UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
UMB Bank, N.A., Appellant
v. Civil No. 23-cv-036-LM Opinion No. 2023 DNH 130 P The MacMillin Company, LLC, et al., Appellees
ORDER
UMB Bank, N.A., appeals the bankruptcy court’s order (doc. no. 588 in the
bankruptcy proceeding, Case No. 21-10523) that (1) granted appellee The MacMillin
Company’s motion seeking a determination that its mechanics’ lien has priority
over UMB Bank’s mortgage and (2) granted the motion filed by appellees Denron
Plumbing & HVAC, LLC; Wallace Building Products Corporation; and JNR Gutters,
Inc. (collectively the “subcontractors”) requesting the same. For the following
reasons, the bankruptcy court’s order is affirmed in part, and vacated in a limited
respect and remanded in part.
STANDARD OF REVIEW
Under 28 U.S.C. § 158(a), this court has jurisdiction to hear appeals from
final judgments, orders, and decrees of the bankruptcy court. District courts
reviewing an appeal from a bankruptcy court decision generally examine the
bankruptcy court’s findings of fact for clear error, and its conclusions of law de novo.
Stilkey v. Marsters, No. 17-cv-337-LM, 2018 WL 345946, at *2 (D.N.H. Jan. 9, 2018). Discretionary rulings made under the bankruptcy code are reviewed for
abuse of discretion. Id. This court may affirm, modify, reverse, or remand the
bankruptcy court’s judgment with instructions for further proceedings. See GT
Advanced Techs. Inc. v. Harrington, No. 15-cv-69-LM, 2015 WL 4459502, at *1
(D.N.H. July 21, 2015).
BACKGROUND
The parties stipulated to the factual record before the bankruptcy court, and
the relevant background facts are not disputed.
Debtor Prospect-Woodward was a not-for-profit corporation which owned and
operated a retirement facility in Keene, New Hampshire. On April 14, 2017,
Prospect-Woodward hired MacMillin to manage the facility’s construction.
Appellees Denron Plumbing, Wallace Building Products, and J.N.R. Gutters were
some of MacMillin’s subcontractors.
About a month later, on May 15, MacMillin began preliminary work on the
facility. This work included tree clearing pursuant to a wetlands permit that
required such work to be performed before June 1, 2017. The subcontractors
involved in this appeal did not begin work until later.
Under a loan agreement dated June 1, 2017, a state agency loaned proceeds
of a bond sale to Prospect-Woodward to finance the facility’s construction. On June
2 19 appellant UMB Bank’s predecessor in interest1 recorded the mortgage against
the facility.
MacMillin worked under the construction contract through 2019. During this
time, UMB Bank paid MacMillin at least $55 million for labor and materials from
the money loaned to Prospect-Woodward. MacMillin executed partial lien waivers
over the course of the project. The partial lien waivers expressly reserved
MacMillin’s mechanics’ lien for unpaid retainage, interest, pending unresolved
change order requests, unresolved claims, and amounts not yet billed by
MacMillin’s subcontractors and suppliers.
By 2019, the facility was almost complete. Prospect-Woodward, however,
stopped paying MacMillin because of alleged construction defects. Between July
and October 2019, MacMillin and its subcontractors sued Prospect-Woodward for
breach of contract and to perfect their then-inchoate mechanics’ liens.
On October 25, 2019, a state court found that MacMillin and its
subcontractors were likely to prevail on their claims and were entitled to
attachments. MacMillin recorded the writ of attachment and the state court's order
based on the mechanics’ liens on October 31. The total amount of these liens is
approximately $5.7 million.
1 UMB Bank is the assigned trustee of the mortgage. For ease of reference and because it makes no difference as to the legal issues involved in this appeal, the court generally refers to UMB Bank when discussing actions taken by its predecessors in interest, though it may have been, in fact, UMB Bank’s predecessors in interest or such predecessors’ agents taking the action.
