In Re Trilogy Development Company, Bankruptcy No. 09-42219-DRD.

• Decision Date: 05 October 2010
• Docket Number: Adversary No. 10-4016-DRD.,Bankruptcy No. 09-42219-DRD.
• Citation: Trilogy Dev. Co. v. BB Syndication Servs. Inc. (In re Trilogy Dev. Co.), 437 B.R. 683 (Bankr. W.D. Mo. 2010)
• Parties: In re TRILOGY DEVELOPMENT COMPANY, Debtor. Trilogy Development Company, LLC, Plaintiff, v. BB Syndication Services, Inc., et al., Defendants.
• Court: U.S. Bankruptcy Court — Western District of Missouri

437 B.R. 683

In re TRILOGY DEVELOPMENT COMPANY, Debtor.Trilogy Development Company, LLC, Plaintiff,

v.BB Syndication Services, Inc., et al., Defendants.

Bankruptcy No. 09-42219-DRD.

Adversary No. 10-4016-DRD.

United States Bankruptcy Court,W.D. Missouri.

Oct. 5, 2010.

Jonathan A. Margolies, McDowell Rice Smith & Buchanan, Kansas City, MO, for Plaintiff.

Robert M. Pitkin, Scott E. Seitter, Shane C. Mecham, Levy & Craig, Christine L. Schlomann, Armstrong Teasdale, Todd M. Johnson, Baty Holm Numrich, David A. Meyers, Frank Wendt, Brown & Ruprecht, P.C., John J. Schirger, Miller Schirger, Joel Pelofsky, Berman DeLeve Kuchan & Chapman, LC, James F. Freeman, III, Swanson Midgley LLC, Eric L. Johnson, Spencer Fane Britt & Browne, Crystanna Cox, Lathrop & Gage, Jerald S. Enslein, Gallas & Schultz, John Joseph Cruciani, Husch Blackwell Sanders LLP, Stephen R. Miller, Miller Schirger LLC, Danne W. Webb, Horn Aylward & Bandy, Brian M. Holland, Janice E. Stanton, Kansas City, MO, Nicholas J. Garzia, Armstrong Teasdale LLP, St. Louis, MO, Eric Van Beber, Wallace Saunders Austin, et al., Chris W. Henry, Payne & Jones, Roger H. Templin, Overland Park, KS, Todd W. Weidemann, Woods & Aitken LLP, Omaha, NE, for Defendants.

CECO Concrete Construction, LLC, pro se.

Jim Kidwell Construction Corp., pro se.

P and J Arcomet LLC, pro se.

MEMORANDUM OPINION

DENNIS R. DOW, Bankruptcy Judge.

This adversary proceeding comes before the Court on the Motion for Partial Summary Judgment(“Motion”) filed by plaintiffTrilogy Development Company, LLC(“Debtor” or “Trilogy”) against defendantJ.E. Dunn(“Defendant” or “Dunn”).Trilogy seeks judgment as a matter of law that Dunn does not have a valid mechanic's lien against property of the bankruptcy estate and that the claim of Dunn against the estate is unsecured.This is a core proceeding under 28 U.S.C. § 157(b)(2)(K) over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b),157(a) and (b)(1).The following constitutes my Findings of Fact and Conclusions of Law in accordance with Rule 7052 of the Federal Rules of Bankruptcy Procedure.For the reasons set forth below, the Court finds that Trilogy is not entitled to a judgment as a matter of law against Dunn.

I.FACTUAL AND PROCEDURAL BACKGROUND

The following facts are uncontroverted: Trilogy is a real estate development company that owns and developed a site for construction of a hotel, office building and parking garage (the “Project”).On December 5, 2005, Trilogy and Dunn entered into a contract (the “Contract”) providing for improvement of the real estate and construction on the Project began soon thereafter.The contract was drafted by Trilogy's counsel.Dunn did not provide a separate notice to Trilogy regarding mechanics' liens that contained the specific language and requirements as set forth in Mo.Rev.Stat. § 429.012.1¹ .However, the Contract contained three separate provisions, specifically Sections 9.2.3,9.4.4and9.4.5, which Dunn asserts satisfy the notice requirements of § 429.012.1.On February 3, 2009, Dunn filed a mechanic's lien, as amended on March 9, 2009, in the Circuit Court of Jackson County, Missouri in the amount of $12,445,963.46, not including penalties, interest and costs.SeeTrilogy's Suggestions in Support of Plaintiff's Motion for Partial Summary Judgment, ¶¶ 2-7;Memorandum of J.E. Dunn Construction Company in Opposition to Plaintiff's Motion for Partial Summary Judgment, pp. 3-6, ¶¶ 1-7;Trilogy's Reply in Support of Plaintiff's Motion for Partial Summary Judgment, Response to J.E. Dunn's Statement of Additional Uncontroverted Facts, ¶¶ 1-7.

