STOCK BUILDING SUPPLY, INC. v. PLATTE RIVER INSURANCE COMPANY; And Vice Versa , 336 Ga. App. 113 ( 2016 )

SECOND DIVISION
ANDREWS, P. J.,
MILLER, P. J., and BRANCH, J.
NOTICE: Motions for reconsideration must be
physically received in our clerk’s office within ten
days of the date of decision to be deemed timely filed.
http://www.gaappeals.us/rules
March 9, 2016
In the Court of Appeals of Georgia
A15A2301, A15A2302. STOCK BUILDING SUPPLY, INC. v.
PLATTE RIVER INSURANCE COMPANY; and vice versa.
MILLER, Presiding Judge.
These cases arise from a contract to build a shopping center (“the Project”).
Madison Retail-Suwanee, LLC, (“Madison”) the Project’s owner, hired
Cannon/Estapa General Contractors, Inc. (“Cannon”) as the general contractor. Stock
Building Supply (“Stock”) sub-contracted with Cannon to supply labor, materials,
and services for the Project. Cannon did not complete the Project, and at the time
Cannon ceased working, Madison had paid Cannon less than the full contract price.
Cannon also failed to pay Stock the full amount it owed Stock under the sub-contract.
Consequently, in 2007 Stock filed a timely lien against the Project and perfected it
by obtaining a judgment against Cannon for the amount due under its sub-contract
with Stock. Platte River Insurance Company (“Platte”), the surety for the Project,
issued a bond to discharge the lien. Stock then filed an action against Platte to collect
the judgment in the amount of $93,865.27.
Platte answered the complaint, raising numerous affirmative defenses,
including that Stock was estopped from enforcing the lien and that Platte was not
liable under the lien based on a full payment defense.1 Platte also asserted a
counterclaim for damages against Stock. Both parties moved for summary judgment.
The trial court (a) denied Platte’s motion for summary judgment on judicial estoppel
grounds, and (b) found there were genuine issues of material fact regarding the lien
amount and Platte’s full payment defense. This Court granted interlocutory review,
and this appeal and cross-appeal followed. In case number A15A2301, Stock argues
that it was entitled to recover all of its costs under the lien, including overhead, profit,
and insurance costs. Stock also argues that Platte failed to establish its full payment
defense. In its cross-appeal, case number A15A2302, Platte argues that Stock is
judicially estopped from enforcing the lien because it failed to include the lien as an
1
The “full payment” defense enables a property owner to avoid judgment
against him if he can show that he made payments under the contract and those
payments were properly appropriated to the materialmen and laborers. Mayer Elec.
Supply Co., Inc. v. Federal Ins. Co., 195 Ga. App. 191, 192 (393 SE2d 270) (1990).
2
asset during its bankruptcy proceeding. For the reasons set forth below, we affirm the
trial court’s orders in both appeals.
Summary judgment is proper when there is no genuine issue of material
fact and the movant is entitled to judgment as a matter of law. A de novo
standard of review applies to an appeal from a [grant or] denial of
summary judgment, and we view the evidence, and all reasonable
conclusions and inferences drawn from it, in the light most favorable to
the nonmovant.
(Citation omitted.) Carter v. Scott, 320 Ga. App. 404, 405 (750 SE2d 679) (2013).
Case No. A15A2302
1. Platte argues that Stock is judicially estopped from bringing suit to enforce
the lien because it failed to include its right to recover under the lien as an asset in its
2009 bankruptcy reorganization, and it subsequently chose not to reopen its
bankruptcy petition to include the lien. We disagree.