3 Prospect-Woodward filed a chapter 11 bankruptcy petition in August 2021.
In the bankruptcy, UMB Bank’s mortgage is an allowed claim2 against Prospect-
Woodward that is secured by the facility to the extent of the mortgage amount,
which is about $65 million. MacMillin and the subcontractors also have allowed
claims via their mechanics’ liens on the facility totaling approximately $5.7 million.
In late 2021, the bankruptcy court approved a sale of the facility for $33 million. As
these figures demonstrate, the facility’s sale will fail to cover all of UMB Bank’s,
MacMillin’s, and the subcontractors’ claims.
Understanding that reality, MacMillin and the subcontractors filed a motion
in the bankruptcy court arguing that, by virtue of their mechanics’ liens and a
victory under New Hampshire’s “race-notice” rules, they have priority over – or are
“senior” to – UMB Bank’s mortgage. UMB Bank objected, contending that its
mortgage has priority under a New Hampshire statute, RSA 447-12:a (“Section 12-
a”), or, alternatively, that it has priority under the race-notice rules, not MacMillin.
The bankruptcy court agreed with MacMillin, finding that MacMillin’s
mechanics’ lien had priority under the race-notice rules because UMB Bank had
actual or inquiry notice of MacMillin’s mechanics’ lien before it recorded the
mortgage. The bankruptcy court rejected UMB Bank’s argument that it was
entitled to priority under Section 12-a. The bankruptcy court also found that under
2 An “allowed claim” is a claim against the debtor that no party in interest has
objected to or that the bankruptcy court has found to be permitted. See 11 U.S.C. § 502(a); Bank of Am., N.A. v. Caulkett, 575 U.S. 790, 793 (2015). The parties have reserved litigation about the precise amounts of their claims, so the numbers used in this order are approximations consistent with the parties’ positions.
4 RSA 447:5 and 447:8, the subcontractors’ liens followed MacMillin’s priority. UMB
Bank filed this appeal and argues that the bankruptcy court erred as to all three
points.
DISCUSSION
Generally, in bankruptcy “state law governs the substance of claims.”
Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 549 U.S. 443, 450 (2007).
The parties do not dispute that New Hampshire law governs the relative priority of
their claims.
New Hampshire is a “race-notice” jurisdiction, meaning that “a purchaser or
creditor has the senior claim if he or she records without notice of a prior
unrecorded interest.” Amoskeag Bank v. Chagnon, 133 N.H. 11, 14 (1990); In re
McLaughlin, Nos. BK 09-11671-JMD, BK 09-11672-JMD, & BK 09-11673-JMD,
2011 WL 1706791, at *3 (Bankr. D.N.H. May 4, 2011). In other words, when there
are two interests competing for priority, the first creditor to have recorded its
interest has priority over the second-in-time creditor’s interest, unless the first
creditor already knew or should have known about the second interest. In re
Moultonborough Hotel Grp., LLC, 726 F.3d 1, 5 (1st Cir. 2013) (“The New
Hampshire recording statute, [RSA] 477:3–a, acknowledges by negative implication
the rule that the first party to record without notice of a prior party’s claim has
priority.”). The creditor who has priority under the race-notice rules is often called
the race-notice “winner” or “victor” in relation to the other creditor, who may be
called the race-notice “loser.”
5 A court can find that a creditor had prior notice of another’s interest in
several ways. Of course, a creditor had notice if it in fact knew about the prior
interest at the time it recorded its own interest. Amoskeag Bank, 133 N.H. at 14.
Likewise, a creditor has constructive notice of any interest already recorded. Id.
And, finally, an unrecorded interest may have priority over a recorded interest if
the recording party possessed facts which would cause a reasonably prudent person
to have inquired further into the existence of the unrecorded interest. See C.F.
Invs. v. Option One Mortg. Corp., 163 N.H. 313, 316 (2012); In re McLaughlin, Nos.
