Michael's Constr., Inc. v. Am. Nat'l Bank

278 P.3d 701

2012 WY 76

MICHAEL'S CONSTRUCTION, INC., a Wyoming corporation, Appellant (Plaintiff),

v.AMERICAN NATIONAL BANK, Appellee (Defendant).

American National Bank, Appellant (Defendant),

v.Michael's Construction, Inc., a Wyoming corporation, Appellee (Plaintiff).

Nos. S–11–0209, S–11–0210.

Supreme Court of Wyoming.

May 31, 2012.

Appeal from the District Court of Campbell County; Michael N. Deegan, Judge.

Representing Michael's Construction, Inc.: James L. Edwards of Stevens, Edwards, Hallock, Carpenter & Phillips, P.C., Gillette, Wyoming.

Representing American National Bank: Clint A. Langer of Davis & Cannon, LLP, Sheridan, Wyoming.

Before KITE, C.J., and GOLDEN, HILL, VOIGT, and BURKE, JJ.

KITE, Chief Justice.

[¶ 1] After the owner of a construction project in Campbell County defaulted on its obligations to various creditors, mortgage holder Pinnacle Bank foreclosed on the real property securing its mortgage. Junior mortgage holder American National Bank (ANB) and construction lienholder Michael's Construction, Inc. (Michael's) both sought payment from the surplus funds resulting from the foreclosure proceeding. The district court declared that ANB's mortgage was superior to Michael's lien, but denied ANB's request for contractual interest from the date of foreclosure through the date of final judgment. Both parties appealed.

[¶ 2] We affirm the district court's order regarding the priority of liens, but reverse the order regarding interest and remand for additional proceedings consistent with this decision.

ISSUES

[¶ 3] Michael's presents the following issue in Case No. S–11–0209:

Whether the decision of the district court granting summary judgment in favor of American National Bank was correct.

ANB responds with this issue:

Whether the district court properly determined that American National Bank's mortgage had priority over Michael's Construction, Inc.'s lien.

ANB and Michael's both identify the following issue for appeal in Case No. S–11–0210:

Whether the district court erred in denying American National Bank the recovery of interest at the contractual rate.

FACTS

[¶ 4] The parties stipulated to the facts of this case. Because the dates are important to our decision, we will list the relevant events in chronological order:

• On March 14, 2006, Anthony Ciochetti, on behalf of several related entities (hereinafter referred to as “owner”), met with Kyle Gillette of Schutz Foss Architects, P.C. regarding the construction of a day care and Montessori school in Campbell County. Mr. Gillette had a bachelor's degree in architecture and was a project manager for Schutz Foss Architects, but he was not a licensed architect.

• On April 21, 2006, Mr. Gillette recorded his first time entry for work on the day care project.

• On April 24, 2006, a warranty deed conveying the day care real property to the owner was recorded in the Campbell County Clerk's office.

• Also on April 24, 2006, a mortgage from the owner to Pinnacle Bank encumbering the day care real property was recorded in the clerk's office.

• On May 15, 2006, Schutz Foss Architects and the owner entered into a contract for architectural services for the day care.

• On July 3, 2006, a mortgage encumbering the day care real property given by the owner to ANB to secure a corresponding promissory note was recorded in the clerk's office.

• On October 20, 2006, Michael's delivered a loader and a blade to the day care property.

• On October 30, 2006, Michael's began removing topsoil from the day care property.

• On November 6, 2006, Michael's and the owner entered into an agreement for construction services.

• On April 17, 2007, Michael's timely filed and perfected a lien statement against the real property.

• As of July 16, 2007, the owner had defaulted on its obligations to Pinnacle Bank, Michael's, Schutz Foss Architects, and ANB.

• On July 16, 2007, Pinnacle Bank commenced foreclosure proceedings pursuant to the power of sale provision in its mortgage.

• On August 21, 2007, the Campbell County Sheriff conducted a foreclosure sale. Michael's purchased the property at the sale for $400,000.

• The owner's debt to Pinnacle Bank was satisfied out of the foreclosure sale proceeds, leaving a balance of $271,968.23.

• As of August 21, 2007, the owner owed Michael's $432,980, plus accrued interest and fees and ANB $88,123.03 in principal, plus accrued interest and fees.

