In re Birdview Satellite Communications, Inc.

• Decision Date: 10 March 1988
• Docket Number: Bankruptcy No. 86-41150-11.
• Citation: 90 BR 465
• Parties: In re BIRDVIEW SATELLITE COMMUNICATIONS, INC., Debtor.
• Court: U.S. Bankruptcy Court — District of Kansas

90 B.R. 465 (1988)

In re BIRDVIEW SATELLITE COMMUNICATIONS, INC., Debtor.

Bankruptcy No. 86-41150-11.

United States Bankruptcy Court, D. Kansas.

March 10, 1988.

Mark G. Stingley, Linde Thomson Fairchild Langworthy Kohn & Van Dyke, Kansas City, Mo., Gregory I. Azorsky, Linde Thomson Fairchild Langworthy Kohn & Van Dyke, Overland Park, Kan., for debtor.

Robert W. McKinley, Swanson, Midgley, Gangwere Clarke & Kitchin, Kansas City, Mo., Robert C. Londerholm, Hackler, Londerholm, Corder, Martin & Hackler, Chartered, Olathe, Kan., for Midgley Assoc.

John W. McClelland, Kansas City, Mo., Walker A. Hendrix, Hendrix & Clark, Ottawa, Kan., for Commercial Nat. Bank of Tulsa.

ORDER DENYING STAY RELIEF

JAMES A. PUSATERI, Bankruptcy Judge.

This matter is before the Court on the motion of Midgley Associates Architects, Inc. for relief from stay to foreclose on a mechanic's lien, and on the debtor's response thereto. Debtor appears by Mark G. Stingley and Gregory I. Azorsky of Linde Thomson Langworthy Kohn & Van Dyke, P.C. Midgley Associates appear by Robert W. McKinley of Swanson, Midgley, Gangwere, Clarke & Kitchin, and Robert C. Londerholm, of Hackler, Londerholm, Corder, Martin & Hackler, Chartered. Commercial National Bank of Tulsa, Oklahoma, appears by John W. McClelland and Walker A. Hendrix of Hendrix & Clark.

This motion was heard on January 13, 1988. At the conclusion of that hearing, the Court ordered the parties to submit briefs on the applicability of 11 U.S.C. § 546(b). The Court further ordered that if no briefs were submitted, stay relief would be granted. Briefs were subsequently filed by all parties, and the matter was submitted for final decision on February 2, 1988. On March 3, 1988, the Court extended the stay until March 10, 1988. In the interim, the Bank filed a supplemental brief and a motion for leave to file the brief out of time. The Court will not consider the late brief for the reason its decision was already drafted when the brief was received.

The sole issue presented for determination is whether under Kansas law a mechanic's lien is fully perfected upon the filing of the verified lien statement or whether commencement of a timely foreclosure action is also necessary to perfect. Having reviewed the record, the Court is now ready to rule.

BACKGROUND

The facts are not in dispute.

From January 15, 1985 to January 30, 1986, Midgley Associates provided architectural and supervisory services for improvement of certain real property owned by debtor. In the interim, on July 9, 1985, the Bank recorded a mortgage on the realty. Within four months after having furnished services to debtor, Midgley, on April 9, 1986, filed a verified mechanic's lien statement in the amount of $165,819.78 with the clerk of the Johnson County District Court.

On August 18, 1986, debtor filed a petition for chapter 11 relief. On March 16, 1987, the Bank secured an order granting relief from stay to foreclose on its previously recorded mortgage. The Bank on April 19, 1987, then filed a foreclosure action in Johnson County District Court, naming debtor and Midgley as defendants. On May 14, 1987, Midgley filed an answer in that action rejecting the Bank's claim of a superior lien.

Midgley asserts it notified debtor of its claimed mechanic's lien by certified letter dated April 10, 1987. Midgley, however, took no action in reference to debtor's bankruptcy action until it filed a proof of claim on November 27, 1987 and the instant motion for stay relief on December 10, 1987.

DISCUSSION

Midgley contends that it has a right to stay relief because its mechanic's lien was perfected before bankruptcy as of the date it filed its verified lien statement. The Bank and the debtor counter that a mechanic's lien is only perfected upon the timely commencement of an action to foreclose it, and that since Midgley did not commence an action within the time allowed by K.S.A. 60-1105 and 11 U.S.C. § 546(b), its lien expired. Midgley in response contends that although it did not commence an action in one year, its time to do so was tolled by 11 U.S.C. § 108(c). The Court agrees with the debtor and the Bank.