BK 09-11671-JMD, BK 09-11672-JMD, BK 09-11673-JMD, 2011 WL 1706791, at *3
(Bankr. D.N.H. May 4, 2011) (“A party is deemed to have actual notice if an
investigation would show the existence of an interest in property.”).
Beyond the race-notice rules, New Hampshire law provides certain interests
automatic priority in specified circumstances. Specifically, MacMillin and the
subcontractors hold mechanics’ liens arising under RSA 447:2(I).3 Under New
Hampshire law, mechanics’ liens begin as inchoate – meaning incomplete or
unperfected – liens at the time work under a contract first begins. See In re
McLaughlin, 2011 WL 1706791, at *3 (“The mechanic’s lien arises by operation of
law when the labor or materials are furnished.”); Boulia-Gorrell Lumber Co. v. E.
3 RSA 447:2(I) states: “If any person shall perform labor, provide professional
design services, or furnish materials to the amount of $15 or more for erecting or repairing a house or other building or appurtenances, . . . , or for consumption or use in the prosecution of such work, . . . , by virtue of a contract with the owner thereof, he or she shall have a lien on any material so furnished and on said structure, and on any right of the owner to the lot of land on which it stands.”
6 Coast Realty, 148 A. 28, 30 (N.H. 1929) (stating that a mechanics’ lien is “one
indivisible lien for the whole” if it was performed “under one entire contract,” so
that “as the work was done under an entire contract, the lien had priority over the
mortgages for the labor and materials furnished after as well as before the
mortgages were recorded”); Pike v. Scott, 60 N.H. 469, 471 (1881) (“If the materials
were furnished under one entire contract, one indivisible lien for the whole was
created thereby.”). After the contractor finishes its work under the contract, it must
take steps to perfect (or complete) the lien. See RSA 447:9; RSA 447:10. Otherwise,
the lien expires. See RSA 447:9; In re McLaughlin, 2011 WL 1706791, at *3. There
is no dispute in this appeal that MacMillin held a mechanics’ lien for the total
amount due under its contract with Prospect-Woodward at the time UMB Bank
recorded the mortgage. There is also no dispute that MacMillin timely perfected its
mechanics’ lien after completing work under the contract.
UMB Bank’s interest, on the other hand, is a construction mortgage, which is
“any mortgage loan made for the purpose of financing the construction, repair or
alteration of any structure on the mortgaged premises where the lien secured by
such attachment arises from the same construction, repair or alteration work.”
RSA 447:12-a.
By statute, New Hampshire provides mechanics’ liens “precedent and priority
over any construction mortgage.” Id. The priority given to mechanics’ liens,
however, is qualified as follows:
7 Such attachment shall not be entitled to precedence as provided in this section to the extent that the mortgagee shows that the proceeds of the mortgage loan were disbursed either toward payment of invoices from or claims due subcontractors and suppliers of materials or labor for the work on the mortgaged premises . . . .
Id.4 The parties agree that UMB Bank paid MacMillin for some of the work
MacMillin performed under the contract, so the applicability of Section 12-a is
qualified to the extent of those payments, which is about $55 million.
UMB Bank argues that the bankruptcy court erred: (1) by rejecting its
argument that Section 12-a mandates that its construction mortgage has priority
over MacMillin’s lien, regardless of whether MacMillin’s lien would have priority
under New Hampshire’s race-notice rules; (2) in the alternative, by finding that
MacMillin has priority under New Hampshire’s race-notice rules on the ground that
UMB Bank had notice of the mechanics’ liens prior to UMB Bank’s recording of the
mortgage; and (3) by finding that the subcontractors share in MacMillin’s race-
notice victory under RSA 447:5 and 447:8.5
The court addresses each argument below.
4 RSA 447:12-a also contains a second qualification that is not relevant to this
appeal.
5 RSA 447:5 and 447:8 are discussed in greater detail in Section
III.
