In re Murray Energy Holdings Co.

654 B.R. 136

IN RE: MURRAY ENERGY HOLDINGS CO., et al., Debtors.

Case No. 19-56885 (Jointly Administered)

United States Bankruptcy Court, S.D. Ohio, Western Division

Signed September 30, 2023

Tiffany Strelow Cobb, Columbus, OH, Melissa S. Giberson, Vorys, Sater, Seymour and Pease LLP, Columbus, OH, Todd Goren, Lorenzo Marinuzzi, Jennifer Marines, Morrison & Foerster LLP, New York, NY, for Creditor Committee.

Jeremy Shane Flannery, Benjamin A Sales, Office of the United States Trustee, Columbus, OH, Monica V. Kindt, John W. Peck Federal Building, Cincinnati, OH, for U.S. Trustee.

MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PART MOTION FOR SUMMARY JUDGMENT SUSTAINING THE DEBTORS' FIRST OMNIBUS OBJECTION TO MECHANIC'S LIEN CLAIMS OF WAYNE'S WATER 'N' WELLS, INC. (Doc. 2407) AND GRANTING IN PART AND DENYING IN PART WAYNE'S WATER 'N' WELLS, INC.'S MOTION FOR SUMMARY JUDGMENT OVERRULING THE FIRST OMNIBUS OBJECTION TO WORKMAN'S LIEN CLAIMS

John E. Hoffman, Jr., United States Bankruptcy Judge

I. Introduction

An objection to over nearly $300,000 in claims filed for unpaid services now boils down to less than $3,000 in disputed interest charges included in those claims. Murray Energy Holdings Co. and its affiliated debtors and debtors in possession ("Debtors") initiated this contested matter by filing an objection (Doc. 1749) to the mechanic's lien claims of Wayne's Water 'N' Wells, Inc. ("Wayne's"). The plan administrator appointed under the Debtors' confirmed Chapter 11 plan ("Plan Administrator") then filed its motion for summary judgment on the claim objection ("Motion") (Doc. 2407) and Wayne's filed its own summary judgment motion (Doc. 2525). For the reasons stated below, the Plan Administrator's motion for summary judgment is granted in part and denied in part, and Wayne's motion for summary judgment is likewise granted in part and denied in part.

II. Jurisdiction and Constitutional Authority

The Court has jurisdiction to hear and determine this matter under 28 U.S.C. § 1334(b) and the general order of reference entered in this district in accordance with 28 U.S.C. § 157(a). An action seeking the allowance or disallowance of claims against the estate is a core proceeding, see 28 U.S.C. § 157(b)(2)(B), as is the determination of the validity, extent, or priority of liens, see 28 U.S.C. § 157(b)(2)(K). "To the extent [a] matter involves a determination of the validity, extent and priority of liens on property of the estate and claims against such property, the matter 'would necessarily be resolved in the claims allowance process,' " BMO Harris Bank, N.A. v. Vista Mktg. Grp., Ltd. (In re Vista Mktg. Grp., Ltd.), 548 B.R. 502, 512 (Bankr. N.D. Ill. 2016) (quoting Stern v. Marshall, 564 U.S. 462, 499, 131 S.Ct. 2594, 180 L.Ed.2d 475 (2011)), and a bankruptcy court therefore would have the constitutional authority to finally adjudicate it. See Waldman v. Stone, 698 F.3d 910, 919 (6th Cir. 2012) ("When a debtor . . . seeks disallowance of a creditor's claim against the estate . . . the bankruptcy court's authority is at its constitutional maximum."); Black Diamond Comm. Fin. L.L.C. v. Murray Energy Corp. (In re Murray Energy Holdings Co.), 616 B.R. 84, 87 (Bankr. S.D. Ohio 2020) ("[B]ankruptcy courts have the constitutional authority to enter final orders adjudicating the validity and priority of liens on property of the estate."). The Court accordingly has the constitutional authority to finally adjudicate this contested matter.

III. Background

A. The WV-Eligibility Opinion

Wayne's proofs of claim that are the subject of this opinion, claim numbers 1780 and 1801 ("Claim 1780" and "Claim 1801"), are based on the mechanic's liens it filed in West Virginia. Mechanic's liens are "statutory lien[s] secured by real or personal property, often for goods or services supplied in connection with improving, repairing or maintaining the property." In re Murray Energy Holdings Co., 639 B.R. 463, 467 (Bankr. S.D. Ohio 2022) ("WV-Eligibility Opinion"). This is not the first time these claims have been before the Court. The Court previously issued its WV-Eligibility Opinion, which addressed the secured status of Wayne's claims and those of other creditors that asserted secured claims based on their West Virginia's mechanic's liens. See WV-Eligibility Op., 639 B.R. at 463. In the WV-Eligibility Opinion, the Court considered whether Wayne's and other mechanic's lien claimants were eligible to file mechanic's liens under West Virginia's laborer's lien statute, W.Va. Code § 38-2-31 (West 2023) ("Section 31") or were required, as the Plan Administrator contended, to file their mechanic's liens under West Virginia's contractor's lien statute, W.Va. Code § 38-2-1, which they failed to do.