[¶ 5] Because the remaining funds from the foreclosure sale were insufficient to satisfy Michael's and ANB's outstanding claims, the matter came before the district court for a declaration of priorities and distribution of the funds. ANB claimed that its mortgage had priority over Michael's lien because the mortgage was recorded prior to the commencement of construction on the project. Michael's claimed that its lien had priority because it related back to the date Schutz Foss Architects began work on the project.

[¶ 6] The parties filed competing motions for summary judgment. The district court interpreted the relevant lien priority statutory sections and ruled that ANB's mortgage had priority over Michael's lien. The district court also ruled that ANB was entitled to contractual interest through the date of foreclosure. ANB filed a motion to amend the summary judgment order to include interest, at the rate specified in the promissory note, until the date of judgment. Michael's argued that the district court had discretion to limit the amount of interest awarded to ANB after the foreclosure sale and, as a matter of equity, any interest awarded should be limited in order to make more of the surplus funds available to satisfy its construction lien. The district court agreed with Michael's and entered an order awarding ANB interest at the contractual rate “only from the date of default until the date of foreclosure....”

[¶ 7] Michael's appeal in Case No. S–11–0209 challenges the district court's decision on the priorities of the parties' liens, and ANB's appeal in Case No. S–11–0210 contests the district court's interest award.

STANDARD OF REVIEW

[¶ 8] This case was determined on summary judgment. Summary judgments are governed by W.R.C.P. 56(c):

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

We review a district court's summary judgment rulings de novo, using the same materials and following the same standards as the district court. The facts are reviewed from the vantage point most favorable to the party who opposed the motion, and we give that party the benefit of all favorable inferences that may fairly be drawn from the record.

Grynberg v. L & R Exploration Venture, 2011 WY 134, ¶ 16, 261 P.3d 731, 735–36 (Wyo.2011) (citations omitted).

[¶ 9] The lien priority issue requires us to interpret the relevant statutes, which involves a question of law and de novo review. J & T Properties, LLC v. Gallagher, 2011 WY 112, ¶ 8, 256 P.3d 522, 524 (Wyo.2011); Vogel v. Onyx Acceptance Corp., 2011 WY 163, ¶ 21, 267 P.3d 1057, 1063 (Wyo.2011). In addition, although Michael's insists the correct standard for reviewing the interest award is the abuse of discretion standard, this case requires us to determine whether the district court had discretion in the first place to reduce the amount of interest due ANB. That question is one of law, which we review de novo. See, e.g., Platt v. Platt, 2011 WY 155, ¶ 14, 264 P.3d 804, 807 (Wyo.2011) (holding the question of whether the district court had discretion to modify a partition order made by a court commissioner was reviewed de novo ).

DISCUSSION

A. Lien Priority

[¶ 10] Michael's claims the district court erred by concluding the date for its lien priority was the first day it performed actual construction work on the building site in October 2006. It argues that, under the relevant statutory provisions, its lien priority date should have related back to when the architectural firm started work on the project in the Spring of 2006, making its lien superior to ANB's mortgage recorded on July 3, 2006.

[¶ 11] Wyo. Stat. Ann. § 29–1–305 (LexisNexis 2009)¹ set out the lien priority rules which apply in this case and stated in pertinent part:

(a) Except as provided in this section the liens provided by this title shall be on an equal footing without reference to the date of the filing of the lien statement.

(b) Any lien perfected as provided by this title attaches to the materials, machinery or supplies furnished and improvements made in preference to any subsequent lien, security interest or mortgage under any other provision of law which has been perfected upon real or personal property, including a leasehold interest, against which the lien is claimed.

(c) Any lien, security interest or mortgage which has been perfected upon real or personal property or upon a leasehold interest prior to the commencement of any construction work or repair of the premises or property ... shall have priority.

(d) Where a sale is ordered by the court on foreclosure of any lien provided by this title and the proceeds from the sale are insufficient to discharge in full all of the liens, the proceeds shall be prorated among the several lien claimants according to the amounts of their respective claims.

[¶ 12] In order to decide this case, we must interpret the statutory language by applying the following principles:

[Our] paramount consideration is to determine the legislature's intent, which must be ascertained initially and primarily from the words used in the statute. We look first to the plain and ordinary meaning of the words to determine if the statute is ambiguous. A statute is clear and unambiguous if its wording is such that reasonable persons are able to agree on its meaning with consistency and predictability. Conversely...