Gay Construction Co. v. Eastern Air Lines, Inc. (In re Ionosphere Clubs, Inc.)

145 B.R. 386, 1992 Bankr. LEXIS 1561
CourtDistrict Court, S.D. New York
DecidedSeptember 25, 1992
DocketBankruptcy Nos. 89-B-10448 (BRL), 89-B-10448 (BRL) and 91-B-10287 (BRL); Adv. No. 92-9093A
StatusPublished

This text of 145 B.R. 386 (Gay Construction Co. v. Eastern Air Lines, Inc. (In re Ionosphere Clubs, Inc.)) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Gay Construction Co. v. Eastern Air Lines, Inc. (In re Ionosphere Clubs, Inc.), 145 B.R. 386, 1992 Bankr. LEXIS 1561 (S.D.N.Y. 1992).

Opinion

MEMORANDUM DECISION ON PLAINTIFF’S AND DEFENDANT’S MOTIONS FOR PARTIAL SUMMARY JUDGMENT

BURTON R. LIFLAND, Chief Judge.

Martin R. Shugrue, Jr., as Chapter 11 Trustee (the “Trustee”) of Eastern Air Lines, Inc. (“Eastern”), and Gay Construction Co., Inc. (“Gay”), dispute whether Gay properly perfected certain mechanic’s liens against Eastern’s interests in the Hangar Facility (as hereinafter defined) and the CTSA property (as hereinafter defined) located at the William B. Hartsfield Atlanta International Airport (“Hartsfield Airport”).

I. Statement of Facts

In 1961, Eastern entered into an agreement with the City of Atlanta, Georgia (the “Hangar Lease”) for the use of certain property at Hartsfield Airport as a hangar facility (the “Hangar Facility”). In 1984, the Supreme Court of Georgia determined that Eastern’s interest in the Hangar Facility was not subject to ad valorem real estate taxes because Eastern had been granted a usufruct, and not an estate for years, under the Hangar Lease. Eastern Air Lines, Inc. v. Joint City-County Board of Tax Assessors, 253 Ga. 18, 19-20, 315 S.E.2d 890, 892 (1984). Gay was not a party to that case. On October 10, 1988, [388]*388Eastern entered into a contract with Gay for certain improvements to the Hangar Facility, and Gay claims that it is currently owed $131,109 for work performed under the contract. On March 9, 1989 Eastern filed a petition for relief under Chapter 11 of the Bankruptcy Code (the “Petition Date”). On March 10, Gay recorded a Claim of Lien against Eastern's interest and the City of Atlanta’s fee interest in the Hangar Facility in the office of the Clerk of the Superior Court of Fulton County. Gay also filed a proof of claim and asserted that it held a valid lien against Eastern’s interest and the City's fee interest in the Hangar Facility. Gay subsequently objected to the Trustee’s motion to assume the Hangar Lease, but withdrew this objection after the Trustee placed $207,807.96 in a segregated account to protect Gay’s rights, if any, in the Hangar Facility (the “Hangar Fund”).

In May 1979, Eastern and the City of Atlanta entered into an agreement (the “CTSA Lease”) for the use of certain property at Hartsfield Airport for use as a central terminal support facility (the “CTSA property”). On June 6, 1988, Eastern and Gay entered into an agreement for improvements to the CTSA property, and Gay alleges that it is owed $906,446 for work and materials supplied. After the Petition Date, Gay recorded a Claim of Lien against Eastern’s leasehold interest and Atlanta’s fee interest in the CTSA property with the Clerk of Clayton County. Gay also filed a proof of claim, asserting that it held a lien against Eastern’s interest in the CTSA property.

On July 31, 1992, the Trustee moved to assume the CTSA Lease, and placed approximately 1.5 million dollars in a segregated account to protect Gay’s rights, if any, in the CTSA property (the “CTSA Fund”). Eastern also moved to secure the ability to extend an option to purchase certain flight kitchen equipment located on the CTSA property (the “Kitchen Equipment”) to the City of Atlanta. Gay alleges that its lien on the CTSA property also encumbers Eastern’s interest in the Kitchen Equipment.