3
The issue before us is whether a debtor seeking reorganization in a
prepackaged bankruptcy petition2 is estopped from pursuing legal claims not listed
as an asset in that petition.3
Since 1994 we have followed the federal doctrine of judicial
estoppel, which precludes a party from asserting in a judicial proceeding
a position inconsistent with a position successfully asserted by it in a
prior proceeding. . . . [T]he essential function and justification of
judicial estoppel is to prevent the use of intentional self-contradiction as
a means of obtaining unfair advantage in a forum provided for suitors
seeking justice. The primary purpose of the doctrine is not to protect the
litigants, but to protect the integrity of the judiciary. The doctrine is
directed against those who would attempt to manipulate the court system
through the calculated assertion of divergent sworn positions in judicial
proceedings and is designed to prevent parties from making a mockery
of justice through inconsistent pleadings. Thus, this equitable doctrine
is invoked by a court at its discretion, and intended to prevent abuse of
2
“A prepackaged bankruptcy case involves a reorganization plan that is
negotiated before the filing of the case. A disclosure statement and proposed plan is
generally filed with the petition, thereby shortening the bankruptcy process and
greatly reducing the expenses inherent in a “normal” Chapter 11 bankruptcy case.”
(Punctuation omitted.) In re Citation Corp., 371 B.R. 518, 521 n.4 (Banr. N.D. Ala.
2007).
3
In CSX Transp. Inc. v. Howell, 296 Ga. App. 583, 588 (2) (675 SE2d 306)
(2009), this Court noted in dicta that it had declined to apply judicial estoppel to cases
in which the petitioner moved to reopen the bankruptcy petition to disclose the asset.
4
the judicial process. The circumstances under which it is appropriate are
not reduced to any general formula or rule.
(Citations and punctuation omitted.) CSX Transp., Inc. v. Howell, 296 Ga. App. 583,
585 (675 SE2d 306) (2009).
Moreover, courts have
commonly applied [the doctrine] to preclude a bankruptcy debtor from
pursuing a damages claim that he failed to include in his assets in the
bankruptcy petition because a failure to reveal assets, including
unliquidated tort claims, operates as a denial that such assets exist,
deprives the bankruptcy court of the full information it needs to evaluate
and rule upon a bankruptcy petition, and deprives creditors of resources
that may satisfy unpaid obligations.
(Citations and punctuation omitted.) Id.
In Period Homes v. Wallick, 275 Ga. 486, 487-88 (569 SE2d 502) (2002), the
Supreme Court of Georgia found that judicial estoppel was not warranted where the
bankruptcy petitioner was not required to provide a schedule of assets as part of the
bankruptcy proceeding, and the petitioner had no statutory duty to amend the
schedule of assets. In that case, the debtor received permission to sell land while in
bankruptcy proceedings, and he informed the bankruptcy trustee of a potential
breach-of-contract claim related to the sale. Id. The debtor did not, however, amend
5
the schedule of assets. When the debtor later tried to bring his breach-of-contract
claim, the defendant in that case argued that the debtor was estopped from bringing
his claim because it was not included in the schedule of assets. Id. The Supreme Court
of Georgia concluded that judicial estoppel was not warranted under the facts of the
case because the debtor did not mislead the Bankruptcy Court and did not take
inconsistent positions with respect to his claims. Id.
In this case, Stock filed a prepackaged Chapter 11 bankruptcy petition, which
did not include or require a schedule of assets. Rather, the Bankruptcy Court
specifically granted Stock additional time to file schedules within 75 days of the
petition date, and further explained that if the court confirmed the plan before the
expiration of that period, no schedules were required.
Moreover, Stock’s bankruptcy petition included a specific provision to
preserve any causes of action. This provision allowed Stock or any of its successors
to pursue any claims, and it stated that the failure to include any such claims in a
schedule of assets did not constitute a waiver or have any other preclusive effect.
More importantly, in its order accepting and confirming the prepackaged bankruptcy
petition, the Bankruptcy Court explicitly provided that Stock retained the right to
6
pursue any legal claims, and that the bankruptcy petition would not have any
preclusive or estoppel effect.4
Applying the reasoning from Period Homes, we conclude that under the
specific facts of this case, judicial estoppel does not preclude Stock from enforcing
its lien. See Period Homes, supra, 275 Ga. at 488 (2). Stock has not concealed
anything or taken a position here that is inconsistent with the position taken in the
bankruptcy proceedings. Rather, we note that in its bankruptcy proceedings, Stock
indicated that there would be funds available for distribution to creditors, and
therefore the failure to identify the lien as a potential asset did not affect the amount
the creditors received.5 See Id. (noting that the petitioner did not accrue any benefit
from the omission of a claim). Thus, applying judicial estoppel to these facts would
4
The Bankruptcy Court found that such retained action provisions are
permissible under 11 USC § 1123 (b) (3).
