Lowery Bros., Inc., Matter of

• Decision Date: 15 February 1979
• Docket Number: No. 76-3151,76-3151
• Citation: 589 F.2d 851
• Parties: In the Matter of: LOWERY BROTHERS, INC., a Florida Corporation, Bankrupt. Edward S. AVDOYAN, Trustee, Appellant, v. DAVIS WATER & WASTE INDUSTRIES, INC., a Georgia Corporation, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 851

589 F.2d 851

5 Bankr.Ct.Dec. 73

In the Matter of: LOWERY BROTHERS, INC., a Florida Corporation, Bankrupt Edward S. AVDOYAN, Trustee, Appellant, v. DAVIS WATER & WASTE INDUSTRIES, INC., a Georgia Corporation, Appellee.

No. 76-3151.

United States Court of Appeals Fifth Circuit.

Feb. 15, 1979.

Morton Kosto, Orlando, Fla., for appellant.

Patrick T. Christiansen, James M. Corrigan, Orlando, Fla., for appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before JONES, RONEY and TJOFLAT, Circuit Judges.

TJOFLAT, Circuit Judge:

The controlling issue in this case is whether Florida Statutes section 713.15, ¹ a portion of the Florida Mechanics' Lien Law, ² creates a statutory lien valid against a trustee in bankruptcy under sections 1(29a), 67(b) and 67(c) of the Bankruptcy Act (the Act), 11 U.S.C. §§ 1(29a), 107(b), 107(c) (1976). The bankruptcy judge held that it does not create a statutory lien and voided as a preferential transfer the repossession of certain materials from the bankrupt, Lowery Brothers, Inc. (Lowery), by Davis Water & Waste Industries, Inc. (Davis). On appeal, the district court reversed, holding that Florida Statutes section 713.15 creates a statutory lien valid against a trustee in bankruptcy. We affirm the ruling of the district court.

I

The relevant facts in this case are not in dispute. Lowery was a contractor retained by ITT Development Corporation (ITT) and Atlantis Development Corporation (Atlantis) to perform certain underground and utility construction on the Palm Coast project in Flagler County, Florida. Lowery commenced work on the Palm Coast project in 1970. It abandoned its work on the project in mid-August 1974 and was formally notified in a letter from ITT and Atlantis dated August 12, 1974, that it should leave the construction site. Prior to its abandonment of the project, Lowery had purchased various supplies and equipment for the construction of water and sewer collection and distribution systems from Davis on open account. While some of these materials had been incorporated into the Palm Coast project prior to Lowery's abandonment, other materials had not yet been so incorporated and were still situated on the jobsite. At the time of its abandonment, Lowery owed Davis approximately $124,000 for materials Davis had furnished to Lowery for the project. In early September 1974, Davis, relying on Florida Statutes section 713.15, repossessed the unincorporated materials; it later issued Lowery a credit for the repossessed materials in the amount of $47,768.09, the original purchase price for those items. On October 30, 1974, Lowery filed its petition for voluntary bankruptcy.

On January 10, 1975, Edward S. Avdoyan, the trustee for Lowery (Trustee), brought this action to avoid Davis's repossession of the materials as an improper preference under section 60(b) of the Act, 11 U.S.C. § 96(b) (1976). Davis answered that Florida Statutes section 713.15 created a valid statutory lien which would prevent the Trustee from avoiding Davis's act of repossession. Both parties moved for summary judgment, and on August 18, 1975, the bankruptcy judge granted the Trustee's motion, holding that Florida Statutes section 713.15 does not create a statutory lien under the Act and that Davis's repossession of materials from the Palm Coast jobsite constituted a preferential transfer within four months of Lowery's bankruptcy and thus was avoidable by the Trustee. In reversing the bankruptcy judge, the district court read section 713.15 as establishing a statutory lien within the meaning of the Act, held that this lien could not be avoided by the Trustee, and directed the entry of final judgment for Davis. The Trustee appealed the decision of the district court.

Although the parties briefed and argued the issue of whether the elements of an avoidable preference are present, we need not decide this point since our finding of a valid statutory lien disposes of this case.

II

The Act provides a special status to the holder of a statutory lien. The holder of such a lien is protected against the avoidance powers of a bankruptcy trustee so long as the tests of sections 67(b), (c)(1)(A) and (c)(1)(B) of the Act are met. ³ Section 67(b) provides that the avoiding power given a trustee by section 60 of the Act, 11 U.S.C. § 96 (1976), is ineffective against a "statutory lien" except under the circumstances set forth in section 67(c). "Statutory lien" is defined by section 1(29a) of the Act, 11 U.S.C. § 1(29a) (1976), as follows:

"Statutory lien" shall mean a lien arising solely by force of statute upon specified circumstances or conditions, but shall not include any lien provided by or dependent upon an agreement to give security, whether or not such lien is also provided by or is also dependent upon statute and whether or not the agreement or lien is made fully effective by statute.