8 I. Whether the bankruptcy court erred in finding that Section 12-a (when a qualification applies) does not override the race-notice rules.
First, UMB Bank contends that Section 12-a overrides New Hampshire’s
race-notice rules and provides construction mortgages priority over mechanics’ liens
to the extent the lienholder was paid for its work. In support, UMB Bank primarily
points to Moultonborough, a First Circuit decision with similar facts to this case.
UMB Bank contends that the bankruptcy court erred by failing to follow this
binding precedent. Because this presents a pure question of law, the court reviews
the bankruptcy court’s decision on this issue de novo. See In re Hill, 562 F.3d 29, 32
(1st Cir. 2009).
In Moultonborough, the debtor hired a contractor, ROK, to build a hotel. 726
F.3d at 2. ROK performed some work under that contract but terminated it when
the debtor failed to pay. Id. at 2-3. The debtor found a lender a short time later,
and ROK agreed to resume work on the hotel, but under a new, second contract. Id.
at 3. The lender paid ROK what was owed under the first contract. Id. By doing
so, the lender extinguished ROK’s mechanics’ lien for the work performed under the
first contract. Id.
After the lender recorded its mortgage on the property, ROK resumed
construction, now under the second contract. Id. During construction, the lender
paid ROK about $6.5 million for its ongoing construction work under the second
contract. Id. As the lender paid it, ROK executed complete lien waivers that
covered all work that had occurred prior to the payment date. See id. When ROK
finished work under the second contract, however, the lender refused to pay the
9 balance owed to ROK under the second contract, alleging that the debtor had
breached the loan agreement by failing to secure yet more funding to ensure the
project’s completion. Id. ROK claimed approximately $2.5 million in unpaid
amounts under the second construction contract. Id.
The debtor ultimately defaulted on the mortgage and went into bankruptcy.
Id. at 4. In the bankruptcy case, the lender brought an adversary proceeding
against ROK, asserting – like UMB Bank here – that its construction mortgage was
senior to ROK’s mechanics’ lien under Section 12-a, to the extent of its $6.5 million
total payments to ROK. Id. In other words, the lender asserted that it should be
paid the first $6.5 million of the hotel’s foreclosure sale proceeds and that if and
only if that amount were satisfied, ROK could collect the $2.5 million it claimed to
be owed. See id. at 5.
In response, ROK argued that “its lien for later work on the project for which
it was not paid takes precedence over the mortgage.” Id. In support, ROK argued
that “because it began work on the project before the mortgage was recorded, any
lien arising out of work on the project performed at any time, whether prior to or
after recording of the mortgage, remains senior to the mortgage, even to the extent
the mortgagee paid for work.” Id. ROK also argued that aside from Section 12-a,
New Hampshire common law provided another alternative avenue for priority and
that if such rules were applied, ROK would have priority under the circumstances.
See id.
10 Examining “the New Hampshire statutory scheme that recognizes mechanics’
liens” and “provides the procedure for their perfection,” the First Circuit rejected
ROK’s arguments and agreed with the lender. First, the Circuit looked at the race-
notice issue, finding that “the race-notice rules favor[ed]” the lender “because the
mortgage was recorded well before the work for which a lien is claimed was
performed.” Id. Second, the Circuit analyzed whether ROK had priority under
Section 12-a, notwithstanding the race-notice rules. Id. at 6. But, as here, Section
12-a did not apply because it has “an important qualification” – namely, a
mechanics’ lien does not have priority under Section 12-a to the extent the
contractor was paid for its work. Id.
