School Board of Broward County v. J.V. Construction Corp.

Full title: SCHOOL BOARD OF BROWARD COUNTY, Plaintiff, v. J.V. CONSTRUCTION CORP., et…

Court: United States District Court, S.D. Florida

Date published: Apr 23, 2004

Case No. 03-60005-CIV-MORENO/GARBER (S.D. Fla. Apr. 23, 2004)

Opinion

Case No. 03-60005-CIV-MORENO/GARBER.

April 23, 2004

REPORT AND RECOMMENDATION

BARRY GARBER, Magistrate Judge

THIS CAUSE is before the Court on Elder, Kurzman Vaccarella P.A.'s Motion to Enforce Charging Lien and Establish Priority (D.E. #77),¹ Hartford Fire Ins. Co.'s Motion for Final Summary Judgment (D.E. #95), Ocean Bank's Motion for Summary Judgment (D.E. #115), the United States' Motion for Summary Judgment (D.E. #149), and Tarmac America's Motion for Summary Judgment (D.E. #159), by Order of Reference from the Honorable Federico A. Moreno, United States District Judge. For the reasons set forth below, it is recommended that the Court DENY Elder, Kurzman Vaccarella P.A.'s Motion to Enforce Charging Lien and Establish Priority. GRANT IN PART AND DENY IN PART Hartford Fire Ins. Co.'s Motion for Final Summary Judgment, GRANT IN PART AND DENY Ocean Bank's Motion for Summary Judgment. GRANT the United States' Motion for Summary Judgment, and DENY Tarmac America's Motion for Summary Judgment.

1 Consistent with the Court's conclusion in its May 23, 2003, Order (D.E. #104), the Court construes Elder, Kurzman Vaccarella P.A.'s Motion as a motion for summary judgment.

STANDARD OF REVIEW

A party seeking summary judgment must demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Maniccia v. Brown, 171 F.3d 1364, 1367 (11th Cir. 1999). The movant bears the initial responsibility of informing the Court of the basis for its motion and of identifying those materials which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2553 (1986).

In response to a properly supported motion for summary judgment, "an adverse party may not rest upon the mere allegations or denials of the adverse party's pleadings, but . . . must set forth specific facts which show a genuine issue for trial." Fed.R.Civ.P. 56(c). If the non-moving party fails to "make a sufficient showing on an essential element of her case with respect to which she has the burden of proof," then the Court must enter summary judgment for the moving party. Celotex Corp., 477 U.S. at 323, 106 S.Ct. at 2552. The Court, however, must view the evidence and factual inferences reasonably drawn from the evidence in the light most favorable to the nonmoving party. Maniccia, 171 F.3d at 1367.

"By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48, 106 S.Ct. 2505, 2510 (1986) (emphasis added). The Court is not to resolve factual issues, but may only determine whether factual issues exist. A material fact is one which "might affect the outcome of the suit under the governing law. . . ." Id. at 248, 106 S.Ct. at 2510. The Court's inquiry therefore is whether "there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Id. at 250, 106 S.Ct. at 2511.

BACKGROUND

In this interpleader action, the res is $489,000.00 which plaintiff the School Board of Broward County, Florida ("the School Board") agreed to pay to or on behalf of defendant J.V. Construction to settle a state court action which J.V. Construction had commenced in 2001. Defendant Elder, Kurzman Vaccarella P.A. ("Elder") represented J.V. Construction in that action.

During the course of the state court litigation, the School Board received from several entities notices of levies and writs of garnishment related to funds which J.V. Construction allegedly owed those entities. On September 12, 2002, the parties to the state court action signed a Mediation Settlement Agreement by which the School Board agreed to pay J.V. Construction $489,000.00. However, because the School Board had received notices of claims against those funds, the parties agreed that the School Board would file an interpleader action related to the $489,000.00 and would name J.V. Construction and the other claimants as defendants in the interpleader action. Consistent with that agreement, on approximately November 4, 2002, the School Board filed this interpleader action in state court. On January 2, 2003, the United States removed the action to this Court pursuant to 28 U.S.C. § 1444, which permits the United States to remove any foreclosure action brought "against [it] in any State court. . . ."

The School Board named more than thirty-five defendants in its Complaint, but only five defendants remain in this action and continue to assert claims to all or a portion of the disputed funds. Those defendants claim that they are entitled to the following amounts of the res: Ocean Bank $489,000.00;² Hartford Fire Ins. ("Hartford") — $433,565.00;³ the United States — $175,102.93, plus penalties and statutory interest computed from July 9, 2003; Tarmac America — $121,713.46; and Elder — $52,935.00.

2 Ocean Bank claims that it has a judgment and lien of $1,947,816.16 against J.V. Construction and therefore claims that it is entitled to the entire res.

3 Hartford claims that it has the right to $440,991.86, but it does not seek to impose a priority on the $52,935.00 claimed by Elder, or $2,500.00 which the School Board may have sought at one time pursuant to its settlement agreement with J.V. Construction. (As discussed infra, the School Board has apparently abandoned any claim it once had to a portion of the res.) The amount which Hartford seeks to recover therefore equals the entire res-i.e., $489,000.00-minus those amounts claimed by Elder and the School Board.

Essentially, Ocean Bank and Tarmac America claim entitlement to the funds based on U.C.C.-1 financing statements which secured debts which J.V. construction owed them; Hartford claims entitlement based on equitable subrogation as J.V. Construction's surety on a contract with the School Board; the United States claims entitlement based on federal tax liens for taxes owed by J.V. Construction; and Elder claims entitlement based on an attorneys' charging lien.

DISCUSSION

1. Plaintiff the School Board

In the School Board's and J.V. Construction's Mediation Settlement Agreement, those parties agreed:

All of the School Board's expenses up to a limit of $2,500, including attorney's fees and costs[,] shall be paid from the Settlement Funds which will be the subject of the interpleader action. After all School Board expenses incurred in the interpleader action to the limit of $2,500 are satisfied, the balance of the Settlement Funds shall be disbursed among the claimants in the interpleader action as determined by Court order.

Mediation Settlement Agreement, at 4 ¶ 3. The School Board, however, wrote in its Response to defendants' Cross Motions for Summary Judgment: "The School Board . . . asserts no claim to the $489,000.00 fund created pursuant to a settlement in the state court litigation. . . ." D.E. #192, at 1. The School Board therefore has abandoned any claim it had to a portion of the res. 2. The United States

The United States has moved for summary judgment on the basis of sovereign immunity and the statute of limitations. The United States held federal tax liens against J.V. Construction for unpaid employment taxes for the first, second, and third quarters of 2000, arising out of assessments made on various dates in 2000. The United States — through the Internal Revenue Service — filed notices of federal tax liens with the Florida Secretary of State on January 31, 2001; March 9, 2001; and March 30, 2001.

On May 1, 2001, the Internal Revenue Service served a notice of levy on the School Board for all property and rights to property of J.V. Construction which the School Board held. D.E. #188, at 6; see 26 U.S.C. § 6331(a) ("If any person liable to pay any tax neglects or refuses to pay the same within 10 days after notice and demand, it shall be lawful for the Secretary to collect such tax (and such further sum as shall be sufficient to cover the expenses of the levy) by levy upon all property and rights to property (except such property as is exempt under section 6334) belonging to such person or on which there is a lien provided in this chapter for the payment of such tax."). The School Board commenced this interpleader action approximately eighteen months later i.e. on approximately November 4, 2002.

"The United States, as sovereign, is immune from suit save as it consents to be sued . . ., and the terms of its consent to be sued in any court define that court's jurisdiction to entertain the suit." United States v. Sherwood, 312 U.S. 584, 586, 61 S.Ct. 767, 769-770 (1941); see also, e.g., United States v. Mitchell, 445 U.S. 535, 538, 100 S.Ct. 1349, 1351 (1980). "A waiver of sovereign immunity `cannot be implied but must be unequivocally expressed." Mitchell, 445 U.S. at 538, 100 S.Ct. at 1351 (quoting United States v. King, 395 U.S. 1, 4, 89 S.Ct. 1501, 1503 (1969)). Thus, "a waiver of sovereign immunity is to be strictly construed, in terms of its scope, in favor of the sovereign." Dep't of the Army v. Blue Fox, Inc., 525 U.S. 255, 261, 119 S.Ct. 687, 691 (1999). A "necessary corollary" of the rule "that the United States cannot be sued at all without the consent of Congress . . . is that when Congress attaches conditions to legislation waiving the sovereign immunity of the United States, those conditions must be strictly observed, and exceptions thereto are not to be lightly implied. . . . When waiver legislation contains a statute of limitations, the limitations provision constitutes a condition on the waiver of sovereign immunity." Block v. N. Dakota ex rel. Bd. of Univ. and School Lands, 461 U.S. 273, 287, 103 S.Ct. 1811, 1819-20 (1983).

Pursuant to 26 U.S.C. § 7426, Congress has waived the United States' sovereign immunity for certain actions brought regarding property upon which the United States has wrongfully levied:

(a) Actions permitted —

(1) Wrongful levy — If a levy has been made on property or property has been sold pursuant to a levy, and person (other than the person against whom is assessed the tax out of which such levy arose) who claims an interest in or lien on such property and that such property was wrongfully levied upon may bring a civil action against the United States in a district court of the United States. Such action may be brought without regard to whether such property has been surrendered to or sold by the Secretary.

26 U.S.C. § 7426; see United Sand Gravel Contractors, Inc. v. United States, 624 F.2d 733, 739 (5th Cir. 1980) ("That section waives the sovereign immunity of the United States for such actions, and limits the relief that may be granted.").

For purposes of such an action, "[a] levy is wrongful if it `will or does effectively destroy . . . [an] interest in the property which is senior to the federal tax lien.'" Trust Co of Columbus v. United States, 735 F.2d 447, 448 (11th Cir. 1984) (quoting IRC Reg. § 301.7426-1-(b)(iv)(d)) (emphasis supplied by the Trust Co. of Columbus court); see also Myers v. United States, 647 F.2d 591, 603 n. 18 (5th Cir. Unit A June 1981).⁴ "A security interest that arose prior to the filing of notice of a tax lien is senior to that lien." Trust Co. of Columbus, 735 F.2d at 448 (11th Cir. 1984) (citing 26 U.S.C. § 6323(a)).

