                                 ___________

                                 No. 96-2353
                                 ___________


In Re Exec Tech Partners, a           *
Missouri General Partnership          *
                                      *
     Debtor.                          *
                                      *
____________________________          *
                                      *
                                      *
Exec Tech Partners, a Missouri        *
General Partnership,                  *
                                      *
     Plaintiff/Appellee,              *
                                      *   Appeal from the United States
            v.                        *   District Court for the Western
                                      *   District of Missouri.
Resolution Trust Corporation,         *
                                      *
     Defendant,                       *
                                      *
Mark One,                             *
                                      *
     Interested Party/Appellee,       *
                                      *
Boatmen’s Bank of Kansas,             *
                                      *
     Interested Party,                *
                                      *
BGM Industries, Inc.; D. M. Ward      *
Construction Company, Inc.;           *
Edwards McDowell, Inc.,               *
                                      *
     Interested Parties/              *
     Appellees,                       *
                                      *
Myron W. Haith,                       *
                                      *
     Interested Party,                *
                                      *
RTC Mortgage Trust 1994-N2, by        *
and through its servicer              *
Amresco Management, Inc.,             *
                                      *
     Defendant/Appellant.             *

                                 ___________
                           Submitted: January 15, 1997

                            Filed: February 27, 1997
                                   ___________

Before BOWMAN and MURPHY, Circuit Judges, and JONES,1 District Judge.

                                        ___________

MURPHY, Circuit Judge.


     This    case   involves      the    relative     priority   in   bankruptcy      of   a
mechanic's lien and two deeds of trust.          Upon filing bankruptcy, Exec Tech
Partners (Exec Tech) initiated this action to determine the relative
priority of its creditors.              The bankruptcy court2 concluded that the
mechanic's lien held by D.M. Ward Construction Co. (Ward) had priority over
two prior deeds of trust, one of which was held by RTC Mortgage Trust
(RTC).    The district court3 affirmed, and RTC appeals from the finding that
it waived its priority.4       We affirm.
     In    1989,    Exec   Tech    purchased     two    buildings     by   assuming    the
obligations under a deed of trust held by Home Savings Association of
Kansas City (Home Savings).        RTC later became the receiver for




     The Honorable John B. Jones, United States District Judge for
the District of South Dakota, sitting by designation.

      The Honorable Arthur B. Federman, United States Bankruptcy
Judge for the Western District of Missouri.

     The Honorable Ortrie D. Smith, United States District Judge
for the Western District of Missouri.
     4
      At the outset of this litigation, RTC and Boatmen’s Bank of
Kansas (Boatmen’s) each held separate deeds of trust on the
property held by Exec Tech. The bankruptcy court concluded that
the deed of trust held by Boatmen’s took priority over that held by
RTC pursuant to a subordination agreement between the two. Counsel
for RTC noted at oral argument that RTC has recently acquired the
second deed of trust previously held by Boatmen’s. It is therefore
not necessary for us to consider the relative priority between the
deeds of trust.

                                           -2-
Home Savings and is now the obligee under the deed of trust.


     In 1992, Exec Tech won a bid to lease the buildings to the Military
Entrance Processing Station.      In order to perform the bid, the buildings
needed extensive renovation.      RTC chose not to lend Exec Tech the money
needed for the renovation, but agreed to subordinate $1,650,000 of its deed
of trust to a new lender so that Exec Tech could obtain financing for the
project.    First Continental Bank & Trust, which has since been purchased
by Boatmen's, loaned Exec Tech $1,650,000.          The loan was secured by a
second deed of trust.      First Continental, now Boatmen's, and RTC entered
into a subordination agreement for the amount of the loan.


       RTC     actively   monitored   the   construction   project.   Under   the
subordination agreement between RTC and Boatmen's, RTC:


     1.   received the construction plans, specifications, a list of
     subcontractors, a draw schedule and a cost breakdown by
     subcontractor,
     2. reviewed each draw request and was able to object to any draw
     request,
     3. received copies of any change orders.


In addition, the record shows RTC was aware that Ward was the general
contractor for the project, RTC approved the architect and the engineer for
the project, and RTC was kept abreast of the construction progress by a
representative of Exec Tech.


