Trilogy Dev. Co. v. BB Syndication Servs., Inc. (In re Trilogy Dev. Co.)

• Citation: 468 B.R. 854
• Decision Date: 29 December 2011
• Docket Number: Bankruptcy No. 09–42219–DRD–11.,Adversary No. 10–4016.
• Parties: In re TRILOGY DEVELOPMENT COMPANY, Debtor.Trilogy Development Company, LLC, Plaintiff, v. BB Syndication Services, Inc., et al., Defendants.
• Court: United States Bankruptcy Courts. Eighth Circuit. U.S. Bankruptcy Court — Western District of Missouri

468 B.R. 854

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

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

Bankruptcy No. 09–42219–DRD–11.

Adversary No. 10–4016.

United States Bankruptcy Court, W.D. Missouri.

Dec. 29, 2011.

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

Robert M. Pitkin, Ryan C. Westhoff, Scott E. Seitter, Shane C. Mecham, Levy & Craig, Christine L. Schlomann, Armstrong Teasdale, Todd M. Johnson, Baty Holm Numrich, Frank Wendt, G. Steven Ruprecht, 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, Brian M. Holland, Crystanna Cox, Lathrop & Gage, Jerald S. Enslein, Gallas & Schultz, Benjamin F. Mann, John Joseph Cruciani, Husch Blackwell Sanders LLP, Stephen R. Miller, Miller Schirger LLC, Danne W. Webb, Horn Aylward & Bandy, Janice E. Stanton, Kansas City, MO, Nicholas J. Garzia, Armstrong Teasdale LLP, St. Louis, MO, Christina Irene Miller, Blue Springs, MO, Eric Van Beber, Wallace Saunders Austin et al., Roger H. Templin, Chris W. Henry, Payne & Jones, Overland Park, KS, Todd W. Weidemann, Woods & Aitken LLP, Omaha, NE, for Defendants.

MEMORANDUM OPINION DENYING IN PART AND GRANTING IN PART BBSSI'S MOTIONS FOR SUMMARY JUDGMENT AGAINST A.T. SWITZER, APPLIED TECHNICAL SERVICES, INC., HARSCO CORP., METRO TILE CONTRACTORS AND WALTON CONSTRUCTION CO., AND DETERMINING THE VALIDITY, ENFORCEABILITY AND AMOUNT OF CERTAIN MECHANICS' LIENS

DENNIS R. DOW, Bankruptcy Judge.

This adversary comes before the Court on the Motion for Summary Judgment filed by defendant BB Syndication Services, Inc. (“BBSSI”) against A.T. Switzer Company (“Switzer”) and the Motion for Summary Judgment filed by BBSSI against Applied Technical Services, Inc. (“ATS”), Harsco Corporation (“Harsco”), Metro Tile Contractors, Inc. (“Metro”) and Walton Construction Co., LLC (“Walton”), and the objections by BBSSI and J.E. Dunn (“Dunn”) to mechanics' liens claimed by various claimants and the objections by BBSSI to the mechanic's lien claim of Dunn. BBSSI seeks judgment as a matter of law that Switzer, ATS, Harsco, Metro and Walton do not retain a valid mechanic's lien against property of the bankruptcy estate. This is a core proceeding under 28 U.S.C. § 157(b)(2)(I) over which the Court has jurisdiction pursuant to 28 U.S.C. §§ 1334(b), 157(a) and (b)(1). The following constitutes the Court's 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 BBSSI is not entitled to a judgment as a matter of law against Metro and Walton, but will enter judgment as a matter of law against Switzer and ATS ¹. Also for the reasons set forth below, the Court overrules, with one exception, the objections to mechanic's lien claims.

I. FACTUAL SUMMARY

Trilogy Development Company, LLC (“Trilogy” or “Debtor”) is a real estate development company that owned and developed a site for construction of a hotel, office building and parking garage (the “Project”). On December 5, 2005, Trilogy and Dunn, together with its subcontractors and other general contractors and their subcontractors, entered into a contract (the “Contract”) providing for construction services and materials on the real estate, and construction on the Project began soon thereafter.

