In re Victoria Grain Co. of Minneapolis
| Decision Date | 02 February 1984 |
| Docket Number | Bankruptcy No. 4-83-2081,Adv. No. 4-84-7. |
| Citation | 45 BR 2 |
| Parties | In re VICTORIA GRAIN CO. OF MINNEAPOLIS, a Minnesota corporation, Debtor. VICTORIA GRAIN CO. OF MINNEAPOLIS, a Minnesota corporation, Plaintiff, v. JANESVILLE ELEVATOR CONSTRUCTION, INC., a Minnesota corporation, Defendant. |
| Court | U.S. Bankruptcy Court — District of Minnesota |
Steven B. Nosek, Rosanne H. Wirth, Wagner, Johnston & Falconer, Ltd., Minneapolis, Minn., for plaintiff.
Edward W. Bergquist, Minneapolis, Minn., Trustee.
John H. McLoone IV, Waseca, Minn., for defendant.
ORDER FOR SUMMARY JUDGMENT
This matter came on for hearing on the motion for summary judgment filed by the plaintiff, Victoria Grain Co. of Minneapolis.1 The following memorandum decision is made pursuant to Bankruptcy Rule 7052.
1. The debtor filed a Chapter 11 petition on January 13, 1983.
2. On February 10, 1983, Janesville Elevator Construction, Inc. (Janesville) filed with the Steele County Recorder a mechanics lien statement against certain real property owned by the plaintiff in Owatonna, Minnesota. The mechanics lien statement alleged that Janesville held a lien on the property for the sum of $45,178.40 for labor and materials furnished and performed in improvement to that land between October 31, 1981 and November 11, 1982, the latter being the alleged date of the last item contributed in the form of labor or material.2
3. On November 11, 1983, the debtor was served with a Summons and Complaint to foreclose the mechanics lien, the defendant herein, Janesville Elevator Construction, Inc. being the plaintiff in that action.
4. On November 14, 1983, the Summons and Complaint were filed with the Steele County Clerk of District Court. On that same date, a Notice of Lis Pendens relative to such action was filed with Steele County Recorder as document No. 188408.
5. Janesville received no written notice of the debtor's bankruptcy proceedings.
The first issue is procedural. The plaintiff styled its motion as one for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure made applicable to this proceeding by Bankruptcy Rule 7056. However, since the motion was made strictly on the plaintiff's complaint and the defendant's answer, it appears that perhaps the motion was properly one for judgment on the pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure made applicable to this proceeding by Bankruptcy Rule 7012(b). The defendant has filed two affidavits, one going to an issue raised in Count 3 of the plaintiff's complaint which is not the subject matter of the motion for summary judgment and another regarding its knowledge of the bankruptcy case which ultimately is irrelevant to the decision on the motion for summary judgment as well. Rule 12(c) states:
If, on a motion for judgment on the pleadings, matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56. . . .
It is clear, in any case, that there are no issues of material fact.
I think that the proper place to start is to review certain sections of the Minnesota Statutes. Minn.Stat. § 514.01 reads:
Whoever performs engineering or land surveying services with respect to real estate, or contributes to the improvement of real estate by performing labor, or furnishing skill, material or machinery for any of the purposes hereinafter stated, whether under contract with the owner of such real estate or at the instance of any agent, trustee, contractor or subcontractor of such owner, shall have a lien upon the improvement, and upon the land on which it is situated. . . .
Minn.Stat. § 514.05 reads:
All such liens, as against the owner of the land, shall attach and take effect from the time the first item of material or labor is furnished upon the premises for the beginning the improvement, and shall be preferred to any mortgage or other encumbrance not then of record, unless the lienholder had actual notice thereof.
Minn.Stat. § 514.08, Subd. 1, read during the times relevant hereto:
Minn.Stat. § 514.10 provides in part:
Such liens may be enforced by action in the district court of the county in which the improved premises or some part thereof are situated,. . . .
Minn.Stat. § 514.11 provides in part:
The action may be commenced by any lienholder who has filed his lien statement for record and served a copy thereof on the owner pursuant to section 514.08, and all other such lienholders shall be made defendants therein. The summons shall state that the complaint has been filed with the clerk and shall be of no effect unless such complaint be in fact so filed.
Minn.Stat. § 514.12 provides in part:
Reviewing § 514.05 above, it is clear that the lien attaches at the commencement of the work even though filing the mechanics lien statement to perfect the lien found in § 514.08 is not required until some 90 days after the date of the last work. When the debtor filed its case, assuming the allegations in the mechanics lien foreclosure complaint are correct, the lien had attached to the debtor's real property. It is also clear that the mechanics lien statement had not been filed and thus the lien was not yet perfected. This might make the mechanics lien avoidable pursuant to 11 U.S.C. §§ 544(a)(3) or 545(2). However, 11 U.S.C. § 546(b) provides:
The rights and powers of the trustee under section 544, 545, or 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 filing of the petition, such interest in such property shall be perfected by notice within the time fixed by such law for such seizure or commencement.
I think that Minn.Stat. § 514.05 is clearly such a generally applicable law and thus lien avoidance rights would be subject to the right of the mechanics lien claimant here to perfect within the statutory period —then 90 days. For a general discussion of mechanics liens and their avoidability, see, In re Saberman, 3 B.R. 316 (Bankr.N.D., Ill.1980). See also, the brief discussion reaching the same conclusion in Collier on Bankruptcy, 15th ed. Paragraph 546.032.
The debtor points out, however, that the filing of the mechanics lien statement would appear to be in violation of the automatic stay found in 11 U.S.C. § 362(a), , § 362(a)(4) which provides that the filing of a petition would act as a stay of "any act to create, perfect, or enforce any lien against property of the estate". However, exceptions to the applicability of the automatic stay are found in § 362(b) and included within those exceptions is "any act to perfect an interest in property to the extent that the trustee's rights and powers are subject to such perfection under § 546(b) of this title". 11 U.S.C. § 362(b)(3). Since I have concluded that § 546(b) does apply to the perfection of mechanics liens, it follows that the exception to the automatic stay found in § 362(b)(3) applies. Thus, the automatic stay did not prohibit the filing of the mechanics lien statement by Janesville.
The debtor also argues that the commencement of the foreclosure proceedings violate the automatic stay found in § 362(a). As noted above, I agree with the defendant that the filing of the mechanics lien statement is perfection of a lien as that term is used in 11 U.S.C. § 546(b). However, clearly the commencement of foreclosure proceedings is something other than perfection of a lien. Foreclosure proceedings are prohibited by any number of the provisions of § 362(a) including those found in § 362(a)(1), (3), (4), and (6). The exception provided in § 362(b)(3) is only for acts to perfect an interest in property. Thus, it is clear that the commencement of the foreclosure proceedings violated § 362(a).
The defendant argues lack of knowledge of the filing of the case4 and thus presumably of the existence of the automatic stay. However, as noted, § 362(a) clearly states that "a petition . . . operates as a stay, applicable to all entities. . . ." The defendant cites no authority for its proposition, I suspect because none exists. The rule is clearly to the contrary; no actual notice is required. Kalb v. Feuerstein, 308 U.S. 433, 60 S.Ct. 343, 84 L.Ed. 370 (1940); Carribbean Food Products, Inc. v. Banco Credito y Ahorro Ponceno, 575 F.2d 961 (1st Cir.1978); Zestee Foods, Inc. v. Phillips Foods Corp., 536 F.2d 334 (10th Cir.1976); ...
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