While the Act defines the term statutory lien, it nowhere defines the term "lien" itself; instead, one must examine the law of the state whose statute is at issue in order to determine whether it establishes a "lien" under state law and thus under the Act. City of New York v. Hall, 139 F.2d 935, 936 (2d Cir. 1944); City of New Orleans v. Harrell, 134 F.2d 399, 400 (5th Cir. 1943); Commercial Credit Co. v. Davidson, 112 F.2d 54, 55 (5th Cir. 1940); City of Dallas v. Ryan (In re Brannon), 62 F.2d 959, 961 (5th Cir. 1933); In re Trahan, 283 F.Supp. 620, 622 (W.D.La.), Aff'd per curiam, 402 F.2d 796 (5th Cir. 1968), Cert. denied sub nom. Bernard v. Beneficial Finance Co., 394 U.S. 930, 89 S.Ct. 1189, 22 L.Ed.2d 459 (1969); 4 Collier on Bankruptcy P 67.20 at 219-20, P 67.25 at 347-48, P 67.281(2.1) at 420-21 (14th ed. J. Moore & L. King 1978); See In re Wallace Lincoln-Mercury Co., 469 F.2d 396, 400 (5th Cir. 1972). Therefore, we must examine Florida law and determine whether Florida Statutes section 713.15 creates a lien. If it does, we then must determine whether this lien is a statutory lien as defined by section 1(29a) of the Act. If it is a statutory lien, we finally must decide whether it survives the test of section 67(c)(1) (A) and (B) of the Act.

III

There is no reported case in which a Florida court has decided whether section 713.15 creates a lien. ⁴ Accordingly, we must anticipate how a Florida court would resolve this question were it confronted by it. In order to do so, we must turn to general tenets of Florida law and to an analysis of section 713.15 and the Florida Mechanics' Lien Law.

Florida courts have defined a lien as "a charge upon property for the payment of a debt or duty." Phillips v. Atwell, 76 Fla. 480, 488, 80 So. 180, 182 (1918). "A lien is a qualified right or a proprietary interest, which may be exercised over the property of another. It is a right which the law gives to have a debt satisfied out of a particular thing." City of Sanford v. McClelland, 121 Fla. 253, 257, 163 So. 513, 514 (1935). Section 713.15 gives the seller of materials the right to repossess them from their purchaser upon the completion or abandonment ⁵ of an improvement ⁶ without or prior to the incorporation of the materials therein if the seller has not received payment for the materials. Although it is unclear from the language of the statute exactly when this right of repossession comes into existence, that is, whether it is a conditional right to repossess the materials which arises at the time of original delivery or whether it only commences upon the act of completion or abandonment of the improvement, the right definitely exists after the time of abandonment or completion. Section 713.15 clearly creates a "charge upon property for the payment of a debt" since it gives the supplier a right to repossess the materials it delivered for an improvement if the debt for the materials has not been satisfied, provides that title to the materials is revested in the supplier "as if (the supplier) had never parted with their possession," and states that after repossession or replevin the underlying debt for the materials is extinguished. Similarly, the provision creates a right which a supplier such as Davis may exercise over the property of another ⁷ in order to satisfy his debt out of a particular thing, that being the unused materials still present on the improvement site. Thus, section 713.15 appears to fit the general characteristics of a lien as defined by the Florida courts.

As mentioned above, section 713.15 is a portion of the Florida "Mechanics' Lien Law," which is Part I of Chapter 713 of the Florida Statutes, entitled "Liens, Generally." Thus, section 713.15 is categorized by the Florida Legislature under both "Liens" and "Mechanics' Liens." The title of the law which enacted the original version of section 713.15 was:

AN ACT Providing for Mechanics' or Laborers' Liens Including Liens for Materials on Real Property, Providing Penalties for Misapplication of Funds and for Furnishing False Statements, to Make Uniform the Laws of this State with Other States with Reference Thereto, and to Repeal all Acts or Parts of Acts Inconsistent Herewith.

1935 Fla.Laws ch. 17097. In 1963 the original version of section 713.15 was revised as part of a law entitled: "AN ACT relating to mechanics' lien law; revising chapter 84, repealing sections 84.01-84.35 and adding sections 84.011-84.371, all Florida Statutes; providing effective date October 1, 1963." 1963 Fla.Laws ch. 63-135.

The Florida Constitution provides that "(e)very law shall embrace but one subject and matter properly connected therewith, and the subject shall be briefly expressed in the title." Fla.Const. art. III, § 6. Thus, the title of an act defines its scope, Finn v. Finn, 312 So.2d 726, 730 (Fla.1975); Hillsborough County v. Price, 149 So.2d 912, 914 (Fla.Dist.Ct.App.1963), and the body of an act can contain no valid provision beyond the range of the subject set forth by the title of the act. State v. Tindell, ...