IN RE MOULTONBOROUGH HOTEL GROUP, LLC, Debtor.
2010-1 SFG VENTURE LLC, Appellee. ROK BUILDERS, LLC, Appellant,
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE [Hon. Paul J. Barbadoro, U.S. District Judge]
William S. Gannon for appellant.
Gary D. Ticoll, with whom Paul T. Martin, Greenberg Traurig, LLP, Edmond J. Ford, and Ford & Associates, P.A., were on brief for appellee.
Before Torruella, Thompson and Kayatta, Circuit Judges.
KAYATTA, Circuit Judge.
This appeal presents two competing claims to the assets of the bankrupt Moultonborough Hotel Group, LLC. Appellant ROK Builders, LLC constructed a hotel for Moultonborough and has a mechanic's lien on the property. Appellee 2010–1 SFG Venture, LLC, is the assignee of the construction lender and has a mortgage on the hotel. When Moultonborough filed for bankruptcy, SFG sought a declaration that its mortgage was senior to ROK's lien to the extent the construction lender had disbursed loan funds to ROK. ROK responded by seeking a declaration that its lien was senior to SFG's mortgage and by advancing various additional counterclaims. The New Hampshire bankruptcy court and district court ruled for SFG. We now affirm.
This dispute has its origins in a project that began in 2006 to build a Hampton Inn & Suites in Tilton, New Hampshire. On December 1, 2006, ROK signed a contract with Moultonborough to construct the hotel. ROK began work, but the project stalled when Moultonborough proved unable to pay its bills. In April 2007, ROK terminated the contract due to nonpayment of roughly $1.6 million. ROK signaled its willingness to resume work if Moultonborough secured adequate financing and paid the balance due, with interest.
On June 26, 2007, Moultonborough signed an agreement letter with Specialty Finance Group in which Specialty committed to extending up to $8.7 million in new funding to restart the project. ROK claims to have then immediately taken steps to resume construction. On September 21, ROK signed a new construction agreement with Moultonborough. Less than a month later, on October 10, Specialty signed a formal construction financing agreement with Moultonborough, as anticipated by the commitment letter. As security, Moultonborough executed a mortgage on the property, which Specialty recorded the next day. In conjunction with the financing agreement, Specialty paid ROK more than $1.8 million to settle the amount due, with interest, to ROK under its original 2006 construction agreement with Moultonborough.
ROK then set about finishing the hotel. For its work, it received loan disbursements from Specialty, in conjunction with at least two of which it executed lien waivers. In its final waiver, executed for the period ending May 31, 2008, ROK acknowledged past payments from Specialty of $5, 751, 419.39 for work done under its 2007 agreement with Moultonborough, and listed a balance due of $954, 571.03. The waiver provided,
In consideration of the payment of the above stated sums currently due and amounts previously paid, the receipt of which is hereby acknowledged, [ROK] hereby waives, relinquishes, and releases any and all liens, rights, claims and interests (including, without limitation, all rights to mechanic's and materialmen's liens) owned, to be owned, claimed or held by [ROK] in and to the [Hampton Inn & Suites in Tilton] . . . by reason of the labor performed and/or materials furnished by [ROK] . . . prior to and including the Payment Date . . . .
At the time it submitted the waiver, ROK was unaware that Specialty had decided to stop payments due to Moultonborough's failure to secure additional financing, as its loan agreement with Specialty required. Indeed, Specialty did not inform ROK of this decision even when it received the waiver, and ROK performed further work in June, still unaware that it would not be paid. ROK's briefs do not dispute that it received an additional $682, 655.01 from Specialty, presumably after the May waiver, yielding a total payout of $6, 434, 074.40 for work performed under the 2007 construction contract. However, ROK maintains that it is still owed $2, 487, 411.94 for work under that contract, secured by a mechanic's lien.
Despite the unresolved payment issue, the hotel opened successfully in June of 2008. Moultonborough and Specialty, however, soon found themselves in financial trouble. In May of 2009, Specialty's parent company, Silverton Bank, N.A., failed, and Specialty assigned the construction mortgage on the hotel to the Federal Deposit Insurance Corporation, the receiver for Silverton. Soon after, the FDIC assigned the mortgage to SFG. Later in 2009, Moultonborough filed a petition in New Hampshire bankruptcy court for reorganization under chapter 11 of the bankruptcy code.
On March 15, 2011, SFG initiated an adversary proceeding against ROK in bankruptcy court, seeking a declaration that $6, 434, 074.40 of the construction mortgage -- the amount Specialty had disbursed to ROK for work performed under the 2007 construction contract -- was senior to ROK's mechanic's lien. In response, ROK filed a dozen counterclaims: two seeking a determination that its lien was senior to SFG's mortgage, and an additional ten advancing causes of action sounding in tort, contract, and equity. SFG filed a motion to dismiss, which the bankruptcy court granted as to the ten secondary counterclaims. SFG then filed a motion for summary judgment on the competing seniority claims, which the bankruptcy court granted. ROK timely appealed to the district court, see 28 U.S.C. § 158(a)(1), which ...