers contend Nybo's mechanics' lien did not attach to their parcels at Black Mountain because the specific requirements of NRS 108.225 (priority of liens) were not met prior to Buyers' purchase of their parcels and therefore Buyers' interests in their parcels have priority over Nybo's mechanics' lien and effectively eliminate Nybo's mechanics' lien as to Buyers' parcels. A mechanics' lien has priority over a conveyance if the lien attaches to the property before the conveyance is made. See Schrader Iron Works v. Lee, 26 Cal.App.3d 621, 632, 103 Cal.Rptr. 106, 113 (Cal.App.1972) (citing general rule). In Nevada, mechanics' liens do not attach to property until the priority requirements of Nevada's mechanics' lien statute (NRS 108.225) have been met. See Aladdin Heating v. Trustees of Cent. States, 93 Nev. 257, 563 P.2d 82, 84 (1977); see also Calder Bros. Co. v. Ross L. Anderson Signs, 652 P.2d 922, 924 (Utah 1982) ();1Walker v. Lytton Sav. & Loan Assn., 2 Cal.3d 152, 84 Cal.Rptr. 521, 465 P.2d 497, 500 (1970) ();2 Pursuant to NRS 108.225(1), mechanics' and materialmen's liens are preferred to:
In Erickson Construction v. Nevada Nat. Bank, 89 Nev. 350, 513 P.2d 1236, 1237 (1973) the Nevada Supreme Court held that priority of mechanics' liens in Nevada is established by NRS § 108.225 "which provides that mechanics' liens are superior to . . . other encumbrances only when such . . . encumbrances have attached subsequent to the time construction was commenced or when the mechanics lienholder had no actual or constructive notice of the encumbrance at the time work was commenced."
In Aladdin Heating, the Nevada Supreme Court held that preparatory work consisting of surveying land, soil testing and drafting architectural plans did not...
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