IN RE GOLDEN OAK MINING COMPANY, L. P.    CASE NO.  00-51142 MEMORANDUM SECURED CLAIMS

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