IN RE
GOLDEN OAK MINING COMPANY, L. P. CASE
NO.
00-51142
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF KENTUCKY
LEXINGTON
IN RE:
GOLDEN OAK MINING COMPANY, L. P. CASE
NO. 00-51142
DEBTOR
MEMORANDUM OPINION
This case is before
the court for ruling on the issue of whether the claim of Drives & Conveyors, Inc. (Proof of Claim
# 72) is secured. Argument of counsel
was heard on May 2, 2001 (Document # 359), the parties have briefed the issues
(Documents # 353, 405, & 424), and the matter now stands submitted for
decision (Document # 455).
FINDINGS OF FACT:
Drives & Conveyors, Inc. (AD&C@) filed
AMechanic=s Lien Statement@ on September 28, 1999 in the Letcher County Clerk=s Office in the amount of $171,366.88. According to the lien statement, D&C
Asupplied, sold and furnished materials,
supplies, parts, equipment and machinery@ to Golden Oak Mining Company, LP (AGolden Oak@) (Attachment to Document # 424). The address given for Golden Oak is
A147 Big Blue Blvd.@ in Whitesburg, Kentucky. The Statement asserts
Aa statutory lien upon the land and or
improvements of Golden Oak Mining, into which the machinery, equipment and
supplies purchased by Golden Oak Mining Company were placed.@
No
specific information is given as to what was purchased or where it was
used. The Statement says that its
Exhibit AA@ is a list of what was provided by D&C to Golden Oak; however,
attached is AAccounts Receivable Aging Report@ which merely lists each invoice by number,
date, and age, with the last page being a summary of the Aging Report and a
certificate of filing by the Letcher County Clerk. (See Statement as Exhibit
AA@ to Document # 424.)
The debtor and D&C do not disagree that
D&C advised Golden Oak by letter dated September 23, 1999 that it would
file a mechanics= lien statement for property supplied by
D&C (Document # 405, Exhibit A) and that Golden Oak received the
letter. Further, the parties do not
disagree that D&C notified Golden Oak by letter dated October 15, 1999,
some seventeen (17) days after the filing, that indeed it had filed a lien
statement or that a copy of the Statement was enclosed with the letter. Nor is there dispute between these parties
that Golden Oak received this letter with a copy of the Statement. (Exhibit
AB@ of Document # 353 is a copy of the 10/15/99
letter without a copy of Mechanics= Lien Statement; however, on Page 2 of Document # 424 counsel for the
debtor acknowledges a copy of the Statement was received with the letter.) The dispute regarding perfection of D&C=s claim concerns timing and manner of
notification as well as description of the property to be covered by the
lien. Further, Golden Oak asserts the
claim of D&C is defective because in order to claim a mechanic=s lien the creditor must show the materials
supplied were incorporated into the realty.
CONCLUSIONS OF LAW:
D&C asserts its lien under Kentucky
Revised Statute (AKRS@) 376.010, Mechanics= and Materialman=s Liens; filing of Statement of Amount
Claimed; Notice to Owner or Agent; Definitions of
ALabor@ and
ASupplies,@ which states in pertinent part in subsection (1):
Any person who performs labor or furnishes materials, for the erection,
altering, or repairing of a house or other structure or for any fixture or
machinery therein, for the excavation of cellars, cisterns, vaults, wells or
for the improvement in any manner of real property including the furnishing of
agricultural lime, fertilizer, concrete pipe or drainage tile, crushed rock,
gravel for roads or driveways, and materials used in the construction or
maintenance or fences, by contract with, or by the written consent of, the
owner, contractor, subcontractor, architect, or authorized agent shall have a
lien thereon, and upon the land upon which the improvements were made or on any
interest the owner has therein, to secure the amount thereof with interest as
provided in KRS 360.040 and costs.
At the heart of D&C=s claim of perfection is KRS 376.080, Lien Dissolved Unless
Statement Filed With County Clerk and Copy Mailed to Property Owner; Form of Statement,
the Kentucky statute which governs the filing requirements for liens created
under KRS 376.010. The filing statute,
KRS 376.080, sets out the requirements as follows. Subsection (1) states that a lien provided for in KRS 376.010,
the Mechanics= and Materialman=s Lien statute,
Ashall be dissolved@ under certain specified circumstances. Those include that the filed Statement set
out the amount due,
Aa
description of the property intended to be covered by the lien sufficiently
accurate to identify it,@ the name of the owner of the property if known, and whether the
materials furnished or the labor performed was pursuant to a contract with the
owner or with a contractor or subcontrator.
