In re Barker Boatworks, LLC

606 B.R. 451

IN RE: BARKER BOATWORKS, LLC, Debtor.

Case No. 8:19-bk-3138-MGW

United States Bankruptcy Court, M.D. Florida, Tampa Division.

Dated: July 25, 2019

Eric D. Jacobs, Esq., Genovese, Joblove & Battista, P.A., Counsel for Sea Force IX, Inc.

Charles A. Postler, Esq., Amy Denton Harris, Esq., Stichter, Riedel, Blain & Postler, P.A., Counsel for Debtor

MEMORANDUM OPINION AND ORDER ON EMERGENCY MOTION OF SEA FORCE IX, INC. FOR ADEQUATE PROTECTION

Michael G. Williamson, Chief United States Bankruptcy Judge

THIS CASE came before the Court for hearing on June 12, 2019, to consider the Emergency Motion of Sea Force IX, Inc. ("Sea Force") for Adequate Protection.¹ Sea Force's Motion was filed in response to the Debtor's Emergency Motion for Turnover of Property of the Estate.²

The Motions relate to certain boat molds that were owned by the Debtor, but possessed by Sea Force to use in the manufacture of fiberglass parts for boats built by the Debtor. The Debtor sought the turnover of the molds in order to deliver them to a third party that has purchased its assets. Sea Force contends that it holds a lien on the molds pursuant to § 713.596 of the Florida Statutes, and therefore requested adequate protection for its lien as a condition to turnover.

The Court has considered § 713.596 (the molder's lien statute) and the record in this case, and determines that Sea Force acquired a possessory lien on the molds when it performed work for the Debtor and was not paid. The lien was enforceable for as long as Sea Force retained possession of the molds, without further notice or action to perfect the interest. Sea Force was in possession of the molds on the date that the Debtor filed its bankruptcy petition, and therefore holds a valid and enforceable lien on the proceeds of the molds.

A. Background

The Debtor is in the business of designing and building custom boats. In September of 2018, the Debtor entered into an agreement with Sea Force for Sea Force to manufacture certain parts for the Debtor's boats. The Debtor's boat molds were moved to Sea Force's facility to enable Sea Force to manufacture the parts, and Sea Force subsequently issued a series of invoices for its manufacturing services. In February of 2019, Sea Force moved the molds to a temporary storage location.³

On April 5, 2019, the Debtor filed a petition under Chapter 11 of the Bankruptcy Code.

On April 29, 2019, the Debtor filed a motion for authority to sell substantially all of its assets to an entity known as Strike Force Seven LLC ("SFS") pursuant to an Asset Purchase Agreement signed on the same date.⁴ The proposed purchase price under the Asset Purchase Agreement is approximately $9,800,000.00. The assets subject to the sale included the boat molds that had been moved to Sea Force's facility under the Debtor's manufacturing agreement with Sea Force.

On June 4, 2019, the Debtor filed a motion for turnover of the boat molds from Sea Force so that they could be delivered to SFS pursuant to the proposed sale.⁵ In response to the Debtor's Motion, Sea Force asserted that it held a perfected molder's lien on the molds in the amount of $27,917.82, and therefore requested adequate protection for its lien as a condition to turnover.⁶

On June 13, 2019, the Court entered an order authorizing the sale to SFS,⁷ and also entered a separate order granting the Debtor's Motion for Turnover.⁸ Generally, the orders provide for the removal of the molds from Sea Force's facility, and for SFS to escrow the sum of $27,917.82 pending the Court's determination of the validity and extent of Sea Force's lien.

B. Statutory molder's lien

Sea Force asserts that it holds a lien on the boat molds pursuant to § 713.596 of the Florida Statutes. Section 713.596 defines a "molder" as "any person who fabricates, casts, or otherwise makes or uses a mold for the purpose of manufacturing, assembling, casting, fabricating, or otherwise making a product for a customer."⁹ Subsections (2) and (3) of § 713.596 provide in part:

§ 713.596. Molder's liens

...

(2) Liens. —

(a) A molder that has not received payment from a customer in accordance with the terms of the contract between the two has a lien on a mold in the molder's possession which belongs to that customer . The lien is for the balance due the molder from the customer for any work that the molder has performed for the customer in manufacturing or fabricating products for the customer using the mold and for the value of all material related to such work. The molder may retain possession of the mold until the debts are paid .