II.LEGAL ANALYSIS

A.Standard for Summary Judgment

Federal Rule of Bankruptcy Procedure 7056(c), applyingFederal Rule of Civil Procedure 56(c), provides that summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law.”Fed.R.Civ.P. 56(c);Fed. R. Bankr.P. 7056;Celotex v. Catrett,477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265(1986).The party moving for summary judgment has the initial burden of proving that there is no genuine issue as to any material fact.Adickes v. S.H. Kress & Co.,398 U.S. 144, 161, 90 S.Ct. 1598, 26 L.Ed.2d 142(1970).Once the moving party has met this initial burden of proof, the non-moving party must set forth specific facts sufficient to raise a genuine issue for trial, and may not rest on its pleadings or mere assertions of disputed facts to defeat the motion.Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp.,475 U.S. 574, 586-87, 106 S.Ct. 1348, 89 L.Ed.2d 538(1986).“A ‘genuine issue’ in the context of a motion for summary judgment is not simply a ‘metaphysical doubt as to the material facts'.”Id.Rather, “a genuine issue exists when the evidence is such that a reasonable fact finder could find for the non-movant.”Buscaglia v. United States,25 F.3d 530, 534(7th Cir.1994).When reviewing the record for summary judgment, the court is required to draw all reasonable inferences in favor of the non-movant; however, the court is “not required to draw every conceivable inference from the record-only those inferences that are reasonable.”Bank Leumi Le-Israel, B.M. v. Lee,928 F.2d 232, 236(7th Cir.1991).With respect to the issue before the Court, there appears to be no factual dispute at all, whether as to a material issue or otherwise.

B.Summary Judgment is Not Proper as to J.E. Dunn

Just as in an action brought under diversity jurisdiction, the doctrine of Erie R.R. Co. v. Tompkins,304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188(1938), governs the Court's application of state law.SeeF.D.I. C. v. Wabick,335 F.3d 620, 625(7th Cir.2003).Under the Erie doctrine, a federal court is bound by the decisions of the state's highest court.SeeBass v. General Motors Corp.,150 F.3d 842, 846-47(8th Cir.1998);HOK Sport, Inc. v. FC Des Moines, L.C.,495 F.3d 927, 934-35(8th Cir.2007).However, if the state's highest court has not clearly spoken, the Court may rely on the decisions of intermediate state courts, unless convinced by persuasive data that the highest state court would decide the issue differently.United Fire & Cas. Ins. Co. v. Garvey,328 F.3d 411, 413(8th Cir.2003)(citing Comm'r v. Estate of Bosch,387 U.S. 456, 465, 87 S.Ct. 1776, 18 L.Ed.2d 886(1967)).In attempting to predict state law, a federal court may “consider relevant state precedents, analogous decisions, considered dicta, scholarly works, and any other reliable data....”Leonard v. Dorsey & Whitney LLP,553 F.3d 609, 612(8th Cir.2009)(citingMcKenna v. Ortho Pharmaceutical Corp.,622 F.2d 657, 663(3d Cir.1980)).The Court's duty is to conscientiously ascertain and apply state law, not to formulate new law based on its own notions of what is the better rule.SeeDavid v. Tanksley,218 F.3d 928, 930(8th Cir.2000);McKenna,622 F.2d at 663.

The issue is whether Missouri law requires strict compliance with the mechanics' lien statute or whether substantial compliance, as espoused in the case of Overberg Decorating Center, Inc. v. Selbah Properties,741 S.W.2d 879(Mo.Ct.App.1987), satisfies the requisite notice.Debtor claims that in Gauzy Excavating and Grading Co. v. Kersten Homes, Inc.,934 S.W.2d 303(Mo. banc 1996), the Missouri Supreme Court affirmed Missouri precedent requiring strict compliance with the mechanics' lien notice statute and noted that the “bright-line rule mandated by the statute gives the best guidance to owners and contractors alike.”Gauzy,934 S.W.2d at 305-06.Debtor argues that the court expressly rejected substantial compliance with the language contained in § 429.012.1.Indeed, the Gauzy court held that the mechanic's lien was invalid because the contractor did not strictly comply with the statutory notice language.However, as discussed below, the court distinguished Gauzy and Overberg on their facts and most importantly, noted that the parties in Gauzy had merely an oral agreement, not a contract that substantially complied with the notice language as in Overberg.

Debtor also cites several Missouri Courts of Appealcases that it claims have enforced the strict compliance requirement and acknowledged a bright-line rule.See, e.g., MECO Systems, Inc. v. Dancing Bear Entertainment, Inc.,42 S.W.3d 794(Mo.Ct.App.2001);Bledsoe Plumbing and Heating, Inc. v. Brown,66 S.W.3d 169(Mo.Ct.App.2002);Landmark Systems, Inc. v. Delmar Redevelopment Corp.,900 S.W.2d 258(Mo.Ct.App.1995);Morgan Wightman Supply Co. v. Smith,764 S.W.2d 485(Mo.Ct.App.1989).However, also as discussed below, this Court believes that these cases also acknowledge the substantial compliance rule and do not reject its application in appropriate factual circumstances.

On the other hand, Dunn relies on Overberg for the proposition that substantial compliance with the language of the statute satisfies its requirements.In Overberg,the court determined that the language contained in the contract between the parties, while not in strict compliance with the statutory requirements, substantially complied with the statute and went even further by providing the owner with protection from hidden liens.Overberg,741 S.W.2d at 881.The court also noted that the developer provided the contract and was knowledgeable regarding mechanics' liens and that the legislature did not intend to protect such defendants in enacting the statute.However, it limited its holding to the particular circumstances of the Overberg case.Seeid.

Debtor argues that this Court is bound by the Missouri Supreme Court decision of Gauzy because it was decided after Overberg and, Debtor contends, the court expressly declined to adopt a substantial compliance exception.It also contends that this Court cannot rely on an appeals court decisi...