Finally, the court looked to ROK’s claim that – setting aside the race-notice
rules and Section 12-a – it had priority under alternative common law rules. The
court also rejected this argument, concluding that neither case identified by ROK
“establishe[d] any principle at variance with the present statutory scheme.” Id. In
other words, ROK had not identified any New Hampshire common law rule which
entitled it to priority notwithstanding its race-notice loss and the non-applicability
of Section 12-a. See id.6 Having rejected all three of ROK’s arguments for priority
6 Though somewhat unclear from the Circuit’s decision, it appears the two
cases identified by ROK in Moultonborough (Cheshire Provident Institute v. Stone, 52 N.H. 365 (1872), and Graton & Knight Manufacturing Company v. Woodworth- Mason Company, 69 N.H. 177 (1897)), applied, in effect, what was or developed into race-notice rules. See Graton & Knight Mfg. Co., 69 N.H. at 177 (“The building being in the course of erection when the claimant took the mortgages, [the mortgagee] would have constructive, if not actual, notice of the contract under which the [material] was furnished; and his security would be subject to the [mechanics’ lien],
11 in its favor, the court held that the lender’s construction mortgage was senior to the
amount owed to ROK under the second contract to the extent that ROK had already
been paid by the lender. Id.
UMB Bank argues that, under Moultonborough, a mechanics’ lien can only
have priority over a construction mortgage if Section 12-a applies. Said differently,
UMB Bank contends that Section 12-a provides automatic priority for construction
mortgages when one of its qualifications applies. But the plain language of Section
12-a shows otherwise, and Moultonborough, which is distinguishable from the facts
of this case, does not establish any rule contrary to that plain language.
To start, when it applies, Section 12-a creates an exception to the race-notice
rules in favor of mechanics’ liens over construction mortgages. Section 12-a,
however, is silent regarding which interest has priority when it does not apply due
to a qualification. And going further, Section 12-a expressly limits the effect of its
qualifications to a mechanics’ lien’s priority “as provided in this section.” Therefore,
a mechanics’ lien may be entitled to priority under some other rule, including race-
notice, when Section 12-a does not apply.
Notwithstanding Section 12-a’s plain language, UMB Bank points to
Moultonborough to support its position that Section 12-a is the exclusive source of
priority for mechanics’ liens. But, read closely, Moultonborough refutes rather than
if one existed.”); Cheshire Provident Inst., 52 N.H. at 367 (holding that mechanics’ lien “took precedence of the mortgages for all that [the contractor] did ‘by virtue of the contract’” where “[u]pon reasonable inquiry, [the mortgagees] would undoubtedly have learned of the existence of the contract between the mortgagor and the [contractor].”).
12 supports UMB Bank’s position. Tellingly, the Circuit began its analysis by setting
out New Hampshire’s race-notice rules and confirming that ROK was the race-
notice loser. 726 F.3d at 5.7 Only after resolving that threshold issue did the
Circuit analyze whether ROK’s mechanics’ lien might find priority under Section
12-a. See id. If the Circuit intended to hold that Section 12-a provided the
exclusive source of priority for a mechanics’ lien, there would have been no reason to
consider whether ROK’s mechanic lien might have priority pursuant to New
Hampshire’s race-notice rules.
To be sure, taken without context, some of the Circuit’s language in
Moultonborough appears to support UMB Bank’s argument. But the Circuit’s
holding must be understood in the context of the opinion as a whole. Most notably,
when addressing whether ROK could still find priority over the lender’s
construction mortgage despite its race-notice loss and its inability to use Section
12-a, the Circuit observed that ROK had presented an argument that “the scheme
envisioned by [Section 12-a] is nonexclusive, and that an alternative source of
priority for mechanics’ liens can be found in older New Hampshire case law.” 726
F.3d at 6. UMB Bank contends that because the Circuit rejected ROK’s argument –
described in the opinion as a contention that Section 12-a is “nonexclusive” – the
7 Importantly, the lien at issue in Moultonborough related to the work ROK
performed under its second contract with Moultonborough, as opposed to the lien which arose from the work ROK performed under the first contract. The First Circuit thus chose its words carefully when it explained that the mortgage was recorded “before the work for which a lien is claimed was performed.” See id. By contrast, in this case, the work for the lien that MacMillin claims began before the mortgage was recorded.