(b) Before enforcing the lien, the molder must notify the customer in writing of the claim of lien.... The notice must state that the molder claims a lien for the balance due for work that the molder has performed in manufacturing or fabricating products for the customer using the mold and for the value of related materials as is specified in the notice. Additionally, the notice must include a statement of the amount of the balance owed, a demand for payment, and a statement of the location of the mold. Finally, the notice must include the following warning in conspicuous type and in substantially the following form:

WARNING: YOUR FAILURE TO PAY THE UNPAID BALANCE AS STATED HEREIN WILL RESULT IN THE IMPOSITION OF A LIEN ON THE MOLD DESCRIBED HEREIN AND IN THE SALE OF THAT MOLD AS PROVIDED BY LAW.

(c) If the customer does not pay the amount due as stated in the notice within 60 days after the date of receipt of the notice, the molder may sell the mold at a public auction....

(3) Sale.—

(a) Before a molder may sell a mold, the molder must notify the customer and any holder of a security interest perfected in this state of the intended sale....¹⁰

It does not appear that § 713.596 has been interpreted by any Florida court. Sea Force contends that a molder's lien under § 713.596 is a possessory lien that arises when the molder performs services using the customer's molds, and that the molder's possession of the molds is the only act required by the statute to perfect the lien. The Debtor does not expressly dispute the creation of a possessory lien under the statute, but contends that a molder must comply with the notice provision of § 713.596(2)(b) before it is entitled to assert a lien against the molds or the proceeds of the molds.

1. Enforceable by possession

The molder's lien statute appears in Part II of Chapter 713 of the Florida Statutes, which governs "miscellaneous liens" in Florida. Section 713.74 of the Florida Statutes relates to the acquisition of miscellaneous liens under Part II. Section 713.74 provides that such liens shall be acquired "by the performance of the labor or the furnishing of the materials," and that the lien "shall continue as long as the possession continues, not to exceed 3 months after performance of the labor or furnishing the material."¹¹

Section 85.011 of the Florida Statutes relates to the enforcement of miscellaneous liens acquired under Part II of Chapter 713. Section 85.011 provides that such miscellaneous liens on personal property are enforceable by five separate methods, including "retention of possession of the property on which the lien has attached for a period of not exceeding 3 months by the person entitled to the lien, if the person was in possession at the time the lien attached."¹² The statute provides for a three-month possessory period, after which the owner may seek possession of the property, but the lien does not expire after three months and the lien rights continue beyond that period.¹³ In other words, if the owner does not recover the property at the end of three months, the lien continues for as long as the lien-holder retains possession.¹⁴

Section 713.596, the molder's lien statute, provides that an unpaid molder "has a lien on a mold in the molder's possession," and that the unpaid "molder may retain possession of the mold until the debts are paid."¹⁵ Under §§ 713.596, 713.74, and 85.011, therefore, a molder's lien is acquired when a molder performs services for its customer, and is enforceable by the molder's continued possession of the molds until it is paid.

2. Enforceable against third parties

A molder's lien is enforceable by possession of the molds, and no further act is required to perfect the lien. Through its possession of the property, the holder of a possessory lien provides actual notice to third parties and the public of its interest.¹⁶

Except for a provision regarding the priority of such liens, statutory liens for services are excluded from coverage under Florida's Uniform Commercial Code.¹⁷ The liens are dependent on possession for their effectiveness,¹⁸ and have priority over a security interest in the property unless the creating statute provides otherwise.¹⁹

Additionally, a person who acquires such a statutory lien for services "has a lien against the property as against subsequent purchasers and creditors without notice so long as the lienor continues in possession of the property upon which the lien is claimed."²⁰

3. Enforceable without pre-sale notice

Under Florida's molder's lien statute, an unpaid molder "has a lien" on molds in the molder's possession which belong to its customer.²¹ A molder's lien arises automatically when the molder performs work and is not paid, and is perfected by possession.²²

Florida's molder's lien statute also provides that the molder must notify its customer in writing "before enforcing the lien." First, the molder must notify the customer of the amount owed and warn the customer that its failure to pay the balance will result in the sale of the mold. Second, if the customer does not pay within sixty days, the molder must notify the customer and any other secured creditors of the intended sale.²³

Generally, the statute allows the molder to sell the molds at public auction if the customer does not pay the molder for its work. The pre-sale notices required by the statute are directed to the customer and any creditors with...