Hunters Run Ltd. Partnership, In re, 88-3735

• Citation: 875 F.2d 1425
• Decision Date: 26 May 1989
• Docket Number: No. 88-3735,88-3735
• Parties: , 21 Collier Bankr.Cas.2d 491, Bankr. L. Rep. P 72,893 In re HUNTERS RUN LIMITED PARTNERSHIP, Debtor. MINER CORPORATION, and John Hand, dba/Sunny Day Cement Company, Appellant, v. HUNTERS RUN LIMITED PARTNERSHIP, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1425

875 F.2d 1425

57 USLW 2709, 21 Collier Bankr.Cas.2d 491,

Bankr. L. Rep. P 72,893

In re HUNTERS RUN LIMITED PARTNERSHIP, Debtor.

MINER CORPORATION, and John Hand, dba/Sunny Day Cement Company, Appellant, v. HUNTERS RUN LIMITED PARTNERSHIP, Appellee.

No. 88-3735.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 1, 1989.

Decided May 26, 1989.

Larrie E. Elhart, Elhart, Frits, Knowles & Van Berkem, Bothell, Wash., for appellant.

Michael D. Bohannon, Hatch & Leslie, Seattle, Wash., for appellee.

Appeal from the United States District Court for the Western District of Washington.

Before ALARCON, FERGUSON and THOMPSON, Circuit Judges.

DAVID R. THOMPSON, Circuit Judge:

John Hand, d/b/a Sunny Day Cement Co. ("Hand"), appeals the district court's order concluding that Hand's Washington state mechanic's lien had expired during pending bankruptcy court proceedings. We hold that 11 U.S.C. Sec. 108(c) tolled the statutory enforcement period governing Hand's lien, reverse and remand.

I FACTS

The facts are not in dispute. Between July 17 and August 5, 1985, Hand furnished labor and materials to certain real property of the debtor commonly known as the Hunters Run Apartments. On September 13, 1985, Hand recorded with the King County Department of Records a Claim of Lien against the property in the amount of $15,500, pursuant to Revised Code of Washington ("RCW") section 60.04.060. ¹

On March 11, 1986, the subject property was conveyed to Hunters Run Limited Partnership ("Hunters Run"). On March 12, 1986, Hunters Run filed its petition for relief under Title XI U.S.C. Ch. 11. Thereafter, the subject property was sold pursuant to an order of the bankruptcy court. Under this order, the property was sold free and clear of liens and encumbrances. All liens were transferred to the proceeds Following hearings on Hunters Run's Application for Determination of Validity and Priority of Liens, the bankruptcy court ruled in a published opinion that Hand's lien against the property ceased to exist when the eight-month statute of duration in RCW 60.04.100 ² expired without action by Hand to preserve his lien. In re Hunters Run Limited Partnership, 70 B.R. 297 (Bankr.W.D.Wash.1987). The district court issued an unpublished order affirming the opinion of the bankruptcy court. Both the bankruptcy court and the district court concluded that RCW 60.04.100 is a statute of duration rather than limitation; consequently, under In re Warren, 192 F.Supp. 801 (W.D.Wash.1961), the eight-month lien enforcement period of RCW 60.04.100 was not tolled by 11 U.S.C. Sec. 108(c).

of the sale, with validity and priority to be determined at a later date. Hunters Run objected to Hand's lien claim on the ground that it had expired under Washington law.

II ANALYSIS

This appeal involves only issues of statutory interpretation. We therefore review the decisions of the bankruptcy and district courts de novo. In re American Mariner Industries, Inc., 734 F.2d 426, 429 (9th Cir.1984).

A. Applicability of In re Warren

Hand's principal argument on appeal is that section 108(c) of the Bankruptcy Code tolled the eight-month enforcement period in RCW 60.04.100 once Hunters Run had filed its petition in bankruptcy. Section 108(c) provides in relevant part:

... if applicable non-bankruptcy law ... fixes a period for commencing or continuing a civil action in a court other than a bankruptcy court on a claim against the debtor ... and such period has not expired before the date of the filing of the petition, then such period does not expire until the later of--

(1) the end of such period, including any suspension of such period occurring on or after the commencement of the case; or

(2) 30 days after notice of the termination or expiration of the stay under section 362, 922, 1201, or 1301 of this title, as the case may be, with respect to such claim.

11 U.S.C. Sec. 108(c) (Supp. V 1987). Hand argues that RCW 60.04.100 is "applicable non-bankruptcy law" to which section 108(c) applies.

Both the bankruptcy court and the district court disagreed. Relying heavily on In re Warren, 192 F.Supp. 801 (W.D.Wash.1961), which held that the predecessor to section 108(c) did not apply to toll RCW 60.04.100, both courts emphasized that Washington's Mechanic's Lien Statute is a statute of duration, not one of limitation. ³ They then tracked the reasoning of In re Warren, explaining that: (1) "nothing in the legislative history of section 108(c) or its predecessor, section 11(f) of the Bankruptcy Act ... indicates that they were intended to apply to other than ordinary statutes of limitation" (Hunters Run, 70 B.R. at 299) and; (2) that section 108(c) applies to a "claim against the debtor" while a Mechanic's Lien "is not a claim against the debtor but is against the realty or the security for the debt." Id. at 300.