4 Decisions rendered by the Fifth Circuit prior to October 1, 1981, are binding on federal courts within the Eleventh Circuit. Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1207 (11th Cir. 1981) ( en banc).

Generally, a suit pursuant to 26 U.S.C. § 7426 must be brought within "9 months from the date of the levy or agreement giving rise to such action."⁵ 26 U.S.C. § 6532(c)(1); see United Sand Gravel Contractors, Inc. v. United States, 624 F.2d 733, 739 (5th Cir. 1980) ("[26 U.S.C.] § 6532(c) sets a short statute of limitations for such suits."). Additionally, "[w]hen someone other than the taxpayer claims an interest in property or rights to property upon which the United States has levied, his exclusive remedy against the United States is a wrongful levy action under [26 U.S.C.] § 7426." United Sand Gravel Contractors, Inc., 624 F.2d at 739.

5 26 U.S.C. § 6532(c)(2) provides that the 9-month limitation period may be extended in certain circumstances: "If a request is made for the return of property described in [ 26 U.S.C. §] 6343(b), the 9-month period . . . shall be extended for a period of 12 months from the date of filing of such request or for a period of 6 months from the date of mailing by registered or certified mail to the Secretary to the person making such request of a notice of disallowance of the part of the request to which the action relates, whichever is shorter."
Even assuming this were an action pursuant to 26 U.S.C. § 7426, none of the defendants contends or has presented evidence that § 6532(c)(2) applies to extend the limitations period in this action.

In this action, all defendants other than the United States contend that their interests are senior to, and have priority over, the United States' federal tax lien. Those defendants therefore contend that the United States' May 1, 2001, levy was wrongful because "it `w[ould] or d[id] effectively destroy . . . [an] interest in the property which [wa]s senior to the federal tax lien.'" Trust Co. of Columbus v. United States, 735 F.2d 447, 448 (11th Cir. 1984) (quoting IRC Reg. § 301.7426-1-(b)(iv)(d)) (emphasis supplied by the Trust Co. of Columbus court) (third and fourth alterations in original).

Because those defendants "claim an interest in property or rights to property which the United States has levied upon, [their] exclusive remedy against the United States is a wrongful levy action under [26 U.S.C.] § 7426." United Sand Gravel Contractors, Inc. v. United States, 624 F.2d 733, 739 (5th Cir. 1980); cf., e.g., Eskanos v. Alpha 76, Inc., 712 F. Supp. 819, 824 n. 2 (Colo. 1989) ("Plaintiffs allege that some of the property sold at the auction belonged to them and not to Alpha 76. Even if this were true, the proper action for the plaintiffs to recover their property is one for wrongful levy under 26 U.S.C. § 7426, and not the instant interpleader action."). Defendants, however, were required to bring any action pursuant to 26 U.S.C. § 7426 within "9 months from the date of the levy . . .," 26 U.S.C. § 6532(c)(1), i.e., on or before approximately February 1, 2002. None of the defendants brought a § 7426 action by February 1, 2002, and this interpleader action was not commenced until approximately November 4, 2002. Thus, even if the Court construed this interpleader action as a § 7426 action against the United States, it would be untimely; and even assuming the other defendants' interests are senior to the United States' interests, those defendants are time-barred from challenging the United States' allegedly wrongful levy. Accordingly, pursuant to its May 1, 2001, levy, the United States' claim has priority over all other defendants' claims.⁶

6 28 U.S.C. § 2410(a) provides: "Under the conditions prescribed in this section and section 1444 of this title for the protection of the United States, the United States may be named a party in any civil action or suit in any district court, or in any State court having jurisdiction of the subject matter —
(1) to quiet title to,
(2) to foreclose a mortgage or other lien upon,
(3) to partition.
(4) to condemn, or
(5) of interpleader or in the nature of interpleader with respect to real or personal property on which the United States has or claims a mortgage or other lien."
That section "waives sovereign immunity and allows the United States to be named a defendant in an interpleader suit with respect to real or personal property on which the United States has or claims a mortgage or other lien, and § 1444 allows the United States to remove the suit to federal court when it is named a defendant in such a suit." General Electric Credit Corp v. Grubbs, 447 F.2d 286, 287-88 (5th Cir. 1971), rev'd on other grounds, 405 U.S. 699, 92 S.Ct. 1344 (1972); see also Truong By Truong v. Grand Trunk Western R. Co., Inc., 882 F. Supp. 107. 108 (E.D. Mich. 1995).
However, § 2410 does not provide an alternative waiver to sovereign immunity in actions against the United States which are premised on an allegedly wrongful levy. In such circumstances, 26 U.S.C. § 7426 provides the only remedy, and allowing a party to proceed pursuant to § 2410 would "completely undercut" "the intent of Congress to set a short time limit for wrongful levy actions. . . ." United Sand Gravel Contractors, Inc. v. United States, 624 F.2d 733, 738 (5th Cir. 1980); see also id. at 737-40; Compagnoni v. United States, No. 94-0813-Civ-Marcus, 1996 Wl. 636110, at *7 (S.D. Fla. Aug. 30, 1996) (J. Marcus), aff'd, 173 F.3d 1369 (11th Cir. 1999).

Hartford contends that the United States' liens and levy were never valid because "the taxpayer, J.V. Construction, ha[d] no rights to the Interpleader Funds to which the United States' tax lien and levy could attach." D.E. #174, at 4. However, the Mediation Settlement Agreement between the School Board and J.V. Construction clearly provided that the School Board was to pay $489,000.00 "to J.V. or on behalf of J.V. . . ." D.E. #1, Exh. A, at 1. Although Hartford is correct that the Mediation Settlement Agreement also required the School Board to commence this interpleader action instead of paying the $489,000.00 directly to J.V. Construction, the point of the interpleader action was to resolve the competing claims to funds belonging to J.V. Construction, specifically the $489,000.00 which the School Board had agreed to pay J.V. Construction. Additionally, the fact that the res did not exist at the time the United States filed its tax liens does not render those liens invalid. See United States v. McDermott, 507 U.S. 447, 453, 113 S.Ct. 1526, 1530 (1993) ("[T]he filing of notice renders the federal tax lien extant for `first in time' priority purposes regardless of whether it has yet attached to identifiable property.").⁷ 3. Ocean Bank

7 Even if the School Board still claimed a portion of the res pursuant to ¶ 3 of the Mediation Settlement Agreement, which provided that "[a]ll of the School Board's expenses up to a limit of $2,500, including attorney's fees and costs[,] shall be paid from the Settlement Funds which will be the subject of the interpleader action . . .," the United States' claim would have priority over the School Board's claim for attorneys' fees. See Cable Atlanta, Inc. v. Project, Inc., 749 F.2d 626, 626 (11th Cir. 1984) ("Normally a stakeholder who brings an interpleader action to determine which of two claimants is entitled to a fund which it holds, but does not claim, is entitled to have attorneys fees it incurs in bringing the action paid out of the fund. No such fees can be paid from the fund, however, when it goes to satisfy a federal tax lien.") (emphasis added); id. at 627-28; Spinks v. Jones, 499 F.2d 339, 340 (5th Cir. 1974) ("The stakeholder of an interpleaded fund is not entitled to attorney's fees to the extent that they are payable out of a part of the fund impressed with a federal tax lien."); Central Bank of Tampa v. United States, 838 F. Supp. 564, 566 (M.D. Fla. 1993) ("The law is well settled that the stakeholder of the funds in an interpleader action is not entitled to attorneys' fees, if those fees would be payable out of the fund that is subject to a federal tax lien."). The School Board and J.V. Construction could not alter by contract the rule stated by the Eleventh Circuit in Cable Atlanta, Inc.

Ocean Bank claims that it has priority over the remaining defendants because it perfected its security interest on November 13, 1997, before any of the other defendants perfected their interests. On that date, Ocean Bank filed a U.C.C.-1 financing statement with the Secretary of State for the State of Florida, and in that security agreement J.V. Construction pledged its contract rights, accounts receivables, and proceeds.

None of the other defendants disputes that Ocean Bank perfected its security interest before those defendants' rights to the disputed funds arose.⁸ However, all contend that the effectiveness of that financing statement lapsed on November 13, 2002, i.e., approximately nine days after the School Board commenced this action and approximately two days before Ocean Bank filed its Answer to the Complaint. Those defendants therefore claim that since November 13, 2002, Ocean Bank has had no interest in the disputed funds which would take priority over their interests.

8 Hartford contends that its enforceable interest arose on November 20, 1997, the date it issued a payment bond for the project that J.V. Construction completed for the School Board. The United States contends that its interests arose on January 31, 2001, March 9, 2001, and March 30, 2001, the dates it filed notices of federal tax liens with the Florida Secretary of State. (The United States also asserts that on May 1, 2001, it served a notice of levy on the School Board for all property and rights to property of J.V. Construction that the School Board held.) Tarmac contends that its claim arose on January 29, 2001, the date it filed its State of Florida Financing Statement Form UCC-1 with the Florida Secretary of State. Elder, Kurzman Vaccarella contends that its charging lien dates back to February of 2000, when it began its representation of J.V. Construction.

Florida Statute § 679.515 provides in pertinent part:

(1) Except as otherwise provided in subsections (2), (5), (6), and (7), a filed financing statement is effective for a period of 5 years after the date of filing. . . .

(3) The effectiveness of a filed financing statement lapses on the expiration of the period of its effectiveness unless, before the lapse, a continuation statement is filed pursuant to subsection (4). Upon lapse, a financing statement ceases to be effective and any security interest or agricultural lien that was perfected by the financing statement becomes unperfected, unless the security interest is perfected without filing. If the security interest or agricultural lien becomes unperfected upon lapse, it is deemed never to have been perfected as against a purchaser of the collateral for value.

