In re Baldwin Builders
| Decision Date | 12 March 1999 |
| Docket Number | BAP No. CC-97-1830-BRiJ,Bankruptcy No. ND 95-13057 RR,ND 95-13508 RR. |
| Citation | 232 BR 406 |
| Parties | In re BALDWIN BUILDERS, and Baldwin Building Contractors, Debtors. Village Nurseries dba Southern Counties Landscape, Appellant, v. David Gould, Chapter 11 Trustee for Baldwin Builders; New Millennium Homes, LLC, Appellees. |
| Court | U.S. Bankruptcy Appellate Panel, Ninth Circuit |
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Karen L. Grant, Grant & Hurlbett, Santa Barbara, CA, for Village Nurseries, appellants.
Rodger M. Landau, McDermott, Will & Emery, Los Angeles, CA, for David Gould, Trustee, appellees.
Before: BRANDT, RIMEL1, and JONES, Bankruptcy Judges.
Pre-petition, Village Nurseries, dba Southern Counties Landscape ("SCL"), recorded a mechanic's lien against debtor's real property. Under California law, a foreclosure action must be commenced on a mechanic's lien within 90 days of recording, or the lien is null and void. Post-petition, SCL filed a foreclosure action on the recorded mechanic's lien, but did not serve the complaint. SCL later recorded a second mechanic's lien and filed a second foreclosure action, again without serving the complaint.
After a court-approved sale of the subject real property, SCL moved to compel the trustee to provide a replacement lien. The bankruptcy court denied the motion, finding that SCL's liens were invalid because its foreclosure complaints were void as violations of the automatic stay, and because SCL had failed to give the notice required to maintain or continue the perfection of its liens. SCL appeals. We AFFIRM.
The facts are undisputed. On 24 March 1995, Appellant Village Nurseries L.P., dba Southern Counties Landscape ("SCL"), entered into a subcontract with Debtors Baldwin Building Contractors, dba the Baldwin Company, and Baldwin Builders (collectively "debtor" or "Baldwin") to provide landscaping and irrigation systems on Toyon Park, a parcel of real property located in Anaheim Hills, California. On 13 April 1995, SCL served on Baldwin a preliminary notice of mechanic's lien, in accordance with Cal.Civ.Code §§ 3097 and 3098.
Baldwin filed for relief under Chapter 11 of the Bankruptcy Code2 on 18 July 1995. On 27 July SCL representatives met with its primary lender. James and Al Baldwin, principals of the debtors, were also two of the four limited partners in SCL. They attended the meeting, during which SCL representatives assured the bank that SCL would pursue its lien rights against the debtors' projects. The next day, SCL recorded a mechanic's lien in Orange County against the Toyon Park property.
On 9 October 1995, the president of Village Envirocorp, Inc., ("Village") the corporate general partner of SCL, sent an intercompany memorandum to Al and Jim Baldwin, which stated:
A draft authorization letter was attached to the memo. That same day, Village's board of directors met by conference call in which Al and Jim Baldwin participated. At the meeting the board unanimously approved the employment of the Greenbaum firm to pursue perfection of the mechanics' liens recorded against Baldwin.
On 25 October 1995 SCL filed a complaint in Orange County Superior Court to foreclose on its Toyon Park lien. SCL did not serve the complaint or otherwise pursue the lawsuit. SCL filed its proof of claim in the Baldwin bankruptcy on 26 January 1996, listing a secured claim of $1,128,733.76 and attaching a listing of the various mechanics' liens held by SCL, including the one on Toyon Park.
SCL continued work at Toyon Park until May 1996, when David Gould ("Gould" or "trustee") was appointed Chapter 11 trustee. On 20 May SCL recorded a second mechanic's lien against Toyon Park, and on 17 July it filed a second complaint in Orange County Superior Court to foreclose on the second lien. Again, SCL did not serve the complaint or otherwise pursue the lawsuit.
In August the trustee moved for approval of a settlement with Shea Homes Limited Partnership calling for, among other things, the transfer of Toyon Park free and clear to the City of Anaheim. As no consideration was to be received in the transfer, the trustee proposed to give lien-holders replacement liens on other real property owned by the debtors. The court granted the trustee's motion. Despite repeated requests, the trustee refused to provide SCL a replacement lien for Toyon Park. On 2 June 1997, SCL moved to compel the trustee and the debtors to comply with certain allocation orders and to provide SCL with a replacement lien on Toyon Park. The trustee responded, questioning the validity of SCL's lien.
At the hearing on SCL'S motion, the court found that SCL's post-petition foreclosure complaints were void as violations of the automatic stay. The court concluded that § 546(b)'s notice requirement had not been satisfied by Al and Jim Baldwins' participation in the meetings of the board of directors or with the bank, nor by their receipt of the interoffice memo, as these were all undertaken in their capacities as SCL limited partners. Nor did SCL's proof of claim, filed more than 90 days after the recording of the first lien and prior to the recording of the second lien, provide timely notice of the first or any notice of the second.
The bankruptcy court denied SCL's motion, entering a written order on 27 October 1997. SCL timely appealed.
A. Whether SCL's complaints were void as violations of the automatic stay;
B. Whether SCL satisfied § 546(b)'s notice requirement by Al and Jim Baldwins' presence at meetings and their receipt of internal SCL correspondence, or by SCL's recording of its mechanics' liens, or by the filing of its foreclosure complaints, or by its filing of a proof of claim; and
C. Whether SCL is entitled to equitable relief.
We review the bankruptcy court's conclusions of law and questions of statutory interpretation de novo, In re Southern California Plastics, Inc., 208 B.R. 178, 180 (9th Cir. BAP 1997) rev'd on other grounds, 165 F.3d 1243 (9th Cir.1999), and factual findings for clear error. Rule 8013. When there are two permissible views of the evidence, the trial judge's choice between them cannot be clearly erroneous. Anderson v. Bessemer City, 470 U.S. 564, 574, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).
Initially, we note that SCL argues that its course of action, filing but not serving its lien foreclosure complaints, is recommended by the leading California treatise on the subject, M.E. and H.M. Marsh, California Mechanics' Lien Law (6th ed.1996). Indeed, § 4.57 of that work does so recommend, but we must apply the statute and binding authority — while secondary authority may be helpful or persuasive, it is no more than that.
We do not find Marsh convincing: first, as the authors refer only to "perfection," and not to "maintenance" or "continuation of perfection," it is not evident that the authors have considered the effects of the 1994 amendment to § 546(b), when Congress added "maintenance or continuance of perfection" to the § 546(b) exception3. Next, although they treat the commencement of an action as "perfection" against other claimants, they do not address the Ninth Circuit's analysis in In re Hunters Run Ltd. Partnership, 875 F.2d 1425, 1427-1429 (1989), concluding that commencing the action under the parallel Washington statute was enforcement. Finally, the authors do not address what may suffice as notice under § 546(b).
(emphasis added). Section 546(b)(2) in turn provides that, where state law requires "commencement of an action to accomplish . . . perfection, or maintenance or continuation of perfection of an interest in property" and the action has not been commenced prepetition, "perfection of such interest shall be maintained or continued, by giving notice within the time fixed by such law for . . . such commencement." (emphasis added).
Hunters Run, 875 F.2d at 1428.
As noted above, when the Ninth Circuit decided Hunters Run, only actions to perfect were exempt from the automatic stay under § 362(b)(3).
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