Opinion
CASE NO. 15-40390 PROC. NO. 15-4007
01-24-2017
IN RE: LOST ACRES LLC Debtor LOST ACRES LLC Plaintiff v. BANK OF WOLCOTT, et al. Defendants
NOT FOR PUBLICATION
DECISION AND ORDER
On January 24, 2017.
You could say this is a case about wishful thinking. "I wish better records had been kept." "I wish understandings had been memorialized somehow." "I wish invoices had been issued for the amounts billed, receipts given for amounts paid, and something done to indicate whether a balance remained at any given time." Because these things were not done, the parties were required to testify based on little more than their memories concerning events going back more than a decade. This means the case largely turns on the credibility of the witnesses and the testimony they offered.
The issue presently before the court in this adversary proceeding is whether one of the defendants, Douglas McGill, is owed money by the debtor; if so, how much, and is it secured by a mechanic's lien on the debtor's property? Once those questions are answered the parties will turn their attention to the issues involving the other defendants.
The debtor is an LLC which owns and operates a campground. Its original shareholder, David Pavy, died in 2007. Its current shareholders, mostly his children, acquired their interests from him. Since his death, a daughter, Angela Holbrook, has been responsible for the management decisions; a son, Cole Pavy, is also involved with different aspects of the debtor, but to a lesser degree.
The relationship between the debtor and Mr. McGill began shortly after Pavy bought Lost Acres, when they met at a meeting of the Indiana Campground Association around 2004. This meeting ultimately led to the "understanding" that lies at the bottom of this suit, which was that McGill would prepare designs for the improvement and expansion of the campground, which he did. McGill also helped to make those plans a reality by doing work at the site, on an as needed basis, and helping Pavy in many ways. Where things began to get a little vague was whether and when Mc Gill was to be paid for any of this. Particularly where the plans were concerned, it was more or less later, when the campground become profitable and how much was never said. Following Pavy's death, McGill informed the debtor's new shareholders of what he had been doing for their father and what needed to be done, by a letter to Angela Holbrook dated April 9, 2007. This letter is the first writing that reflects any kind of understanding of the financial aspects of the arrangement. It included a bill for services and materials provided during 2006, reflecting a net balance due of $64,899.18, which was paid. As for the plans he had prepared, the letter stated they were worth about $100,000, but McGill did not want any payment at that time; that could wait until much later when things were up and doing well.
After Pavy's death, the debtor continued to use McGill's services to improve and maintain the campground, continuing the same informal, unwritten arrangements. During the course of the relationship from 2007 to 2013, McGill would meet with Holbrook, or talk with her on the phone, to let her know what was being done and request payment for his services and the debtor would pay. There were no written contracts between the parties for any of this, no invoices, receipts or even letters that might indicate what was going on or what the state of affairs might be at any given time. The last task McGill performed was purchasing electrical boxes to replace ones that had been damaged over the July 4, 2013 holiday. On July 24, 2013 the debtor paid McGill $5,986.73, as asked.
July 2013 is also about the time the parties' relationship fell apart. McGill says he became concerned about the debtor's financial condition and presented a bill for over $200,000, including $147,000 for the plans and unpaid balances for labor and materials going back to 2007. He also asked for a promissory note and a mortgage to secure it. When this was refused, on September 16, 2013, McGill filed a notice of mechanic's lien in the sum of $222,418.29. This litigation is about that bill and the claimed mechanic's lien.
The first order of business is to determine whether McGill is owed anything by the debtor. Only if he is will the court have to address the question of whether any of it is secured by the claimed mechanic's lien. Here is where credibility issues begin to come to the fore. Where McGill's labor and materials are concerned, Holbrook testified that whenever she received a request for payment from him, she paid it in full. McGill, on the other hand, claims that she never did so and consistently paid him less than requested from 2007 through 2012. He admits that she paid his requested amount, for 2013 in full ($5,986.73), but claims a balance is still due because he forgot to include some things in the bill. Of course, there are no contemporary records, memos or notes that would corroborate the testimony of either party. On this point, the court finds Holbrook's testimony to be the more credible. The court does not believe that McGill would labor for years, from 2007 into 2013, never being fully paid for his efforts and do nothing about it. If that were what was happening he would have done something to memorialize the situation, ask for some kind of payment arrangement, or stop working until an understanding was reached. Instead, he did nothing. The court finds that McGill has been fully paid for all the labor and materials he provided and billed the debtor for the years 2007-2013. As for the claimed damage to his equipment, the court is not satisfied that the repairs were necessitated by any misuse attributable to Lost Acres, as opposed to other causes, such as ordinary wear and tear or exposure to the elements.
