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Independent Enterprises, Inc. v. LaSalle Bank National Association

March 11, 2010

INDEPENDENT ENTERPRISES, INC. APPELLANT,
v.
LASALLE BANK NATIONAL ASSOCIATION, APPELLEE, DEFENDANT.



MEMORANDUM OPINION AND ORDER OF COURT

Pending before the Court is the Notice of Appeal (Document No. 1) from an Order of the Bankruptcy Court dated November 19, 2009, which granted the motion for summary judgment filed by LaSalle Bank National Association ("LaSalle Bank")*fn1 and denied the cross-motion for summary judgment filed by Independent Enterprises, Inc. ("Independent"). An extensive appendix has been provided to the Court, the issues have been thoroughly briefed (Document Nos. 3, 4, 6), and the appeal is ripe for disposition.

Factual and Procedural Background

This case arises in the context of the commercial development of an industrial park. LaSalle Bank provided an open-end construction mortgage in April 2005 to the debtor, Imperial Business Park, L.P. ("IBP"), in connection with IBP's purchase of a "First Parcel" of property which consisted of approximately 171 acres. The mortgage was duly filed. Shortly thereafter, IBP filed a Land Development Plan which contemplated the acquisition of two contiguous parcels of land totaling approximately 22 acres from Collier Development, L.P. ("Collier") (hereafter referred to as "Parcel A" and "Parcel B," collectively the "Collier Parcels"), for the purpose of storm water management, utilities, and ingress and egress. Collier executed an acknowledgement that these parcels were included in the Land Development Plan.

Appellant Independent is a contractor. Both Collier and Independent are owned and operated by James and Jack Cargnoni. On October 10, 2005, Independent and IBP entered into a "Clearing and Grubbing" contract. Independent commenced its work, which involved heavy machinery and earth moving on the First Parcel, the same day. The contract contained the following "No-Lien" provision in Addenda 1 (emphasis added):

It is specifically agreed by and between the parties to this Contract that Contractor shall not file, nor will it permit or suffer any subcontractors, materialmen or their persons under it to file, nor shall any such contractor, subcontractor, materialmen or other person file any mechanics or other lien or claim for work done or materials furnished in or about the performance of this Contract or changes therein, against any structure covered by this Contract. Contractor hereby agrees to require all subcontractors, materialmen or other persons who perform work to furnish materials in or about the performance of this Contract to execute waiver of lien agreements in form acceptable to Owner prior to performing such work or furnishing such materials. Evidence of the execution of such waivers must be furnished prior to the commencement of construction.

Contractor shall save and hold Owner harmless from and against any and all claims of any kind or character whatsoever that may be filed against the aforesaid property or property interests by a subcontractor, materialman, or any other person arising out of or in any manner connected with the performance of this Contract or any agreement supplemental thereto; and Contractor shall, at its own expense, defend any and all actions based upon such liens or claims and shall pay all charges of attorneys and all costs and other expenses arising therefrom. Contractor shall execute a Waiver of Liens agreement in form acceptable to Owner upon request by Owner.

On October 15, 2005, Independent executed two substantially identical Waiver of Liens forms. IBP's signatures were not notarized, and the forms were not filed, until November 30 and December 20, 2005, respectively. The text of the Waiver of Liens form provides, in relevant part (emphasis added):

NOW, THEREFORE, in consideration of the execution and delivery of the Contract and intending to be legally bound hereby, Contractor, for itself, its successors and assigns, and all subcontractors and other parties acting through or under it or them, does hereby covenant, promise and agree that no mechanic's liens or claim or other lien or claim of any kind whatsoever shall be filed or maintained against the Improvements or the Premises or any part or parts thereof or the appurtenances thereto, by Contractor or by any subcontractors, materialmen, laborers or others for work done or for any tools, equipment, materials or supervision or other services furnished under the Contract or any subcontract and supplements thereto, written or oral, or by any other party acting through or under them, or any of them, for and about the Improvements, the Premises or any parts thereof, or on credit thereof.

This Waiver of Liens shall be an independent covenant and shall operate and be effective as well with respect to work done and materials and services furnished under any supplemental contract for extra work in connection with the construction of the Improvements as to any work and labor done and materials furnished under the Contract.

The terms "Improvements" and "Premises" are defined by reference to a contract "for the construction of certain improvements (the "Improvements") on certain real property owned by the Owner in North Fayette Township, Allegheny County, Pennsylvania (the "Premises")." The property description in each of the Waiver of Liens forms was defined as: "All that certain parcel located in North Fayette Township, Allegheny County, Pennsylvania, known as Block & Lot 9929-X-60 in Recorder of Deeds of Allegheny County." That description refers to the original 171 acre tract and does not include Parcel A or Parcel B. The Waiver of Liens forms further provided that "in order to give Owner full power and authority to protect itself, and the Improvements and the Premises against any and all claims filed by Contractor," any attorney was authorized to mark "satisfied" "any and all mechanics' liens or claims or other liens or claims of any kind whatsoever filed or maintained against the Improvements or the Premises or any parts thereof or the appurtenances thereto."

On December 21, 2005, Independent and IBP entered into a second contract (the "Grading Contract"). Independent had commenced work under this contract on the First Parcel two days earlier. The Grading Contract had an addendum with a "No-Lien" provision that was substantially identical to the "No-Lien" provision in the Clearing and Grubbing contract.

Parcel A was acquired by IBP from Collier in December 2005 and Parcel B was acquired in January 2006. The LaSalle mortgage was amended and duly filed on December 22, 2005 and January 4, 2006 to reflect that the Collier Parcels were covered by the mortgage. No work was performed by Independent on Parcel A or Parcel B prior to January 4, 2006. The Clearing and Grubbing contract was amended to include those two parcels, although the "No Lien" provision was not modified.

Through May 31, 2006, IBP timely paid all payment applications submitted by Independent on both contracts. IBP then began to experience cash flow shortages and payments became delayed. IBP assured Independent that the problems were temporary, and Independent continued to perform work until September 14, 2007. Independent was ultimately paid in full for the work it did on the Clearing and Grubbing contract, but was not fully paid for its work on the Grading contract. On October 1, 2007, Independent filed mechanics' lien claims in the amount of $766,212.09 in the Court of Common Pleas of Allegheny County as to both of the Collier Parcels.

On October 2, 2008, IBP commenced Chapter 11 bankruptcy proceedings and the parties filed proofs of claims. The Bankruptcy Court ordered the parties to file cross-motions for summary judgment as to their competing claims to IBP's bankruptcy estate. After conducting oral argument on November 18, 2009, the Court ruled in favor of LaSalle "for the reasons expressed on the record this date." A "Proceeding Memo" has been included in the appendix which briefly summarizes the contentions made by the parties but does not articulate the Court's ...


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