(4) A continuation statement may be filed only within 6 months before the expiration of the 5-year period specified in subsection (1) or the 30-year period specified in subsection (2), whichever is applicable.

It is undisputed that Ocean Bank filed its financing statement on November 13, 1997, and that Ocean Bank did not file a continuation statement "within 6 months before the expiration of the 5-year period. . . ." Fla. Stat. § 679.515(4). Therefore, Ocean Bank's financing statement lapsed and ceased to be effective on November 13, 2002, and on that date Ocean Bank's security interest became unperfected. Fla. Stat. § 679.515(3); Frank v. James Talcott, Inc., 692 F.2d 734, 737 (11th Cir. 1982).

Plaintiff, however, commenced this action on November 4, 2002, nine days before Ocean Bank's financing statement became ineffective. The parties disagree as to whether the parties' rights to the interpleaded funds were cast in stone as of the date plaintiff commenced this action, with events occurring subsequent to the commencement of the action having no effect on the priorities of the parties' interests; or whether, instead, the parties' rights to the disputed funds are fluid and subject to change based on actions taking place subsequent to commencement of the interpleader action.

Three courts of appeals have considered the question of whether events which take place subsequent to the commencement of an interpleader action can affect parties' rights to those funds. All three have answered that question in the negative.

In Avant Petroleum, Inc. v. Banque Paribas, 853 F.2d 140 (2d Cir. 1988), the Second Circuit considered the competing interests of two parties, Banque Paribas ("Paribas") and BP North American Petroleum, Inc. ("BP"), to funds which were the subject of a statutory interpleader action. Similar to Ocean Bank in this action, Paribas had perfected a security interest pursuant to the U.C.C. "prior to the filing of the interpleader action and prior to BP's acquisition of its lien on the property." 853 F.2d at 141. Also similar to Ocean Bank in this action, Paribas had "allowed its U.C.C. filing statements to lapse during the pendency of the interpleader action," and BP therefore asserted, as the four defendants assert in this action with regards to Ocean Bank, that the lapse had "subordinat[ed] Paribas's interest to that of BP." Id.; see also id. ("In August and September 1986, while the interpleader action was pending, Paribas's five-year U.C.C. financing statements, filed in 1981, lapsed."). The Second Circuit rejected BP's contention that parties' rights to interpleaded funds "remain fluid during the course of proceeding," id. at 143, and instead concluded that, consistent with the general rule that "court[s] normally determine the rights of parties on the basis of facts as they existed at the time [an] action was commenced . . .," id., once a statutory "interpleader action is commenced and the property has been deposited with the court, continuation filings are not required, and it remains appropriate for the court to determine the relative priorities of the claimants as of the time the interpleader fund was deposited with the court." Id. at 144.

In White v. FDIC, 19 F.3d 249 (5th Cir. 1994), the Fifth Circuit considered "whether activity subsequent to the initiation of an interpleader action can give one claimant a right to the interpleader fund which is superior to that which he had at the time the interpleader is initiated." 19 F.3d at 252. The court, after looking to Avant Petroleum, Inc. v. Banque Paribas for guidance.⁹ joined the Second Circuit in "hold[ing] that activity subsequent to the initiation of an interpleader action is normally immaterial in determining which claimant has a superior right to the interpleader fund." Id. The court noted that "[a]n objective of the interpleader action, like that of any civil action, is to determine the respective and relative rights of the parties asserting claims as of the date . . . the action was commenced." Id. at 253 (emphasis added). The court then repeated its holding that "when an action in interpleader is brought, the court should, absent extraordinary circumstances, determine the relative priorities of all claimants as of the time that the interpleader action was initiated." Id.; see also id. ("But only that interest which the debtor retains in the interpleader funds, as of the date of the initiation of the interpleader action, may be the subject of the writ of garnishment.") (emphasis added).

9 The Fifth Circuit described the issue presented to the Second Circuit in Avant Petroleum as: "whether the failure of a secured creditor to file continuation statements after the initiation of the interpleader action would result in the subordination of his interests to those of a lien creditor, whose rights were indisputably inferior to those of a secured creditor at the time the interpleader action was initiated." 19 F.3d at 252.
The Fifth Circuit described the Second Circuit's holding in Avant Petroleum as: "the retroactive unperfection of a security interest which takes place subsequent to the date that the interpleader action was initiated and the funds were deposited does not divest the secured creditor of his superior interest in the funds." 19 F.3d at 252.

Similarly, in Texaco, Inc. v. Ponsoldt, 118 F.3d 1367 (9th Cir. 1997), the Ninth Circuit considered whether actions which occur after commencement of an interpleader action can affect the claimants rights to the funds which are the subject of the action. The court, relying on Avant Petroleum and White, first noted that "both the Second and Fifth Circuits have wisely determined that interpleader actions focus on the claimants' rights at the time an interpleader action is filed and do not give priority to claims made after the action commences, or remove priority from claims which existed when the interpleader commenced." 118 F.3d at 1369 (emphasis added). The Ninth Circuit agreed with the Second and Fifth Circuits, and "h[e]ld that a district court must normally determine the priority of claims in an interpleader action as they existed at the time the action was initiated." Id. at 1370 (emphasis added). The Ninth Circuit succinctly stated the basis for that conclusion: "As the entire point of an interpleader action is to resolve then[-]competing rights and claims, it makes perfect sense that the action itself cannot be used as a vehicle for further jockeying for claim position. It should just be a straightforward determination of the priority of the claims as they existed at the time the interpleader became viable." Id (emphasis added); see also id. at 1371 ("The priority of claims to the res in an interpleader action must normally be determined at the time the action is initiated, and cannot be altered by events after interpleader fund becomes viable.").

This Court agrees with the rationales of the courts' decisions in Avant Petroleum, White, and Ponsoldt, and therefore concludes that in this interpleader action the Court must determine the parties' rights as they existed on November 4, 2002, the date plaintiff commenced this action. Events subsequent to that date, including the expiration of Occan Bank's U.C.C.-1 filing statement, have no bearing on the Court's determination.

Assuming that this Court follows the rationale of Avant, Tarmac contends that in that decision the Second Circuit did not conclude that the rights of parties to an interpleader action are determined at the time the action is filed, but instead concluded that those rights are determined at the time the interpleader fund is deposited with the court. Because the School Board has not deposited the res with this Court, Tarmac contends that actions taken after November 4, 2002 — and presumably any actions taken until the res is deposited with the Court — can affect the Court's determination of the parties' relative priorities.

Tarmac is correct that in Avant, the Second Circuit wrote that "[t]he court will normally adjudicate the rights of the claimants as of the time the interpleader fund is deposited with the court" Avant Petroleum, Inc. v. Banque Paribas, BP, 853 F.2d 140, 143 (2d Cir. 1988) (emphasis added). That action, however, was brought pursuant to 28 U.S.C. § 1335, which requires a plaintiff to deposit the interpleader funds with a district court before the court may exercise jurisdiction. See 28 U.S.C. § 1335(a)(2); Murphy v. Travelers Ins. Co., 534 F.2d 1155, 1159 (5th Cir. 1976) ("the deposit requirement is a jurisdictional prerequisite to suit under the interpleader statute, 28 U.S.C. § 1335"). Thus, in Avant, the Second Circuit was merely applying to the facts before it, ie an interpleader action commenced pursuant to § 1335, the general principle that "the court normally determines the rights of the parties on the basis of the facts as they existed at the time the action was commenced." Avant, 853 F.2d at 143. The district court could not exercise jurisdiction until the interpleader funds had been deposited with the court, and therefore the parties' rights were determined as of that date, not the date the action was filed.

In White v. F.D.I.C. and Texaco, Inc. v. Ponsoldt, however, the Fifth and Ninth Circuits implicitly recognized that in Avant Petroleum the Second Circuit did not hold that in all interpleader actions the parties' rights are determined as of the date the interpleader fund is created, but instead held that the parties' rights are determined as of the date the interpleader action is commenced, and the date of "commencement" in a § 1335 action is the date the funds are deposited with the district court. See Texaco, 118 F.3d 1367, 1369 ("Nonetheless, both the Second and Fifth Circuits have wisely determined that interpleader actions focus on the claimants' right at the time an interpleader action is filed and do not give priority to claims made after the action commences, or remove priority from claims which existed when the interpleader commenced.") (emphasis added); id. at 1370 ("We agree with the sound reasoning of both the Fifth and Second Circuits and hold that a district court must normally determine the priority of claims in an interpleader action as they existed at the time the action was initiated.") (emphasis added); id. ("It should just be a straightforward determination of the priority of the claims as they existed at the time the interpleader became viable."); id. ("[T]he action itself is simply for the purpose of determining what the rights and priorities were at the time the action was filed.") (emphasis added); id. at 1371 ("The priority of claims to the res in an interpleader action must normally be determined at the time the action was initiated. . . .") (emphasis added); White, 19 F.3d 249, 252 ("Today, we join with our brethren of the Second Circuit to hold that activity subsequent to the initiation of an interpleader action is normally immaterial in determining which claimant has a superior right to the interpleader funds.") (emphasis added), id. ("In Avant Petroleum, the issue before the court was whether the failure of a secured creditor to file continuation statements after the initiation of the interpleader action would result in the subordination of his interests to those of a lien creditor, whose rights were indisputably inferior to those of a secured creditor at the time the interpleader action was initiated.") (emphasis added); id. at 253 ("An objective of the interpleader action, like that of any civil action, is to determine the respective and relative rights of the parties asserting claims as of the date . . . the action was commenced.") (emphasis added); id. ("In sum, when an action in interpleader is brought, the court should, absent extraordinary circumstances, determine the relative priorities of all claimants as of the time the interpleader was initiated.") (emphasis added).

