Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca10-88-02408/USCOURTS-ca10-88-02408-0/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 

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UNITED STATES COURT OF APPEALS 

FOR THE TENTH CIRCUIT 

United Star,• Cm,rr of Appeals 

Tenth Grrpit 

JAN 2 .. 1990 

TEMPLE-INLAND FOREST PRODUCTS 

CORPORATION; TEMPLE ASSOCIATES, INC., 

Plaintiffs-Appellants, 

v. 

FOOTHILL CAPITAL CORPORATION; JIM 

GILCHRIST; GREGORY L. HENNEMAN, 

Defendants-Appellees, 

and 

YAFFE IRON & METAL COMPANY, INC.; 

MICHAELE. TARR; JAMES J. ROONEY, 

Defendants. 

TEMPLE-INLAND FOREST PRODUCTS 

CORPORATION; TEMPLE ASSOCIATES, INC. 

Plaintiffs-Appellees, 

v. 

YAFFE IRON & METAL COMPANY, INC., 

Defendant-Appellant, 

and 

FOOTHILL CAPITAL CORPORATION; 

MICHAELE. TARR; JAMES J. ROONEY; JIM 

GILCHRIST; GREGORY L. HENNEMAN, 

Defendants. 

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ROBERT L. HOECKER 

Clerk 

No. 88-2408 

(D.C. No. 86-0428-P) 

(W.D. Okla.) 

No. 88-2465 

(D.C. No. 86-0428-P) 

(W.D. Okla.) 

Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 1 
ORDER AND JUDGMENT* 

Before MOORE, BARRETT, and BRORBY, Circuit Judges. 

After examining the briefs and appellate record, this panel 

has determined unanimously that oral argument would not materially 

assist the determination of these appeals. See Fed. R. App. P. 

34(a); 10th Cir. R. 34.1.9. These cases are therefore ordered 

submitted without oral argument. 

These appeals are from judgments entered in a diversity 

action based upon the assertion of a materialman's lien on 

plaintiffs' property. In appeal No. 88-2408, plaintiffs commenced 

an action against defendants Foothill Capital Corporation and two 

former employees (collectively Foothill), seeking restitution for 

the misapplication of construction trust funds under Oklahoma law. 

Plaintiff Temple-Inland Forest Products Corporation 

contracted with plaintiff Temple Associates, Inc., as the general 

contractor, for the construction of an industrial plant in 

Fletcher, Oklahoma. Plaintiffs contracted with Capitol Steel 

Corporation (Capitol) to supply the structural steel for the 

project. 

* This order and judgment has no precedential value and shall 

not be cited, or used by any court within the Tenth Circuit, 

except for purposes of establishing the doctrines of the law of 

the case, res judicata, or collateral estoppel. 10th Cir. R. 

36.3. 

2 

Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 2 
Capitol obtained its financing from Foothill, who agreed to 

provide Capitol with a revolving line of credit, secured by 

Capitol's accounts receivable. Pursuant to the "General Loan and 

Security Agreement," Foothill advanced cash to Capitol based upon 

invoices issued by Capitol. As repayment, Capitol deposited 

payments made on its accounts receivable into a "lock-box" 

account, through which the deposited funds were automatically 

transferred to Foothill. 

Pursuant to this arrangement, Capitol deposited all checks 

received from plaintiffs into the "lock-box" account for 

Foothill's benefit. At the time Capitol deposited these checks, 

valid lienable claims remained against plaintiffs' Fletcher, 

Oklahoma, project due to Capitol's failure to pay those 

materialmen supplying Capitol with steel to satisfy Capitol's 

contract with plaintiffs. 

Oklahoma law provides that 

[t]he amount payable under any building or remodeling 

contract shall, upon receipt by any contractor or 

subcontractor, be held as trust funds for the payment of 

all lienable claims due and owing or to become due and 

owing by such contractors or subcontractors by reason of 

such building or remodeling contract. 

Okla. Stat. Ann. tit. 42, § 152(1)(1979). Further, 

[t]he trust funds created under Section 152 of this 

title shall be applied to the payment of said valid 

lienable claims and no portion thereof shall be used for 

any other purpose until all lienab le claims due and 

owing or to become due and owing shall have been paid. 

Okla. Stat. Ann. tit. 42, § 153(l)(Supp. 1989-90). 