5
Platte argues that Stock wrote off millions of dollars in debt, but it cites to no
evidence in the record to support its claim. Importantly, creditors could have been
willing to accept less money to resolve their claims during bankruptcy, enabling
Stock to write off debt, if creditors were not fully informed of Stock’s assets. Cf. In
re Grelier, 400 B.R. 826, 828-31 (Bankr. N.D. Ala. 2009) (finding that judicial
estoppel applied despite a reservation of rights clause in a bankruptcy petition
because the petition was insufficient to inform creditors of potential assets, and that
without full information the creditors agreed to a lesser amount of funds).
7
not further the purpose of the doctrine, namely, to protect the integrity of the judicial
process. Id.
Platte’s reliance on In re USInternetworking, Inc. v. Gen. Growth Mgmt., Inc.,
310 B.R. 274 (Bankr. D. Md. 2004), is unavailing. That case did not involve a
prepackaged bankruptcy petition, and the Bankruptcy Court did not excuse the
petitioner from filing a schedule of assets. 310 B.R. at 277, 281-85. Furthermore, our
prior decision in Southmark Corp. v. Trotter, Smith & Jacobs, 212 Ga. App. 454, 455-
56 (442 SE2d 265) (1994), does not dictate a different result. In that case, we focused
on the debtor’s obligation to file a list of assets as the basis for applying judicial
estoppel. Southmark Corp., supra, 212 Ga. App. at 455-56. As noted here, however,
Stock was not required to file a schedule of assets. Accordingly, we find that the trial
court properly rejected Platte’s judicial-estoppel argument.
Case No. A15A2301
2. Stock contends that the trial court erred by denying its motion for summary
judgment because (a) it was permitted to seek money to cover profit and overhead as
part of its lien, and (b) Platte failed to establish its full payment defense.
(a) Whether Stock could recover the full contract price.
8
Stock first argues that it was permissible to include profit and overhead as costs
recoverable under its lien pursuant to OCGA § 44-14-361. Stock contends that the
trial court erred in relying on 182 Tenth, LLC v. Manhattan Constr. Co., 316 Ga. App.
776 (730 SE2d 485) (2012), to conclude otherwise because the intent of the statute
has always been to permit materialmen to recover on the full price of the contract and
the statute does not make a distinction between lienable and non-lienable items. Stock
contends that the amendment to OCGA § 44-14-361 following this Court’s decision
in 182 Tenth merely clarified that materialmen may recover the full contract price.
The Georgia General Assembly has enacted a detailed statutory
scheme for creating special liens on real property, including liens of
materialmen who furnish materials for the building, repairing, or
improving of the property. A materialman’s lien effectively permits the
transfer of liability from the person who actually contracted with the
materialman for materials to be used in improving real estate to the
owner of the improved property, even though that property owner
usually will have no relationship with the materialman, contractual or
otherwise. . . .The right to a materialman’s lien is based upon the theory
that the work and material . . . for which the lien is sought have
increased the value of the realty by becoming a part thereof.
(Citations and punctuation omitted.) Hill v. VNS Corp., 329 Ga. App. 274, 275-76
(764 SE2d 876) (2014); see also OCGA § 44-14-361.1 (a) (4) (permitting a lienholder
9
to enforce the lien directly against the property owner where the contractor has been
adjudicated bankrupt). “[B]ecause materialman’s liens are in derogation of the
common law, statutes involving such liens must be strictly construed in favor of the
property owner and against the materialman.” (Citations omitted.) Hill, supra, 329 Ga.
App. at 276.
(i) Whether OCGA § 44-14-361 enables materialmen to recover all costs
under the contract or only lienable items.