Both parties have filed motions for partial summary judgment. Gay seeks a determination that its liens against Eastern’s interests in the Hangar Facility and the CTSA property are valid. If this Court determines that Gay has not perfected its liens, Gay alternatively requests that this Court impose a constructive trust or an equitable lien on the proceeds of any future transfer of Eastern’s interests in the Hangar Facility, the CTSA property or the Kitchen Equipment.

Eastern opposes Gay’s motion and in its own motion for partial summary judgment seeks a determination that (1) Gay does not have a perfected lien against Eastern’s interest in either the Hangar Facility or the CTSA property; (2) Gay is not entitled to a constructive trust or an equitable lien with regard to the proceeds of the sale of any of Eastern’s interests; and (3) that the Court issue a declaratory judgment that Gay’s claimed liens against the City of Atlanta’s fee interests in the Hangar Facility and CTSA property are extinguished because Gay failed to file suit within the time period prescribed by applicable Georgia law.

II. Discussion of Law

The plaintiff and the defendant have each moved for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure (“Rule 56”), which is made applicable to adversary proceedings in bankruptcy cases pursuant to Federal Rule of Bankruptcy Procedure 7056. Rule 56 provides that summary judgment shall be granted to the moving party if the court determines 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); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 599, 106 S.Ct. 1348, 1362, 89 L.Ed.2d 538 (1986). Although certain material facts remain in dispute in this adversary proceeding, the parties have requested summary judgment only with re[389]*389spect to those legal issues as to which there are no disputed issues of material fact.

It is well settled that Georgia law determines whether Gay has a valid lien in Eastern’s interests in the Hangar Facility and the CTSA property. Butner v. U.S., 440 U.S. 48, 54-55, 99 S.Ct. 914, 917-18, 59 L.Ed.2d 186 (1979) (“Property interests are created and defined by state law.”) Furthermore, Georgia law also governs the characterization of Eastern’s interest in the properties because both are located in Georgia. Sanyo Electric, Inc. v. Howard’s Appliance Corp. (In re Howard’s Appliance Corp.), 874 F.2d 88, 94 (2d Cir.1989). Under Georgia law, a mechanic’s lien cannot attach to a usufruct interest but can attach to the interests of a lessee who has an estate for years. Jones v. E.I. Rooks & Son, 78 Ga.App. 790, 793, 52 S.E.2d 580, 581-82 (1949); In re Mikart, Inc., 9 B.R. 144 (Bankr.N.D.Ga.1981). Therefore, at the outset, this Court must determine whether Eastern’s interests in the Hangar Facility and the CTSA, respectively, are usufructs or estates for years.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Erie Railroad v. Tompkins
304 U.S. 64 (Supreme Court, 1938)
Jaffke v. Dunham
352 U.S. 280 (Supreme Court, 1957)
Butner v. United States
440 U.S. 48 (Supreme Court, 1979)
P. P. G. Industries, Inc. v. Hayes Construction Co.
290 S.E.2d 347 (Court of Appeals of Georgia, 1982)
Camp v. Delta Air Lines, Inc.
205 S.E.2d 194 (Supreme Court of Georgia, 1974)
Eastern Air Lines, Inc. v. Joint City-County Board of Tax Assessors
315 S.E.2d 890 (Supreme Court of Georgia, 1984)
Cutler-Hammer, Inc. v. Wayne
101 F.2d 823 (Fifth Circuit, 1939)
Jones v. E. I. Rooks & Son
52 S.E.2d 580 (Court of Appeals of Georgia, 1949)
United States Fidelity & Guaranty Co. v. Leach
438 F. Supp. 295 (M.D. Georgia, 1977)

Cite This Page — Counsel Stack

Bluebook (online)
145 B.R. 386, 1992 Bankr. LEXIS 1561, Counsel Stack Legal Research, https://law.counselstack.com/opinion/gay-construction-co-v-eastern-air-lines-inc-in-re-ionosphere-clubs-nysd-1992.