The bill for the plans stands on a different footing. Although the understanding between McGill and Pavy was a bit fluid where payment is concerned, the court is satisfied that they had an understanding that payment would be made, even if it was a bit indefinite as to when. That understanding is reflected in McGill's letter of April 9, 2007, placing their value at $100,000, but also indicating that nothing would need to be paid until the campground was doing well. While Holbrook denies receiving this letter, on this point the court finds McGill to be the more credible witness. Accordingly, the court finds that McGill is owed the sum of $100,000 by the debtor
To the extent the debtor contends the statute of limitations bars this claim, the court has nothing before it to indicate what the statute of limitations might be or when it might have begun to run. That latter point is particularly important given the indefinite (contingent) nature of when payment was due and the absence of any demand for payment until 2013.
Mr. McGill claims he has a valid mechanic's lien for amounts owed (plus interest) for everything he was owed, including the plans. He claims that all of the work he performed from when he first met Pavy in 2004 to 2013 was part and parcel of a single transaction or part of employment related to single purpose, i.e. development of the campground, and so long as his notice of intent was filed within ninety days of the last activity, the entire sum owed is subject to a mechanic's lien.
Notice of intent to hold a mechanic's lien must be filed no later than ninety days after performance of the work or furnishing the materials. I.C. 32-28-3-3. That time period cannot be extended by performing repairs or work incidental to the contract. Abbey Villas Development Corp. v. Site Contractors, Inc., 716 N.E. 91, 98 (Ind. Ct. App. 1999); Chapman-Stein Co. Lippincott Glass Co., 161 N.E. 645 (Ind. Ct. App. 1928). There is no dispute that the notice was filed within ninety days after McGill provided the electrical boxes in July 2013. Nonetheless, "work which is not performed to correct a problem with the work originally contemplated under the contract, but which is performed . . . under a new contract to make repairs or perform services not contemplated under the original contract, will not serve as a basis for a mechanic's lien for work performed under the original contract." Abbey Villas, 716 N.E.2d at 98. That is the situation here. --------
The one asserting a mechanic's lien must prove they meet all of the statutory requirements necessary to its creation. Puritan Engineering Corp. v. Robinson, 191 N.E. 141 (Ind. 1934); Stanray Corp. v. Horizon Const., Inc., 342 N.E.2d 645 (Ind. Ct. App. 1976). "Provisions relating to the creation, existence, or persons entitled to claim a mechanic's lien are narrowly construed. . . .", Premier Investments v. Suites of America, Inc., 644 N.E. 2d 124, 127 (Ind. 1994), and where this is a question, should be construed in favor of the landowner. Valley View Development Corp. v. Cheugh & Schlegel of Dayton, Inc., 280 N.E.2d 319, 326 (Ind. Ct. App. 1972).
Applying that standard here, McGill has failed to satisfy his burden. The work performed and materials purchased to develop and maintain the campground do not constitute a single contract such that the expenses incurred relate back over the course of many years. Rather, what we have is a number of separate projects with McGill wearing many hats - maintenance, repairs, electrician, purchasing, designing, etc. Each task was separate and distinct depending on what the debtor wanted done. They cannot be combined into a single transaction for the improvement of the land acquired by Lost Acres. See, Wavetek Indiana, Inc. v. K.H. Gatewood Steel Co, Inc., 458 N.E. 2d 265, 268 (Ind. Ct. App. 1984); Dix v. Willfred Coal Co., 122 N.E. 595, 596 (Ind. Ct. App. 1921). See also, Chapman-Stein Co. v. Lippincott Glass Co., 161 N.E. 645 (Ind. Ct. App. 1928). Instead, they are serialized transactions, including maintenance, performed on an as needed basis. This was not a project in which McGill worked from beginning to end to complete it, but, rather one where he worked on portions of it here and there doing many different types of things, some of which, while important, did not contribute to the furtherance of completion of the entire development.
While McGill is owed $100,000 for the plans he prepared, that sum is not secured by a mechanic's lien. The remaining issues raised will be scheduled for further proceedings.
SO ORDERED.
/s/ Robert E . Grant
Chief Judge, United States Bankruptcy Court