Rok Builders, LLC v. 2010-1 SFG Venture LLC
2013 U.S. App. LEXIS 14546
| 1st Cir. | 2013Background
- ROK Builders contracted (2006, then again 2007) to construct a Hampton Inn in Tilton, NH; work stalled for nonpayment and ROK terminated in April 2007 but later resumed after financing commitments.
- Specialty Finance Group (Specialty) agreed to finance the project, took a mortgage on the property, recorded it October 2007, and paid ROK over $6.4 million for work under the 2007 contract (including executed lien waivers for some disbursements).
- ROK claims an outstanding mechanic’s lien of $2.49 million for later/unpaid work; Specialty stopped further payments when additional financing conditions were unmet.
- Specialty’s mortgage eventually passed (via FDIC) to appellee 2010-1 SFG Venture, LLC (SFG); Moultonborough filed Chapter 11 and SFG sought a declaration that the mortgage is senior to ROK’s lien to the extent Specialty disbursed funds to ROK.
- Bankruptcy and district courts ruled for SFG; ROK appealed contesting (1) seniority of SFG’s mortgage over ROK’s lien for amounts paid to ROK and (2) dismissal of counterclaims for implied contract, promissory estoppel, and unjust enrichment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether mortgage is senior to ROK’s mechanic’s lien for amounts Specialty paid to ROK | ROK: lien arising from work begun before mortgage recording remains senior to mortgage even for later unpaid work | SFG: under NH law §447:12-a, a mechanic’s lien is subordinate to a construction mortgage to the extent mortgage proceeds were disbursed to pay the mechanic | Held for SFG: mortgage is senior to extent Specialty disbursed $6,434,074.40 to ROK; §447:12-a applies and ROK does not dispute those payments |
| Whether SFG assumed liability for implied contract or promissory estoppel claims based on Specialty’s promises to ROK | ROK: SFG implicitly assumed Specialty’s liabilities by accepting assignment of the mortgage/loan documents | SFG: assignment did not transfer liabilities arising from an implied contract between Specialty and ROK; assignee did not assume separate third-party obligations | Held for SFG: no basis to impose Specialty’s implied-contract or promissory-estoppel liabilities on SFG; assignments did not transfer such obligations |
| Whether SFG is liable for unjust enrichment for benefit from unpaid work | ROK: SFG (as mortgage assignee) was unjustly enriched by acquiring a mortgage on a completed hotel that benefitted from ROK’s unpaid work | SFG: purchase was arm’s-length; no unconscionable retention of benefit; ROK pleaded no facts showing SFG’s retention was inequitable | Held for SFG: unjust-enrichment claim fails — ROK did not plausibly allege SFG received a benefit it would be unconscionable to retain |
Key Cases Cited
- Amoskeag Bank v. Chagnon, 572 A.2d 1153 (N.H. 1990) (New Hampshire is a race-notice jurisdiction for recorded interests)
- Mansur v. Muskopf, 977 A.2d 1041 (N.H. 2009) (recording required for a purchaser with a senior claim to prevail over a bona fide purchaser)
- Lewis v. Shawmut Bank, 650 A.2d 744 (N.H. 1994) (describing statutory exception that mechanics’ liens can have priority over construction mortgages)
- Gen. Insulation Co. v. Eckman Constr., 992 A.2d 613 (N.H. 2010) (restitution may be required even if recipient did not act wrongfully; passive receipt can suffice)
- Nute v. Blaisdell, 374 A.2d 923 (N.H. 1977) (example where factual circumstances supported unjust enrichment against recipient of property purchased with another’s funds)
- Axenics, Inc. v. Turner Const. Co., 62 A.3d 754 (N.H. 2013) (context for assessing whether retention of benefit is unconscionable)