Plaintiffs commenced this action against Foothill, seeking to 

recover plaintiffs' funds deposited by Capitol into the "lock-box" 

3 

Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 3 
account for the repayment of the loans from Foothill while 

lienable claims on plaintiffs' project remained unpaid by Capitol. 

Plaintiffs and Foothill both filed motions for summary judgment. 

The district court denied plaintiffs' motion and granted summary 

judgment in favor of Foothill. Plaintiffs appeal. 

The issue presented by this appeal is whether the district 

court erred in denying plaintiffs' motion for summary judgment and 

granting summary judgment in favor of Foothill. 1 This court will 

review a district court's determination on a motion for summary 

judgment de novo, viewing the record in the light most favorable 

to the opposing party. 

1437 (10th Cir. 1987). 

Ewing v. Amoco Oil Co., 823 F.2d 1432, 

Summary judgment is appropriate where 

there is no genuine issue as to any material fact and the moving 

party is entitled to judgment as a matter of law. 

Fed. R. Civ. P. 56(c). 

"When the [subcontractor's] lender knows or should have known 

that repayment from the borrower (a) is derived from a statutory 

construction trust fund and that (b) it constitutes an 

unauthorized or improper expenditure from that fund, the lender is 

liable in restitution for the amount received." Sandpiper N. 

1 Plaintiffs assert three other issues on appeal: whether, 

because Foothill filed a response to plaintiffs' motion for 

summary judgment three days late, plaintiffs' motion was deemed 

confessed; whether, because Foothill failed to file a proper and 

timely brief with its motion for summary judgment, that motion 

should have been dismissed; and whether, because plaintiffs' 

motion for summary judgment should have been deemed confessed, the 

district court erred in granting summary judgment in favor of 

Foothill. Because plaintiffs failed to raise and adequately 

preserve these issues in the district court, we will not consider 

these issues now on appeal. See Graham v. City of Oklahoma City, 

859 F.2d 142, 146 n.6 (10th Cir. 1988). 

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Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 4 
Apartments, Ltd. v. American Nat'l Bank & Trust Co., 680 P.2d 983, 

988 (Okla. 1984). Foothill asserted that it did not know that 

lienable claims existed under Capitol's construction contracts 

and, therefore, it did not have knowledge Capitol's loan 

repayments were unauthorized expenditures of construction trust 

funds. See id. at 986-87 and n.3 (funds paid on construction 

contract in excess of lienable claims are not subject to the 

statutory trust fund doctrine, citing Sandpiper N. Apartments, 

Ltd. v. American Nat'l Bank & Trust Co., 600 P.2d 332 (Okla. 

1979)). In support of its assertion of lack of knowledge, 

Foothill presented affidavits of three of its officers, attesting 

that Foothill was unaware that Capitol was repaying its loan with 

funds subject to a construction trust and that Foothill was 

unaware valid lienable claims remained unpaid by Capitol. Also in 

support of its motion for summary judgment, Foothill produced the 

security agreement executed by Foothill and Capitol, whereby 

Capitol warranted that the accounts receivable in which Foothill 

held a security interest ''are, and will at all times hereafter, be 

bona fide existing obligations created by sale and delivery of 

Inventory or rendition of services to Account Debtors in the 

ordinary course of Borrower's business, free of liens and security 

interests and unconditionally owed to Borrower .... " General 

Loan and Security Agreement 5.l(a} at 12. While plaintiffs 

asserted Foothill was aware Capitol was repaying its loan with 

proceeds from construction contracts, plaintiffs failed to assert 

any specific facts tending to establish Foothill's knowledge of 

existing lienable claims. 

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Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 5 
Where a nonmoving party fails to make an affirmative showing 

of specific facts showing there is a genuine issue for trial, 

summary judgment is appropriate. Anderson v. Liberty Lobby, Inc., 

477 U.S. 242, 256-57 (1986). Because plaintiffs failed to make an 

affirmative showing of specific facts indicating Foothill had 

knowledge that Capitol's use of the proceeds of the construction 

contract to repay its loan was "an unauthorized or improper 

expenditure" of construction trust funds, the district court did 

not err in granting Foothill summary judgment. See Sandpiper, 680 

P.2d at 988. 

In appeal No. 88-2465, defendant Yaffe Iron and Metal Company 

(Yaffe) appeals from a verdict entered in favor of plaintiffs, 

after trial to the court, and denying Yaffe's counterclaim. 

