Pinnacle Props. V, LLC v. Mainline Supply of Atlanta, LLC., A12A0809.

Citation319 Ga.App. 94,735 S.E.2d 166
Decision Date30 November 2012
Docket NumberNo. A12A0809.,A12A0809.
PartiesPINNACLE PROPERTIES V, LLC et al. v. MAINLINE SUPPLY OF ATLANTA, LLC.
CourtUnited States Court of Appeals (Georgia)

OPINION TEXT STARTS HERE

Jefferson Madden Allen, Steven James Estep, Atlanta, for Pinnacle Properties V, LLC et al.

Mark Vincent Hanrahan, David Reid Cook Jr., Atlanta, Adam C. Caskey, Alpharetta, Fred D. Bentley Jr., Marietta, for Mainline Supply of Atlanta, LLC.

RAY, Judge.

Pinnacle Properties V, LLC (“Pinnacle”) appeals from the trial court's order which, inter alia, granted summary judgment to a materialman, Mainline Supply of Atlanta, LLC, d/b/a Mainline Supply Company (“Mainline”), thereby establishing a special lien against Pinnacle's interest in an office building. Pinnacle asserts that the trial court erred as a matter of law in granting a special lien: 1) on an interest granted through a usufruct; 2) on Pinnacle's contractual options to buy real property and sell improvements upon it; and 3) on Pinnacle's rights as a grantee under a deed to secure debt. For the reasons that follow, we affirm.

Summary judgment is appropriate if the pleadings and evidence show no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. On appeal from the grant or denial of summary judgment, an appellate court conducts a de novo review, construing all reasonable inferences in the light most favorable to the nonmoving party.1

“When a question of law is at issue, we owe no deference to the trial court's ruling and apply the ‘plain legal error’ standard of review.” 2

Mainline brought this suit for $113,731.22, seeking to foreclose a materialman's lien on a building which Pinnacle built on land leased from the Kennesaw Development Authority (“KDA”). The claim arose when a general contractor hired by Pinnacle, to whom Mainline had supplied piping, valves and fitting materials, failed to pay Mainline's invoices. Mainline filed claims of lien against both KDA and Pinnacle. Only the claim of lien against Pinnacle is at issue here.

The question before us is whether Pinnacle's interest in the building is subject to lien. The interest at issue was created when Pinnacle and KDA, on December 1, 2007, executed four agreements regarding the building: the Rental Agreement; the Purchase, Sale, Financing and Option Agreement (“Option Agreement”), and two other agreements related to Pinnacle's management and use of the site and building.

Under those agreements, Pinnacle agreed to sell to KDA 34 acres of real property for an initial payment in excess of $11.6 million.3 Then KDA agreed to rent those 34 acres back to Pinnacle for $10 so that Pinnacle could construct mixed-use office and retail buildings. The agreements also provided an option contract whereby KDA could buy the improvements from Pinnacle as they were completed, or Pinnacle could purchase both the land and the improvements from KDA. Although the agreements contemplate the construction of an entire development, it appears that only the building subject to this litigation ever was built. The agreements further provide that Pinnacle's ownership of the improvements terminates when the Rental Agreement terminates, regardless of whether either party exercises its purchase option. The Rental Agreement terminates, at the latest, on November 30, 2012.

After executing these contracts, Pinnacle hired a general contractor, McGuire Properties, Inc., which in turn hired Mainline to provide piping, valves, and fittings for the building. The general contractor failed to pay Mainline, and Mainline filed claims of lien and a complaint against, inter alia, KDA and Pinnacle.

On September 7, 2010, the trial court granted summary judgment to KDA on Mainline's claim of lien. The trial court found that according to the rental agreement, ownership of the land was severed from ownership in the building. The court determined that KDA had no ownership interest in the building, but held a fee simple interest in the land, and that Pinnacle held a usufruct in the land, but had “title” to the improvements, i.e., the building, which could be encumbered. Pinnacle never moved for reconsideration or otherwise appealed this order. Nor did Pinnacle challenge the form of the lien or Mainline's satisfaction of the requirements of OCGA § 44–14–361.1 below.

Mainline then moved for summary judgment against Pinnacle. On September 1, 2011, the trial court granted Mainline's motion, thereby creating an enforceable materialman's lien pursuant to OCGA § 44–14–361.1(a).4 The order declared a special lien and entered judgment against Pinnacle's “fee simple title” to the improvements, its options to sell the improvements or purchase the land, and its interest as a grantee under the deed to secure debt. Pinnacle appeals.