In this action, contrary to the facts of Avant Petroleum, jurisdiction was not premised on 28 U.S.C. § 1335, and there was no requirement that the School Board deposit the res with the Court in order for the Court to exercise jurisdiction. In its Notice of Removal of Civil Action, the United States premised removal on 28 U.S.C. § 1444, which allows the United States to remove "[a]ny action brought under [28 U.S.C.] section 2410 . . . against the United States. . . ." 28 U.S.C. § 1444; see D.E. #1, at 2 ¶ 3. Among those removable actions listed in § 2410 are actions "of interpleader or in the nature of interpleader with respect to, real or personal property on which the United States has or claims a mortgage or other lien." 28 U.S.C. § 2410(a)(5). Section 1444 "confers a substantive right to remove, independent of other jurisdictional limitations." City of Miami Beach v. Smith, 551 F.2d 1370, 1373-74 n. 5 (5th Cir. 1977); see also, e.g. General Electric Credit Corp. v. Grubbs, 447 F.2d 286, 287-88 (5th Cir. 1971) (Holding that 28 U.S.C. § 2410 "waives sovereign immunity and allows the United States to be named a defendant in an interpleader suit with respect to real or personal property on which the United States has or claims a mortgage or other lien, and § 1444 allows the United States to remove the suit to federal court when it is named a defendant in such a suit."), rev'd on other grounds, 405 U.S. 699, 92 S.Ct. 1344 (1972); Truong By Truong v. Grand Trunk Western R Co. Inc., 882 F. Supp. 107, 108 (E.D. Mich. 1995); Chrysler First Fin Servs. v. Greenfield, 753 F. Supp. 939, 941 (S.D. Fla. 1991) (J. Gonzalez) ("In actions involving multiple parties, however, the Federal Government may remove the entire proceeding under § 1444. . . . The United States has an `unqualified option to remove' any state court lawsuit brought under § 2410.") (citations omitted).

Therefore, the United States properly removed this action pursuant to § 1444. Neither that section nor § 2410 requires that the res of an interpleader action be deposited with a court before the court exercises jurisdiction over the action. Accordingly, this Court must decide the parties' rights as they existed on November 4, 2002, the date the interpleader action was filed. Texaco, Inc. v. Ponsoldt, 118 F.3d 1367 (9th Cir. 1997); White v. FDIC, 19 F.3d 249 (5th Cir. 1994); Avant Petroleum, Inc. v. Banque Paribas, 853 F.2d 140 (2d Cir. 1988).

In its June 12, 2003, Memorandum in Opposition to Hartford's Motion to Require School Board to Turn Over Funds to Third Party, the School Board asserted that this action was governed by Federal Rule of Civil Procedure 22. D.E. #128, at 4, 5-7; see Fed.R.Civ.P. 22(1) ("Persons having claims against the plaintiff may be joined as defendants and required to interplead when their claims are such that the plaintiff is or may be exposed to double or multiple liability."). No party disputed that assertion.¹⁰ Even assuming the School Board is correct that Rule 22 applies, that Rule does not requires that the res of an interpleader action be deposited with a court before the court exercises jurisdiction over the action. Murphy v. Travelers Ins. Co., 534 F.2d 1155, 1159 (5th Cir. 1976) ("Rule 22 interpleader does not require a `deposit'. . . ."). Accordingly, even if Rule 22 applies, this Court must decide the parties' rights as they existed on November 4, 2002, the date the interpleader action was filed. Texaco, Inc. v. Ponsoldt, 118 F.3d 1367 (9th Cir. 1997); White v. FDIC, 19 F.3d 249 (5th Cir. 1994); Avant Petroleum, Inc. v. Banque Paribas, 853 F.2d 140 (2d Cir. 1988).

10 Hartford subsequently withdrew its Motion to Require Plaintiff to Deposit Funds Into Interest-Bearing Account and Motion to Dismiss Plaintiff. See D.E. # 108, 134.

Tarmac next contends that the Court should not follow the rationale of Avant Petroleum because that court's decision "was supported almost entirely by the court's inferred rationale behind the `insolvency exception' set forth in UCC [§] 9-403(2)." Memorandum of Law in Support of Tarmac's Motion for Summary Judgment (D.E. #160), at 3. According to Tarmac, because that "insolvency exception" was removed from the U.C.C. in 2000, as well as based on comments to U.C.C. § 9-515, "it is clear that the drafters of the UCC did not intend to create any exception to the lapse provisions under UCC except as it related to insolvency proceedings." D.E. #160, at 4. The Court disagrees.

Former § 9-403(2) of the U.C.C. "provide[d] that a filed financing statement is effective for five years" and that "[u]nless a continuation statement is filed prior to the end of that period, the security interest becomes unperfected after five years and becomes subordinated to a theretofore junior lien. . . ." Avant Petroleum, Inc. v. Banque Paribas, 853 F.2d 140, 142 (2d Cir. 1988). That provision also contained an "insolvency exception" which provided:

If a security interest perfected by filing exists at the time insolvency proceedings are commenced by or against the debtor, the security interest remains perfected until termination of the insolvency proceedings and thereafter for a period of sixty days or until expiration of the five year period, whichever occurs later.

Avant Petroleum, 853 F.2d at 144 (quoting former U.C.C. § 9-403(2)). That insolvency exception was abrogated in 2000.

In Avant Petroleum, the Second Circuit discussed the interplay between U.C.C. § 9-403(2) and interpleader actions. 853 F.2d at 144-45. Tarmac is correct that the court concluded that "[t]he rationale for eliminating the requirement for filing continuation statements during insolvency proceedings" was "applicable to the present interpleader action." Id. at 144-45. However, despite the fact that the Second Circuit concluded that the rationale behind § 9-403(2) applied to interpleader actions, the court did not conclude that § 9-403(2) itself applied to interpleader actions; instead, the court found no evidence that the U.C.C. "drafters gave any thought to interpleader proceedings," id. at 145, and therefore the court concluded that § 9-403(2)'s silence regarding interpleader actions could not be interpreted as a requirement that "the holder of the secured interest [in an interpleader action] . . . make continuation filings after" commencement of the interpleader action. Id.

The abrogation of § 9-403(2)'s insolvency exception has not changed the fact that the U.C.C. is silent regarding whether an exception to the continuation filing requirement should exist for interpleader actions. Regardless of whether an insolvency exception continues to exist for bankruptcy proceedings, with regards to interpleader actions the rationale behind the Second, Fifth, and Ninth Circuit's opinions in Avant Petroleum, White, and Texaco still applies, and "`certainly the purpose of requiring the filing of a continuation statement would not be served with regard to existing creditors who already had notice of the creditor's perfected security interest and knowledge of the interpleader actions themselves on the date the interpleader actions were filed.'" Avant Petroleum, 853 F.2d at 145 (quoting Avant Petroleum, Inc. v. Banque Paribas, 652 F. Supp. 542, 547-48 (S.D.N.Y. 1987)).¹¹

11 As Tarmac concedes, the Uniform Commercial Code comments to U.C.C. § 9-515, which discuss the removal of the "insolvency exception," provide in part: "Of course, if the debtor enters bankruptcy before lapse, the provisions of this Article with respect to lapse would be of no effect to the extent that federal bankruptcy law dictates a contrary result ( e.g., to the extent that the Federal Bankruptcy Code determines the rights as of the date of the filing of the bankruptcy petition)." D.E. #160 (quoting comment to U.C.C. § 9-515) (emphasis added). Even assuming this comment applied to interpleader actions, the result would be the same because federal interpleader law, as stated in Avant Petroleum, White, and Texaco, "determines the rights as of the date of the filing of the" interpleader action.

Finally, Tarmac contends that its claim is superior to Ocean Bank's because Ocean Bank failed to offer evidence of any value it gave J.V. Construction prior to January 29, 2001, the date Tarmac perfected its security interest. Ocean Bank responds that the September 22, 1997, Commercial Security Agreement between Ocean Bank and J.V. Construction, which is attached to Margarita Celaya's affidavit (D.F. #116), demonstrates that Ocean Bank gave J.V. Construction a $500,000.00 promissory note on September 22, 1997. See Ocean Bank's Memorandum in Opposition to Tarmac's Motion for Summary Judgment (D.E. #182), at 5-6. Ocean Bank also contends that "Tarmac was a party to the action Ocean Bank commenced against [J.V. Construction] to, inter alia, foreclose its security interest" and that "[i]n those proceedings, Tarmac was served with Ocean Bank's Affidavit of Plaintiff's Claim" which "clearly shows that Ocean Bank gave value before January 29, 2001, the date Tarmac allegedly perfected its security interest." Id. at 6; Haley Aff. (D.E. #184) ¶ 11 ("Lastly, attached as Exhibit `10' is the affidavit of which demonstrate[s] that the value given by Ocean Bank occurred prior to Tarmac's perfecting its Security agreement.").

A security interest is not "enforceable against the debtor and third parties with respect to the collateral" until, inter alia, "[v]alue has been given. . . ." Fla. Stat. § 679.2031(2)(a). The Commercial Security Agreement which Ocean Bank attached to Margarita Celaya's affidavit was signed by representatives of Ocean Bank and J.V. Construction on September 22, 1997. According to the terms of that Agreement, in consideration for the Agreement Ocean Bank gave J.V. Construction a $500,000.00 loan on September 22, 1997, which bore loan number 303076482-66. See September 22, 1997 Commercial Security Agreement, at 1. Tarmac contends that that Agreement is insufficient to demonstrate that Ocean Bank gave J.V. Construction value on September 22, 1997, because Ocean Bank failed to present "a copy of the promissory note/agreement, nor any other loan document, evidencing that [Ocean Bank's] value given to [J.V. Construction] was prior to [Tarmac's] January 29, 2001 perfected security interests. . . ." D.E. #160, at 9.

The Court agrees with Ocean Bank that the September 22, 1997. Commercial Security Agreement constitutes evidence that Ocean Bank gave J.V. Construction value on that date, despite the fact that Ocean Bank did not submit the original promissory note or loan agreement. That Commercial Security Agreement was signed by representatives of both J.V. Construction and Ocean Bank, and those representatives acknowledged that in consideration for the Agreement, Ocean Bank gave J.V. Construction a $500,000.00 loan on September 22, 1997. In response to Ocean Bank's submission of that evidence, neither Tarmac nor any other party has submitted any contrary evidence.