13 Circuit must have intended to hold that Section 12-a is indeed exclusive. Far from
making such a sweeping holding, the Circuit merely reasoned that the two 19th-
century cases cited by ROK in support of this claimed alternate source of priority
were unpersuasive on that count because neither “establishe[d] any principle at
variance with the present statutory scheme” – the “present statutory scheme”
referring to both New Hampshire’s race-notice rules and Section 12-a. See 726 F.3d
at 5-6.8 UMB Bank thus incorrectly equates the First Circuit’s rejection of ROK’s
argument that it was entitled to priority under two 19th-century cases with a
rejection of the applicability of the race-notice rules. See id. at 5.9 As just
discussed, it would have been odd for the Circuit to have examined and applied the
race-notice rules, just to reverse course a few paragraphs later and implicitly hold
that they were irrelevant.
8 UMB Bank also points to similar reasoning in Judge Barbadoro’s decision in
the same case. Finding, as the First Circuit ultimately did, in favor of the lender, Judge Barbadoro wrote: “I conclude that [Section 12-a] unambiguously sets forth the exact terms of priority between a mechanic’s lien attachment and a construction mortgage, notwithstanding any prior inconsistent common law.” ROK Builders, LLC v. 2010-1 SFG Venture, LLC, No. 12-cv-57-PB, 2012 WL 3779669, at *3-4 (D.N.H. Aug. 30, 2012). UMB Bank contends that, by this, Judge Barbadoro meant the race- notice rules were inapplicable. But in that paragraph Judge Barbadoro was not rejecting the race-notice rules, as UMB Bank seems to suggest, but was rather rejecting ROK’s convoluted argument that the common law establishes some alternative scheme for automatic priority for mechanics’ liens which Section 12-a did not abrogate. In any event, the district court opinion underlying Moultonborough is not binding precedent, while Moultonborough is. To the extent the two decisions are inconsistent, Moultonborough necessarily controls.
9 Moreover, the First Circuit again observed that ROK’s first-in-time lien under
the first contract had “expired, leaving ROK with only a lien for later work,” meaning work performed under the second contact, for which the Circuit found ROK was the race-notice loser.
14 Finally, UMB Bank cites language from a treatise, which states that “[a]
statute dealing with construction loan mortgages may be enacted with the intent of
giving the construction mortgage priority over mechanics’ liens . . . .” Doc. no. 27 at
28 (emphasis added) (quoting 56 C.J.S. Mechanics’ Liens § 263 (2023)). But that
treatise continues, observing that a state “may” decide to treat mechanics’ liens and
construction mortgages in many different ways. See 56 C.J.S. Mechanics’ Liens
§ 263 (2023) (listing several possible approaches that states may take to accomplish
their policy objectives related to mechanics’ liens and construction mortgages). For
that same reason, UMB Banks’s reference to how mechanics’ liens are treated
under Ohio law is unpersuasive. See id. § 4 (“By reason of the dissimilarity of the
mechanic’s lien statutes of the different states, the decisions of the courts of one
state construing the statute of that state are generally not considered as of great
value as precedents . . . .”); see also Grant S. Nelson, et al., Real Estate Finance Law
§ 12.4 at 1063 (6th ed. 2014) (“Generalizations about mechanic’s liens are extremely
problematic and always must be checked against local law, because the laws
creating the liens and judicial interpretations of the laws are extremely varied
. . . .”).10 At bottom, New Hampshire chose to determine priority by race-notice
10 UMB Bank claims that Ohio law “mimic[s]” Section 12-a, but this is not the
case. Compare O.R.C. § 1311.14 (“Except as provided in this section, the lien of a mortgage . . . shall be prior to all mechanic’s . . . and similar liens . . . to the extent that the proceeds thereof are used and applied for the purposes of and pursuant to this section . . . .”), with RSA 477:12-a (stating that mechanics’ liens have “precedent and priority over any construction mortgage” but that “[s]uch attachment shall not be entitled to precedence as provided in this section to the extent that the mortgagee shows that the proceeds of the mortgage loan were disbursed . . . .”). Ohio’s statute
15 rules and to provide mechanics’ liens a qualified automatic priority under Section
12-a. But there is nothing in the plain language of Section 12-a or the caselaw
interpreting it that holds New Hampshire likewise intended a construction
mortgagee to have automatic priority when Section 12-a’s applicability is qualified.
