Opinion
CASE NO. 2:06-cv-998-WKW.
February 28, 2008
MEMORANDUM OPINION AND ORDER
This action concerns the validity, priority and enforcement of a materialmen's lien (the "lien") under Alabama law. It was removed from the Circuit Court of Montgomery County, Alabama, by the United States of America. The case arises out of and is ancillary to the forfeiture to the government of certain real property in the criminal prosecution of its former owner, Leon Carmichael. See United States v. Carmichael, No. 2:03-cr-259-MHT (M.D. Ala.). Before the court is the Motion for Partial Summary Judgment (Doc. # 2) filed by plaintiff Reese Howell, Inc. ("R H"). The motion is fully briefed and ripe for decision. For the reasons discussed below, the motion is due to be granted.
The Alabama Code refers to such liens as belonging to "Mechanics and Materialmen." Ala. Code § 35-11-210 — § 35-11-234 (1975). "The term `mechanic's lien' is the generic name for any lien on realty in favor of persons furnishing labor or materials in, or for, the erection of buildings, or for the making of improvements on realty." Hartford Accident Indem. Co., Inc. v. Am. Country Clubs, Inc., 353 So. 2d 1147, 1148 (Ala. 1978) (citing Emanuel v. Underwood Coal Supply Co., 14 So. 2d 151 (1943)). "Mechanics" and "materialmen" are used interchangeably in the cases and the briefs of the parties, and "material man" is a spelling variant frequently used as well. For consistency, the court will use "lien" or "materialmen's lien" except when a direct quote requires otherwise.
I. FACTS AND PROCEDURAL HISTORY
A more detailed statement of facts is rendered in Judge Thompson's March 14, 2006 opinion in Carmichael's criminal case. See United States v. Carmichael, 419 F. Supp. 2d 1376 (M.D. Ala. 2006).
In the meantime, on December 19, 2003, the United States filed a lis pendens in the Probate Court of Montgomery County, giving notice of its forfeiture interest in the Carmichael Center. The next month, on January 6, 2004, R H filed an action against Carmichael in state court to enforce the materialmen's lien. In Carmichael's criminal case, Judge Thompson noted that the government had not been joined in the state court action and determined the state court would decide certain relevant issues:
The state court has yet to enter judgment establishing R H's lien, and the government may yet be joined, or intervene, in that action to assert its interest in the property. Even if it does so, it is unclear whether the state court will need to decide the status of a lis pendens, since the government's lis pendens was filed after R H filed its statement of lien. Following Lily Flagg, this timing arguably absolves R H from any obligation to join the government in the state-court action, even if the lis pendens is to be considered a valid property interest. Regardless, these issues will either be decided by the state court, or if the state court establishes R H's lien without deciding the question of joinder, by this court at a later date. For the time being, R H's lien remains attached to the Carmichael Center.See United States v. Carmichael, No. 2:03-cr-259-MHT (M.D. Ala. June 7, 2006) (opinion) (Doc. # 708, at *28-29). The government was subsequently joined in and removed the state court action, which is now the instant action before this court. Though he is a party to this action, Carmichael has taken no position on the pending motion.
II. DISCUSSION
The issues before the court are whether judgment on the materialmen's lien should be entered in favor of R H and, if so, the amount of that judgment. In its amended complaint, R H pleads for a money judgment against Carmichael and the United States in the amount of $182,367.28, plus interest and costs, and requests "[t]hat a mechanic's lien be fixed and established on the proceeds held by the United States Marshal's Service from the interlocutory sale of the Carmichael Center." (Am. Compl. 4.) R H further quantified its demand with a calculation of accrued interest due at the contract rate of eighteen percent per annum, resulting in a per diem of $89.93 and a total interest due of $115,110.40 as of April 19, 2007. (R H's Br. 2, 8.)
Judge Thompson authorized the government's sale of the Carmichael Center, with the proceeds of the sale subject to resolution of the lien issues now before this court. United States v. Carmichael, No. 2:03-cr-259-MHT (M.D. Ala. July 7, 2006) (order) (Doc. # 739).
The government does not challenge the validity of the lien in its opposition to the motion, but it advances arguments challenging the balance due under the contract and the rate of interest to be used. First, the government contends that R H has not supported its motion with properly authenticated evidence. Second, the government objects to the use of the contractual rate of interest. The government insists that genuine issues of material fact exist "regarding amounts due under the contract and under law" and that summary judgment is therefore inappropriate. (U.S.A.'s Br. 5.)
A. Validity of Lien
A materialmen's lien comes into existence immediately when one provides materials or performs labor upon real property, but the lien remains inchoate until all statutory requirements have been met. Metro Bank v. Henderson's Builders Supply Co., 613 So. 2d 339, 340 (Ala. 1993) (internal quotation marks and citation omitted); Tucker v. Trussvile Convalescent Home, Inc., 267 So. 2d 438 (Ala. 1972). In order for the lien to properly attach to the real property and to be perfected, the person claiming the lien must file a verified statement of lien and file suit in the county in which the real property is located. Bailey Mortgage Co. v. Gobble-Fite Lumber Co., Inc., 565 So. 2d 138, 143 (Ala. 1990). Upon perfection, "the lien relates back to the date that the materials or labor was provided, and the priority of the lien is determined according to § 35-11-211." Metro Bank, 613 So. 2d at 340 (Ala. 1993) (internal quotation marks and citation omitted).
