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Michael's Construction, Inc., A Wyoming Corporation v. American National Bank

May 31, 2012

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).



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

The opinion of the court was delivered by: Kite, Chief Justice.

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

NOTICE: This opinion is subject to formal revision before publication in Pacific Reporter Third. Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of typographical or other formal errors so correction may be made before final publication in the permanent volume.

[¶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.

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

 As of July 16, 2007, the owner had defaulted on its obligations to Pinnacle Bank, 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. . . ."

[ΒΆ7] 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 ...


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