In re- 450 S. WESTERN AVE., LLC,
- Case Type:
- Business
- Case Status:
- Affirmed
- Citation:
- BAP No. CC-21-1116-LFS (9th Circuit, Nov 23,2021) Published
- Tag(s):
-
- Ruling:
- A creditor required to file notice to perfect its interests in a debtor's property under 11 U.S.C. § 546(b) must do so before the non-bankruptcy limitations period expires. Section 546(b)(2) establishes non-bankruptcy law as the applicable law for determining timeliness. Section 108(c) of the Bankruptcy Code does not extend such deadline.
The Bankruptcy Court thus properly dismissed the mechanics' lien creditor's adversary proceeding for failure to state a claim when the lien creditor filed its § 546(b) notice more than 90 days after it recorded its lien.
- Procedural context:
- A creditor asserting a pre-petition mechanics' lien on the debtor's property filed an adversary proceeding, seeking to have the Bankruptcy Court declare that the creditor's lien was perfected and payable from the proceeds of a post-petition sale of the debtor's property.
The debtor moved to dismiss under Rule 12(b)(6).
The Bankruptcy Court granted the debtor's motion, and the creditor appealed.
- Facts:
- The debtor, 405 S. Western Ave., LLC, owned a shopping center in Los Angeles (the Property). In 2017, the Debtor contracted with Philmont Management, Inc. (Philmont) to perform improvements at the Property. Philmont did the work and billed the Debtor. Debtor informed Philmont that the bill would not be paid until June 2018. Debtor did not pay, and Philmont filed a mechanics' lien on July 18, 2018.
Debtor delayed payment--and Philmont's threats to sue to perfect its mechanics' lien--for 18 months with assurances of payment. The Debtor and Philmont agreed that Philmont could refile its mechanics' lien if the Debtor failed to pay the debt within 90 days of a refinancing and that the Debtor would not contest the timeliness of the filing of any subsequent liens.
In reliance on the Debtors' statements, Philmont did not commence an action on its original mechanics' lien and refiled its lien five times between June 2018 and December 2019.
On January 1o, 2020, the Debtor filed a chapter 11 petition. On April 29, 2020, Philmont filed a Notice of Perfection of Mechanics' Lien under 11 U.S.C. § 546(c). On May 28, 2020, Philmont timely filed its proof of claim.
On September 23, 2020, the Debtor moved to sell the Property. In the motion, the Debtor asserted that Philmont’s mechanics' lien was invalid and disputed. The sale was approved, and all secured claims attached to the sale proceeds.
On January 27, 2021, the Debtor filed a plan of liquidation that also disputed Philmont's mechanics' lien.
Philmont commenced an adversary proceeding to determine the amount and secured status of its claim, arguing that the Debtor is estopped from disputing Philmont's mechanics' lien or its claim. The Debtor moved to dismiss and argued that Philmont's Notice of Perfection of Mechanics' Lien under § 546(b) was untimely because it was filed more than 90 days from the date on which Philmont filed its fifth mechanics' lien. (California Civil Code § 8412 establishes the 90-day deadline for recording a claim of lien.)
In response, Philmont argued that the 90-day notice of perfection requirement was tolled by 11 U.S.C. § 108(c).
- Judge(s):
- LAFFERTY, FARIS, and SPRAKER, Bankruptcy Judges
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