ROK Builders, LLC v. 2010-1 SFG Venture LLC (In re Moultonborough Hotel Group, LLC)

Summarized by Michael Sugar , Commonwealth of Massachusetts
12 years 7 months ago

Citation:

No. 12-2182

Tag(s):

Ruling:

Despite ROK Builders, LLC ("ROK"), a contractor, initiating work prior to a construction loan being taken out, the Court found that 2010-1 SFG Ventures, LLC ("SFG"), the purchaser of the construction loan and mortgage, had priority over ROK's mechanic's lien claim to the extent that the proceeds of the construction loan had been used to pay ROK, its subcontractors and suppliers and the work had occurred after the construction loan was secured by the mortgage. The Court also upheld the dismissal of ROK's unjust enrichment claim on the basis that SFG had not received a benefit that would be unconscionable to allow it to retain.

Procedural context:

SFG challenged the priority of the mechanic's lien asserted by ROK. SFG filed a motion for summary judgment , requesting that the court find that its lien was entitled to priority over ROK. The Bankruptcy Court granted SFG's motion and ROK appealed to the district court, which affirmed, and then to the First Circuit Court of Appeals.

Facts:

In 2006, Moultonborough Hotel Group, LLC ("Moultonborough") contracted with ROK to build a hotel. After incurring $1.6 million in unpaid claims to ROK, Moultonborough obtained a construction loan secured by a mortgage on the future hotel. The construction lender paid more than $6.4 million to ROK for ROK's work on the hotel. Moultonborough and the construction lender did not pay ROK's remaining claim of almost $2.5 million. In 2008, the hotel opened. In 2009, Moultonborough declared bankruptcy and SFG purchased the construction loan from the FDIC.

Judge(s):

Torruella, Thompson and Kayatta. (Kayatta author)

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