- Case No. KS-10-084 (B.A.P. 10th Cir. May 7, 2012)
- The Bankruptcy Appellate Panel ("BAP") for the Tenth Circuit AFFIRMED the bankruptcy court's order ruling that a lender's mortgage interest in property has priority over mechanics' lien claims. The BAP found that based on the evidence, the bankruptcy court's finding that one of the contractor-appellants had not done lienable work under a contract with the Debtor prior to the filing of lender's lien was not clearly erroneous. The BAP also found that, under Kansas mechanic's lien law, a contractor-appellant who had done work on the subject property for a different owner under a different contract previously (which was satisfied), could not use that work to tack work performed under a different contract with the current owner (the Debtor) to achieve priority of its mechanic's lien. Accordingly, the lender's lien was in first priority.
- Procedural context:
- Two general contractors and four subcontractors appeal the bankruptcy court's order determining that under Kansas law, the interest of a construction lender/mortgagee in a retail shopping center development has priority over their mechanic's lien claims.
- Certain mechanic's liens were filed against a retail shopping center development (the "Property") owned by the Debtor. Bank of America ("BoA") also perfected a security interest in the Property related to a mortgage on October 10, 2008. There was no dispute that mechanic lien claimants furnished lienable labor and materials under a contract with the Debtor at some point. The issue was whether the contractors furnished the labor and materials prior to the filing of BoA's mortgage. One of the contractor-appellants argued that its mechanic's liens relate back to August 24, 2008, the first day of work billed under its contracts with the Debtor. A different contractor-appellant argued that its first lienable work was done in 2003, before the Property was owned by the Debtor. The bankruptcy court reviewed the evidence and found that no lienable work was done by the first contractor-appellant before BoA filed its lien. The bankruptcy court also found that, although the second contractor-appellant did work on the Property in 2003, that was done under a different contract with the prior owner, and could not be used to give priority under its contract with the Debtor, the current owner.
- Cornish, Michael, and Thurman
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