BBSSI made a construction loan to finance the costs of construction of the Project and holds a deed of trust to secure that loan. Disputes arose during construction on the Project and Debtor stopped paying its contractors. Dunn and other contractors and subcontractors stopped work on the Project and filed mechanics' liens. Thereafter, in May 2009, Debtor filed a Chapter 11 petition and in January 2010, it filed an adversary action against all mechanic's lien claimants (“Claimants”) and BBSSI seeking a determination of the validity and priority of the liens. Procedures were put into place to deal with the multiple mechanic's liens and objections thereto. BBSSI (which had taken over as Plaintiff in place of Trilogy) and Dunn both filed reports specifying their objections to each mechanic's lien. The various Claimants then filed objections to the reports. The trial was bifurcated and the Court first heard and decided the issues of priority between Dunn's lien and BBSSI's deed of trust and Dunn's compliance with statutory notice requirements in Phase I. The issues regarding validity and amount of the mechanic's liens were heard in Phase II.

In August 2010, an auction was held to sell the asset and the sale was approved by the Court on August 31, 2010. In the fall of 2010, the Court resolved Phase I by summary judgment and trial. In April 2011, a two day trial was held on the Phase II issues. The Court took evidence on some of the liens and others were submitted on stipulation. There are also two motions for summary judgment at issue filed by BBSSI against certain Claimants.

II. MOTIONS FOR SUMMARY JUDGMENT

A. Standard for Summary Judgment

Federal Rule of Bankruptcy Procedure 7056(c), applying Federal 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 nonmovant.” 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).

B. Summary Judgment is Proper Against Switzer

BBSSI filed a motion for summary judgment against Switzer seeking discharge of Switzer's mechanic's lien claim. BBSSI alleged, and Switzer admitted, that Switzer did not file a mechanic's lien with the Clerk of the Court, rather it recorded its lien statement with the Jackson County Recorder of Deeds. As noted by BBSSI, Missouri courts have found that “the foundation of a mechanic's lien is the lien statement filed with the clerk of the circuit court of the county where the property is located. Unless this lien statement, which must be in substantial compliance with the provisions of the statute, is filed as required by the statute, no lien attaches.” Landers Lumber & Cement Co. v. Short, 225 Mo.App. 416, 37 S.W.2d 981 (1931). While the Court agrees with Switzer about the proposition that mechanic's lien laws in Missouri are remedial in nature and should be liberally construed for the benefit of the lien claimants, see BCI Corp. v. Charelbois Const. Co., 673 S.W.2d 774, 780 (Mo.1984), this liberal policy is not open-ended and does not relieve a lien claimant of reasonable and substantial compliance with statutory requirements. See Mitchell Engineering v. Summit Realty Co., 647 S.W.2d 130 (Mo.Ct.App.1983). Here, § 429.080 requires the filing of the lien statement with the Clerk of the Court. The Court finds that recording a lien statement with the Recorder of Deeds is not in substantial compliance with the statutory requirements. Thus, Switzer has not met its burden of showing substantial compliance with the statutory requirements of filing its lien statement with the Jackson County Clerk of Court and the Court grants BBSSI's motion for summary judgment against Switzer.

C. Summary Judgment is Not Proper as to Metro Tile Contractors, Inc. Or Walton Construction Co., LLC

BBSSI argues that ATS, Metro and Walton did not provide the requisite 10–point bold type Notice specified in § 429.012.1. It asserts the same legal arguments that were previously set out in the Motion for Partial Summary Judgment filed by Trilogy against Dunn on June 28, 2010 (the “Dunn Motion”), specifically that the claimants did not strictly comply with the notice provisions and therefore do not have a valid, enforceable mechanic's lien. As the parties are well aware, this Court ruled on that motion on October 5, 2010, and held that strict compliance was not necessary. In part, this Court stated that it appears “that nearly all of the Missouri state court cases cited by both Debtor and Dunn acknowledge, and in several instances apply, the notion of substantial compliance with the statutory notice language and that none of them, including the Missouri Supreme Court in Gauzy, has explicitly rejected the doctrine. It is in no way clear to this Court that Missouri's highest court would require absolute strict compliance with the statutory language set forth in § 429.012.1.” Memorandum Opinion dated October 5, 2010, p. 10 (“Dunn Opinion”).

This Court provided a detailed analysis setting forth its reasoning in the...