Upon careful consideration of the undisputed evidence, the court finds that R H has a perfected and valid materialmen's lien and judgment is due to be entered in its favor in the amounts of $152,942.19 and $29,425.09, plus interest. The court is not breaking new ground here. The court concurs in the analysis and conclusion reached by Judge Thompson, who considered the validity of the lien in his June 7, 2006 opinion in the criminal case. "All statutory requirements have been met and a suit for enforcement timely filed." United States v. Carmichael, No. 2:03-cr-259-MHT (M.D. Ala. June 7, 2006) (opinion) (Doc. # 708, at *23). The government has since been joined in this action, and it has challenged neither R H's compliance with the statutory requirements for the creation and perfection of R H's materialmen's lien nor the lien's priority over the government's interest in the Carmichael Center. Because the government, when it acquired title to the property, had constructive notice of R H's materialmen's lien by virtue of R H's earlier filed statement of lien, the government took the property subject to the prior outstanding lien of R H. See Greene v. Thompson, 554 So. 2d 376, 380 (Ala. 1989). Accordingly, R H's lien is declared valid and perfected, and it attaches to the proceeds of the sale of the Carmichael Center and may now be enforced.
The government challenges the authenticity of some of R H's evidence, yet has not provided any evidence in opposition to the motion or in contradiction to R H's submission. The court finds that the government's argument is without merit and that the challenged evidence is competent and properly authenticated.
B. Rate of Interest
When the court ascertains that the claimant has a valid lien, "judgment shall be entered for the amount" secured by the lien, "interest and costs, against the party liable for the same. . . ." Ala. Code § 35-11-224. Therefore, the interest must be calculated on the judgment amount. The statute is silent as to the appropriate interest rate.
As a threshold matter, the government argues that R H is not entitled to prejudgment interest because R H fails to make the showing required by Ala. Code § 8-8-8. (U.S.A.'s Br. 3.) The government appears to argue that prejudgment interest cannot be had because any amount owed on the contract is unliquidated until the court has entered judgment on the lien. The court finds that the evidence presented by R H clearly establishes that the amount of the debt was certain. There is no doubt that R H is entitled to prejudgment interest from the date the debt is found to be due. See Crane v. Wilson, 261 So. 2d 877, 881 (Ala. 1972); Harden v. Wood Lumber Co., 178 So. 540, 542 (Ala. 1938).
Section 8-8-8 establishes the right to prejudgment interest and the date upon which such interest should accrue in the event a contract is breached:
All contracts, express or implied, for the payment of money, or other thing, or for the performance of any act or duty bear interest from the day such money, or thing, estimating it at its money value, should have been paid, or such act, estimating the compensation therefor in money, performed.
Ala. Code § 8-8-8. The parties do not dispute the applicability of § 8-8-8.
R H's evidence shows that Carmichael was billed for Estimate 8 in the amount of $152,942.19 on July 28, 2003, and for Estimate 9 in the amount of $29,425.09 on October 1, 2003. Carmichael's payment on Estimate 8 was due on August 15, 2003, and payment on Estimate 9 was due on October 15, 2003.
The parties dispute the applicable rate of interest. R H seeks the contractual rate of interest, whereas the government takes the position that R H is "limited to collecting the legal rate of interest." (U.S.A.'s Br. 3.) However, the authority relied upon by the government does not support its argument. See Fed. Ins. Co. v. Dean Constr. Co., 432 F. Supp. 2d 1256 (M.D. Ala. 2006); Richards v. William Beach Hardware Co., 7 So. 2d 492 (Ala. 1942); Wood v. Cent. Bank of the S., 435 So. 2d 1287 (Ala.Civ.App. 1982). These cases are inapposite as they involve actions on contracts or other instruments that did not contain interest rate provisions.
R H represents that Alabama law does not expressly answer this question but that the law of other jurisdictions supports the application of the contractual interest rate. (R H's Br. 7-8.). For example, in a mechanic's lien action, a Virginia court awarded prejudgment interest at the contractual rate rather than at the legal rate. See Marple v. Kerns, No. 5814, 1084 WL 276232 (Va. Cir.Ct. Feb. 28, 1984). The court reasoned: "[I]t is the opinion of the Court that even though the mechanic's lien remedy is asserted for the collection of the money, nevertheless the obligation arose out of the written contract and the rate of payment, including the interest rate, would be that provided in the contract." Id. at *1 (citing Benner-Williams, Inc. v. Romine, 437 P.2d 312 (Kan 1968)).
Like the court in Marple, this court "perceives no reason not to award the contract rate." Id. Therefore, in the absence of any contrary authority, and the government having presented no persuasive reason why the court should ignore the contractual interest rate, the applicable rate of prejudgment interest is eighteen percent per annum as set forth in the contract.
III. CONCLUSION
In accordance with the foregoing, it is ORDERED and DECLARED that:
1. The Motion for Partial Summary Judgment (Doc. # 2) filed by Reese Howell, Inc., is GRANTED;
2. Reese Howell, Inc., has a valid, perfected, and enforceable materialmen's lien under Alabama law that has priority over the interest of the United States of America;
3. Judgment in favor of Reese Howell, Inc., will be entered by separate order in the amounts of $152,942.19, plus $124,976.82 in interest, and $29,425.09, plus $23,159.56 in interest, together with costs of this action, in accordance with the directive of § 35-11-224 of the Alabama Code;
4. Reese Howell, Inc., shall file a proposed judgment on or before March 6, 2008; and
4. Each party shall file a report on the status of remaining claims on or before March 10, 2008.
A copy of this checklist is available at the website for the USCA, 11th Circuit at www.ca11.uscourts.gov Effective on April 9, 2006, the new fee to file an appeal will increase from $255.00 to $455.00.
CIVIL APPEALS JURISDICTION CHECKLIST
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