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Wells Fargo Bank, N.A. v. WREC Precision Park

April 12, 2011


The opinion of the court was delivered by: Lanphear, J.

In this receivership action, D'Angelo Custom Homes, LLC and D. Larsen and Sons LLC seek to subordinate the debt of the mortgage holder, Wells Fargo Bank, N.A. in order to give their debts priority.

I. Findings of Fact

In early 2008, D'Angelo Custom Homes, LLC ("D'Angelo") entered into an agreement with WREC Precision Park, Inc. ("WREC") to perform construction work on a commercial property. Specifically, D'Angelo agreed to complete 'build-outs' on parcels owned by WREC, so the properties would be prepared for new commercial tenants. After a build-out for Big Fitness, Inc. was completed, D'Angelo was contracted by WREC to do the build-out for Frito Lay, Inc. áNo written contracts were placed into evidence.

The initial payments due to D'Angelo were paid timely. By September 20, 2008, D'Angelo had received about $229,300 for the Frito Lay áproject. In order to procure the payments, D'Angelo routinely executed lien waivers in advance. Exhibit 8 is an acknowledgement that a payment of $92,775, and cumulative payments of over $322,075, had been received. The document was signed under oath on September 19, 2008, when D'Angelo had not received the payments described. Through the next month, D'Angelo performed an additional $54,900 in work, with a balance of $104,775 remaining due.*fn1 D'Angelo, behind in its monies due and not receiving payments, ceased work in October 2008.

Larsen was enlisted by WREC to perform heating, ventilation and air-conditioning work on the Frito Lay ábuild-out. Larsen invoiced $44,542 for work on the building and is currently due $42,906.83. After several attempts at collection, Larsen ceased work in October 2008 and told WREC he would require payment before returning.

When the contractors stopped working, the Frito Lay áproject was nearing completion. Frito Lay áexpected to occupy the premises in November 2008, but no Certificate of Occupancy was issued from the town. At some point,*fn2 Mr. D'Angelo was attempting to procure continued payments and met at the site with Bernard Wasserman, a principal of WREC. Mr. D'Angelo sought assurance that he would be paid for the remaining work. Mr. Wasserman indicated he was calling a banker on his cell phone. In front of Mr. D'Angelo he had a brief conversation and then placed his cell phone on speaker. Mr. D'Angelo, believing he was speaking to a bank representative, was told that he would receive full payment if he completed the work. At some point, Mr. Wasserman spoke with Mr. Larsen, indicating that the bank had assured payments. When Mr. D'Angelo assured Mr. Larsen that he had received assurances of payment from the bank, Larsen completed its work. Larsen never spoke to the bank.

D'Angelo also completed its work. A Certificate of Occupancy was issued on November 17, 2008.

In October 2008, WREC was also significantly deficient in paying its mortgage. Wells Fargo Bank, the lender, transferred the file to Orix Capital Markets for asset management of the deficient debt. James Lingle, an asset manager for Orix, received the file material on October 31, 2008. He did not confer with Mr. D'Angelo or any representatives of D'Angelo or Larsen before November 15, 2008, when he first visited the site. By then D'Angelo and Larsen had nearly completed their work.

Neither D'Angelo nor Larsen received additional payments. D'Angelo filed a Notice of Intent to enforce a mechanics' lien on November 25, 2008 (for $104,300) and Larsen filed a similar notice on December 8 (for $42,400).

On December 24, 2008, this Court appointed a temporary receiver and stayed further collection proceedings against WREC. Although D'Angelo and Larsen received notice of the receivership, they failed to notify the receivership of the lien (or conform to the requirements of the stay).

II. Presentation of Witnesses

While Mr. D'Angelo was well-prepared, his recollection of the precise events was not firm, and initially he was very tentative in identifying Mr. Lingle as the person on the cell phone. Of course, Mr. D'Angelo had not spoken with Mr. Lingle previously. Mr. D'Angelo was courteous, pleasant and patient, but he was not confident of his answers, often looking at his counsel while answering questions on cross-examination, as if he were seeking verification that the responses were appropriate. Mr. D'Angelo appeared educated, sophisticated with the building trade, and intelligent. Oddly, he testified that he made no notes of the conversations for the Frito Lay ábuild-out project, even though he was already seeking $104,775 when he stopped work, and he then agreed to perform more work. This testimony was contrary to his deposition testimony wherein he indicated he had a notebook but discarded it in frustration before filing a claim (Deposition transcript, July 22, 2010, p. 101). The D'Angelo paperwork on several important points was lacking. He produced no independent invoices, billing notes or file material. The paperwork which was produced diminished his credibility: Mr. D'Angelo executed lien releases acknowledging receipt of monies he had not received.

While Mr. D'Angelo produced uncontroverted proof (his own testimony) that Mr. Wasserman made the cell phone call, the Court cannot conclude that Mr. Lingle was on the call. Mr. D'Angelo was not confident that the caller identified himself as Mr. Lingle. Although cell phone records were produced, he never produced cell phone records from Mr. Wasserman for the call.

The Court is also unable to conclude when the cell phone call took place. The date is critical, as Mr. Lingle was very specific about when he received the file material and the date of his call. The date is critical in determining which work of D'Angelo may be entitled to priority. Nevertheless, Mr. D'Angelo was very vague about the date of the crucial call. On direct examination he testified:

Q. All right. And where did that conference call take place?

A. He asked me to meet him at the job site. So we met at the job site, and Mr. Wasserman called the bank at that time.

Q. All right. And were you – when did that phone ...

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