     Particularly relevant to this appeal is how funds were disbursed for
the project.     RTC approved ten separate draw requests for project funds.
The last draw request approved by RTC was submitted on December 9, 1993,
and in it Ward stated that the construction was 100% complete.         Ward was
also required to sign a lien waiver concurrently with any payment it
received.    Ward signed lien waivers for each payment received under the
first ten draw requests.




                                       -3-
        The present dispute centers on Ward’s last request for payment.   On
March 11, 1994, Ward submitted an additional change order to Exec Tech for
$144,837.97, representing changes required to complete the project plus
Ward’s retainage fee.       This work on the changes was completed before
December 9, 1993 and was not included in any of the first ten draw
requests.    RTC never approved a disbursement, and Ward never signed a lien
waiver for this final amount.        When Ward was not paid, it filed and
perfected a mechanic’s lien for the entire $144,837.97.


        The parties stipulated to the validity of Ward's mechanic’s lien, and
the only question on appeal is the relative priority of the mechanic's lien
and the deeds of trust.    Like the district court, we review the bankruptcy
court's legal conclusions de novo and its factual findings under the
clearly erroneous standard.    Montgomery v. Ryan (In re Montgomery), 37 F.3d
413, 414-15 (8th Cir. 1994).        Absent an overriding federal law, the
existence and magnitude of valid claims against a debtor are determined by
state law, which in this case is that of Missouri.     See Speer v. Weathers
(In re Weathers), 40 B.R. 634, 638 (Bankr. W.D. Mo. 1984).


        Mechanic's liens are encumbrances on real property "to secure a
priority of payment for the performance of labor or the supply of materials
to buildings, or other improvements."    In re Gateway Ctr. Bldg. Investors,
Ltd.,    95 B.R. 647, 650 (Bankr. E.D. Mo. 1989) (citations omitted).
Normally the holder of a prior deed of trust would maintain its priority
over a mechanic's lien for later improvements to an existing piece of
property.    Id. at 650.   The holder of a prior deed of trust can waive its
priority over a mechanic's lien, however, even over a mechanic's lien based
on improvements to existing property.       Id. at 651.   Whether waiver has
occurred is a question of fact.    Kolb Grading, Inc. v. Lieberman Corp., 837
S.W.2d 924, 934 (Mo. Ct. App. 1992).


        In general, a mortgagee waives its priority when it induces




                                      -4-
the furnishing of labor or material by the materialmen.    Trout Invs., Inc.
v. Davis, 482 S.W.2d 510, 517 (Mo. Ct. App. 1972).    At least two cases have
held that knowledge of the construction giving rise to a mechanic's lien
is sufficient to find that a lender has waived its priority over the
mechanic's lien.     See Gateway, 95 B.R. at 654-55; Cinco Enters., Inc. v.
Lake St. Louis Estates Co., 557 S.W.2d 9, 10 (Mo. Ct. App. 1977).      Other
cases seem to require that the lender have knowledge of the construction
and participate actively in the project.    See, e.g., Genesis Eng’g Co. v.
Haueser, 829 S.W.2d 579, 580 (Mo. Ct. App. 1992); Kranz v. Centropolis
Crusher, Inc., 630 S.W.2d 140, 147-50 (Mo. Ct. App. 1982).


       There is no one precise test for waiver because waiver is an
equitable doctrine without a rigid legal formula.       Kranz, 630 S.W.2d at
147.     The bankruptcy court found that RTC and Boatmen's had waived their
priority because both knew about the construction project and participated
in it.    Examination of the record shows that these findings of waiver are
not clearly erroneous.


       RTC waived its priority because it had knowledge of the construction
and was an active participant in the renovation project.        It agreed to
subordinate its deed of trust to make the project loan possible.    It could
have expected ultimately to benefit from the project by an increase in the
value of the collateral securing its deed.           Under the subordination
agreement between RTC and Boatmen's, RTC received a copy of the plans and
specifications of the renovation, a list of subcontractors, and a copy of
the draw schedule.      RTC also reserved the right to object to any draw
request, and it received copies of any change orders.       RTC approved the
architect and the engineer associated with the project, knew Ward had been
selected as the general contractor, and was kept informed about the status
and progress of the construction by one of Exec Tech's partners, Myron
Haith.    RTC waived its priority because its extensive involvement in the
project induced Ward to provide the necessary material and labor.