However, that fact does not require entry of summary judgment in Ocean Bank's favor against the remaining defendants because the 1997 $500,000.00 loan and Commercial Security Agreement are irrelevant to Ocean Bank's claim in this action. In this action, Ocean Bank's claim is based on J.V. Construction's default of certain loans which resulted in Ocean Bank obtaining a state court judgment in the amount of $1,947,816.16 against J.V. Construction on September 19, 2001. See Ocean Bank's Motion for Summary Judgment (D.E. #115), at 2 Exh. B; Celaya Aff. (D.E. #116) ¶¶ 4-6. In the state court action, however, Ocean Bank did not assert that J.V. Construction had defaulted on the 1997 $500,000.00 loan. Instead, Ocean Bank's claims in that action related to a number of other promissory notes, obligations, and security agreements executed between April 30, 1999, and April 7, 2000. See Affidavit of Plaintiff's Claim in Ocean Bank v. J.V. Construction Corp., Case No. 01-10504 CA(09) (attached as Exh. 10 to D.E. #184, J.T. Haley's Affidavit); Complaint in Ocean Bank v. J.V. Construction Corp., Case No. 01-10504 CA(09) (attached as Exh. 1 to D.E. #184) and Exhibits attached to that Complaint; Final Judgment in Ocean Bank v. J.V. Construction Corp., Case No. 01-10504CA(09) (attached as Exh. 3 to D.E. # 184). Ocean Bank did not assert in that state court action, and does not assert in this action, that J.V. Construction defaulted on the 1997 $500.000.00 loan or that Ocean Bank's claims are based on a default of that loan or are based on the 1997 Commercial Security Agreement.

Because the 1997 Commercial Security Agreement is irrelevant to Ocean Bank's claim in this action, the fact that Ocean Bank perfected that security agreement by giving value for it on September 22, 1997, is also irrelevant to this action.

Ocean Bank's claim, however, is based in part on an April 30, 1999, Security Agreement and on an October 22, 1999, Security Agreement. See Exhs. II-1 II-2 to Complaint in Ocean Bank v. JV Construction Corp., Case No. 01-10504 CA(09) (attached as Exh. 1 to D.E. #184). Ocean Bank has submitted evidence that it gave value for those security agreements on April 30, 1999, in the form of a $238,134.45 Fixed Rate Commercial Promissory Note, and on October 22, 1999, in the form of a $1,100,000.00 Commercial/Agricultural Revolving or Draw Note-Variable Rate. See Exhs. A B to Complaint in Ocean Bank v. J.V. Construction Corp., Case No. 01-10504 CA(09) (attached as Exh. 1 to D.E. # 184). Ocean Bank therefore has presented evidence that those security interests became enforceable and perfected on April 30, 1999, and October 30, 1999, the dates it gave value for them.¹² See Fla.Stat. § 679.2031(2)(a); Gibson v. Resolution Trust Corp., 51 F.3d 1016, 1023 (11th Cir. 1995) ("The Uniform Commercial Code, as adopted in Florida, provides that a security interest is legally enforceable or `perfected' if . . . value has been given by the secured party. . . .").

12 Tarmac contends that "the dollar amount that [Ocean Bank's] Security Agreement may secure is less than clear in this matter." D.E. #160, at 9 n. 6. It is irrelevant whether the Court can determine the exact amount that Ocean Bank's security agreements may secure, because Ocean Bank had given at least $1,338,134.45 in value in exchange for those agreements by October 22, 1999, and that amount is greater than the res in this action. Thus, if Ocean Bank had priority over all other defendants, Ocean Bank would be entitled to the entire res, regardless of whether the Court could determine the exact amount that Ocean Bank's security agreements may secure.

Thus, even accepting as true Tarmac's and Elder's representations regarding the dates their interests in the interpleader funds arose (January 29, 2001, and February 24, 2000),¹³ Ocean Bank's security interests, which were perfected in 1999, take preference over Tarmac's and Elder's interests. See Memorandum of Law in Support of Tarmac's Motion for Summary Judgment (D.E. #160), at 2 ("[Tarmac] perfected its security interests in and to the settlement funds on January 29, 2001."); Elder's Motion to Enforce Charging Lien and Establish Priority (D.E. #77), at 4 ¶ 11 ("[Elder] commenced its representation of J.V. in the underlying action on February 24, 2000."); id. at 7 ("[A]n attorney's lien has priority over judgments obtained against the client subsequent to commencement of [the] attorney[']s services."). A question remains, however, whether Ocean Bank's interests have priority over Hartford's interests.

13 Elder "commenced its representation of J.V. [Construction] in the underlying action on February 24, 2000." Elder's Motion to Enforce Charging Lien and Establish Priority (D.E. #77), at 4. Therefore, assuming Elder has an equitable charging lien, that lien relates back to February 24, 2000. See, e.g., In re Washington, 242 F.3d 1320, 1323 (11th Cir. 2001) ("Although an attorney's charging lien attaches to a judgment for the client, this equitable lien relates back to the commencement of the services rendered by the attorney on behalf of the client and takes effect from that time. . . . In effect, the interest created by a valid attorney's charging lien arises by operation of law when all of the requirements of such a lien are satisfied and is effective from the commencement of the attorney's services in advance of any judicial action recognizing it.").

4. Hartford

Hartford claims that it has priority with respect to $440,991.86, but only seeks to recover $433,565.00 of the res. This amount reflects the $489,000.00 res minus $52,935.00 which Elder seeks pursuant to its charging lien and minus $2,500.00 in legal fees which the School Board apparently sought at one time pursuant to its Mediation Settlement Agreement with J.V. Construction. Hartford does not seek priority over those two parties' claims.

Hartford cites Amwest Surety Ins. Co. v. United States, 870 F. Supp. 432 (D.Conn. 1994), for the proposition that its claim has priority over the United States' claim "based on its equitable rights arising from [the] bond issued before [the] tax liens were perfected by filing. . . ." D.E. #95, at 8. Hartford also cites Kansas City v. Tri-City Constr. Co., 666 F. Supp. 170 (W.D. Mo. 1987), and Int'l Fidelity Ins. Co. v. United States, 949 F.2d 1042 (8th Cir. 1991), in support of its contention that it has priority over the United States.

In Amwest and Int'l Fidelity Ins. Co., however, the courts considered wrongful levy actions filed pursuant to 26 U.S.C. § 7426, 870 F. Supp. at 432, 949 F.2d at 1044. Therefore, Amwest and Int'l Fidelity Ins. Co. are consistent with this Court's conclusion, discussed supra, that Hartford's exclusive remedy for challenging the United States' claim of priority was a wrongful levy action pursuant to 26 U.S.C. § 7426. See United Sand Gravel Contractors, Inc. v. United States, 624 F.2d 733, 739 (5th Cir. 1980) ("When someone other than the taxpayer claims an interest in proper or rights to property which the United States has levied upon, his exclusive remedy against the United States is a wrongful levy action under [26 U.S.C.] § 7426.").

In Kansas City v. Tri-City Constr. Co., the court did consider an interpleader action, as opposed to a wrongful levy action pursuant to 26 U.S.C. § 7426, and the court concluded that a surety's interest which arose as a result of its equitable subrogation rights had priority over the United States' interest which arose as the result of a tax levy. 666 F. Supp. at 170-73. However, there is no indication that the United States argued in Kansas City, as it does in this action, that the surety's claims were barred because the surety had not timely filed a § 7426 wrongful levy action, and the Kansas City court did not address that issue. This Court will not infer from the Kansas City court's silence regarding that issue that it intended to hold that an interpleader action serves as an alternative remedy to a § 7426 action for someone other than the taxpayer who claims an interest in property or rights to property upon which the United States has levied. Even if the Kansas City decision stood for that proposition, it would be inconsistent with the former Fifth Circuit's holding in United Sand Gravel Contractors. Inc., which is binding on this Court, that "[w]hen someone other than the taxpayer claims an interest in property or rights to property which the United States has levied upon, his exclusive remedy against the United States is a wrongful levy action under [26 U.S.C.] § 7426." 624 F.2d 733, 739 (5th Cir. 1980).

Therefore, to the extent Hartford's interest in the res was superior to the United States' interest. Hartford's exclusive remedy was a § 7426 action, and the limitations period for filing such an action has expired. Accordingly, the United States' claim has priority over Hartford's.

With respect to the remaining defendants, Hartford's claim is based on the equitable subrogation rights it allegedly obtained when it allegedly made $440,991.86 in payments to materialmen and contractors pursuant to a $5,181,088.00 payment bond it issued in accordance with Florida Statute § 255.05 on November 20, 1997. See Fla.Stat. § 255.05 (Requiring "[a]ny person entering into a formal contract with the state or any county, city, or political subdivision thereof, or other public authority, for the construction of a public building, for the prosecution and completion of a public work, or for repairs upon a public building or public work" to obtain "a payment and performance bond with a surety insurer authorized to do business in this state as [a] surety."); TransAmerica Ins. Co. v. Barnett Bank of Marion County, N.A., 540 So.2d 113, 115 (Fla. 1989) ("Because of their importance, payment and performance bonds are mandatory under section 255.05 for government projects and are commonly employed by prudent private owners."). Hartford issued that bond on behalf of its principal, J.V. Construction, for the Westwood Heights Elementary School construction project, and in that bond the School Board was named obligee. See Hartford's Statement of Undisputed Facts (D.E. #97), at 2-3. Hartford also issued a performance bond related to the Westwood Heights Elementary School construction project. Hartford contends that its interest in the res relates back to November 20, 1997, the date it issued the payment bond.