Reliance on In re Warren is outdated. Modern section 108(c) differs significantly from old section 11(f). Section 11(f), by its terms, suspended only "statutes of limitation." ⁴ The In re Warren court thus read the section literally when it excluded RCW 60.04.100 from section 11(f)'s scope. In re Warren, 192 F.Supp. at 804. Section 108(c), however, is not limited to statutes of limitation. It applies to "applicable non-bankruptcy law," whatever that law may be. Under well-settled principles of statutory construction, it no longer matters whether RCW 60.04.100 is durational or limitational.

Plainly read, section 108(c) encompasses RCW 60.04.100, an "applicable non-bankruptcy law" that "fixes a period for commencing a civil action in a court other than a bankruptcy court on a claim against the debtor." See, e.g., Richards v. United States, 369 U.S. 1, 9, 82 S.Ct. 585, 591, 7 L.Ed.2d 492 (1962) (In cases involving statutory construction we assume "that the legislative purpose is expressed by the ordinary meaning of the words used.") And while the legislative history of section 108(c) does mention "statutes of limitation" in describing the statute's purpose, that history in no way suggests that section 108 is to be read so narrowly as to exclude statutes like Washington's mechanic's lien law. See Consumer Product Safety Commission v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S.Ct. 2051, 2056, 64 L.Ed.2d 766 (1980) ("Absent a clearly expressed legislative intention to the contrary, [statutory] language must ordinarily be regarded as conclusive") and see H.R.Rep. No. 95-595, 95th Cong., 2d Sess. 318 (1978), U.S.Code Cong. & Admin.News 1978, pp. 5787, 6275.

Further, while it is true that section 108(c) refers only to a "claim against the debtor," this language must be interpreted according to the rules of construction set forth in 11 U.S.C. Sec. 102, which provides in pertinent part:

In this title--...

(2) "claim against the debtor" includes claim against property of the debtor.

11 U.S.C. Sec. 102 (1982). Thus Hunters Run's argument that Hand's claim is not "against the debtor" but is instead "against the realty or security for the debt" is unavailing. Moreover, reliance on In re Warren is again misplaced. The old statute (section 11(f)) referred only to "debts of a bankrupt," a phrase which was also read very strictly by the In re Warren court.

In sum, In re Warren does not control the outcome of this case. Bankruptcy law has changed. Section 108(c), on its face, does not exclude RCW 60.04.100 from its purview. It is necessary, therefore, to examine the applicability of section 108(c) within the context of modern bankruptcy law.

B. The Modern Statutory Framework

Applicability of section 108(c) in this case hinges on the applicability of another section of the Bankruptcy Code, the automatic stay provisions of 11 U.S.C. Sec. 362. Section 362(a)(4) provides in relevant part:

(a) except as provided by subsection (b) of this section, a petition filed under ... this title ... operates as a stay, applicable to all entities, of--

* * *

(4) any act to create, perfect, or enforce any lien against property of the estate.

11 U.S.C. Sec. 362(a)(4) (1982). Hand argues that section 362(a)(4) automatically stayed his ability to bring a foreclosure suit under RCW 60.04.100, and that section 108(c), which works in tandem with section 362, served to toll the eight-month enforcement period found in RCW 60.04.100.

A foreclosure suit brought pursuant to RCW 60.04.100 is "an act to ... enforce [a] lien against property of the estate" under (b) the filing of a petition under ... this title, ... does not operate as a stay--

section 362(a)(4). Hunters Run argues, however, that section 362(a)(4) did not apply to Hand, because section 362(b)(3) exempts Hand's foreclosure action from the automatic stay. We disagree. Section 362(b)(3) modifies section 362(a) as follows:

* * *

(3) under subsection (a) of this section, of any act to perfect an interest in property to the extent that the trustee's rights and powers are subject to such perfection under section 546(b) of this title ...

11 U.S.C. Sec. 362(b)(3) (Supp. V 1987). In other words, "act[s] to perfect an interest in property" as defined by 11 U.S.C. Sec. 546(b) are exempted from the automatic stay. The question, therefore, is whether section 546(b) would have permitted Hand to commence his foreclosure suit against Hunters Run as an "act to perfect an interest in property" for the purposes of section 546). If it would have, then neither section 362(a)(4) nor section 108(c) could have applied.

Section 546(b) provides:

The rights and powers of a trustee under section 544, 545, and 549 of this title are subject to any generally applicable law that permits perfection of an interest in property to be effective against an entity that acquires rights in such property before the date of such perfection. If such law requires seizure of such property or commencement of an action to accomplish such perfection, and such property has not been seized or such action has not been commenced before the date of the...