For these reasons, the court affirms the bankruptcy court’s finding that
MacMillin’s mechanics’ lien has priority over UMB Bank’s lien to the extent
MacMillin was the race-notice winner.
II. Whether the bankruptcy court erred in finding that UMB Bank had inquiry notice about MacMillin’s lien prior to recording its mortgage.
In the alternative to its argument that it is entitled to automatic priority
under Section 12-a, UMB Bank contends that it was the race-notice winner because
it was the first to record its interest in the property and did so without notice of
MacMillin’s prior existing interest. UMB Bank argues that the bankruptcy court
erred by finding otherwise.
The bankruptcy court did not clearly err. The bankruptcy court found11 that
MacMillin “offered undisputed evidence that work had in fact commenced on the
provides that covered mortgages have priority over a mechanics’ lien when loan funds have been disbursed to the lienholder, while Section 12-a only eliminates the automatic priority given to mechanics’ liens in the same circumstances. Further, Ohio’s statute also expressly overrides other statutory rules, stating: “This section, as to mortgages contemplated by this section, controls over all other sections of the Revised Code relating to mechanic’s . . . and all liens that can be had under this chapter . . . .” O.R.C. § 1311.14.
11 The parties dispute whether MacMillin or UMB Bank bears the burden of
proof as to notice. The bankruptcy court found that regardless of who had the burden,
16 property at the time the [original lender] recorded its mortgage,” that a reasonable
inquiry by UMB Bank would have revealed such work, and, by operation of law, the
existence of MacMillin’s mechanics’ lien. Doc. no. 29-27 at 15. The court continued,
explaining that, “[s]pecifically, the stipulated record shows that the wetland permit
issued in connection with the project prohibited tree clearing work between June 1,
2017, and July 31, 2017, but the Contract required work to commence by June 30,
2017.” Id. So, “unless tree clearing work commenced before the June 1, 2017,
proscription period, the pricing under the Contract was in jeopardy.” Id.
Consequently, Prospect-Woodward “instructed MacMillin to commence work on
May 15, 2017, and the [original lender] paid invoices at the [loan] closing that
referred to both the wetland permit and the tree clearing that had already occurred
at the project site.” Id. The bankruptcy court found that UMB Bank “did not refute
that such invoices were paid prior to the [original lender] recording its mortgage, or
that they referred to pre-recordation work that would have been obvious to anyone
inspecting the work site.” Id.
The record shows, just as the bankruptcy court described, that prior to
recording its interest, UMB Bank knew about the construction contract and the
wetlands permit which together required certain work to be performed prior to June
1, 2017. A reasonable creditor possessing this information would have undertaken
a simple observation of the property, which would have revealed the already-
there was sufficient evidence to find that UMB Bank had notice of MacMillin’s interest. The court agrees that there was sufficient evidence to find that UMB Bank had notice regardless of who had the burden of proof.
17 commenced tree-clearing work resulting in MacMillin’s mechanics’ lien. For those
reasons, the bankruptcy court did not clearly err by finding that UMB Bank knew
or should have known about MacMillin’s mechanics’ lien prior to recording its
mortgage.12
III. Whether the bankruptcy court erred by finding that the subcontractors are entitled to priority via MacMillin’s mechanics’ lien.