"The doctrine of equitable subrogation is designed to apply where the claimant satisfied an obligation of another and then stands in the shoes of the satisfied creditor. The doctrine is founded on established principles of equity to prevent an unjust forfeiture, on the one hand, and a windfall amounting to unjust enrichment, on the other." Radison Properties, Inc. v. Flamingo Groves, Inc., 767 So.2d 587, 590 (Fla. 4th Dist.Ct.App. 2000); see also, e.g., Pearlman v. Reliance Ins. Co., 371 U.S. 132, 136-37, 83 S.Ct. 232, 235 (1962) (Defining the "right of subrogation" as the doctrine "that a surety who pays the debt of another is entitled to all the rights of the person he paid to enforce his right to be reimbursed."). A surety's equitable subrogation rights "arise from law, not from the provisions of a contract. . . ." TransAmerica Ins. Co. v. Barnett Bank of Marion County, N.A., 540 So.2d 113, 116 (Fla. 1989); see also, e.g., Pearlman, 371 U.S. at 135, 83 S.Ct. at 234, and the U.C.C.'s rules governing priority of security interests do not apply to such equitable subrogation rights. TransAmerica Ins Co., 540 So.2d at 116; see also id. (noting that the Editorial Board which drafted the U.C.C. "specifically rejected" a draft provision of the U.C.C. which would have specifically subordinated a surety's assignment to a later perfected security interest"). A surety therefore "is not required to file financing statements under the Uniform Commercial Code to preserve its rights to equitable subrogation in the event of its principal's default." First Ala. Bank of Birmingham v. Hartford Accident Indemnity Co., Inc., 430 F. Supp. 907, 910 (N.D. Ala. 1977); see also TransAmerica, 540 So.2d at 117 ("`no U.C.C. filing is necessary to perfect the surety's interest'") (quoting TransAmerica Ins. Co. v. Barnett Bank of Marion County, N.A., 524 So.2d 439, 450 (Fla. 5th Dist. Ct. App. 1988) (J. Sharp, dissenting)).

The question remains, however, as to what, if any, priority the equitable subrogation rights of a surety such as Hartford have vis-a-vis other entities' interests which were perfected in accordance with the U.C.C. Hartford contends that its subrogation rights relate back to November 20, 1997, the date it executed its payment bond. Tarmac asserts that Hartford is not entitled to priority over Tarmac because: (1) Hartford "failed to prove or otherwise show that its payments in the total amount of $440.991.86 were properly made to subcontractors, laborers, materialmen and/or suppliers who possessed valid claims under [Florida Statute §] 255.05. . . ." and (2) Hartford, "as subrogee, stands in the shoes of only such properly paid and valid claimants with respect to the settlement funds" and "[n]owhere in its Motion does [Hartford] address the priority of such subcontractors, laborers, materialmen, and/or suppliers over [Tarmac] . . . or any of the other Defendants as to the settlement funds." Opposition of Tarmac to Hartford's Motion for Final Summary Judgment (D.E. #111), at 7. Ocean Bank asserts that Hartford's rights are limited to the rights of J.V. Construction's subcontractors, laborers, materialmen, and/or suppliers, and that those entities had no rights to the funds because they did not "file suit, obtain a judgment against [J.V. Construction], and perfect the judgment lien pursuant to Florida Statute Sections 55.201-209." Ocean Bank's Memorandum of Law in Opposition to Hartford's Motion for Summary Judgment (D.E. #109), at 6. Relying on former Florida Statute § 679.312,¹⁴ which was entitled, "Priorities among conflicting security interests in the same collateral," Ocean Bank also contends that "even if Hartford had an equitable lien, Hartford's interest [in] the interpleader funds would be inferior to Ocean Bank['s] because Ocean Bank perfected its UCC-1 Lien before Hartford issued its payment bond." Ocean Bank's Rebuttal Memorandum (D.E. #190), at 3.

14 Section 679.312 was repealed effective January 1, 2002. Other sections of the Florida U.C.C., including Florida Statute § 679.322, which is entitled, "Priorities among conflicting security interests in and agricultural liens on same collateral," now govern priorities of security interests.

In Prairie State Nat'l Bank of Chicago v. United States, 164 U.S. 227, 17 S.Ct. 142 (1896), the Supreme Court considered the relative priorities of a surety who had equitable subrogation rights by virtue of its performance under a performance bond related to a public contract, and a bank which had lent money to the contractor. The "surety . . . had been compelled to complete a government contract upon the contractor's default in performance" and "claimed that he was entitled to be reimbursed for his expenditure out of a fund that arose from the Government's retention of 10% of the work done under the terms of the contract between the original contractor and the Government." Pearlman v. Reliance Ins. Co., 371 U.S. 132, 137, 83 S.Ct. 232, 235 (1962). The bank, "contesting the surety's claim, asserted that it had a superior equitable lien arising from moneys advanced by the bank to the contractor before the surety began to complete the work." Id. The surety had issued the performance bond in May of 1888, approximately twenty-two months before the bank had loaned money to the contractor, but the surety had not spent money to complete the project until after the bank's lien allegedly arose in February of 1890. Prairie State Nat'l Bank, 164 U.S. at 230, 232, 240, 17 S.Ct. at 144, 147. The bank alleged that the surety's interest in the funds did not arise until the surety advanced funds pursuant to the performance bond in order to begin completion of the project, id. at 230, 17 S.Ct. at 144, and the surety alleged "that his equity arose at the time he entered into the contract of suretyship . . .," id., i.e., the date he entered into the performance bond. See id. at 232, 17 S.Ct. at 232 ("In other words, the rights of the parties depend upon whether [the surety's] subrogation must be considered as arising from, and relating back to the date of, the original contract, or as taking its origin solely from the date of the advance by him.").

The Supreme Court held that the fund retained by the government

materially tended to protect the surety, that its creation raised an equity in the surety's favor, that the United States was entitled to protect itself out of the fund, and that the surety, by asserting the right of subrogation, could protect itself by resort to the same securities and same remedies which had been available to the United States for its protection against the contractor.

Pearlman, 371 U.S. at 138-39, 83 S.Ct. at 235. For purposes of establishing priority to the withheld funds, the Supreme Court held that the surety's interest arose on the date it issued the performance bond, not the date it began making advances pursuant to that bond upon the contractor's default, and therefore the Court held that the surety's equitable subrogation rights were superior to the bank's lien. Prairie State Nat'l Bank, 164 U.S. at 240, 17 S.Ct. at 147 ("[T]he equity, if any, acquired by the Prairie Bank in the fund then in existence and thereafter to arise was subordinate to the equity which had in May, 1888, arisen in favor of the surety. . . ."). The Court reasoned, in part, that: (1)

[t]he [surety], in making his payments, discharged an obligation due by [the contractor], for the performance of which [the surety] was bound under the obligation of suretyship. The bank, on the contrary, was a mere volunteer, who lent money to [the contractor] on the faith of a presumed agreement, and of supposed rights acquired thereunder. . . .

id. at 232, 17 S.Ct. at 144; and (2) the contractor "could not transfer to the bank any greater rights in the fund than they themselves possessed. Their rights were subordinate to those of the United States and the sureties. . . ." id. at 240, 17 So. Ct. at 147.

In Henningsen v. United States Fidelity Guaranty Co., 208 U.S. 404, 28 S.Ct. 389 (1908), the Supreme Court considered the relative priorities of a surety who had equitable subrogation rights by virtue of payments it made under a payment bond related to a public contract, and a bank which had lent money to the contractor. The surety in Henningsen had issued both a performance bond and a payment bond. 208 U.S. at 410, 28 S.Ct. at 391 ("The guaranty company was surety on that contract. Its stipulation was not merely that the contractor should construct the buildings, but that he should pay promptly and in full all persons supplying labor and material in the prosecution of the work contracted for."); see also id. at 404, 28 S.Ct. at 390; Pearlman v. Reliance Ins. Co., 371 U.S. 132, 138-39, 83 S.Ct. 232, 236 (1962). The contractor completed the construction but failed to pay its subcontractors. The surety therefore did not have to perform under the performance bond, but pursuant to the payment bond the surety "was compelled to and did make the payment." Henningsen, 208 U.S. at 410, 28 S.Ct. at 391; see also Pearlman, 371 U.S. at 139, 83 S.Ct. at 236 ("Henningsen completed the buildings according to the contract but failed to pay his laborers and materialmen. The surety paid."). The Supreme Court considered whether the surety's equitable subrogation rights were superior to the rights of a bank which "simply loaned money to the contractor, to be by him used as he saw fit, either in the performance of his building contract or in any other way. . . ." Henningsen, 208 U.S. at 410, 28 S.Ct. at 391. The Court applied the Prairie State Nat'l Bank Court's rationale and held that the surety's equitable subrogation rights, which arose solely by virtue of payments it made pursuant to its payment bond, were superior to the bank's rights to the disputed funds. Id. at 410-12, 28 S.Ct. at 391-92; see also Pearlman, 371 U.S. at 139, 83 S.Ct. at 236 ("This Court applied the equitable principles declared in the Prairie Bank case so as to entitle the surety to the same equitable claim to the retained fund that the surety in the Prairie Bank case was held to have."). The Court also applied the Prairie State Nat'l Bank Court's rationale regarding the distinction between the surety's contractual obligations and the bank's status as volunteer. Henningsen, 208 U.S. at 410, 411-12, 28 S.Ct. at 391, 392. The Court quoted with approval the Prairie State Nat'l Bank Court's statement that "the rights of the parties depend on whether [the surety's] subrogation must be considered as arising from and relating back to the date of the original contract, or as taking its origin solely from the date of the advance by him." Id. at 411, 28 S.Ct. at 391. The Court then stated that it "agree[d] with the views of the circuit court of appeals" in the appealed-from opinion. Id. at 411, 28 S.Ct. at 391-92. In that opinion, the Ninth Circuit had held, based on Prairie State Nat'l Bank, that the "right of subrogation relates back . . . to the time the contract of suretyship was entered into." Henningsen v. United States Fidelity Guaranty Co., 143 F. 810, 814 (9th Cir. 1906), aff'd, 208 U.S. 404, 28 S.Ct. 389 (1908).