1. Pinnacle argues that the trial court erred as a matter of law in granting to Mainline a special lien on the building. Whether Mainline may claim a special lien here depends upon Pinnacle's interest in the building.

Pursuant to OCGA § 44–14–361(a), materialmen may have a special lien in “real estate,” which is defined in OCGA § 44–1–2(a)(1) and (3) as including [a]ll lands and the buildings thereon” or [a]ny interest existing in, or issuing out of, or dependent upon land or the buildings thereon.” 5

Mainline contends, and the trial court's order finds, that Pinnacle has a fee simple interest in the building. By contrast, Pinnacle's brief extensively discusses estates for years and usufructs, and contends that Pinnacle's interest in the building amounts only to a usufruct. While we will discuss the various potential interests at issue more fully below, in general, a fee simple interest provides the owner with entire and absolute ownership and with an unconditional power of disposition,6 while an estate for years is essentially a lease by which one person acquires a right to use real estate for a finite period “in as absolute a manner as may be done with a greater estate,” so long as neither the property nor the person entitled to the reversionary interest in it is injured by that use.7 A usufruct, by contrast, is created when the owner of real estate grants to another person the right to use and enjoy the property for a fixed time or at the will of the grantor, as in a landlord-tenant relationship, but no property interest arises in the grantee.8 A materialman's lien may attach to the interests of a “true owner,” that is, someone who has an estate or property interest in realty; it will not attach to a usufruct, which does not convey an ownership interest and is not subject to levy and sale.9

Pinnacle's argument that it possesses only a usufruct in the building fails, therefore, because it has admitted to having a property interest in the building. “A usufruct is sometimes referred to as a license to use. The conveyance of a usufruct passes no property interest to the tenant. 10 In its answer to Mainline's complaint, Pinnacle admitted that it held property interests in the improvements, i.e., the building. This is an admission in judicio. “Under the rule of the Code and the decisions of this court thereunder, admissions made in pleadings constitute a conclusive presumption of law unless and until altered by amendment.” 11 Pinnacle's reply brief before this Court also states that it has a “property interest” in the building.

Pinnacle attempts to argue that because this property interest was granted under the Rental Agreement, which conveyed only a usufruct in the land, this grant is not subject to lien because any ownership interest Pinnacle has is subordinate to KDA's reversionary interest in the building when the usufruct in the land terminates. However, this Court has determined that a materialman may assert a lien against whatever interest his employer had in the property at the time the work was done, or the materials were furnished. 12 At the time the work was done or the materials were furnished, Pinnacle by its own admission had a property interest in the building.

Here, the trial court's unappealed September 3, 2010, order on KDA's motion for summary judgment found that the agreements between Pinnacle and KDA severed ownership of the building from ownership of the land. In general, “any buildings placed upon the land of another, although by a person entitled to the use of the land, become part of the realty, and the title to the buildings becomes vested in the owner of the land.” 13 However, this rule may be altered by a “special agreement otherwise.” 14 As evidenced by the agreements, the parties here clearly intended to create a special agreement otherwise.15

At issue here is what type of interest Pinnacle has in the building.

(a) Fee simple interest. Mainline contends, and the trial court found, that a lien could attach because Pinnacle has a fee simple interest in the building.16 This is incorrect.

“An absolute or fee simple estate is one in which the owner is entitled to the entire property with unconditional power of disposition during his life and which descends to his heirs and legal representatives upon his death intestate.” 17 The Rental Agreement and the Option Agreement clearlyindicate that no fee interest was created. Fee interests in general run indefinitely,18 but Pinnacle's interest terminates on November 30, 2012. On that date, the Rental Agreement states that Pinnacle will own the improvements only “until expiration of the term or sooner termination of this Rental Agreement.” The Rental Agreement further provides that Pinnacle “will own the Improvements and will sell the Improvements to [KDA] as the Improvements are completed each year.” 19 This language indicates that the parties did not intend to create a fee interest 20 because such language is contrary to the “unconditional power of disposition” required to establish fee simple ownership.21 Pinnacle is clearly not free to sell the building to a party other than KDA, thus, Pinnacle does not have a fee simple interest.

(b) Estate...

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