Lastly, the bankruptcy court found that the subcontractors shared in
MacMillins’ race-notice victory by virtue of RSA 447:5 and 447:8, even though the
subcontractors were race-notice losers as against UMB Bank. RSA 447:8 states, in
relevant part, as follows:
Any person giving notice as provided in RSA 447:5-7 shall . . . furnish to the owner . . . an account in writing of the labor performed . . . and the owner or person in charge shall retain a sufficient sum of money to pay such claim, and shall not be liable to the agent, contractor or subcontractor therefor, unless the agent, contractor or subcontractor shall first pay it.
And RSA 447:5 states:
If a person shall perform labor . . . or furnish
12 In a footnote, doc. no. 27 at 48 n.12, UMB Bank summarily asserts that
MacMillin was on notice of the “construction financing” before it began work. This argument does not appear to have been presented to the bankruptcy court, and it is insufficiently developed before this court, in any event. Accordingly, it is waived. See Coons v. Industrial Knife Co., 620 F.3d 38, 44 (1st Cir. 2010) (explaining that “judges are not obligated to do a party's work for him” and that district courts are “free to disregard” arguments that are not developed in briefs); Timmins Software Corp., v. EMC Corp., 502 F. Supp. 3d 595, 606 (D. Mass. 2020) (explaining that superficial arguments may be deemed waived) (citing United States v. Zannino, 895 F.2d 1, 17 (1st Cir. 1990)). Similarly, UMB Bank did not argue that MacMillin is necessarily a race-notice loser as against the mortgage because MacMillin’s mechanics’ lien was inchoate at the time the mortgage was recorded.
18 materials to the amount of $15 or more for any of the purposes specified in [assorted statutory sections], by virtue of a contract with an agent, contractor or subcontractor of the owner, the person shall have the same lien as provided in said sections, provided, that he or she gives notice in writing to the owner or to the person having charge of the property that he or she shall claim such lien before performing the labor or furnishing the material for which it is claimed.
In other words, so long as the subcontractors provided notice under RSA 447:5, :6,
or :7, “the owner or person in charge [i.e., Prospect-Woodward] shall retain a
sufficient sum of money to pay” the subcontractors’ claims. RSA 447:8. The
bankruptcy court found that the subcontractors provided the requisite notice under
RSA 447:5, so Prospect-Woodward was required to pay the subcontractors’ claims
prior to paying MacMillin’s claim (whose claim is prior to UMB Bank’s claims). In
effect then, the subcontractors’ claims have first priority.
UMB Bank argues that, contrary to the bankruptcy court’s finding, the
subcontractors did not provide the required notice and the record does not evidence
such notices. The subcontractors respond and appear to agree with UMB Bank that
they did not provide notice prior to their work commencing as required by RSA
447:5. See doc. no. 31 at 4. The subcontractors argue, however, that they in fact
provided notice after work commenced and that RSA 447:6 permits such post-work
notice.13
13RSA 447:6 states that “[s]uch notice may be given after the labor is performed, the professional design services are provided, or the material is furnished, and said lien shall be valid to the extent of the amount then due or that may thereafter become due to the contractor, agent or subcontractor of the owner.”
19 Considering the agreement between UMB Bank and the subcontractors that
they did not provide notice under RSA 447:5, the court finds that the bankruptcy
court erred in finding that the subcontractors were entitled to priority under RSA
447:8 by virtue of RSA 447:5 alone. The court vacates the bankruptcy court’s
decision only in this limited respect and remands the matter so that the bankruptcy
court can determine whether RSA 447:8 nonetheless still applies on the present
record because the subcontractors provided sufficient notice considering RSA
447:6.14
CONCLUSION
The bankruptcy court’s order is affirmed in part and vacated and remanded
in part.
SO ORDERED.
__________________________ Landya McCafferty United States District Judge
October 16, 2023
cc: Counsel of Record
14 The subcontractors argue that the court should affirm on an alternative
basis that the bankruptcy court did not reach, namely, that the subcontractors are entitled to automatic priority under Section 12-a. The court declines to do so and leaves that matter for the bankruptcy court to address in the first instance, if it chooses to do so.