                                     -5-
        RTC argues it did not knowingly waive its priority because its
approval       of    the   draw   requests        was   procured     by   misrepresentation.
Specifically, RTC alleges that Ward’s certification in the tenth draw
request that the construction was complete was fraudulent because it knew
there remained work to be billed.                  RTC also alleges that it was led to
believe that liens could not be filed for any of the work performed by
Ward.    RTC did not raise a misrepresentation claim in the trial court, in
this case the bankruptcy court.             RTC did devote a portion of its district
court brief to the misrepresentation theory, but the district court did not
specifically address that claim in its opinion.


        Generally, this court will not review an issue not raised at trial,
unless to do so would result in a miscarriage of justice or a substantial
injustice.          Unigroup, Inc. v. O'Rourke Storage & Transfer Co., 980 F.2d
1217, 1222 (8th Cir. 1992); Kern v. Prudential Ins. Co., 293 F.2d 251, 259
(8th Cir. 1961).           It would not result in a miscarriage of justice or a
substantial          injustice    to     decline        to   consider     RTC’s     claims    of
misrepresentation.         RTC induced Ward to provide labor and material for the
project before the alleged misrepresentations concerning the disbursement
process occurred.          Even assuming Ward’s certification of completeness in
the tenth draw request was inaccurate, such a finding would not negate a
conclusion that RTC waived its priority by its earlier knowledge and
actions.


        Moreover, RTC’s misrepresentation claims are not supported by the
facts.     RTC argues Ward’s certification that the construction was 100%
complete was fraudulent because Ward knew there remained work orders to be
submitted.      But testimony at trial indicated that it is not unusual for a
general    contractor       to    submit    additional       bills   after   the   project    is
completed because expenses often continue to be tabulated after the actual
construction is finished.              Although there may be a dispute about whether
this    work    was    authorized      by   the    construction      contract,     Ward   simply
certified that




                                              -6-
the project was complete on December 9, 1993, not that it had submitted its
final bill.     RTC may not have realized that additional bills would be
submitted,    but   it   does   not    follow    that   RTC’s   approval    of    previous
disbursements was procured by misrepresentation.


     RTC also argues Ward is estopped from asserting the priority of its
lien because Ward was required to sign lien waivers for each payment it
received.    Each draw request form approved by RTC stated lien waivers would
be obtained from Ward before, or concurrently with, the disbursement of
funds.    Unlike the case relied upon by RTC, Ward never signed a lien waiver
for the work that is the subject of the lien.                   See Herbert & Brooner
Construction Co. v. Golden, 499 S.W.2d 541, 546 (Mo. Ct. App. 1973).                  Ward
only signed lien waivers when it received payment for its work.                  Since Ward
never signed a waiver for the work in dispute here, it is not estopped from
claiming its lien has priority.


     RTC also argues that the subordination agreement between Boatmen’s
and RTC cannot form the basis for waiver because Ward was unaware of the
subordination agreement and therefore could not have been induced to
provide labor and material by its terms.                It is not the terms of the
subordination agreement that induced Ward, however, but the fact that it
provided funding.


     RTC     contends    that   if    waiver    is   premised   on   the   subordination
agreement, its waiver should be limited by the terms of that agreement.
Since RTC only agreed to subordinate $1,650,000 to Boatmen's deed of trust,
it should not be deemed to have waived its priority for more than that
amount.     A subordination agreement is to be interpreted according to
ordinary contract principles.         In re General Homes Corp., 134 B.R. 853, 864
(Bankr. S.D. Tx. 1991).         A contract generally binds no one except the
parties.    Continental Cas. Co. v. Campbell Design Group, Inc., 914 S.W.2d
43, 44 (Mo. Ct. App. 1996).           Ward was not a party to the subordination
agreement,




                                          -7-
and RTC has not articulated why Ward’s claims against Exec Tech should be
limited   by an agreement between two separate creditors.        While the
subordination agreement demonstrates RTC knew about and participated in the
project, Ward’s claims against Exec Tech are not limited by the terms of
a separate agreement between RTC and Boatmen’s.


     For these reasons, the judgment giving priority to the mechanic’s
lien is affirmed.


A true copy


     Attest:


              CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




                                     -8-