Subsection (1) concludes:
The claimant shall send by regular mail a
copy of the statement to the property owner at his last known address within
seven (7) days of filing the statement with the county clerk. Any lien provided
for in KRS 376.010 shall be dissolved if a copy of the statement is not sent to
the property owner as provided in this subsection.@
Counsel for the debtor asserts that the claim of D&C is not secured
because its lien statement does not comply with KRS 376.080 in terms of the
notice given or description of the property to be covered. Counsel for the creditor counters that
D&C complied with the intent of the statute.
KRS 376.080 is unambiguous as to notice. The creditor
Ashall send@ a
copy of the Statement
Awithin
seven (7) days of filing.@
Furthermore, if a copy of the
filed Statement is not sent to the property owner
Aas provided in this subsection,@ the lien
Ashall be dissolved.@
The directive of the court in Hub
City Wholesale Electric, Inc. v. Mik-Beth Electrical Co., 621 S.W.2d
242 (Ky.App. 1981), is strict adherence to statutory provisions for
perfection of a mechanics= lien. Therefore, since the
lien of D&C is not in strict compliance with the notice requirement of KRS
376.080(1), it is unperfected.
In addition, the court finds that the lien of
D&C is unperfected as not being in compliance with the statute in regard to
the description requirement. KRS
376.080 provides that the Statement include
Aa description of the property intended to be covered by the lien
sufficiently accurate to identify it.@
No such description in the
Mechanics= Lien Statement filed by D&C on September
28, 1999 was given. No location was
given of Golden Oak=s
operations, or of the property provided by D&C. The only location information supplied by D&C=s Statement was Golden Oak=s business or mailing addressB
A147 Big Blue Blvd, Whitesburg, Ky 41858.@
Furthermore, as to what was
supplied by D&C, the description on the face of the Statement was general:
Amaterials, supplies, parts, equipment, and
machinery.@
The
attachment to the Statement was exclusive: an aging report of Golden Oak=s account with D&C, that is,
categories of numbers. Neither the Statement itself, nor the attachment, nor
combination of the two gives sufficient information to identify the property
provided by D&C.
The Sixth Circuit case Central Contractors
Service, Inc. v. Ohio County Stone Co., 255 S.W. 2d 17 (Ky. 1952), offers
some guidance in this area of the law. Contractors
involved actions to establish mechanics= and materialmen=s liens on property of a bankrupt mining company. In that case Kentucky=s highest court, then the Court of Appeals of
Kentucky, found the statements to be adequate.
The property to be charged was all that was used or occupied by the
mining company at the site of its single mining operation. Thus, Contractors is distinguishable
from the situation at hand. The
Statement is woefully inadequate in identifying the property on which Golden
Oak operated, or the property provided by D&C to Golden Oak at its multiple
mining locations.
In sum, the claim of D&C, Claim No. 72,
is unsecured because D&C failed to perfect a mechanic=s or materialman=s lien in compliance with the requirements of
KRS 376.080 in regard to timing and manner of notification and in regard to
description of the property to be covered by the lien. Having so concluded the court finds it
unnecessary to address the assertion that D&C is not entitled to a lien
pursuant to KRS 376.010 because it has not demonstrated that the property it provided
became attached to the realty.
Dated:
By the court
B
____________________________
JOSEPH M. SCOTT, JR.
U. S. BANKRUPTCY JUDGE
Copies to:
Gregory R. Schaaf,
Esq.
K. David Kersey,
Esq.
Taft A. McKinstry,
Esq.
U. S. Trustee
UNITED STATES
BANKRUPTCY COURT
EASTERN
DISTRICT OF KENTUCKY
LEXINGTON
IN RE:
GOLDEN OAK MINING COMPANY, L. P. CASE
NO. 00-51142
DEBTOR
ORDER REGARDING CLAIM OF
DRIVES & CONVEYORS (CLAIM
# 72)
In accordance with the Memorandum Opinion
this day entered, IT IS HEREBY ORDERED that the claim of Drives & Conveyors
(Claim # 72) is unsecured.
Dated:
By the court
B
____________________________
JOSEPH M. SCOTT, JR.
U. S. BANKRUPTCY JUDGE
Copies to:
Gregory R. Schaaf,
Esq.
K. David Kersey,
Esq.
Taft A. McKinstry,
Esq.
U. S. Trustee