Durkan Patterned Carpet, Inc. v. Premier Hotel Development Group (In Re Premier Hotel Development Group)

270 B.R. 234, 47 Collier Bankr. Cas. 2d 573, 2001 Bankr. LEXIS 1576, 2001 WL 1575658
CourtUnited States Bankruptcy Court, E.D. Tennessee
DecidedOctober 11, 2001
DocketBankruptcy Nos. 01-20922, 01-20923, 01-20940. Adversary No. 01-2022
StatusPublished
Cited by6 cases

This text of 270 B.R. 234 (Durkan Patterned Carpet, Inc. v. Premier Hotel Development Group (In Re Premier Hotel Development Group)) is published on Counsel Stack Legal Research, covering United States Bankruptcy Court, E.D. Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Durkan Patterned Carpet, Inc. v. Premier Hotel Development Group (In Re Premier Hotel Development Group), 270 B.R. 234, 47 Collier Bankr. Cas. 2d 573, 2001 Bankr. LEXIS 1576, 2001 WL 1575658 (Tenn. 2001).

Opinion

MEMORANDUM

MARCIA PHILLIPS PARSONS, Bankruptcy Judge.

In this adversary proceeding, the plaintiff, Durkan Patterned Carpet, Inc. (“Dur-kan”), seeks to enforce its materialman’s lien against the debtor’s real property and a determination that its lien is superior to that held by the debtor’s principal secured lender, First Tennessee Bank National Association (“First Tennessee”). Presently before the court is First Tennessee’s motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6), as incorporated by Fed. R. Bankr.P. 7012(b). The motion presents the primary issue of whether under Tennessee law a materialman’s lien takes precedence over subsequent encumbrances if notice of the lien was filed more than ninety days after the materials were furnished but prior to the ninety-day period following completion of the structure. The other issue presented is whether a bankruptcy filing by the owner of the real property within ninety days after completion of the structure tolls the material-man’s ability to file a notice of lien. Because the court answers both of these questions in the negative, First Tennessee’s motion to dismiss will be granted. 1

I.

In its complaint filed on September 27, 2000, in the Chancery Court for Washington County, Tennessee, Durkan alleges that it entered into a contract with Premier Hotel Development Group, L.L.C. (“Premier LLC”) to supply carpet and related materials to Premier LLC for installation in connection with the construction of the Carnegie Hotel in Washington County, Tennessee. Durkan alleges that it fully complied with the contract by furnishing the carpet, but that it has not been paid the sum of $63,755.55 which remains owing under the contract. Because of this failure, Durkan filed a “NOTICE OF MECHANIC’S AND MATERIALMAN’S LIEN” (the “Notice”) in the register’s office for Washington County, Tennessee on July 10, 2000. The Notice, a copy of which *236 is attached to the complaint, was addressed to Carnegie Hotel and Premier LLC and specified that Durkan furnished materials “on or about March 17,2000, and prior thereto.”

Durkan also alleges in the complaint that at the time the contract was executed, Premier LLC owned the property upon which the Carnegie Hotel was located and that effective December 31, 1999, Premier LLC merged into Premier Hotel Development Group, a Tennessee general partnership (“PHDG”). By quitclaim deed dated March 23, 2000, PHDG conveyed the Carnegie Hotel property to the Public Building Authority of Johnson City, Tennessee, who by agreement dated that same day, leased the property back to PHDG and provided PHDG an option to repurchase the Carnegie Hotel property for $10. Also, on March 23, 2000, PHDG executed a deed of trust in favor of First Tennessee on the Carnegie Hotel property in order to secure a loan in the principal amount of $8,250,000. Durkan requests in the complaint that an attachment issue and be levied on the Carnegie Hotel property, that it be granted a judgment in the amount of $63,755.55 plus interest, that the judgment be declared a lien superior to First Tennessee’s deed of trust and PHDG’s leasehold interest, and that the court order the Carnegie Hotel sold in satisfaction of Durkan’s judgment.

PHDG filed for chapter 11 relief on March 15, 2001, commencing the underlying bankruptcy case, and Durkan’s state court action was removed to this court by the debtor on April 16, 2001. In its motion to dismiss, First Tennessee states that according to the allegations in the complaint, Durkan supplied materials on or about March 17, 2000, but did not record its Notice until July 10, 2000, some 115 days later.' First Tennessee asserts that pursuant to Tenn. Code Ann. § 66-11-117, a materialman’s lien relates back and takes precedence over all other subsequent liens only if notice of the materialman’s lien is filed within ninety days following completion of the materialman’s contract. First Tennessee contends that because Durkan’s Notice was not filed within ninety days of March 17, 2000, it does not have precedence over First Tennessee’s deed of trust recorded on March 23, 2000.

First Tennessee also asserts that Dur-kan’s action against it should be dismissed because Durkan “failed to perfect its mechanic’s lien through issuance of a proper attachment as required by Tenn. Code Ann. § 66-11-126.” First Tennessee maintains that under Tenn. Code Ann. § 29-6-117(e), Durkan was required to post an attachment bond “double the amount of Durkan’s claim” which “would have been in a minimum amount of $127,511.10 [$63,755.55 x 2].” Because Durkan only posted a bond in the amount of $500, First Tennessee argues that the attachment was void and did not perfect the Durkan’s lien.

In response, Durkan asserts that under applicable law, a materialman may file its notice of lien within ninety days after expiration of its contract or within ninety days after the building is completed. Durkan maintains that because no notice of completion was ever filed on the Carnegie Hotel, the building was completed on January 19, 2001 when the final certificate of occupancy was issued. Thus, the argument continues, Durkan had ninety days after January 19, 2001, in which to perfect its lien. Because the debtor filed bankruptcy on March 15, 2001, during the ninety-day period following completion of the building, Durkan asserts that its ability to preserve its lien was stayed by the automatic stay of the bankruptcy filing and that pursuant to 11 U.S.C. § 108(c), the *237 ninety-day period does not expire until thirty days after the stay is lifted.

With respect to First Tennessee’s argument regarding the amount of the attachment bond, Durkan disagrees that Tennessee law requires the amount of the bond to be twice the amount sought. Instead, Durkan asserts that when the property to be attached is real property, Tenn. Code Ann. § 29-6-116(4) only requires “a bond in penalty sufficient to cover all costs and damages as same may be estimated by the issuing officer.” Durkan states that the issuing officer for the state court determined the amount of the bond and that this amount is “perfectly satisfactory.” Furthermore, argues Durkan, a defect in the bond is not cause for dismissal of the attachment and even if the amount of the bond is incorrect, Durkan should be permitted to modify the amount.

II.

The Tennessee statutory scheme for ma-terialmen’s liens is found in Title 66, Chapter 11 of the Tennessee Code under the heading “MECHANICS’ AND MATERI-ALMEN’S LIENS.” See Tenn. Code Ann. §§ 66 — 11—101 through 66-11-146.

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Bluebook (online)
270 B.R. 234, 47 Collier Bankr. Cas. 2d 573, 2001 Bankr. LEXIS 1576, 2001 WL 1575658, Counsel Stack Legal Research, https://law.counselstack.com/opinion/durkan-patterned-carpet-inc-v-premier-hotel-development-group-in-re-tneb-2001.