In Pearlman v. Reliance Ins. Co., the Supreme Court considered "a dispute between the trustee in bankruptcy of a government contractor and the contractor's payment bond surety over which ha[d] the superior right and title to a fund withheld by the Government out of earnings due the contractor." 371 U.S. 132, 133, 83 S.Ct. 232, 233 (1962). Similar to the facts of Henningsen, the surety had executed both a performance bond and a payment bond, and the payment bond had "guarantee[d] payment to all persons supplying labor and material for the project." Id. Also similar to the facts of Henningsen, the surety was not called upon to complete the project pursuant to its performance bond,¹⁵ but it was called upon to make payments pursuant to its payment bond. Id. at 134, 83 S.Ct. at 233. The Court noted that it "seems rather plain" that it had held in Prairie State Nat'l Bank and Henningsen "that there is a security interest in a withheld fund like this to which the surety is subrogated. . . ." Id. at 137, 83 S.Ct. at 235. The Court then considered whether that rule "had been changed by the passage of the Miller Act or by "the Court's holding in United States v. Munsey Trust Co., 332 U.S. 234, 67 S.Ct. 1599 (1947). Pearlman, 371 U.S. at 137, 83 S.Ct. at 235. The Court answered that question in the negative and held that Prairie State Nat'l Bank and Henningsen "therefore, together with other cases that have followed them, establish the surety's right to subrogation in such a fund whether its bond be for performance or payment." Id. at 139, 83 S.Ct. at 236; see also, e.g., id. ("The Henningsen case, decided 12 years later in 1908, carried the Prairie Bank case still closer to ours. . . . This Court applied the equitable principles declared in the Prairie Bank case so as to entitle the surety to the same equitable claim to the retained fund that the surety in the Prairie Bank case was held to have. Thus the same equitable rules as to subrogation and property interests in a retained fund were held to exist whether a surety completes a contract or whether, though not called upon to complete the contract, it pays the laborers and materialmen."); Am. Surety Co. of N.Y. v. Westinghouse Elec. Mfg. Co., 75 F.2d 377, 379-80 (5th Cir. 1935); In re P. McGarry Sons, 240 F. 400, 402 (7th Cir. 1917) ("That the surety, on payment of labor and material claims, was subrogated and that its equity attached as of the date of the bond, and that a mere volunteer's rights would be subject to those of the surety who pays the labor and material bills, was clearly laid down in Prairie State Bank v. United States. . . . This was approved in Henningsen v. United States. . . .").

15 In Henningsen, the original contractor completed the contract. In Pearlman, a second contractor completed the job after the government's original contractor ran into financial trouble. 371 U.S. at 134, 83 S.Ct. 233.

Hartford, like the sureties in Henningsen and Pearlman, provided a public contractor, J.V. Construction, with both performance and payment bonds. Also like the sureties in Henningsen and Pearlman. Hartford was not called upon to complete performance under the performance bond but was called upon to make payments under its payment bond. In accordance with Prairie State Nat'l Bank, Henningsen, and Pearlman, Hartford has an equitable subrogation right to the extent it paid the claims of subcontractors, laborers, materialmen and/or suppliers.¹⁶ See also, e.g., Nat'l Fire Ins. Co. of Hartford v. Fortune Constr. Co., 320 F.3d 1260, 1271-72 (11th Cir. 2003) ("Since National Fire did not complete construction under its performance bonds, it has acquired equitable subrogation rights only with respect to its payment bonds."); Transamerica Ins. Co. v. Barnett Bank of Marion County, N.A., 540 So.2d 113, 155 (Fla. 1989) ("When, on default of the contractor, [the surety] pays all the bills of the job to date and completes the job, it stands . . . in the shoes of laborers and material men who have been paid by the surety — who may have had liens. . . .'") (quoting Nat'l Shawmut Bank v. New Amsterdam Cas. Co., 411 F.2d 843, 845 (1st Cir. 1969)). That equitable subrogation right relates back to November 20, 1997, the date Hartford issued the payment bond. See, e.g., PrairieState Nat'l Bank, 164 U.S. at 240, 17 S.Ct. at 147; In re P. McGarry Sons, 240 F. at 402; Henningsen, 143 F. at 814; TransAmerica Ins. Co. v. Barnett Bank of Marion County, N.A., 540 So.2d 113, 116-17 (Fla. 1989) (Holding that "the well-established rules governing the priority of a surety assignment" dictate that "it is appropriate to give priority to the claims of the surety, up to the limits of its performance."); id. at 117 ("`[T]he surety's interest continues to be, as it was under pre-Code law, superior to the claim of a contract assignee, such as a bank.'") (quoting TransAmerica Ins. Co. v. Barnett Bank of Marion County, N.A., 524 So.2d 439, 450 (Fla. 5th Dist.Ct.App. 1988) (J. Sharp, dissenting)). Therefore, Hartford's claim has priority over Ocean Bank's, Elder's, and Tarmac's claims.¹⁷

16 Tarmac contends that because this action involved a public construction project, "the validity of the claims of the subcontractors, laborers, materialmen and/or suppliers are determined under Section 255.05, Florida Statutes." D.E. #111, at 7.
Such subcontractors cannot acquire a lien on public property. E.g., City of Ft. Lauderdale v. Hardrives Co., 167 So. 339, 341 (Fla. 2d Dist.Ct.App. 1964), overruled in part on other grounds, N. Broward Hosp. Dist. v. Crosewell, 188 So.2d 54 (2d Dist.Ct.App. 1966). Section 255.05 was enacted to protect such subcontractors "by substituting a penal bond for the lien allowed by other statutes on private construction projects." Id.; see also, e.g., Fla. Stat. § 713.05 ("Liens of persons in privity"). That section requires any person entering into a contract "with the state or any county, city, or political subdivision thereof, or other public authority, for the construction of a public building," to obtain performance and payment bonds "before commencing the work. . . ." and creates in favor of a subcontractor "a right of action against the contractor and surety for the amount due him or her, including unpaid finance charges due under the claimant's contract." Fla.Stat. § 255.05(1)(a).
Section 255.05 does not, however, evince the Florida legislature's intent to abrogate or limit the equitable subrogation rights which the Supreme Court discussed in Prairie State Nat'l Bank, Henningsen, and Pearlman.

17 As discussed supra, Ocean Bank perfected its security interest in 1999; Tarmac contends that its claim to the res arose on January 29, 2001, the date it filed its State of Florida Financing Statement Form UCC-1 with the Florida Secretary of State; and Elder contends that its charging lien dates back to February of 2000, when it began its representation of J.V. Construction.

As discussed supra, Ocean Bank, relying on former Florida Statute § 679.312, contends that "even if Hartford had an equitable lien, Hartford's interest [in] the interpleader funds would be inferior to Ocean Bank['s] because Ocean Bank perfected its UCC-1 Lien before Hartford issued its payment bond." Ocean Bank's Rebuttal Memorandum (D.E. #190), at 3. Former Florida Statute § 679.312 was a part of the Uniform Commercial Code. See Fla. Stat. Ch. 679 (2000) ("Uniform Commercial Code: Secured Transactions"). As discussed supra, however, the U.C.C.'s rules governing priority of security interests do not apply to equitable subrogation rights. TransAmerica Ins. Co. v. Barnett Bank of Marion County, N.A., 540 So.2d 113, 116 (Fla. 1989). Therefore, contrary to Ocean Bank's assertion, to the extent Hartford has equitable subrogation rights in the res, former Florida Statute § 679.312 is not instructive regarding the priority of those equitable subrogation rights.

Equally unavailing is Ocean Bank's assertion that Hartford has no rights to the funds because J.V. Construction's subcontractors, laborers, materialmen, and/or suppliers did not file suit, obtain a judgment, and perfect a judgment lien against J.V. Construction pursuant to Florida Statute §§ 55.201.209. Ocean Bank has cited no authority in support of that assertion. Additionally, although those statutory provisions prescribe the manner in which the holder of a judgment may obtain "[a] judgment lien securing the unpaid amount of any money judgment. . . ." Fla. Stat. § 55.202(1), and establish the priority of such judgment liens, Fla. Stat. § 55.202(3), they do not evince the Florida legislature's intent to change the long-established rule regarding the priority of equitable subrogees' rights, and they do not evince the legislature's intent to abrogate other types of liens such as common law equitable liens or other statutory liens. See, e.g., Fla. Stat. § 713.04 (providing a method for obtaining liens by individuals or entities which "perform services or furnish material to real property for the purpose of making it suitable as the site for the construction of an improvement or improvements"). In fact, by their terms those statutes do not even establish the only way in which a judgment creditor may proceed against a debtor's property. Instead, § 55.205 specifically provides that a judgment creditor who does not obtain "a judgment lien as provided in § 55.202 or whose lien has lapsed may nevertheless proceed against the judgment debtor's property through other judicial process." Fla. Stat. 55.205(1) (emphasis added). The Court therefore will not construe §§ 55.201-209 to mean that unpaid subcontractors, laborers, materialmen, and/or suppliers who do not obtain a judgment lien pursuant to those statutory provisions have no legal or equitable interest in the res. ¹⁸ See Ocean Bank's Memorandum of Law in Opposition to Hartford's Motion for Summary Judgment (D.E. #109), at 6 ("As . . . unpaid subcontractors, laborers, materialmen, and/or suppliers of [J.V. Construction], the appropriate manner in which such creditors could establish any interest in the subject account receivable would be for said creditors to file suit, obtain a judgment against [J.V. Construction], and perfect the judgment lien pursuant to Florida Statute Sections 55.201-.209.") (emphasis added).

18 In Nat'l Fire Ins. Co of Hartford v. Fortune Constr. Co., the Eleventh Circuit held that a "payment bond surety's subrogation is limited to proper payments made to valid lien claimants." 320 F.3d 1260, 1271 (2003). To the extent Ocean Bank or other defendants rely on Nat'l Fire Ins Co of Hartford to assert that Hartford could not acquire equitable subrogation rights because the subcontractors did not perfect liens, that assertion is unavailing. Nat'l Fire Ins. Co. of Hartford involved a private construction project over which an unpaid subcontractor could obtain a lien pursuant to, e.g., Florida Statute § 713.05. See 320 F.3d at 1271 ("Under Florida law, construction liens of laborers and materialmen have priority over all subsequently recorded encumbrances on the owner's property.") (citing Fla. Stat. § 713.07(3)). As discussed supra, however, a subcontractor cannot acquire a lien over public property such as that involved in this action. E.g., City of Ft. Lauderdale v. Hardrives Co., 167 So. 339, 341 (Fla. 2d Dist.Ct.App. 1964), overruled in part on other grounds, N. Broward Hosp. Dist. v. Crosewell, 188 So.2d 54 (2d Dist.Ct.App. 1966). Therefore, the Eleventh Circuit's reference to "valid lien claimants" does not mean that subcontractors in this action who did not obtain liens had no interest in the res.