Under the language of OCGA § 44-14-361 (a) (2) in effect when Stock filed
its lien, all sub-contractors and materialmen may obtain a lien on the property for
which they “furnish labor, services, or materials.” This Court interpreted this statute
to limit a materialman’s ability to recover costs only for the materials and work which
actually went into the structure. OCGA § 44-14-361 (2006); Hill, supra, 329 Ga. App.
at 275-76. Thus, in 182 Tenth, this Court held that only lienable items may be
claimed, and the lien holder has the burden of proving what items are lienable. See
182 Tenth, supra, 316 Ga. App. at 779 (2). Non-lienable items include costs of clean-
up, insurance, and other “overhead costs to manage the job site.” Id. at 780-81 (3).
In 2013, the Georgia Legislature amended § 44-14-361, adding the following
provision: “Each special lien . . . shall include the amount due and owing the lien
10
claimant under the terms of its express or implied contract, subcontract, or purchase
order subject to subsection (e) of Code Section 44-14-361.1.”6 OCGA § 44-14-361
(c) (2013).
Stock contends that the trial court erred by relying on 182 Tenth because the
legislature’s 2013 amendments to § 44-14-361 nullified that decision, clarified that
materialmen could recover the full contract price, and applied retroactively. The trial
court found that the amendments to § 44-14-364 were substantive in nature and thus
could not apply retroactively. We agree.
“[T]he retroactive application of statutes has long been disfavored in the law,
even if it is not always forbidden.” Deal v. Coleman, 294 Ga. 170, 174 (1) (b) (751
SE2d 337) (2013). Unless the legislature has clearly indicated its intent that a statute
apply retroactively, we generally construe a statute as applying prospectively only.
Polito v. Holland, 258 Ga. 54, 55 (2) (365 SE2d 273) (1988). Legislation that
involves “mere procedural or evidentiary changes” may apply retroactively, but
legislation that “affects substantive rights” will only apply prospectively. Enger v.
Erwin, 245 Ga. 753, 754 (267 SE2d 25) (1980). Substantive law creates rights, duties,
6
OCGA § 44-14-361.1 (e) limits the aggregate amount of liens recoverable
under § 44-14-361 to the contract price.
11
and obligations, whereas procedural law simply dictates the enforcement of existing
rights, duties, and obligations. Polito, supra, 258 Ga. at 55 (3).
Here, the amendment affects the parties’ substantive rights by enabling them
to bring an action based on the contracted price of the work, which includes overhead
costs and profit, rather than just on the value of the materials and labor that directly
improved the property. See, e.g., Polito, supra, 258 Ga. at 57 (4) (discussing a
substantive change as one that would reduce damages, such as the collateral source
rule of recovery). Given that the change under § 44-14-364 enables the lienholder to
recover additional costs from the property owner, and we strictly construe liens in
favor of the property owners, we cannot view this as a procedural change. See Hill,
supra, 329 Ga. App. at 276. We note that in a decision issued after the amendment,
this Court upheld the limitation that only lienable items were recoverable. See id.
(discussing a lien obtained before the amendment and explaining that the “lien
statutes allow a materialman to secure a lien only for the materials and work which
actually went into the structure”).
Moreover, nothing in the statute clearly indicates its intent to apply
retroactively. Deal, supra, 294 Ga. at 175 (1) (b) (finding clear intent where the
statutory language stated that the amendment “shall apply to any request . . . made
12
prior to the date of this Act”). Rather, the amendment simply states that it is intended
“to provide that special liens include the amount due pursuant to an express or
implied contract and interest on such amount; to provide for related matters; to repeal
conflicting laws; and for other purposes.” Ga. L. 2013, p. 1102. We will presume that
the legislature says what it means and means what it says, Deal, supra, 294 Ga. at 172
(1) (a), and the legislature did not say that the statute applies retroactively.
Stock relies on Daniel Hinkel’s treatise Georgia Construction Mechanics’ &
Materialmen’s Liens § 7:3 (4th ed.), in support of its argument that the statute applies
retroactively, but we are not persuaded. In his treatise, Hinkel opines that the
amendments were designed to return the law to the correct interpretation prior to this
Court’s erroneous decision in 182 Tenth. The legislature, however, failed to clearly
set forth its intent that the amendment apply retroactively, and thus we will not apply
it in that manner. Accordingly, we agree with the trial court’s conclusion that the
amendments to § 44-14-361 do not apply retroactively, and we find that the trial court
properly applied the version of § 44-14-361 in effect at the time Stock obtained the
lien in 2007.
