208 B.R. 178 (9th Cir.BAP (Cal.) 1997), CC-96-1647, In re Southern California Plastics, Inc.

Docket Nº:BAP No. CC-96-1647-MCMEJ.
Citation:208 B.R. 178
Party Name:In re SOUTHERN CALIFORNIA PLASTICS, INC., Debtor. Lawrence A. DIAMANT, Chapter 7 Trustee, Appellant, v. Vartain KASPARIAN, Appellee.
Case Date:April 25, 1997
Court:United States Bankruptcy Courts, Ninth Circuit
 
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Page 178

208 B.R. 178 (9th Cir.BAP (Cal.) 1997)

In re SOUTHERN CALIFORNIA PLASTICS, INC., Debtor.

Lawrence A. DIAMANT, Chapter 7 Trustee, Appellant,

v.

Vartain KASPARIAN, Appellee.

BAP No. CC-96-1647-MCMEJ.

Bankruptcy No. SV 92-40592-AG.

United States Bankruptcy Appellate Panel of the Ninth Circuit

April 25, 1997

Page 179

Argued and Submitted March 19, 1997.

Damon G. Saltzburg, Saltzburg, Ray & Bergman, L.L.P., Los Angeles, CA, for Lawrence A. Diamant, Trustee.

Before: McKEAG 1, MEYERS, and JONES, Bankruptcy Judges.

OPINION

McKEAG, Bankruptcy Judge:

Lawrence A. Diamant, in his capacity as a Chapter 7 trustee (the "Trustee"), has appealed the bankruptcy court order overruling his objection to a claim filed by creditor Vartan Kasparian ("Kasparian"). The bankruptcy court ruled that Kasparian's claim should be allowed as a secured obligation in a bankruptcy filed by Southern California Plastics, Inc. (the "Debtor"). We affirm.

STATEMENT OF FACTS

In 1991, Kasparian entered into a written contract with the Debtor to purchase certain products and equipment. The Debtor did not deliver the items purchased although Kasparian had paid a portion of the purchase price. On November 22, 1991, Kasparian filed an action in Los Angeles County Superior Court against the Debtor and its principals (the "State Court Action"), based on breach of contract, fraud, and rescission theories.

In the State Court Action, Kasparian sought and obtained a prejudgment writ of attachment against the Debtor, which was issued on February 13, 1992. On February 27, 1992, Kasparian filed a notice of attachment lien (the "Attachment Lien") with the California Secretary of State. The Attachment Lien extends to "any property [of the Debtor] for which a method of levy is provided" and purportedly encumbers proceeds from the Debtor's bank accounts and a sale of its equipment and machinery. After the Debtor filed a voluntary Chapter 7 bankruptcy case on August 7, 1992, the State Court Action was closed. 2

Page 180

Kasparian timely filed a proof of claim in the bankruptcy case in the amount of $127,870 for "goods sold" and "services performed" (the "Claim"). The Claim consists of a secured component in the amount of $27,870, based on the Attachment Lien, and an unsecured claim for $100,000. On May 19, 1995, the Trustee filed an objection to the Claim, alleging that it was supported by inadequate documentation. On July 5, 1995, the bankruptcy court entered an order disallowing the Claim in its entirety.

The bankruptcy court granted Kasparian's motion for reconsideration and scheduled an evidentiary hearing on the Trustee's objections to the Claim. In a Joint Pretrial Order, the parties agreed that the only issues before the bankruptcy court were: whether the Debtor owed $127,870 to Kasparian; whether Kasparian was a secured or unsecured creditor; and certain evidentiary/estoppel questions. Prior to trial, Kasparian withdrew his $100,000 claim and the Trustee stipulated to allowance of the Claim in the amount of $27,870, reserving only his objections to Kasparian's claimed security interest. Following the evidentiary hearing, the bankruptcy court concluded that Kasparian's claim was unsecured because the Attachment Lien had expired under California law and Kasparian had not sought relief from the automatic stay to extend it.

Kasparian filed a second motion for reconsideration, asserting that the bankruptcy court had not considered the impact of Bankruptcy Code section 108(c), which extends or suspends certain deadlines. The court granted the motion for reconsideration, ruling that Kasparian's claim is secured. It concluded that section 108(c) tolled the automatic expiration of the Attachment Lien. Therefore, Kasparian's lien had not expired. It also decided that the issue of whether Kasparian should, or even could, proceed with the State Court Action was not relevant to its determination of his secured status. The Trustee appeals from this decision.

ISSUES

1. Whether the automatic expiration of a prejudgment attachment lien pursuant to California Code of Civil Procedure section 488.510 is tolled by 11 U.S.C. § 108(c).

2. Whether a prepetition attachment creditor has a...

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