Hartford, however, is only entitled to priority with regards to claims of subcontractors which it properly paid pursuant to the payment bond. See, e.g., TransAmerica Ins. Co. v. Barnett Bank of Marion County, N.A., 540 So.2d 113, 115 (Fla. 1989) ("`When, on default of a contractor, [a surety] pays all the bills of the job to date and completes the job, it stands . . . in the shoes of laborers and material men who had been paid by the surety. . . .'") (quoting Nat'l Shawmut Bank v. New Amsterdam Cas. Co., 411 F.2d 843, 844-45 (1st Cir. 1969)); see also id. at 116 ("A surety who performs or pays on behalf of a[n] obligee steps into the shoes of the obligee to the extent of performance or payment.") (emphasis added); cf., e.g., Nat'l Fire Ins. Co. of Hartford v. Fortune Constr. Co., 320 F.3d 1260, 1271-72 (11th Cir. 2003) ("Where a surety pays the claims of laborers and materialmen, the surety is only entitled to stand in the shoes of those laborers and materialmen who might have had liens, `but for' the surety's payment. Of course, in both cases, the surety's subrogation rights exist only to the extent of the surety's performance.").

Hartford contends that it has paid $440,991.86 as payment bond surety. Tarmac asserts that Hartford "failed to prove or otherwise show that its payments in the total amount of $440,991.86 were properly made to subcontractors, laborers, materialmen and/or suppliers who possessed valid claims under [Florida Statute §] 255.05. . . ." Opposition of Tarmac to Hartford's Motion for Final Summary Judgment (D.E. #111), at 7.

In support of Hartford's calculation of the payments it allegedly made to subcontractors, it has submitted: (1) the affidavit of Joseph A. Madagan, one of Hartford's employees (D.E. #178); (2) copies of notices of non-payment which subcontractors submitted to Hartford (D.E. #178, Exh. A); (3) the affidavit of James F. Morelwicz, one of Hartford's employees (D.E. #96); (4) a copy of the payment bond (D.E. #96, Exh. B); (5) a check log indicating the amount of money Hartford paid to J.V. Construction's subcontractors in accordance with the payment bond (D.E. #96, Exh. D); and (6) copies of the checks Hartford paid to J.V. Construction's subcontractors in accordance with the payment bond (D.E. #96, Exh. D).

The notices of non-payment which Hartford submitted reflect a total of $404,075.84 which J.V. Construction failed to pay its subcontractors. Those notices reflect the following unpaid amounts: $62,896.83 to Coltee Engineering, Inc.; $460.00 to American Overhead Door, Inc.; $17,750.00 to BS Casework, Inc. (Hartford also submitted a second notice of non-payment for $17,749.99 regarding BS Casework, Inc.); $113,675.01 to DEC Electric, Inc.; $26,685.00 to Dilema Corporation; $29,923.00 to Fence Masters, Inc.; $1,304.54 to Gancedo Lumber Co., Inc.; $51,300.00 to Manny Lou Plumbing Contractors, Inc.; $44,030.12 to Ralph Martin Construction Co., Inc.; $540.34 to Rinker Materials Corp.; $42,947.00 to LiteCrite, Inc.; and $12,564.00 to K.D.G, Inc. d/b/a Wildcat. Additionally, Hartford submitted a copy of a notice of non-payment from All Specialty Sales, Inc., which does not reflect the amount J.V. Construction failed to pay that subcontractor.

The copies of checks which Hartford submitted reflect a total of $440,991.86 which Hartford paid to J.V. Construction's subcontractors. Those checks reflect the following paid amounts: $74,000.00 to Coltee Engineering, Inc.; $460.00 to American Overhead Door, Inc.; $17,750.00 to BS Casework, Inc.; $102,500.00 to DEC Electric, Inc.; $21,365.06 to Dilema Corporation; $36,510.19 to Fence Masters, Inc.; $5,737.27 to Gancedo Lumber Co., Inc.; $52,000.00 to Manny Lou Plumbing Contractors, Inc.; $44,000.00 to Ralph Martin Construction Co., Inc.; $540.34 to Rinker Materials Corp.; $29,500.00 to Steven Rosen, attorney for LiteCrite, Inc.; $5,974.00 to Wildeat ( i.e., K.D.G. Inc.); $562.00 to All Specialty Sales, Inc.; $3,609.00 to Pro Courts; $14,484.00 to Mastee North America; $32,000.00 to Acoustical Distributors, Inc.

The Court notes that Hartford paid certain subcontractors more money than those subcontractors demanded in the notices of non-payment which Hartford submitted to the Court. As discussed supra, however, Hartford is only entitled to priority regarding funds which it properly paid to subcontractors; i.e., funds which it was obligated to pay subcontractors pursuant to the payment bond. For purposes of summary judgment, the Court therefore finds that Hartford has demonstrated that it has priority as to all defendants except the United States with regards to the $367,513.77 for which Hartford submitted both proof of filing a notice of non-payment and proof of payment by Hartford. That amount is comprised of the following amounts which Hartford paid: $62,896.83 to Coltec Engineering, Inc.;¹⁹ $460.00 to American Overhead Door, Inc.; $17,750.00 to BS Casework, Inc.; $102,500.00 to DEC Electric, Inc.; $21,365.06 to Dilema Corporation; $29,923.00 to Fence Masters, Inc.;²⁰ $1,304.54 to Gancedo Lumber Co., Inc.;²¹ $51,300.00 to Manny Lou Plumbing Contractors, Inc.;²² $44,000.00 to Ralph Martin Construction Co., Inc.; $540.34 to Rinker Materials Corp.; $29,500.00 to LiteCrite, Inc.; and $5,974.00 to Wildcat ( i.e., K.D.G, Inc.). None of the defendants has submitted any evidence to contradict Hartford's evidence. Therefore, the undisputed material facts establish that Hartford is entitled to priority as to $367,513.77 of the res with regards to all defendants except the United States.

19 Although Hartford submitted evidence that it paid $74,000.00 to Coltec Engineering, Inc., Hartford only submitted evidence of a $62,896.83 notice of non-payment from Coltec Engineering, Inc.

20 Although Hartford submitted evidence that it paid $36,510.19 to Fence Masters, Inc., Hartford only submitted evidence of a $29,923.00 notice of non-payment from Fence Masters, Inc.

21 Although Hartford submitted evidence that it paid $5,737.27 to Gancedo Lumber Co., Inc., Hartford only submitted evidence of a $1,304.54 notice of non-payment from Gancedo Lumber Co., Inc.

22 Although Hartford submitted evidence that it paid $52,000.00 to Manny Lou Plumbing Contractors, Inc., Hartford only submitted evidence of a total of $51,300.00 in notices of non-payment from Manny Lou Plumbing Contractors, Inc.

As discussed supra, Hartford does not seek priority over Elder's $52,935.00 claim.²³ However, based on the authorities discussed supra, Hartford's claim to $367,513.77 of the res has priority over Elder's claim. If the Court were to comply with Hartford's request and give Elder's claim priority over Hartford's claim, the following circular conclusion would result: Elder's claim would have priority over Hartford's claim; Hartford's claim would have priority over Ocean Bank's claim; Ocean Bank's claim would have priority over Elder's claim. In that situation, it would be logically impossible to determine which of those three defendants had priority to the res. To avoid that result, it is recommended that the Court decline to comply with Hartford's request to give Elder's claim priority over Hartford's claim.²⁴

23 As discussed supra, Hartford also does not seek priority as to $2,500.00 in legal fees which the School Board apparently sought at one time pursuant to its Mediation Settlement Agreement with J.V. Construction. However — and also as discussed supra — the School Board has abandoned whatever claim to the res it once had.

24 Of course, Hartford and Elder may reach a private settlement reallocating that portion of the res which Hartford receives.

SUMMARY OF PRIORITIES

In summary, it is recommended that the Court prioritize the parties' claims to the res as follows:

First priority: the United States' claim ($175,102.93, plus penalties and statutory interest computed from July 9, 2003);

Second priority: Hartford's claim ($367,513.77);²⁵

25 If the Court adopts these recommendations, Hartford will not be able to recover the entire $367,513.77, but instead will only be able to recover whatever portion of the res remains after the United States recovers its claim.

Third priority: Ocean Bank's claim ($489,000.00).²⁶

26 Because Ocean Bank's claim has third priority and the United States' and Hartford's claims will exhaust the res, if the Court adopts these recommendations then Ocean Bank will not recover any of the res.

Because the res will be exhausted by the United States' and Hartford's claims, the Court does not have to decide which of the remaining defendants — Tarmac or Elder — is fourth in priority and which is fifth in priority.

RECOMMENDATION

For the foregoing reasons, it is respectfully recommended that the Court:

1. DENY Elder, Kurzman Vaccarella P.A.'s Motion to Enforce Charging Lien and Establish Priority (D.E. #77);

2. GRANT IN PART AND DENY IN PART Hartford Fire Ins. Co.'s Motion for Final Summary Judgment (D.E. #95);

3. GRANT IN PART AND DENY IN PART Ocean Bank's Motion for Summary Judgment (D.E. #115);

4. GRANT the United States' Motion for Summary Judgment (D.E. #149); and

5. DENY Tarmac America's Motion for Summary Judgment (D.E. #159).

The parties have ten (10) days from service of this Report and Recommendation to file written objections, if any, with the Honorable Federico A. Moreno, United States District Judge. See 28 U.S.C. § 636. Failure to file timely objections may bar the parties from attacking on appeal the factual findings contained herein. See LoConte v. Dugger, 847 F.2d 745, 750 (11th Cir. 1988).

RESPECTFULLY SUBMITTED.