The Court granted partial summary judgment to Wayne's and the other mechanic's lienholders on the eligibility issue, holding that they had a right to file mechanic's liens under the laborer's lien statute. Id. at 490. But the Court held that Section 31 provides priority to a lienholder over later-filed liens only "to the extent and value of one month's . . . work or labor" and that another West Virginia statute, W. V. Code § 38-2-33 ("Section 33"), requires mechanic's lienholders to state in their notices of lien the one-month amounts for which they claim priority status. Ordinarily, when a bankruptcy court uses the phrase "priority status," it does so to denote that a particular unsecured claim or expense is entitled to priority in payment under §507 of the Bankruptcy Code. See 11 U.S.C. § 507. Here, however, the Court uses the phrase "priority status" to refer to the priority that Section 31 grants a mechanic's lienholder over a later-filed lien to the extent of one month's work or labor. And when the Court finds that all or part of an amount on a Wayne's invoice is entitled to "priority status," that amount may be included in calculating the allowed amount of Wayne's related secured claims.

In the WV-Eligibility Opinion, the Court found that Wayne's had not properly stated its one-month amount in the notices of lien it filed and thus deferred a ruling as to what portion of Wayne's claim had priority status vis-a-vis later filed liens until Wayne's had the opportunity to comply with the directives set forth in that opinion. Id. at 489-490. Wayne's then filed Wayne's Water 'N' Wells, Inc.'s Statement of Days Worked and Election of Priority ("Priority Statement") (Doc. 2939) with exhibits (Doc. 2939-1),¹ and the Plan Administrator responded with the Plan Administrator's Objection to Wayne's Water 'N' Wells, Inc.'s Statement of Days Worked and Election of Priority ("Objection") (Doc. 2954).

B. Calculation of Wayne's One-Month Priority Amount

Consistent with the Court's instruction in its prior opinion, Wayne's elected a one-month priority period starting July 17, 2019 and ending August 17, 2019 ("Priority Period") as to both claims. Priority Statement at 8.

1. Claim 1780

Wayne's Claim 1780 asserts a secured claim in the amount of $98,089.08 for work "performed no earlier than July 26, 2019 and no later than August 12, 2019," all of which fell within the Priority Period. Priority Statement at 4.

a. Principal

Claim 1780 is based on two Notices of Workman's Lien filed against the Marshall County Coal Company and two corresponding invoices. Invoice No. 3180, for $49,783.60, covers work performed at the 18E-2 Degas Borehole,² and Invoice No. 3179, in the amount of $47,252.70, is for work performed at the 18E-3 Degas Borehole. Priority Statement at 3. According to Wayne's, it completed all work at Borehole 18E-2 between August 5, 2019 and August 12, 2019, id. at 4, and it completed work at Borehole 18E-3 between July 26, 2019 and August 5, 2019. Id. at 2-3.

Both borehole locations are in Marshall County, West Virginia, and both notices of lien were filed with the Marshall County Clerk on November 1, 2019. Id. at 2. The total of these notices of lien and invoices is $97,036.30.

b. Interest

Claim 1780 was filed in the amount of $98,089.08. The difference between the proof of claim total of $98,089.08 and the total of $97,036.30 stated in the notices of lien and invoices—$1,052.78—represents the combined finance charges for the two jobs: $540.12 on Job 18E-2 and $512.66 on Job 18E-3. Id. at 3-4. Both finance charges were accrued from the invoice payment-due date to the bankruptcy petition date. Id. at 3, 4. And each invoice says that Wayne's determined the amount of the finance charges on past due invoices in the following manner: "All past due invoices are subject to a finance charge of 1.5% per month. Annual rate 18%." Claim 1780, Exs. A and B. This 18% annual finance charge rate is identified as an 18% "annual interest rate" on the proof of claim form. Claim 1780 at 2. The amounts themselves, however, are not found on either invoice, nor are they stated in Wayne's Notices of Workman's Lien.

2. Claim No. 1801

Wayne's Claim 1801 asserts a secured claim against the Ohio County Coal Company in the amount of $212,456.50 for work performed between July 17, 2019 and August 19, 2019. All but the last of these days falls within the Priority Period. Priority Statement at 8.

a. Principal

Claim 1801 is based on charges for work done on three boreholes at a location known as 8 South in Marshall County, West Virginia. Id. at 5. This work is described in one Notice of Workman's Lien filed with the Marshall County Clerk on November 1, 2019. Id. at 5. The lien refers to two invoices: Invoice No. 3181 and Invoice No. 3197. Id. The principal amount of Claim No. 1801 is $210,668.11. Id.

b. Interest

Wayne's asserts that interest of $909.18 on Invoice 3181 and interest of $858.56 on Invoice 3197, for a total of $1,767.74, are proper components of its allowed secured claim. Id. at 9. In calculating the finance charges that it included to arrive at the total amount of its Claim 1801, Wayne's used the same method described above with regard to Claim 1780. With the addition of the...