11 U.S.C. § 546(b) provides that the rights and powers of a trustee under sections 544, 545 and 549

"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 the petition. If such law requires . . . commencement of an action to accomplish such perfection, and . . . such action has not been commenced before the date of the filing of the petition, such interest in such property shall be perfected by notice within the time fixed by such law for such . . . commencement."

This section limits a trustee's avoiding powers by allowing certain interest holders such as statutory lienholders to perfect their interests after the trustee's rights have intervened through bankruptcy, to the extent applicable law allows such interests to relate back and be superior to intervening creditors. See In Re: Houts, 23 B.R. 705, 706-07 (Bankr.W.D.Mo.1982); H.Rep. No. 95-595 to accompany H.R. 8200, 95th Cong., 1st Sess. (1977) pp. 371-72, U.S.Code Cong. & Admin.News 1978, p. 5787. The automatic stay does not stay an act to perfect such a lien. 11 U.S.C. § 362(b)(3).

The "generally applicable law" sought to be applied here is the Kansas mechanic's lien law. K.S.A. 60-1101 creates a lien in favor of any person furnishing labor, equipment, material or supplies used or consumed for the improvement of real property. The lien relates back to the commencement of the furnishing of such labor, equipment, material or supplies and is superior to intervening liens or encumbrances. K.S.A. 60-1102 provides that any person claiming such a lien shall file a verified statement containing the names of the owner of the property and of the claimant, a description of the property and a reasonably itemized statement of the amount of the claim. In this case, no party has disputed whether Midgley complied with K.S.A. 60-1102 or whether a lien of the kind specified in K.S.A. 60-1101 arose.

At the crux of the parties' dispute is the effect to be given another provision of the mechanic's lien laws, K.S.A. 60-1105(a). That section provides that

"an action to foreclose a lien under this article shall be brought within one year from the time of filing the lien statement . . . "

Specifically, Midgley asserts that this section is not a requirement for perfection of the lien, but only a statute of limitation. The debtor and Bank disagree, urging that this section is a statute of duration, and thus a necessary step to perfect. Midgley responds that Kansas courts have never recognized the distinction between statutes of limitation and duration.

Midgley is incorrect in its assertion that the distinction between statutes of limitation and duration has not been recognized in Kansas. A statute of limitation operates to extinguish the ability to enforce the claim but not to extinguish the claim itself. The limitation in a statute of duration, however, "is a condition imposed upon the exercise of the right of action granted," such that when the limitation expires, so too does the right. Rodman v. Railway Co., 65 Kan. 645, Syl. ¶ 2, 70 P. 642 (1902). Statutes of duration generally arise where a special statute creates a remedy and the statute provides its own "limitation" of time for commencing proceedings to obtain the special relief. Hodge v. Hodge, 191 Kan. 390, 392, 381 P.2d 329 (1963). Thus in Rodman, the Kansas Supreme Court considered a wrongful death act which provided for commencement of an action within two years. Gen.Stat. 1901 § 4872. A widow sought to recover damages for the death of her husband. Her first action, timely commenced, was dismissed without prejudice after removal to federal court. The widow then became the duly appointed representative of the estate and filed a second action, this time after the expiration of the two year period for commencement. The district court dismissed the widow's action, rejecting her contention that a savings clause for representatives of estates in the general statutes of limitations extended the two year deadline in the wrongful death act. The widow appealed.

On appeal, the Kansas Supreme Court affirmed the district court's order of dismissal. The court reviewed the history of the wrongful death act, which by statute had created a right of action unknown at Kansas common law. Rodman, 65 Kan. at 650, 70 P. 642. The court observed that where such statutes also created a limitation on the right of action the limitation was considered to be a "limitation of the liability itself as created, and not of the remedy alone." Rodman, 65 Kan. at 651, 70 P. 642, quoting The Harrisburg, 119 U.S. 199, 7 S.Ct. 140, 30 L.Ed. 358 (1886), overruled on other grounds Moragne v. States Marine Lines, 398 U.S. 375, 90 S.Ct. 1772, 26 L.Ed.2d 339 (1970). Summing up a review of the relevant authorities, the Supreme Court thus held:

"The scope and effect of the wrongful death act is not merely to provide a remedy for a cause of action existing independent of the act itself, but to create a cause or right of action where, prior to the passage, or in the absence of the act, none existed. As a part of the right of action itself, as a condition imposed upon and in limitation of the exercise of the right granted, it is provided that the action upon which recovery is had must be commenced within two years from the time the right of action arose. No excuse pleaded for delay in the commencement of the action for more than two years will avail, for the reason that no such excuse can in law be held sufficient. A limitation upon the time in which a preexisting right of action may be exercised is governed by the general statutes of limitation . . . But the limitation in time of the commencement of the action here brought . . . is imposed as a

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