Plaintiffs commenced a quiet title action against Yaffe, a 

supplier of steel to Capitol, challenging the validity of Yaffe's 

materialman's lien filed against plaintiffs' 

property. Yaffe asserted a counterclaim 

seeking to foreclose its lien. 

Fletcher, Oklahoma 

against plaintiffs, 

On appeal, Yaffe asserts three issues: 1) the district court 

erred in finding Yaffe failed to prove its lien; 2) the district 

court erred in not finding a valid lien in favor of Yaffe in a 

minimum amount of $60,687.39; and 3) the district court erred in 

placing the burden of proof on Yaffe. 

On appeal, this court will review the district court's legal 

determinations de novo. In re Ruti-Sweetwater, Inc., 836 F.2d 

1263, 1266 (10th Cir. 1988). Factual findings will be reviewed 

under a clearly erroneous standard. Anderson v. City of Bessemer 

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Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 6 
• 

City, 470 U.S. 564, 573 (1985). "If the district court's account 

of the evidence is plausible in light of the record viewed in its 

entirety, the court of appeals may not reverse it even though 

convinced that had it been sitting as the trier of fact, it would 

have weighed the evidence differently." Id. at 573-74. 

Addressing Yaffe's third argument first, we determine that, 

because there was no dispute that plaintiffs held legal title to, 

and had possession of, the property upon which Yaffe filed its 

lien, the district court did not err in requiring Yaffe to prove 

the validity of its materialman's lien. See, ~, Piland v. 

Craig, 154 P.2d 583, 585 (Okla. 1944). 

In order 

establish that 

to foreclose 

the material 

its 

it 

materialman's lien, Yaffe must 

furnished was used in the 

construction of plaintiffs' industrial plant. De Bolt v. Farmers' 

Exch. Bank, 151 P. 686 (1915); see also Cashway Lumber Co. v. 

Langston, 479 P.2d 582, 585 (Okla. 1970). A lien claimant can 

establish a prima facie case that the material it supplied was 

used in a particular construction project by presenting evidence 

that the material was sold specifically for use in the 

construction project, the material was delivered to the site of 

the project, and some of the claimant's material was used in the 

construction of the project. De Bolt, 151 P. at 686; see also 

McGlumphy v. Jetero Constr. Co., 593 P.2d 76, 80 (Okla. 1978). 

Review of the record on appeal indicates Yaffe established a 

prima facie case that the steel it supplied Capitol was used in 

the construction of plaintiffs' plant. Plaintiffs, however, 

sufficiently rebutted Yaffe's prima facie case by presenting 

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Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 7 
• 

evidence that some of the steel supplied by Yaffe to Capitol was 

diverted to another Capitol project and that some of Yaffe's steel 

remained in Capitol's warehouse after Capitol had completed its 

contract with plaintiffs. See DeBolt, 151 P. at 686-87; see also 

In re Rhine, 213 F. Supp. 527, 538 (D. Colo. 1963)(applying 

Oklahoma law). 

Where the lien claimant's prima facie case has been rebutted, 

the lien claimant can recover for the material which was actually 

used in the construction project, if the lien claimant can 

establish with "sufficient definiteness" the value and amount of 

its material actually used. DeBolt, 151 P. at 687; cf. Holmes 

Oil Co. v. Rule, 70 P.2d 86, 87-88 (Okla. 1937)(lien claimant 

attempting to assert mechanic's lien for salary due and owing to 

him must establish, with some degree of certainty, the time spent 

working on the property and the value of that time). Yaffe 

asserts that, regardless of plaintiffs' rebuttal evidence, Yaffe 

proved its lien claim, at least in the amount of approximately 

$60,000, which was the difference between the total amount of 

Yaffe's contract with Capitol and the final amount purportedly 

remaining in Capitol's inventory. Because plaintiffs presented 

evidence discrediting the reliability of Capitol's system of 

maintaining its inventory during the time period in question, the 

district court's determination that Yaffe failed to establish its 

lien in any amount, with sufficient definiteness, was not clearly 

erroneous. 

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Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 8 
The judgments of the United States District Court for the 

Western District of Oklahoma are AFFIRMED. 

for sanctions against Yaffe is DENIED. 

Plaintiffs' request 

ENTERED FOR THE COURT 

PER CURIAM 

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Appellate Case: 88-2408 Document: 01019957786 Date Filed: 01/02/1990 Page: 9