DONALD MacDONALD IV
John C. Siemers, Burr, Pease & Kurtz, Anchorage, AK, William Ross Spence, Snow Fogel Spence, LLP, Houston, TX, for Plaintiff. David W. Oesting, Davis Wright Tremaine, Garrett C. Parks, Davis Wright Tremaine LLP, Erik LeRoy, Gary C. Sleeper, Jermain Dunnagan & Owens, David J. Schmid, Law Offices Of David J. Schmid, Michelle L. Boutin, Jermain, Dunnagan & Owens, P.C., Gregory G. Silvey, Michael S. McLaughlin, Guess & Rudd, Anchorage, AK, Lori V. Graham, Dore & Associates, Attorneys, PC, Houston, TX, for Defendant.
CoBank, ACB, pro se.
Workstrings, LLC, pro se.
MEMORANDUM ON CROSS MOTIONS FOR SUMMARY JUDGMENT
DONALD MacDONALD IV, Bankruptcy Judge.
Motions for partial summary judgment on the priority of certain statutory liens have been filed by the plaintiffs and by defendant TIW Corporation (“TIW”). Defendants Tecton Geologic, LLC, GBR Equipment, Inc., Centrifuge Services, LLC, and Larry Compton, as chapter 7 trustee for BC Contractors, Inc., have joined in the plaintiffs' motion. A motion for summary judgment has also been filed by defendant and cross-claimant National Rural Utilities Cooperative Finance Corporation (“CFC”). Having considered the motions, joinders, oppositions and responses thereto, I conclude that the plaintiffs' motion for partial summary judgment, and the joinders thereto, should be granted, in part. TIW's motion for partial summary judgment should be granted on the same basis as the plaintiffs' motion. CFC's motion will be denied. Factual Background
Debtor Naknek Electric Association, Inc., is an electric utility cooperative that serves members in the remote western Alaska communities of King Salmon and Naknek. The debtor uses diesel fuel to generate electricity. Because of the significant increase in the price of diesel fuel from 2005 to 2008, the debtor decided to pursue geothermal power as a supplemental method to provide electric power to its members. In mid–2009, it obtained a permit to conduct geothermal drilling operations on property that it owned in Naknek, Alaska. It acquired a drilling rig (Rig No. 7), improved it, and transported it to the property. Once the rig was assembled and positioned on the site, the debtor started drilling an exploratory well.
The debtor incurred substantial debt in its efforts to drill and develop a successful well. Its efforts were thwarted by many factors. Anticipated grant funds were not received, and compliance with regulatory requirements was costly. Other factors also affected the successful development of the well.
The debtor filed a chapter 11 petition on September 29, 2010. By the time its petition was filed, several statutory liens had been recorded by contractors and vendors who had provided services, equipment or materials in connection with the development of the exploratory well. Additionally, two of the debtor's largest creditors, CoBank and Baker Hughes, had obtained and recorded judgments against it. Naknek filed its chapter 11 petition to stay further collection efforts against it and to preserve its rights to avoid the CoBank and Baker Hughes judgments as preferential transfers.
The instant adversary proceeding was commenced on April 19, 2011. It involves a lien priority dispute between the entities claiming statutory liens against the well and Rig No. 7, and CFC, which has a security interest in the rig. CFC filed a financing statement with the UCC Central Filing Office on October 14, 2009, that describes Rig No. 7 as its collateral. The plaintiffs, Baker Hughes and BJ Services, claim mining liens against the well and Rig No. 7 under AS 34.35.125, et seq. They recorded lien notices in the Kvichak Recording District, where the rig and well are located, on July 21, 2010, and May 7, 2010, respectively. The other named defendants in this proceeding (excluding the debtor and CFC) also claim statutory liens against the well and rig. The pending summary judgment motions address the validity of the plaintiffs' mining liens and the issue of priority between those liens and CFC's security interest. Summary Judgment Standard
TIW Corporation and GBR Equipment also claim mining liens. Defendants BC Contractors, Centrifuge Services, LLC, and Tecton Geologic claim mechanics' liens under AS 34.35.050 and 34.35.070. Defendant CoBank, ACB, has agreed not to contest the validity of plaintiffs' liens in this proceeding, and defendant Workstrings, LLC, has not answered or appeared.
Fed.R.Civ.P. 56(a), which is applicable to adversary proceedings, provides:
.Fed. R. Bankr.P. 7056.
(a) Motion for Summary Judgment or Partial Summary Judgment. A party may move for summary judgment, identifying each claim or defense—or the part of each claim or defense—on which summary judgment is sought. The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. The court should state on the record the reasons for granting or denying the motion.
“Interpretation of the statutory requirements for a valid lien is a question of law ... [and] whether those requirements are met is a question of fact.”
Here, the material facts are embodied in the recorded lien notices and CFC's recorded financing statement. The pending motions can be resolved by applying the pertinent lien statutes to those notices.
The Summary Judgment Motions
Three summary judgment motions have been filed in this proceeding and are now ripe for ruling. The plaintiffs filed a motion for partial summary judgment on November 21, 2011. The sole issue to be determined is whether their statutory liens take priority over CFC's security interest in Rig No. 7. The plaintiffs contend their liens take priority pursuant to AS 34.35.135 because CFC never recorded notice of its lien in the Kvichak Recording District. They also say their liens prime CFC's interest in any event because the liens relate back to the date they started An interlocutory order will be entered consistent with this memorandum. A final judgment will be entered after all remaining claims have been fully adjudicated. The court will schedule a status conference so that a deadline for further dispositive motions and a potential trial date can be set.