(ii) Whether Stock established its lienable items.
13
The trial court found that there was a genuine issue of material fact regarding
whether Stock had sought to recover only lienable items.
Stock submitted numerous invoices to show the amount it expended on the
Madison Project. Stock did not, however, divide those into lienable and non-lienable
items. In fact, the only evidence Stock presented to show that only lienable items
were listed was the testimony of its agent, Harmon White Caldwell III. Yet Caldwell
also testified that Stock did not bill Cannon separately for overhead and insurance.
Thus, we agree with the trial court’s conclusion that an issue of fact remains
regarding whether Stock can show that the total amount it claimed under its lien
covers only the lienable items.
(b) Platte’s full payment defense
Stock next argues that it was entitled to summary judgment on Platte’s full
payment defense because Platte failed to show that the money Madison paid under
the contract was applied to pay Stock. Stock concedes, for purposes of this appeal,
that Cannon abandoned the Project. Platte responds that, because Cannon abandoned
the Project, Platte was not subject to the lien if the cost for completing the Project
exceeded the original contract price, as it did in this case.
14
Where a contractor abandons his contract, the cost of completing the
work is to be deducted from the contract price in order to ascertain the
amount up to which the subcontractors may claim liens; and if such
deductions, together with payments previously made to the contractor,
equal or exceed the entire contract price, then of course the
subcontractors and materialmen have no lien, since there is nothing due
under the contract . . . [T]he owner is required to show that the sums
paid to the contractor were properly appropriated to materialmen and
laborers or that the contractor’s statutory affidavit concerning such
indebtedness had been obtained.
(Citations and punctuation omitted.) Jones Mercantile Co. v. Lyn-Har, Inc., 245 Ga.
812, 812 (267 SE2d 251) (1980). Moreover, under OCGA § 44-14-361.1 (e), “[i]n no
event shall the aggregate amount of liens set up by Code Section 44-14-361 exceed
the contract price of the improvements made or services performed.”
The trial court found that there was a genuine issue of material fact with respect
to whether Cannon abandoned the project. For purposes of the appeal, however,
Stock has conceded abandonment. Thus, to succeed on the full payment defense,
Platte must show that the payments made were properly applied to Stock’s
materialmen and laborers. Mayer Elec. Supply Co. v. Federal Ins. Co., 195 Ga. App.
191, 192 (393 SE2d 270) (1990).
15
In an affidavit, certified public accountant Gary Fortier stated that he reviewed
the jobs cost evaluation and tracked the payments made by Madison. In his affidavit,
Madison representative Stephen Wisenant detailed the payments Madison made under
the contract, as well as Madison’s costs to complete the Project after Cannon
abandoned it. Thus, Platte presented some evidence to show that the total costs of
completing the project – including the amounts it paid to Cannon and the amounts it
paid to complete the Project – exceeded the contract price. Platte has not shown,
however, that the payments Madison made to Cannon were properly appropriated to
Stock.
Platte points to copies of invoices and cancelled checks to show the payments
were made. Although Platte can show payments made to Cannon, it has not shown,
at least at this stage of the proceedings, that those payments were appropriated to
Stock’s labor, materials, and services. Accordingly, the trial court properly found that
a genuine issue of material fact remained with regard to Platte’s full payment defense.
In sum, in case A15A2302, we affirm the trial court’s denial of Platte’s motion
for summary judgment on judicial estoppel grounds. In case A15A2301, we also
affirm the trial court’s denial of summary judgment to Stock with respect to the
16
interpretation of OCGA § 44-14-361 covering lienable items and Platte’s full
payment defense.
Judgment affirmed. Andrews, P. J.,concurs. Branch, J., concurs fully as to
Division 2 and in judgment only as to Division 1.
17